Singapore details US$5 billion support plan for Indonesia
03:29 a.m. Apr 20, 1998 Eastern
SINGAPORE, April 20 (Reuters) - Singapore Prime Minister Goh
Chok Tong told parliament on Monday that Singapore's trade
insurance scheme for Indonesia would be in two parts.
He said the first US$3 billion under the previously announced
proposal would be used to guarantee export credit for
Singapore exports to Indonesia, and exports from Indonesia
retained in Singapore.
The next $2 billion would be used eventually for exports
through Singapore to Indonesia by companies whose home
countries did not have similar bilateral trade guarantee
schemes.
He said some details were still being worked out and he could
not say at this point when the scheme would begin.
''As Singapore has no experience designing or operating a
government-sponsored trade guarantee scheme, we have to
start cautiously and modestly,'' Goh said.
He said the scheme would be administered by Singapore-based
ECICS Credit Insurance Limited.
''Initially, the scheme would only provide export credit
insurance for our domestic exports to Indonesia,'' Goh said.
''After we have gained experience with the scheme, we would
extend the scheme to cover retained imports from Indonesia.''
Singapore would use $3 billion out of the $5 billion it pledged
earlier for this, he said.
''We will eventually expand the scheme to cover exports
through Singapore by Indonesia's trading partners who do not
have (their own) bilateral export credit schemes,'' Goh said.
''The remaining $2 billion out of five will be used for this
purpose.''
Goh said the Singapore government would select several banks
operating in Indonesia as trade finance banks (TFBs).
It would then identify a group of Singapore exporters to
participate.
Indonesian importers would go to the TFBs, which would issue
export credits for the business.
The TFBs would bear the commercial risk of transactions and
the letters of credit would then be presented to the
Singapore-based banks of the exporters.
Should there be a default, the Bank of Indonesia, Indonesia's
central bank, would give an unconditional guarantee but the
Singapore government would provide partial counter-guarantee, Goh said.
The Singapore exporters, Singapore banks and ECICS Credit
Insurance would share some of this risk to ensure due diligence
on their part.
''Singapore and Indonesian officials will meet soon to flesh out
the scheme,'' Goh said.
He had announced Singapore's intention to help Indonesia in
the trade credit area earlier in the year.
Indonesia, a next-door neighbour and major trade partner of
Singapore, has been among the Asian countries hardest hit by
the regional economic crisis and as a result its companies have
been having difficulty securing trade financing.
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