This content is from: Local Insights

Foreign exchange flow and withdrawal of offshore borrowing

Freddy KaryadiOene Marseille

On 30 September 2011, Bank Indonesia issued three new regulations on the foreign exchange policy related to export proceeds and withdrawal of offshore borrowing:

(i) Bank Indonesia Regulation No. 13/20/PBI/2011 on the Receiving of Export Proceeds Foreign Exchange (Devisa Hasil Ekspor or DHE) and the Offshore Borrowing Foreign Exchange (Devisa Utang Luar Negeri or DULN), effective January 2 2012 (PBI No. 13/20); and

(ii) Bank Indonesia Regulation No. 13/22/PBI/2011 on the Reporting Obligation of Withdrawal of Offshore Borrowing Foreign Exchange, effective January 2 2012 (PBI No. 13/22).

The issuance of the Bank Indonesia regulations is to achieve, among others, stability of macro economic resources, increasing levels of foreign exchange, a higher quality of statistics and foreign exchange monitoring (export, import and offshore borrowing), and the stability of the exchange rate of the Indonesian rupiah.

PBI No. 13/20 provides that all DHEs must be received by the exporter through the domestic forex bank not later than 90 days as of the date of registration of the goods export notification (tanggal pendaftaran Pemberitahuan Ekspor Barang or PEB date).

The receiving of DHE through the domestic forex bank, which is made by way of a letter of credit payment, goods in transit, deferred payment, collection (of which the maturity date is longer or equal to 90 days as of the PEB date), must be made not later than 14 days as of the maturity date of such payment.

In this regard, the exporter must, no later than 14 days as of the PEB date, submit a written explanation accompanied with the supporting documents to the domestic forex bank to be delivered to Bank Indonesia. If the exporter fails to do so, it will be deemed not to receive the DHE in a manner as referred to in the first paragraph of this section.

PBI No. 13/20 requires the exporter to convey information, as stated in the PEB relating to the received DHE, to the domestic forex bank not later than three business days from when the DHE is received by the exporter through the domestic forex bank.

An exporter who breaches its obligation to receive DHE through the domestic forex bank within the determined period shall be subject to administrative sanction in the form of fines amounting 0.5% of the DHE amount which has not been received through the domestic forex bank. The minimum fine is IDR10 million ($1,134) and the maximum fine is IDR100 million.

The fine is made in rupiah by using the Bank Indonesia's middle rate applicable on the date of fine imposition.

PBI No. 13/20 and PBI No. 13/22 provide that every DULN must be withdrawn by the debtor through domestic forex bank (the DULN requirement).

The amount of DULN to be withdrawn must be equal with the total commitment granted by the creditor or lender under the relevant offshore borrowing agreement. In the event that the withdrawn DULN is less than the total commitment, the debtor must submit written explanation to Bank Indonesia prior to the maturity date of the offshore borrowing concerned. If the debtor fails to do so, it will be deemed not to withdraw that amount through the domestic forex bank.

PBI No. 13/20 further provides that the DULN requirement shall apply for the DULN in the form of cash originated from:

(i) offshore borrowing based on a non-revolving loan agreement not to be used for refinancing;

(ii) the difference between the refinancing facility and the original (refinanced) offshore borrowing; and

(iii) offshore borrowing based on debt securities (surat utang) in the form of bonds, medium term notes, floating rate notes, promissory notes and commercial paper.

PBI No. 13/22 provides that the withdrawal of DULN must be reported to Bank Indonesia on a monthly basis, with the period of submission within the 1st until the 10th day of the next month. If the 10th day falls on a non-business day, the reporting must be submitted in the next business day.

The submission of a withdrawal report must be accompanied with the supporting documents showing that the withdrawal of DULN is made through Domestic Forex Bank. The reporting of the DULN withdrawal shall be made in accordance with the regulation of Bank Indonesia on the reporting obligation of offshore borrowing.

Oene Marseille and Freddy Karyadi

Instant access to all of our content. Membership Options | One Week Trial