Singapore details RI trade financing plan
Singapore details RI trade financing plan
SINGAPORE (Reuters): Singapore Prime Minister Goh Chok Tong
told parliament yesterday that Singapore's trade insurance scheme
for Indonesia would be in two parts.
He said the first US$3 billion under the previously announced
proposal would be used to guarantee export credit for Singapore
exports to Indonesia, and exports from Indonesia retained in
Singapore.
The next $2 billion would be used eventually for exports
through Singapore to Indonesia by companies whose home countries
did not have similar bilateral trade guarantee schemes.
He said some details were still being worked out and he could
not say at this point when the scheme would begin.
"As Singapore has no experience designing or operating a
government-sponsored trade guarantee scheme, we have to start
cautiously and modestly," Goh said.
He said the scheme would be administered by Singapore-based
ECICS Credit Insurance Limited.
"Initially, the scheme would only provide export credit
insurance for our domestic exports to Indonesia," Goh said.
"After we have gained experience with the scheme, we would
extend the scheme to cover retained imports from Indonesia."
Singapore would use $3 billion out of the $5 billion it
pledged earlier for this, he said.
"We will eventually expand the scheme to cover exports through
Singapore by Indonesia's trading partners who do not have (their
own) bilateral export credit schemes," Goh said.
"The remaining $2 billion out of five will be used for this
purpose."
Goh said the Singapore government would select several banks
operating in Indonesia as trade finance banks (TFBs).
It would then identify a group of Singapore exporters to
participate.
Indonesian importers would go to the TFBs, which would issue
export credits for the business.
The TFBs would bear the commercial risk of transactions and
the letters of credit would then be presented to the Singapore-
based banks of the exporters.
Should there be a default, the Bank of Indonesia, Indonesia's
central bank, would give an unconditional guarantee but the
Singapore government would provide partial counter-guarantee, Goh
said.
The Singapore exporters, Singapore banks and ECICS Credit
Insurance would share some of this risk to ensure due diligence
on their part.
"Singapore and Indonesian officials will meet soon to flesh
out the scheme," Goh said.
He had announced Singapore's intention to help Indonesia in
the trade credit area earlier in the year.
Indonesia, a next-door neighbor and major trade partner of
Singapore, has been among the Asian countries hardest hit by the
regional economic crisis and as a result its companies have been
having difficulty securing trade financing.