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Government Pushes for Renewable Energy Despite Cheaper Oil

The government has stepped up its efforts to reach the 23 percent targeted renewable energy utilization over the next nine years, by boosting regional partnership, research and clean energy investment despite cheaper fossil-based fuels.

“There are always factors concerning capital efficiency as most clean energy technology is more expensive than coal-fired, but we can decrease the gap with technology and cooperation,” Vice President Jusuf Kalla said in his speech at the Bali Clean Energy Forum on Thursday.

As a tropical and archipelagic country, Indonesia has abundant resources, from hydropower to solar energy. In the long-term, the increased use of the new and renewable energy will benefit the country as the costs incurred from the environmental damage caused by the exploitation of the fossil-based fuel will be also high.

The country is estimated to have around 28 gigawatt (GW) in geothermal potentials and 75 GW in hydropower potentials that can generate electricity. The total potential renewable energy is estimated to reach more than 300,000 megawatt (MW).

“In 10 years, Indonesia will build two times 35,000 MW, and the proportion of coal-fired power plants should fall to 50 percent from the current 60 percent, while the proportion of the renewable energy will increase to 25 percent from 11 percent,” he said.

According to data from state-owned electricity firm PLN, around 55.7 percent of electricity generation in 2015 was fueled by coal, 25.3 percent by gas, 8.2 percent by diesel fuel, 5.9 percent by hydropower plants and around 4 percent by geothermal energy.

The government has also aimed to add 35,000 MW of electricity over the next five years, with 25 percent slated to be sourced from renewable energy.

Kalla also said that the slumping oil price might not last long and the price could exceed the renewable energy cost in time.

Oil benchmark Brent crude was at US$30.54 per barrel on Thursday, according to Bloomberg figures, compared to $64.64 per barrel on April 28 last year.

Kalla cited that the diesel fuel electricity price once hit 30 US cent per kilowatt hour (kWh) compared to 10-12 US cents per KwH for clean energy, such as hydropower and geothermal.

Energy and Mineral Resources Minister Sudirman Said voiced the same concern, stating that the country should avoid the pitfall of overdependency on fossil fuels, which could lead to a so-called “corrosive energy policy”.

Sudirman also said that he aimed to capitalize on the country’s recent move to become an associate member of the International Energy Agency (IEA) and rejoin OPEC to boost the partnership in renewable energy development.

“We will form a Center of Excellence in Bali to aid the research, education, pilot project and investment facilitation of clean energy,” he said, adding that Bali would be a good exemplary project with its size as the government aimed to supply 90 percent of the island’s electricity through renewable energy sources over the next five years.

The government will also work with governors from six provinces, including East Nusa Tenggara and West Papua, on the clean energy program to provide electricity for 12,600 villages, in a program called Indonesia Terang (Bright Indonesia).

He also cited the government’s recent plan to establish an entity similar to PLN to handle renewable energy to buffer the purchasing of electricity from independent power producers and sell the power to PLN under a certain price, as well as a cooperation with Financial Services Authority (OJK) to boost the funding for renewable energy projects.

Big Coal Miners Plan Higher Production This Year

The country’s major coal miners plan to further boost production in 2016 although analysts estimate that an oversupply in the world’s coal market will continue.

The production levels proposed by large coal miners are quite different from those filed by small and medium coal miners, who mostly plan to reduce production on account of low demand in the world’s coal market.

According to data from the Energy and Mineral Resources Ministry’s mineral and coal directorate general, by mid-December, as many as 71 companies, consisting of 64 coal contract of work holders and 7 permit holders, proposed a total of 303.33 million tons of production in 2016. The 2016 production plan will be far lower compared to the proposed 419 million tons in 2015.

The ministry’s director for coal, Adhi Wibowo, said that a large number of small coal producers had yet to file their production plans for this year. However, their contribution to the country’s total production is quite small.

Figures from the mineral and coal directorate general showed that most big firms actually planned to increase their output.

Among 11 firms producing more than 5 million tons, only two firms proposed lower output in 2016, namely PT Adaro Indonesia with a slight 0.8 percent cut and PT Kideco Jaya Agung with almost 18 percent.

President director of Adaro Energy, the owner of Adaro Indonesia, Garibaldi Thohir said earlier that his company would set output at a range of 52 to 54 million tons in 2016, around 7 percent lower compared to targeted output in 2015 of 54 to 56 million tons.

“We sell most of our coal under long-term contracts and only a little we offer on the spot market. We will reduce the amount [of coal offered] on the spot market,” he said.

Meanwhile, Kideco is unlikely to raise its production because its sales remain sluggish. Figures from Jakarta-listed Indika Energy, which is Kideco’s parent firm, showed that the subsidiary company had suffered from a 15.6 percent drop in selling price from January to September 2015. The company also became less aggressive as its realization of capital expenditure, particularly for maintenance and heavy equipment spending, stood at only US$4.3 million during the first nine months of 2015, only around 25 percent of the budgeted $17.8 million. 

On the other hand, state-owned PT Bukit Asam will boost its output this year, partly because a new train transport facility and long-term contract have been sealed. 

Adhi said that small miners with less than 3 million tons in production tended to cut output because they were the most affected by plunging prices. Meanwhile, big firms continue to increase their production.

“There are fixed costs companies have to pay. To pay the costs, increasing the production volume is the only way. However, we will evaluate further if higher production is meaningless and firms continue seeing losses, we will reject the proposals,” Adhi said.

He revealed that the company that proposed the highest drop in output for 2016 was PT Kaltim Jaya Mineral, which slashed its plan to only 150,000 tons in 2016 compared to 1.2 million tons in 2015.

Global coal companies have been suffering from declining prices, particularly on slowing growth of demand while stockpiles continue to rise as producers pump up output. The benchmark thermal coal price at Newcastle Port in Australia fell to US$50.63 per ton in the last two weeks of December, according to figures from Bloomberg. The price was the lowest level since December 2006.

Indonesia’s coal reference price (HBA) for December was set at $53.51 per ton, around 16 percent lower compared to a reference price of $63.84 per ton set in January. The December price is around 57 percent lower compared to the all-time high HBA price of $127.05 per ton set in February 2011.

Coal Exports Drop on Low Prices

The nation’s coal exports significantly dropped in the first nine months of the year as coal companies continued to suffer from low prices in addition to becoming increasingly dependent on the domestic market.

Figures from the Energy and Mineral Resources Ministry’s directorate general for minerals and coal showed that national production reached 308 million tons from January to September this year, declining by around 14 percent compared to the 360 million tons produced in the same period of last year. 

“Out of total production, 235 million tons were exported,” director for coal, Adhi Wibowo, said. 

The export figure was equal to an almost 20 percent drop compared with the 293 million tons sold overseas during the January to September period of last year. As many as 6 million tons of coal are currently in inventories, a similar level at the end of September last year, according to Adhi.

In a contrary trend, as much as 67 million tons were sold to domestic markets during the first nine months of the year, increasing by around 9 percent compared to the 61 million tons delivered to domestic buyers in the same period last year.

Coal mining firms have been struggling to survive amid a challenging business environment marked by low commodity prices partly caused by weakening demand against the backdrop of global economic uncertainties. 

The government set the Indonesian coal reference price (HBA) at US$57.39 per ton in October, an all-time low since the reference was first introduced in 2009. The HBA price is currently 10 percent lower compared to the $63.84 per ton set for January.

The price at Australian port Newcastle, the benchmark for thermal coal, dropped to $54.37 per ton in April, the lowest level since May 2007, Bloomberg reported. Prices continued sliding over the last the three months, the longest run of declining prices since April 2014, Bloomberg added. 

World Coal Association’s chief executive, Benjamin Sporton, said in a recent interview that the global demand for energy was expected to continue growing, particularly in new coal-fired power plants between now and 2040.

“The market is growing, the future for coal is strong and we’ll see prices rebound. Over the next few months, I’m not sure, it is very difficult to forecast but in the next couple of years we will see prices rebound,” Sporton said.

While Chinese demand for coal would likely taper off, Indian demand could become a key driver of coal prices thanks to the country’s efforts to boost electricity capacity. 

“In China, the coal share in the energy mix will decrease because there is more utilization of gas, renewable energy, nuclear, and others. In India, there will be very significant demand for coal due to plans to increase electricity capacity. Indonesia is increasingly using coal for its domestic market instead of exporting it,” Sporton said.

The government of Indonesia plans to see national coal production hit 425 million tons by the year’s end. The coal mining business remains a significant contributor to the country’s revenue of non-tax income. However, given the pressure on prices, output is expected to be well below 400 million tons this year. 

The government has been encouraging miners to sell more of their coal to the domestic market, which is expected to expand following the government’s electricity procurement program. While non-fossil energy sources are expected to be part of the electricity procurement program, the share of coal-fired power plant development remains dominant.

Bukit Asam Calls It a Day on Exploration

State-run coal miner Tambang Batubara Bukit Asam has announced it is halting its exploration activities and will focus on operating its existing mines. 

The coal miner, which has seen slowing business amid declining prices and oversupply, announced that the company would not explore any possible additional reserves in the period between October this year and March next year, and would focus on exploration to support production planning and to collect data necessary for daily and short-term production purposes.

Bukit Asam corporate secretary Joko Pramono said the move was not driven by cost-cutting or anxiety about an unfavorable commodity market, but more by the fact that the company had abundant reserves to meet production needs.

“We have enough reserves to supply operation for the next 40 years, so I think for now we can stop exploring,” Joko told The Jakarta Post over the phone.

Bukit Asam’s coal resources, he revealed, stood at 7.29 billion tons, while its coal reserves were at 1.99 billion tons. The company currently produces 20 million tons of coal per year, and in the next five years, annual output is expected to reach 50 million tons. 

“That does not necessarily mean that we will stop adding reserves. If we want to we can do so externally through an acquisition.”

The company’s latest acquisition was in May, when it acquired coal miner Tabalong Prima Resources (TPR) and coal transport Mitra Hasrat Bersama (MHB) in a transaction worth US$36 million. TPR operates a 3,145 hectare mining concession in Tabalong, with 292 million tons of coal resources and 109 million tons of mineable coal reserves. 

Despite selling a higher volume of coal, Bukit Asam saw its profits fall in the first half of this year as the commodity’s price plunged. The publicly listed coal supplier booked a 31.22 percent drop in net profits to Rp 795.6 billion in the January-June period this year from the same period last year, its earnings dragged down by weak coal prices.

Coal prices have halved in the last two years amid oversupply and declining demand from China, where the economy is slowing and which is trying to combat pollution. Demand from the world’s largest consumer of raw materials fell by 31 percent in the first half, the biggest drop since at least 2009.

Bukit Asam’s coal sales rose mildly by 2.02 percent to 9.03 million tons, resulting in a 1 percent rise in revenue to Rp 6.51 trillion, Joko added. 

Bukit Asam produced 8.32 million tons of coal and purchased 0.82 million tons from a third party, reaching a total of 9.14 million tons, up 4 percent on a yearly basis, according to company records. Of that amount, 4.62 million tons were delivered to domestic buyers, while the remainder was shipped overseas.

William Simadiputra from DBS Vickers predicted that Bukit Asam’s earnings would drop by 30 percent on an annual basis to Rp 1.4 trillion, mainly on lower average selling prices and higher cash cost per ton, despite higher sales volumes.

Isnaputra Iskandar from Maybank Kim Eng Indonesia said that he had cut his earnings forecasts for Bukit Asam for 2016 and 2017 by 21.8 percent and 40 percent, respectively, on expected lower sales volume and lower coal prices. 

He predicted that the miner would book declining net profits in the next two years, from this year’s estimated Rp 1.4 trillion to Rp 1.39 trillion in 2015 and Rp 1.03 trillion in 2016.

Govt Expects Rising Income from Coal Despite Weak Output

The Energy and Mineral Resources Ministry is expecting to see rising royalties and fees from the mineral and coal sectors this year despite plunging production due to low selling prices.

According to the proposed state budget for 2016, the non-tax income from minerals and coal is targeted to reach Rp 40.82 trillion (US$3 billion), roughly a 28 percent jump compared with this year’s target of Rp 31.7 trillion. Royalty payment from the coal industry usually dominates contribution to the total income from the mineral and coal sector.

Although income is expected to increase, the production plan is lower. 

“The PNBP [non-tax income] for 2016 is based on a production plan of 400 million tons of coal,” said Adhi Wibowo, the director for coal at the Energy and Mineral Resources Ministry’s mineral and coal department. The output target is lower than the 425 million tons expected by the end of 2015. 

For this year’s target, some argued that the figure would not be achieved as production had been declining in the last few months, meaning that the contribution target to the state income would also be lower than targeted.

“As of August 15, the non-tax income from the mineral and coal sector reached Rp 19.7 trillion,” said Sri Rahardjo, the director for program development at the mineral and coal office.

The total production during the January to July period of that year was 232.9 million tons, declining by approximately 15 percent compared with 274.9 million tons in the same period last year. Out of the total production, as many as 186.8 million tons were exported and only 46.1 million were delivered to the domestic market. 

The narrowing margin between production and cost has been seen as the main reason behind the output drop. Like other coal miners in the world, Indonesian coal mining companies are currently under pressure due to the plunging commodity price. 

The plunge in prices is also caused by slowing demand following weakening economic activities in countries that are the world’s main consumers of the commodity, such as China — with the yuan devaluation adding to the reasons for price fluctuations. 

Expectation on the recovery of the coal price has also been shadowed by the current plunge in the price of crude oil, which remains the main energy source in the world. 

Indonesia, a major thermal local exporter, set its coal price reference (HBA) for 6,322 kcal/kal coal at $59.14 per ton for August, already 7.4 percent lower compared to a reference price of $63.84 per ton set in January. 

The global coal price has dropped around 10 percent this year, extending losses after a bearish trend since late 2011, according to figures from Bloomberg. The benchmark Newcastle contracts were at $58.35 per ton on Tuesday, data from Reuters showed. 

The Indonesian Coal Mining Association (APBI) chairman Pandu Sjahrir said that domestic coal production would continue to drop further, between 17 and 25 percent by the year’s end, due to weak prices and unfavorable regulations in Indonesia. Therefore, he said, the total output would likely be well below 400 million tons throughout this year.

PLN to Keep 35,000 MW Megaprojects on Priority List

Amid the possibility of a review of the ambitious project to build enough plants to produce 35,000 more megawatts (MW) of power for the country, state owned electricity firm Perusahaan Listrik Negara (PLN) has reiterated the importance creating the new infrastructure to anticipate higher demand in the future.

PLN’s director for strategic procurement and primary energy, Amin Subekti, said that the company estimated that the country’s electricity demand would continue to grow despite a current weakening in demand.

“Infrastructure development always has to be performed earlier than the escalation of consumption. We are currently seeing weakening demand for power, but this is temporary and we still anticipate that our consumption will continue to be bigger than it is now,” Amin said on Friday.

PLN is currently working on a number of power plant projects that are part of the government’s plan to add 35,000 MW to Indonesia’s electricity generating capacity by 2019. The new capacity is crucial to help the country avoid blackouts in the next few years. 

However, since the introduction of the megaproject by President Joko “Jokowi” Widodo in October last year, critics have said the plan was made necessary by past failures, particularly when a so-called fast track program that aimed to produce an addition 10,000 MW of electricity frequently missed completion deadlines because of various issues, ranging from incapable developers, problems with financing and delayed land acquisitions.

In the new 35,000 MW program, PLN will develop 5,000 MW, a reduction from a previous plan for the company to produce 10,000 MW in capacity. The remaining capacity will be developed by independent power producers, which have to pass a thorough due diligence process before they will be able to win projects. 

Earlier on Thursday, the newly appointed coordinating maritime affairs minister, Rizal Ramli, said that he would ask the Energy and Mineral Resources Ministry to re-calculate the 35,000 MW program. 

Rizal argued that developing such a big program within a five-year period was unrealistic.

The 35,000 MW program was introduced to anticipate an estimated growth of electricity consumption in the country of around 8 percent per year to support economic growth of at least 6 percent. 

To balance the growth, the country will have to have an additional capacity of 60 GW during a 10-year period, according to figures from the Energy and Mineral Resources Ministry. 

However, the rate of growth in electricity consumption has been declining year to date, particularly because the industry was affected by slowing economic growth. Figures from PLN showed that nationwide electricity consumption grew by only 1.78 percent to 98.27 terrawatt hours (TWh) in the first six months of the year compared to 96.56 TWh in the same period last year. 

The Energy and Mineral Resources Ministry’s director general for electricity, Jarman, said if there was decline in consumption because of a weakening economy, the long-term power demand would need to be re-calculated. 

However, according to Jarman, that doesn’t mean the 35,000 MW plans should be scaled down. 

“We only need to shift the power plants’ operation times instead of lowering the amount of capacity because the demand will continue to grow,” Jarman said.

Indonesia’s Coal Exports Slide 18% as Overseas Demand Weakens

Coal exports from Indonesia, the world’s biggest exporter of the power-station fuel, have fallen 18 percent so far this year as overseas demand weakens, according to the country’s Energy and Mineral Resources Ministry.
Shipments dropped to 186.8 million metric tons in January to July from 227.9 million tons a year earlier, Adhi Wibowo, director for the ministry’s coal business, said by text message on Wednesday. Exports are down because of slumping demand from overseas buyers, Wibowo said, without specifying any countries.
Benchmark Asian thermal coal prices are heading for a fifth annual loss after Australia and other producers flooded the market and demand faltered in China, the biggest consumer, because of stricter environmental controls and support for domestic miners. About a quarter of Indonesia’s coal export were destined for China from 2008 to 2013, according to the ministry’s data.
Indonesia was the hardest hit of China’s coal suppliers in the first half of the year as the country’s imports fell 38 percent, the biggest drop for that the period in at least five years, according to most-recent China customs data published last month. Shipments from Indonesia declined 49 percent, the most of China’s five largest suppliers.
Indonesia mined 232.9 million tons of coal during the January-July period, down 15 percent from 274.9 million tons a year earlier, Wibowo said. Domestic consumption fell to 46.1 million tons in the same period from 47 million tons, he said.
Australia’s Newcastle coal, an Asian marker grade, has fallen about 13 percent in the last 12 months to $59.54 a ton as of Aug. 7. Indonesia last month cut its benchmark price to a record low of $59.16 a ton.

Output Drops as Price, Rulings Hurt Miners

The country’s coal production took another nose dive at the end of this year’s first semester as the price of the energy commodity showed no sign of rebound amid regulations that business players have deemed to be unhelpful. 

Figures from the Energy and Mineral Resources Ministry’s directorate general for mineral and coal showed that coal production was 202.7 million tons during the January to June period of the year, a 17.4 percent drop compared to the 245.5-million-ton level hit in the same period of last year.

“Of the total production until June, as much as 38.6 million tons went to the domestic market,” said Adhi Wibowo, the director for coal at the ministry.

The deliveries to domestic markets during the first semester of the year dropped 7.4 percent from the 41.7 million tons of coal sold to local buyers during the January to June period of last year. On the export side, as much as 164.1 million tons of Indonesian coal was sent abroad, a 17 percent fall compared to the 197.9 million tons sold overseas in the first six months of last year.

Like other coal miners in the world, Indonesian coal mining companies are currently under pressure due to the plunging commodity price. The plunge in price is partly caused by slowing demand following weakening economies in countries that are the main consumers of the commodity. Expectation of the recovery of the coal price has also been dented by the recent plunge in the price of oil, which remains the main energy source in the world.

Indonesia, a major thermal local exporter, set its coal price reference (HBA) for 6,322 kcal/kal coal at US$59.59 per ton for June, already 6.6 percent lower compared to a reference price of $63.84 per ton set in January. Meanwhile, the cal price at the Newcastle port of Australia, which is the world’s benchmark for thermal coal, was at around $61 per ton at the end of June, according figures from Reuters.

The Indonesian government hopes to see national coal production reach 425 million tons by the year’s end. Coal mining businesses remain a significant contributor to the country’s revenue of non-tax income.

However, national coal production would likely hit less than 400 million tons as mining firms are running out of cash and cutting off production, according to the chairman of the Indonesian Coal Mining Association (APBI), Pandu Sjahrir.

“This year, production levels could go far lower by 17 to 25 percent due to the weakening price. Moreover, unfriendly regulations from the government, including the [planned] income tax for coal exports, will also push down mining firms,” Pandu said.

He was referring to the government’s plan to impose a 1.5 percent income tax for coal exports starting August 8.

Meanwhile, the price was in a flat trend as there was no sign of demand recovery from the main coal markets of China and India, according to Pandu.

“There is an increase in demand in India but it cannot overcome the lower demand from China. Meanwhile, Australian coal is getting cheaper because they enjoy a lower exchange rate against the US dollar in addition to less regulations,” he said.

Government Delays Plan to Raise Coal Royalties Amid Plunging Price

The government will postpone a plan to increase royalty payments from coal miners as they are already burdened with the commodity’s plunging price, a top official has said.

The decision was based a government review in which it found that the low global coal price had prompted ongoing losses for coal miners in Indonesia, one of world’s major producers of the commodity.

“The government decided to review the plan based on the current situation and price,” Energy and Mineral Resources Ministry’s director general for mineral and coal, Bambang Gatot Ariyono, said last week.

Coal price reference (HBA) for 6,322 kcal/kal coal stood at US$59.19 per ton for July, down from around $63 per ton at the beginning of the year and half the price it was four years ago, over $127 per ton.

Bambang said the government had acknowledged that the current coal price slump was caused by weak local and global demand as Indonesia and countries that import the commodity faced weaker economic growth.

Prices at the Newcastle Port of Australia, which is the world’s benchmark for thermal coal, was at around $61 per ton at the end of June, also half of what it was in 2011.

The Energy and Mineral Resources Ministry’s proposal for the plan to the Finance Ministry’s Fiscal Policy Office (BKF) will also be delayed, according to Bambang.

The ministry’s initial proposal was to increase royalty payments for all coal types to the range of 7 to 13.5 percent, an increase from the current level of 3 percent for low-calorie coal, 5 percent for the medium-calorie type and 7 percent for high calorie, as stipulated in a 2012 regulation.

The plan was based on the ministry’s assessment that the current level would unlikely help the mineral and coal office meet its non-tax revenue (PNBP) target this year of Rp 52.5 trillion (US$3.91 billion).

The revenue target from the coal sector was calculated based on the ministry’s coal output target this year to 455 million tons — higher than the initial aim of 425 million tons — to offset the ongoing decline in the commodity’s price.

From last year’s total output of 458 million tons, the mineral and coal office collected Rp 35.4 trillion in royalties from the holders of mineral and coal mining permits and contracts of work.

Indonesia’s coal production stood at 202.7 million tons in the first six months of the year, a 17.4 percent drop compared to 245.5 million tons in the same period last year, according to the office’s data.

Industry players have rejected the plan to increase the royalty payments as it would be too burdensome for their businesses, which have been under pressure because of the decline in coal prices.

“It is not the right time to impose the plan as some coal miners are planning to decrease production,” said Pandu Sjahrir, chairman of the Indonesian Coal Mining Association (APBI), as quoted by kontan.co.id. 

To maximize state revenue collection from the coal sector, the mineral and coal office has been working with the Corruption Eradication Commission (KPK) to ensure that all mining companies have fulfilled their obligations to the state, including paying royalties. The KPK found last year that numerous miners had not paid their royalties.

BI to Enforce No-Dollar Rule Despite Opposition

Bank Indonesia (BI) has decided to stand firm in enforcing the ban on US dollars for domestic transactions, arguing that it had given enough exemptions for some strategic industries that the economy would not be negatively affected by the rule.

BI spokesperson Peter Jacobs confirmed Tuesday that the requirement to use rupiah in all domestic transactions would go ahead on July 1 as planned, despite opposition from certain local businesspersons.

“Our position is that we will continue implementing this rule. Those opposing [the regulation] are yet to understand its details and, especially, its exemptions,” he wrote in a text message.

Beginning this Wednesday, BI will fully implement the central bank regulation (PBI) no. 7 that regulates the mandatory usage of rupiah for all transactions onshore, with the central bank banning all transactions conducted in foreign exchange currencies such as the US dollar.

The regulation is designed to rein in local demand for dollars and stabilize the rupiah, known as among Asia’s most volatile currencies.

The rupiah was traded at 13,395 per dollar on Tuesday, and data from Bloomberg showed that the currency led losses in Asia in 2015, falling 1.9 percent in the second quarter and at least 7 percent this year.

The central bank’s mandatory rupiah use was met by opposition from importers and even government officials who received complaints from state-owned firms. Some economic stakeholders fear a rise in costs, as they frequently use dollars in their transactions to safeguard their balance sheets against the rupiah’s depreciation.

The regulation, nevertheless, grants several exemptions for a number of transactions. The PBI said that non-rupiah currencies could still be used in international financial and commercial transactions, specified incomes and expenditures under the state budget, foreign currency savings and deposits in banks, as well as many other transactions allowed by the BI Law and the Investment Law.

In Indonesia, domestic transactions conducted in foreign exchange outside of the rupiah amount to US$11-12 billion a day, which “does not appear to be significantly large enough to have an impact on the day-to-day movement of the exchange rate”, Maybank analysts, led by Saktiandi Supaat, wrote in a research note analyzing the rule.

In the mining sector, business players have raised concerns that the Indonesian coal price would plunge further following the implementation of the government’s new regulation.

Indonesian Coal Mining Association chairman Pandu Sjahrir said that the necessity of using rupiah in coal purchasing or selling transactions would push traders to set a lower price than the benchmark in an attempt to compensate for fluctuations in the exchange rate.