Trade funding scheme for RI not canceled: S'pore

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.