Jakarta –
Indonesia and several countries have cooperated to use local currency in transaction settlement. The name is Local Currency Settlement (LCS) so settlement transactions between countries use the local currency of each country.
The goal is to reduce dependence on the US dollar. The reason is, when transacting for foreign trade the local currency must first be converted to US dollars and then converted to the currency of the destination country.
Head of the Department of Financial Market Development (DPPK) of Bank Indonesia (BI) Donny Hutabarat revealed that this LCS can be used for the settlement of international direct investment and trade transactions.
In addition, foreign exchange transaction costs are also more efficient with direct quotations. Then there is also the diversification of non-US dollar currency exposure for market participants and the development of financial market deepening.
“With the strengthening of the local currency transaction framework since 2021, remittance activities such as the income of Indonesian migrant workers and foreign workers, school fees and living expenses can be done through ACCD bank,” he said in a Media Taklimat.
Therefore, this transaction will facilitate and make remittance transaction costs cheaper. Because there is no need to convert remittances to US dollars and then to the currency of the destination country. “This remittance will certainly be cheaper, it doesn’t need to be converted into profit in the spread, so if you want Malaysian Ringgit, you can go directly to MYR in Indonesia,” he said.
But in its implementation there are still obstacles faced. Head of the International Department of Bank Indonesia (BI), Doddy Zulverdi, said that, for example, with Malaysia before the LCS cooperation, transactions were only limited to trade. Then BI and Malaysian authorities expanded the transaction.
“From the beginning, only trade was included in FDI (Foreign Direct Investment) and income transfer payments were also included in the remittances of our TKI labor,” he said in a Media Briefing, Friday (6/8/2021).
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