Govt to establish financing agency to boost exports

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)