Starting August 1, Export Proceeds Must Be Kept Domestically First
President Jokowi stipulates Government Regulation Number 36 of 2023 which requires exporters to include foreign exchange earned from exports of natural resources into the Indonesian financial system. Providing incentives is considered necessary in line with these obligations.
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By
CYPRIANUS ANTO SAPTOWALYONO
·4 minutes read
The following article was translated using both Microsoft Azure Open AI and Google Translation AI.
JAKARTA, KOMPAS — The government officially requires exporters who have foreign exchange proceeds for export of natural resources with an export value on export customs notifications of a minimum of 250,000 US dollars or its equivalent to include 30 percent of them in the financial system Indonesia. This applies to foreign exchange from exports of natural resources originating from the export of goods in the mining, plantation, forestry and fishery sectors.
This regulation is contained in Government Regulation (PP) Number 36 of 2023 concerning Export Proceeds of Foreign Exchange Exports from Exploitation, Management and/or Processing of Natural Resources. The PP stipulated by President Joko Widodo on July 12, 2023 will come into effect on August 1, 2023 as a substitute for PP No. 1 of 2019.
Referring to Articles 5, 6, and 7 of Regulation No. 36/2023, exporters who have foreign exchange from natural resources exports (DHE SDA) with export values on the Export Customs Notification (PPE) of at least 250,000 US dollars or the equivalent are obliged to include DHE SDA into Indonesia's financial system. This is done by placing DHE SDA into a special account for DHE SDA at Indonesian export financing institutions and/or banks that conduct foreign currency business operations.
The DHE SDA that has been deposited and placed by exporters into that special DHE SDA account must be placed at least 30 percent in Indonesia's financial system for a minimum of three months since being deposited into the special DHE SDA account.
When asked for his opinion on Friday (July 14, 2023), Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, stated that the policy of placing DHE domestically is aimed at increasing foreign exchange reserves. The increase in foreign exchange reserves will strengthen Indonesia's economic fundamentals.
"And indeed, our foreign reserve is relatively large in Southeast Asia, but not as big as its potential. In fact, our (foreign reserve) is still behind Singapore and Thailand. Meanwhile, our import-export activities were actually quite large, especially in commodities," said Faisal.
"Our foreign exchange reserves are relatively large in Southeast Asia, but not as large as their potential. In fact, our reserves are still behind Singapore and Thailand."
Reserves of natural resources, especially during the commodity boom, should increase as profitability increases or gains are made in US dollars. However, many of them are not parked in the country.
"The reason for businessmen, actually, is to maximize profits when parked abroad. And, in addition, for convenience because there are obligations that are also paid using US dollars," said Faisal.
As long as there are no strong regulations in the country and no incentives, according to Faisal, they certainly do not want to park their DHE in the country. Moreover, financial instruments in US dollars are also relatively limited domestically.
”So, in order to attract or encourage entrepreneurs to keep DHE domestically, a lot of incentives are needed, both taxes and conveniences. What is clear, without any incentives, entrepreneurs, yes, are reluctant. So, there is stick and carrot. The stick is in the form of mandatory regulations and there are sanctions when they are not carried out. And there is carrot in the form of incentives that are also provided by the government," said Faisal.
So, there is stick and carrot. The stick is in the form of mandatory regulations and there are sanctions when they are not carried out. And, there is carrot in the form of incentives that are also provided by the government.
Since the beginning of 2023, the preparation of regulations governing exporters storing DHE for three months has been conveyed by the Coordinating Minister for Economic Affairs, Airlangga Hartarto. Airlangga conveyed this in his statement to the media after attending the National Coordination Meeting for Covid-19 Handling Transition and National Economic Recovery at the AA Maramis Building, Jakarta, on Thursday (26/1/2023).
At that time, Airlangga said that Indonesia was entering a period where uncertainty still occurred and posed a number of threats. One threat that occurs is stagflation, namely when several countries, including the United States, continue to raise interest rates. ”Therefore, we must take an umbrella before it rains. So the export proceeds must become a buffer for our economy, then the P2SK Law becomes a buffer in the financial sector so that in this way we already have everything, (so) we are better prepared," he said.
According to Airlangga, the government made a PP that regulates exporters to keep export proceeds domestically for three months to prevent the foreign exchange from going abroad. Adequacy of funds, especially to finance exports and imports, is needed to prevent capital flight or outflow of capital.
"The need for exports and imports is real. When the need for exports and imports is provided with foreign exchange from export earnings, we will prepare a foreign exchange ecosystem or a dollar ecosystem within the country so that our entrepreneurs do not solely rely on banks in Singapore," said Airlangga."
Therefore, Indonesia will provide incentives to exporters who keep export earnings in the country. Airlangga stated that these incentives will compete with the attraction offered by Singapore. "We need to make it competitive with Singapore so that it (foreign exchange) doesn't fly to Singapore anymore," said Airlangga.
Editor:
ANTONIUS PONCO ANGGORO
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