Indonesia, Malaysia and Thailand Seek to Boost Local Currency Settlement
BY :NILUFAR RIZKI
DECEMBER 11, 2017
Jakarta. The central banks of Indonesia, Malaysia and Thailand launched a framework on Monday (11/12) aimed at increasing direct settlement of transactions in their local currencies to reduce the current dependence on the US dollar.
The regulatory framework is "part of the continuous effort to promote a wider use of local currencies to facilitate and boost trade and investment in these countries," the three said in a joint statement issued in Jakarta on Monday. A number of banks will be allowed to carry out such settlements, including three of Indonesia's state-controlled banks, Malaysia's CIMB Bank and Malayan Banking and their Indonesian and Thai affiliates, as well as Bangkok Bank.
Bank Indonesia Governor Agus Martowardojo said 94 percent of Indonesian exports and 78 percent of imports were settled in US dollars, and the new framework aimed to diversify to other currencies.
"If this diversification in trade could be more varied, of course it would allow better stability for the Indonesian financial system," Agus told reporters.
He said direct settlement would mean banks in the three countries could complete transactions without using dollars, improving their operational efficiency.
Malaysia and Thailand are among Indonesia's top three Southeast Asian trade partners, with non-oil and gas exports amounting to a combined $10.3 billion in January to October, data from Indonesia's Central Statistics Agency (BPS) showed.
In the same period, Indonesia imported $11.9 billion worth of goods from Malaysia and Thailand.
Agus said the central bank was looking at applying similar settlement policies to other currencies, such as those of Indonesia's top 10 trading partners.