Jakarta. The Indonesian government is set to revise regulations on foreign exchange earnings from natural resource exports (DHE SDA), aiming to encourage exporters to retain funds longer within the domestic financial market.

"We need these export earnings to bring greater inflows into Indonesia," said Chief Economic Affairs Minister Airlangga Hartarto on Monday.

Airlangga said that President Prabowo Subianto has instructed the government to issue regulations to incentivize exporters to keep their funds in Indonesia longer. This would allow investors to use DHE funds as working capital. However, Airlangga did not specify how much longer DHE funds would need to stay in the domestic market.

“The duration is under discussion. It will be longer but can be used as working capital,” Airlangga said.

Previously, Government Regulation No. 36 of 2023 on Foreign Exchange from Natural Resource Business Activities offered various retention periods—one month, three months, and six months—each with tax incentives. For a one-month period, exporters receive a tax discount on deposit interest from 20 percent to 10 percent. If the US dollars are converted to rupiah, the interest rate is reduced to 7.5 percent. For three months, the tax incentive on deposit interest is 7.5 percent for DHE in US dollars and 5 percent for rupiah. For a six-month retention, the interest tax is 2.5 percent, with no interest tax if converted to rupiah.

Yusuf Rendy Manilet, an analyst at the Center of Reform on Economics (CORE) Indonesia, said  that extending DHE retention would require more comprehensive and attractive incentive schemes to offset the higher opportunity costs for exporters, who would face longer liquidity constraints.

“The ideal retention period for DHE SDA in Indonesia would be around three to six months, as this duration has shown, in other countries, to stabilize foreign exchange reserves and support exchange rate stability,” Yusuf said.

He suggested that the government could offer premium interest rates for longer DHE placements, larger tax cuts, or easier access to export financing. Additionally, export license prioritization could reward exporters who comply with these extended retention policies.

“With more attractive incentives, exporters will be more motivated to comply with DHE SDA placement requirements, reducing the likelihood of fund diversion overseas,” Yusuf explained.

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