Export financing agency to be legalized

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)