FORMATION OF TRESTEE: IS IT NECESSARY?

The Governor of Bank Indonesia Darmin Nasution stated that he was dissecting the plan to operate Trustee service to manage forex reserves from export yields. Discussions over Trustee came up after grievances was voiced by companies which were engaged in production sharing contract (KPS) in the oil and gas sector (MIGAS).

According to Darmin Nasution, many parties wished there was Trustee in Indonesia. The status of Trustee was in the Law of Banking, which was essentially depositing forex from export (DHE) in banks. The process of discussing forex from export yields with contract-holder companies in the oil and gas sector was still a long way to go. Generally they complained that there was no Trustee in Indonesia.

Discussions of DHE including Trustee had been going on for six to seven months. For Trustee he expected that the regulations would be released through Bank Indonesia in two or thee months.

Previously it was informed that BI was scheming up a regulation to step up capacity of banking services at home to manage incoming DHE. Among them was Trustee, a body which did not only keep DHE but also managed the forex. The forex reserves, by Trustee management could be used for investments depending on agreement with exporters.

The objective was that domestic banks could be confided to render trustee services and manage DHE. This was done so that DHE which were now deposited in domestic banks would feel at home in Indonesia.

Now Trustee had become a hot issue because the management of forex liquidity had been the focus of criticism by many parties since crisis swept over two continents. One thing was certain that BI’s plan to form a Trustee to manage DHE was worthy of appreciation although the execution was not easy.

In fact the plan was a praiseworthy effort by BI but there were hindrances to the execution like absence of legal protection, poor infra structure and non-existing banking product. Legal umbrella was needed because the way it had been, foreign banks which were entrusted to manage Trustee already had their regulation so the operation was well secured. If the legal factor was north strong, it might pose danger to customers.

Besides, the local banks were rated as not having the right instrument. Trustee had been in operation in the capital market. In the Stockmarket Trustee was the entrusted party, where investors deposited their money first in the appointed bank as trusted bank, and soon to transfer the fund to the related eminent. In this case the legal protection was only the Bapepam and financial institutions.

Previously BI believed that there were still foreign companies or trustees who placed their DHE in their holding companies, not in Indonesia. They were reluctant to place their DHE in Indonesian banks as they were afraid the fund could not be withdrawn. The final objective of Trustee was that the Government would receive report from DHE recipients which declared the amount of products exported.

Today all of the DHE money deposited in local forex banks were usable, but only used for credit and investments while attractive products as being offered by foreign banks were not available. Up to April 2012 last, based on Notification of Exported Goods (PEB) per January 2012 only half of DHE had entered.

Of the total PEB per January amounting to USD 14.6 billion, the amount received by April was around USD 7.4 billion. Most of the exporters who had not received DHE through domestic forex banks were those active in the sectors of palm oil, rubber, coffee, and cacao.

As with oil & gas, the hindrance was DHE accounts entering through trustee bodies abroad. BI coordinated with BP Migas to respond to that matter. There were 21,600 exportes which were identified as not having entered their DHE. In this case BI had sent a letter to Them. Although still not due because export data of January was received in July 2012 at the latest, BI kept on reminding aboit it.

Or the letters sent out by BI, so far there were only 200 exporters who responded and explained. Most of them claimed to have received DHE through domestic forex banks. BI followed up the responses by checking to the banks mentioned by exporters as recipients of their DHE. Still in this case BI had to face the problem of finding exporters’ address as many of them were not accurate.

If the DHE rules were obeyed by importers exporters, it could increase supply of USD at home; Rupiah movement would be more stable. Unfortunately some business players felt that this regulation was not efficient enough. Understandable because BI themselves claimed they were having difficulty in applying Bank Indonesia Regulations (PBI) No. 13/20/PBI/2-11 which obliged exporters to deposit DHE. Among the problems was obstacles by exporters network at international level.

The problem arose because multi-national companies operating in Indonesia had their principal in Indonesia. Meanwhile interbank accounts were spread out. However, generally there were many companies which had reported. Therefore to increase awareness among exporters, BI must continue to step up illumination campaign for exporters who had not or even did not deposit DHE on July 2.

BI Rules (PBI) regulated that exporters were obliged to accept all DHE through Indonesian forex banks at the longest 90 days after PEB. In the event that by July 2, 2012 exporters ignored this PBI, the Central Bank would put administrative sanction from Rp 10 million to Rp 100 million.

The banking circles claimed they were having difficulty in identifying DHE. The point was that exporters could make PEB direct with the Customs Dept while there were exporters who used the (T/T) transfer mechanism so banks were only receiving transferred fund belonging to exporters without submitting documents to banks. By this mechanism banks could not open PEB data and cross-check them against DHE as there was a Law of Customs which prohibited it. Only BI, The Customs Dept. and Central Board of Statistics (BPS) could open data.

Bank could only cross-check PEB documents against DHE provided the transaction was through letter of credit (L/C), the point was that it was compulsory to apply for PEB document. However, transaction by L/C was no longer popular because now nearly 85% of export transactions were done by using non-L/C documents so banks could only publicize DHE policy to their customers.

Word was out that the oil & gas sector was the least receptive to the application of DHE rules. The reason was low confidence of exporters in the security state of the nation so in times of emergency exporters could not carry their money away while demand for oil was always high; besides there was the habit of letting exporters to park their money abroad. That there was no trustee in Indonesia was only an excuse to justify their acts. When Rupiah value reached Rp 9.600 per USD, many exporters sold their dollars to banks.

So the challenge for BI and the banking sector was to try to bring DHE to Indonesia through trustee. That the trustee itself was not ready, it must be made ready because the need for it was pressing. Beside Trustee, domestic banks must also be wise and smart to create attractive products as offered by foreign banks so national exporters would be attracted to deposit their money at home in Indonesia.

 Business News - September 14, 2012