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)