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)