S'pore unveil $3b program for RI

S'pore unveil $3b program for RI

LONDON (Agencies): Singapore will set up a US$3 billion
program to guarantee trade financing for Indonesia, the nation
hardest hit by Asia's financial crisis, Prime Minister Goh Chok
Tong said Saturday.

The program can be expanded to $5 billion in the future to
guarantee exports from other Asian countries like Thailand, which
also have been hit by the crisis, he said.

At a news conference following the second Asia-Europe summit,
Goh said President Soeharto called him in London on Thursday and
said "the scheme would be very welcomed by Indonesia."

Three Indonesian ministers had earlier been in contact with
Singaporean officials about "the urgency of the trade financing
scheme," he said.

The $3 billion will be used to counter-guarantee the guarantee
by Indonesia's central bank, Bank Indonesia, for the financing of
trade loans by the country's commercial banks.

Singapore has chosen to focus on Indonesia, the world's fourth
most populous country, because "the collapse of its economy would
cause another round of turmoil in Asia," Goh said in a statement
to leaders of the 25 nations attending the Asia-Europe Meeting.

The money is to come from the $5 billion pledged last fall as
Singapore's contribution to a bailout package for Indonesia
orchestrated by the International Monetary Fund.

Singapore's initial proposal for a multilateral trade
financing plan failed due to the lack of support from the Group
of Seven leading industrialized nations, Goh said.

"We would have preferred the multilateral scheme that we had
announced earlier, but given the urgency of trade financing for
Indonesia, we are proceeding with our bilateral scheme," he said
in the statement.

"Nevertheless, we hope to build in the flexibility in our
bilateral scheme to move to a multi-lateral one, if circumstances
permit," he added.

He said Indonesia had "strongly requested" that Singapore
launch its own scheme.

Under the G-7 scheme, export credit agencies from 18 countries
would ease trade financing for several Asian countries, including
Indonesia and South Korea.

The trade finance scheme will relieve the credit crunch for
Indonesian companies facing difficulties securing credit.

International banks, fearful of more bad loans because of the
country's financial troubles, have refused to accept LCs opened
by Indonesian banks.

This is even after the Indonesian central bank said in late
January it would guarantee those obtained by Indonesian banks.

Goh told the news conference that Singapore had no experience
operating such a scheme and was looking for expert help in
setting it up.

"The money is there ... but I would begin cautiously and get
the thing going and expand over time," he said. "I'm fearful that
if we make some mistakes to begin with - assuming that the
structure isn't done properly - the scheme could be affected."

Goh said the scheme is contingent on Indonesia reaching
agreement with the IMF on a rescue package.