ASEAN Summit 2023 Momentum for Economic Integration in the Region

Armfalcon.com, JAKARTA — Indonesia will continue to encourage ASEAN countries to integrate the economic sector. One of them is by using the local currency in trade transactions within the region.

Head of the BKF Regional and Bilateral Policy Center (Fiscal Policy Agency) of the Ministry of Finance, Nella Sri Hendriyetty said, the policy Local Currency Transactions (LCS) aims to reduce dependence on foreign currencies as an effort to anticipate the impact of the global crisis. As Chair of ASEAN, Indonesia encourages countries in ASEAN to use local currencies in transactions across ASEAN borders.

“Currently we are establishing an approach with Malaysia and Thailand which is carried out bilaterally, not regionally,” he said in a discussion at the Merdeka Barat 9 Forum (FMB9) entitled ‘Maintaining ASEAN Economic Stability and Neutrality’, Wednesday (3/5/2023).

At present, he continued, a task force has formed for the process of transitioning the use of local currencies in ASEAN countries. It is hoped that this transition process will be successful so that it can include provisions regarding the use of ASEAN local currencies in business contract obligations among ASEAN countries.

According to him, although it strongly encourages the use of local ASEAN currencies in trade transactions, there is no coercion in the implementation process. All left to the readiness of each country.

“With this instrument, ASEAN countries have the option of diversifying the composition of their foreign exchange reserves. And they can increase trade in the Southeast Asian region. If you rely entirely on the US dollar, for example, you are vulnerable to economic turbulence and weakening economic fundamentals. If there is a strengthening of the dollar, the value of the rupiah falls, costs imports of raw materials, and others will increase quite sharply,” he explained.

Still in the financial sector, Indonesia’s chairmanship in ASEAN also encourages the use of a single Quick Response Code or QR that can be used in all member countries in trade transactions, including in the tourism sector. In addition, there is also financial inclusion for the MSME sector.

Not only that, Indonesia is also seeking support from ASEAN countries to incorporate the energy transition into the second version of the energy transition taxonomy which is in accordance with the situation and character in Southeast Asia so that it is recognized globally. If it is recognized globally, then the distribution of energy transition financing will be even cheaper.