Geopolitics, Supply Chain, and New Market are Challenges of Modern Trade

JAKARTA - Chairman of the ICC Banking Commission Indonesia, Herry Hykmanto, conveyed that there are three major challenges currently faced by modern trade, especially international trade.

Herry added that geopolitical volatility and policy changes in various countries, supply chains that are increasingly diversified and not dependent on one region, and developing countries are becoming new growth markets for international trade.

He also explained that in the midst of international trade dynamics, banks and business actors must be able to manage risks when working with new partners or expanding new markets with higher risks.

Herry added that the selection of the right risk mitigation instruments is needed to support the expansion of the exporter market and access to financing from banks.

According to him, export guarantee and insurance products can be alternative instruments for risk mitigation that are crucial for growth, market expansion, and business resilience.

"Guarantees and insurance allow business actors to enter new markets, participate in international tenders, and reduce payment risks," he said in a statement some time ago, quoted on Monday, January 12.

International trade payment shift

At another presentation, the Executive Vice President of Indonesia Eximbank, Suharyanto, explained that in recent years there has been a shift in the method of payment in international trade transactions which were previously dominated by Letter of Credit (LC) to non-LC.

According to him, this new trend has increased due to rapid development in digital technology.

He added that currently international trade is also entering the era of digitization, where the way of billing conventionally (physical) through couriers, is beginning to be abandoned and replaced with digital billing.

"Exporters and importers can agree that the billing process is carried out online by uploading documents, including shipping documents and invoices, making approvals, and monitoring payment schedules. Thus, the flow of transactions will be more efficient, fast, and safe," he said.

In line with this, Suharyanto suggested that business actors can adapt to the ever-changing global landscape.

He added that Indonesia Eximbank has export insurance products such as Trade Credit Insurance (TCI) which provides protection for exporters from buyer default risks due to commercial and political risks, with an indemnity of up to 90 percent and Marine Cargo Insurance for the risk of damage or loss of goods during shipment.

Meanwhile, Indonesia Eximbank in its role as Eximbank and Export Credit Agency (ECA) of the Republic of Indonesia is also present with an integrated solution to answer this challenge by offering Credit Guarantee products to banks.

According to him, through collaboration within the export ecosystem to help business actors, Eximbank's Indonesian products can also provide significant benefits for banks.

Suharyanto explained that in line with the regulator's provisions, with the status of Sovereign, Indonesia Eximbank can issue Credit Guarantees with the benefit of ATMR (Risk Weighted Asset) calculation of 0-20 percent, so that it can provide alternative solutions to banks in increasing financing capacity.

According to him, by using the Credit Guarantee product with special features in accordance with the regulator's provisions, banks also have the opportunity to obtain exemption from the calculation of BMPK (Maximum Credit Granting Limit), which gives banks more room for healthy credit expansion.

Suharyanto explained that in addition to through the Credit Guarantee product, Indonesia Eximbank can also support exporters with Guarantee products which refer to regulations commonly used in domestic trade in the context of exports and international trade, including URDG, ISP98, UCP600, Civil Code or the law of the country agreed by the parties.

"The combination of products in the structure of a solutive facility makes Indonesia Eximbank's guarantee one of the strategic instruments to strengthen the competitiveness of the banking sector in supporting export financing," he said.