Indonesia Encourages Expansion of the Use of Local Currencies at the G20 Forum, What are the Benefits? page all

JAKARTA, KOMPAS.com – The government continues to push for expansion local currency transactions or local currency settlement (LCS) inter-state in the forum G20.

Besides being able to reduce dependence on the US dollar, LCS also has other benefits. LCS is a potential business for banks. By completing transactions using local currency, banking foreign exchange (forex) conversion transactions have the potential to be boosted.

PT Bank Mandiri (Persero) Tbk noted, the volume of foreign exchange conversion of LCS reached 122.63 million US dollars with a frequency of 895 transactions until February 11, 2022. The presence of LCS is projected to encourage business volume of trade transactions in various countries that have implemented LCS.

“In 2022, the growth will continue to occur in transactions using the LCS umbrella,” said Bank Mandiri President Director Darmawan Junaidi at the Side Event Finance Track G20 event this week.

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The growth of LCS transactions was also recorded by PT Bank Central Asia Tbk. This largest private bank recorded LCS transactions increased by more than 40 percent, both in terms of transaction value and number of transactions.

BCA President Director Jahja Setiaatmadja assesses that the presence of LCS has provided various benefits for customers, including direct foreign exchange rate quotes (direct quotation) between Indonesia and partner countries, as well as faster transaction settlements because the partner countries are in the Asian time zone.

In addition, customers can also get competitive exchange rates and low fees, and there is also relaxation of regulations in conducting foreign exchange buying and selling transactions in ringgit, baht, and yen against rupiah.

“In the future, BCA will continue to support international banking businesses, especially those related to LCS transactions,” said Jahja.

By seeing the positive impacts of implementing this policy, Jahja supports BI’s efforts to expand the implementation of SCS.

“As for several countries that have the potential to be explored for LCS cooperation, namely Taiwan, Korea and India,” he said.

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BI asked to expand LCS implementation

The implementation of the LCS is still considered to be able to be expanded to other countries, therefore the Indonesian Employers Association (Apindo) has asked BI to expand the bilateral transaction cooperation to several other countries.

Chairman of Apindo, Hariyadi B. Sukamdani, said that the expansion of cooperation was carried out selectively to several countries that have a high role in trade and investment with Indonesia. These countries, among others, India, South Korea, Saudi Arabia, to Russia.

“Expanded the participating countries. Earlier, it was mentioned that there were India, South Korea, perhaps Saudi, Russia, then other countries that we saw as having great potential with us. That’s good,” said Hariyadi.

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The Central Statistics Agency (BPS) noted that the share (portion) of Indonesia’s exports to India reached 1.04 billion US dollars or 5.68 percent in January 2022.

India is Indonesia’s fourth largest export share, after China, the US and Japan. While South Korea is in sixth place with a share of 740 million US dollars. The portion is 4.03 percent of Indonesia’s total exports as of January 2022.

These countries are predicted to be able to increase LCS transactions. This is because the state has close links with Indonesia in the trade and investment sectors.

“Like Russia, if you use US dollars, you will be hit” office of the foreign asset control. Well, let’s just expand with Russia. Which is clearly yes. It will also help the (LCS expansion) process,” said Hariyadi.

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