Bank Indonesia and Bank of Korea agreed on this cooperation on the sidelines of the ASEAN+3 meeting of finance ministers and central bank governors.
Heaptalk, Jakarta — Bank Indonesia announced a collaboration with the Bank of Korea to encourage the use of each country’s local currency in bilateral transactions between Indonesia and South Korea.
Representatives of both parties, namely the Governor of Bank Indonesia, Perry Warjiyo, and the Governor of the Bank of Korea, Rhee Chang Yong, signed a memorandum of understanding in South Korea (05/02). The signing was carried out on the sidelines of the ASEAN+3 meeting of finance ministers and central bank governors.
This step expands similar cooperation agreements between Bank Indonesia and several central bank authorities, including Bank Negara Malaysia, the Bank of Thailand, the Japan Ministry of Finance, the People’s Bank of China, and the Monetary Authority of Singapore.
In more detail, the use of each country’s local currency in bilateral transactions can include current account transactions, direct investment, as well as other economic and financial transactions that will be agreed upon by the two authorities. The collaboration between the two countries marks a valuable achievement in strengthening bilateral financial cooperation between Bank Indonesia and the Bank of Korea.
Business actors can take advantage of this cooperation to reduce transaction costs and exposure to exchange rate risk in conducting bilateral transactions between the two countries, for example through the use of direct exchange rate quotations between the Korean Won and Rupiah in interbank trade.
Further, this cooperation will be strengthened through regular information sharing and discussions between Indonesian and South Korean authorities. The authorities of the two countries expect that the wider use of each country’s local currency for bilateral transactions will eventually contribute to promoting trade between Indonesia and South Korea. In addition, this cooperation will be able to deepen financial markets in local currencies in both countries.
