BI to introduce penalty for forex monitoring<\/p>\n
JAKARTA (JP): Bankers and businessmen who do not report their
\nforeign exchange transfers into or out of the country will face
\njail terms, a senior official at Bank Indonesia said here on
\nMonday.<\/p>\n
The central bank director, Achjar Iljas, said on Monday that a
\nprovision on the penalty would be inserted in the bill on capital
\nmonitoring to be debated by the House of Representatives in
\nApril.<\/p>\n
He said the penalty for those failing to provide appropriate
\ninformation on the transaction of foreign currencies above a set
\namount would risk both imprisonment and fines.<\/p>\n
\"The result of the capital monitoring is expected to be much
\nbetter with the penalty system,\" he told reporters on the
\nsidelines of a debate session on a new central bank law between
\nthe government and the House's commission VIII on finance and the
\nstate budget.<\/p>\n
The monitoring system was expected to be effective before
\nJune, he said.<\/p>\n
Achjar stressed that introducing a penalty in the forex
\nmonitoring system was not a form of capital control.<\/p>\n
\"It will be a market-friendly measure,\" he said.<\/p>\n
He explained that Indonesia would retain its open foreign
\nexchange policy because the country was still a net importer of
\ncapital due to the large savings-investment gap.<\/p>\n
\"But we need information to be able to come up with an
\nappropriate policy response,\" he said.<\/p>\n
Achjar said the capital monitoring system would provide the
\ngovernment and the central bank with a database that could be
\nused to design reliable fiscal and monetary policies.<\/p>\n
He said the capital monitoring bill stipulated that all
\nforeign currency and rupiah transfers of particular amounts must
\nbe reported to Bank Indonesia through banks or other institutions
\nappointed by the central bank.<\/p>\n
The central bank has yet to decide the lower limit for
\ntransactions to need reporting.<\/p>\n
Achjar said there were plans to introduce a new computerized
\nsystem to link the central bank other banks to enable the
\nmonitoring system to be effective and efficient.<\/p>\n
\"We have started a pilot project on several large banks,\" he
\nsaid, adding that the computer system must also be compatible
\namong the banking population.<\/p>\n
\"So whatever happens it will be immediately recorded,\" he
\nsaid.<\/p>\n
The country suffered a massive capital outflow in the wake of
\nthe August 1997 rupiah flotation, which caused the local currency
\nto tumble by more than 75 percent in value against the U.S.
\ndollar.<\/p>\n
Some members of the Cabinet considered following Malaysia's
\nadoption of a foreign exchange control system in September,
\nincluding introducing an exit tax on outbound capital transfers.<\/p>\n
The idea irked the International Monetary Fund, which is
\nproviding a multibillion dollar bailout package for Indonesia.<\/p>\n
The government later agreed with to introduce a capital
\nmonitoring system while maintaining the open capital account
\npolicy.<\/p>\n
In the latest letter of intent sent to the IMF, the government
\nsaid the central bank was making progress toward establishing the
\nmonitoring system with the technical assistance from the IMF.<\/p>\n
\"A consultant from the statistics department of the IMF is to
\nprovide further technical assistance over the next three months,
\nand the monitoring system is expected to be in place by June
\n1999,\" it said.<\/p>\n
Asked to comment on the possibility of introducing a tax
\nsystem as part of the monitoring mechanism, Achjar indicated that
\nit could be an option. (rei)<\/p>",
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