Export financing agency to be legalized

JAKARTA (JP): The government is to issue a government regulation by April as a basis for creating an export financing agency, the central bank's director Dono Iskandar said on Monday.

Dono, also the chairman of the government committee for the creation of such an agency, said here that it would have paid-up capital of US$150 million.

He said funding for the agency may come from both bilateral and multilateral foreign financial institutions such as the Japan Export Import Bank, the World Bank and Asian Development Bank.

"We have secured US$1 billion in standing loans from the Japan Export Import Bank. In the first stage, our export financing agency may only need $200 to $300 million," Dono said on the sidelines of the national meeting of the Indonesian Exporters Association.

Dono confirmed that the agency would be a new institution and that the government would not transform any existing bank into an export financing agency as was initially planned.

The government planned in January to convert Bank PDFCI, one of the private banks nationalized last year, into an agency of this kind. It then canceled the plan, saying that establishing a new entity would be more favorable.

Dono said the new agency would only provide financial assistance to exporters who had suffered greatly from the collapse of the local banking industry.

Because of the currently low international confidence in the local banking system, letters of credit issued by local banks were often rejected by their foreign counterparts.

The government then extended a helping hand by guaranteeing all letters of credit issued by appointed local banks. But still exporters have had to deposit all the money needed before they could open letters of credit at these local banks.

"The agency will help finance the exporters in opening up letters of credit to import raw materials and also in boosting their working capital."

The chairman of the Indonesian Chamber of Commerce and Industry, Aburizal Bakrie, said he hoped the agency would be brought to life soon in order to boost exports.

"Export credits should have a longer maturity because our competitors have export financing for up to 10 years. We have only 12 months maturity, and even that it is scarce."

Such an export financing agency would also break the current vicious circle in the Indonesian banking system, which was already being kept in limbo by high interest rates and a legal lending limit.

Many local banks are not able to disburse various trade facilities provided by foreign donors through the central bank because of the legal lending limit as most of them had previously broken the rules, Aburizal said.

The agency should also help to revive business activities in the real sector, which has already been seriously affected by the collapse of the banking sector.

Separately, the exporters association secretary-general Toto Dirgantoro said many of the association's members have complained that they were still burdened by a monthly fee of Rp 100,000 (US$11) payable to the Indonesian Importers Association (GINSI) in order to get its recommendation to import raw materials.

"In the past, we paid GINSI a monthly fee in order to get their recommendation so that we could obtain clearance for our imported goods from the customs area. Now, this should be abolished," he said.

This requirement was actually revoked in 1998 by then Director General of Customs and Excise Martiono Hadianto, Toto said. (02)