Economists support new L/C facility for Texmaco

JAKARTA (JP): Economists supported on Friday the Rp 720 billion (US$96 million) credit facility extended by state Bank Negara Indonesia (BNI) to giant textile producer Texmaco Group despite the latter's huge nonperforming loans.

Economist Sri Mulyani of the University of Indonesia and Sri Adiningsih of Gadjah Mada University supported the fresh facility, saying it would revitalize Texmaco's textile business which employs a huge workforce.

"I don't see a problem here since the government partly owns Texmaco," Mulyani said on the sidelines of a seminar on the economy organized by the Indonesian Democratic Party of Struggle (PDI Perjuangan).

The Indonesian Bank Restructuring Agency (IBRA) took over last Monday BNI's nonperforming loans, including some Rp 9.6 trillion owed by the Texmaco Group, as part of BNI's recapitalization program.

According to Kontan weekly, on the following day BNI provided Texmaco with a Rp 720 billion L/C facility, which IBRA guaranteed.

The weekly said IBRA agreed to guarantee Texmaco's new L/C facility as the company had no working capital left to run its business.

The six-month credit facility will be used to import raw material for Texmaco's production, which is vital to restructuring its debts, the weekly quoted IBRA's deputy chairman for assets management credit Eko Budianto as saying.

While voicing support for the L/C facility, Mulyani called on IBRA to place its people at Texmaco to control the use of the facility.

Adiningsih said the government could not ignore the importance of Texmaco given the large number of its workers.

But, she said, the government should keep in mind that Texmaco is a big debtor and the L/C provision should be transparent.

She said BNI should have waited until Texmaco's debt restructuring program was completed before it was provided with fresh credit.

"In the end this may burden BNI's recapitalization program," she said.

Legislator Sukowaluyo Mintorahardjo approved of the new L/C facility provided it was aimed at sustaining Texmaco's business.

"This is a new Texmaco here, in which the government has a stake," Suko said.

Sukowaluyo, who is also head of House of Representatives Commission IX for financial affairs, said the House would not question Texmaco over the new facility unless the company used it to repay its debts to creditors.

Late last year, Texmaco was widely criticized for obtaining $754 million plus Rp 1.9 trillion mostly in preshipment export facilities between November 1997 and February 1998 from Bank Indonesia (the central bank) through BNI at a time when the rupiah was under enormous pressure.

Critics said Texmaco had used its ties to Soeharto to twist central bank rulings and gain access to preshipment trade facilities from Bank Indonesia.(bkm)