JAKARTA (TheInsiderStories) – Bank Indonesia (BI) and Bank of Thailand (BoT) have agreed to strengthen the cooperation in the areas of Payment Systems, Financial Innovation, Anti-Money Laundering, and Prevention of Terrorism Funding, said the central banks today (04/04).
The agreement was signed by Governor of BI Perry Warjiyo and Governor of BoT Veerathai Santiprabhob in the middle series of ASEAN Central Bank Governors Meeting meeting in Chiang Rai, Thailand.
This agreement is a form of BI’ support for the government of Indonesia to become a member of the Financial Action Task Force on Money Laundering (FATF), and demonstrating the central bank commitment to fight money laundering and terrorism funding and fulfill FATF recommendations and guidelines.
This memorandum of understanding (MoU) adds to the amount of cooperation in the Anti-Money Laundering and Prevention of Terrorism Funding field that has also been carried out with Banko Sentral Ng Pilipinas (2018) and Bank Negara Malaysia (2013).
It said the signing of the MoU was carried out in order to strengthen the implementation of central bank policies and address the increasingly complex challenges in payment system activities in both countries. In addition to the Anti-Money Laundering and Prevention of Terrorism Funding field, Indonesia and Thailand also emphasized the need for synergy in the development of payment systems and fostering financial innovation.
Through this collaboration, both parties hope to strengthen cooperation in the payment system area in order to support the availability of a secure, fast, efficient and reliable payment system. In addition, it is also expected to be able to encourage financial innovation and strengthen the implementation of the Anti-Money Laundering and Prevention of Terrorism Funding policies.
This MoU is the cornerstone of the implementation of various current and future of BI and BoT collaborations that are implemented through several forms of activities namely policy dialogue, information exchange, innovation collaboration, and capacity building.
Beside cooperation in payment system, both parties also cooperate in the implementation of Local Currency Settlements (LCS). It also gave positive impact on bilateral trade between the two countries. Total transactions in the first two months of 2019 reached THB272 million or equivalent to US$8.58 billion.
“Transactions increased sharply from the same period last year amounting to THB 69.5 million or equivalent to Rp30 billion. Thus, trade transactions using the rupiah/baht skyrocketed to 291.37 per cent,” he said.
Through this scheme, Indonesian importers wishing to import goods from Thailand can make transactions using the baht currency through the bank operations of the LCS framework. Conversely, Indonesian exporters can be paid in rupiah, without the need to convert it into US Dollar.
This cooperation framework will reduce the transaction costs of foreign exchange against the rupiah with a direct price quote between the rupiah and the partner country’s currency. This is expected to be able to develop financial markets based on local currencies, encourage diversification of currency exposure, and expand access to business actors.
Warjiyo stated, the agreement had strengthened trade and investment cooperation between countries. Since it was implemented on Dec. 11, 2017, the total trade transactions through LCS have shown an increase.
Throughout 2018, trade transactions through LCS reached an average of THB 130 million or equivalent to Rp58 billion per month.
This development was one of the topics raised in the bilateral meeting of Warjiyo and Santiprabhob on March 23, 2019, in Jakarta.
This LCS has strengthened trade and investment cooperation between countries. These conditions also provide market confidence and have a positive impact on Indonesian and Thai bilateral trade.
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