Singapore bankers cool on USDA plan
Singapore bankers cool on USDA plan
SINGAPORE (Reuters): Singapore bankers reacted coolly to a
U.S. Agriculture Department (USDA) plan to let banks in Singapore
participate in a U.S. farm export loan guarantee program for
Indonesia.
In a move to help U.S. farm exports, USDA said last week it
would allow banks in Singapore to participate in a program to
offer loan guarantees for U.S. farm exports to Indonesia.
"The idea is not bad, if things are operating normally. But
the condition is not normal in Indonesia. The risk is just too
high," said a Singapore-based executive at a U.S. bank.
He was attending a seminar organized by U.S. Agriculture Trade
Office in Singapore on the USDA plan.
USDA has allocated $400 million in GSM-102 loan guarantees to
help the financially-struggling nation buy U.S. farm goods in
fiscal 1998, which began October 1.
Indonesia is a leading Asian grain buyer but industry sources
have estimated its soymeal and corn imports in 1998 will crumble
owing to its worst economic crisis in decades.
Wheat imports could drop by as much as 20 percent despite
rising consumption, they said.
As of Feb. 27, Indonesia had used only $31.4 million of the
U.S. loan guarantees -- to buy $24.1 million of oilseeds, $7.1
million of cotton and $200,000 worth of corn products.
"The United States is shifting some of its risk in Indonesia
to Singapore," said one banker at the seminar.
Washington does not want to lose Indonesia during stiff
competition with South American countries like Argentina and
Brazil in the commodities industry, the banker said.
"We are trying to maintain our market share," Lawrence
McElvain, a director of USDA's Export Credits, told dozens of
bankers at the seminar.
Despite the financial instability in Indonesia, "we are
prepared to take the risk," McElvain said.
The GSM-102 loan guarantee program will cover all agricultural
commodities and approval will be granted within 24 hours if all
necessary documents are provided, he added.
Singapore also supported a multilateral system of guarantees
of Letters of Credit (LCs) for Indonesia to enable the country to
import goods vital for its export trade.
Singapore Prime Minister Goh Chok Tong proposed the LCs system
to Indonesian President Soeharto in February.
But many bankers here were apparently unwilling to participate
in the USDA program.
"Singapore government has its concerns as it has huge
investment in Indonesia. If the situation in Indonesia keeps
worsening, it won't do Singapore any good," one banker said of
Singapore's support for LCs.
"But at the moment even one percent of risk is a big deal for
any bank in Asia," the banker said.
"The main problem is they don't have cash so who can guarantee
them?" he added.
The International Fund Management's (IMF) postponement of a $3
billion bail-out payment to Jakarta over the weekend cast more
shadows on the USDA program, trade sources and bankers said.
"I can't imagine what will happen to Indonesia if they can't
get the money from IMF or foreign banks. They've already cut down
imports tremendously," said one grain trader at a U.S. commodity
house in Singapore.
Even after Indonesia's key election this week, most banks are
likely to maintain a wait-and-see attitude, they said.
"Anything can change any minute in Indonesia, but shipments
from the United States will take three weeks to arrive. Who wants
to take this kind of risk?" said one banker at a Europe-based
bank.