Govt plans to make exporters repatriate forex

Rendi A. Witular, The Jakarta Post/Jakarta

To help strengthen the country's foreign exchange reserves, the government and the central bank will soon issue regulations requiring local exporters to repatriate their export revenues to local banks.

The regulations were aimed for state enterprises and private companies, which currently have proceeds stored in banks overseas, Bank Indonesia (BI) Governor Burhanuddin Abdullah said after a ceremony at the State Palace on Friday.

He said BI and the government believed that such policies would help improve the supply of the country's foreign exchange reserves, especially against pressure from the U.S. dollar.

"We are not appealing for them (the companies) to repatriate their funds like before ... We are going to force them to do it as soon as possible through the planned regulations. Bank Indonesia and the government are still discussing the mechanism," he said.

The policies are expected to bring between US$8 billion and $10 billion into the country.

The central bank has recently issued a ruling, requiring state enterprises to place their export revenues in local banks as part of its latest effort to help strengthen the rupiah, which hit a two-year low on Tuesday.

Data from the Central Statistics Agency shows that Indonesia's exports between January and May reached $33.88 billion, producing a surplus of $10.3 billion as imports stood at $23.57 billion.

A large portion of these export proceeds, however, have never made their way into the country's foreign exchange reserves, but rather remain stashed abroad.

Coordinating Minister for the Economy Aburizal Bakrie said the problem was decades' old one. He had often suggested to former finance ministers to apply a regulation that obliged exporters to stored their proceeds in local banks.

"I hope that my idea can be realized now. It is a good practice applied by several countries in the world as part of efforts to help strengthen their local currencies against the dollar. We should surely apply it," he said.

Aburizal said this did not mean that the government would force exporters to convert their foreign currency reserves into rupiah like China did with the yuan.

"Exporters can still hold their proceeds in foreign currencies. We are not going to force them to convert them into rupiah. Their funds will remain safe at local banks," he said. The government had not yet decided when BI would implement the regulation, he said.

There are 101 other countries studied by the central bank that have implemented such repatriation policies, with 76 of them implementing direct repatriation without currency conversion beforehand.

Indonesia's foreign currency reserves as of June 30 stood at $33.87 billion, down $510 million from the previous week. The rupiah also closed slightly higher on Friday against the dollar at Rp 9,790 from Rp 9,795 on Thursday.

Burhanuddin said BI remained upbeat that the rupiah would remain around the average of Rp 9,300 for the year estimated in this year's state budget.

"At present, the rupiah is trading at a (yearly) average of Rp 9,556 to the dollar. However, with our recent currency regulations, we are optimistic of Rp 9,300," Burhanuddin said.