ASEAN Members Agree to Reduce Use of US Dollar, Why?

ASEAN Members Agree to Reduce Use of US Dollar (photo: lucas Favre - Unsplash)

The member countries of the Association of Southeast Asian Nations (ASEAN) have agreed to reduce the use of the US dollar (USD) and instead promote the use of local currencies in cross-border transactions.

This was announced by the Governor of the Bank of Indonesia, Perry Warjiyo, after attending a meeting of ASEAN finance ministers and central bank governors in Bali last weekend.

“ASEAN agrees to reaffirm resilience, among others, by using local currencies to support cross-border trade and investment in the ASEAN region,” said Perry.

According to Perry, reducing the use of the US Dollar in integrated payment systems will reduce global risk to the region. This is in line with the joint agreement to accelerate the transformation and participation of inclusive digital economies.

Specifically, five ASEAN countries, namely Indonesia, Thailand, Malaysia, Singapore, and the Philippines, have signed a cross-border payment transaction cooperation since November 2022, in the midst of the G20 summit in Indonesia.

The cross-border payment cooperation between the five ASEAN countries includes QR codes, fast payments, data, RTGS, and local currency transactions.

Under the ASEAN Chairmanship in 2023, Perry claimed that Indonesia successfully encouraged five other ASEAN member states to collaborate in transactions leaving the USD.

“So ASEAN connectivity is not just five but will be expanded to 10 and will be expanded globally with the next project,” Perry explained.

Vietnam, according to Perry, is one of the countries that is ready to implement the cross-border payment agreement, through the LCT scheme.

Meanwhile, three other ASEAN countries, such as Laos, Cambodia, and Brunei Darussalam, are also interested in cooperating in cross-border payment transactions.

However, these three countries still need to build and strengthen their domestic payment systems before joining the cross-border payment transaction cooperation.

In addition, ASEAN finance ministers and central bank governors agreed to strengthen external resilience, including improving and promoting exports and investments to strengthen the balance and foreign exchange reserves.

Therefore, the meeting of finance ministers and central bank governors in the region agreed to develop the ASEAN Development Guideline for resolving cooperation in terms of transactions using local currencies.

Bank Indonesia hopes that ASEAN can become a leader and an example in the implementation of cross-border payment connectivity between countries.