Starting from today, Tuesday (1/8/2023), the official implementation of the Ministry of Finance Regulation No. 73 of 2023 concerning the Imposition and Revocation of Administrative Sanctions for Violations of Export Proceeds (DHE) from the Activities of Utilization, Management, and/or Processing of Natural Resources has taken effect.
This regulation is a subsidiary rule derived from Government Regulation No. 36 of 2023 concerning Export Proceeds (DHE). So, what exactly is the underlying objective of this newly introduced policy? Let us delve into the comprehensive explanation provided below.
Explanation of Export Proceeds (DHE) and its Objectives
According to PMK 73/2023, Devisa (foreign exchange) encompasses financial assets and liabilities utilized in international transactions. In this context, Export Proceeds (DHE) is defined as foreign exchange derived from the export of goods originating from the activities of utilization, management, and/or processing of natural resources.
The activities involving the processing of natural resources include mining, plantations, forestry, and fisheries, as specified in the Government Regulation pertaining to Export Proceeds.
Regarding the rationale behind the implementation of this regulation, Coordinating Minister for Economic Affairs, Airlangga Hartarto, elucidated that retaining export proceeds (DHE) domestically or within the Indonesian Financial System (SKI) aims to bolster forex liquidity and foster financial service growth.
“The Coordinating Ministry for Economic Affairs, in conjunction with relevant Ministries, particularly the Ministry of Finance, Bank Indonesia, and OJK, has concluded Government Regulation No. 36 of 2023, drafted with the spirit of upholding Article 33 of the 1945 Constitution, which advocates the utilization of natural resources for the welfare of the people and to safeguard national economic resilience,”
Coordinating Minister for Economic Affairs, Airlangga Hartarto
By mandating that 30 percent of DHE from natural resources be retained in SKI, there is a potential for substantial domestic forex liquidity (resulting from the placement of DHE of natural resources) amounting to USD 60.9 billion per year.
Elaborating further, Article 3, paragraph (1) of PMK 73/2023 specifies that DHE of natural resources is intended for use in the following payments:
- Outgoing duties and other levies in the export sector
- Loans
- Imports
- Dividend profits; and/or
- Other needs of investors as regulated in Article 8 of Law No. 25/2022 concerning investment.
Furthermore, the utilization of DHE from natural resources as mentioned above is subject to considering the provisions of placing DHE of natural resources for a specified duration.
Additionally, Airlangga expounded that the potential for optimizing DHE of natural resources is considerable, as data from 2022 revealed that the total DHE from the four obligated sectors (Mining, Plantations, Forestry, Fisheries) amounted to USD 203.0 billion per year or 69.5 percent of the total exports.
He projected that the mandatory 30 percent DHE regulation could augment Indonesia’s forex reserves by up to USD 100 billion annually. “And with the minimum 30 percent DHE provision, it can range from 60 to 100 billion US dollars,” he announced during the DHE press conference at his office in Jakarta on Friday (28/7/2023).
Airlangga articulated that the potential for exporting natural resources from the four sectors is significant, encompassing Mining, Plantations, Forestry, and Fisheries. In 2022 alone, the total export from these four sectors reached 203 billion US dollars, accounting for the total exports.
The Export Proceeds (DHE) Rule Encounters Criticism
Despite the government’s emphasis on the benefits of implementing this regulation, numerous parties, particularly exporters, have expressed their criticism.
Quoted from kumparan, Chairman of the Indonesian Coal Mining Association (APBI-ICMA), Pandu Sjahrir, acknowledged that the government’s new rule would add a heavy burden to coal exporters.
Whereas the export of coal commodities has been a mainstay of the national economy, contributing to both tax and non-tax state revenue, export forex, job creation, and more.
He said that the regulation will undoubtedly make it difficult for exporters to manage cash flow, especially since the margin obtained by exporters does not reach 30 percent. Therefore, working capital already disbursed by exporters will be held back amidst the downward price trend and increasing operational costs.
Since the second semester of 2022, the price of coal has experienced a sharp decline, while operational costs have continued to rise. The operational costs of coal miners this year are estimated to increase by an average of 20-25 percent due to the rise in fuel costs, larger stripping ratios resulting in higher mining costs, inflationary effects, and others.
Moreover, the increase in mining costs has become even more burdensome with the hike in royalty rates.
Furthermore, Executive Director of the Indonesian Coal Entrepreneurs Association (APBI), Hendra Sinadia, believes that the obligation to keep DHE will burden exporters. Because the forex from exports, which can usually be immediately used for business purposes, must now be withheld for a long time.
“Well, of course, this regulation will impact the cash flow of all SDA exporters,”
Hendra said, quoted from Tirto on Monday (31/7/2023).
Hendra believes that this regulation will disrupt the cash flow for coal exporters, especially when prices are continuously declining while operational costs continue to rise.
“So, we are concerned that this regulation could be counterproductive amidst the government’s efforts to boost exports. The time for disseminating the regulation is very short, it was just today and tomorrow the rule is already in effect,” he said.
Minister Luhut Responds to Criticism from Exporters
Regarding the criticism raised by coal entrepreneurs, Coordinating Minister for Maritime and Investment, Luhut Binsar Pandjaitan, considers that the criticism comes from a lack of understanding among entrepreneurs about the regulation.
“Yes, indeed. But because they don’t understand, the government is very aware of it. So we have discussed it for a long time, we have discussed it with the entrepreneurs,” said Luhut at Halim Perdanakusuma, Thursday (27/7/2023).
Luhut said that this regulation is actually applied to proceeds above USD 250,000. While proceeds below that amount are not subject to the regulation.
Furthermore, Luhut emphasized that this DHE regulation is very crucial for increasing Indonesia’s forex reserves.
“DHE is very important. DHE can be funds that are circulated within Indonesia from exports from these mines, reaching up to USD 9 billion per year,” said Luhut.
20% off today. Whatsapp us!