LOAN TO INDONESIAN GOVERNMENT

Mr Low Thia Khiang asked the Minister for Finance what actions can Singapore pursue should the Indonesian government default in repayment of the loan which Singapore extended to them.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, the US$5 billion loan to Indonesia is a stand-by facility which will only be used when Indonesia has drawn down their own resources and other loans from international bodies such as the IMF, World Bank and ADB. Other countries such as Japan, US, Australia, Malaysia and Brunei have also contributed to the stand-by facility. As previously stated, it is a second line of defence and to-date, no funds have been disbursed.

Secondly, this is a sovereign loan which carries commercial interest rates throughout its tenor. Indonesia has up to five years to repay any draw-downs. We do not expect Indonesia to default on their loan obligations. The country has never defaulted on such loans. They are a fellow ASEAN member with abundant natural resources. At the end of 1996, the annual GDP of Indonesia was US$228 billion. This is more than twice Singapore's GDP.

Mr Low Thia Khiang: Would the Minister disclose the terms of the loan and whether or not there is any collateral, since it is a commercial loan, before the loan is released?

Dr Richard Hu Tsu Tau: I mentioned that this is a sovereign loan which does not require security. You do not pledge a country to secure the loan.