KUALA LUMPUR: The central banks of Indonesia, Malaysia and Thailand launched a framework on Monday aimed at increasing direct settlement of transactions in their local currencies to reduce the current dependence on the U.S. 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 Bhd and Malayan Banking Bhd and their Indonesian and Thai affiliates, as well as Bangkok Bank PCL.
Bank Indonesia (BI) Governor Agus Martowardojo said 94 percent of Indonesian exports and 78 percent of imports were settled in U.S. 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,” Martowardojo 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 statistics bureau showed.
In the same period, Indonesia imported $11.9 billion worth of goods from Malaysia and Thailand.
Martowardojo said BI was looking at applying similar settlement policies to other currencies, such as those of Indonesia’s top 10 trading partners.
