By Mohd Shukri Ishak
JAKARTA, Feb 23 (Bernama) -- Malaysian companies are encouraged to utilise the local currency settlement (LCS) framework to facilitate trade with Indonesia, the Malaysia External Trade Development Corporation (MATRADE) said.
Its Trade Commissioner in Indonesia, Naim Abdul Rahman said Malaysian companies doing business and trade with Indonesia needed to avail to the LCS facility, a framework agreement which commenced on Jan 2, 2018.
"Malaysia's trade performance with Indonesia in 2017 showed a strong rebound with an increase of 21.9 per cent to reach US$16.9 billion (US$1=RM3.90) from US$13.8 billion in 2016.
"However, only five per cent of which were settled in local currencies, therefore there are still a lot of trade potentias for both countries to utilise the facilities," he told Bernama here today.
Naim said that Indonesia is now Malaysia seventh largest trading partner and third largest in ASEAN.
"There is a target for total trade between the two countries to reach US$30 billion and MATRADE is working closely with all parties in striving to achieve it by 2020," he said.
Meanwhile, I Mede Budhi Artha, Chief Executive Officer, Global Market and Corporate Treasury of Maybank Indonesia, said the LCS framework sought to reduce dependence on the US dollar in international trade transactions.
He said the implementation was in line with the decision made jointly by Bank Indonesia (BI), Bank Negara Malaysia (BNM) and Bank of Thailand's (BOT) in December 2017.
Malaysia's central bank, BI and BOT jointly announced the launch of three LCS frameworks to promote a wider use of local currencies to facilitate and boost trade and investment in these countries.
All three frameworks -- rupiah-ringgit framework; rupiah-baht framework; and expanded baht-ringgit framework came into effect on Jan 2, 2018.
BI and BNM have appointed CIMB Bank Bhd, Hong Leong Bank Bhd, Malayan Banking Bhd, Public Bank Bhd, RHB Bank Bhd, PT. Bank Rakyat Indonesia, PT. Bank Mandiri, PT. Bank Central Asia, PT. Bank Negara Indonesia, PT. Bank CIMB Niaga, and PT. Bank Maybank Indonesia to support the operationalisation of the rupiah-ringgit framework.