Mastercard, visa score victory in Indonesia with US govt help

THE US STRIPPED INDIA’S SPECIAL TRADE PRIVILEGE CITING ‘A WIDE ARRAY OF TRADE BARRIERS’ IN JUNE

JAKARTA/NEW DELHI: US trade officials, at the request of card networks Mastercard and Visa, convinced Indonesia late last year to loosen rules governing its new domestic payment network, according to Indonesian government and industry officials aware of the matter, and emails reviewed by Reuters.

The change will allow the US companies to process credit card transactions without having to partner with a local company in Indonesia, the officials said.

Indonesia’s decision represented a major lobbying victory for US payment companies in efforts to beat back a host of new regulations in Asia and elsewhere around data storage or the promotion of local payment networks over foreign ones.

The lobbying effort in Indonesia was detailed in more than 200 pages of email communications between US trade officials and executives of card companies that Reuters obtained under the US Freedom of Information Act.

The emails, dated between April 2018 and August 2019, also showed that Mastercard lobbied the office of the United States Trade Representative to oppose new data rules and local payment systems in India, Vietnam, Laos, Ukraine and Ghana. Visa was looped into several of the discussions, the emails showed.

The US in June stripped India’s special trade privilege citing “a wide array of trade barriers”, though it did not specifically cite its concerns over data storage rules.

The Indonesian rules would have required foreign firms to process credit and debit card transactions onshore in partnership with a domestic partner under Indonesia’s payment network, known as the National Payment Gateway (NPG). The decision would have hit the companies by reducing their earnings in Indonesia, especially on the more lucrative credit card fee.

US trade officials made changing that rule a top demand if Indonesia were to retain a privileged trade status known as the Generalized System of Preferences (GSP), three Indonesian officials and two industry officials involved in the negotiations told Reuters. GSP gives Indonesia lower tariffs on exports to the US worth $2 billion annually.

As a result, Indonesia’s central bank agreed to exclude all credit card transactions from the NPG, the officials said.

“The US side made clear the NPG was a main demand if Indonesia wanted GSP. The US side was dead-set on this,” said one of the industry officials.

Indonesia now expects to retain its GSP status, officials said, though negotiations are ongoing.

A spokesman for Indonesia’s central bank said its role in the GSP talks was over and credit cards would not be regulated under the new system in the near term.

The spokesman did not comment on the US pressure.

The office of the USTR in Washington did not respond to requests for comment.