Foreign banks plan more loans to RI

Foreign banks plan more loans to RI

SINGAPORE (JP): Foreign banks plan more commercial loans to
Indonesia to tap the country's lending market.

Ong Choon Hong of the Singapore branch of Japan's Daiwa Bank,
said that his bank is ready to increase its lending portfolio to
the Indonesian private sector, which is now being groomed to
become a dominant player in the country's economy.

"We are now giving a closer look to Indonesia to ensure that
we will not lose any business chances," he said following the
signing of a lending facility of US$120 million between the
publicly-listed PT Unggul Indah Corporation as a borrower and a
syndication of 24 international banks.

He said on Wednesday that the government's plan to further
boost the economy will consequently create a larger lending
market for foreign banks as local banks are unlikely to be able
to provide all of the huge investments needed to support the
country's high economic expectations.

Ong said that the planned increase in Daiwa Bank's lending
portfolio to the Indonesian private sector reflected the bank's
confidence in the country's economic outlook.

He acknowledged that Daiwa's rating on Indonesia is not as
good as other developed countries but said that "it is still
considered not so risky".

More important

Shuichi Takenaka, an executive of the Jakarta branch of
Japan's Long-Term Credit Bank (LTCB), said here that Indonesia,
the largest recipient of LTCB's commercial debts in Southeast
Asia, is becoming more important to the bank's future.

"The economy is growing and that's why we are very confident
on Indonesia," he said.

Merrill Lynch, a U.S. securities company, predicted in its
recent monthly report that Indonesia's economy is likely to grow
by about 7.7 percent, as compared to 7.3 percent in 1994.

Merrill Lynch's estimate is much higher than the government's
revised growth projection of 7.1 percent per annum in the sixth
Five Year Development Plan (Repelita VI) period ending in 1999.

According to Bank Indonesia's records, the commercial loans of
the private sector totaled approximately $30 billion as of April,
nearly half of the $64 billion in soft loans owed by the
government.

The high amount of the country's external debts, however,
worries many economists, who say that the increase in the
external debts could further widen the country's current account
deficit.

The economists said the commercial loans of non-bank private
companies should also be limited to prevent the deficit from
growing.

The offshore borrowing restriction is now imposed only on
domestic banks and state-owned companies.

Foreign bankers said that limiting non-bank private companies
to raise commercial loans overseas could result in a stagnation
of business activities because the available funds at home are
not enough to support their rapid growth, given the country's
tight monetary condition.(hen)