U.S. Export-Import Bank To Offer Credit Insurance
February 17, 1998
By BOB DAVIS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The U.S. is rallying industrial nations to provide more than $10 billion in export assistance to companies doing business in troubled Asian nations.
As part of the effort, the U.S. Export-Import Bank plans to make available several billion dollars in short-term letter-of-credit insurance to U.S. companies exporting to South Korea, Indonesia and Thailand. Export-Import Bank Chairman James Harmon also is pressing other nations in Europe and Asia to provide similar assistance. The U.S. expects to announce a $10 billion package of export aid this weekend during a meeting of finance ministers from the seven largest industrial nations. The Group of Seven nations are the U.S., Japan, Germany, France, Italy, Canada and Britain.
"Each nation would support exports from its own country" to Asia, Mr. Harmon said. "It's an important signal in support of the region."
The package could ultimately climb well beyond $10 billion, as other nations join the G-7 plan. Australia, Singapore and the Netherlands, among other nations, have expressed interest in providing export credits. However, the plan isn't final and could run into opposition as export-credit agencies in different nations try to win approval from their finance ministries.
Each nation would provide export finance help according to its own rules. In the case of the U.S., the aid plan would build on a $750 million program for South Korea. There, the Ex-Im Bank works with 10 Korean banks to insure their letters of credit. Before the Asian crisis, Korean importers routinely obtained letters of credit from South Korean banks to pay for imports from the U.S. companies. Banks in the U.S. would then insure payment, based on the letter of credit.
That system broke down after the crisis, with banks in the U.S. and elsewhere refusing to guarantee payment from South Korea for fear that beleaguered banks there would default. Now the Ex-Im bank issues the guarantees, in lieu of private banks. From Dec. 1, 1997, to Jan. 20, 1998, the Ex-Im Bank issued 200 such guarantees -- 40 times the number for the comparable period a year earlier.
The trade-aid plan would help exporters continue to do business in South Korea, Thailand and Indonesia, and also help ensure those countries received needed imports. But it would help exporters from those nations as well. That's because the goods sold to Asia are often incorporated into products shipped to markets elsewhere. Under the plan, for instance, the Ex-Im Bank could help U.S. semiconductor makers ship computer chips to customers in Thailand where they are used to make computer parts that are then shipped to the U.S. and Europe.
Separately, the International Monetary Fund is starting to permit South Korean banks to use IMF loans to back South Korean exports.
Meanwhile, Indonesia, reeling from the lack of trade credits, is slipping back into a barter system, bankers said.
Concerned about worsening conditions for Indonesian companies -- and its own status as a hub for trade in the region -- Singapore Monday announced plans to boost bartering -- authorities use the term "countertrade" -- as a legitimate way of handling transactions.
--Darren McDermott contributed to this article. |
