JAKARTA (TheInsiderStories) – Bank Indonesia (BI) said that the implementation of Local Currency Settlements (LCS) between Indonesia and Thailand had a positive impact on bilateral trade between the two countries. Total transactions in the first two months of 2019 reached THB272 million or equivalent to US$8.58 billion, said the central bank.
“Transactions increased sharply from the same period last year amounting to THB 69.5 million or equivalent to Rp 30 billion. Thus, trade transactions using the rupiah/baht skyrocketed to 291.37 per cent,” according to an official release today (03/25).
Through this scheme, Indonesian importers wishing to import goods from Thailand can make transactions using the baht currency through the bank operations of the LCS framework. Conversely, Indonesian exporters can be paid in rupiah, without the need to convert it into US dollars.
This cooperation framework will reduce the transaction costs of foreign exchange against the rupiah with a direct price quote between the rupiah and the partner country’s currency. This is expected to be able to develop financial markets based on local currencies, encourage diversification of currency exposure, and expand access to business actors.
The Governor of Bank Indonesia said the agreement had strengthened trade and investment cooperation between countries. Since it was implemented on December 11, 2017, the total trade transactions through LCS have shown an increase. Throughout 2018, trade transactions through LCS reached an average of THB 130 million or equivalent to Rp. 58 billion per month.
This development was one of the topics raised in the bilateral meeting of BI Governor Perry Warjiyo and Bank of Thailand (BoT) Governor Veerathai Santiprabhob on March 23, 2019, in Jakarta.
This LCS has strengthened trade and investment cooperation between countries. These conditions also provide market confidence and have a positive impact on Indonesian and Thai bilateral trade.
In addition to the LCS, the meeting discussed the economic development of the two countries as well as the direction and implementation of central bank policies, especially in the field of payment systems.
The two central banks emphasized the importance of optimizing the benefits of digital economic and financial developments with a variety of the latest technological innovations, including the application of the Quick Response Code.
Optimizing the benefits of economic development continues to be taken by mitigating potential risks, including in terms of financial system stability, as well as anti-money laundering and prevention of terrorist funding.
BI and BoT regularly exchange views and experiences so that they can enrich and strengthen the capacity of both parties in managing risks and challenges going forward. The two central banks also believe that strengthening cooperation between authorities at the bilateral, regional and multilateral levels is key in facing increasingly complex challenges amid uncertainty in the global economy.
Going forward, the two governors affirmed their commitment to continue to strengthen mutually beneficial cooperation between the two central banks, including continuing bilateral meetings at the Central Bank Leadership level and at the technical level.
US$1 = Rp 14,100
Written by Lexy Nantu, Email: firstname.lastname@example.org