So far, in addition to the three pioneer countries, three partner countries of ASEAN—China, Japan, and South Korea—have joined the LCT cooperation. China and Japan have been actively implementing it, whereas South Korea is currently in the exploratory phase.

The implementation of LCT cooperation has proven instrumental in reducing the countries' dependence on the US dollar in bilateral transactions. Based on data provided by BI, as of July 2023, the value of transactions in local currencies reached a figure equivalent to US$3.7 billion, an improvement over the total transaction value of US$4.1 billion in 2022.

Destry Damayanti, Senior Deputy Governor of BI, said that Indonesia's local currency transactions with Malaysia have so far been the most productive since they have involved a very wide range of business actors.

Some parties have expressed optimism regarding LCT cooperation bolstering the independence of the participating countries in terms of currency. The promotion of LCT is expected to help the countries end their reliance on the US dollar in cross-border transactions.

According to the director of the Center of Economics and Law Studies (CELIOS), Bhima Yudhistira, Indonesia will be able to maintain the valuation of the rupiah, its national currency, at Rp15 thousand per US dollar for a considerable period if the country manages to use its currency in 40 percent of its total economic and financial activities with other ASEAN countries.

Related news: ASEAN task force to devise transition for currency transactions

Even so, he pointed out, in order to optimize the agreement, all participating countries will need to ensure that they are ready and capable of supporting the use of local currencies while paying close attention to non-dollar foreign exchange markets.

Said Abdullah, chairperson of the Budget Committee of the House of Representatives (DPR), shared a similar view, saying that monetary instability in the US has often led to the rupiah's depreciation.

Translator: Imamatul S, Tegar Nurfitra
Editor: Anton Santoso
Copyright © ANTARA 2023