BI requires companies to report forex transactions

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.