Two Indonesian Banks Sign Trade Agreements with ADB

Asian Development Bank

MANILA, PHILIPPINES - Two Indonesian banks today signed trade financing agreements with the Asian Development Bank (ADB), a move that will help them provide crucial support for their local exporters and importers.

The agreements, signed by PT Bank Mandiri (Persero) Tbk and PT Bank Muamalat Indonesia are part of ADB's Trade Finance Facilitation Program (TFFP) and are the first such agreements signed by Indonesian banks.

"These agreements with ADB will make it easier for Indonesian banks to extend trade financing," said James Nugent, Country Director of ADB's Indonesia Resident Mission. "Easier access to trade finance will help Indonesian companies at a time when external trade is gradually recovering from the effects of the global financial crisis."

Under the $1 billion TFFP, which started operations in 2004, the Triple-A rated ADB provides finance and guarantees through, and in conjunction with, international banks and banks in ADB's developing member countries. By attracting private sector financing, and because the portfolio can roll over once a year, the program could generate $15 billion in trade finance through 2013.

The TFFP is central to ADB's commitment to support trade in emerging economies. Trade is a key tool to boosting economic growth and reducing poverty by creating jobs and attracting private capital. However, borrowers in emerging markets seeking financing for trade have traditionally had difficulty accessing credit. This is partly because banks elsewhere are unfamiliar with local borrowers.

"Participating in ADB's trade finance program will connect those Indonesian banks and their clients more closely in global banking, trade and business networks, which should ultimately reap rewards in terms of higher domestic and world economic growth," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department, which oversees the TFFP.

ADB's Asian Development Outlook 2009 Update, released in September, forecasts growth in developing Asia of 3.9% this year and 6.4% in 2010. It expects Indonesia's economy to expand 4.3% in 2009 and 5.4% in 2010, with the current account surplus to rise to 2.0% of gross domestic product this year and 2.1% next year. In 2008, it was 0.1% of GDP.

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