By Stefanno Sulaiman
JAKARTA, Feb 23 (Reuters) - Indonesia's plan to require
exporters to retain part of their earnings onshore should boost
U.S. dollar liquidity, but bankers and businesses warn against
imposing mandatory conversion of funds to rupiah, some likening
it to a form of capital control.
The central bank, Bank Indonesia (BI), hopes the
repatriation of funds will help support the rupiah if, as
expected, U.S. interest rates continue to rise.
Policymakers in Southeast Asia's largest economy have long
been concerned about exporters' habit of parking earnings in
offshore bank accounts, even after authorities made them receive
proceeds through local banks more than a decade ago.
The issue has become stark since a commodity boom drove
exports to a historic high of $292 billion last year but the
country saw no equivalent jump in U.S. dollar supply.
Authorities now plan to make exporters of natural resources
keep about 30% of earnings onshore for three months after
receipt.
Under the regulation, due to be issued this month, it will
be possible for the funds to move to the central bank, which
will set up new term deposit instruments with attractive returns
and tenors of one, three and six months.
BI Governor Perry Warjiyo said last week that details of the
new rules were being discussed, including "the pros and cons of
mandatory conversion to rupiah".
The Indonesian Exporters' Association welcomed higher
investment returns. But its chairman, Benny Soetrisno, said
exporters would resist mandatory rupiah conversion since it
would mean "we'd be under a regime of capital control, and that
would be negative for investment."
Clients of Standard Chartered's Indonesian unit are on the
same page, also backing the new rules, especially BI's term
deposits, but not if they must sell U.S. dollars, the bank's
head of transaction banking Raymond Purnama said.
"If they buy and sell in dollars and we're asking them to
convert, they will object," he said, adding that the most
important thing was to ensure funds stayed in Indonesia.
David Sumual, Bank Central Asia's chief economist, said
market sentiment would sour if conversion was mandatory. He
urged authorities to incentivise swap transactions instead.
Whether conversion will be mandatory remains unclear.
Finance Minister Sri Mulyani has stressed no capital control
measures would be introduced.
Some bankers say the measures will spur repatriation of
offshore funds and help anchor the rupiah, though how much will
flow in remains unclear.
BCA's Sumual estimated exporters had parked at least $18
billion of earnings offshore last year.
The government expects the new measures could boost forex
reserves, which topped $139 billion in January, by $40 billion
to $50 billion within a year.
A key reason for exporters keeping money offshore has been
the low rates that Indonesian banks have paid on dollar
term-deposits. Last year it was less than 2%, compared with more
than 4% offered by some banks in Singapore.
BI has said its term deposits will pay more than offshore
rates and that banks will get a fee when they pass on exporters'
earnings.
Standard Chartered's Purnama said the market might ask for
100 basis points above offshore rates for repatriation to be
attractive.
(Additional reporting by Gayatri Suroyo; Editing by Ed Davies
and Bradley Perrett)
