RI L/Cs accepted overseas

JAKARTA (JP): Overseas banks have started to accept Indonesian letters of credit (L/C) but they are still limited to importing particular commodities, a key government official said.

Director General of International Trade Djoko Mulyono was quoted by Antara Friday as saying that some 67 L/Cs had been accepted but in particular import commodities only.

He said Australia had reopened its trade credit line for Indonesia to import commodities including flour, cotton, meat, powder milk raw material, processed leather, aluminum, machinery and automotive components.

Overseas banks have recently rejected Indonesian L/Cs due to the plunging confidence in the crisis-hit country. This impaired the country's production system, including the export industry, as imported raw materials were unavailable.

To help solve the problem, Bank Indonesia stored a total of US$1 billion in overseas banks to guarantee Indonesian L/Cs.

But due to several inadequacies by Indonesian corporates which were also importers, the guarantee scheme was not effective as most of the foreign banks declined to open the credit line unless these were corrected.

Bambang said the foreign banks urged the corporations to solve the problems first in order to be eligible for the L/C guaranteed by the central bank.

Textile businesspeople also said that the foreign banks' hesitation was compounded by the unclear realization schedule of commitments made by Indonesia's major trading partners to guarantee the country's L/Cs.

Singapore, Japan, Germany, Canada, the Netherlands and the U.S. are among countries which have made commitments. (rei)