New banking regulation introduced
New banking regulation introduced
JAKARTA (JP): Bank Indonesia, the central bank, yesterday
enforced a new ruling on the uniform practice for documentary
credits imposed on local trading activities as part of the
government's effort to accelerate non-oil and gas exports.
"The new ruling, which has just been completed today
(yesterday), should be seen as a concerted part of the new
deregulatory measures which were introduced by the government
last week," Bank Indonesia Governor Soedradjad Djiwandono told
reporters at a briefing at the central bank's headquarters here
yesterday.
The ruling authorizes banks to make payments to third parties
which usually act as suppliers of goods at the behest of
applicants who act as buyers of goods in the transactions, he
explained.
"The documentary credit scheme is actually the same as that
introduced by the Paris-based International Chamber of Commerce
last year," he said. That involved a new payment scheme, called
the Uniform Customs and Practice for Documentary Credits, which
required traders to use the code for their export and import
activities. The new code, popularly known as UCP-500, took effect
in January this year.
"But the core of our decree is to standardize the system of
payment to be used by local traders for their transactions,"
Soedradjad said, adding that the central bank thus far adjusted
the UCP-500 code in line with the country's business climate.
With the new ruling, applicants can instruct the banks to
issue letters of credit (L/C) in either rupiah or foreign
currency, he said.
"But, the L/C payment in foreign currencies is only permitted
for foreign exchange banks, while L/C payments in rupiah can be
handled by any bank," he added.
"Like the UCP-500 scheme, the local documentary credit is
irrevocable, meaning that the credit cannot be canceled or
amended without the permission of all parties involved," he said.
Bill of lading
He said that the shipment of goods, which also requires a bill
of lading,covering port-to-port shipments through any couriers or
shippers, is subject to negotiations between buyers and
suppliers.
Documentary studies on the shipment should be made by the
banks, which are responsible for the payment, within seven days
after receiving the bill of lading, the governor said, adding
that the new decree only applies to the trade of goods and not
for transaction of services.
"Service transactions can be thus far covered by the existing
procedures," he added.
Like UCP-500, the banks will also accept an insurance document
which contains all risk notations or clauses, he said.
"For the purpose, the central bank has instructed all related
ministries and institutions, such as the ministries of
transportation, tourism, post and telecommunications, and finance
to realign their provisions which are expected to facilitate the
implementation of the local documentary credit scheme," he
pointed out.
"You can see that the new ruling on documentary credit will
help facilitate not only the delivery of goods, but also payments
to suppliers, who are always vulnerable to delays of payment," he
added.
He noted that suppliers, most of whom are small-scale
producers, received payment three months after delivery. "With
the new scheme, they can receive the money as soon as they
complete the shipment," he added.
According to Soedradjad, the decree will therefore help speed
up the country's exports, since most products exported are
supplied by manufacturers located on distant islands.
The central bank will soon introduce the new payment scheme to
bankers, entrepreneurs, exporters and importers so that they are
prepared to enforce the new 23-chapter ruling, Soedradjad said.
"Thanks anyway to some buyers and banks, which have thus far
tapped the documentary credit scheme, for their payments to local
trade," he said. (fhp)