Jakarta. This week, Indonesia will begin talks with the Philippines to seal an agreement on bilateral cooperation in liberalization of the banking sector within Asean, an official said on Friday (02/05).

The Financial Services Authority (OJK) is going  to sign the agreement with the Philippines's central bank Bangko Sentral ng Pilipinas (BSP) on Sunday, starting a series of discussions between the two countries.

"The signing of a letter of intent with BSP on Sunday will start negotiations on the Asean Banking Integration Framework," OJK deputy commissioner for banking supervision Sukarela Batunanggar said during a press conference.

The framework provides guidelines for banks to gain wider access to the Asean markets. The banks that meet all the requirements regarding ownership, size in terms of assets, capital adequacy and reputation, are called the Qualified Asean Banks, or QAB.

"The  main principle of this agreement is reciprocity," Sukarela said.

"The framework applies to all countries of the Asean community, but we need adjustments in its implementation to allow flexibility ... We can't immediately launch the banking integration, as some countries may be not ready," he added.

The talks between Indonesia and the Philippines will include a number of QABs from each country.

As of now, there is no Philippine bank in Indonesia and no Indonesian bank in the Philippines.

When the authorities reach the agreement, Bank Mandiri, Indonesia's biggest bank by assets, may be the first Indonesian lender to open its branch in the Philippines.

OJK communication and international department head Triyono told reporters that negotiations can take up to four years.

In August, after four years of talks, OJK signed a bilateral agreement with Malaysian central bank, Bank Negara Malaysia.

Economic Growth, Financial Inclusion

Batunanggar said the banking integration of Asean will contribute to the region's economic growth and financial inclusion, if the screening process of the QABs is done properly.

According to him, the integrated banking sector will promote competition and improve the quality of services, and in turn should benefit trade and investment in the region.

Indonesia's exports to the Philippines in 2016 constituted less than 4 percent of the total exports.

The non-oil and gas exports to the Philippines were worth $5.3 billion last year, 34.2 percent more than in 2015. Non-oil and gas imports to Indonesia from the Philippines reached $820 million last year, up 20.6 percent from a year earlier.