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International trade exempted from BI rule
Import and export activities, as part of international trade, are exempted from the obligation to use rupiah in all transactions, according to an official with Bank Indonesia (BI)
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mport and export activities, as part of international trade, are exempted from the obligation to use rupiah in all transactions, according to an official with Bank Indonesia (BI).
Aside from export and import activities, exemptions have also been granted for several strategic infrastructure projects including the financing of the construction of airports and power plants.
'Foreign currency can still be used for import and export transactions [...] We are flexible so as to not interfere in the economy,' The head of BI's payment system policy and monitoring department, Eni Panggabean, told The Jakarta Post on Sunday.
Eni made the statement particularly in response to comments by Anne Patricia Sutanto, president director of garment producer PT Pancaprima Ekabrothers, who criticized the BI policy that previously required all business transactions performed in Indonesian territory to be conducted in rupiah.
Anne said the policy had especially hurt companies involved in import and export activities because, with the mandatory use of rupiah, they had to renegotiate their business contracts with their foreign partners.
Before the policy was implemented, most export and import related transactions were conducted in US dollars. 'Now, we have to change this and, for example, we have to tell shipping companies to draft invoices in rupiah,' Anne said. 'This policy has caused confusion in the business world.'
Central bank regulation (PBI) No. 17, which is the object of the complaint, stipulates that when non-rupiah currencies can be used in international financial and commercial transactions, specifies income and expenditure under the state budget, regulates foreign currency savings and deposits in banks and international financing transactions, as well as many other transactions covered by the BI Law and the Investment Law.
'Those who already signed contracts [using foreign currencies] before July can still proceed,' Eni added.
Exemptions to the rule were also made for strategic infrastructure projects, such as airports and projects in electricity and geothermal energy, with the consent of the central bank, Eni added.
Eni also said BI had given some companies extra time to adjust their accounting systems to rupiah, as backed up by article 16 of PBI No.17.
The article stipulates that the bank can adopt a particular policy if the mandatory use of rupiah for non-cash transactions causes problems for business people, with certain qualifications.
'The company's system and accounting can't change quickly by changing the accounting records from dollars to rupiah, some companies need to close their financial book first,' Eni said, adding that the length of time to adjust the system depended on the company's request to the central bank.
Eni maintained that companies had been supportive of the policy, including in the travel sector and the oil and gas sector.
BI has stood firm in implementing its PBI which regulates the mandatory usage of rupiah for all transactions onshore, with the central bank banning all transactions conducted in foreign currencies such as the US dollar.
The policy also stemmed from the Currency Law in 2011, she said, so it did not come out of the blue amid the rupiah devaluation.
The measure was taken to curb the local demand for dollars and hence stabilize the rupiah, which has been among Asia's most volatile currencies.
The strong demand for greenbacks has partly contributed to the fall in the rupiah, which has lost about 14 percent this year amid the fall in regional financial markets. It stood at Rp 14,306 on Friday against the dollar, according to the Jakarta Interbank Spot Dollar Rate (JISDOR), way past the previously significant 14,000-mark.
Currency trade consultant and expert Farial Anwar voiced the same concern, warning against further devaluation of the rupiah if the rule was not enforced, as the pressure on the rupiah mounted inside and outside the country.
'There are already too many transactions inside the country unrelated to international transactions that use foreign currencies. Even apartment rents, mall rents, or hotel bookings don't use rupiah. That is not right,' Farial said. (fsu)
