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EximBank May Provide $2.5b In Export Financing Loans

Indonesia EximBank, the nation’s export financing agency, is ready to make $2.5 billion available for export financing this year after it secured $100 million in loans from the Japan Bank for International Cooperation, an official said on Tuesday.

The increase in the loan facility was welcomed as a boost for the beleaguered export sector, which is down more than 20 percent from January to May.

Eddy Putra Irawady, deputy for industry and trade for the Coordinating Ministry for the Economy, said that given the trade financing agency’s own capital of about $400 million and the additional $100 million loan, that EximBank would be able to provide export financing of up to Rp 25 trillion ($2.5 billion).

Eddy said that if the trade financing materialized, it would represent about 2 percent of the country’s annual non-oil and gas exports by value.

“Therefore, assuming nothing changes, we could expect non-oil and gas export growth of 7.2 percent year-on-year,” Eddy said.

The country’s non-oil and gas exports reached $107.8 billion last year, growing 17.16 percent from 2007, according to data from the Central Statistics Agency (BPS). However, from January to May this year, the country still recorded a drop of about 21.19 percent of non-oil and gas exports to $35.06 billion from $44.48 billion in the same period last year.

On Monday, Japan, through the JBIC, agreed to a loan for Indonesia export financing worth $500 million, $100 million of which would go to EximBank.

The bank is in the process of transition and will be fully operational as an export agency by October this year. Indonesia EximBank was previously known as PT Bank Ekspor Indonesia.

Its main activities would be to provide export financing, guarantees and insurance.

“Exim would also help banks in supporting exports activities as many banks are currently facing liquidity problems,” Eddy said.

The bank would focus on exports to nontraditional markets, including the Middle East, Eastern Europe, Russia and countries in west Asia.

“It will focus on the penetration of conventional commodities and also new products to these countries,” Eddy said, adding that new products would include construction services, technology, fertilizers and tourism.

Meanwhile, Erwin Aksa, chairman of the Indonesian Association of Young Entrepreneurs (Hipmi), said EximBank should carefully select products that are the country’s top exports and diversify markets, as this would boost exports.

“Looking at current conditions, it will be hard to improve export performance by financing alone, as the biggest problem is sluggish markets,” Erwin said.

“Export penetration must be diversified,” he added.

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