Indonesian spinners cannot use U.S. credit guarantee

Indonesian spinners cannot use U.S. credit guarantee

JAKARTA (JP): Although the United States is looking to
maintain and increase in its cotton sales to Indonesia with
assistance to local yarn producers, government regulations bar
spinning firms to use the aid.

"Through the Foreign Market Development Program and the Market
Promotion Programs we are working with the Cotton Council
International (CCI) and Cotton Incorporated (CI) to expand our
cotton sales," the U.S. Under Secretary for International Affairs
and Commodities Programs Eugene Moos told Indonesian textile
businessmen at a breakfast meeting yesterday.

He said the two organizations will conduct seminars and
provide more direct technical assistance to Indonesian mills.

Moos said another key U.S program to boost cotton consumption
in Indonesia is the export credit guarantee called GSM-102.

Under the program, the U.S. government underwrites credit
extended by U.S. private banks for up to three year, to eligible
Indonesian businesses looking to purchase U.S. farm products.

"By participating in the GSM-102 program, Indonesia will be
able to build a more stable economy at a faster rate, while
strengthening trade ties with the United States," he said.

Unfortunately, the government is currently banning the
spinners from the scheme, saying that it is a form of overseas
borrowing, and therefore falls subject to the government's
ceiling on such borrowing. This is something the textile
manufacturers dispute.

Husen Aminuddin, chairman of the Indonesian Spinners
Association (Sekbertal), says that the credit guarantees would
enable spinners to decrease their production costs and
consequently lower their sales prices to weaving companies.

"The GSM-102 program would actually be very beneficial for us
because it would protect our cotton fiber importers from
unilateral breaches of contracts," added Aminuddin, also a vice
chairman of the Indonesian Chamber of Commerce and Industry for
international relations and trade.

Wonder

Aminuddin wondered why the Indonesian government considers the
guarantee to be borrowing, since the risk belongs to the U.S.
government, not the Indonesian businesses.

After all, he said, private firms are one of the economic
backbones together with state companies and cooperatives.
Two Way Trade

Indonesia is currently one of America's biggest customers for
cotton, due to the booming domestic textile industry. Moos said
that Indonesia's agricultural exports to the U.S. exceeded US$1.4
billion last year, including palm, coconut oil and other
products.

U.S. agricultural trade with Indonesia has also grown steadily
especially in cotton, soybeans and processed food products.

"Despite the increased competition from Australia, China,
Pakistan and India, Indonesia is still the fourth largest cotton
market for the U.S.," he said.

According to Aminuddin, who hosted the breakfast meeting,
Indonesian cotton fiber imports from the U.S. amount to about
$200 million a year.

Indonesia's textile and garment exports reached about $6
billion last year, of which $750 million went to the U.S.

The U.S. Department of Agriculture has authorized more than
$135 million in credit guarantees for agricultural commodity
exports to Indonesia for 1994, including $30 million for cotton,
$30 million for soybeans, $20 million for wheat and $10 million
for feed grains.

Moos told The Jakarta Post that his government is encouraging
the Indonesian private sectors to purchase cotton, but that their
focus is elsewhere for other commodities.

"With regard to soybeans, corn, wheat and other kinds of farm
produce we deal mainly with the Indonesian government (state
companies)," he said. (icn)