Lawmakers clear way for export financing agency

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Wed, 12/17/2008 11:07 AM  |  Business

The establishment of the Indonesian export financing agency, made possible by the relevant bill being passed into law Tuesday, is expected to support exporters that are beyond the reach of banks, amid an expected slowdown in exports.

"The agency is expected to provide financing to sectors unreachable by banks and commercial institutions ... It can also give financing for projects considered crucial by the government to support government programs," Finance Minister Sri Mulyani Indrawati said.

"It should create a conducive investment climate to raise exports and highly competitive national products, while supporting micro-, small- and medium-sized businesses (MSMEs) to make export-oriented products."

About 90 percent of businesses in Indonesia are MSMEs, which often face difficulties in securing financing for expansion.

Exports have fallen since October due to decreasing demand from the United States, the world's largest importer.

"The agency is expected to accelerate exports and raise international confidence in Indonesian products," said Nursanita Nasution of the Prosperous Justice Party (PKS) after the plenary session endorsing the bill.

"It can give financing that cannot be given by commercial sources," said Musa Ichwananshah of the United Development Party (PPP).

The agency will replace Bank Ekspor Indonesia (BEI) and must be established within nine months of the law being enacted. The agency will be named Indonesian Eximbank.

BEI president director Arifin Indra said the agency would complement the banks as they would work together to finance exporters.

"The agency should enter areas where banks don't reach because they are not yet commercialized," said Zaenal Abidin Hussein of the Reform Star Party (PBR).

There will be a change in management from BEI to the new agency. BEI has a board of commissioners and a board of directors, but the agency will have only a board of directors, comprising 10 members.

Its initial capital will come from BEI, which is now has Rp 4.3 trillion in capital, Arifin said.

The government must inject more funds if the agency's capital plunges below Rp 4 trillion. However, if the capital grows by 25 percent -- which means it passes Rp 5 trillion -- 75 percent of the additional amount will be used to strengthen its capital, while 25 percent will be considered non-tax state revenue.

The agency will be allowed to secure funds from government bonds and foreign borrowings, while putting its unused money into government bonds, central bank certificates and foreign currencies.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.