REPUBLIKA.CO.ID, NUSA DUA -- Indonesia Central Bank, Bank Indonesia (BI) and Bank of Korea (BOK) officially expand collaboration of Local Currency Transactions (LCT) today, Sunday (10/11/2023). The deal came after a high-level meeting between BI and BOK at Hotel Apurva Kempinski, Nusa Dua, Bali.

“This framework to be implement in 2024 can facilitate bilateral transactions between Indonesia and Korea, hoping to reduce the reduction in exchange rates and business costs,” said BI Governor Perry Warjiyo during a press conference at Hotel Apurva Kempinski, Sunday (10/11/2023).

Perry insists, the use of LCTs is important to reduce market volatility as the world facing unstable economy. Especially amid the high global uncertainty.

“It is important to closer the relationship of the two countries central banks to stabilize the framework encouraging bilateral transactions and LCTs of the two countries' central banks,” Perry explained.

On the same occasion, Bank of Korea Governor Rhee Chang Yong explained, Indonesia with its large region and population plays an important role in the global supply chain of developed sectors. Especially in the battery and electric vehicle sectors. Moreover, the interest of Korean businesses in Indonesia also continues to show an increase.

“With this background, the implementation of the LCT framework that encourages the use of local currencies in bilateral trade transactions is expected to have a positive impact on economic development through increased bilateral trade and the utilization of local currencies of both countries,” explained Chang Yong

Based on Indonesia's successful experience in implementing the LCT framework with a number of countries in recent years, Chang Yong expects the LCT framework between Korea and Indonesia will also be successfully established and implemented. To achieve these goals, both central banks are committed to giving their best efforts.

As a first step in implementation, BI and BOK agreed to draft an LCT framework in an Operational Guidelines. The initiative is a follow-up to the signing of a Memorandum of Understanding (MoU) of cooperation on the use of local currencies of the two central banks agreed in May 2023.

In its implementation, the LCT framework will facilitate the completion of cross-border payment transactions in the trade area. In doing so, it is expected to minimize exposure to exchange rate risks and costs for businesses and other users.

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