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)