Indonesia will issue investment instruments for export earnings of natural resources

[JAKARTA] Indonesia will issue investment instruments for earnings from the export of natural resources, a finance ministry official said on Thursday (Dec 18). This is to try to improve exporters’ compliance, with rules to keep their foreign currency proceeds in the country.

The new regulation, intended to increase onshore US dollar liquidity and stabilise the rupiah exchange rate, will require natural resource exporters to retain all foreign currency earnings from Jan 1 in state banks for at least a year, and limit their use.

The new instruments will include a new competitive series of domestically issued foreign exchange bonds, said Febrio Kacaribu, a senior official at the finance ministry.

Indonesia is the world’s biggest exporter of palm oil, thermal coal, nickel and tin, and a major seller of rubber, coffee and other commodities.

“What has happened is the earnings are converted into rupiah, and they end up offshore,” Febrio said.

The planned rule has received complaints from the palm oil and mining associations, as the new regulation will cap the conversion of their FX earnings to rupiah at a maximum of 50 per cent.

Under the current regulations, exporters can keep earnings in any Indonesian bank. They can also get a waiver for the length of the retention if the proceeds are converted into rupiah.

“We need funds for our operation, mostly in rupiah ... We hope they will reconsider,” said Hadi Sugeng, the secretary general of Indonesian palm oil association (GAPKI).

Hendra Sinadia, executive director of the Indonesian Mining Association, said that the miners also hoped that the government would keep the current rules.

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When asked about the industry complaints, Febrio said exporters should get a loan from banks if they required more rupiah funds beyond the 50 per cent limit.

Febrio also said there should be limited liquidity impact for non-state banks, because they could still cater for exporters outside of natural resource sectors. REUTERS