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STABILITY ATTEMPTED THROUGH THE MANDATORY USE OF RUPIAH
In today’s constantly changing economic environment, it would be nearly impossible to find someone who doesn’t know the significance of US President Benjamin Franklin: the face of the USD 100 dollar bill. While USD continues to be the most heavily traded currency throughout the world, Indonesia took a stand.
The Indonesian Central Bank (“BI”) Regulation No 17/3/PBI/2015 regarding the Mandatory use of Rupiah within the territory of Republic of Indonesia (“PBI”) was enacted on 31 March 2015. The main purpose of the PBI enactment was to to improve the constancy of Rupiah’s exchange rate.
Transactions Subjected to PBI
After the enactment of PBI, all transactions conducted within the territory of the Republic of Indonesia must use Rupiah. This is applicable to both cash and non-cash transactions as follows:
- transaction for purposes of payment;
- The settlement of other obligations that must be fulfilled by using money; and/or
- Other financial transactions.
However, Article 4 of the PBI provides exemptions for the following transactions:
- Certain transactions within the framework of implementing state revenues and expenditures as follows:
- Payment of foreign debt;
- Payment of domestic debt in foreign currency;
- Purchase of goods from overseas;
- Capital expenditures from overseas;
- States revenue from the sales of government bonds in foreign currency; and
- Other transactions related to the implementation of the state budget
- Export and/or import of goods to or from outside the custom’s territory of the Republic of Indonesia; and/or
- Cross border service activities.
Additional activities such as port clearance, transportation, and other supporting business activities for export and/or import of goods to or from outside the customs territory of the Republic of Indonesia must also use Rupiah as currency.
If there’s a foreign element in the agreement related to the transaction, business parties can still agree on the price with foreign currency but only as reference value for the agreement. Business parties, however, must state the applicable exchange rate pursuant to the Foreign Exchange References Rates published by BI (“JISDOR”), and the payments have to be made in Rupiah pursuant to the JISDOR exchange rate.
Moreover, business parties must list the price of goods or services in the Rupiah currency.
So what are the repercussions of using our friend Benjamin Franklin to transact in Indonesia?
According to Article 17 of the PBI, any violation of the mandatory use of Rupiah in non-cash transactions is subject to administrative sanctions as follows:
- Written warning;
- 1 (one) percent fine of the transaction value, with a maximum fine of Rp 1,000,000,000,000 (one billion Rupiah); or
- Ban from participating in any payment transaction.
To make it even more severe, any violation of the mandatory use of Rupiah in cash transactions is considered a criminal offence under Article 33 of the Law No.7 Year 2011 regarding Currency. It is punishable by a maximum 1 (one) year of imprisonment and a fine of Rp200,000,000 (two hundred million Rupiah).
Wow! It’s quite clear that Indonesia is serious about its attempts to safeguard the value of its domestic currency within the world market.
The moral of the story here: DON’T RISK IT! Leave Mr. Franklin for your travels!
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