Goh urges multirateral guarantee for RI L/Cs

Goh urges multirateral guarantee for RI L/Cs

JAKARTA (JP): Singapore Prime Minister Goh Chok Tong proposed
yesterday the establishment of a multilateral committee to
guarantee letters of credit (L/Cs) issued by Indonesian banks to
help Indonesia finance badly needed imports.

Goh flew into Jakarta yesterday to review Indonesia's economic
crisis with President Soeharto.

He told a joint media briefing after the 90-minute meeting at
Soeharto's Jl. Cendana residence that a multilateral committee
could guarantee far more funds in L/Cs than a bilateral
arrangement could.

Such an arrangement could be expected to generate US$20
billion in letters of credit, he said, adding the guarantees
would be given to foreign banks who would accept the letters of
credit.

Goh said he would still have to work on the concept but hoped
to proceed "to unlock the international financial system for
Indonesia. This is very important."

Indonesian importers have complained that their L/Cs issued by
local banks were rejected by foreign banks over fears that they
could not service their commitments.

"We are facing a lack of confidence, so we have to ask other
countries to also guarantee our letters of credit," Soeharto
said.

Goh will fly back to Singapore today. Soeharto is also
scheduled to meet with World Bank President James Wolfensohn
today.

Tanri Abeng, a member of the President's Economic and Monetary
Resilience Council, stressed yesterday the importance of a
complete inventory of private sector foreign debts and their
maturity schedules.

Tanri, chief operating officer of the Bakrie Brothers Group,
said reports on private sector external debts had so far been
conflicting, thereby confusing the market as to the magnitude of
the debt overhang.

"We need to communicate to the market a complete profile of
our private sector foreign debts, including details such as how
much will mature this year," he said after meeting Soeharto.

The government has proposed a temporary freeze on the
servicing of private sector debt to create breathing room for
companies to negotiate with their creditors.

Tanri said analysts were still unclear over the details of the
private debt situation.

Private sector foreign debt is estimated at $65 billion.

"But obviously, not all of these debts mature this year,"
added Tanri.

He said he would meet with Radius Prawiro, the President's
advisor on the settlement of private sector debts, as soon as the
latter returned from his talks with Japanese bank lenders in
Tokyo.

"Our first priority will be to get the complete profile of the
debts with their maturity schedules and to communicate this
information to the market.

"This information is quite vital because the amount of foreign
debt which will mature this year will strongly influence the
demand for American dollars. And as long as this data is not
available to the market, the foreign exchange market here may
remain wildly volatile," Tanri said.

According to Tanri, the private sector foreign debt should
also be categorized according to their borrowers: multinational,
joint venture and private national companies.

"Obviously, Radius' team should not be involved in
facilitating negotiations concerning debts of multinational
companies. It should instead zero in on the debts of private
national companies and the Indonesian partners of joint venture
debtors," Tanri added.

In a related development, the Nikkei English language news
service reported that Radius suggested in Tokyo on Monday that 11
major Japanese banks roll over foreign currency-denominated loans
to Indonesian corporations.

Radius said he sought the understanding of Japanese banks as
they prepare for negotiations on rolling over Jakarta's foreign
currency-denominated loans in early February, according to
Nikkei. (prb/vin)