Thai exporters cautious over Indonesia

Thai exporters cautious over Indonesia

BANGKOK (Reuters): Escalating problems in Indonesia, a major importer of Thai rice and sugar, has unnerved Thai exporters, industry sources said yesterday.

Indonesia has so far delayed a relatively small shipment of rice and committed to sugar purchases. But Thai exporters said they are increasingly worried about Indonesia's political and economic prospects and the direction of the volatile rupiah currency.

If Jakarta failed to form a currency board to peg the rupiah to a major currency as planned, the Indonesian unit could drop further and affect that nation's ability to import, they said.

The currency has lost up to 76 percent of its value against the U.S. dollar since last July, the start of the region's financial crisis.

If it introduces a currency board, Indonesia might run into trouble with the International Monetary Fund (IMF), which has asked Jakarta not to implement the system. The IMF has suggested it might halt the flow of cash agreed under a $43 billion aid package the fund helped arrange, a move likely to drive the currency well below 10,000 to the dollar.

"So far, (Indonesia) has committed well to its sugar contracts. There have been no defaults or cancellations. But we just wonder what would happen if the rupiah continued its downward trend," said one sugar trader.

Traders said the market was confused by the news that Indonesia was unlikely to import more sugar from Thailand.

"We heard a report that they are not going to import more. That is a bit unclear and worrying," said another trader from a major European trading house.

"Do they mean they are not going to buy more than what they had made contracts, or they are not going to take any more deliveries other than what has been executed?" he said.

Trade sources believed Indonesia has bought around 700,000 tonnes of white sugar from Thailand for this year although a large part of the contracts had yet to be executed.

Thailand delivered about 117,250 tons of white and refined sugar to Indonesia in January. Similar quantities were expected to be shipped in February and March.

Thai rice traders also complained that recent problems with Indonesia's letters of credit has cut the volume of rice traded between the two countries.

Indonesia recently delayed taking delivery of shipments of around 100,000 tons of rice because of problems with letters of credit following the country's temporary freeze on foreign debt repayments.

"Indonesia is a big buyer and I hate to say that the situation made us more cautious," said an executive at one major rice trading firm.

"However, I hope the situation will not be too bad as procuring rice to meet local demand should be on the top of the country's priority list," he said.

Industry sources had earlier forecast that Indonesia could import up to 800,000 tons of Thai rice this year.