Bank Indonesia (BI) has expanded local currency agreements with Bank of Thailand and Bank Negara Malaysia.

The three countries signed bilateral memorandums of understanding (MoUs) with one another on local currency transaction (LCT) partnerships on Friday, during the ASEAN Finance Ministers and Central Bank Governors Meeting (AFMGM) in Jakarta.

Indonesia already has bilateral pacts with Malaysia and Thailand since 2018 to settle trade and investment transactions in local currency under a policy referred to as local currency settlements (LCSs).

BI Governor Perry Warjiyo explained the cooperation was now to be expanded from LCSs to LCTs to cover not only settlements for trade and investment but also payments and the purchase of financial products, which would also be done in local currencies.

"In the future, people [in other countries] could use local currency to buy government bonds and other financial asset instruments [in Indonesia]," he said during a different press briefing on Thursday.

BI and its Malaysian and Thai counterparts also have cross-border partnerships to connect Quick Response (QR)-based payment systems, eliminating the need for travelers to exchange money or carry credit cards during visits between those countries.

Indonesia has not so far signed any local currency agreement with fellow ASEAN member Singapore. However, the central banks of the two countries launched a trial on Aug. 17 to connect their QR-based payment systems.

BI's Perry also said the deputy governor of Banko Sentral ng Pilipinas had promised to conclude a local currency agreement with Indonesia by the end of this year.

Outside Southeast Asia, Indonesia also has LCS partnerships with Japan and China, while a deal with South Korea is reportedly in the pipeline and to be finalized soon.

Read also: BI, BOK sign deal on local currency settlement

The value of local currency transactions between Indonesia and other countries reached US$3.7 billion in the first seven months of this year. For the full year, BI expected the number to exceed last year's transaction value of $4.1 billion.

More tie-ups

The AFMGM event also saw the inclusion of Vietnam into the MoU on regional payment connection (RPC), which was signed by Indonesia, Thailand, Malaysia, Singapore and the Philippines last year. The deal was marked by the signing of the MoU amendment by the State Bank of Vietnam.

An RPC is a framework that lays out design and testing mechanisms to integrate various payment methods, such as QR-based payments, fast payments and real-time gross settlement (RTGS).

Inclusion into the RPC is the first step, before countries in the agreement could sign separate bilateral agreements.

Read also: RI, Singapore debut linked cross-border QR payment system

Perry said Brunei Darussalam would be the next country to join the RPC, as the country was in the midst of preparing its domestic regulations. According to the BI head, the initial five members of the agreement in principle want all countries of Southeast Asia on board.

"However, their readiness varies. In order to join, they need to have a regulatory framework and domestic arrangement first. Once they have that, we just need to connect them," added Perry.