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On June 1, 2015, Bank Indonesia (BI) issued circular letter number 17/11/DKSP on the Mandatory Use of Rupiah Currency in the Territory of Indonesia (Circular Bank Indonesia). The Circular Bank Indonesia provides further explanation to the BI regulation number 17/3/PBI/2015 on the Mandatory Use of Rupiah Currency in the Territory of Indonesia (Regulation), which we have discussed in our previous column. The Circular Bank Indonesia does not provide many new additions, and mainly provides clarifications and examples to the matter regulated in the Regulation.
In next few columns we will highlight the main issues discussed in the Circular Bank Indonesia.
Background: Mandatory Use of Rupiah in Indonesia
The Regulation, which is an implementing regulation of Law number 7 of 2011 concerning Currency, mandated the use of the Indonesian rupiah for the following cash and non-cash transactions:
1. each transaction which has the purpose of a payment for something;
2. other settlement of obligations that must be fulfilled by transferring money; and/or
3. other financial transactions.
Also prices in quotations of the above mentioned transactions must be stated in rupiah. The Regulation stipulated also several exceptions to the mandatory use of rupiah.
Strategic Infrastructure Projects
The Regulation stipulated already in article 10 (3)(b) that strategic infrastructure projects can be exempted from the mandatory use of rupiah. The Circular further defines which projects are included in strategic infrastructure projects. The Circular defines infrastructure projects as follows:
A. transport infrastructure, including the services of airport services, delivery and/or service of ports, railway infrastructure;
B. road infrastructure, including toll roads and toll bridges;
C. irrigation infrastructure, channels to transport water;
D. drinking water infrastructure, which includes the building of water extraction, transmission networks, distribution networks, water treatment plants;
E. sanitation infrastructure, which includes waste water treatment plant, the collection network and the main network, and garbage facilities including transport and disposal;
F. telecommunications and informatics infrastructure, including telecommunications networks and infrastructure of e-government;
G. electricity infrastructure, including power plants, including the development of electricity derived from geothermal, transmission or distribution of electricity; and
H. The oil and gas infrastructure, including transmission and/or distribution of oil and gas.
The above-mentioned infrastructure projects can be excluded from the mandatory requirement to use the rupiah in case:
1. a project is declared by the local or central government as strategic infrastructure project. In such event the government will issue a license to the respective project company; and
2. the project company must obtain approval from BI for the exemption to the obligation to use the rupiah.
The Circular Bank Indonesia further defines the application requirements to request approval from BI by preparing the following documents:
1. a document showing legality of the applicant, such as the deed of establishment, including its amendments, domicile, and company profile;
2. the license of the government designating the project as strategic infrastructure project. For subcontractors of such project, they may attach a copy of the aforementioned license, accompanied by a recommendation which states:
a. that the project of the subcontractor is a part of the strategic infrastructure project; and/or
b. the implementation requires foreign exchange or services origination from outside the Indonesian territory.
3. A copy of the agreement which shows that payments are made in foreign currency.
Unless BI requires more time, BI gives approval or rejection in writing on the request submitted, no later than 30 days after receipt of the complete application.
In our next column we will discuss among others the exemption of mandatory use of rupiah provided by BI in certain circumstances.
This column is provided by PNB Law Firm Jakarta