BEI to directly channel Japanese loans to exporters

JAKARTA (JP): Bank Expor Indonesia (BEI) said on Tuesday the government had amended a US$1-billion loan agreement with Japan to allow it to channel the money directly to exporters.

BEI said the Ministry of Finance and the Japan Bank for International Cooperation (JBIC) signed the amendment on Monday.

"Under the improved facility, the loan's utilization through BEI can be expected to be promoted more efficiently and effectively, thereby greatly contributing to further exports from Indonesia," BEI said in a press statement.

It said that under the original agreement, BEI provided financing for exporters through appointed local banks.

This two-step lending scheme drew sharp criticism from exporters.

Because BEI had to provide the loans through other banks, exporters were concerned the scheme would only increase lending costs and add red tape.

BEI had said it was unable to channel the loans directly because it had to comply with the loan agreement with Japan.

Under the amended agreement, BEI can directly finance exporters in cofinancing agreements with the appointed local banks.

The $1 billion loan, BEI said, was provided by JBIC -- formerly known as Japan Exim Bank -- as part of the Miyazawa Initiative.

The Miyazawa Initiative provided emergency assistance packages from the Japanese government to Asian countries struck by the economic crisis.

"The facility was originally extended to Bank Indonesia, but afterward transferred to BEI," the release said.

BEI was established in May with a paid-up capital of Rp 3 trillion ($329 million at the current exchange rate) to help finance the import of raw materials for export-oriented firms.

However, local banks were also reluctant to extend new credits because of the constraints of the legal lending limit set by the central bank, BEI said.

Furthermore, the loan scheme was deemed unfit to meet the actual needs of the country, the bank added.

BEI said it had discussed these issues with several major exporters as well as with JIBC.

"For the past several months, BEI has made the effort to modify the scheme and the procedures of the facility for the improvement of workability to meet the actual market needs," it said.

Other modifications include easier administration requirements when applying for a loan.

Under the previous scheme, exporters had to submit export documents such as letters of credit and sales contracts at the time of application.

However, with the modification, exporters can submit the export evidence after the loan disbursement by showing documents of past export activities and their projections.

The amendment of the loan agreement also enables BEI to expand the scope of sectors eligible for its loan facilities.

Previously, eligible businesses were limited to direct exporters that earned foreign exchange revenue by exporting their own products.

But under the amended agreement, businesses producing the raw materials for exports also are eligible, BEI said.

Furthermore, companies offering services with foreign exchange revenue can also apply for BEI's loan facility.

The bank cited maintenance and repair services for foreign airline companies as among the eligible.

Others eligible for the loan facility, it said, were those businesses providing services that helped the production of export commodities, like subcontractors for oil and mining firms. (bkm)