Leaders' Retreat: Singapore and Indonesia to renew US$10b currency pact for another year, step up economic cooperation

Indonesian President Joko Widodo and Prime Minister Lee Hsien Loong witness as Indonesian Minister of Finance Sri Mulyani Indrawati and Finance Minister Heng Swee Keat sign a memorandum of understanding during the Singapore-Indonesia Leaders’ Retre
Indonesian President Joko Widodo and Prime Minister Lee Hsien Loong witness as Indonesian Minister of Finance Sri Mulyani Indrawati and Finance Minister Heng Swee Keat sign a memorandum of understanding during the Singapore-Indonesia Leaders’ Retreat at the Istana on Oct 8, 2019.ST PHOTO: MARK CHEONG

SINGAPORE - Singapore and Indonesia announced the renewal of a US$10 billion currency pact, which will help support monetary and financial stability in the region.

Both countries will continue to have access to each other's currency as well as US dollars, to settle trades or defend their currency in times of financial stress.

This was announced by Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo at the Istana on Tuesday (Oct 8) as part of an annual leaders' retreat.

"A renewal on existing terms will help support monetary and financial stability in our countries and also in the region," said PM Lee at a joint press conference after a meeting between the leaders and an expanded meeting between their delegations.

The local currency swap and US dollar repurchase agreement, which was signed at the previous leaders' retreat in Bali last October, will be renewed for a year.

Through this deal, Bank Indonesia and the Monetary Authority of Singapore can obtain each other's currencies at the prevailing exchange rate, with the agreement to reverse the transaction at the same exchange rate on a specified maturity date.

Both central banks will also allow each other to obtain US dollars from each other in exchange for government securities, with the agreement to reverse the transaction on a specified maturity date.

Such an agreement will help reduce the uncertainty and risk that can stem from exchange rate fluctuations and provide liquidity to the banking system, or to support the domestic currency during periods of volatility.

At Tuesday's retreat, both leaders affirmed the importance of the bilateral investment treaty, which offers protection for Singapore companies in Indonesia, as well as Indonesian companies in Singapore.

"We also agreed to encourage the speedy ratification of the bilateral investment treaty signed last year," said Mr Joko.

Singapore has ratified the pact and it could come into effect once it is approved by the Indonesian Parliament.

 
 
 
 

More work will also be done to update the Avoidance of Double Taxation Agreement, which came into force in 1991.

"Both agreements would boost investor confidence and further increase two-way trade and investment flows," said Singapore's Ministry of Foreign Affairs in a statement.

Singapore has been Indonesia's top investor since 2014 with investments from Singapore to Indonesia reaching US$9.2 billion in 2018.

PM Lee and Mr Joko also welcomed the good progress that had been made on flagship bilateral investment projects.

PM Lee noted that the Kendal Industrial Park in Central Java "continues to thrive", and the Nongsa Digital Park in Batam has also done well.

The Kendal Industrial Park has attracted over US$800 million in investments from almost 60 companies since it was opened at a previous leaders' retreat in 2016. And it is projected to create 7,000 jobs.

Separately, 90 international and local firms have set up shop at the Nongsa Digital Park, employing almost 800 Indonesian tech talents.

"Nongsa Digital Park is the digital bridge connecting the two countries, as defined by President Jokowi, and we are confident that under his second term, focus on digital economy will remain strong," said Nongsa Digital Park's senior executive director, Mr Marco Bardelli.

Mr Bardelli hopes that the park will eventually become the "birthplace of next Indonesia's unicorns".

As part of expanding collaborations in the digital economy, Singapore and Indonesia signed a pact on Tuesday to electronically link up the national single windows of both countries.

This electronic exchange of trade data will allow both customs administrations to expedite clearance of trade and enhance supply chain security through better risk management, said Singapore Customs in a statement.

"Under this initiative, participating companies in Singapore and Indonesia may expect to benefit from a seamless and more efficient declaration process, and enjoy greater ease in doing business between Singapore and Indonesia," it added.

On the tourism front, PM Lee pointed out that cruise tourism cooperation is "cruising" on well.

Both countries have consistently been among each other's largest sources of tourist arrivals, with 1.8 million visitors from Singapore arriving in Indonesia in 2018 and over three million visitors from Indonesia visiting Singapore in 2018.

Since both leaders' last visit to the Marina Bay Cruise Centre in 2017, new cruise routes from Singapore to Bintan, Surabaya and Bali have been launched.

More cruise infrastructure and destination development cooperation are on the cards, PM Lee said.

Both leaders also noted that there had been strong interest from Singapore to be involved in infrastructure projects in Indonesia.

Infrastructure Asia, a Singapore government agency, and PT Sarana Multi Infrastruktur, an Indonesian state-owned enterprise, have recently signed a deal to support public-private partnership project development in the country.