S'pore, RI agree bilateral trade financing scheme

Fri, 27 Mar 1998 | Source: REUTERS

SINGAPORE (Reuters): Singapore and Indonesia will launch a bilateral trade financing scheme, state television quoted Prime Minister Goh Chok Tong as saying yesterday.

It said Goh told Singapore reporters at the end of a two-day trip to Thailand that this trade guarantee should be backed by at least US$2 billion, which would come from Singapore's pledge to the International Monetary Fund (IMF) rescue package for Indonesia.

Goh said he might be able to supply details next week.

Singapore bankers would be consulted to take part in the scheme.

Goh said the scheme had come at Indonesia's request and would have some flexibility built in so other countries could participate later.

Exports, such as those from Singapore manufacturers, would be covered under the scheme.

State television quoted Goh as saying his proposal for a multi-lateral trade financing scheme for Indonesia depended on the support of the Group of Seven (G-7) countries.

So far, the G-7 countries had not shown much interest. Goh said they preferred their own financing schemes.

Goh suggested in early February that a multilateral consortium be formed to guarantee letters of credit (L/Cs) for Indonesian companies in essential export industries.

Indonesian trade has been hit hard by the Asian currency crisis, which has seen the Indonesian currency, the rupiah, fall by about 70 percent since mid-1997.

As a result, Indonesian firms have found it difficult to get their L/Cs accepted by international suppliers, hampering the import of raw materials vital for manufacturing industry.

Goh wrote to all the G-7 countries -- the United States, Canada, Japan, Britain, France, Italy and Germany -- as well as China, Australia, Brunei, Malaysia and the Netherlands, asking for their views on the subject, Singapore said this month.

But many Western countries have been reluctant to get involved in any scheme to support Indonesia until it complies fully with its agreements with the IMF over the restructuring of its economy.

The $2 billion worth of guarantees falls far short of the US$8 billion target Goh said last month he thought was achievable.

Meanwhile an IMF official said in Tokyo yesterday that Indonesia and the International Monetary Fund made "reasonably good progress" in their talks on a new package of measures to revive the Indonesian economy.

But IMF official Jack Boorman said he could not predict when a new agreement would be reached.

"We are making reasonably good progress, but it's very complicated," Boorman said. "One doesn't want to rush.

"We want to make sure we have an agreement that everyone understands and that can be carried out effectively," he said.

Asked when such an agreement might be reached, Boorman said: "I can't put a time on it."