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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, M. Agus Yozami
Photo by: RES
A nation’s currency can be considered a primary symbol of its sovereignty. Consequently then, it should be natural for Indonesian citizens to favor rupiah over foreign currencies, particularly the US dollar, when engaging in various transactions. Bank Indonesia (BI) recently added its voice to this argument by stating that the use of rupiah can bolster the country’s state sovereignty by ensuring the stability of the national economy.
With this in mind, and in a bid to encourage Indonesian citizens to utilize the rupiah in all of their transactions, BI issued BI Regulation No. 17/3/PBI/2015 on the Mandatory Use of the Rupiah Currency in Indonesian Territory (2015 Regulation) on 31 March 2015. This regulation relates to Law No. 7 of 2011 on Currency (Currency Law). BI also followed up the new regulation with BI Circular Letter No. 17/11/DKSP (Circular) on 1 June 2015.
It should be noted that the new regulation, which stipulates the mandatory use of rupiah for all transactions taking place inside Indonesian territory, has been spurred by the current state of play on Indonesia’s foreign-exchange market. Specifically, there has been a sharp spike in demand for foreign currencies (especially the US dollar) in relation to the available supply since 2011.
Moreover, the current global economic slowdown is also impacting upon the Indonesian economy, while the plan by America’s central bank to raise interest rates has led to a strengthening in the US dollar exchange rate against various global currencies, including the rupiah.
The foreign debt held by the corporate/private sector has also increased significantly, from USD 80 billion in 2005 to some USD 160 billion in 2015. Furthermore, the debt to service ratio (DSR) has also increased considerably, from around 15% in 2007 to around 54% in 2015.
Ultimately though, responsibility for the dissemination of the mandatory use of rupiah policy does not lie solely with BI. The government, the House of Representatives (House) and, finally, citizens themselves must also play their part in ensuring that the rupiah exchange rate is not so easily swayed by foreign currencies.
“I hoped that BI and all of its related institutions will be able to cooperate as regards promoting the use of the rupiah as the country’s sole legitimate payment currency,” asserted Lawmaker Misbakhun (Commission XI).
Lawmaker Misbakhun believes that if it is carried out consistently, then this policy will have a positive effect on the economy. Mr. Misbakhun also stated that it was vital for all parties to firmly comply with the mandatory use of rupiah policy, including its enforcement.
Article 21 (1) of the 2015 Regulation stipulates that, “The Rupiah must be used in all transactions taking place for the purposes of payment, settlement of other obligations that must be fulfilled in cash, and/or other financial transactions conducted within the territory of Indonesia.”
Meanwhile, Article 33 (1) states that, “Any person found to have not used rupiah in transactions taking place for the purposes of payment, settlement of other obligations that must be fulfilled in cash, and/or other financial transactions, will be sentenced to one-year’s confinement (maximum) and a fine of IDR 200 million (maximum).”
“The government must enforce this policy and BI must consistently reaffirm it,” concluded Mr. Misbakhun.
Leniency
Also commenting on this issue was Aviliani, an economics and banking expert, who asserted that, to date, BI had played its part well in encouraging the use of rupiah. However, Mrs. Aviliani also lamented the fact that the general public had not been very compliant with this policy.
“The regulations are already good, it’s just that they are not being widely implemented,” explained Mrs. Aviliani.
Indeed, foreign currency is still being widely used across the country for certain transactions. It should be noted, however, that the 2015 Regulation also offers leniency or exemptions to certain sectors that wish to use foreign currencies in their transactions.
These exemptions apply to transactions involving the state budget, international trade, international financing (where one of the parties involved is domiciled outside Indonesia), banking activities using foreign exchange (including shariah banking), and securities transactions using foreign exchange undertaken by the government in primary and secondary markets, as well as other foreign-exchange transactions stipulated by the prevailing laws and regulations.
In addition, contracts or written agreements that use foreign currencies made before 1 July 2015 will remain valid until they expire, provided that said contracts and agreements are stipulated in detail and have not been amended.
According to the provisions set out in Article 10 (3) and Article 16 of the 2015 Regulation, companies may file an application to use foreign currencies with BI. Approval will then be granted to companies which are engaged in strategic infrastructure projects that possess certain features, including system adjustments, bookkeeping, business strategies, as well as evaluations pertaining to the company’s financial conditions and business processes.
“These provisions are intended to uphold the sovereignty of the rupiah within Indonesia and to support the macro economy,” explained Eni V. Panggabean, BI’s Executive Director of Payment System Policy.
One area of the economy that is still allowed to engage in transactions using foreign currencies is the energy sector. Indeed, three main types of businesses working in the energy sector are exempt from the mandatory use of rupiah.
The first of these includes the renting of offices/houses/vehicles, salary payments for Indonesian workers, and various supporting services in the energy sector. These types of transactions have been granted a six-month transition period before the 2015 Regulation will finally be implemented.
The second exempt energy-sector area involves transactions that require a certain amount of time before the 2015 Regulation can be implemented. These types of transactions include fuel transactions, import transactions through local agents, long-term contracts, and multi-currency contracts.
The third exempt area in the energy sector involves transactions that will prove difficult to harmonize with the 2015 Regulation owing to various factors, such as government policy, payments to expatriate employees, drilling services and ship rentals.
Sudirman Said, the Minister of Energy and Mineral Resources (ESDM), asserted that his institution fully supported the 2015 Regulation. Minister Said also stated that his ministry was making an active contribution to ensure that the policy would ultimately prove a success.
“We fully support BI’s policy,” Minister Said affirmed.
(sp)
Marcell Sihombing, M. Agus Yozami
Photo by: RES
A nation’s currency can be considered a primary symbol of its sovereignty. Consequently then, it should be natural for Indonesian citizens to favor rupiah over foreign currencies, particularly the US dollar, when engaging in various transactions. Bank Indonesia (BI) recently added its voice to this argument by stating that the use of rupiah can bolster the country’s state sovereignty by ensuring the stability of the national economy.
With this in mind, and in a bid to encourage Indonesian citizens to utilize the rupiah in all of their transactions, BI issued BI Regulation No. 17/3/PBI/2015 on the Mandatory Use of the Rupiah Currency in Indonesian Territory (2015 Regulation) on 31 March 2015. This regulation relates to Law No. 7 of 2011 on Currency (Currency Law). BI also followed up the new regulation with BI Circular Letter No. 17/11/DKSP (Circular) on 1 June 2015.
It should be noted that the new regulation, which stipulates the mandatory use of rupiah for all transactions taking place inside Indonesian territory, has been spurred by the current state of play on Indonesia’s foreign-exchange market. Specifically, there has been a sharp spike in demand for foreign currencies (especially the US dollar) in relation to the available supply since 2011.
Moreover, the current global economic slowdown is also impacting upon the Indonesian economy, while the plan by America’s central bank to raise interest rates has led to a strengthening in the US dollar exchange rate against various global currencies, including the rupiah.
The foreign debt held by the corporate/private sector has also increased significantly, from USD 80 billion in 2005 to some USD 160 billion in 2015. Furthermore, the debt to service ratio (DSR) has also increased considerably, from around 15% in 2007 to around 54% in 2015.
Ultimately though, responsibility for the dissemination of the mandatory use of rupiah policy does not lie solely with BI. The government, the House of Representatives (House) and, finally, citizens themselves must also play their part in ensuring that the rupiah exchange rate is not so easily swayed by foreign currencies.
“I hoped that BI and all of its related institutions will be able to cooperate as regards promoting the use of the rupiah as the country’s sole legitimate payment currency,” asserted Lawmaker Misbakhun (Commission XI).
Lawmaker Misbakhun believes that if it is carried out consistently, then this policy will have a positive effect on the economy. Mr. Misbakhun also stated that it was vital for all parties to firmly comply with the mandatory use of rupiah policy, including its enforcement.
Article 21 (1) of the 2015 Regulation stipulates that, “The Rupiah must be used in all transactions taking place for the purposes of payment, settlement of other obligations that must be fulfilled in cash, and/or other financial transactions conducted within the territory of Indonesia.”
Meanwhile, Article 33 (1) states that, “Any person found to have not used rupiah in transactions taking place for the purposes of payment, settlement of other obligations that must be fulfilled in cash, and/or other financial transactions, will be sentenced to one-year’s confinement (maximum) and a fine of IDR 200 million (maximum).”
“The government must enforce this policy and BI must consistently reaffirm it,” concluded Mr. Misbakhun.
Leniency
Also commenting on this issue was Aviliani, an economics and banking expert, who asserted that, to date, BI had played its part well in encouraging the use of rupiah. However, Mrs. Aviliani also lamented the fact that the general public had not been very compliant with this policy.
“The regulations are already good, it’s just that they are not being widely implemented,” explained Mrs. Aviliani.
Indeed, foreign currency is still being widely used across the country for certain transactions. It should be noted, however, that the 2015 Regulation also offers leniency or exemptions to certain sectors that wish to use foreign currencies in their transactions.
These exemptions apply to transactions involving the state budget, international trade, international financing (where one of the parties involved is domiciled outside Indonesia), banking activities using foreign exchange (including shariah banking), and securities transactions using foreign exchange undertaken by the government in primary and secondary markets, as well as other foreign-exchange transactions stipulated by the prevailing laws and regulations.
In addition, contracts or written agreements that use foreign currencies made before 1 July 2015 will remain valid until they expire, provided that said contracts and agreements are stipulated in detail and have not been amended.
According to the provisions set out in Article 10 (3) and Article 16 of the 2015 Regulation, companies may file an application to use foreign currencies with BI. Approval will then be granted to companies which are engaged in strategic infrastructure projects that possess certain features, including system adjustments, bookkeeping, business strategies, as well as evaluations pertaining to the company’s financial conditions and business processes.
“These provisions are intended to uphold the sovereignty of the rupiah within Indonesia and to support the macro economy,” explained Eni V. Panggabean, BI’s Executive Director of Payment System Policy.
One area of the economy that is still allowed to engage in transactions using foreign currencies is the energy sector. Indeed, three main types of businesses working in the energy sector are exempt from the mandatory use of rupiah.
The first of these includes the renting of offices/houses/vehicles, salary payments for Indonesian workers, and various supporting services in the energy sector. These types of transactions have been granted a six-month transition period before the 2015 Regulation will finally be implemented.
The second exempt energy-sector area involves transactions that require a certain amount of time before the 2015 Regulation can be implemented. These types of transactions include fuel transactions, import transactions through local agents, long-term contracts, and multi-currency contracts.
The third exempt area in the energy sector involves transactions that will prove difficult to harmonize with the 2015 Regulation owing to various factors, such as government policy, payments to expatriate employees, drilling services and ship rentals.
Sudirman Said, the Minister of Energy and Mineral Resources (ESDM), asserted that his institution fully supported the 2015 Regulation. Minister Said also stated that his ministry was making an active contribution to ensure that the policy would ultimately prove a success.
“We fully support BI’s policy,” Minister Said affirmed.
(sp)