Heading Closer to AEC, OJK Attempts Bilateral Approach to Reciprocal Principle

 
Fathan Qorib, Christina Desy
 
Conscious of possible market shifts and increased competition under the upcoming ASEAN Economic Community (AEC), the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) is vigorously making preparations for Indonesia’s financial industries. From bank consolidations to branchless banking, the OJK continues go through any possible measures to ensure that Indonesia is sufficiently prepared for regional banking integration in 2020.
 
The initiatives being undertaken for th AEC are also aimed at arming regulators to able implement the most favorable laws and regulations to protect Indonesian interests while competing in an environment of increased market liberalization. To that extent, the OJK is attempting to bilaterally approach other ASEAN countries, particularly on matters such as the reciprocal principle and Qualified ASEAN Banking (QAB) criteria.
 
Muliaman D. Hadad, the Chairman of OJK’s Board of Commissioners has said that most ASEAN countries support the idea of reciprocity. However, the principle is yet to be embraced under the ASEAN Banking Integration Framework (ABIF), agreed by ASEAN countries as the basis for organizing regional banking integration. Hesitant to ratify the ABIF, Indonesia is expecting the reciprocity principle to be enforced under bilateral agreements as the OJK is now attempting to do.
 
The OJK is also striving for bilateral negotiation on QAB criteria. Amongst others, the main points of the QAB are financial competence, financial indicators, as well as compliance with the global financial rules.
 
Further, to further increase Indonesia’s competitiveness and recognizing its market potential, the OJK is also targeting penetration of the Cambodian, Lao, Myanmar, and Vietnam (CLMV) markets. To date, however, not many Indonesian businesses have entered these countries.
 
As a show of its support, the OJK recently organized a focus group discussion (FGD) comprised of entrepreneurs who have conducted business in these markets. The FGD was mostly attended by banks, including HSBC, BNI, BRI, BTN, BCA, Bank Mega, and with the participation of Semen Indonesia.
 
According to Mr. Hadad, the FGD discussed the participants’ experiences in running their businesses in CLMLV countries, which raised the awareness on challenges that need to be dealt with by Indonesian enterprises.
 
“The potential is worth serious consideration from Indonesian financial industries. Of course it requires good preparation. The technical considerations, for example,” said Mr. Hadad.
 
Sharing Mr. Hadad’s view, Ahmad Baiquni, BRI’s Financial Director, welcomed both the bilateral approach and the FGD. He also hopes for flexible regulations to be established under any bilateral cooperation. As for these new potential markets, BRI is interested in promoting their credit services to micro, small, and medium enterprises in CLMV countries.
 
Diverging from the focus of the FGD, Kastaman Thayib, President Director of Bank Mega, stated that for the time being Bank Mega will concentrate on the Indonesian domestic market.
 
“Indonesia still has a big market with great margins,” concluded Mr. Thayib.
 
(hot/kc)