Indonesia to make it less painful for exporters to keep earnings onshore

INDONESIA is developing a scheme for banks to provide a financing facility for exporters who keep their earnings onshore, after business groups complained that new rules made it harder to cover operational costs, a government official said.

Under a rule introduced earlier this month, natural resource exporters must retain for three months in the domestic financial system 30 per cent of their proceeds for every custom document for exports worth at least US$250,000, starting from Aug 1.

The regulation, which was intended to boost domestic foreign-exchange supply, sparked a backlash from exporters, who said parking funds for three months took away cash needed for operations.

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, Pandu Sjahrir, chairman of Indonesia Coal Miners Association, said in a statement.

Eddy Martono, chairman of the Indonesian Palm Oil Association, also complained that companies would have to 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.

Ferry Irawan, a senior official at Indonesia’s Coordinating Ministry for Economic Affairs, told Reuters that the government is finalising rules to address exporters’ concerns.

“We will prepare a banking regulation that allows a back-to-back loan where the proceeds that an exporter put into a bank can be used as a lending collateral,” he said.

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, he said, without elaborating.

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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 deposit carrying high returns.

Bank Indonesia governor Perry Warjiyo on Tuesday (Jul 26) 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.