Behind the scenes support for Asean economic integration

Franck de Pratere, head of Southeast Asia at Swift, discusses Indonesian payments and Asean economic integration from the sidelines of the organisation’s Jakarta Business Forum.
Franck de Pratere
Franck de Pratere

What is the focus for Swift in Southeast Asia?

Swift supports the Asian growth and stability. How we support that growth is focusing on market infrastructures. On both the payments and securities side, these are critical components of stable financial growth. We assist countries in the region to adopt international standards.

So Swift's role is to bring international best practices to Indonesia and the region?

Exactly. Indonesia has a strong focus on being ready for 2015, when we look forward to financial integration with the rest of the Asean [Association of Southeast Asian Nations] economic community. To achieve this financial flows between countries need to be improved, something that requires interoperable platforms and systems that can easily talk to each other.

Tell me a bit more about the Asean economic integration project.

This is something where we believe Swift has a very strong role to play. When we're talking about interconnectivity, this covers payments, securities and some initiatives in trade, so we can really help the original community achieve great efficiency by providing international standards to ensure communication between all the players. It's with stock exchanges and RTGS systems that we see Swift acting as a backbone to enable Asean countries to achieve economic integration by 2015.

What markets currently use Swift for their financial infrastructure in Asia?

We have eight high-value payment systems -- Australia, Fiji, Hong Kong, New Zealand, Philippines, Singapore, Sri Lanka and Thailand.

How would a Swift-based high value payments system help Indonesia?

As we heard this morning, Indonesia is the largest economy in Southeast Asia and they want to play a leading role by driving market harmonisation in the Asean economic community. I'd say they really want to be a driving force. That's where common standards and best practices come into the picture and with Swift they can lead that.

Are you working with Indonesia on anything other than high value payments?

On the securities side, we are in an advanced stage of implementation. Last year we saw the CSD [central securities depository], KSEI, adopt ISO standards for corporate actions which are all the events related to the activities corporates need to perform for the flows between the CSDs and local custodians. Before it used to a manual process so the CSD adopted ISO standards to bring automation in that space. It's all about efficiency to support growth, corporate actions are the first step and now they are looking at embracing ISO standards for settlement and reconciliation.

And Swift for corporates?

We are still in the early stage of the corporate space in Indonesia. There are a few reasons for this, but first you have to keep in mind that there is a significant regional treasury hub in Singapore. Most of the MNCs [multinationals] and Asian corporates have regional treasury centres there from where they manage their liquidity for Asia-Pacific, these include Shell and Nokia who use Swift for their cash management.

In Indonesia, we are at a phase where we work with the banks to support market readiness and support MNCs. At this stage, we don't have Indonesian local corporates on Swift but we see some flows related to foreign MNCs with operations in Indonesia.

Have Swift's efforts translated into an increase in message traffic from Indonesia?

Yes, indeed. We're talking about year-to-date Swift traffic growth of about 30% compared to 2009. Securities are the engine of that growth where we had a 111% rise, on the payments side we had growth of around 10%.

We are pleased to see such growth and when, in two years' time, the RTGS [real-time gross settlement] system migrates to Swift, there will be significant further traffic growth in Indonesia.

It sounds like this is an exciting time for payments here in Indonesia.

That's the interesting part of being in Asia. We see the growth and a strong desire for more efficiency from both the banking community and the regulators. This has a lot to do with remaining relevant especially in Asean. If you look around, they're surrounded by two big players so there is a real need for collaboration to make sure Asean remains relevant among its peers and Asian neighbours.

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