Indonesian Entrepreneurs Prefer Parking Funds Abroad, Here Are the Reasons
The Indonesian National Bankers Association (Perbanas) has revealed the reasons why entrepreneurs prefer to place their funds abroad. The Vice Chairman of Perbanas, Nixon L.P. Napitupulu, stated that he previously conducted a study with consultants regarding the relative prevalence of entrepreneurs parking their funds overseas.
He identified the first factor as security concerns related to regulations on the placement of export proceeds (DHE). Nixon noted that entrepreneurs want to feel secure when placing their funds within Indonesia.
The second factor is confidentiality. Nixon mentioned that entrepreneurs feel safer when the ownership and transactions of their funds remain private.
Furthermore, Nixon stated that survey results also indicate considerations regarding tax benefits. This is because countries often compete to attract capital by offering competitive tax regimes. “Therefore, these transactions are also accompanied by tax benefits for the holders of foreign exchange. There is competition between countries regarding tax ratios,” Nixon concluded during a Public Hearing at Commission XI of the Indonesian House of Representatives (DPR RI) on Tuesday.
Nixon subsequently suggested that measures should be taken to address this issue, alongside the establishment of a commodity exchange in Indonesia. This is because many commodity and derivative transactions are linked to foreign exchange, and these instruments are, in practice, very closely related to financial instruments.
However, the regulator currently remains under the Ministry of Trade through Bappebti. “The problem is that today Bappebti is managed by the Ministry of Trade, not the Ministry of Finance or a financial authority. Consequently, the instruments are positioned there, even though we know they are essentially financial instruments today,” Nixon explained.
He hinted that if Indonesia wishes to attract more export funds and financial transactions back into the country, the financial market and commodity market ecosystems need to be more integrated with financial sector regulators.