RI's small firms need emergency funds: PECC

RI's small firms need emergency funds: PECC

SINGAPORE (Reuters): An economic think tank said yesterday it had asked the Asia Pacific Economic Cooperation (APEC) group to make emergency loans of US$3 billion to prop up thousands of small Indonesian firms on the brink of bankruptcy.

Asia's economic crisis is starving small and medium-sized enterprises (SMEs) of vital working capital which urgently need the loans to support production and exports, the Singapore-based Pacific Economic Cooperation Council (PECC) said in a statement.

"These enterprises are the bedrock of the Indonesian economy. If they go, it goes," Adlai Stevenson, co-chairman of the financial markets development group of PECC, was quoted as saying.

PECC said the loans would supplement the International Monetary Fund's US$40 billion-plus bailout of Indonesia and would not undermine the program that had been in danger of collapse in recent weeks.

"The proposed working capital loan fund is intended to support the IMF by helping SMEs survive until equilibrium is restored," said PECC, which groups 23 Asia-Pacific economies.

If no relief was forthcoming for Indonesia's small firms a broadening of unrest could occur within three to six months, PECC warned.

Export financing plans unveiled by Singapore and the United States were helpful, but supplied small firms with less than half the capital they required, PECC said.

"Without the working capital loan fund or its equivalent, export financing programs will have little effect," it said.

PECC said its proposal, which advocated making the loans at prevailing market rates, met with positive, if cautious response from APEC and lending institution representatives.

"There is genuine appreciation for the PECC proposal and there is a unanimous agreement that the problem is critical," Stevenson said.

Although Indonesian firms would be the immediate recipients of the loans, the scheme should be extended in the near future to other countries hit by the regional crisis, PECC said.

APEC groups 18 Asia-Pacific economies -- Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, South Korea, Taiwan, Thailand and the United States. Peru, Russia and Vietnam are scheduled to join this year.