•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   

Despite strenuous objections from commodities exporters, the Trade Ministry is set to start implementing a regulation requiring exporters of cocoa, coffee and rubber to obtain letters of credit from local banks starting next month.

A letter of credit is a document issued by bank that guarantees payment for an exporter. Shippers had not been required to obtain the facilities in the past.

The regulation, which applies to shipments of cocoa, coffee or rubber worth more than $1 million, comes into effect on Nov. 1, after being pushed back from Sept. 1.

The Trade Ministry said the rules would increase the volume of foreign exchange transactions in the country’s banking system and ensure better payment guarantees for Indonesian exporters. It initially formulated the regulation this year when the rupiah was dropping in value amid the global economic crisis.

However, exporters said they didn’t need the regulation.

Halim Razak, chairman of the Indonesian Cocoa Association (Askindo), said the new requirement was likely to result in additional costs for cocoa exporters.

“Though we don’t know the actual details of the regulation and need more information from the Trade Ministry on how it will work, there is no doubt that the requirement to open an LC will increase the burden on cocoa exporters,” Halim said on Monday.

He said cocoa, coffee and rubber exporters were to meet Trade Minister Mari Pangestu today to seek further explanations. Halim added that the ministry needed to provide more support to the cocoa industry, rather than making operations more difficult.

Objections to the regulation were also voiced by the Indonesian Association of Coffee Exporters (AEKI).

“Under the regulation we have to report all information on export transactions to the Ministry of Trade,” AEKI executive secretary Rachim Kartadibrata said last week. “We have never had to report the details of our transactions, especially information related to payment dates, to the ministry,” he said.

Halim said that overall cocoa exports were looking up this year, with total exports expected to reach about $1.4 billion on output of 590,000 tons, compared with 480,000 tons last year.