The customs and excise tax directorate general has decided not to process the export documents of companies that have stubbornly refused to repatriate and place their foreign currency (forex) earnings in domestic banks in defiance of Bank Indonesia (central bank) regulations. The harsh measure, taken against 20 export companies, boils down to the suspension of their export permits, because goods cannot be exported without customs clearance.
It is about time to deal quickly and firmly with defiant exporters, as the transition period for the enforcement of the central bank’s regulation was more than adequate. The rule was issued in October 2011 and came into force last June, except for oil and gas companies, which have been given until June to fully implement it. The suspension of the 20 exporters seemed designed to be shock therapy for other companies that may still doubt the government’s seriousness in enforcing the regulation.
The suspension will be lifted only after the exporting firms pay the fines, set at 0.5 percent of their unrepatriated export proceeds, and place their forex earnings in banks in Jakarta. We don’t see any reason as to why exporting companies should have any strong objection to the forex rule. It does not in any way breach or violate any element of the basic principles of our open capital account regime and free forex policy. Exporters remain free to withdraw their forex funds anytime they want to meet their financing needs.
They are not required to deposit their export earnings at domestic banks for a fixed period of time. Nor are they obliged to convert their forex earnings into rupiah. They are even given freedom to deposit their export earnings at foreign or national banks in Jakarta. The regulation has been designed to help improve corporate governance by enabling the central bank to match forex fund data with the flow of goods, add to the dollar supply of the national financial system, reducing exposure to short-term capital flows, strengthening the base of the domestic forex market and improving data on imports and exports.
Significant increases in the forex supply held by domestic banks will eventually press down forex borrowing costs for Indonesian companies as well. The policy also will help the government clamp down on undeclared offshore profits and consequently prevent tax evasion that could happen through the under-invoicing of export prices. Therefore, the central bank made the regulation in cooperation with the Finance Ministry (notably the customs and tax offices) and the Central Statistics Agency (BPS).
Similar rules also have long been enforced in neighboring countries and other emerging markets, although the specifics vary. For example, in Malaysia, export earnings must be placed at domestic banks within six months of export activities at the latest and within one year in Thailand and India. India even requires the concession of converting forex earnings into the local currency. So all in all, the new ruling will strengthen our national defense against speculative attacks on the rupiah and against the risk of sudden reversals in portflio capital flows, as we suffered in October 2008 in the fallout from the global financial crisis that started in the US.
source : the jakarta post
source : the jakarta post
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