Indonesia Pushes for Strengthening Local Currency in Inter-State Transactions
JAKARTA - Indonesia through the Consulate General of the Republic of Indonesia (KJRI) Johor Bahru in Malaysia together with representatives of Bank Indonesia (BI) in Singapore encourages the strengthening of the local currency in inter-state transactions.
The use of local currencies is considered to be able to spur the economic sovereignty of the two countries, namely Indonesia and Malaysia, amid increasing global geopolitical uncertainty and world economic vulnerability, given the dependence on third-party currencies such as the US dollar is increasingly seen as inefficient and risky.
The KJRI Johor Bahru in a statement received in Kuala Lumpur, Saturday, said that fluctuations in exchange rates, layered conversion costs, and external pressures prompted the need for a more stable and sovereign alternative.
In this context, the use of local currencies in bilateral transactions is an increasingly relevant solution.
Indonesia and Malaysia, according to the statement, actually have a Local Currency Transaction (LCT) framework, namely the settlement of inter-country transactions using local currencies (rupiah and ringgit) without the intermediation of third-party currencies. However, its implementation is still considered not optimal.
Although the use of local currencies in trade has increased significantly in recent years, most transactions still rely on global currencies.
As one of the efforts to increase the use of local currency in transactions, the Indonesian Consulate General in Johor Bahru and representatives of the Bank Indonesia in Singapore held a strategic forum entitled "Leveraging the Benefits of Local Currency Transactions (LCT) Indonesia-Malaysia to Support Bilateral Economic Growth" in Johor Bahru, Wednesday (1/4).
In the activity, as reported by Antara, Executive Analyst of the Bank Indonesia Representative Office in Singapore Budi Satria emphasized that LCT is a tactical solution to increase the efficiency of cross-border transactions.
With the support of modern payment infrastructure based on barcodes such as QRIS (Indonesia) and DuitNow (Malaysia), the direct use of the rupiah and ringgit is able to strengthen financial connectivity which provides real benefits for businesses, including micro, small and medium enterprises (MSMEs).
Budi said that although the LCT framework had been initiated by the two countries since 2016, its utilization still needed to be accelerated.
As an illustration, the share of the settlement of Malaysian-Indonesian trade in local currency has only reached around 16.3 percent or the equivalent of 10.6 billion ringgit in 2025.
Meanwhile, the Indonesian Consul General in Johor Bahru, Sigit S Widiyanto, said Indonesia has close relations with Malaysia, especially with the State
Johor is in various aspects, such as geography, social, culture, history and economy.
Consul General Sigit gave an example of 8 out of 11 international passenger ferry terminals connecting the two countries are in Johor.
The mobility of citizens of the two countries is also very intensive. In 2025, 2.6 million Malaysian tourists visited Indonesia, while 3.8 million Indonesian tourists visited Malaysia for tourism, health, and education purposes.
Both countries are also each other's main trading partners and currently the leaders of both countries have very close and close relations.
Therefore, Sigit encourages business actors to increase the use of LCT with the concept of LAJU, namely:
L - Local Currency: Encourage local currency as the main choice to achieve economic efficiency and sovereignty. A - Accelerate Adoption: Accelerate adoption by the banking sector and businesses given that the technical infrastructure is already available. J - Joint Growth: Place LCT as a joint growth instrument that provides equal benefits for both countries and the region. U - Unlock Potential: Optimize the huge potential that has been hampered, especially in the trade, tourism, education, and professional talent mobility sectors.The KJRI Johor Bahru emphasized that the LAJU approach confirms that LCT is not merely a technical instrument, but a strategy to strengthen economic sovereignty and deepen regional integration.
Real benefitsIn the discussion session which featured experts from Bank Indonesia, Bank Negara Malaysia, and the Trade Attaché of the Indonesian Embassy in Kuala Lumpur, various practical benefits of using LCT were presented.
The system effectively eliminates the double conversion costs that have burdened business actors, and reduces logistics costs. The system is considered to increase efficiency and provide a more stable exchange rate certainty.
For the general public, LCT makes it easier to pay for children's school fees abroad to pay hospital bills without having to worry about fluctuations in global currencies.
LCT is also an important instrument to strengthen the resilience of the regional financial system.
However, the sources acknowledged that there were challenges in the form of the psychological dominance of the US dollar and the limited understanding of the public regarding the local exchange rate mechanism.
As a follow-up, the forum agreed on the need for more massive education and transparency in the determination of exchange rates by appointed cross currency dealers (ACCD) so that LCT is widely used by the people of both countries when conducting bilateral transactions.
The activity was attended by around 90 business actors representing various vital sectors, ranging from banks and remittance institutions, to private hospital managers, educational institutions, as well as exporters and importers.