Economist: Momentum For ASEAN Chairship Can Be Utilized By Indonesia To Expand The Use Of Local Currency

Director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira. (Photo: Theresia Agatha/VOI)

JAKARTA - Economists welcome Indonesia's efforts to reduce dependence on the US dollar currency.

The momentum of the chairmanship of ASEAN 2023 currently held by Indonesia can be used by Indonesia to expand cooperation in the use of local currency or Local Currency Transaction (LCT).

"I think LCT is a long way to go and Indonesia can take advantage of the chairmanship of ASEAN 2023 to encourage LCT to be used in many countries," said Director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira in Jakarta, Thursday, May 4.

Bhima said, LCT can have a long-term positive impact on currency stability if it is implemented properly.

This is because LCT plays a role in reducing the country's dependence on the United States (US) dollar.

This means that countries involved in LCT cooperation can avoid the risk of US dollar fluctuations.

He also assessed that the LCT initiative is the best option that can be done to strengthen financial cooperation in the region today.

"I think that's the most rational before gasting a common currency in ASEAN, for example. So, it's better to focus first on using local currencies," he said.

In addition, Bhima recommends the government to provide incentives to exporters and importers as the main actors in regional trade transactions. The reason is, he sees that the absorption of local currencies among exporters and importers is still relatively low.

For example, in trading transactions between Thailand and Indonesia, the portion of absorption of local currency use is still in the range of four percent.

This shows that more logistics trading relies on payments using non-local currencies, such as dollars and euros. In fact, the export-import potential between Indonesia and Thailand is quite large.

"It is necessary to prepare from a banking perspective to absorb more currencies, such as ringgit or won. That way, exporters and importers can use local currencies to transact," he said.

Meanwhile, Economist and Director of the Center of Reform of Economics (CORE) Piter Abdullah assessed that the initiative to use local currencies could make Indonesia receive positive appreciation from ASEAN countries.

"I think Indonesia's initiative to invite many countries to conduct LCT has been positively appreciated by ASEAN countries," he said.

Piter said LCT was a very good step in an effort to reduce dependence on the US dollar.

He is also optimistic that the implementation of LCT in the ASEAN region will increase and expand.

If more countries agree to conduct LCT, Piter continued, the benefits of LCT will be even greater, especially in terms of trade transactions and dependence on the US dollar.

Even so, he admits that the implementation of LCT still requires additional support. This is because one of the important aspects in trading transactions is supply and demand, as well as global supply chains.

"The use of LCT can only be maximized if LCT involves many countries and is related to the global supply chain. Meanwhile, the need for imports of countries that are still large from Europe and America that require euros and dollars, the use of LCT will still be limited," he said.

For your information, LCT is one of the agreements between countries that are members of ASEAN+3 to strengthen financial cooperation in the region. ASEAN+3 countries include 10 Southeast Asian countries and China, Japan, and Korea.

Currently, Indonesia has collaborated with LCT with five countries, namely Malaysia, Thailand, Japan, China, and South Korea.