Japan's trade head denies report on aid to Indonesian venture
Japan's trade head denies report on aid to Indonesian venture
TOKYO (Kyodo): Japan's trade minister Eijiro Hata denied yesterday a newspaper report that the Indonesian government has asked the trade ministry to salvage an ailing aluminum-smelting joint venture between Japan and Indonesia.
But an official of the Tokyo-based investing firm for PT Indonesia Asahan Aluminum (Inalum) acknowledged that the participants in the joint venture agreed that some kind of bailout is necessary for survival of the Jakarta-based partnership.
Speaking at a news conference held after the regular cabinet meeting, Hata, minister of international trade and industry, said such a request was not made when he met with a high-ranking Indonesian economic official Thursday.
The Nihon Keizai Shimbun, Japan's leading financial daily, reported in its Friday morning edition that the Indonesian government has asked the Japanese side to shoulder a major part of a capital increase that the joint venture plans and to lower the interest rate on Japan's loans to the alliance.
The newspaper quoted a ministry official as saying that the ministry is examining a possible capital injection into Inalum as part of a much broader rescue package, including a possible easing of loan interest charges by Export-Import Bank of Japan, the official said. The loan totals about 190 billion yen (US$1.8 billion).
The ministry expects the rescue package for Inalum to be finalized by June following the termination of the most recent rescue plan, under which Japanese partners injected 56 billion yen of extra capital and Japan's Ex-Im Bank cut loan interest rates to five percent from 6.75 percent, the official said.
Serious
An executive with Nippon Asahan Aluminum Co., the investing firm for the joint venture, admitted that the aluminum smelter has been in a serious financial state for years due chiefly to softening market prices of aluminum and needs some aid.
The official said the concerned parties are indeed discussing the kinds of support the financial daily reported but its details, such as the sum of additional funding, have yet to be worked out and no official request from Indonesia has been made.
He said Asahan Aluminum's accumulative losses amount to as much as US$230 million and another $90 million in losses are expected to be incurred for the 1993 business year ended March 31.
The joint venture, established in 1976, is 60 percent owned by Nippon Asahan Aluminum Co. Ltd. and 40 percent by the Indonesian government. The Overseas Economic Cooperation Fund (OECF) in turn owns 50 percent of Nippon Asahan and the remaining 50 percent held by 12 Japanese private firms including Sumitomo Chemical Co. Ltd., Showa Denko KK and Nippon Light Metal Co. Ltd.
The firm started manufacturing in 1982 and is one of the largest overseas aluminum-making footholds for Japan, with an annual output capacity of 200,000 tons, half of which is exported to Japan.
The company was bailed out once before in 1987 in a similar deal, featuring the injection of Japanese funds and reduced debt burdens on Japanese lending.