Trade funding scheme for RI not canceled: S'pore

SINGAPORE (AFP): The Monetary Authority of Singapore (MAS) said yesterday the city-state's proposed guarantee scheme to help finance Indonesian imports would proceed despite reports in Jakarta that it had failed.

"Singapore has not canceled the plan to set up a multilateral trade finance guarantee facility for Indonesia," a spokesman for the MAS, Singapore's de facto central bank, said in a statement in reply to media queries.

Newspaper reports in Jakarta yesterday quoted outgoing Minister of Trade and Industry Tunky Ariwibowo as saying the scheme failed after Singapore was unable to get support from other countries for its proposal. Banking sources said Jakarta was looking into alternative arrangements.

"Singapore is still waiting for a reply from Indonesia's major trading partners and the multilateral financial institutions on the proposal," the MAS spokesman said.

"Singapore understands that uncertainty over Indonesia's compliance with the IMF measures and the creation of a proposed currency board system has held up replies from the countries concerned," the statement added.

Fresh talks are scheduled between the International Monetary Fund (IMF) and Indonesia next week on ways to ease an impasse over the terms of a tough reform program linked to a US$43- billion bailout for Jakarta.

Indonesia's plans to impose a currency board system that would set a fixed rate for the rupiah have also been opposed by foreign creditors.

The trade guarantee scheme was proposed by Singapore Prime Minister Goh Chok Tong during a visit to Indonesia after foreign banks refused to honor letters of credit issued by troubled Indonesian banks.

In a recent media interview, Goh said the scheme would "insure against sovereign risks of Indonesia," and this would "help foreign banks accept letters of credit."

But he noted that the Group of Seven (G-7) developed countries were planning bilateral arrangements to keep Indonesian trade going despite the country's financial crunch.

"The schemes can complement one another, but our scheme may become unnecessary if the G-7 countries decide that theirs is good enough. At the moment, I'm waiting for a reply from the leaders of the G-7 countries," he said.

"These are ideas and proposals which we can do to help the countries over here to overcome the currency problem and we also, in a sense like the others, tell the countries concerned that they have to abide by the IMF package which they have signed," he said.

In other development, the central Bank Indonesia told five of its correspondent banks overseas that it would deposit $1 billion with them if they would guarantee letters of credit issued by Indonesian state banks, banking sources said.

Bank Indonesia approached ABN-Amro of the Netherlands, Bank of America, Standard Chartered of Britain, Bank of Tokyo-Mitsubishi and the Industrial Bank of Japan after the Singapore-backed multilateral guarantee scheme proposal for Indonesian imports was in a limbo.

A foreign banker confirmed the negotiations between Bank Indonesia and the five foreign banks but said final terms and conditions had yet to be established. It is not immediately known whether the central bank had deposited the money with the five banks.