Business loans are available, govt assures

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)