Jakarta, CNBC Indonesia – Coal companies in Indonesia are getting a breath of fresh air. This is because the government officially waives production taxes or coal royalties of up to 0%.
This provision is contained in the Government Regulation Substituting the Job Creation Act (Perppu) signed by President Joko Widodo o Jokowi on December 30, 2022.
The regulation on royalties is dictated by the Perppu which contains an insert of an article of the law n. 3 of 2020 concerning Minerba Minerba, or art.
“The granting of certain treatment to the government revenue obligation in paragraph (1) for coal development and/or utilization activities may consist of the imposition of a 0% (zero percent) production/royalty tax” , reads the article listed in Job Creation Perppu.
This provision will be regulated in more detail in a Government Regulation (PP). With 0% royalties, mining entrepreneurs, especially coal, will make more money. Also, when the price of coal rises.
Like last year, the price of coal has reached $400 a ton. Coal broke the records twice, namely on March 2, 2022 at a price of US$446 per ton and on September 5, 2022 at a price of US$463.75 per ton.
Even with the global weakening due to China’s economic downturn, Ahmad Zuhdi, industrial analyst at Bank Mandiri, estimates that coal prices will range between US$360 and US$380 per ton in the first week of January 2023.
The Russo-Ukrainian war, gas problems in Europe, drought and heatwaves in China and India, floods in Australia, to Indonesia’s export ban sent coal flying last year.
However, exporters of coal and other mineral resources who have benefited from this price hike are suspected not to keep their export dollars domestically.
This worries the government and Bank Indonesia (BI). This is because the increase in commodity prices has supported Indonesia’s trade balance, which has recorded a surplus for 31 consecutive months.
Unfortunately, this surplus has not been reflected in foreign exchange reserves, which have declined.
In November 2022, Bank Indonesia’s (BI) registered foreign exchange reserves reached only USD 134 billion, up slightly from USD 132 billion in October 2022. Indonesia’s foreign exchange reserves had actually reached USD 144.8 billion USD in August 2021. This is a historical document.
Instead of saving and exchanging dollars domestically, exporters prefer to save their dollars which should be counted as export earnings (DHE) abroad, one of which is in the neighboring country, Singapore.
The government and BI also reimposed penalties and fines on natural resource exporters (SDAs) who failed to report and bail out their export dollars in national banks.
BI has even tried to get exporters to place their export earnings (DHE) domestically.
This effort has been carried out by BI through the issuance of foreign currency monetary operating instruments (OM) which should be able to attract exporters because they are able to provide competitive returns on foreign currency deposits based on a transparent market mechanism accompanied by incentives for banks.
In this OM, banks can later provide higher interest rates on deposits and charge the gap or spread to the BI.
Exporters save many dollars from their exports to Singapore, bearing in mind that interest rates on deposits are higher than in the country.
Indonesian Export Companies Association (GPEI) president Benny Soetrisno said yields were not the only consideration for entrepreneurs to place their DHE nationwide.
“We can consider that later, maybe yield-wise it’s decent, but from another perspective we will definitely consider what other conveniences can equate to convenience when placed outside,” he explained to CNBC Indonesia, quoted on Monday (26/ 12/2022).
In addition to yields, he stressed that exporters are also considering more promising administrative structures abroad.
Therefore, in addition to monetary instruments, administrative facilitation guarantees must also be implemented to entice entrepreneurs to park their DHE nationally.
“It’s not just about returns, it means there are different administrations that might be harder here, better (that are) easier there,” he said.
Seeing this condition, it is sad if coal companies get the convenience of zero percent royalty fees, but park their profits overseas.
As for DHE, exporters: We’re foreign exchange fighters, but how come it’s complicated