The government's move has finally produced results. Within one month after the enactment of Government Regulation (PP) Number 36 of 2023, which regulates a new framework for the export of natural resources, 64 exporters have already parked export earnings in the form of foreign exchange (FX) amounting to US$605 million or approximately Rp9.2 trillion (assuming an exchange rate of Rp15,235 per US dollar).

"We reported to Minister of Finance Sri Mulyani that 64 exporters have now joined. There has been an increase of around US$605 million in FX DHE. This is not yet effective, but we continue to push forward with the coordination of the Coordinating Ministry of the Economic Affairs," said Bank Indonesia Governor Perry Warjiyo during a working meeting with the Indonesian House of Representatives Commission XI on Thursday, 31 August 2023.

DHE, as mentioned by the BI Governor, refers to foreign exchange earnings. The issue of DHE has long been a well-known practice among exporters, as it has been common knowledge that DHE is kept abroad, especially in Singapore. This was made possible because Indonesia follows a free foreign exchange regime, where the country does not prohibit its citizens from holding DHE overseas.

The idea of regulating the relocation of freely placed DHE abroad has long been discussed but was difficult to implement. Therefore, when Government Regulation (PP) 36/2023, which regulates a new framework for the export of natural resources, was introduced, it was considered a significant leap.

As revealed by the Coordinating Minister for Economic Affairs Airlangga Hartarto in Jakarta on Friday, 28 July 2023, the policy requires exporters to place a minimum of 30 percent of FX earnings from natural resources within the country. The primary purpose of this regulation in the midst of the free foreign exchange regime is to strengthen Indonesia's foreign exchange reserves. Ultimately, this aims to maintain the stability of the rupiah and the economy, making the Indonesian economy more resilient amid global uncertainty.

Furthermore, as explained by Minister Airlangga, the issuance of PP 36/2023 is in line with Article 33 of the Constitution concerning natural resources, to truly create prosperity for the people and safeguard national economic resilience. The export earnings from natural resources mentioned in the new policy cover four sectors: mining, plantations, forestry, and fisheries.

The export value of these four sectors is substantial. For example, in 2022, the total reached US$203 billion. Mathematically, 30 percent of the export value (US$203 billion) amounts to at least US$60 billion or approximately Rp918 trillion per year. Imagine if these funds were parked within the country, Indonesia's foreign exchange reserves would undoubtedly strengthen. Moreover, if the minister's calculations are realized, the potential could reach up to US$100 billion.

According to government records, the highest export value comes from the mining sector, reaching 44 percent or US$129 billion. Of this figure, coal contributes the most, accounting for 36 percent. Next is the plantation sector with a value of US$55.2 billion. Out of this, US$27.8 billion comes from palm oil.

The third-ranked sector is forestry with a value of US$11.9 billion. The fourth contributor is the fisheries sector, touching US$6.9 billion.

Exemption from Parking for MSMEs

It is interesting to note that the obligation to park FX does not apply to all exporters. Referring to Article 6 of PP 36/2023, the placement of FX earnings from natural resources into special accounts is only mandatory for exporters with export values on export customs notifications (PPE) of at least US$250,000 or its equivalent. This means that exporters with values below approximately Rp3.8 billion (at the exchange rate of Rp15,308 per US dollar) are exempt from the obligation to park their FX earnings.

Generally, export values below US$250,000 fall under the category of Micro, Small, and Medium-sized Enterprises (MSMEs) exporters. Therefore, they are not affected and can continue to grow.

Regulatory Support

To complement PP 36/2023, the Ministry of Finance has issued two regulations that also came into effect on 1 August 2023. Firstly, Minister of Finance Regulation (KMK) Number 272 of 2023. Its content includes the addition of 260 tariff positions, from the 1,285 positions previously regulated through KMK/04/2020. This means that, as reported in GPR News in August 2023, there are currently a total of 1,545 tariff positions subject to FX obligations.

"Secondly, there is PMK 73/2023. Its content, quoting an explanation by Minister of Finance Sri Mulyani Indrawati, pertains to the regulations regarding the imposition and removal of administrative sanctions for violations of DHE provisions. The application of these sanctions will be carried out by Customs and Excise in the form of export service suspension.

Sanctions will be imposed after Customs and Excise receives information, whether through Bank Indonesia (BI) or the Financial Services Authority (OJK). "Customs and Excise will convey these sanctions to the respective exporters or related institutions," explained Finance Minister Sri Mulyani.

Meanwhile, corrections can be made if there are errors in the imposition of sanctions. Exporters who violate the rules can file objections. If the assessment by BI and OJK shows that the exporter has fulfilled their obligations, administrative sanctions will be revoked."

Translator: Irvina Falah