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)