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.