Retaining Export Earnings and Government Incentives to Drive Industrialization: 'Indonesia First'

JAKARTA, Investortrust.id – The government’s plan to require exporters to retain 100% of their foreign exchange earnings, known as DHE, domestically for a year is a positive step toward boosting foreign reserves and stabilizing the rupiah against the US dollar. However, the liquidity and investment funding needs of exporters must be carefully addressed to ensure that this well-intentioned policy does not inadvertently harm the business sector.

“The Indonesian Chamber of Commerce and Industry (Kadin) supports all government efforts to strengthen the national economy. The goal of retaining DHE is to stabilize the rupiah and reduce volatility, which we agree with, especially since our foreign reserves are relatively modest,” said Kadin Chairman Anindya Novyan Bakrie during a press briefing on Wednesday, Jan. 22, 2025.

However, Anindya emphasized that exporters’ cash flow and liquidity needs must also be considered. Many exporters require foreign currency to import raw materials and capital goods for investments. Ensuring liquidity availability is essential to prevent negative impacts on their operations. “Exporters are often also importers, particularly in the manufacturing sector,” he explained.

Exporters also need rupiah for domestic obligations. With the one-year retention of DHE, Anindya noted, solutions must be offered to ensure exporters have adequate liquidity. Any difficulties in securing funds for operations or investments could disrupt export activities in the long run.

As partners of the government, businesses—including exporters represented by Kadin—play a crucial role in driving national development, achieving 8% economic growth, expanding businesses, and creating new jobs. Private sector players are increasingly looking to contribute to infrastructure development, agriculture for food security, and downstream industrialization. Disruptive policies could hinder this collaborative effort between the government, state-owned enterprises (SOEs), and private businesses.

We are confident that the government will design policies that benefit all stakeholders to promote job creation, stability, and economic growth,” said Anindya. He expressed hope that the incentives being prepared under the new DHE regulation revision would strike a balance—boosting reserves while ensuring exporters are not disadvantaged.

 

Foreign Exchange and Export Landscape

On the foreign exchange market on Wednesday (Jan. 22, 2025), the rupiah traded at IDR 16,322 per US dollar. Indonesia’s foreign reserves managed by Bank Indonesia reached $155.7 billion in December 2024, up from $135.9 billion in 2020. By comparison, Thailand and Singapore reported foreign reserves of $237 billion and $506.7 billion, respectively, during the same period.

Indonesia’s exports in 2024 totaled $264.7 billion, a slight increase from 2023 but lower than the $292.9 billion recorded in 2022 during the pandemic. In contrast, Singapore’s exports reached $515 billion, Vietnam $453.7 billion, Malaysia $312.96 billion, and Thailand $280 billion in 2024.