JAKARTA (TheInsiderStories) – Indonesia Financial Services Authority needs to step up and build bridges and highways for Indonesian banks to enter foreign markets — while still keeping domestic interests in mind, according to Triyono, Advisor of the Board of Commissionaires on International Affairs at the Financial Services Authority.
The banking industry, which dominates the financial sector, is now the main target of further integration through the ASEAN Banking Integration Framework (ABIF).
“ASEAN integration is intended to support equality and lessen disparity; there should be greater efforts made to minimize gaps in banking presence. The most obvious such gap is the difference in the number of banks from some ASEAN members as compared to other ASEAN member states,” Triyono told TheInsiderStories.
He stressed the purpose of the ABIF is to facilitate progressive market access and operational flexibility for Qualified ASEAN Banks (QAB), subject to prudential requirements and reciprocal arrangements. QABs are created to have an even greater role in facilitating intra-ASEAN trade and investment by 2020.
ABIF was initiated with a spirit to accelerate ASEAN banking integration while defending regional financial stability.
Through reciprocal arrangements, the level of concession will be negotiated between participating countries, based on reciprocity, meaning that arrangements between two or more ASEAN member states should be mutually beneficial and acceptable to the parties concerned.
‘Since the ABIF agreement is based on mutual benefit, a win-win solution will always be on the doorstep. It is only a matter of finding the willingness to let one another in,’ he said.
Last year, Malaysia and Indonesia signed an ABIF agreement, and others are being negotiated, but the bigger moves toward regional financial liberalization will be happening outside of the ABIF framework.
Bank Negara Malaysia (BNM) governor Datuk Seri Muhammad Ibrahim said integration is the key to progress for ASEAN, with the successful implementation of ABIF, a major catalyst for sustainable, inclusive and mutually reinforcing growth in the region.
‘Financial integration is a key agenda for the ASEAN region and will only intensify further in the future,’ he said at the opening of Bank Mandiri, Indonesia’s largest lender, in Kuala Lumpur last July.
Bank Mandiri opened its first full-branch office at Kuala Lumpur after Indonesia Financial Services Authority (FSA) and Bank Negara Malaysia signed a bilateral agreement that will supposedly make banking operations easier for each local lender.
Since the founding of ASEAN in 1967, and with the implementation of the priority measures to establish an Asean Economic Community, the region has been transformed into an increasingly well-regulated, dynamic and creative platform for trade and commerce across what many regard as the world’s fastest-growing economic region.
After the financial crisis hit Asia in 1998, the region put all its strength into measuring each and every risk that might shake the financial system any time volatility erupts. By integrating 10 economies into a single community, ASEAN provides members greater access to a market of approximately 640 million people. This is roughly equivalent to 9 per cent of the world population.
More important, the region offers a market that is considered the third-largest in Asia and the fifth-largest in the world in terms of economic size, or Gross Domestic Product (GDP).
ASEAN is fueled by a vision of a single market and production base that is highly competitive and integrated into the global economy. This is slowly happening with free movement of goods, services, investment, skilled labor and freer flow of capital. Against other countries and economic community, ASEAN is stronger as a community at the negotiating table.
To achieve a fully-integrated single ASEAN market requires financial integration that allows freer flow of financial services and Garuda Indonesia; ASEAN financial services stakeholders agreed to recognize facilitating intra-ASEAN trade and investment should be implemented through augmenting the roles of ASEAN indigenous banks.
Written by Elisa Valenta, email: firstname.lastname@example.org