Finance minister tells companies to park their dollars in RI

13 December, 2012 | Source: The Jakarta Post

Finance Minister Agus Martowardojo has urged export-oriented companies and oil and gas producers to repatriate their export earnings currently parked in overseas banks, a move that he said would help strengthen US dollar reserves and stabilize the rupiah.


“Our foreign exchange market is ‘thin’ because our export-related companies do not deposit their dollars in Indonesia. Please think about this,” Agus said in his keynote speech at a banking discussion held in Jakarta on Wednesday.

The rupiah had depreciated “beyond the government’s initial expectations”, according to Agus, noting that the currency had hovered at an average of 9,366 per dollar, higher than the state budget’s macroeconomics assumption of 9,250.

Such a weak rupiah would burden Indonesian importers, the finance minister added.

The rupiah advanced 0.3 percent to 9,635 per dollar as of 3:50 p.m. in Jakarta, according to rates quoted by local banks compiled by Bloomberg.

The rupiah, already the worst-performing currency in the region, came under pressure this week, as it touched 9,733 on Monday, its weakest level in three years.

Concerns over the weak rupiah have heightened due to the widening current account deficit. Analysts have said that the deficit might widen to 2.5 percent of gross domestic product (GDP) by the end of this year, higher than the 2.4 percent deficit posted in the third quarter.

Economists also linked the weakening rupiah to the country’s US$1.55 billion trade deficit recorded in October, driven mainly by the sharp rise in imports, especially the purchase of new commercial aircraft and spare parts by local airlines.

“Our currency market can be shaken by even a slight increase in imports of airplanes or oil. Please, let us work together to safeguard our economy.”

The central bank implemented a policy requiring exporters to deposit funds parked overseas in
Indonesia-based banks in January.

The central bank has also introduced a short-term US dollar time deposit with an attractive interest rate to retain export earnings at home. However, the monetary instrument has yet to reach its full potential.

In reality, the funds have been deposited in domestic banks only on a temporary basis, with exporters opting to move foreign currency proceeds to banks in overseas jurisdictions that provide a clearer regulatory system.

Due to this problem, Bank Indonesia (BI) recently issued a regulation allowing banks with certain requirements to apply for so-called trust rights, which will act as a legal framework for banks to manage the dollar-based funds of their clients.

Executives from Bank Mandiri and Bank Negara Indonesia (BNI), two of the country’s largest state-run banks, have confirmed that they have already applied for the rights.

Bank Mandiri president director Zulkifli Zaini expressed his optimism that the existence of a legal framework on trusts would attract more dollars to the country.

He noted that oil and gas companies that kept their dollars overseas frequently argued that Indonesia did not have clear legal frameworks on the management of funds.

“With the existence of the legal framework on trusts, those oil and gas companies will no longer have any reason not to deposit their export earnings in Indonesia,” Zulkifli said on Wednesday.

 

The government and Indonesian tea stakeholders will visit three European cities – Hamburg, London and Brussels – for a week-long program dubbed the Indonesia Tea Trade Mission (ITTM) starting Sunday to boost declining exports of Indonesian tea to Europe.
Transportation Minister Budi Karya Sumadi said that Indonesia has surpassed the world aviation safety standards, based on the International Civil Aviation Organization (ICAO USOAP), from 50 to 80.
Indonesian President Joko Widodo (Jokowi) held a bilateral meeting with Australian Prime Minister Malcolm Turnbull on the sidelines of APEC Summit held, here, Saturday.
Indonesian President Joko Widodo (Jokowi) discussed security situation in the Korean Peninsula with his South Korean counterpart, Moon Jae-In, during bilateral talks at the Bogor Palace on Thursday.
Indonesia was awarded the Best Dive Destination 2017 by British Dive Magazine at the World Travel Market (WTM) London held in ExCel London, England, from Nov 6 to 8.
The United Nations Educational, Scientific and Cultural Organization (UNESCO) has considered Indonesia to be a superpower country in terms of culture.
Address: 1068 Budapest, Városligeti fasor 26. | MAP |
Phone: (+36-1) 413 3800 Fax: (+36-1) 322 8669
E-mail: embassy@indonesianembassy.hu