Exim Bank's facilities may include crude oil

Exim Bank's facilities may include crude oil

TOKYO (Reuters): The Export-Import Bank of Japan said yesterday it was open to negotiating on including crude oil in the list of items Indonesia is entitled to buy using a recent $1 billion loan from Japan.

"The oil and gas sector is not covered in this round of financial aid," a bank official said.

"But if there is a request from Indonesia, we are ready to consider including it in the list of (raw material) imports for exporters which are covered by the loan," the official said.

The Japanese bank signed an agreement on the five-year loan with Indonesia's Finance Ministry on Thursday in a bid to improve Indonesia's exports situation.

Despite the rupiah's depreciation, Indonesian exports have been shrinking because exporters are having a hard time importing raw materials and parts for production facilities.

Amid Indonesia's lack of foreign reserves and the instability of the financial system, foreign suppliers were reluctant to accept letters of credits issued by Indonesian commercial banks, a statement by the Export-Import Bank said.

The $1 billion loan was aimed at boosting the credibility of letters of credit issued by Indonesian banks by injecting funds into the country's financial sector.

Exporters of 26 products, such as textiles and electronic appliances, can import raw materials and parts using letters of credit supported by the Japanese loan.

Oil products are not included in the list.

However, the bank official said plastic products are on the list, which enables petrochemical manufacturers such as PT Chandra Asri to take advantage of the loan for feedstock naphtha imports.

Though a member of the Organization of Petroleum Exporting Countries (OPEC), Indonesia imports as well as exports crude oil and oil products.

There was talk recently in the oil market that Indonesia's state oil firm Pertamina was in negotiations with a western oil major to buy a very large crude carrier of crude oil, but that negotiations fell through due to a problem relating to letters of credit.