Foreigners steer clear of the Indonesian turmoil
Foreigners steer clear of the Indonesian turmoil
SINGAPORE (Reuters): Nervous investors acted yesterday to secure themselves against unrest in Indonesia, as Thai exporters backed away from Indonesian letters of credit and two major loans stalled.
As student protests persisted in Jakarta after last week's riots in which at least 500 died, business people in Indonesia's neighbors took steps to insulate themselves from any economic fallout.
In Bangkok, Thai rice and sugar exporters said they had stopped taking Indonesian letters of credit.
"The situation in the country raises a lot of questions on risks which we are not ready to take," said Vorapong Pichpongsa, president of the Thai Rice Exporters Association.
"Unless their letters of credit are guaranteed by financial institutions in third countries such as Singapore or Hong Kong, I am afraid we will have to suspend shipments."
On sugar, Thai trading houses said they would apply the same measure.
In Manila, the Asian Development Bank (ADB) postponed a board meeting to discuss a proposed US$1.5 billion loan.
An ADB spokesman said the meeting was being rescheduled, but did not give a new date. "I believe it is most unlikely it will be this week."
The Export-Import Bank of Japan announced it was delaying the signing of a $1 billion loan to Indonesia, scheduled for Tuesday, due to concerns about whether bank officials would be able to travel to Jakarta.
"Because of concern about public peace, we are now working to switch the venue of the signing ceremony to Tokyo," a spokesman said.
Amid more calls for President Soeharto to step down, Jakarta's stock market slid 4.19 percent to 388.92, while the rupiah sank to 12,500 against the dollar before recovering slightly.
The World Bank's country director for Indonesia said Jakarta's $40 billion-plus rescue package from the International Monetary Fund needed to be re-examined.
"The IMF and other donors will clearly have to reassess the reform package, particularly the monetary and fiscal program and targets and the assumptions underlying them, which have obviously been affected by the ongoing unrest," Dennis de Tray said.
Fuel price rises ordered under the IMF plan were one of the factors that sparked last week's unrest in Jakarta.
Joseph Estrada, presumed winner of the May 11 election in the Philippines, said the turmoil in Indonesia would affect all its neighbors, stressing the country's importance in the Association of Southeast Asian Nations (ASEAN).
"We are all concerned because Indonesia is a very important member of the ASEAN," Estrada said. "I hope and pray that they resolve their internal problems immediately because all of us will be affected."
Estrada also expressed concern about the impact on the Philippine economy of the return home of hundreds of Filipinos working in Indonesia.
After a mass exodus of foreign nationals at the weekend, foreign firms in the troubled country were still re-examining their operations on Monday.
Japan's Mitsubishi Materials Corp said it was considering a temporary halt to construction of the Gresik smelter, Indonesia's first copper smelter, scheduled for completion in August.
"We may stop construction temporarily. However, the situation does not yet allow us to make a final decision," a company spokesman said.
Australia's Broken Hill Pty Co Ltd said it had no plans to reopen its four steel coating and rolling plants around Jakarta that closed last week.
"We're just monitoring the situation," a spokesman said. BHP has kept its coal mining operations in East Kalimantan province operating, the spokesman said.
Japanese government spokesman Kanezo Muraoka said 5,000 Japanese were expected to return home from Indonesia by commercial flights by Wednesday. Many foreign firms have ordered staff out of Indonesia.
Freeport McMoRan Copper & Gold, which runs a giant gold and copper mine in the eastern province of Irian Jaya, said on Friday it was moving its expatriate employees out of Jakarta, although the mine was still operating normally.