Exporters to get better deal

Exporters to get better deal

JAKARTA (JP): Bank Indonesia (the central bank), in another
bid to boost non-oil exports, has decided to extend its
rediscount facilities to suppliers of export-related products and
cut the discount rate on usance export drafts by one percentage
point.

The central bank's managing director, Paul Sutopo
Tjokronegoro, said yesterday that only those companies supplying
goods to exporters were entitled to rediscount facilities, which
exporters already received.

"With these facilities, we try to encourage suppliers and
exporters alike to boost their business and thus improve the
country's non-oil exports," Paul told journalists at his office.

As part of the government's deregulation package announced on
June 4, 1996, the central bank provides a more favorable interest
rate on rediscount facilities to exporters of textiles and
textile-related products, shoes, electronics, timber and rattan
products and leather goods.

Paul said the Ministry of Industry and Trade had listed 284
exporters which were eligible for the central bank's rediscount
facilities. They include 184 exporters of textiles and textile-
related products, 39 exporters of footwear and 31 exporters of
timber products.

According to the central bank's ruling No. 29/151/KEP/DIR,
dated Dec. 31, 1996 and effective next month, exporters may sell
their export proceeds to Bank Indonesia through foreign exchange
banks.

Export proceeds can be in the form of a sight draft or usance
draft issued on the basis of an irrevocable bankers' letter of
credit.

Bank Indonesia will rediscount usance export drafts with a
remaining maturity period of between 30 days (one month) and 720
days (two years).

Bank Indonesia accepts five currencies for rediscount. Its
rates are floating, using Singapore Inter-bank Offered Rates
(SIBOR) as a reference.

The discount rate for special exporters is now SIBOR. It was
SIBOR plus one point. The new rate for general exporters is SIBOR
plus one point, down from SIBOR plus two.

Paul said that cutting the discount rate to the level of SIBOR
aimed to maintain the facilities' attractiveness for exporters.

"Our rediscount facilities, introduced in June last year, have
influenced banks to lower inter-bank discount rates on usance
export drafts. Therefore, it is normal for us to adjust our
discount rate," Paul said.

The five currencies are U.S. dollars, Japanese yen, Deutsche
Marks, Netherlands gilders and British pounds. Export proceeds in
other currencies can be sold to Bank Indonesia after being
converted into U.S. dollars.

Bank Indonesia normally rediscounts export drafts in rupiah.
However, the new ruling allows banks, which issue export drafts
denominated in U.S. dollars, to ask the central bank to pay them
in U.S. dollars.

"We will pay them in U.S. dollars provided that we have enough
reserves of U.S. dollars," Paul said, adding that the central
bank's reserves now stood at US$19.1 billion.

Paul warned that the central bank would punish any bank which
applied for the rediscount facilities illegally. In the early
1990s, a noted businessman secured rediscount facilities for
fictitious exports.

Another central bank ruling issued by the central bank on Dec.
31, 1996, stipulates that the rediscount facility for special
suppliers must be based on local letters of credit opened by
exporters based on irrevocable bankers' letters of credit.

Based on the local letters of credit, suppliers ask their
banks to issue bank drafts and sell them to Bank Indonesia. The
central bank will only rediscount bank drafts issued by sound
banks. And their remaining maturity period should be between 30
and 90 days.

The rates for bank drafts are based on the central bank's
three-month money market securities' cut-off-rate plus or minus a
set margin. The margin is now minus 0.50 percent.

Bank Indonesia has also issued a ruling on domestic letters of
credit by local banks.

Paul said the new ruling on local letters of credit aimed to
improve the local payments system and encourage the trade of
local letters of credit in a secondary market.

"A liquid secondary market for local letters of credit will
benefit the monetary authority in terms of managing the money
supply, banks in terms of managing their liquidity and businesses
in general," Paul said. (rid)