South Korea and Indonesia, among the five leading economies in Asia, have decided to transact in local currencies. A meeting of both countries’ central banks was recently held in South Korea. On this occasion, an agreement was signed to use the local currencies ‘Won’ and ‘Rupiah’ instead of the US dollar in trade transactions between the two countries. This agreement is an important step as Indonesia currently holds the presidency of ASEAN, a major organisation of Southeast Asian countries.
Moreover, Bank Indonesia, the central bank of Indonesia, has released a statement regarding the agreement. It was informed that there was a mutual agreement with the Bank of Korea. Indonesia’s statement mentioned that this was a decisive moment for economic cooperation between the two countries.
The new agreement will promote using local currencies in bilateral transactions between Indonesia and South Korea. It will include current account transactions, direct investment and other commercial and financial transactions. Transactions agreed by both countries will be given priority, said Bank Indonesia. Indonesia’s central bank has pointed out that entrepreneurs and companies can take advantage of the convenience of local currencies to avoid the risk of currency exchange rate fluctuations and reduce the cost of transactions.
Furthermore, an increase in the use of local currencies for bilateral transactions can be beneficial in increasing trade between the two countries. At the same time, Indonesia expressed the hope that the scope of the financial market related to local currencies will also increase. Indonesia is currently the chairman of the ‘ASEAN’ group and there are moves by this group to prioritise using local currencies.
This year, in November, five major countries in Southeast Asia agreed on using local currencies. These countries include Singapore, Malaysia, Thailand, the Philippines, and Indonesia. ASEAN is working on developing a ‘Digital Cross Border Payment System’ to use local currencies. It was also revealed that the President of Indonesia, Joko Widodo, has called for using local cards instead of Visa and Mastercard cards.
