Up-Coming Regulation Potentially Requiring Exporters to Deposit 100% of Their Export Earnings in Indonesia

The Indonesian government is in the process of revising Government Regulation No. 36 of 2023 on Export Earnings (Devisa Hasil Ekspor “DHE”) from Business, Management, and/or Processing Activities Relating to Natural Resources. Under this revision, it is expected that exporters with a minimum export value of USD 250,000 will be required to deposit 100% of their DHE domestically within one year, effective from 1 March 2025. This marks a significant change from the previous requirement, where only a minimum of 30% of the total DHE was mandated to be kept within the Indonesian financial system in a special DHE account for at least three months. This regulation applies to export activities in the mineral and coal, fisheries, and plantation sectors. The DHE must be deposited into Indonesia’s financial system, particularly through banks operating in Indonesia.

If and when issued, this policy would undoubtedly have significant impacts on exporters, especially those who have financial commitments abroad, such as loan repayments, supplier contracts and foreign investment obligation. A sudden shift from 30% to 100% DHE could disrupt their operations and financial arrangements.

To mitigate the increase amount and duration of DHE deposits, the government has prepared several facilities and incentives. These include a 0% income tax rate on the interest income from DHE deposits, whereas regular income is taxed at 20%. Additionally, exporters can use DHE deposits as collateral for back-to-back rupiah credit from banks or the Indonesian Export Financing Agency (Lembaga Pembiayaan Ekspor Indonesia). They can also engage in currency swap transactions with banks to convert foreign currency into rupiah or utilize swap instruments between banks and Bank Indonesia for domestic business needs. Furthermore, the regulation allows DHE from the natural resources sector to be used for payments such as taxes, royalties and dividends.

While this regulation may bring several benefits to Indonesia financial industry, such as increased liquidity, challenges such as exporter resistance, the readiness of the financial system and potential trade implications must be carefully considered. We will continue to monitor and evaluate the developments related to this new policy and will issue another alert as soon as the regulation is officially released.

Articked by: Sharon Eklesia Manoppo

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