Indonesia and the United Arab Emirates (UAE) are moving forward in strengthening their financial ties by signing a Memorandum of Understanding (MoU) to link their payment systems. This important agreement is one of the outcomes of President Joko Widodo's (Jokowi) visit to Abu Dhabi, where he met with UAE President Mohamed bin Zayed Al Nahyan (MBZ).
The cooperation includes the establishment of a joint mechanism for risk management and regulatory cooperation, as well as the protection of users' rights in accordance with each country's regulations. It is expected that this partnership will enhance the smoothness, efficiency, transparency and affordability of the payment systems in both countries.
The Central Bank of the UAE (CBUAE) stated that this partnership is expected to promote the UAE as a global fintech and cross-border payments hub. Meanwhile, Bank Indonesia Governor Perry Warjiyo is optimistic that this collaboration will open up new opportunities, including the potential for cross-border payments using local currencies, which is expected to be operational by 2024.
The MoU is a continuation of a bilateral agreement signed on November 29, 2023, which strengthens cooperation and information exchange, including in payment systems and digital innovation. The MoU also complements cooperation on the use of local currencies through the Local Currency Transaction (LCT) framework, which enables transactions in Indonesian rupiah or Emirati dirham, reducing dependence on the US dollar.
Trade between Indonesia and the UAE was recorded at $5 billion in 2023. Meanwhile, in the first five months of 2024, total bilateral trade reached $1.9 billion. These figures reflect the great potential and positive momentum of economic cooperation between the two countries, signaling a promising new chapter in their bilateral relations.
