MITI raises insurance premium for Indonesia

MITI raises insurance premium for Indonesia

TOKYO (Dow Jones): The Ministry of International Trade and Industry will increase trade insurance premiums for Indonesia, Thailand and Malaysia on April 1, according to The Nihon Keizai Shimbun's Monday morning edition.

The maximum rate hike is estimated at 30 percent.

The higher premiums are attributed to increased country risk amid economic and political uncertainty in the three Southeast Asian nations.

At the same time, the move will tighten insurance coverage standards to levels offered by U.S and European institutions, forcing Japanese companies to compete with overseas rivals on equal footing. The higher premiums will raise overall export costs, taking away some of the competitive edge Japanese companies have enjoyed in the Asian market.

The first revision will lower Indonesia's trade credit rating from F to G and Thailand's from D to E. Malaysia's rating will fall from C to D on the eight-grade scale ranging A to H.

Such revisions will likely raise premiums to the three countries by 20 percent to 30 percent, in line with a deal reached in June 1998 among the member countries of the Organization for Economic Cooperation and Development (OECD).

Although the rate hike will vary according to trading item, coverage period and country, many trading houses and plant exporters fear they will have to raise export prices to absorb the higher premiums, potentially shrinking trade between Japan and Southeast Asia.