- VIVAnews/Tri Saputro
VIVAnews – Bank Indonesia (BI) claims no capital control is applied as regards the implementation of export foreign exchange domestic placement.
“We accommodate free foreign exchange system. There’s no capital control or holding period,” said BI Head of Public Relations, Difi A Johansyah.
The procedure refers to Law No. 19/1999 on Foreign Exchange Flow. The regulation states exporters are not compelled to convert foreign exchange to Rupiah. In addition, exporters are not required to deposit foreign exchange reserves to the central bank, but rather to local banks.
Difi explained the regulation patches up foreign exchange supply so in case of capital reversal, Rupiah would not fluctuate much. Indonesia’s economy has a structural weakness, that is capital inflow-prone. Thus selective measures are needed to maintain speculations. Despite the fact that balance of payment gains surplus, not all foreign currencies are available in Indonesia.
The weak industrial structure in Indonesia causes import demands to go high when the economic growth is high. This condition is unlike China, which has strong industrial structure. In spite of the high growth in the country, foreign exchange supply is still high. “If our economic growth is good, import demands will go up. Import needs will be more of raw materials and capital goods,” he explained.
Difi said further that if import demands rises quickly, Rupiah’s exchange rate will be pressed and Indonesia will need a large amount of foreign currencies. “With high foreign currency demands, the question remains: where can we get foreign currencies? Earlier, we obtained foreign currencies from capital inflow and hot money such as SUN bonds, capital market and state promissory notes SBI,” he said.
However, hot money is temporary, so it can be taken away by investors any time. Under such condition, the Rupiah’s exchange rate is at risk.
“We want to eliminate our dependency. So in the future the monetary policy will be more focused and clear regarding policy rate as so far our exchange rate is supported by hot money, which is temporary,” he said.
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