Bank Indonesia (“BI”) recently issued a circular (the “Circular”) to further explain the scope and ambit of BI Regulation No. 17/3/PBI/2015 on the obligation to use rupiah in payment transactions conducted within the territory of Indonesia (the “Regulation”). While most of the contents of the Circular (which came into effect on 1 June 2015), merely reiterate the provisions of the Regulation, it does contain some additional useful information.
1. Dual Quotation
The Circular makes it clear that BI is determined to enforce a prohibition on dual price quotations, meaning that in most cases prices may only be quoted in Rupiah. Besides the obvious example of a price tag attached to a particular good that is offered for sale, other examples given in the Circular include prohibitions on the dual quotation of prices/fees in respect of:
The Circular also stresses that the prohibition of dual quotation applies equally to goods and services sold via the Internet.
2. Strategic Infrastructure Projects
The Circular puts some meat on the bones of the exemption contained in the Regulation for strategic infrastructure projects. These are now spelled out as including infrastructure projects in the following sectors: (1) transportation, including airports, ports and railways; (2) highways; (3) irrigation and drinking water; (4) sanitation; (5) information and communications technology; (6) power; and (7) oil and gas.
In order for a particular project in the above sectors to be exempted, a two-stage process must be gone through whereby the project must:
The exemption may be extended to cover not only transactions conducted as part of the project’s development up until completion, but also the sale of products or services produced by the project for a designated period of time, provided that this was envisaged from the outset.
BI is required to approve or reject an exemption request within a period of 30 days from the date of receipt of all the required application documents. Should it not be possible to arrive at a determination within 30 days, BI must inform the applicant of this. Given that the approval process may exceed 30 days, there appears to be no strict limit on the amount of time that may be taken by BI in making a decision.
3. Non-Cash Transactions by Parties with Special Characteristics
Should the rupiah-use requirement for non-cash transactions present special difficulties for particular types of businesses, BI has the discretion to apply special policies based on a consideration of whether the requirement will (i) require such businesses to make fundamental changes to their business systems and/or processes; (ii) endanger the survival of such businesses should a sufficient transitional period not be applied; (iii) adversely affect investment where businesses require foreign currency-denominated financing for a particular period and an obligation to quickly shift to rupiah use would disrupt such investment; and/or (iv) adversely affect businesses that have a significant influence on national economic growth.
In addition to considering factors such as the above, BI will also take into account the level of compliance of a business with BI regulations, including compliance with their obligations as regards forex earnings from exports and the application of prudential principles in relation to offshore borrowing by non-bank corporations.
4. Role of Banks
Banks are required to inform customers that intend to conduct foreign currency-denominated transactions of the obligation to use Rupiah within Indonesian territory. Should a customer persist with the intention of using foreign currency, the customer must be requested to state the purpose of the transaction on the transaction form or slip.
5. Transitional Provisions
The Circular further elaborates the transitional provisions of the Regulation by providing that grandfathering applies to master or derivative agreements and other transaction documents, such as purchase and delivery orders, executed prior to 1 July 2015. Should a derivative or other form of agreement necessary for the implementation of the main agreement be treated as a stand-alone agreement, then it will not be grandfathered and must comply with the requirements of the Regulation if it is executed after 1 July 2015. Similarly, agreements that are extended or amended subsequent to this date must also comply with the Rupiah-use requirements, with the term “amended” covering changes in the parties, the price of the goods/services, and / or the subject matter of the agreement.
(i). Peraturan BI No. 17/3/PBI/2015 tentang kewajiban Penggunaan Rupiah di Wilayah Negara Kesatuan Republik Indonesia.
AHP Client Alert is a publication of Assegaf Hamzah & Partners. It brings an overview of selected Indonesian laws and regulations to the attention of clients but is not intended to be viewed or relied upon as legal advice. Clients should seek advice of qualified Indonesian legal practitioners with respect to the precise effect of the laws and regulations referred to in AHP Client Alert. Whilst care has been taken in the preparation of AHP Client Alert, no warranty is given as to the accuracy of the information it contains and no liability is accepted for any statement, opinion, error or omission.