Govt sets up new bank to back exports

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan said on Thursday the government would open a bank next month to finance exports.

Rahardi said the legal basis for the establishment of the special financing agency was signed by President B.J. Habibie on Tuesday.

Under the regulation, the agency, to be named Bank Ekspor Indonesia, will begin operations with an initial paid-up capital of Rp 3 trillion (about US$375 million).

"The agency will start its operations next month," Rahardi said.

He said private companies would be allowed to hold shares in the bank, but the government would be the majority shareholder.

Rahardi said the bank would not raise funds from the public, adding that the bank's funding would mainly come from bilateral and multilateral foreign financial institutions, including the Japan Export Import Bank, the World Bank and the Asian Development Bank.

The government has secured $1 billion in standing loans from the Japan Export Import Bank to finance the new bank's operations, he said.

The government initially planned to transform Bank PDFCI, one of the private banks nationalized last year, into an export financing agency.

The government canceled this plan, saying that establishing a new bank would be more effective.

Export companies have complained about the delay in the establishment of the agency, saying any further delays would completely destroy the country's foreign trade.

The export financing agency is designed to provide financial assistance to Indonesian exporters who have been hurt by the collapse of the country's banking industry.

Because of low international confidence in the local banking system, letters of credit issued by local banks are often rejected by foreign banks.

The government attempted to help export companies by guaranteeing all letters of credit issued by certain local banks. However, exporters still have had to make deposits before being allowed to open letters of credit at these local banks.

"The agency will help exporters obtain letters of credit to import raw materials and also boost their working capital," Rahardi said.

Export tax

Rahardi also criticized analysts and export associations who questioned his plan to impose export taxes on primary agricultural products, saying the plan was merely an idea to help encourage the local downstream industry and boost the export of more value-added secondary products.

He said the prices of primary products such as coffee and cocoa always fluctuated sharply, while the prices of processed commodities were relatively stable.

"We have been known as exporters of primary products since the colonial era. Now it is the time for us to develop an agroindustry which will produce more value-added products and create more job opportunities for our workforce," he said.

"But it is still an idea which needs discussion. So please give me input," he said.

Export associations, including the Association of Indonesian Coffee Exporters and the Indonesian Cocoa Association, have objected to the plan, saying they feared export taxes would make Indonesian commodities less competitive on the world market.

Rahardi, who is also the chairman of the State Logistics Agency, presided over the opening on Thursday of a Warehouse Retail Center for Basic Staples, jointly operated by Inti Mitra Mandiri Cooperative (Kopimma), PT Radyana Mandiri Perkasa and the Association of Young Indonesian Businessmen.

Koppima chairman Juan Permata Adoe said the warehouse would distribute staple products to cooperatives and small-scale enterprises at reduced prices. (gis)