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)