EFIC pays A$1m insurance claims on exports to RI

EFIC pays A$1m insurance claims on exports to RI

CANBERRA (Dow Jones): The Australian government's Export Finance and Insurance Corp., or EFIC, said yesterday it has paid around A$1 million insurance claims in recent months relating to exports to Indonesia.

EFIC, in its Export Active June newsletter said a further A$6 million is still owed to EFIC clients by Indonesian buyers, and likely will be added to the claims total.

These claims relate to insurance cover offered to exporters on EFIC's commercial account. An exporter seeking insurance against payment default by a foreign buyer would pay a premium to EFIC, which would cover non-payment.

Separately, the agency has extended cover of around $570 million to Australian wheat and cotton exporters to Indonesia on the government's so-called national interest account, a facility used in exceptional circumstances.

EFIC said the commercial claims paid by the agency, or pending, in relation to Indonesia, involved exporters that took out insurance cover before the serious downturn in Asia.

"Of concern is that most of the claims, or potential claims, arising out of Indonesia involve smaller exporters, who are much more likely to be vulnerable to the impact of such losses," it said.

Stuart Fishwick, EFIC's head of credit insurance, said the agency has received a "major influx" of applications from exporters seeking insurance cover "not just for markets in crisis, but also for markets on the other side of the world."

"Events of the past few months have resulted in many exporters now considering this insurance as part of their approach to export risk," Fishwick said in the newsletter.

EFIC said the worst of the Asian crisis is yet to hit Australian exporters. There are signs that export growth is slowing, despite a 13 percent increase in exports in the 10 months to April 1998 from the year-earlier period, it said.

"The deep import cuts that have come in the wake of the financial crisis in Indonesia, Thailand and South Korea have hit Australian exporters hard," it said, but noted a recent fall in the value of the Australian dollar has helped exports into non- Asian countries such as the U.S. and U.K..

EFIC said the economies of Hong Kong and Malaysia, in addition to those of Indonesia, Thailand and South Korea, are likely to enter recession in 1998.

Earlier Tuesday, the government said it would extend for three months existing arrangements for the provision of short-term credit insurance for exporters to Indonesia.

Industry Minister John Moore said the insurance cover will continue to operate on a case-by-case basis and be subject to a guarantee from the Indonesian government.

"Indonesia is currently entering a new era. In order to help the Indonesian government and people meet their new challenges, there is need for stability and certainty in the trading relationship," Moore said in a statement.

He said extension of the insurance cover will enable essential trade to continue between the countries.

Australia exported goods to Indonesia valued at A$3.38 billion in 1997.