Australian govt to underwrite exports to RI

Australian govt to underwrite exports to RI

CANBERRA (Reuters): Australian Prime Minister John Howard said yesterday the government would underwrite Australian exports to financially-troubled Indonesia, one of the country's major trading partners.

"I've called this news conference this afternoon to announce that the government has decided to provide assistance to Australian exporters and therefore to support Australian jobs in relation to Australia's export trade with Indonesia," Howard told reporters.

Howard said there was no cap on the level of assistance provided as it would be provided on a case-by-case basis.

It would also be conditional on a sovereign guarantee from Indonesia, he said.

"We will provide, on the basis of a case-by-case analysis in relation to the whole gamut of Australia's export trade with Indonesia, short term credit insurance on a national interest account for Australian exporters to Indonesia through EFIC (the Export Finance Insurance Corp.)," Howard said.

Howard said Australia's export trade with Indonesia was worth more than A$3 billion a year, and said the case-by-case basis would ensure the support was properly targeted.

The decision to provide the assistance was also prompted by aggressive moves by the U.S. to make inroads into Indonesia.

"At a time like this when our exporters are facing fierce, even on occasions actively avaricious, competition from United States exporters into Indonesia,...it is very important that my government and that Australia stands up for the interests of Australian exporters and therefore of Australian jobs," he said.

The Australian economy was holding up well despite the Asian turmoil, with Howard saying he had no hard evidence that any jobs had been lost due to the regional crisis.

Australia's cotton industry welcomed Wednesday's announcement by the Australian government that it will provide export trade assistance to cover trade to Indonesia.

This was a positive move to assist exporters in their fight to retain a very important market, Cotton Australia chief executive Gary Punch said in a statement.

He also said the industry was pleased that Howard had shown a willingness to take a tough diplomatic stand with the U.S. over its efforts to enter Indonesian markets.

In Singapore, a proposal for international guarantees to support Indonesian letters of credit (LCs) to keep the country's crisis-stricken trade going got a cautious welcome from financial markets yesterday.

But the scheme would have to involve many countries and would take time to be put together, economists said.

Singapore's Prime Minister Goh Chok Tong proposed on Tuesday a system of multilateral guarantees for Indonesian LCs to enable the country to import components vital for its export trade.

Speaking after meeting Indonesian President Soeharto, Goh said LCs issued by Indonesian banks were having difficulty being accepted and this might prevent firms getting components essential for goods to be manufactured for export.

Indonesia's rupiah has lost some 75 percent of its value against the U.S. dollar since July and made the country's corporate debt, estimated at more than $60 billion, difficult to repay. Many foreign banks feel overexposed to Indonesian debt.