NZ warns exporters of perils of Indonesian trade

NZ warns exporters of perils of Indonesian trade

WELLINGTON (Reuters): New Zealand is warning its exporters to be extra cautious in trading with Indonesia, and says the advice need not apply to Kiwis alone.

New Zealand's trade commissioner in Jakarta, Nick Arathimos, said on Thursday: "What we're warning people about is to be very, very careful about payment.

"It's something which applies to everyone, not just New Zealand exporters," he told Reuters in a telephone interview.

"Frankly, what's happening around this town now is that major corporates are defaulting against their loans. We're having an unofficial debt moratorium because people are simply telling their bankers, 'I'm sorry, I can't pay'."

Indonesia's rupiah plunged to a record low of 12,000 to the dollar on Wednesday, souring hopes that Asia's financial crisis may have reached its nadir.

"Extreme caution is now required for all dealings with Indonesia. This caution should be extended to long-standing and deep relationships," Arathimos added.

"I therefore suggest no credit be given to Indonesian companies."

Arathimos said Indonesia, New Zealand's 11th largest trading partner, remained in crisis despite receiving a US$43 billion IMF bailout package in exchange for sweeping reforms.

"You can see that the crisis is deepening, rather than reaching a turning point," he said.

"The IMF package was great for Indonesia's macro(economic) problems, but the most significant problem that people are concerned about, and the reason for the currency plummeting in the last two days, is worries about default in the private sector. That is the key issue now."

Indonesia bought NZ$363 million ($210 million) worth of mainly meat and dairy product exports from New Zealand in the year to October 1997. But industry boards expect the next round of exports data to show there has been a substantial fall.

"We have been told that exports to Indonesia have decreased and at present there is no product, hardly anything, going into Indonesia," New Zealand Meat Producers Board spokeswoman Lyn Kehely said.

Arathimos said Indonesian meat importers had "basically stopped importing in the last two months".

"Talking to meat importers here, I know that sales will be down by about 70 to 80 percent," he said.

The New Zealand Dairy Board also expects a decline in export volumes to Indonesia, although it said it was too early to estimate the damage accurately.

Indonesia's woes could not have come at a worse time for New Zealand exporters -- the Southeast Asian economy was one of their fastest growing markets.

"We have been selling a lot of foodstuffs here, particularly dairy products. It's been a very rapidly expanding market up until recently with growth levels of around 30 percent per annum," Arathimos said.

"Meat products, apples, kiwifruit -- all of those products certainly had a niche here and were growing....it's going to reduce dramatically now."