Bank Negara Malaysia, Bank Indonesia and the Bank of Thailand (BoT) signed two bilateral memoranda of understanding (MoUs) yesterday to facilitate the use of local currencies for settlements of trade and investments.
A joint statement said Bank Negara and BOT, respectively, signed MoUs with Bank Indonesia on a framework of cooperation to promote the settlement of bilateral trade and direct investment in their local currencies.
“Following the successful implementation of a similar arrangement between Bank Negara and BoT earlier this year, these bilateral arrangements will efficiently facilitate economic and financial activities among the three countries,” the statement said.
“The enabling environment will benefit businesses by reducing transaction costs and enhancing efficiency of trade and investment settlements. Amid the current volatile global financial market conditions, this will offer businesses more options in choosing currencies for trade settlement.”
The local currency settlement framework is expected to pave the way for wider usage of local currencies in the Asean Economic Community and spur further development of the regional foreign exchange and money markets, in support of wider economic and financial integration.
The bilateral MoUs were signed by Bank Negara governor Datuk Muhammad Ibrahim, Bank Indonesia governor Agus D.W. Martowardojo, and BoT governor Veerathai Santiprabhob.
Muhammad said in a separate statement that the arrangements signed yesterday were part of their continuous efforts to provide the institutional and policy framework to promote orderly financial market conditions and support the efficient management of financial risks.
“In particular, these arrangements will enable exporters and importers in our countries to better manage foreign exchange risks by using local currencies to settle trade and investment activities,” he said.
“In addition to improving cost efficiencies for businesses, the increased demand for local currency financial products will also contribute towards deepening the region’s financial markets.”