Singapore trade finance for Indonesia set at $3 billion

Singapore trade finance for Indonesia set at $3 billion

SINGAPORE (Reuters): Singapore said yesterday its trade financing scheme for crisis-battered Indonesia would be US$3 billion.

A statement from Prime Minister Goh Chok Tong's office confirmed a state television report from London that a bilateral financing scheme between the two countries aimed at helping Indonesia revive its trade would amount to US$3 billion.

The new figure -- up from the US$2 billion Goh had mentioned several times -- was removed from the television teletext report while confirmation was sought from Goh's party, in London for a summit of European and Asian leaders.

Goh said in Bangkok last week that at least US$2 billion of Singapore money originally pledged for the US$43 billion International Monetary Fund (IMF) rescue package for Jakarta would go to the trade financing scheme.

Singapore has given few details of how the scheme would work, but economists say the basic outline is clear and it would be of major help to Indonesian companies whose trade is virtually paralyzed by their inability to get letters of credit (LCs).

The Indonesian rupiah has lost some 70 percent of its value against the U.S. dollar since July and foreign banks have been very reluctant to accept Indonesian LCs, cutting a heavy swathe through the country's trade.

The economists say the Singapore plan is designed to help restore confidence in the ability of Indonesian companies to pay for imports.

They said the scheme should allow Indonesian banks to issue LCs for goods to be imported from, or through, Singapore -- especially goods needed for Indonesian export items.