T

he governments of Indonesia and Papua New Guinea (PNG) have signed a memorandum of understanding (MoU) on the use of the Indonesian rupiah and PNG kina in the two countries'€™ border areas.

The MoU was signed in Yogyakarta on Thursday by Bank Indonesia'€™s (BI) deputy governor for payment systems, Ronald Waas, and Bank of PNG Deputy Governor Benny Popoitai.

'€œThe MoU is aimed at increasing economic activities in areas along the border between the two countries,'€ Ronald said after the signing ceremony.

The MoU will, among other things, regulate the exchange mechanism between the rupiah and the kina.

Indonesian and PNG citizens living along the border often cross the divide to buy their daily provisions. '€œIf [the two currencies] are compared, the rupiah is dominant,'€ Ronald said, adding that by far the most transactions took place in the border villages of Sota and Sekouw.

Ronald expressed his hope that the signing of the MoU would increase the growth of the banking industry in border areas and increase the number of money changers, thus enabling people in both countries to exchange their currencies.

So far, he said, there were only two official money changers along the Indonesia-PNG border.

The first such MoU between the two countries was introduced in 1996 and it has been amended through the years to reflect new developments. '€œThe MoU we have signed today will be in force for five years,'€ he said.

Executive director of BI'€™s money management department, Lambok Antonius Siahaan, said payment
systems in border areas were needed to improve the economy of those areas.

People'€™s daily needs could also be met if the financial system ran smoothly as both the kina and rupiah were easily obtainable, he said.

'€œThat way, the economy will automatically develop along with a growth in small and medium enterprises,'€ Lambok added.

Separately, Popoitai said the MoU was very important for the central banks of both Indonesia and PNG as it would help them deal with finance-sector problems in border areas. The MoU would also allow people in both countries to enjoy a good exchange mechanism and facilities.

'€œWe have to create and support an environment on both sides of the border that will enhance the flourishing trade in the area,'€ Popoitai said.

He added that many PNG residents traveled to Jayapura in Papua to buy food, clothes, machines and other necessities. The same was also true of Indonesians traveling to PNG to buy their daily needs, such as coffee.

'€œWhen they [PNG nationals] do business, they take the kina to Indonesia. Now, Indonesians can change that money into rupiah in our banks,'€ Popoitai said.