Japan pledges to guarantee RI imports

Japan pledges to guarantee RI imports

JAKARTA (JP): A visiting special envoy from Japanese Prime
Minister Ryutaro Hashimoto said here yesterday Japan would
provide trade guarantees to back up Indonesian imports.

The Japanese envoy said the trade financing facilities would
be channeled through Japan's Exim Bank.

"On the opening of Indonesian letters of credit (L/Cs), Japan
is determined to assist through a trade insurance scheme issued
by Japan's Exim bank," Yoshiro Hayashi said after meeting with
President Soeharto at his private residence on Jl. Cendana,
Central Jakarta.

He, however, did not provide details on the plan.

Indonesian importers are facing credit problems to import
their products as letters of credit issued by Indonesian banks
are often rejected by banks abroad.

Singapore Prime Minister Goh Chok Tong has proposed the
establishment of a multilateral committee to guarantee Indonesian
L/Cs. Goh's initiative, expected to generate a US$20 billion
fund, has yet to materialize.

During Hayashi's meeting, the President was accompanied by
State Minister of Research and Technology B.J. Habibie. Habibie
and Hayashi jointly chair the Japanese-Indonesian Forum for
Technology.

"Japan is determined to continue its assistance and support
for Indonesia in stabilizing its rupiah and to restore its
economy," said the former minister of finance.

The steep appreciation of the dollar against the rupiah since
July has led prices of most goods, including medicine, to
skyrocket. Most raw materials for local medicine production are
imported.

The rupiah was trading at 12,000 to the dollar late Friday
morning, compared to 2,450 to the dollar before the currency
began its free fall last July.

The high prices of imports and the inability of producers to
import raw materials following the rejection of Indonesian
letters of credit abroad has forced production cuts, leading to
shortages of medicines.

Hayashi also told the President that the Japanese cabinet
decided yesterday to provide Indonesia a 1.02 billion ($8.2
million) grant to help the country face medicine shortages and
price increases.

According to the Japanese Embassy, the $8.2 million grant is
part of Tokyo's $8 billion dollar rescue package for Indonesia
announced Feb. 20.

Japan decided last month to provide a $1 billion credit line
for Japanese companies in Indonesia which finance locally
operated companies.

Japan is Indonesia's main trading partner and also its biggest
creditor.

When asked about the President's plan to peg the rupiah to the
greenback at a fixed exchange rate under a currency board system
(CBS), Hayashi responded cautiously: "CBS is not the only way to
restore the Indonesian economy. There are many things or policies
which need to be carried out to restore confidence in its
economy."

Japanese Vice Finance Minister for International Affairs
Eusuke Sakakibara urged Indonesia Tuesday to investigate the
feasibility of the CBS.

Finance Minister Hikaru Matsunaga also said Indonesia's
currency turmoil was not over and that the situation here was
still severe.

"We are closely following the situation here, especially with
the election of the president and vice president and the
formation of the new cabinet," a Japanese official, who spoke on
condition of anonymity, said yesterday. (prb)