Trade Minister Enggartiasto Lukita said on Tuesday (18/09) that the authorities intended to make it mandatory for exporters of commodities such as palm oil, coal, oil and natural gas to keep half of their proceeds onshore for at least six months and convert them to rupiah. (Reuters Photo/Darren Whiteside)
Indonesia Aims to Coax, Not Compel, Exporters to Convert Dollar Revenue : Finance Minister
BY :MAIKEL JEFRIANDO AND BERNADETTE CHRISTINA MUNTHE
SEPTEMBER 20, 2018
Jakarta. Finance Minister Sri Mulyani Indrawati said on Thursday (20/09) that the government aims to "persuade" exporters to keep earnings onshore and convert them into rupiah, rather than make it mandatory, amid confusion over a plan floated by Trade Minister Enggartiasto Lukita.
Enggartiasto said on Tuesday that the authorities intended to make it mandatory for exporters of commodities such as palm oil, coal, oil and natural gas to keep half of their proceeds onshore for at least six months and convert them to rupiah.
The measure was intended to boost onshore dollar supply, he said, because portfolio outflows had drained it at a time imports were rising, sending the rupiah to its weakest since the 1998 Asian financial crisis.
Also on Tuesday, another Trade Ministry official said the Finance Ministry or Bank Indonesia would come up with a regulation on the conversion of export earnings.
But lobby groups for exporters argue that such a measure would hurt their business.
And a Bank Indonesia deputy governor told Reuters on Tuesday that the central bank had no such plan.
"I am hoping earnings can be saved onshore and converted to rupiah," Sri Mulyani told reporters when asked about Enggartiasto's remarks.
She said the authorities had talked to some companies holding dollars to "persuade" them to convert to rupiah, including mining companies who she said pay contractors with dollars.
'Pressure on Cashflows'
Ido Hutabarat, chairman of the Indonesia Mining Association, said retaining and converting export revenue would put pressure on cashflows of commodity exporters, especially for those needing to repay offshore debt and buy imported equipment.
Togar Sitanggang, deputy chairman of the Indonesia Palm Oil Association (Gapki), said some producers might opt to reduce exports and sell as much palm oil as they could domestically.
"Rather than export, they will try hard to sell domestically, because by doing so they don't have to deposit 50 percent of their revenue," he said.
President Joko "Jokowi" Widodo has repeatedly asked exporters to exchange their dollar earnings, trying to appeal to nationalistic sentiment.
Indonesia has seen an ongoing debate over how to push exporters to keep earnings onshore locally, with some analysts pointing to equivalent rules in Malaysia and Thailand, though others argue that such measures would go against Indonesia's free foreign-exchange regime.
Malaysia has required exporters to convert 75 percent of earnings to ringgit since 2016, while Thai exporters must keep export proceeds above a certain amount in authorized banks for 360 days.