ndonesian central bank overhauled the provisions on export proceeds and foreign exchange for imports as stipulated in Bank Indonesia Regulation (PBI) Number 22 of 2020 - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesia’ government s ready to impose sanctions on peoples who violate a new regulation intended to force exporters to keep their foreign exchange (forex) earnings from natural resources in Southeast Asia’s largest economy financial system, finance minister Sri Mulyani Indrawati told media in Jakarta, Thursday (07/4).

The rule, which took effect July 1, 2019, is one of the government’s efforts to ensure that forex returns to Indonesia so that it can improve . Repatriated earnings could help the country’ economy refill its declining foreign exchange reserves, which the central bank has been using to keep the rupiah from falling too sharply amid a heavy selloff in emerging market currencies.

Finance Ministerial Regulation 98/PMK.04/2019 on tariffs and administrative punishment imposes fines for exporters who violate the export proceeds of natural resources and outlines the procedures for imposing levies.

Under the regulation, an exporter of natural resources who don’t deposit export earnings in a special bank account within a certain period of time is required to pay 0.5 percent of the total forex earned as a fine.

The regulation derived from Government Regulation No.1/2019 on requirements for exports to put their export earnings from natural resources into Indonesia’s financial system. The commodities include those from mines, plantation, forests and the fisheries.

The government regulates the use of export earnings for a number of types of payments, including import tax, debts, dividends, and others as stipulated in the investment law. Violators of the regulation are required to pay 0.25 percent of their total export earnings.

For export earnings, an exporter is required to have escrow accounts in an Indonesian bank. If the exporter has an escrow account in another country, it must be transferred to a bank in Indonesia.

If the exporter does not abide by the regulation, the government will issue further punishment in the form of delaying customs services.

“Regarding sanctions, customs and excise will do, whether the export delays or payment of fines, as required regarding the proceeds from natural resource exports,” Indrawati said, adding that the customs and excise directorate had cooperated through an information system with Bank Indonesia.

That way, the flow of export goods can be tracked by customs and excise, while the flow of money can be traced through the banking system. So, the government can identify the name of the company, the number of goods, and the amount of foreign exchange they get from the export activity.

Indrawati stressed that the regulation is one of the government’s efforts to ensure that forex returns to Indonesia so that it can improve the current account balance. Country’ forex reserves stood at US$120.3 billion in May, lower $4 billion than the $124.3 billion recorded a month earlier, Bank Indonesia data showed.

The central bank noted the position of forex reserves is equivalent to financing 6.9 months of imports or 6.7 months of imports and the government’s foreign debt payments. The level was well above the international adequacy standards of around three months of imports.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com