JAKARTA: Indonesian companies are asking the government to consider adjustments to the new rule to retain all proceeds from natural resource exports onshore for a year, amid concerns it will further hurt their cashflows.
On Tuesday (Jan 21), Jakarta announced the new rule will take effect on Mar 1 and applies to every export with a shipping document worth at least US$250,000.
Currently, exporters are only obliged to retain 30 per cent of total proceeds for a minimum of three months, which already has pushed up interest expenses for some exporters.
Jakarta said the move is needed to shore up US dollar supply in the largest economy in Southeast Asia, helping its efforts to stabilise rupiah, which hit a 6-month low in January.
“We’re still assessing the impact, but this is extraordinary because one year is not short,” Moshe Rizal, the head of investment committee at the Association of Oil and Gas Companies, told Reuters on Wednesday, asking for a gradual implementation of the rule.
He said the association will ask for a meeting with the energy ministry to discuss the risks which could stem from the policy on their ability to fund operational costs, such as importing equipments and chemicals, which are paid for in US dollars.
The government has said to tackle the working capital issue, earnings could be used as collateral for a loan, but Rizal said it is still unfavorable as the company must bear the loan interest, adding to their expenses.
Under the current 30 per cent retention rule, the local cocoa industry has been paying up to a 6 per cent interest rate gap as they are forced to take up loans at market rates, while the domestic deposit gave lower returns, Indonesian Employers Association (Apindo) said in its statement late on Tuesday.
Of all exporters, cocoa and fishery businesses were among the most impacted by the current dollar retention rule, according to Apindo, and the group urged the government to consider applying the rule selectively, not across the board.
“Our input and concerns have been received by the government so we are asking for more detailed explanation of the latest government position,” Apindo Chairwoman Shinta Kamdani told Reuters on Wednesday.
In support of the rule, Indonesia’s central bank has said it will continue to offer term deposit instruments with a competitive return and to provide its FX-denominated securities as an alternative for the proceeds placement.
