Indonesia plans to increase minimum period for exporters to retain earnings

INDONESIA plans to increase the minimum period to retain export earnings for natural resource exporters to beyond three months, its Chief Economic Affairs Minister Airlangga Hartarto said on Sunday (Nov 3). Under a rule introduced last year, 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.

“We are currently preparing the rule’s revision,” Airlangga said in a news conference.

The rule aims to boost domestic foreign exchange supply and the plan to extend the minimum period comes amid ongoing pressure on Indonesia’s rupiah in recent weeks, mainly due to global risks such as tensions in the Middle East.

The earnings retention policy when introduced sparked a backlash from exporters who said it took away cash for operations, which saw the government offer attractive term deposits and allow it to be used as loan collateral.

Airlangga also said the government was considering next year extending a tax break on property purchases worth up to 5 billion rupiah (S$420,000) and exempting electric vehicles (EVs) from a luxury tax.

The proposals on property and EVs were aimed boosting the weak spending power of Indonesia’s middle class, a key group for economic growth, said Airlangga.