Jakarta. The Indonesian government is finalizing a regulation that will require natural commodity exporters to retain all their foreign exchange revenues in local banks or financial markets for at least one year, Coordinating Minister for Economic Affairs Airlangga Hartarto said on Tuesday.

The new regulation aims to bolster Indonesia’s foreign exchange reserves by keeping export earnings within the country. To encourage compliance, the government will offer various incentives for exporters who hold their foreign exchange revenues domestically for extended periods.

“The regulation will mandate 100 percent of foreign exchange revenues [to be kept domestically]. At the same time, we are preparing incentives such as cash collateral and favorable tax and dividend payment regulations,” Airlangga explained during a press briefing at his Jakarta office.

Airlangga noted that President Prabowo Subianto has approved the provisions of the draft regulation, which incorporates input from Bank Indonesia, the Financial Services Authority (OJK), and domestic banks.

“President Prabowo has given his green light for the regulation, which is being developed in coordination with Bank Indonesia, OJK, and the banking sector,” he said.

Indonesia’s foreign exchange reserves rose to $155.7 billion in December from $150.2 billion the previous month, according to central bank data. Airlangga said the new regulation could increase the reserves by an additional $90 billion or more.

Under existing regulations, natural commodity exporters are required to keep their foreign exchange revenues in domestic banks for one-month, three-month, or six-month periods. To incentivize compliance, the government offers reduced tax rates on interest revenue:

• 10 percent for one-month deposits
• 7.5 percent for three-month deposits
• 2.5 percent for six-month deposits

Exporters who convert their foreign exchange savings into rupiah are exempted from interest revenue tax altogether.

The forthcoming regulation is expected to further strengthen these measures, encouraging exporters to keep their earnings in Indonesia for longer durations.

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