Indonesia and South Korea have taken a significant step in boosting their bilateral trade by signing a new local currency agreement. The agreement, finalized by Bank Indonesia, the Bank of Korea, and South Korea’s Ministry of Economy and Finance, aims to enhance trade efficiency and reduce exchange rate risks by facilitating direct currency transactions between the Indonesian rupiah and the South Korean won.
By bypassing the need for U.S. dollars or other foreign currencies, this framework creates a more seamless and efficient trading process. Erwin Haryono, head of Bank Indonesia’s department of communication, highlighted the importance of this agreement in strengthening financial cooperation between the two nations.
This agreement builds upon a memorandum of understanding signed in May 2023 and an operational framework agreement signed in June 2024. The local currency transaction (LCT) framework is scheduled to take effect on September 30, 2024.
Designated as appointed cross-currency dealer (ACCD) banks, financial institutions such as Bank Mandiri, Bank Negara Indonesia (BNI), and Bank Rakyat Indonesia (BRI) in Indonesia, and Woori Bank, KEB Hana Bank, and Shinhan Bank in South Korea will play a crucial role in facilitating direct currency transactions. By directly quoting and trading in rupiah and won, these banks will promote increased bilateral trade and enhance economic ties between the two countries.
Overall, this new local currency agreement between Indonesia and South Korea is expected to provide a significant boost to their trade relations, ultimately benefiting their economies and strengthening bilateral cooperation.