S'pore aid for RI trade to go ahead

S'pore aid for RI trade to go ahead

SINGAPORE (Dow Jones): Singapore Deputy Prime Minister Lee
Hsien Loong said Monday plans to offer up to US$5 billion in
trade financing to help Indonesia remain in place despite the
abrupt change in government in Jakarta.

Lee, addressing Parliament, said however that the money, which
is supplemental to a rescue plan put together by the
International Monetary Fund, wouldn't be released until IMF
funding for the embattled country is reinstated.

"Singapore believes that the trade financing scheme can play a
significant catalytic role to unlock private funding (for
Indonesia)," Lee said.

Alluding to the Singapore trade financing plan, which could
eventually include non-Singaporean firms doing business with
Indonesia, Lee chided the U.S., the European Union and Japan,
saying, "Perhaps (they) will show such confidence (in
Indonesia)."

Lee said restoring confidence is a key factor in helping the
country's battered economy recover. "The IMF can make a
difference" by encouraging domestic reforms, he said.

But the deputy prime minister warned that political change in
Indonesia can only come from within and outside players,
including Singapore, can do little in this respect.

On the trade finance scheme, Lee said Indonesian officials are
still studying Singapore's proposal, following a meeting with
Singapore officials April 20. He said the discussions, put on
hold because of the recent developments in Indonesia, will resume
when Indonesia is ready.

The trade finance guarantee replaces the US$5 billion loan
which Singapore pledged in November last year to Indonesia as a
back-up facility to supplement the IMF rescue package, Lee said.

The change was made in March, in response to requests from
Indonesia for Singapore to launch its own trade finance scheme.

Lee said the scheme, which will initially provide export
credit insurance for Singapore's domestic exports to Indonesia,
may be expanded to cover retained imports from Indonesia and,
also, exports to Indonesia through Singapore by countries without
their own export credit schemes.

RI exposure

Lee said Singapore's six banking groups had investments in
loans in Indonesia totaling S$3.9 billion or 1.6 percent of total
assets as of April 30.

The information was part of a written response to a
parliamentary question asking for an update on the country's
exposure to Indonesia.

"The local banks...had set aside substantial provision to
cater to the potential risks arising from their exposure to the
regional economies, including Indonesia," said Lee, who is also
chairman of the Monetary Authority of Singapore, the island-state
effective central bank.

"In view of the current situation in Indonesia, the local
banks have indicated that they would set aside additional
provisions in 1998 for their exposure to Indonesia," he
continued.