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Batam requests use of Singaporean dollars

Bank Indonesia’s (BI) Batam branch head says that it is difficult to implement the currency law, especially with transactions in the industrial sector, due to Batam’s proximity to neighboring countries like Singapore and Malaysia

Fadli (The Jakarta Post)
Batam
Sat, October 1, 2011

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Batam requests use of Singaporean dollars

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ank Indonesia’s (BI) Batam branch head says that it is difficult to implement the currency law, especially with transactions in the industrial sector, due to Batam’s proximity to neighboring countries like Singapore and Malaysia.

BI Batam has requested the BI governor to grant an exemption to Batam in the implementation of Law No. 7/2011 on currencies that stipulates financial transactions in Indonesian territory must use the rupiah with those found guilty of violating the law facing fines or imprisonment.

The law was passed by the House of Representatives (DPR) in May this year and came into force in June.

However, many financial transactions in Batam and Riau Islands still involve foreign currencies, especially the Singaporean dollar, due to various reasons, such as geographical location and stable exchange rates.

“The law has been put into effect but is difficult to implement in Batam because foreign currencies are still being used in many financial transactions,” Batam BI head Elang Tri Praptomo said.

“We have expressed to the BI governors’ council the wish to have Batam exempted from implementing the law due to the punishment of potential offenders. We are still waiting for directives from the BI governor.”

According to Elang, his office has told the industrial sector in Batam to continue using the rupiah in business contracts between foreign investors and local subcontractors.

“This is a political policy, but we have called on investors in Batam who have used foreign currencies in contracts with local subcontractors thus far to shift to the rupiah, because raw materials and capital are domestically sourced, so it is not right to conduct transactions in foreign currencies,” said Elang in Batam recently.

Elang claimed not to remember the percentage of financial transactions involving foreign currencies but he was certain that the amount is quite significant.

A shipping entrepreneur in Batam and former Batam Chamber of Commerce head, Nada Faza Soraya, said she had proposed to Batam BI and DPR members from the Riau Islands constituency to grant special privileges in implementing the currency law.

“Local companies also use a lot of imported raw materials. The geographical situation of Batam which is close to neighboring countries, such as Singapore and Malaysia, has forced us naturally to use foreign currencies. This is purely for reasons of business and not politics. We want Batam to be given a dispensation,” said Nada.

Abidin, advisor to the Riau Islands chapter of the Indonesian Employers Association (Apindo), said Batam should be exempted from the currency law because as a Free Trade Zone (FTZ), it was required to expand its business network.

“Batam’s FTZ status will mean nothing without privileges from the currency law because it will be difficult and potentially detrimental to local entrepreneurs,” said Abidin.

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