Indonesia, Malaysia and Thailand are teamed up to use local currency for bilateral trading

News24xx.com -   Bank Indonesia (BI) along with Malaysia's central bank, Bank Negara Malaysia and Thailand's central bank, Bank of Thailand, agreed on bilateral trade transactions using of local currency.

The agreement directly affects the dependence on the US dollar (USD).

Bank Indonesia has just issued bilateral trade settlement regulation using local currency settlement through bank, as stated in Bank Indonesia Regulation (PBI) No.19 / 11 / PBI / 2017.

"The Local Currency Settlement (LCS) arrangement aims to support the stability of the rupiah exchange rate, by reducing the dependence on US dollar usage in the settlement of bilateral trade transactions between Indonesia and partner countries," said BI's official statement, on Monday, October 16 2017.

Through this regulation, it is also expected to reduce the cost of forex transactions against the rupiah with the occurrence of direct quotation, between rupiah and some currency of partner countries, so as to develop regional currency markets and expand the access of business actors to pay their obligations in the eyes local money.

The issuance of the PBI is a follow-up to the signing of a Memorandum of Understanding between Bank Indonesia and Bank of Thailand and Bank Negara Malaysia on December 23, 2016, which agreed on LCS cooperation between Indonesia, Malaysia and Thailand in the settlement of international trade between the three countries using local money (rupiah, ringgit, and baht).

PBI No.19 / 11 / PBI / 2017, among others, regulates the authority of BI together with the central bank of partner countries to appoint banks in Indonesia to conduct certain financial transactions and activities for the benefit of LCS, or also referred to as the Bank Appointed Cross Currency Dealer (Bank ACCD).