Export funding scheme 'needs clarification'

JAKARTA (JP): The mechanism for the government's latest measure to provide Rp 2.5 trillion (about US$185 million) in export loans through 21 banks has yet to be clarified, according to an official from a participating bank.

"The mechanism for the letter of credit (L/C) guarantee scheme is still not clear, so our bank has yet to take any action," said president of state Bank BRI Djokosantoso Moeljono following a meeting with the Investment Coordinating Board yesterday.

He pointed out that the targeted exporters, the amount of credit per recipient, and the source of the financing had not yet been specified.

However, he added that BRI was ready and capable of implementing the program.

The government signed a memorandum of understanding with 21 banks to provide loans to the export-oriented industries in the country on Wednesday.

Although Finance Minister Bambang Subianto said the government would guarantee commercial loans issued by the banks, he did not clarify how the loans were to be used.

Also unclear was what kind of incentives would be put in place to encourage banks to issue loans, but sources said that banks participating in the scheme would be able to swap non-performing loans for government bonds to the value of export loans issued under the scheme.

The Minister of Trade and Industry said that eligibility criteria for the facility had yet to be established, but added that garment exporters could get priority because they have to follow the fashion seasons.

Despite the sharp depreciation in the value of the rupiah against the U.S. dollar, local exporters have failed to take advantage of these favorable conditions because of difficulties obtaining imported raw materials.

Although Bank Indonesia and some foreign governments have started to guarantee L/Cs opened at local banks over the past couple of months, exporters have continued to face difficulties as a result of their inability to make up front payment in full, a condition demanded by local banks.

Following the enforced closure of 16 private banks in November, overseas banks began to reject Indonesian L/Cs.

Local banks demand up front cash because they doubt the ability of exporters to repay their dues at a later date.

The government is also expected to provide loans to rebuild the country's distribution sector, shattered during the May riots, in the near future. (rei)