The Circular Letter of Bank Indonesia No. 17/11/DKSP (“BI Circular Letter No. 17/11/DKSP“) has been issued by Bank Indonesia, which has come into force on June 1, 2015 based on the the mandate of article 22 of Bank Indonesia Regulation No. 17/3/PBI/2015 concerning the Mandatory Use of Rupiah in the territory of the Republic of Indonesia (“BI Regulation No. 17/3/PBI/2015“) which states that further provisions of BI Regulation No. 17/3/PBI/2015 are stipulated under this BI Circular Letter.
This Circular Letter governs provision on the implementation of Bank Indonesia Regulation No. 17/3/PBI/2015 which basically has been described in such regulation. There are however further provisions along with its elucidations that are set out as follows:
A. General Provision
- Any financial transaction carried out within the territory of Indonesia by citizens or non-citizens, in cash or non-cash transactions, is required to use Rupiah;
- The payment and transaction are considered as an integral. The acceptance of any transaction conducted in Indonesia must be in Rupiah;
- The mandatory use of Rupiah does not apply to international money transfer activity that are not intended for the payment purpose or settlement of liabilities arising from transactions in the territory of Indonesia.
B. Obligation to Price Label on Goods and/or Services in Rupiah
- It is prohibited to include the price in Rupiah and foreign currencies simultaneously (dual quotation), Only Rupiah is allowed for price label;
- Obligation and restriction on price label on goods and/or services also applies to price label of goods and/or services through electronic media.
C. Implementation of Mandatory Use of Rupiah For A Written Agreement of Strategic Infrastructure Project
- Strategic infrastructure project is an example of a written agreement of payment or settlement of obligation in foreign currency which is excepted in regards to the prohibition to refuse the acceptance of Rupiah towards any party as set out in article 10 paragraph (2) letter b of PBI 17/3/PBI/2015.
- Strategic infrastructure project that is agreed in writing can be an exception with respect to the mandatory use of Rupiah if: (i) stated by national or local governments as a strategic infrastructure project that is proven by the grant of statement letter from the Minister or its related agencies to the project owner; and (ii) an approval from Bank Indonesia on an exception with respect to the mandatory use of Rupiah in Indonesia;
- Such approval from Bank Indonesia with regards to strategic infrastructure project consists of:
- transactions within the framework of the development of strategic infrastructure projects until the project is completed and/or;
- transactions within the framework of the sale of products or services produced by strategic infrastructure projects until certain period of time, with the terms of sale of products or services that have been agreed since the beginning of the construction of such project.
– the application of an exception with respect to the mandatory use of Rupiah shall be filed by a party who requests such exemption while the purpose in using foreign currency in a payment transaction or the settlement of obligation shall also be disclosed.
D. Implementation on the Mandatory Use of Rupiah in Non Cash Transaction for Businessmen with Certain Characteristic
- In the event where there is an issue occurred to businessemen with certain characteristics in relation to the implementation on the mandatory use of Rupiah for non-cash transactions, Bank Indonesia may set specific policies due to consideration of:
- the preparedness of the businessesmen, in case where the application on the mandatory use of Rupiah requires fundamental change in the system and/or business processes of business activities and/or certain businessmen;
- continuity of business operation, in case where the application on the mandatory use of Rupiah at any time soon without sufficient transitional period could affect the process of business operations;
- investment activity, among others, in case where business activity requires financing in foreign currencies for a certain period while the mandatory use of Rupiah at any time soon may disrupt such investment and or;
- business activitiy that has a significant impact on national economic growth.
In addition to the above considerations, the compliance of businessmen to Bank Indonesia provisions on the obligation to accept foreign exchange earnings from export activity and the application of the precautionary principle in the management of the foreign debt of non-bank corporation are also deemed as considerations that should be taken into account by Bank Indonesia.
E. Supervision on the Compliance of the Use of Rupiah in the Territory of the Republic of Indonesia
- The mechanism on the compliance of each party to the implementation on the mandatory use of Rupiah and the inclusion of the price of goods and/or services in Rupiah, among others:
- supervision method is performed directly and/or indirectly;
- direct supervision is conducted through the inspection that can be performed by Bank Indonesia at any time;
- indirect supervision is conducted through analysis and evaluation of the report submitted by each party.
Bank Indonesia has its authority in requesting for report, statement, and/or data towards any party with respect to the implementation of the mandatory use of Rupiah which is therefore making the party responsible to submit report, statement, and/or data mentioned to Bank Indonesia if requested. For this reason, the submission of report or mail shall be submitted to Bank Indonesia in Indonesian language to:
Departemen Kebijakan dan Pengawasan Sistem Pembayaran Kompleks Perkantoran Bank Indonesia Gedung D lantai 5 Jl. M.H. Thamrin No. 2, Jakarta 10350.
G. Other provisions
- Banks and organizers of fund transfer are required to notify the mandatory use of Rupiah in Indonesia to every customer who will conduct transactions using foreign currency;
- If a customer would still conduct a transaction using foreign currency, Banks and the organizers of fund transfer are required to ask the customer to state the purpose of the transaction in a form or a transaction slip.
H. Transitional Provisions
With respect to the exception on the prohibition to refuse the acceptance of Rupiah towards any party, as regulated under PBI No. 17/3/PBI/2015 or BI Circular letter, it is said that such exception only applies to the written agreement of payment or settlement of obligation in foreign currency in which its payment method is settled through a non cash transaction. In terms of this, besides the enforceability of PBI No. 17/3/PBI/2015, the mandatory use of rupiah for non cash transaction is about to become effective on 1 July 2015.
Therefore, a written agreement concerning payment or settlement of obligation in foreign currency made prior to 1 July2015 shall remain valid until the expiration of such written agreement.
The written agreement, a derivative or implementation of a master agreement made from1 July 2015, which is treated as a stand-alone agreement shall be subject to the provisions concerning mandatory use of Rupiah in Indonesia.
Furthermore, the extension of the period and/or amendment to the written agreement made from 1 July 2015 shall be subject to the provisions regarding the obligation to use Rupiah in Indonesia.
Such amendment include changes regarding parties to the agreement, price of the goods and/or services, and/or object of the agreement.