Jakarta. The central banks of Indonesia and the United Arab Emirates (UAE) recently inked a deal that would link their respective payment systems. 

The freshly inked memorandum of understanding (MoU) became one of the partnerships that President Joko “Jokowi” Widodo had brought home from his state visit to Abu Dhabi. Jokowi at the time met with his Emirati counterpart Mohamed bin Zayed Al Nahyan (MBZ).  

Bank Indonesia announced that the MoU aimed at linking the two countries’ payment systems to make it faster, more efficient, transparent and affordable. 

The central bank said that the deal would establish a joint mechanism for sound risk management and facilitate regulatory cooperation, among others. It also seeks to protect the rights and interests of users in compliance with the existing regulations in each country.

The Central Bank of the UAE (CBUAE) stated that this partnership was part of its country’s effort to be a global financial technology and cross-border payments hub. 

“Through this cooperation, the potential for conducting cross-border payments between the two countries under the local currency transaction framework, which is scheduled to be operationalized in 2024, is a promising prospect,” Bank Indonesia’s governor Perry Warjiyo was quoted as saying in a press statement. 

The MoU followed an earlier agreement signed last year, which facilitated enhanced cooperation and exchange of information on payment systems, among others.

In May, Indonesia and the UAE signed a MoU on local currency transactions after a growth in non-oil trade. This MoU defines a framework that would enable importers and exporters to make their transactions in local currencies, be it Indonesian rupiah or the Emirati dirham, thus potentially reducing the countries’ dependence on the American dollar. 

Government data showed Indonesia-UAE trade amounted to $5 billion in 2023. Bilateral trade totaled $1.9 billion in the first five months of 2024.


 

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