Private firms must report foreign debts

JAKARTA (JP): The government will introduce a new ruling to force private sector companies to report their offshore borrowing to the central bank as most of them have been reluctant to make reports due to the absence of penalty, a senior official says.

Speaking at a seminar on the implementation of the government's liberalization regulations yesterday, Paul Soetopo Tjokronegoro, a director of Bank Indonesia, however, said that such a measure will not bring Indonesia back to its controlled foreign exchange policy, although the existing 1964 law on foreign exchange recognizes it.

"There's just no way of returning to the foreign exchange control with the world economy becoming more integrated and transparent," Paul told the seminar in defense of the government ruling.

Indonesia dismantled its policy on the control of foreign exchange in the late 1960s to smoothen the inflow of capital for development.

In 1972, the central bank issued instructions to all foreign exchange banks to report their commercial offshore borrowing to the central bank. However, since the government deregulated the banking industry in 1983, the central bank has lost its grip on private banks.

"We no longer know what the debts are for," Paul said.

In 1991, the government announced a policy aimed at controlling the inflow of commercial offshore borrowing to secure the country's balance of payments.

Paul explained that this year almost 80 percent of private borrowers did not report to Bank Indonesia about their offshore borrowing.

"Accurate data on foreign debts is very important for the government, especially in policy making," Paul said.

Paul noted that Bank Indonesia collects data on private offshore debts from banks and foreign lenders. "As for government debts, they are all well recorded."

Minister of Finance Mar'ie Muhammad said this week that the outstanding debts of the private sector surged by $6.8 billion within three months to $36.34 billion as of the end of September, while the government's outstanding borrowing fell by almost $3 billion to $56.66 billion in the same period.

Paul said the borrowers will get benefits from reporting their foreign debts to Bank Indonesia by way of no-fee technical assistance from the central bank to protect them from any deviations from their loan agreements.

"If they report to us before signing the contracts, we will help them in preparing the loan agreements, in this case, the terms of the agreements," Paul said. (rid)