BI Officials Confirm Indonesia-China LCS Cooperation Pure Economy: No Politics!

JAKARTA - Head of the International Department of Bank Indonesia (BI) Doddy Doddy Zulverdi confirmed that the bilateral transaction agreement with local currency (Local Currency Settlement/LCS) between Indonesia and China was purely economic.

"This cooperation is intended to expand the settlement of trade transactions and direct investment with partner countries and there is no other element besides that, let alone politics," he said in a webinar organized by BI on Wednesday, September 8.

According to Doddy, the decision to build synergy with China is a continuation of similar cooperation that has been established with three other countries, namely Japan, Malaysia and Thailand.

"Of course with China, we hope that we can immediately bring benefits to Indonesia because China is the largest trading partner country and their investment is quite large here," he said.

To note, the LCS agreement with the Bamboo Curtain Country will begin to be implemented on Monday, September 6, 2021.

The framework for this cooperation includes the use of direct quotations and relaxation of certain regulations in foreign exchange transactions between Rupiah and Yuan.

In the future, the expansion of the use of LCS is expected to support rupiah stability through its impact on reducing dependence on certain currencies in the domestic foreign exchange market.

BI claims that the use of LCS provides many direct benefits to business actors, including more efficient conversion costs of transactions in foreign currencies, availability of alternative trade financing and direct investment in local currencies.

Then, the availability of alternative hedging instruments in local currency, and diversification of currency exposure used in the settlement of foreign transactions.

To expedite this agenda, each country appoints a bank that acts as an Appointed Cross Currency Dealer (ACCD). In Indonesia, BI has appointed 12 banks as ACCD. Meanwhile, China has assigned 8 banks to facilitate LCS transactions with Indonesia.