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Banking on Asia’s Future With FAS
By Jill Lee
Political strife and economic troubles put Indonesia in the
news last year, but Ketut Dwirianto, with Bank CIC in Jakarta,
expects better times for his country.
"I think we are going to be okay," he said. "I’m an optimist for the future of Indonesia. We’ll be buying, and I see potential for U.S. soybeans, corn and wheat."
Dwirianto’s positive thinking may explain why he was chosen to lead efforts to build a special trade financing department.
To prepare him, the bank sent Dwirianto to the United States for a 3-week course on the financing of U.S. agricultural exports, sponsored by FAS’ Cochran Fellowship Program.
"This is my first trip to the United States," said Dwirianto. "I felt it was very important to participate in this training. FAS’ GSM-102 program can really help my customers and my country. When I get back I plan to make people aware of this program."
GSM-102 is an FAS export credit guarantee program designed to open the doors to trade with the United States.
"We presented a thorough program," said Cochran coordinator Avis Watts-Massenburg. "Martha Keplinger, the branch chief of the credit sales program, explained GSM to the group. Then, members of her staff who deal with Asia answered country-specific questions. We even had a speaker explain how to evaluate financial statements. "
Training To Enhance Trade
Cochran is a whole world in itself. This people-oriented, FAS international training program covers everything from veterinary medicine to supermarket management. Lately, it has been doing more to help mid-level banking professionals like Dwirianto understand technical aspects of FAS’ GSM-102 and GSM-103 guarantees.
The program enables importers in emerging nations to bring U.S. goods into their markets, in situations where credit may be necessary, but is not easily obtainable.
For countries like Indonesia, it’s just right. On Nov. 23, 1999, Indonesia was approved to receive $400 million in GSM backing for fiscal year 2000. More than 30 Indonesian banks have been named eligible for participation. Commodity coverage ranges from soybeans to cotton.
The agricultural specialists who manage the GSM program welcome the new Cochran training; educated borrowers make better customers.
"We certainly advocate further use of the Cochran program to bring in bankers," said William Hawkins, branch chief for FAS’ Export Program Survey and Review. "Our partnership with the Cochran program can only expand awareness of the GSM program as a tool to help emerging countries."
Hawkins, together with Cochran Program Leader Gary Laidig, are working on a standard training program to help bankers from emerging market nations interact with the U.S. banking system and FAS’ financing.
GSM Programs: A Win-Win for All
The GSM program is not about loans. It is insurance for U.S. lenders. So why should foreign banks care about it? This somewhat simplified explanation may help.
Exporters need to get paid right away. Importers, however, need time to distribute goods to retailers, who may, in turn, need time to pay the importer.
To solve the problem, the importer’s and the exporter’s bank must build a financial bridge to meet both sets of needs.
The U.S. bank provides a credit to the importer’s bank. The importer’s bank, in turn, provides credit to the importer.
The goods are shipped. The U.S. bank pays the exporter. The U.S. bank is paid, principal and interest, by the importer’s bank. The importer pays his or her bank under the terms of their credit arrangement.
The system has sealed deals since cargo ships were wooden and used cloth sails. But, just because an exporter is willing to sell and an importer is ready to buy, doesn’t mean their banks will support their plans. When an importing country is emerging from political or financial instability, a U.S. bank can get cold feet. That means no sale.
GSM-102 and GSM-103 turn the deal back on by insuring the money the U.S. bank lends. Nobody wants–or expects–a default to happen, but those GSM programs allow the American banks to lend with an extra measure of confidence.
"It’s a four-way winner," explains Hawkins. "U.S. exporters make a sale–perhaps one they couldn’t make before. U.S. banks get business they can feel confident about. Foreign banks receive better terms, and may be able to provide more favorable terms to the importer, who then can order more U.S. goods," said Hawkins.
He added that under the GSM programs, the foreign bank must repay in U.S. dollars, protecting the American banks from losses caused by changes in international exchange rates.
Cochran Fellow Suhardono Sudjono is the Group Head of Government Relations and Subsidiaries at Bank Mundiri, the biggest bank in Indonesia. His previous employer, state-operated Bank Dagang Negara recently merged with Bank Mundiri.
Sudjono said the longer repayment period under GSM-102 would help Indonesian importers hit hard by recent economic woes. He also points out demand for U.S. goods is currently strong.
"Indonesia is a country of 200 million people. We are an excellent market for your agricultural products. Our major food staple, soybeans, comes mainly from the United States," he said. "Also, I think American cotton is the best in the world. There is no better quality than what we can purchase in the United States."
Banking Beyond GSM 102-103
Participants came not only from Indonesia but also from Thailand and Vietnam.
After their Washington, D.C. instruction, they boarded a plane
for Ames, Iowa to attend seminars at the Center for International
Agricultural Financing at Iowa State University. 
Ron Prescott, the center’s assistant director for international programs, had several classes planned on banking, trade and financing.
"Since 1991, we have done over 40 Cochran training programs," he said. "I try to tailor the training to the needs of each group."
Prescott has been approached by many U.S. banks that wanted to talk with the group. They, like FAS, see potential in emerging markets.
"Vietnam has been opening up to the outside world and making great strides in its development, especially with the Vietnam-U.S. trade agreement, which has been initially signed in principle," said Le Thi Kim Thu, head of the International Payment Department at the Bank for Investment and Development of Vietnam in Hanoi. "The GSM program would support U.S. and Vietnamese businessmen as they begin to trade. In that circumstance, our bank would play a large and important role in matching these business partners."
Than Thi Lan is a trade official with the International and Commercial Bank of Vietnam in Hanoi. She says she took the Cochran training with her customers in mind.
"I think many of our Vietnamese customers would like to import agricultural products from the United States, such as cotton. But you have a different way of doing business here," she said.
Like Dwirianto, her Indonesian colleague, Lan is realistic about the difficulties in building trade with the United States, but is an optimist for her country’s future.
"We’ve hit some barriers in that some banks are just not open for business yet in Vietnam. But now we see that, in fact, there are options for import guarantees. I will tell our customers about the GSM program when I get back. At the moment, they haven’t heard much about it," she said.
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The author is a public affairs specialist with the FAS Information Division, USDA, Washington, D.C. Tel.: (202) 720-7939; Fax: (202) 720-1727; e-mail: leejill@fas.usda.gov
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