Austrian bank hails RI's stability

Austrian bank hails RI's stability

SINGAPORE: An Austrian bank which extended a US$21 million loan to United Fiber System (UFS) to develop a mill in Indonesia cited the country's growing political stability as the deciding factor, the chief executive officer said in published remarks on Monday.

Analysts have expressed doubts the plans will take off.

Rainer Silhavy, head of Raiffeisen Zentralbank Osterreich's (RZB) Singapore branch, told The Straits Times the project involving a woodchip mill in Kalimantan had been under study for more than a year.

"But a real positive thing happened over the last six months when the improvement in the political situation in Indonesia convinced us to participate," he was quoted as saying.

The current Indonesian government is very interested in attracting direct foreign investments, Silhavy noted. "Now we can say that we have partners in Indonesia that we can rely on".

The bank is not overly concerned over a legal dispute centered on UFS' forest concession rights in Indonesia, confident that it will be resolved in the company's favor, he added.

Brokerage firms in Singapore recently imposed trading curbs on UFS shares after a sudden price surge because they were not convinced about the company's fundamentals.

UFS chief executive Kishore Dass said recently he expects the issue to be settled within the first quarter of this year.

UFS also plans to build a pulp mill in Kalimantan costing $1 billion.

Silhavy defended the company's fundamentals and said the projects make "commercial sense".

He told the newspaper the output from the woodchip mill would be used as raw material for the pulp mill. The entire output from the woodchip mill has guaranteed buyers, he added.

The mill is expected to start operations in the last quarter of this year. -- DPA