Currency Management Systems: Issues, Challenges, and Policies

Transcription

1 Currency Management Systems: Issues, Challenges, and Policies Solikin M.Juhro, Head of Bank Indonesia Bank Indonesia Welcoming Remark at the International Seminar on Currency Management System, Yogyakarta, 26 September 2017 Distinguished Speakers, Assalamualaikum Warrahmatullahi Wabarakatuh, Peace be on us, Very Good Morning and Welcome to Yogyakarta, the special city of education, art, and culture. First of all, let us extend our praise to Allah, God Almighty, since only with His permission and blessings can we congregate here this morning to attend the opening ceremony of the International Seminar on Currency Management Systems, Tuesday, 26 September 2017, hosted by Bank Indonesia Institute. This seminar represents an integrated element of various programs organised internationally by the Bank Indonesia Institute. Since the beginning of this year, we have held several international events in the form of workshops, seminars and learning vehicles related to the core functions of the central bank, including monetary policy, financial system stability, payment system, central bank statistics, risk management, and leadership.this seminar is basically the 8 th (of 10) international flagship programs we hold this year. Therefore, it is a great honour for me to deliver, on behalf of the Bank Indonesia, a welcoming remark at this international seminar. I would like to congratulate the Bank Indonesia colleagues for the excellent arrangements of this seminar. I believe all the participants will be enjoying their stay in Yogyakarta. I also would like to thank the speakers for the opportunity to learn from their knowledge and experience in currency management systems, which is our subject of this seminar. Last but not the least; I would like to give my warm welcome to all of the participants from central banks and regulatory authorities. 1

2 Distinguished speakers, This seminar is necessary as a tool to achieve our mission of creating national economic leaders by sharing central banking knowledge, as well as exchanging views and experiences amongst central bankers and other related parties around the world, as global economic uncertainties have heightened since the global financial crisis in 2008/09 (the GFC). Therefore, on this special occasion, let us convey some some key issues in currency management systems, challenges, and Bank Indonesia's policies in supporting its strategic role in these related areas. Bank Indonesia, as the central bank of the Republic of Indonesia, has single objective that is to achieve and maintain the stability of Rupiah (our domestic currency), which is reflected by the stability of inflation and exchange rate developments. In pursuance of that objective, Bank Indonesia has an obligation to manage and maintain the smoothness of payment system. In this regard, Bank Indonesia has a mission to meet the demand of Rupiah in sufficient amount, appropriate denomination, timely, and best quality. Based on the Currency Law No. 7/2011, Bank Indonesia has role in planning, printing, issuing, distributing, withdrawing, and destructing Rupiah. I believe that central bank around the world have similar roles regarding currency management. In every role, central bank faces various challenges. The function of distributing money has a very strategic role, not only supporting the sustainability of the economic developments, but also supporting the sovereignty of the nation. This is due to the fact that, as the money is one of the symbols of the country, the distribution or circulation of Rupiah currency must reach all remote, outlying and isolated areas in the country (3T: terdepan, terluar, tertinggal)). The Indonesian government has experience, that the lack of circulation of Rupiah currency at the border of the country causes the circulation (or existence) of currency of other countries in the region. This becomes not only an economic challenge, but also polical complexity, given the length of the border line of Indonesia. In accordance with the Currency Law, printing of Rupiah banknotes is done by state owned printing company (Perum Peruri). To ensure the optimization of money printing, Bank Indonesia, along with Perum Peruri, undertake several strategic steps, including 2

3 investing 2 lines of printing presses, increasing printing capacity, increasing working hours and pricing print money with reference to the applicable best practices. To facilitate the preparation of the printing plan, the allocation of resources and to maintain the stability of the money supply for Perum Peruri, Bank Indonesia and Perum Peruri also make multi-year procurement. Currently, Bank Indonesia is implementing a strategic program, called Centralized Cash Network Planning (CCNP). The CCNP aims to ensure that money distribution can be implemented effectively, efficiently, safely, and reaching all areas of the country. Bank Indonesia hopes CCNP can enhance distribution coverage from 66% in 2015 to 100% in With the CCNP program, Bank Indonesia is expected to provide the money in accordance with the quality standards and denomination according to the needs of people in all corners of Indonesia. In expand and improve the network / distribution point, Bank Indonesia increased cooperation with banks in the form of cash point. This is possible because some commercial banks have extensive branch networks to reach out to residents in the district or village. To improve the efficiency of distribution of money, the central bank also conducted a policy of inter-bank currency transactions (TUKAB). This policy requires that banks have an excess supply of money amount to be offered to banks experiencing a shortage of supply Rupiah. This policy will reduce the activities of deposit by banks to the central bank. To improve the quality of money circulating in urban and district communities, Bank Indonesia also conducted a mobile cash program. This program is an initiative of the central bank to approach the public directly in order to circulate the new money, withdraw money which is not fit for circulation, as well as to disseminate money to care for and detect counterfeit money. This program is suitable to be applied in Indonesia given the vast geographical conditions and there are many people who are not accustomed to using financial services in the Bank. It worth noting that, in distributing money throughout the territory of the Republic of Indonesia, Bank Indonesia faces various challenges that come from internal and external. Internal challenges such as small denomination of money that are not in accordance with the needs of the community (unfit notes), and limited Bank Indonesia distribution 3

4 network, both in terms of quantity and capacity. As an illustration, in 2015 there were 77 distribution points consisting of 42 Bank Indonesia offices and 35 cash points. In some Bank Indonesia offices have limitations in terms of management, storage, and circulation of money, resulting from the limitations of infrastructure and human resources The external challenge faced in the distribution of money is the vast geographical condition of Indonesia and consists of thousands of islands not yet fully supported by adequate infrastructure and modes of transport, enormous population with diverse social and cultural conditions, and the roles of third party supporters yet optimal. These internal and external conditions give effect to the disruption on the effectiveness and efficiency of money distribution to the entire territory of the country, and this still leaves a large blank spot area. Therefore, Bank Indonesia continues to solve these challenges through innovative policies and technical programs, and utilizing their networks through the establishment of commercial banks cash point To overcome difficulties in distributing and circulating banknotes throughout Indonesia, Bank Indonesia encourages the use of non-cash payment instruments through the Non- Cash National Movement (GNNT) program. The policy is supported by the rapid technological development of payment systems. The consequence of GNNT implementation is the decline in the use of currency in the community. Some examples of GNNT implementation in the community include the implementation of Social Assistance Programs, Digital Financial Services, and the payment in the transportation sector. Furthermore, to integrate the various payment channels used in the transfer of funds from source of funds to the beneficiary account system, Bank Indonesia has developed the National Payment Gateway. Through the National Payment Gateway, all non-cash payment transactions in the territory of the Republic of Indonesia will be connected and processed in Indonesia, so that transactions can be done more efficiently and effectively. In addition, to encourage the development of financial technology (FinTech), Bank Indonesia has established Fintech Office and regulatory sandbox. FinTech Office was formed as a forum for evaluation, assessment, risk mitigation, and research initiatives related to financial technology. In addition, FinTech Office is also a forum for industry players and regulators to collaborate and synergize. 4

5 It has become a major task for central banks to address the challenges mentioned above. With better money management, we believe that the secure and efficient payment system can be realized. Distinguished Speakers, Ladies and gentlemen Learning from others is the reason we need this seminar as a tool to exchange views and experiences amongst central bankers and other related parties around the world. Today and for the next two days, we are going to learn the salient and updated materials from prominent speakers from Bank of Thailand, People s Bank of China and Reserve Bank of Australia and also from Bank Indonesia. We organized this seminar into six sessions, among others Designing the Banknotes: Balancing Security and Aesthetics, Issuing New Currency, Distribution Strategy: Efficiency Concerns vs. Obligations, The Role of Currency Distribution: Indonesian Case, Banknote Innovations in Communication and Modernizing Banknote Storage, Distribution and Processing. We hope that through discussion and sharing of experiences among central bankers can bring ideas and innovation that can address the challenges in terms of money management in their respective countries, including Indonesia. Before I conclude my remarks, let me (on behalf of Bank Indonesia) express my appreciation to Bank of Thailand, People s Bank of China and Reserve Bank of Australia for their avowed support and collaboration, as well as for delivering a successful event. Thanks also to all participants for attending this workshop. Finally, let us share with you that Yogyakarta is well known for its rich traditions, historical values and warm culture. For those of you who do not know yet, Yogyakarta was once the capital of Republic of Indonesia during the period of revolution when this new republic was born. I hope being in this beautiful land will bring us a memorable experience and relaxed atmosphere, while at the same time, stimulating our senses, thought processes, innovativeness, and creativity that will help us having a fruitful discussion in the seminar. Hence, to all of you, I would like to say: Enjoy a fruitful seminar and I expect an interesting and beneficial few days. Have a pleasant stay in Yogyakarta! Without further ado, allow me to declare this special event officially open. Thank You. Wassalaamualaikum. 5