Govt to establish financing agency to boost exports

JAKARTA (JP): In an effort to boost exports, the government plans to establish a financing agency whose immediate focus will be to provide subsidized, preshipment working capital and export credit for exporters hampered by the current financial crisis.

Minister of Trade and Industry Rahardi Ramelan said on Friday that the agency would provide guaranteed short-term export financing and export insurance, as well as operating as an export information and data center.

"The agency will be established by transforming the function of one of the banks taken over by IBRA, and it will take over all of the existing export financing schemes," he told the press following a meeting of senior economic ministers.

IBRA is an acronym for the Indonesian Bank Restructuring Agency, which has taken over some 34 private banks. Some of the banks had been liquidated.

He added that the selected bank will first be cleared of bad assets and troubled liabilities, and will be provided with sufficient capital.

Financing will come from the government, the private sector, overseas donor institutions and the capital market, he said.

Rahardi said that the agency will be named next week at a press conference on bank recapitalization.

He added that the agency will be developed into an export credit agency, whose main responsibility will be to provide mid- term and long-term postshipment financing.

The country's exporters have faced financing difficulties as overseas banks have rejected letter of credits (L/Cs) opened at local banks, which were badly hit by the economic crisis.

The government did get foreign export financing agencies to guarantee local L/Cs, but the exporters continued to have difficulties, as local banks, not wishing to increase their already high level of bad loans, which would cause further difficulties in meeting the strict government requirement for all banks to have a minimum 4 percent capital adequacy ratio by the end of this year, were reluctant to open the L/Cs.

The Ministry of Trade and Industry said in a report that only US$618 million out of the $5.6 billion provided by Bank Indonesia and foreign institutions for the export financing scheme had been used by local banks as of the end of October.

Meanwhile, Radius Prawiro, the head of the Indonesian debt restructuring team, reported that the Jakarta Initiative Task Force had managed to encouraged 62 debt-laden companies to accelerate the debt restructuring process.

The companies have outstanding debts of $6.72 billion in overseas loans, and Rp 2.41 trillion in domestic debt, he added.

He said that 19 companies operated in the manufacturing sector, 14 in agribusiness, 11 in real estate, 11 in services, two in oil and gas and five in other sectors.

He also said that the task force was studying possibilities to provide interim financing for companies which have been restructured.

Task force chairman Jusuf Anwar said earlier this week that he was seeking at least $2.5 billion from multinational financial companies for this purpose.

A solution to the country's debt overhang is critical to economic recovery. The private sector (excluding banks) has more than $63 billion in overseas debts, and more than Rp 600 trillion in domestic debt.

The government is encouraging out-of-court debt settlements by providing restructuring facilities through the Jakarta Initiative.

"To accelerate the restructuring process, the Minister of Finance is studying the possibility of providing a tax breaks for certain restructuring plans, including debt forgiveness measures," Radius said. (rei/prb)