BI requires companies to report forex transactions

The Jakarta Post, Jakarta

Bank Indonesia will now require companies to report their foreign exchange transactions with offshore parties to the central bank under a new ruling that tightens supervision of the country's foreign exchange traffic.

In a statement, Bank Indonesia said the ruling applied to non- financial institutions, in an extension of the same requirement imposed on banks and financial institutions.

Bank Indonesia ruling No 4/2/PBI/2002 will come into effect on June 1.

Foreign exchange flows by companies with total assets or an annual sales turnover of at least Rp 100 billion (about US$10.6 million) will be subject to it.

"The requirement for non-financial institutions to report their forex traffic aims to understand the position of offshore financial assets and offshore financial liabilities," the central bank said on Wednesday.

It said offshore financial assets were loans or receivables local companies had with non-residents or offshore parties such as companies and banks.

Offshore financial liabilities were debts owed to non- residents or offshore parties, it added.

Among those most affected by this ruling will be exporters who keep foreign exchange deposits offshore, from which they withdraw payments to import raw materials.

Exporters prefer to protect their dollar earnings from the unstable and depreciation-prone rupiah by parking them overseas.

Although Indonesia's export sales were brisk throughout 2000, dropping off a bit in 2001, much of the earned dollars remained in offshore bank accounts.

Bank Indonesia, however, dismissed notions that the new tighter forex ruling was a precursor to a full fledged capital control.

Capital control limits foreign exchange movements, making it harder for foreign investors to extract their money from Indonesia.

According to Bank Indonesia, its new policy aims to support free capital movements by way of keeping records on local companies' forex traffic.

"The reports will be used to produce statistics on the foreign exchange traffic of Indonesians that are highly necessary to support macroeconomic and monetary policy decisions," Bank Indonesia said.

To enforce the new ruling, issued on March 28, the central bank said it would penalize companies violating it.

For incomplete or false reports, companies may face a penalty of up to Rp 20 million. For late reports the penalty is Rp 10 million a day.

Failure to submit the reports may cost a company Rp 20 million in penalties plus Rp 10 million a day until they file the complete reports.

Failure to submit accounting evidence or documents related to forex movement will lead Bank Indonesia to recommend the industry authorities to revoke a company's business permits.