Business loans are available, govt assures

JAKARTA (JP): The government assured exporters on Friday that trade financing and credit facilities were available even though the establishment of the much-awaited Export Financing Agency had yet to come about.

A team consisting of key officials of the Ministry of Industry and Trade and Bank Indonesia told the disgruntled businesspeople that the central bank's recent move to extend the legal lending limit would allow banks to resume lending.

"The policy has freed banks from legal lending limit restrictions, which used to restrain them from lending to the private sector," Bank Indonesia director Subarjo Joyosumarto told the meeting.

On Tuesday, the government eased the legal lending limit to nonaffiliated single parties to 30 percent from 20 percent until Dec. 31, 2001.

Banks with negative capital adequacy ratio, the risk weighted ratio, are also allowed to resume lending as long as they have joined the government bank recapitalization program.

For now, this applies only to state banks and provincial banks, he said.

"I remind you that this new policy does not need the issuance of implementation guidelines, so you will no longer hear that kind of excuse anymore from banks," Subarjo said.

The appeasement, however, received a cool reception from skeptical exporters, who since the economic crisis worsened have stumbled upon layers of financial difficulties to import materials despite various efforts made by the government.

Many exporters with high reliance on imports had trouble importing because letters of credit (L/Cs) issued here were rejected abroad as confidence in the local banks dwindled.

Overseas banks accepted locally issued L/Cs after the government secured financial guarantees to back up the trade financing facilities. But to lessen the risk, local banks required importers to deposite the same amount of the L/Cs in cash before they would issue the L/Cs.

The exporters said on Friday that banks would most likely be reluctant to begin channeling credits to the private sector amid drained liquidity.

"The problem is liquidity, no bank would ever give loans to businesses with the country's tight monetary policy and the negative spread," Soy Pardede, who heads the trade department in the Indonesian Chambers of Commerce and Industry, said.

"The real sector would have to live off of its own money," Pardede added.

Others were concerned that no business could afford a loan despite the new move, with the current high lending interest rates of above 50 percent.

"With the current commercial lending rates, it will be way too costly to borrow," the head of the Association of Indonesian Coffee Exporters, Oesman Soedargo, said.

The secretary-general of the Indonesian Textile Association, Irwandy Muslim, vented frustration over a series of unsuccessful moves made by the government in dealing with trade financing problems since last year.

"This is the 31st meeting we've had to resolve this problem, and none of the efforts have worked so far. What we need now is an emergency scheme... Why can't we just set up the Trade Financing Agency?" he asked.

The proposed agency, expected to start operating in February, is designed to overhaul unresolved trade financing issues in the country. (das)