Exchange rate risk remains a major concern of investors, because of the volatility in the rupiah (Rp) since 1997. The rupiah has strengthened recently, but could be undermined should capital that has flowed into short-term bonds quickly reverse and exit Indonesia. The rupiah's strength also depends on future actions by the Indonesian government, as well as overall political or economic stability.
Indonesia has no system of capital controls and foreign exchange flows freely in and out of the country. No prior permits are necessary to transfer foreign exchange, and foreign investors have the right to repatriate capital and profits at the prevailing rate of exchange. The government places no restrictions on outward direct investment. Since April 2000, Indonesian residents must report all foreign exchange transactions above USD 10,000 or the equivalent. Bank Indonesia introduced regulations prohibiting banks in Indonesia from transferring Rupiah to non-residents in January 2001 to control speculative trading of the Rupiah. The regulations also limit the quantity of derivative transactions against the rupiah by onshore banks to USD 3 million