New Japan plan to help Jakarta may be announced this week
Plan may involve additional support lines for rupiah or guaranteed loans
By Anthony Rowley
JAPANESE finance ministry officials yesterday professed ignorance on the contents of a new plan mooted by the ministry's International Finance Vice-Minister Eisuke Sakakibara to aid Indonesia but they suggested that an announcement is likely this week. The plan may involve additional support lines for the beleaguered rupiah or officially-guaranteed loans from Japan, sources said.
ÿ <Picture: Worries linger>
Mr Sakakibara suggested on Japanese television last weekend that Japan would cooperate with the International Monetary Fund in drawing up additional measures to help Jakarta. "We will never let Indonesia down, at any cost," he said in a statement that underscored the strong economic and historical ties between Japan and Indonesia.
The senior finance ministry official declined to specify what new measures he had in mind beyond saying that they "need not be drastic".
Mr Sakakibara had earlier suggested that the United States and Singapore might also be involved with Japan and the IMF in providing fresh support for Indonesia but he made no mention of this during his television appearance.
Japan and Singapore have already agreed to supply Indonesia with US$5 billion (S$8.8 billion) each by way of so-called "second-line" dollar swap arrangements to support the rupiah, a finance ministry official in Tokyo noted last night to BT.
The US also contributed US$3 billion to this arrangement while Australia, China, Hongkong and Malaysia supplied more modest amounts.
The total of around US$13 billion involved was in addition to "first-line" support of US$23 billion made available to Indonesia under an IMF package but some sources suggested last night that the collapse of the rupiah has been so dramatic as to render these amounts inadequate for underwriting the currency.
The rupiah fell as much as 15 per cent in early trading yesterday. It steadied to close down 1.5 per cent at 12,950 to the US dollar. Jakarta wishes to mount a serious defence of the rupiah and to place a credible floor under the currency. It may need longer-term loans to bolster its official reserves in addition to the kind of short-term swaps (usually backed by the collateral of holdings in US Treasury securities) that was agreed to late last year, the sources suggested.
While it is unlikely that the Sakakibara plan will involve Japanese banks agreeing to provide Indonesia with medium-term loans to bolster its reserves at their own risk, the Japanese government is known to have been mulling for some time the idea of providing guarantees by Japanese public institutions such as the Japan Exim Bank.
Japan has a strong motivation to provide such assistance. Indonesia is Japan's largest supplier of natural gas and a significant source of Japanese oil imports.
Indonesia also ranks among the top three destinations for Japanese foreign direct investment and nearly one-third of all Indonesian borrowing from foreign banks is from Japanese institutions. Japan is also the primary source of foreign aid to Indonesia, reflecting strong ties that pre-date World War II.
Meanwhile, Australian Foreign Minister Alexander Downer said yesterday that Canberra is considering backing lines of credit used in trade with Indonesia.
"We are prepared to look at the possibility of providing some government cover for lines of credit to ensure that the trading relationship remains a strong relationship," he told reporters after meeting Indonesian President Suharto.
The matter will have to be considered by Prime Minister John Howard and the cabinet, Mr Downer added. |
