- The Governor of Bank Indonesia ("BI"), Perry Warjiyo ("Governor"), has affirmed that BI has reached an agreement with the Bank of Korea ("BOK") to further support the utilization of local currencies during financial transactions and economic activities by 2024. In line with this agreement, the Governor has stated that the collaboration between BI and BOK will further strengthen bilateral financial cooperation between Indonesia and Korea, while also affirming that this new agreement follows up on the Memorandum of Understanding (MoU) that was signed between BI and BOK back in May 2023.
- The new agreement, which is being referred to as the local currency transaction ("LCT") framework, will be implemented by 2024 and, at its core, is being aimed at the facilitation of cross-border payment transactions within trade areas and the minimization of exchange rate and liquidity risks for businesses and users. In this regard, the Governor has affirmed that through the new LCT framework, direct exchange rate quotations, as provided by Appointed Cross Currency Dealers (ACCD), may now be utilized and will offer businesses the option of engaging in more efficient and direct trade transactions, potentially increasing the total amount of trade between Indonesia and Korea.
- The application of the LCT framework, which should further encourage the utilization of local currencies during bilateral trade transactions, is expected to deepen financial markets in both countries and boost economic growth. Moreover, this cooperation follows similar successful agreements between BI and financial authorities in several other countries, including: 1) Malaysia; 2) Thailand; 3) Japan; 4) China and 5) Singapore. (ANT)
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