BANCO CENTRAL DE TIMOR-LESTE. National Payments System Development Project. Request for Proposals for an Automated Transfer System

Transcription

1 BANCO CENTRAL DE TIMOR-LESTE National Payments System Development Project Request for Proposals for an Automated Transfer System Dili, Timor-Leste 5 August 2013

2 BCTL Table of Contents 1. INTRODUCTION AND BACKGROUND TIMOR-LESTE NATIONAL PAYMENTS SYSTEM DEVELOPMENT PROGRAMME THIS RFP ABBREVIATIONS AND DEFINITIONS CURRENT SITUATION INSTITUTIONAL STRUCTURE PAYMENT INSTRUMENTS AND CIRCUITS CLEARING AND SETTLEMENT FIXED INCOME SECURITIES EQUITIES GOTL IT ENVIRONMENT SCOPE OF THIS PROCUREMENT CLEARING AND SETTLEMENT PARTICIPANTS LINKAGES TECHNICAL ENVIRONMENT SERVICES GENERAL SYSTEM REQUIREMENTS PRINCIPLES OPERATIONAL INTEGRITY TRANSACTION AND FILE PROCESSING CONTROLS VALIDATION CONTROLS MESSAGE INTEGRITY AND ACCOUNTABILITY SYSTEM OPERATION ENQUIRY AND REPORTING SECURITY PROCESSING REQUIREMENTS OPERATIONAL REQUIREMENTS BILLING INFORMATION HARDWARE, SOFTWARE AND COMMUNICATIONS SPECIFIC FUNCTIONAL REQUIREMENTS FOR THE ATS OBJECTIVES ACH ELEMENT CLEARING FUNCTIONALITY RTGS ELEMENT ACCOUNTING CONSIDERATIONS LIQUIDITY MANAGEMENT CASH ISSUING AND RETURN MANAGEMENT OF GOVERNMENT TRANSACTIONS INTERFACE TO PARTICIPANT BANK SYSTEMS MONITORING AND REPORTING ACCOUNT MAINTENANCE AND MONITORING PARTICIPANTS AND VOLUMES i

3 BCTL 6. IMPLEMENTATION AND SUPPORT BUSINESS LEVEL CONSULTING PROJECT PLAN AND IMPLEMENTATION SCHEDULE PROPOSER S STAFF PROJECT MANAGEMENT TESTING AND ACCEPTANCE KNOWLEDGE TRANSFER AND TRAINING DOCUMENTATION SUPPORT SERVICES INSTRUCTIONS TO PROPOSERS CONDITIONS OF THIS RFP PROPOSER QUALIFICATIONS STRUCTURE OF PROPOSALS PROCUREMENT PROCESS CONTRACT ATTACHMENT 1: TABLES OF REQUIRED FEATURES COMMON SYSTEM REQUIREMENTS SPECIFIC FUNCTIONAL REQUIREMENTS FOR THE ATS ii

4 1. Introduction and Background 1.1 Timor-Leste Geography The Democratic Republic of Timor-Leste is a small country in Southeast Asia with a population of approximately 1.2 million. Geographically it comprises the eastern half of the island of Timor, which is the largest and easternmost of the Lesser Sunda Islands at the eastern end of the Indonesian archipelago, the nearby islands of Atauro and Jaco, and Oecussi, an exclave on the northwestern side of the island within Indonesian West Timor. The country's area is a little less than 15,000 km 2. History Following Portuguese colonial rule which lasted from the 16 th century until 1975 (apart from a period of Japanese occupation during the Second World War), the country was occupied by Indonesia in The period of Indonesian occupation was marked by violence and brutality, with the local guerrilla force Falintil fighting a campaign against the Indonesian forces from 1975 to In August 1999 a United Nations-sponsored referendum was held, resulting in an overwhelming majority in favour of independence from Indonesia. Following a period of intense civil strife which broke out following the referendum, United Nations peacekeeping troops deployed to the country and helped bring the violence to an end. Democratic elections were held in August 2001 and Timor-Leste became a fully-independent sovereign state on 20 May In 2006 and 2007 there were further internal upheavals and further United Nations assistance was rendered, culminating in a peaceful election. There was a failed attempted coup in early 2008 and since then the country has enjoyed stability and peace. Economy Timor-Leste is one of the poorest countries in the Asia-Pacific region, with a Gross Domestic Product (GDP) per capita of USD 3, It is also the fastestgrowing economy in the Pacific region with forecast growth of 9.5% in due to substantial petroleum revenues. As a result it is one of the most heavily petroleum-dependent economies in the world. It was the relative abundance of sandalwood that attracted European explorers to the island in the early 16th century, and subsequently sandalwood remained the main export crop, with coffee exports also becoming significant in the mid-nineteenth century. Agriculture still plays an important part in the non-oil economy, accounting for over 30 per cent of 1 Trade Advocacy and Statistics Section, Australian Department of Foreign Affairs and Trade, Asian Development Bank Pacific Economic Monitor, July

5 GDP and around 75 per cent of employment. However, relatively low food production by small-holders and the low level of development of local markets have led to a dependence on imports. The current main export apart from oil is coffee. Transforming subsistence farming into an export-oriented industry is a challenge. Key crops such as coffee and vanilla, and potentially candlenut and palm oil, are being targeted for increased capital investment. Petroleum Timor-Leste has significant revenue from offshore oil and gas reserves. The Government of Timor-Leste (GOTL) is seeking to use its oil revenues in support of long-term economic development, infrastructure development, economic diversification and poverty reduction. It has established an internationally-acclaimed Petroleum Fund to manage its petroleum revenues transparently and sustainably. As at 30 June 2013 the capital of the fund was US$13.6 billion, having grown from $11.8 billion since the beginning of the year. On 13 July 2011 the Timorese Government released a Strategic Development Plan, which provides a framework for development for National Payments System Development Programme Banco Central de Timor-Leste (BCTL) is the central bank of Timor-Leste and has, as one of its functions established under the Organic Law of the Central Bank of Timor-Leste 2011 to establish, promote and oversee sound and efficient payments and securities settlement systems. In its Corporate Plan BCTL has set out the following key objectives as they relate to payment systems: To review the safety and efficiency of the payments system, and work with banks to modernise the payments system; To monitor the need for electronic payments and clearing systems; To collect and publish data on payment systems; To establish a nationwide system to improve access of the public for making payments to the government. Further information on BCTL can be found on the website: In recognition that the payments system is an integral part of the financial system of every country, and is vital for its soundness, economic growth and financial inclusion, BCTL is committed to the safety and efficiency of Timor- Leste s National Payment System (NPS). BCTL is adopting a strategic approach 3 See 2

6 to payment systems reform, with the objective of achieving a safe and efficient NPS that effectively contributes to the country s financial stability and economic growth. BCTL has therefore initiated a comprehensive review of the NPS with a view to producing a broad strategy for NPS development covering the next three to six years. This review will involve all stakeholders in the NPS and BCTL expects to complete and publish it by the end of At the same time BCTL has also decided to proceed immediately with the procurement and implementation of an Automated Transfer System (ATS) which is the subject of this Request for Proposals (RFP) and which will: 1. Provide a solid and efficient foundation for the development of a range of innovative payment systems and services; 2. Accelerate the move towards electronic payment instruments and reduce the systemic importance of cash and cheques; 3. Reduce risk in the financial system; 4. Contribute towards mobilisation of funds as deposits in banks for productive investment in investment and job creation developments; 5. Improve the timeliness and effectiveness of GOTL and public utilities payment collections; 6. Improve disbursement of state pensions and social benefits, particularly in rural areas; 7. Promote efficiency and convenience, and foster trust, in the NPS for both individual and institutional users; 8. Improve the attractiveness of Timor-Leste from an investment and transactional perspective by providing payment services and surety that conform to international standards. 1.3 This RFP At present, there is no automated interbank clearing and settlement system in Timor-Leste. The settlement of all interbank payments, including highvalue, involves physical exchange of paper instruments and manual postings in BCTL s General Ledger (GL). To improve this, and to address systemic risk in the financial system, BCTL wishes to put in place an appropriate electronic system for clearing and settling large-value and time-critical payments. In addition, the current system for retail payments is inefficient and does not provide a satisfactory level of functionality and service to the payments community (which effectively includes, not only banks and other financial institutions but also all citizens, companies and civil society organisations). BCTL therefore intends to acquire and implement a modern Automated Transfer System (ATS). The ATS will be an interbank electronic payment processing system whose function will be to enable commercial banks, GOTL entities and BCTL itself to make and receive payments between themselves. 3

7 It will conform with current best practice and with international principles and recommendations, particularly the CPSS-IOSCO Principles for Financial Market Infrastructures 4.The ATS will provide functionality for clearing and settling all electronic interbank payments, both high and low value, within one integrated software package, and will have two main functions: 1. A Real-Time Gross Settlement (RTGS) function for large value and time critical payments, including settlement of net interbank positions arising from clearing operations in the ACH function and the operation of possible future external clearing houses such as card and mobile phone payment switching and clearing operations; and 2. An Automated Clearing House (ACH) function, which in the first instance will provide clearing and netting facilities for electronic direct credit transfers and which will have the capability in future to handle direct debit payments if and when they are introduced in Timor-Leste. Both functions will be tightly-integrated within one system so as to ensure seamless clearing and settlement of all domestic interbank payments on a same-day basis with finality and irrevocability. The ATS will be interfaced to the in-house core banking systems (CBSs) operated by the commercial banks, to enable fully automated straightthrough processing (STP). The ATS will also support interfaces to systems operated by agencies of the GOTL, particularly those responsible for making payments and collecting revenues. Within BCTL it will be integrated with a new accounting and financial management system which is currently being procured via a separate RFP. This RFP is therefore issued for the supply and implementation, on a turnkey basis, of an ATS, and proposals are invited from qualified companies for: 1. Supply, customisation and implementation of an ATS application software package; 2. Specification of all: (i) hardware; (ii) licences for system software, database management software, middleware, certificate and web server software; and (iii) networking components and all other technical elements necessary to run both systems in two (primary and Disaster Recovery) processing centres; 3. Implementation of automated linkages between the ATS and a range of other information systems both within BCTL and in external organisations including commercial banks and government entities; 4. The complete range of required services including at least the following: i. Project management; 4 See 4

8 ii. iii. iv. Business and user functional requirements specification; Business-level advice and consultancy to both BCTL and all participants related to the establishment and operation of the system; Customisation/parameterisation of software package(s); v. Implementation of all required linkages; vi. Technical advice to system participants (including GOTL participants) on implementing the necessary linkages and modifications to their internal systems; vii. viii. ix. Acceptance testing; Training; Documentation; x. Establishment and operation of a help-desk; xi. Post-live software maintenance and ongoing support. 1.4 Abbreviations and Definitions ACH AML/CFT AP ASYCUDA ATM ATS AUD BCTL BIC BIS CBS CFET CPSS CRIS Customs DR EDTL Automated Clearing House Anti Money Laundering/Countering Financing of Terrorism Accounts Payable Automated System for Customs Data Automated Teller Machine Automated Transfer System Australian Dollar Banco Central de Timor-Leste SWIFT Bank Identifier Code Bank for International Settlements Core Banking System Consolidated Fund of East Timor Committee on Payment and Settlement Systems Credit Registry Information System The Directorate General for Customs of the Ministry of Finance Disaster Recovery Electricidade de Timor-Leste 5

9 EFTPOS EUR FIU FMIS GDP GL GOTL GUI IBAN IT IOSCO IPWG LAN LVTS MSS NPS ODTI Proposer Revenue RFP RTGS SAS SIGTAS SLA STP Supplier TIN TPO Treasury UNCTAD USD Electronic Funds Transfer at Point of Sale Euro Financial Intelligence Unit Financial Management Information System Gross Domestic Product General Ledger Government of Timor-Leste Graphical User Interface International Bank Account Number Information Technology International Organisation of Securities Commissions Inter-Participant Working Group Local Area Network Large Value Transfer System Ministry of Social Solidarity National Payments System Other Deposit Taking Institutions Company responding to this RFP The Directorate General for Revenues of the Ministry of Finance Request for Proposals Real Time Gross Settlement Survicos de Agua Saneamento (water supply authority) Standard Integrated Government Tax Administration System Service Level Agreement Straight-Through Processing The successful proposer Taxpayer Identification Number Treasury Payment Order The Directorate General for Treasury of the Ministry of Finance United Nations Conference on Trade and Development United States Dollar 6

10 2. Current Situation 2.1 Institutional Structure Central Bank BCTL is the monetary authority of Timor-Leste, and enjoys legal, operational, administrative, and financial autonomy. It was formally established on 13 September 2011 under law no 5/2011 in accordance with Article 143 of the Constitution. BCTL operates at two sites: its head office in Dili, and a branch office in the exclave of Oecussi. The Oecussi branch currently has two staff and is used for cash distribution. In total BCTL employs approximately 80 professional staff. It is intended that it should be possible to network the Oecussi office with the head office for financial management and other functions if required. Until the establishment of BCTL, central banking functions in Timor-Leste were carried out by its predecessor organizations, the Central Payments Office ( ) and the Banking & Payments Authority of East Timor (2001 to 2011), both of which were created by the United Nations Transitional Administration of East Timor (UNTAET) which administered the country from October 1999 to May BCTL s functions include: Licensing and supervision of financial institutions (including insurance companies); Providing the means of payment (US Dollar (USD) notes and Timorese centavos coins) through the commercial banks to the economy; Operation of interbank clearing arrangements; Acting as banker to the GOTL; Publication of monetary and banking statistics and other economic information; Operational management of the Petroleum Fund; Operation of a Credit Registry Information System (CRIS). Each commercial bank is required to maintain a Settlement Account at BCTL. These accounts are used for interbank transfers and settlement of payment clearing operations. Settlement Accounts are held in BCTL s GL and are currently updated by manual postings. Commercial banks are also required to maintain Collateral Accounts at BCTL, as described in BCTL currently pays interest on Collateral Accounts. BCTL also holds several GOTL accounts: 1. The Consolidated Fund of East Timor (CFET) account, which is the GOTL s main operating account. BCTL pays interest on the CFET Account; 7

11 2. The Infrastructure Fund account; 3. The Human Capital Development account Formal Banking Sector Banks There are four commercial banks currently operating in Timor-Leste: 1. Australia and New Zealand Banking Group Limited, Timor Leste branch (ANZ), which has two branches, both in Dili. 2. Banco Nacional de Comércio de Timor-Leste (BNCTL), which is locallyowned and is the largest bank in Timor-Leste by numbers of both branches and customers. BNCTL was formed in 2002 as the Instituição de Micro Finanças de Timor-Leste and was granted a full banking licence in early BNCTL has 12 branches, two sub-branches and eight agencies, giving it a presence in all Districts of the country including Oecussi. 3. Banco Nacional Ultramarino (BNU), which is a branch of the Portuguese state-owned Grupo Caixa Geral de Depósitos (CGD) and has eight branches throughout the country (including Oecussi) in addition to the head office in Dili, with three more planned. In addition there are BNU offices at the land border with Indonesia and at Customs head office in Dili, for the collection of Customs duties. 4. PT. Bank Mandiri (Persero) Tbk. Dili Timor-Leste Branch which is a branch of the Indonesian Bank Mandiri and has one branch in Dili Numbers of accounts Between the four banks, there are some 260,000 accounts in total. Somewhat over half of these accounts are at BNCTL Bank account numbering At present there is no coherent numbering of bank accounts across the banks operating in Timor-Leste. In order to rectify this, and to prepare for the introduction of electronic interbank payment systems, BCTL and the banking community have decided to standardise bank account numbering using ISO (the international standard for numbering bank accounts (International Bank Account Numbers or IBAN)). This process is expected to be completed before the ATS goes live, and therefore proposers should take IBAN into account in preparing their proposals as necessary Payment services The commercial banks provide a range of retail payment services including: cheques for both small and large value transactions; debit cards for point of sale (POS) transactions and withdrawal of cash via Automated Teller Machines (ATMs); and direct credit transfers. With the exception of cheques, 8

12 these instruments are currently offered for intrabank use only (i.e. between customers of the same bank). Total deposits with the commercial banks amounted to USD364.4 million in March 2013, an increase of 8.4% during the previous 12 months Non-Bank Financial Sector There are several Other Deposit Taking Institutions (ODTIs) which, while licensed by BCTL, have less stringent licensing criteria than the commercial banks and whose objectives are to provide financial services to lower-income segments of the population. They are keen to develop their payment service offerings but at the present time it is not envisaged that they will be participants in the ATS. 2.2 Payment Instruments and Circuits Cash The USD was adopted as the official currency of Timor-Leste in January Timorese domestic coins in denominations of 1, 5, 10, 25 and 50 centavos were introduced in November 2003 to facilitate small denomination transactions and contribute to the monetisation of the economy. Cash is the overwhelmingly predominant means of payment in Timor-Leste. As the majority of the population do not have bank accounts, cash is the only way in which they can make payments. Cash is even used, for example, to make tax payments (see 2.6.2) Paper Instruments There are two types of paper instrument used for interbank payments, namely cheques and credit notes, both of which are cleared through the clearing house operated by BCTL as described in These are the only interbank payment instruments used in Timor-Leste apart from cash Cheques The numbers of cheques passing through the interbank clearing house (see 2.3.1) are very small, amounting to fewer than 100 per day on average, as shown in Tables 2 and 3 below. Because of the very low volumes of cheques, the ATS will not be required to provide cheque truncation/clearing functionality. Rather, the present manual clearing house will continue in operation Large value cheques Cheques for amounts greater than USD200,000 are not accepted in the clearing house and are therefore not included in Tables 2 and 3. They are settled via the Large Value Transfer System (LVTS) described in

13 (Credit) notes These are primarily used by the Directorate General for Treasury of the Ministry of Finance (Treasury) for making payments on behalf of GOTL entities. To make a payment, Treasury draws up a Treasury Payment Order (TPO) which is sent to BCTL where the information is entered into an Excel application. The Excel system prints a Funds Transfer Advice which is sent to the clearing house, and the BCTL accounts department carries out the necessary GL postings on the basis of the TPO. Credit notes are also used for interbank transfers. As might be expected, there is a significant volume of such payments, as shown in Tables 2 and 3 below (in the columns headed Notes and Return notes ). Current clearing arrangements for these are described in 2.6.1: they will be converted to either RTGS payments or ACH Direct Credits in the ATS Bulk payments Large volumes of individual payments, such as GOTL payroll, pension and Social Solidarity payments are made using a bulk payment arrangement. Under this arrangement schedules of individual payments are drawn up, one for each commercial bank, and the total amounts of these payments are calculated. The actual payments are made using TPOs for the total amounts, which are sent by Treasury to BCTL for processing, together with the corresponding schedules of individual payments. On receipt of a TPO, BCTL settlements staff debit the CFET account, credit the beneficiary bank s Settlement Account and send a Funds Transfer Advice together with the payment schedule to the beneficiary bank by fax. The original documents are then forwarded to the beneficiary bank, which applies the credit payments to its customers accounts. This arrangement forms part of the LVTS described in Volumes of these payments are given in Table 4 below. 10

14 Clearing House Transactions 2012 Month Cheques Notes Return Cheques Return Notes Number Value Number Value Number Value Number Value January 1,666 14,984, ,042 34,887, , , February 1,768 12,857, ,142 12,992, , , March 1,828 12,940, ,855 14,653, , , April 1,548 11,588, ,383 11,796, , , May 1,904 13,811, ,027 20,480, , , June 1,851 12,387, ,718 19,122, , , July 1,734 13,025, ,736 18,338, , , August 1,728 13,003, ,592 27,556, , , September 1,461 12,421, ,578 25,290, , ,425, October 1,697 14,674, ,086 29,189, ,228, , November 1,451 11,333, ,170 13,090, , , December 1,776 14,049, ,955 37,778, , , Total , ,078, , ,176, ,736, ,903, Table 2: Monthly Clearing House Transactions for

15 Clearing House Transactions January to June 2013 Month Cheques Notes Return Cheques Return Notes Number Value Number Value Number Value Number Value January 1,608 15,611, ,799 50,285, ,107, ,146, February 1,432 9,880, ,829, , , March 1,624 11,004, ,567, , , April 1,841 13,905, ,390 11,933, ,023, , May 1,784 13,852, ,715 13,793, , , June 1,820 14,980, ,546 12,771, , , Total 6,505 50,402, ,283 73,616, ,720, ,014, Table 3: Monthly Clearing House Transactions for the Period January-June

16 No Distritos Monthly Payroll for Veterans pension 1 Aileu 1, , Ainaro 1, , Baucau 1, , Bobonaro 1, , Covalima , Dili 3, , Ermera 1, , Lautem 1, , Liquisa 1, , Manatuto 1, , Manufahi , Oecussi , Viqueque 1, , Monthly payroll for public services Payroll as of April 2013 per District Elderlies (Six month) Item Amount Item Amount Item Amount Subsidies for the mothers (Six month) Monthly Payroll for Defence/FDTL Monthly Payroll for police/pntl 285,222 3, , , , , ,292 5,877 1,066, , , , ,687 14,485 2,560, , , , ,744 9,732 1,745, , , , ,903 6,532 1,163, , , , ,793,133 8,316 1,480, , , , , , , ,066 8,163 1,464, , , , ,303 5,961 1,070, , , , ,747 5,805 1,032, , , , ,295 4, , , , , ,681 5, , , , , ,057 5, , , , , ,411 9,808 1,752, , , , T o t a l 18,460 6,234, ,771 9,571, ,038 16,601, ,104 4,450, , , ,458 1,119, Table 4: GOTL Welfare and Payroll Disbursements for the Month of April

17 2.2.4 Debit cards The use of debit cards (for use in ATMs and POS terminals) is at an early stage of development in Timor-Leste, with very few places where they can be used. In May 2013 there were 11,852 debit cards issued across all the banks Automated Teller Machines (ATMs) As of May 2013 there were 22 ATMs in total in Timor-Leste, nearly all of them in Dili. They are owned by ANZ (6), BNU (11) and Bank Mandiri (5), while BNCTL currently has none. There is currently no interoperability between any of the different banks ATMs, although a proposal for this has been made by one bank. The number of ATM cash withdrawals in May 2013 was 88, Electronic Funds Transfer at Point of Sale (EFTPOS) EFTPOS is hardly used, as there are very few installed terminals. In May 2013 the total number of installed EFTPOS terminals was 51, and in the same month there were 23 debit card and 913 credit card transactions carried out on these terminals Credit cards There is very limited use of credit cards, and then only of foreign-issued cards. Very few establishments accept credit cards, mainly those catering to foreigners, such as hotels and restaurants in Dili. In May ,015 transactions were recorded using foreign credit cards Internet payments One or two banks offer Internet payments but only on an intrabank basis (i.e. between customers of the same bank) Mobile payments There are currently no mobile payment services offered in Timor-Leste. 2.3 Clearing and Settlement Dili Clearing House Cheques and (credit) notes are cleared through a manual interbank clearing house operated by BCTL at its head office in Dili at 09:30 daily. Monthly volumes for these for the last 18 months are given in Tables 2 and 3. Net positions (credit and debit) arising from the daily clearing house sessions are posted manually to banks Settlement Accounts in BCTL s GL. In order to cater for a situation where a bank has insufficient funds in its Settlement Account to cover a debit position, and cannot borrow from another bank, all 14

18 banks are required to maintain Collateral Accounts at BCTL, in addition to their Settlement Accounts. The required balance in an individual bank s Collateral Account is equal to its maximum debit position in the clearing house in the previous 60 days, calculated on a rolling monthly basis. If a bank cannot cover its clearing house debit position from its Settlement Account, the necessary funds are taken from its Collateral Account. If this is still insufficient, there is also a loss-sharing arrangement enforced by BCTL which allocates the remaining debit among the other banks. This ensures that clearing house positions are always settled. When the ATS comes into operation, the requirement to maintain Collateral Account funds to the level specified will remain. However, as settlement of clearing house positions will be carried out in the RTGS element of the ATS, the Collateral Accounts themselves will cease to exist in BCTL s GL. This is further discussed in Large Value Transfer System As described in , cheques for amounts greater than USD200,000 are not accepted by the Clearing House and are required to go through the LVTS. This involves presentation of the cheque directly by the presenting bank to the drawing bank, which validates the cheque and then either dishonours it or sends an instruction by secure fax to BCTL to debit its Settlement Account and credit the presenting bank s Settlement Account. All interbank credit transfers for amounts greater than USD200,000 are executed via fax as described above. The LVTS also includes the arrangements for clearing and settling GOTL payroll, pension and welfare payments described in BCTL expects that all payments currently made through the LVTS will disappear when the ATS comes into operation, and will be replaced by RTGS payments. The cheque clearing house will continue to reject high-value cheques, although the value threshold may be altered Card clearing Because ATM and EFTPOS circuits are currently not interoperable, all debit card transactions are cleared and settled within the issuing bank. 2.4 Fixed Income Securities At present neither the GOTL not BCTL issues securities. There are also no plans at present for either party to start issuing securities, although this may change over the next few years. 2.5 Equities There is no equities market in Timor-Leste. 15

19 2.6 GOTL Treasury Domestic Payments Treasury operates a single Financial Management Information System (FMIS) for all of GOTL. This uses the FreeBalance software package from the Canadian company of the same name. All payments made by any element of GOTL are processed in the FreeBalance Accounts Payable module which creates TPOs as described in , and also writes cheques. Within Treasury the Payment Directorate is responsible for preparing the GOTL payroll, and for releasing for payment all salaries and pensions (including those which are prepared by the Ministry of Social Solidarity). BCTL intends to include Treasury as a direct participant in the ATS so that Treasury can make and receive payments directly from/to the CFET account which will be held in the ATS Treasury International Payments Treasury makes a significant number of payments to international payees, all in USD. At present these are made by Treasury forwarding TPOs (see ) to BCTL, which debits the amount from the CFET account and sends an MT103 payment message via SWIFT to the overseas correspondent bank (Federal Reserve Bank of New York or Reserve Bank of Australia) Directorate General for Revenue (Revenue) Revenue is responsible for collecting a variety of taxes. It uses the Standard Integrated Government Tax Administration System (SIGTAS) from the Canadian company CRC Sogema. SIGTAS was implemented in 2001 and has not been updated since then, as a result of which there is significant dissatisfaction with it, and Revenue is planning to go to the market for an upgrade or complete replacement in the near future. At present all tax payments are required to be made at BNU. A taxpayer completes a tax assessment form in three copies which he/she takes to a BNU branch together with the payment which must be made in cash (BNU will not accept cheques for tax payments). Taxpayers can also make their payments via credit transfers to BNU from other banks, but this is hardly used because of the high fees involved. BNU retains one copy of each tax assessment form for its own records. Tax payments are credited to a special account at BNU, which is swept regularly to the CFET account at BCTL. Each day BNU prints a statement of all tax payments, sorted by Taxpayer Identification Number (TIN) and type of tax. A Revenue employee visits BNU each day to collect these statements together with one copy of each of the corresponding tax assessment forms. All of this information is manually entered into SIGTAS. Every month the third copies of all tax assessment forms are sent by BNU to Treasury for updating 16

20 the government revenue accounts. Treasury then sends a monthly statement to Taxation for reconciliation in SIGTAS. This is a very inefficient, cumbersome, inconvenient (particularly for the taxpayer), slow, costly and error-prone process. Both Revenue and Treasury are looking to make significant improvements, much of which are expected to come from an upgrade or replacement of SIGTAS, as noted above. They are also enthusiastic about the potential of the ATS to support these improvements by making payments easier, faster and more efficient Directorate General for Customs (Customs) Customs is responsible for collecting duty and taxes on all imports. It uses the Automated System for Customs Data (ASYCUDA) developed by the United Nations Conference on Trade and Development (UNCTAD). The current version in use is ASYCUDA++, but Customs is planning to upgrade this to ASYCUDA World. In addition to the head office in Dili, Customs has offices in eight locations throughout Timor-Leste, all of which are connected online to ASYCUDA. There are some 20 Customs brokers, half of whom are also connected online to ASYCUDA. For those brokers which do not have an online connection, terminals are provided in Customs offices. Brokers enter Customs Declarations into ASYCUDA, which calculates the tax/duty payable and prints an Assessment showing the amount payable. As with tax, all Customs payments are required to be made through BNU, which maintains branch offices at Customs head office and a land border crossing for this purpose. Payments are required to be made in cash. Once a payment has been made, the broker takes the receipt to the Customs office where the payment is entered into ASYCUDA and the shipment is cleared (subject to any requirement for inspection) Ministry of Social Solidarity The Ministry of Social Solidarity (MSS) is responsible for managing the GOTL s welfare payments, including civil service pensions, old age pensions, war veterans payments, disability pensions and child support payments. The volumes of these payments are given in Table 4 above. MSS prepares schedules of required payments and forwards them to Treasury which makes the actual payments via bulk payments as described in Others A number of GOTL and state-owned enterprises are involved in receiving significant volumes of payments, including; for example: the state-owned power company Electricidade de Timor-Leste (EDTL); the state-owned water supply organisation Survicos de Agua Saneamento (SAS); the Port Authority of Dili; the Civil Aviation Authority; and others. 17

21 Introduction of the ATS will offer the opportunity to make such collections faster and more efficient and convenient. 2.7 IT Environment The existing IT environment at BCTL can be broadly grouped as follows: Facilities BCTL runs a small in-house network based on Microsoft Windows Server releases 2003 and It uses the usual Microsoft suite of Office, Outlook/Exchange and Internet Explorer. The Bank has an Internet connection provided by Timor Telecom. BCTL s IT facilities are all located within two buildings at the head office in Dili Applications Current applications are: 1. The MYOB accounting package, which is deemed to be at the end of its life: BCTL is in process of issuing an RFP for its replacement at the same time as this RFP; 2. The Teller Support System, which is a bespoke application to support cash payments to large numbers of beneficiaries according to lists provided by GOTL; 3. Clearinghouse, which is an Excel-based system for calculating Clearing House balances; 4. Investment management software, which is primarily Excel-based; 5. CRIS, which is a Credit Registry Information System running on a Windows server that is used by the commercial banks. Apart from this and its public website, none of the Bank s existing IT facilities are visible outside the organisation Database management software Current applications use either Microsoft SQL Server (2000, 2005 and 2008 R2) or Microsoft Access IT arrangements for ATS It is anticipated that the ATS will operate out-of-house in a third-party hosting facility in Timor-Leste, with server and network support provided by that facility. BCTL also intends to establish a disaster recovery (DR) site, either on its own premises or in a GOTL or commercial location. 18

22 3. Scope of this Procurement This section briefly summarises the required products and services that are the subject of this procurement. The required solution must be proposed on a full turnkey, fixed-price, basis and cover all elements including: 1. ATS application software package; 2. All hardware and other software (e.g. system software, DBMS, etc.) necessary to run the ATS at all project locations; Proposers will not be required to supply these items, which BCTL will procure via an outsourcing arrangement as described in 2.7.4; 3. A high level of consulting services to assist BCTL and all participants with the business and technical aspects of introducing the ATS as detailed in Any required customisation and integration of the application software, including requirements analysis, specification, development of special software modules and implementation; 5. Full implementation services including installation, testing, documentation, training and integration with external systems in BCTL and participants as described in 3.3; 6. Ongoing (post-acceptance) support as specified in Clearing and Settlement The ATS will provide a comprehensive electronic interbank payment mechanism. Using the ATS, financial institutions will be able to send a variety of payment instructions to each other and to BCTL. The ATS will provide both Real Time Gross Settlement (RTGS) and Automated Clearing House (ACH) capabilities for the clearing and settlement, within one integrated system, of all interbank electronic payments. It will carry out the functions that in some countries have been provided by different, discrete software systems (RTGS and ACH packages) which have had to be installed with interfaces to achieve what the ATS will achieve in one integrated system RTGS BCTL expects that the ATS will be based on a Real Time Gross Settlement software package, which will handle the settlement of: 1. High-value and/or high urgency bank-to-bank payments including payments to banks customers; 2. High-value and/or high urgency payments from and to Treasury; 3. Net interbank positions from the ACH clearing element of the ATS; 19

23 3.1.2 ACH 4. Purchase and deposit of cash by banks. It will also be able to handle other types of payment in future, as new systems are introduced into Timor-Leste, such as: 1. Settlement of net interbank obligations from other clearing houses such as payment card and mobile phone payment processing centre(s); 2. Transactions involving purchase and sale of securities (on both primary and secondary markets) in accordance with the principles of Delivery versus Payment (DvP) and STP (if and when the GOTL and /or BCTL start issuing securities); 3. Settlement of transactions on possible trading platforms such as a Stock Exchange and an interbank money market system. In addition to the RTGS capability, the ATS will contain clearing functionality (ACH) to handle the processing of different retail payment streams. In the first instance these will consist of direct credit payment instructions, either singly or in batches. In future Direct Debit payments will probably also be introduced in Timor-Leste, so the ATS must be capable of processing these also. 3.2 Participants The participants in the ATS will be: BCTL; the four commercial banks; Treasury. Revenue and Customs will also be participants for the purpose of receiving information on their tax and Customs receipts respectively, as described in 5.7. Any new bank receiving a banking licence from BCTL in the future will be required to become a participant in the ATS as a condition of having a licence. As noted in 2.1.2, a number of ODTIs have expressed interest in the potential offered by the ACH element of the planned ATS. At some future point they may be admitted as participants without Settlement Accounts (i.e. making and receiving payments in their own right but using a fully-licensed bank as settlement bank). The ATS must have the capability of supporting such a type of participant. 3.3 Linkages Linkages will be developed to: 20

24 1. BCTL s accounting system (which is currently in process of being procured under a separate RFP); 2. In-house CBSs operated by participants; 3. The Financial Management Information System (FMIS) operated by Treasury and based on the FreeBalance software package; 4. The tax accounting system operated by Revenue and based on the Standard Integrated Government Tax Administration System (SIGTAS) software package; 5. The Customs management system operated by Customs and based on the Automated System for Customs Data (ASYCUDA) software package. In future BCTL envisages a potential requirement for a variety of other systems to be linked to the ATS if and when they are introduced in Timor- Leste. These might, for example, include: 1. A securities registry (Central Securities Depository system); 2. An interbank card and mobile payments switch; 3. A Stock Exchange equities trading system; 4. An interbank money market system; 5. A foreign exchange trading system. 3.4 Technical Environment Security and Integrity The ATS will be developed and implemented to the highest standards of security and will meet all participants expectations of confidentiality, integrity, and availability. Confidentiality will be supported through strong encryption of all data in transit between users, connected systems and the ATS. Stringent user registration and authentication functionality will also be provided to ensure that only authorised persons have access to the system. Operational integrity and availability will be supported through hosting the processing capability for the system at primary and alternate processing sites, with redundancy of key components at the main site and close integration between the two sites to ensure that the system operates to a level of performance and reliability commensurate with its critical role in the national economy of Timor-Leste Hardware and Associated Software Proposals must include the specification (but not the supply, as previously stated) of all necessary items of hardware and associated components. 21

25 The supplier will be required to provide contractual assurances that the agreed total configuration (hardware, networking and software) will support the ATS in processing expected workloads for at least three years after acceptance Communications The secure transmission and receipt of messages is essential for all elements of the ATS. The system will require the highest standards of availability, reliability and performance. BCTL intends to implement a resilient IP-based network interconnecting the participants of the ATS. This network will actually comprise two separate networks using different technologies such as fibre-optic and microwave. It is not yet known whether the use of SWIFT as a message transport mechanism will be a requirement. Proposers should describe the network requirements for their solutions in terms of network technology, protocols, bandwidth and resilience. They should also comment on the above proposed network and/or suggest alternatives. 3.5 Services BCTL understands that the success of the ATS project is particularly dependent on the provision of a comprehensive range of high-quality services from the supplier. The services components of proposals will be given a substantial weighting in the overall proposal evaluation process and criteria. Proposals must contain full details of the services to be provided, as described in detail in section 6. In summary they will include: 1. A comprehensive range of implementation services which will include: a. Project Management; b. Business level consulting to advise BCTL and all participants on the non-technical aspects of implementing the systems, including development of associated documentation including system rules, pricing policy, operational procedures, certificate policy and certificate practice statement, and any others of relevance. c. Requirements analysis to investigate and document the functional requirements of the ATS in the specific environment of Timor-Leste; d. Customisation and integration of the application software to meet the detailed requirements documented as described under c above; e. Installation of the application software including technical and integration testing; 22

26 f. Detailed documentation and advice to all participants on linking their systems to the ATS; g. Implementation of all required linkages; h. Testing as specified in 6.5; i. Training as specified in 6.6; j. Documentation as specified in Ongoing (post-acceptance) support of the entire system including: a. Problem analysis/management and error correction for application software; b. Support, advice and guidance for all supplied software; c. Provision of all corrective, new and updated versions of the software which become available, including change management support for introducing them. 23

27 4. General System Requirements Proposals should consider all aspects of the system including: 1. The facilities and functionality provided to all system participants; 2. System performance levels; 3. Billing; 4.1 Principles 4. Operations, maintenance and support; 5. Development and enhancements; 6. Capacity, scalability and upgradability of the system. The ATS should be based on best international practice and: 1. Conform to the CPSS-IOSCO Principles for Financial Market Infrastructures; 2. Have a high level of ease of use, with a common look and feel achieved through a standard graphical user interface (GUI); 3. Comply with industry standard conventions and interfaces which allow the system to be interfaced easily with other systems, and/or expanded by either functional module or capacity; 4. Offer low cost and easily implemented technical connections for external participant sites on either a remote terminal or host-to-host basis for all system traffic; 5. Enable BCTL system operators easily to add, remove or suspend participants; 6. As appropriate, permit optimum use to be made of any equipment that is already installed in both BCTL and participant organisations; 7. Have high levels of trustworthiness with particular emphasis on data integrity and security, particularly preventing unauthorised access and assuring 100% data accuracy; 8. Have very high levels of service availability which will be assured through demonstration, rigorous testing and a robust Service Level Agreement; 4.2 Operational The ATS must be delivered in both English and Portuguese language variants. BCTL is also interested in evaluating the possibility of having a Tetum 5 5 Tetum is one of the two official languages of Timor-Leste, the other being Portuguese. 24

28 language variant available and proposals should provide information on how this can be achieved. Each individual user must be able to select his/her preferred language variant. In addition the ATS should: 1. Allow for easy customisation or change of system functions through onscreen parameters, etc.; 2. Provide online access to and reporting of historical records covering a period of at least five (5) years plus the current year without compromising response times; 3. Provide online, context sensitive help for all user and operator functions; 4. Enable automation of daily processing including initiating links to directly interfaced systems with appropriate security procedures and exception and summary control reports; 5. Provide full audit trails for all activities within the system, including system accesses and messages sent and received; 6. Provide comprehensive event and problem management tools; 7. Be configured such as to process the expected workload in terms of throughput capacity and response times, making due allowance for peaks in transaction volumes and general growth in transaction volumes. 8. Be operationally resilient, with high levels of local recovery supported by an appropriately configured back-up installation and a smooth cut-over between the primary and alternate sites, and back again to the primary site when service is recovered. 4.3 Integrity The ATS should provide: 1. Financial integrity checks to ensure that value in = value out at all times and that the ATS component can be reconciled to a zero net balance at any time; 2. Processing integrity checks to ensure that number of financial items in = number of financial items out at all times and that each processing site can be reconciled to a no missing items position at any time; 3. Consistent and regular reporting for financial processing, security logs, calculated settlement positions, gross and net settlement values, batch and file numbers processed etc. which can be reported both locally and centrally to prove system integrity and complete systemwide reconciliation; 25