Jakarta, CNBC Indonesia – Bank Indonesia (BI) continues to encourage socialization of the use of local currency settlement (LCS) for industrial players in Indonesia. The policy of leaving the United States (US) dollar in trade and investment transactions is fully supported by the President of the Republic of Indonesia, Joko Widodo (Jokowi).
This was conveyed by BI Senior Deputy Governor Destry Damayanti at the 2022 West Java Industrial Meeting (WJIM) quoted by CNBC Indonesia, Thursday (16/6/2022).
“President (Jokowi) sees the LCS as a good policy, because it cannot fully rely on the dominance of a particular country’s currency and encourage our economy, to be competitive and increase our trade and investment transactions,” Destry explained.
As is known, Local Currency Settlement (LCS) is the settlement of bilateral transactions between two countries carried out in the currencies of each country where the transaction settlement is carried out within the jurisdiction of the respective countries.
Destry explained that the use of LCS transactions was continuously encouraged to maintain the stability of the rupiah exchange rate, given the current global instability.
The use of LCS is also optimized to reduce the dominance of the US dollar in trade and investment transactions in Indonesia. Destry said that 80-90% of the total imports and exports used US dollars.
Whereas exports to the US are only 10% of the total value of national exports and imports are only 5%. This dominance causes a very high dependence on the US currency, whose value is currently uncertain and tends to continue to strengthen.
Unfortunately, said Destry, the use of LCS is still minimal, therefore BI encourages industry players and entrepreneurs engaged in international trade and investment to use this LCS transaction.
“The government and regulators can have good policies, but if the industry doesn’t support it, it will only become a toothless tiger for those policies,” Destry explained.
Currently, there are 4 destination countries that can use the LCS, namely Malaysia, Thailand, Japan, and China. It will be expanded in the future.
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