Indonesia has again established good relations with Malaysia. Relations between the two countries will be even closer due to the Local Currency Bilateral Swap Arrangement (LCBSA) renewal of up to MYR 8 billion or Rp. 28 trillion on September 23, 2022. This renewal has been agreed upon by Bank Indonesia (BI) and Bank Negara Malaysia.
The agreement is effective for 3 (three) years. This agreement renewal was first agreed upon in 2019. The renewal of the LCBSA also further strengthens financial cooperation between the two central banks.
“Bank Indonesia believes that the LCBSA renewal reflects the ongoing strengthening of financial cooperation between Bank Indonesia and Bank Negara Malaysia and is expected to further increase market confidence in the economic fundamentals of the two countries,” said BI Governor Perry Warjiyo in an official statement.
“The renewal of the agreement also demonstrates a shared commitment to strengthen financial market stability through the wider use of local currencies for bilateral transactions between Indonesia and Malaysia,” Perry continued.
Meanwhile, Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Mohd Yunus said this decision was taken after considering the development of significant trade flows between Malaysia and Indonesia.
“This LCBSA cooperation also complements the financial cooperation that the two central banks have had which are aimed at encouraging the use of local currencies in trade and investment activities between the two countries,” he said.
Previously, Finance Minister Sri Mulyani wanted the cooperation between Indonesia and Malaysia to be stronger. As one of Indonesia’s closest relatives in Southeast Asia, Indonesia’s diplomatic relations with Malaysia began in 1957, the exact year of its birth.
In this time full of various dynamics and challenges, the bilateral relationship between Indonesia and Malaysia remains strong. Thus, it is supported by a commitment to enhancing cooperation in various fields. Malaysia itself is Indonesia’s second-largest trading partner and the 8th investor in 2021.
Indonesia and Malaysia themselves are actively cooperating under the Indonesia – Malaysia – Thailand Growth Triangle (IMT-GT) mechanism and also Brunei Darussalam – Indonesia – Malaysia – Philippines East ASEAN Growth Area (BIMP EAGA) through the MoU Air and Sea Linkages.
The commitment to strengthening bilateral relations is also realized through state visits that have been carried out by the respective Heads of State.