Bank Indonesia warned of export credit scam

Bank Indonesia warned of export credit scam

JAKARTA (JP): Business analysts warned Bank Indonesia, the
central bank, yesterday to improve its control over the use of
its subsidized export credit facility and to impose stern
punishments against commercial banks found in violation of the
loan scheme.

Rizal Ramli, an executive of an independent consulting agency,
said that stronger law enforcement is a prerequisite in dealing
with the misuse of the loan scheme.

The abuse of the export credit facility has been widely
debated in local newspapers since early last month following the
disclosure of bogus export documents allegedly issued by Detta
Marina, a Jakarta-based garment factory. Kim, the company's
owner, according to the press reports, used bogus export
documents to obtain credit export loans.

The export credit facility, carrying subsidized interest
rates, was introduced by the central bank in the 1980s to support
export-oriented companies. However, many exporters and commercial
banks allegedly cooperate to issue cheap export credits by using
bogus exports.

In obtaining the loan facility, an exporter should normally
submit export documents to a commercial bank, which will then
apply for the loan facility from the central bank on behalf of
the exporter. The central bank will then provide an export credit
for the exporter through commercial banks.

Rizal charged that the abuse of the cheap funding facility was
made possible with the help of commercial banks, which help
distribute the loans.

"It would not happen without collusion between commercial
banks and exporters," he said about the export credit scams.

Plot

According to sources, Kim, who is now a target of an Attorney
General's office investigation, had been plotting with a number
of commercial banks to illegally benefit from the subsidized
export loans.

Those banks, instead, used the low interest loans to
strengthen their financing activities, rather than distributing
them to exporters. Meanwhile, Kim, who provided bogus exports to
back up the special loan application, received a fee of between
two and three percent for his services from the banks.

The sources said that a major private bank, for example,
allegedly obtained approval from the central bank to channel
export credits of around US$100 million last year by illegally
using fake export documents.

Interest rates for the central bank's export loans are set at
levels far lower than those charged by commercial banks on time
deposits. By using the central bank's export loans for their
lending operations, commercial banks can, therefore, more than
double their interest income.

Rizal, the managing director of Econit, an industrial and
trade consulting agency, said yesterday the government should
also reconsider assigning Societe General de Surveillance (SGS),
the Geneva-based surveyor, to inspect Indonesia's imports at
points of loading.

"The issuance of bogus export documents proved that SGS's work
was not so effective," he told Antara news agency.

He said that SGS's service is not only ineffective but also
very expensive, adding that by abandoning the agency, the
government could save over US$100 million per annum.

In the period between August 1993 and January 1994 alone, the
government paid at least $193 million to SGS, Rizal said. (hen)