The Indonesian government is to delay until 1 April the implementation of a new regulation that requires the country's miners to obtain letters of credit (L/Cs) from local banks for exports valued at US$1 million or more.

Exporters say the regulation, which was due for implementation in late February, will push up costs and put off would be overseas buyers of Indonesian metals and minerals.

Payment changes

Mining industry critics say the new regulation would deter foreign buyers because they would have to pay a deposit into an Indonesian bank as an advance against goods on order. Currently, buyers can pay for goods after they received shipments of metals and minerals.

Under the new regulations, exporters will no longer be allowed to receive payments from foreign companies in overseas accounts.

Benefits

The regulation is aimed at reducing capital outflows and maintaining Indonesia's foreign currency reserves, while the government says the new rules are part of its efforts to ensure that exporters are paid on time.

One official has suggested that exporters could use the L/Cs as loan collateral or for government trade financing incentives.

Critics

Executive director of the Indonesian Mining Association, Priyo Pribadi Soemarno, does not think the new regulations will be at all good for an industry already badly impacted by the global economic downturn.

He predicts that the value of mining exports, which average more than US$10 billion per year, will decline under the new rules by as much as 40 per cent to US$6 billion.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.