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usinesspeople have criticized a government plan that would force them to sit on at least half of their export earnings in an attempt to safeguard foreign exchange reserves amid a weakening rupiah.

The government is devising a regulation that would require exporters to immediately convert at least 50 percent of their export earnings into rupiah through state-owned banks, Trade Minister Enggartiasto Lukita said on Tuesday. They would then have to retain those funds for at least six months before using them as working capital.

The commodities included in the regulation will be crude palm oil (CPO), coal, oil and gas, as well as mineral resources.

Togar Sitanggang, vice chairman of the Indonesian Palm Oil Producers Association (Gapki), questioned the government’s move, stressing that it would affect exporters’ performance.

“Those [export earnings] are our [working] capital. How are we going to do business if our capital is withheld?” Togar told The Jakarta Post on Tuesday. “The worst that could happen is we will no longer export CPO and crude palm kernel oil [CKPO].”

Gapki data shows decreasing global demand for CPO, with Indonesia recording 14.16 million tons in export volume in the first half, a 6 percent drop from the same period in 2017.

As the country grapples with a swelling current account deficit, which is considered risky amid heightened external pressures, Indonesia’s foreign exchange reserves continues to fall victim to a weakening rupiah against a stronger United States dollar.

Indonesia’s foreign exchange reserves declined to US$117.9 billion from $118.3 billion in July, a far cry from October last year when Bank Indonesia (BI) recorded a record-high monthly figure of $129.4 billion.

The rupiah exchange rate has dropped about 9 percent since the start of the year.

While voicing his support for the greater good of the economy, Handito Joewono, deputy chairman for export development at the Indonesian Chamber of Commerce and Industry (Kadin), urged policymakers to be fully prepared before implementing the regulation, which had surprised several business players.

“We understand that this policy will cause disruption, at least in the short term,” Handito told reporters following a seminar on Tuesday. “But as all companies need money, we hope that we are given more leeway for corporate loans with, perhaps, a zero-percent interest rate to compensate for the retained earnings.”

Indonesian Coal Mining Association (APBI) chairman Pandu Sjahrir told the Post that, like Kadin, his business group would support the policy. While projecting that the plan would disrupt the cash flow of exporters, he said the government could ease their burden by requiring domestic banks to issue a letter of credit (L/C) as a warranty.

“I believe that coal businesspeople would also try and talk to their buyers [to overcome the obstacle],” Pandu said on Tuesday.

Enggartiasto said he was aware of businesspeople’s concerns that their cash flow and, eventually, their export performance, could be affected. But he urged them to understand the country’s need to maintain a healthy level of foreign exchange reserves.

“[If] exporters need US dollars, BI and [the government] will have them ready with an affordable swap premium,” he said.

Enggartiasto signed on Sept. 7 Trade Ministerial Regulation No. 94/2018 on the use of L/C for affected commodities. The regulation will take effect in October, he said, pointing out that more L/Cs would mean that more export revenue will go into state coffers.

“We will not issue a permit for exporters [who fail to show their L/C],” he said.

Trade Ministry’s director general for foreign trade, Oke Nurwan, said the Finance Ministry and BI would realize the plan through a ministerial regulation and a BI regulation. He did not specify when they would be issued.