Trading partners agree to give credit guarantees

Trading partners agree to give credit guarantees

JAKARTA (JP): Japan, Australia and the United States have
agreed to provide credit guarantees for Indonesian exporters to
import raw materials, a senior trade official said yesterday.

Djoko Moelyono, the director general of international trade,
said similar facilities were still being discussed with the
governments of Germany, Singapore and the Netherlands.

He said the U.S. had agreed to guarantee a total of US$460
million in Indonesian letters of credit (L/Cs) to import certain
raw materials for exporters, including cotton, corn, wheat,
flour, meat, rice and soybeans.

He said Australia had also specified it would only cover
certain items, including cotton, meat, dairy products, sugar,
aluminum products and automotive components.

"Both the U.S. and Australia have specified that the
facilities will only be provided for specific products imported
from their countries," Djoko said after a meeting with the
Indonesian Importers Association (Ginsi) and central bank
officials.

He said Bank Indonesia had designated 31 banks as the issuers
of L/Cs backed by U.S credit guarantees.

The banks include Bank Internasional Indonesia, Bank Central
Dagang, Bank Duta, Bank Tamara, Bank Central Asia, Bank Danamon,
Bank Mashill, Bank Umum Nasional, Bank Nusa, Bank Bali, Chase
Bank, Bank Universal, Bank of America, Bank Negara Indonesia,
Bank Modern, Bank Dharmala and Bank Bukopin.

He added that Australia had not designated any issuing banks
or the total value of its credit guarantees, but had asked the
government to designate importers to be eligible for its
guarantees.

Japan will provide its guarantees for Indonesian L/Cs through
its Exim bank, he said.

He explained that although Japan's assistance had no
specifications on type of raw materials or country of origin, it
wanted its assistance to be only given to exporters receiving
special government status.

Djoko expressed confidence that many developed countries would
come to Indonesia's aid because they have an interest in
continuing to market their products here.

German Finance Minister Theo Waigel signed a memorandum of
understanding Wednesday with the government to provide a total of
Dm375 million ($206 million) in financial assistance to help
Indonesia in dealing with the economic crisis.

Some Dm250 million will be given in export credit guarantees
for small and medium enterprises facing financing difficulties
importing raw materials or investing in projects.

"We want importers to use these facilities," Djoko said.

Importers have asked the government to continue providing more
facilities, especially a special rupiah exchange rate of Rp 4,000
to the U.S. greenback.

"If not, we may still face huge problems in importing raw
materials," said Amirudin Saud, chairman of Ginsi, adding that
many importers would run out of raw materials in March.

The currency crisis has caused the value of the rupiah to drop
about 75 percent from its pre-crisis level of Rp 2,450 in July.
This has caused prices of imports to increase sharply.

He explained that the financial crisis has slashed import
activities, pointing out that before July, total imports of raw
materials totaled $2.5 billion per month, while current imports
tallied to less than 100 million per month.

Indonesian importers and exporters have suffered as well from
a loss in public confidence of Indonesian banks as foreign banks
have generally not accepted L/Cs from the local banks.

This has raised concerns that the country might fail to
achieve its non-oil and non-gas export target of $49.25 billion
in the 1998/1999 fiscal budget. Many Indonesian export products
have a 50 percent import content.

Despite a government guarantee of all bank obligations
announced in January, importers say that L/Cs opened at domestic
banks are still unaccepted by their foreign counterparts. (08)