Malaysia will open up its banking sector to Indonesia under an agreement signed yesterday at the annual meeting of the leaders of the two countries.
Under the agreement, Malaysia will allow up to three banks from Indonesia to open branches and operate automated teller machines (ATMs) in its domestic market
Indonesia in turn will allow a third Malaysian bank to come in, adding to the two already operating in Indonesia.
Malaysia's biggest lender, Maybank, currently has branches in cities across Indonesian provinces and operates ATMs in more than 70 Indonesian cities. The second-biggest lender, CIMB, also has branches and ATMs across Indonesia.
The signing was witnessed by Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak at the presidential palace in Jakarta following the 11th annual consultation meeting between the two Asean neighbours.
They held a similar meeting in Kuala Lumpur last year.
The annual consultation is the main channel of bilateral diplomatic talks between leaders of the two countries, and this is complemented by senior official-level discussions that cover issues ranging from security to economy.
The banking agreement is expected to end several years of lobbying by Indonesia, Southeast Asia's biggest economy, to seek reciprocity from Malaysia, Asean's third-biggest economy.
Indonesia has been making similar demands to Singapore.
"This bilateral agreement is aimed at reducing inequality in terms of market access in the banking sector in the two countries," Mulyaman Hadad, chairman of Indonesia's financial service authority, said after he signed the agreement with Malaysian central bank governor Muhammad Ibrahim.
Meanwhile, Jakarta and Kuala Lumpur also signed yesterday an agreement to boost cooperation to campaign against anti-palm oil lobby groups.
Indonesia and Malaysia are the world's largest and second-largest palm oil exporters, respectively.
"Palm oil is a very important resource to Indonesia and Malaysia," said Najib at a joint press conference with Joko.
He said the two countries not only need to have a joint study and set up a secretariat to face anti-palm oil campaign, but also need to do research and development to make the commodity more widely accepted worldwide.
Discussions also covered the need to step up security in the Sulu Sea in southern Philippines to fend off a spate of kidnappings of sailors in recent months.
"On the border issue, we have agreed to negotiate more intensively and hold more meetings," Joko said.
He called yesterday's consultation meeting "productive and transparent".
Najib arrived in Jakarta on Sunday night for a three-day working visit. Today, he will attend the 12th World Islamic Economic Forum in Jakarta.