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A new Indonesian government regulation that forces exporters to deposit part of their earnings in a government-controlled bank account is another blow to the nation’s shrimp exporters and processors, who are already suffering from a global demand slump and rising feed and production costs.
The regulation requires exporters sending cargo with a value of USD 250,000 (EUR 232,000) or more to deposit at least 30 percent of their earnings for a minimum of three months in a special bank account controlled by the Indonesian government. The government’s justification for the regulation, which took effect on 1 August, is that Indonesian exporters often retain their foreign exchange earnings overseas in order to capitalize on more favorable interest rates and to support their international operations.
“It’s the aim of the government to keep more money within the country for financial stability,” Sander Visch, the lead analyst at Norwegian aquaculture and fisheries data firm Kontali, said during the 2023 Shrimp Summit, which took place in Vietnam. “But it will have an enormous effect on the operations of exporters and processors, meaning it will be very difficult for them to buy shrimp at higher prices.”
Exporters who comply with the regulation will receive tax incentives, but those who fail to make the required deposit may have their export permissions suspended. A lobbying effort has cropped up in response to the regulation, aimed at mitigating or eliminating the rule, which is opposed by several of Indonesia’s largest industries.
“It is hoped that the enactment of the regulation will propel Indonesia’s economic development to be more in line with export of natural resources products, which continues to enjoy strong growth. For now, the government is focusing on four sectors, namely mining, plantation, forestry, and fishery, as they are the largest contributors to the nation’s [export earnings],” a 3 August brief from the Indonesian law firm Assegaf Hamzah and Partners said. “In light of the regulation, exporters in the foregoing sectors must examine their business plan and make the necessary adjustment on, among others, their cash flow management. It may be the case that as a result of the regulation, a portion of their [export earnings] that has been earmarked for business support must now be reserved for at least three months. We expect that the government will issue further implementing regulations in the future to regulate, among others, the details of the incentives offered under this regulation.”
The rule could threaten Indonesia’s ambitious target of USD 7.6 billion (EUR 7.1 billion) for its exports of fishery and marine products in 2023 …
Photo courtesy of FarisFitrianto/Shutterstock
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