In Indonesia, it is Tuesday (March 28). On the agenda are talks about shifting financial transactions away from the US Dollar, Euro, Yen, and British Pound and toward settlements in local currencies.
Through the Local Currency Transaction (LCT) scheme, the meeting addressed efforts to reduce reliance on major currencies. This is an expansion of the previous Local Currency Settlement (LCS) scheme, which is already being applied among ASEAN members.
This means that an ASEAN cross-border digital payment system would be extended and ASEAN states would be able to trade in local currencies. In November 2022, Indonesia, Malaysia, Singapore, the Philippines, and Thailand achieved an agreement on such cooperation. This follows the announcement by Indonesia’s banking regulator on March 27 that the Bank of Indonesia is planning to launch its own domestic payment system.
Indonesian President Joko Widodo has encouraged regional governments to begin using credit cards issued by domestic banks and gradually phase out the use of foreign payment systems. He claimed that Indonesia needed to protect itself from geopolitical disruptions, noting sanctions imposed by the US, EU, and their allies on Russia’s financial sector in response to the conflict in Ukraine.
Only Singapore has imposed sanctions on Russia, while the rest of the ASEAN countries continue to trade with the country. There has been concern that Central and South Asian countries engaged in cotton manufacturing, a major industry in the region employing millions of people, will be caught up in US-led secondary sanctions.
In light of an upcoming ASEAN currency trade decision, foreign investors in Asia may want to consider the amount of US dollars, Euros, and Yen kept in their accounts. Professional advice should be sought before moving company money to alternative currencies.