by Riccardo Cacelli
London – The finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) held a meeting on March 30-31 in Bali, Indonesia. One of the topics they discussed was reducing reliance on western currencies, such as the U.S. dollar.
The meeting was also attended by representatives from six international
organizations, namely Asian Development Bank (ADB), ASEAN+3 Macroeconomic Research Office (AMRO), the International Monetary Fund (IMF), the Financial Supervisory Board (FSB), the Bank for International Settlement (BIS), and the World Bank.
The meeting discussed efforts to reduce dependence on major currencies through the Local Currency Transaction (LCT) scheme. This is an extension of the previous Local Currency Settlement (LCS) scheme that has already begun to be implemented between ASEAN members.
This means that an ASEAN cross-border digital payment system would be expanded further and allow ASEAN states to use local currencies for trade. An agreement on such cooperation was reached between Indonesia, Malaysia, Singapore, the Philippines, and Thailand in November 2022. This follows from Indonesia’s banking regulator, stating on March 27 that the Bank of Indonesia is preparing to introduce its own domestic payment system.
Indonesian President Joko Widodo has urged regional administrations to start using credit cards issued by local banks and gradually stop using foreign payment systems. He argued that Indonesia needed to shield itself from geopolitical disruptions, citing the sanctions targeting Russia’s financial sector from the US, EU, and their allies over the conflict in Ukraine.
Moving away from Western payment systems is necessary to protect transactions from “possible geopolitical repercussions,” Widodo said.
Of the ASEAN nations, just Singapore has enforced sanctions on Russia, while all other ASEAN nations continue to trade with the country. There has been alarm at being caught up in US-led secondary sanctions, as are short to impact Central and South Asia countries involved in cotton manufacturing, a major industry in the region employing millions of people.
Foreign investors in Asia may wish to consider the amount of US dollars, Euros and Yen held in their accounts in light of a pending ASEAN currency trade decision. Professional discussions should be taken regarding any movement of company funds to alternative currencies.
About Association of Southeast Asian Nations (ASEAN)
The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN: Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam joined ASEAN on 7 January 1984, followed by Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN.
ASEAN DATA | |
---|---|
Area Total
|
4,522,518 km2 (1,746,154 sq mi) |
Population | |
• 2021 estimate
|
667,393,019 |
• Density
|
144/km2 (373.0/sq mi) |
GDP (PPP) | 2022 estimate |
• Total
|
$10.205 trillion |
• Per capita
|
$15,157 |
GDP (nominal) | 2022 estimate |
• Total
|
$3.619 trillion |
• Per capita
|
$5,376 |
HDI (2021) | 0.726 high |