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)