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xporters are apparently still reluctant to convert their export earnings into rupiah, despite calls to do so, resulting in a lack of foreign exchange (forex) supply in the domestic market.

Indonesian Exporters Association (GPEI) secretary general Toto Dirgantoro said not all exporters were happy to comply with the government'€™s demand.

'€œThis is all business. Many exporters choose to keep their earnings in foreign denominations, especially in US dollars, because they need the money to import raw materials. So it keeps on revolving,'€ he said on Monday in a telephone interview.

He added that 70 percent to 80 percent of exporters, most of which were in the manufacturing sector, needed a sufficient supply of forex at hand, which cemented their reluctance to '€œlet go'€ of the forex.

Data from Bank Indonesia (BI) confirms the exporters'€™ reluctance, with the ratio of earnings converted into rupiah on a declining trend, falling from around 20 percent in early 2013 to around 11 in late 2015.

Toto added that some exporters already had buyers standing by in Indonesia, which might explain the low ratio.

'€œTransactions occurred in Indonesia using the rupiah, but were recorded and reported in US dollars in the PEB [export declaration]. So they didn'€™t actually create earnings in forex. This happens in the furniture business, for instance.'€

Meanwhile, BI Governor Agus Martowardojo said the exporters'€™ reluctance had resulted in a lack of forex supply in the domestic market, while demand for forex kept rising.

By the third quarter, average forex demand amounted to US$454 million a day, higher than the average $410 million in daily supply.

'€œIn the past, we could still cover the excess demand using inflows into the debt paper and stock markets, but now inflows are not as strong as before,'€ he said in his remarks during BI'€™s annual meeting with exporters and banks.

From January to Dec. 8, BI recorded total inflows of Rp 51.39 trillion ($3.65 billion) in the bond and stock markets, a stark contrast to the Rp 181.5 trillion recorded last year.

'€œThat has eventually put pressure on the rupiah. That'€™s why we need the earnings to be converted into rupiah to ensure we have enough forex supply to support the economy,'€ Agus said.

The rupiah itself has depreciated around 12.3 percent against the US dollar throughout this year, closing at 14,123 on Monday.

BI expects the latest tax incentive on time deposits will make it more appealing for exporters to put their money into the domestic banking system and even lure them to convert the earnings into rupiah, so that they can be used to meet demand for foreign exchange, especially dollars.

The incentive is part of an economic policy package introduced by the government in September.

Under the scheme, exporters who put their earnings in time deposits '€” either US dollar or rupiah '€” will get a certain reduction on withholding tax on interest income. To incentivize the conversion, the rebate is greater for rupiah time deposits.

Meanwhile, BI honored several companies that fulfilled the central bank'€™s reporting requirements on foreign exchange flows (LLD), exports earnings, debtor information system (SID) and commercial banks (LBU).

Automotive firm PT Toyota Motor Manufacturing Indonesia was named the best firm in terms of reporting export earnings, followed by BP Berau Ltd. and Sari Dumai Sejati.