Tue, 06 Aug 2002

BI to ease forex ruling

The Jakarta Post, Jakarta

Bank Indonesia has announced plans to ease a foreign exchange ruling that limits rupiah transactions between local banks by non-residents.

Central bank deputy governor Miranda Goeltom said the planned revision was meant to remove restrictions for foreign investors.

"The changes (are needed) because there are several things that restrict risk management mechanism by foreign investors," she was quoted by Koran Tempo daily as saying on Monday.

She said the revision would be made "soon".

The plan came amid reports that foreign direct investment (FDI) approvals in the country had fallen by 42 percent during the first semester of this year compared to the same period last year.

Bank Indonesia issued the ruling in January last year as part of efforts to curb speculation of the beleaguered rupiah.

The ruling bans banks from making certain transactions with non-residents including foreign individuals and institutions.

It also reduces the amount of derivative transactions without any underlying trade transaction a bank can make with non- residents to a maximum level of US$3 million from the previous limit of $5 million.

The ruling said the restriction did not apply when carried out for the purpose of protecting the value (hedging) of investments including direct investments, the purchase of securities, and credit provisions in Indonesia by non-residents.

However, foreign investors are only allowed to hedge their investments if they can show supporting documents with respect to their investment activities here.

Miranda said that under the planned revision, the above requirement would no longer be needed.