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strong>Aug. 26, p1

The fallout from a sustained decline in commodity prices and the government'€™s recent ban on raw mineral ore exports have caused non-performing loans (NPLs) in the mining sector to jump almost twofold in the first half of the year.

Loans that became hard for banks to collect in the mining sector rose to Rp 2.9 trillion (US$247.57 million) during the first six months of 2014 from Rp 1.08 trillion in the same period of last year, according to banking statistics published recently by Bank Indonesia (BI) and the Financial Services Authority (OJK).

Your comments:

What is the reason to be alarmed when there is a steep rise in non-performing loans?

Are all the loans not fully secured?

Accountants or borrowers are only afraid of the following: their inability to increase export shipments to defray their installment payments.

Here, coal exports have no regulatory impediments except those imposed for other mineral ores. When they are forced to build smelters they have to wait for two to three years to complete them before exports can take place '€” whereupon the long three-year lull forces the borrowers to bear and increase their financial obligations.

Didn'€™t the government anticipate such a situation taking place with all the NPLs? Was it expected? Exorbitant interest rates are charged by the lending banks, plus other payments are imposed by the ministry of mining, and remember that offshore loans incur charges by the principal and the participating banks.

There is also the falling rate of exchange of the rupiah, if the original loan was disbursed in foreign currency. Indeed, as woeful as it may seem, it is expected that more bad loans will surface '€” making a mockery of the law banning the export of mineral ore.

Now, can someone please look into his crystal ball and say that there will be no recession or fallout in the coming years? If yes, trouble and hardship lurks '€” until and unless the new president decides to introduce new ways and means to assist and revamp the overall mining industry.

Luwanto