While deliberations over a bill on state-owned Indonesian Exports Financing Agency (LPEI) are still at an early stage, the government and the House of Representatives have agreed such services will be opened to foreign investors.
"The distinction between domestic and foreign investment is no longer relevant -- both government and House members agree the state exports financing will be accessible to foreign investment," said Hasto Kristiyanto, vice chairman of the special committee for the LPEI bill.
National Agency for Exports Development head Bachrul Chairi said domestic and foreign investors had the same right to export financing as long as they were registered under Indonesian companies.
"Our new laws on corporations and investment clearly state both domestic and foreign investors will be given equal treatment. So it is natural the financing be open to everyone," he said.
Hasto said the bill's only discrimination concerned financing for exports intended for markets exposed to high political risk.
"For exports to risky markets, for instance, Iran, the agency would only finance projects handled by state-owned firms and not by private ones," he said,
He further said House members involved in the committee had accepted the government's proposal for the agency's starting capital, which would come from government liquid assets, worth Rp 4 trillion, previously stored in the already defunct Bank Ekspor Impor Indonesia (Exim).
The government and the House expect the deliberation process to conclude this year and are hopeful the agency will begin operations early next year.
Establishing exports financing is crucial for local industries that are reluctant to borrow from banks in fear of enduring high borrowing interest rates, which currently stand at 12 percent.
In the last couple of years, banks have been reluctant to lend to the real sector, preferring instead to target consumer credit, which continues to show significant growth despite its interest rates could climb to 17 percent.
An official draft on the bill states the exports financing agency aims to provide more affordable credits in three steps.
First, by issuing securities, second, by borrowing funds from short, medium or long term loans from foreign government, multilateral institutions or banks and third from grants.
Such fund gathering strategies were impossible for PT Bank Ekspor Indonesia (BEI) due to restrictions imposed by the central bank. BEI was established in 1999 after the demise of Bank Exim following the Asian financial crisis.
The agency can give credits to buyers, provide export guarantees and shipping insurance, all under one roof, in addition to providing credits with low interest for exporters prior to shipping.
The risks covered by the agency insurance services include, failure to export, payment failure, investment failure of local based exporters in the export market and destination and export failure due to political risks -- although only state firms are eligable for this coverage.
The draft also says all risks relevant to small and medium enterprises export activities will be covered by the government.
Despite the seemingly positive provisions, Barchrul said House members must be careful all benefits provided by the agency would not violate WTO regulations on subsidies.
"We don't want the credits given by the agency seen as a hidden subsidy from the government," he said.
Benny Soetrisno, chairman of both Indonesian Exporters Association (GPEI) and Indonesian Textile Producers (API), said the export financing must also be available to credible exporters regardless of whether they had standing debts with banks.
"I also think the agency must correspond to the central government programs, for instance by focusing on financing business sectors currently being prioritized by the government."
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