The new regulation mandates businesses to deposit 30% of their foreign exchange earnings within the country in a special bank account for three months.

The Indonesian Coal Mining Association (APBI) believed that the new regulation mandatory DHE deposit will impose additional burdens on exporters.

Burden to working capital and operational costs

The Chairman of APBI, Pandu Sjahrir, mentioned that the requirement to keep a minimum of 30% of DHE in the Indonesian financial system for three months may complicate cash flow management for exporters.

Consequently, it may hinder their business operations because their working capital will be unusable amid falling coal prices and increasing operational costs.

Moreover, Pandu highlighted that coal prices have been sharply declining since the second half of 2022, while operational costs have been rising.

The estimated average increase in operational costs for coal miners in 2023 is around 20-25%, attributed to higher fuel prices, inflation's influence, and larger stripping ratios leading to higher mining costs.

Government claims new policy benefits exporters

In response to these concerns, the Minister of Energy and Mineral Resources (ESDM), Arifin Tasrif, stated that the government has prepared financial benefits to assist exporters in complying with the new obligation.

He mentioned that the government hopes that businesses can understand and show support towards the policy.

According to Arifin, the establishment of DHE regulations aims to prevent mineral and coal exporters from storing their foreign exchange earnings abroad.

In addition, the new regulation is also expected to boost Indonesia's foreign exchange reserves.

Policy benefits according to the government

As of August 1, 2023, foreign exchange earnings from natural resources commodities (SDA) are required to be placed in the Indonesian financial system for a minimum of three months.

This policy applies to exported goods in the mining, plantation, forestry, and fisheries sectors.

Exporters are mandated to place at least 30% of their foreign exchange earnings into a special Indonesian banking account.

This requirement applies to exporters with export values on Export Customs Notifications (PPE) of at least US$ 250,000 or its equivalent.

Exporters who comply with this regulation can benefit in the following ways:

• Tax Discounts

Finance Minister Sri Mulyani explained that exporters who place their DHE in a special account are entitled to tax discounts based on the chosen placement period, which can be 1, 3, or 6 months or more.

For a 1-month placement, the income tax (PPh) on deposit interest is only 10%, and it can even decrease to 7.5% if the DHE is converted to Indonesian Rupiah.

For a 3-month tenure, the PPh discount on deposit interest is 7.5% and 5% if converted to Rupiah.

For a 6-month tenure, the PPh discount on deposit interest is 2.5%, and there is no tax if the DHE is converted to Rupiah.

• Exporters Receive 3.5% Interest

Bank Indonesia (BI) Governor Perry Warjiyo, stated that they will offer competitive interest rates for exporters who place their foreign exchange domestically.

The interest rates provided are even higher than what exporters would receive for keeping their foreign exchange abroad.

For example, on a 3-month Term Deposit in Foreign Currency for Export Earnings above US$10 million, BI will provide 5.51% interest to the bank, and the bank provides 5.385% interest to the exporter.

• Exporters Can Use DHE as Collateral for Bank Loans

Depositing their foreign exchange domestically can also enable exporters to use it as cash collateral for obtaining bank loans.