RI receive $1b trade loan from Japan's Exim Bank

JAKARTA (JP): The country's crippled export industry will soon get a boost of a US$1 billion trade financing facility from Japan's Exim Bank under a credit agreement signed here yesterday.

The yen-denominated loan will be used for guaranteeing letters of credits (L/Cs) issued by banks in Indonesia, which have thus far been rejected by most banks overseas.

"The Japanese Exim Bank loan is not part of the IMF (International Monetary Fund) bailout package, but is designed specially to boost Indonesian foreign trade, particularly exports which depend on imported materials," Minister of Finance Bambang Subianto said at a media conference following the loan signing.

The trade financing facility is an untied loan, he added, meaning that Indonesian industrial companies using the loan should not import raw materials or components from Japan.

The credit facility, which will be available later this month, will mature in five years, including a grace period of three years, Bambang said.

Also in attendance at the signing were Japan's Exim Bank senior executive director Hidemi Kawai, IMF Asia Pacific director Hubert Neiss, Bank Indonesia Governor Sjahril Sabirin and Minister of Trade and Industry Rahardi Ramelan.

Exporters eligible for the facility are those accorded special status by the Ministry of Trade and Industry or companies which are affiliated with Japanese firms.

Bambang said local companies had not been able to capitalize on the cheap rupiah rate to boost exports because of the problem over L/Cs issued by banks here.

"The lack of financing is a serious threat to reviving the economy."

Kawai said: "The normalization of trade financing is therefore most urgent for Indonesia to reinvigorate its export industry."

Neiss also praised the agreement as a measure to get the economy back on track.

"I warmly welcome this agreement. A very crucial element in getting production and exports moving is the restoration of trade financing."

He added that several other loans were currently in the pipeline, including the upcoming disbursement of another tranche of the IMF's bailout money.

"I hope the other international support will follow Japan's Exim Bank. This is the time to come to support Indonesia's recovery."

Neiss stressed it would be imperative for Indonesia to utilize the facility to the utmost.

Exporters have expressed concerns over the workability of the L/C guarantee scheme. They argued it would be difficult to provide the 100 percent up-front cash demanded by the local banks to open the L/Cs under the prevailing tight money policy.

Sjahril acknowledged the problem but exporters to resolve the issue with their banks.

"We expect the banks will not request a 100 percent margin deposit," he said. Although he said there were 14 domestic banks appointed to the L/C guarantee scheme, he declined to identify them.

Rahardi added: "We will inform the local banks that the exporters eligible for this trade financing facility are those with good track records. There's no need to be worried."

Several other donor countries have pledged to provide a multibillion dollar L/C guarantee to Indonesia, including $1 billion from U.S. Exim Bank, A$400 million from Australia, $3 billion from Singapore and DM300 million from Germany.

But Rahardi said last month that several of the commitments, including those from Singapore and Germany, had not been realized because terms were difficult to implement and needed to be renegotiated. (rei)