Indonesia expands local currency cooperation with Southeast Asian countries

Jakarta (Indonesia Window) – Indonesia’s central bank Bank Indonesia (BI) will expand cooperation on the application of Local Currency Settlement (LCS) with countries in the Southeast Asian region.

“We will continue to develop the implementation of LCS, especially in the region because we have many economic partners,” said Executive Director, Head of the International Department of Bank Indonesia Doddy Zulverdi in a webinar entitled Impacts of Expanded LCS Implementation, What’s the Fate of the Rupiah? on Thursday (Sep. 23).

So far, there is no information about which Southeast Asian countries will be invited by BI to cooperate in implementing the LCS. However, Doddy said that BI would prioritize countries that have been Indonesia’s main trade and investment partners.

He stressed that LCS cooperation is reciprocal, so the central bank is likely to target countries that require collaboration in this field.

Doddy appreciated the previous cooperation agreements with China and Japan, because these two countries have strong currencies.

In the future, Indonesia will strengthen the implementation of LCS with those two countries, along with Malaysia and Thailand which have agreed to cooperate in the same field.

“We will continue to strengthen (this cooperation) because there are still a lot of potentials. The LCS transactions with Japan is still less than five percent of total trade, while with Malaysia and Thailand are four and five percent respectively, yet the trend continues to increase,” Doddy noted.

In the first semester of 2021, the portion of using LCS in trade transactions between Indonesia and Malaysia was 2.8 percent, with Thailand was 0.8 percent, and with Japan was 3.4 percent.

So far, data on the LCS implementation in trade and investment activities with China are not available because the cooperation between Indonesia and this East Asian country just started on September 6, 2021.

Reporting by Indonesia Window