26-7-2023 (JAKARTA) Indonesia is developing a financing scheme for its exporters, enabling them to keep their earnings onshore, after business groups complained that new rules made it harder to cover operational costs.
Under a rule introduced earlier this month, natural resource exporters must retain 30% of their proceeds for every custom document for exports worth at least $250,000 in the domestic financial system for three months, starting from August 1. The regulation was intended to boost domestic foreign exchange supply but has faced backlash from exporters who argue that parking funds for three months takes away cash needed for operations.
Pandu Sjahrir, Chairman of the Indonesia Coal Miners Association, stated that coal miners’ profit margins were already squeezed by plunging global prices and rising fuel costs, and the new rules would hinder their ability to pay contractors and vendors. Eddy Martono, Chairman of the Indonesian Palm Oil Association, also complained that companies must set aside funds for operational costs if they were unable to use some of their revenues for three months. “If we have to get that from a bank, there will be more cost involved,” he told Reuters.
To address exporters’ concerns, the government is finalising rules for a banking regulation that allows a back-to-back loan where the proceeds that an exporter puts into a bank can be used as a lending collateral. Authorities are also working on new tax incentives that will ensure an attractive return for exporters’ funds parked onshore, which will be competitive with returns offered for term deposits offshore, said Ferry Irawan, a senior official at Indonesia’s coordinating ministry of economic affairs.
The government has already set a lower tax rate on the earnings that exporters receive in interest from their rupiah term deposits at local banks. Earlier this year, Bank Indonesia launched a new instrument that allowed banks to pass exporters’ funds to the central bank, where they would be placed in term deposits carrying high returns.
Bank Indonesia Governor Perry Warjiyo on Tuesday said it would revise central bank rules on export proceeds to align with the government’s new export retention regulation, but did not provide details. The development of a financing scheme for exporters is expected to ease the burden on businesses and facilitate smoother transactions.
