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.