Economic Watch: ASEAN sees necessity to expand LCS to enhance integration, prevent external risks

HONG KONG, June 13 (Xinhua) -- During the 46th Association of Southeast Asian Nations (ASEAN) Summit concluded last month in Malaysia, leaders of the 10-member bloc agreed to expand and strengthen regional payment connectivity and promote local currency settlement (LCS).
Adopted by the 46th ASEAN Summit, the ASEAN Economic Community Strategic Plan 2026-2030 pledged that ASEAN will "promote the use of local currencies to reduce the region's vulnerability to exchange rate fluctuations and external economic and financial shocks, and to lower transaction costs associated with cross-border payments."
FAST STEPS FORWARD
In 2021, Thailand and Singapore linked their fast payment systems, a pioneering move allowing people to make real-time, low-cost mobile payments using just the recipient's phone number.
In 2023, ASEAN leaders adopted the declaration on advancing regional payment connectivity and promoting local currency transactions, eyeing leveraging local currencies for cross-border payments and establishing a task force to develop an ASEAN local currency transaction framework.
Since then, progress by 2025 has been both significant and tangible, particularly through the Regional Payment Connectivity (RPC) initiative, said Tasawan Khao-uppatum, a senior researcher at Kasikorn Research Center in Thailand.
The RPC has rapidly expanded from five founding central banks in 2022 to nine ASEAN members by 2025, and it aims to build seamless regional payment systems through cross-border QR code payments, especially for tourism and retail, and account-to-account transfers that enhance financial inclusion, particularly for small- and medium-sized enterprises (SMEs), Tasawan said.
Now, many national systems have already been linked, including Thailand's PromptPay, Indonesia's QRIS, Singapore's PayNow, Malaysia's DuitNow, and full ASEAN-wide interoperability is expected by the end of 2025, according to the expert.
"In practice, Thai consumers can now use QR code payments abroad in countries such as Japan, Cambodia, Vietnam, Malaysia, Indonesia, Singapore and some other places. Additionally, cross-border transfers with Singapore can now be done using mobile phone numbers."
ENHANCE REGIONAL INTEGRATION
As intra-regional trade is rapidly growing, promoting LCS through the QR code-based payment systems simplifies transactions for tourists, expatriates and small businesses, promotes financial inclusion, and boosts local economic development. SMEs can use the system to conduct international trade with lower transaction costs. In ASEAN, the adoption rate of digital payments, especially QR code payments, has grown significantly.
Mohammad Faisal, executive director at the Center of Reform on Economics Indonesia, said that for Indonesia, cooperation in the implementation of local currency transactions has started since 2017 with Thailand and then followed by several other countries including Malaysia, Singapore, Japan, South Korea, and China.
Faster and more interoperable payment systems support seamless trade, investment, and tourism flows within the ASEAN bloc, said Tasawan, adding that in 2024, 25 percent of Thailand's exports were settled in local currency Thai baht, up from 14 percent in 2010.
"For instance, the growth of cross-border QR payment systems makes it easier for Thai tourists to spend abroad, particularly within ASEAN. The number of Thai travelers to ASEAN countries increased from 4.5 million in 2013 to 6.7 million in 2023. Likewise, the number of ASEAN tourists entering Thailand rose from 7.38 million in 2014 to 10.6 million in 2024," said Tasawan.
Vice President of National Chamber of Commerce and Industry of Brunei Darussalam Haji Halim Saim said the LCS will enhance trade and investment as well as economic activities in ASEAN region and boost ties with financial institutions.
MITIGATE EXTERNAL RISKS
Analysts also believe that ASEAN's push for a framework for trading in local currencies will enhance its resilience -- by promoting financial integration and the use of local currencies, ASEAN aims to avoid the volatility in global financial markets and possible disruptions caused by geopolitical events.
Referring to the change of U.S. interest rate in the past years, Faisal said that every policy that comes from the United States related to monetary policy often greatly affects the emerging countries, including ASEAN, because of the large use of the U.S. dollar by ASEAN countries' trade. Therefore, it is necessary to reduce dependency on the U.S. dollar to make the ASEAN currencies more stable.
The benefit of building regional payment connectivity for ASEAN is to make the ASEAN currencies more stable, stronger and more resilient against external shocks or changes in the global economy. It can also encourage an increase in intra-ASEAN trade and investment, Faisal added.
By settling trade in local currencies, emerging markets aim to reduce their exposure to exchange rate volatility and external monetary shocks stemming from advanced economies' policy shifts, said Tasawan, adding that this trend signals a decentralization of global financial power -- moving away from a reliance on the U.S. dollar and toward a more balanced system where multiple currencies play significant roles regionally and globally.
Experts suggest that by decreasing dependence on the U.S. dollar, ASEAN can gain greater control over its economic future and lessen its susceptibility to U.S. monetary policy.
The growing trend of emerging markets shifting to local currency settlements in international trade reflects their increasing needs and awareness to have a more stable global economy and a more balanced global economic order, Faisal said.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Borneo Post

an hour ago

• Borneo Post

Power-sharing of a different kind

For Malaysia, the cross-border power-sharing is a meaningful contribution to the APG scheme itself, which aims to build an electricity grid link with almost all the member countries of Asean. — Bernama photo SHOULD the Republic of the Philippines need extra electricity for its industries and private homes and cannot get it elsewhere, it can turn to Sarawak. Within minutes, through the renewable energy grid, the Asean Power Grid (APG), electricity could be transmitted to the Southern Philippines through Sabah. I take it that Sarawak has no problem with the federal government in this cross-border transaction. After all, we are selling power to the Indonesians too in a similar fashion. In December of last year, the Tenaga Nasional Berhad (TNB) began selling green energy to Singapore. So you say that Malaysia, both the West and the East, is a good source of electricity for the neighbours. Here is a good chance for Malaysia as the Asean Chair to play the role of a good promoter of product as well as act as salesman. Should there be any problem with any member of Asean with regard to the project, the Chair would be able to display tact and ingenuity to ensure that this, being an Asean project, has to proceed. Once the vendor and the buyer agree upon the terms of purchase that it is a deal, no second, third or fourth opinion needed. For Malaysia, this a meaningful contribution to the APG scheme itself, which aims to build an electricity grid link with almost all the member countries of Asean. Let's start with Malaysia. The electricity is actually from Sarawak, but never mind the saying 'lembu punya susu, sapi punya nama' (the milk is from the cow, but the buffalo gets the name). Somehow my gut feeling is that this energy grid, going through the territory of Sabah, may meet with some political problems. I'm thinking about the Philippines' claim to Sabah. I am confident that this was on the mind of the Prime Minister before he popped the suggestion, and he was confident that it would not stand in the way because this would be an Asean project. It is crucial that the Chair of Asean will be supported by the other member countries. Malaysia must make a mark during its term of office. 'Good personal relationship matters' I am told that our Prime Minister Datuk Seri Anwar Ibrahim has a good personal relationship with the President of the Republic of the Philippines. That relationship is crucial when it comes to tackling a problem relating to an economic scheme that benefits both parties. This electricity grid is one such scheme. This is a sensible suggestion from our Prime Minister. It is a practicable move that deserves full support by anyone thinking about what to do with excess electricity in Sarawak. At this stage, there appears to be clear evidence of the existence of political will on the part of Malaysian leaders in terms of state-federal relations. However, at this stage, we do not really know what the Philippines government thinks of the proposal. The potential buyer of our electricity has not made known publicly its response or even interest in purchasing power from us. I am sure there will be some response from President Ferdinand R Marcos Jr after he has received the report from his representative. Give him and his colleagues time to think about the proposal by our PM in terms of the economic viability of the purchase of power, and to make decisions at their own speed. Politics may have a role in this deal. My surmise. I hope this would not derail the initial talks on the sale and purchase. Treat the dealing like a normal sale and purchase of a product that the buyer needs and the vendor has the stock for disposal anytime – a business-like transaction. Meanwhile, we should support PM Anwar's proposal if we have enough electricity supply for our own use and enough to sell overseas. We are selling electricity to Indonesia anyway. Is there enough of the product for another buyer? As regards the sale of power to Kalimantan, my sources say that the time may come when the demand will be reduced or even stopped altogether once the Indonesians have built a hydro-power dam across the upper reaches of the River Mahakam. The power generation from that dam will serve the needs of the new capital Nusantara, and the districts along the coast including the city of Samarinda itself. There are several rivers in that part of Borneo that may be dammed for hydropower generation. In 1989, I was in the Sarawak team as a delegate attending the post-Asean Conference on Land Settlement Conference held in Samarinda. I joined a team who rode a Russian double-decker helicopter flying over the great Mahakam; we were being flown to a settlement of Kenyah and Kayan at Datah Bilang. It was an eye-opener. The river, if dammed, would generate an enormous amount of electricity for the entire region. The electricity supply from Sarawak could be affected if the Indonesians could produce enough electricity from their own dams, unless the APG steps in to enable the grid to provide the link to continue. An economic question. Between good neighbours, sharing of electrical power would be mutually beneficial on a commercial basis. It makes good economic sense. The other power (political) is not for sale, though! * The opinions expressed in this article are the columnist's own and do not reflect the view of the newspaper. Asean power grid malaysia Philippines

The Star

3 hours ago

• The Star

Duisburg launches return leg of ASEAN Express to boost Europe-Asia trade

DUISBURG, Germany, June 21 (Xinhua) -- A freight train loaded with maternal and infant products, cosmetics, and medical supplies departed Duisburg, Germany on Saturday, marking the launch of the return leg of the ASEAN (Association of Southeast Asian Nations) Express service. The departure marks the start of bidirectional operations for a new trade corridor linking Europe and Asia. The train is expected to arrive in ASEAN countries in 19 days, traveling via Chongqing, an inland municipality in southwest China. The ASEAN Express has achieved "seamless connection" between two vital international trade routes of the New International Land-Sea Trade Corridor and the China-Europe freight train service. Its transportation efficiency has significantly improved compared with traditional sea routes. "As the service continues to be optimized and expanded, more enterprises are expected to benefit from this efficient and reliable logistics solution, ushering in a new era of trade," said Liu Taiping, chairman of New Land-Sea Corridor Operation Co., Ltd. Li Yan, deputy director of Chongqing port and logistics office, said the ASEAN Express, as an extension of the China-Europe freight train service, is poised to become an efficient, green, and stable economic and trade corridor connecting the two continents. Following the departure ceremony, a promotional event for the ASEAN Express was held, during which representatives from Chinese and German enterprises exchanged views on corridor cooperation and supporting services. Several cooperation agreements were signed.

The Star

4 hours ago

• The Star

DR Congo extends suspension of cobalt exports by three months

KINSHASA, June 21 (Xinhua) -- The Democratic Republic of the Congo (DRC) has extended its temporary suspension of cobalt exports for an additional three months, citing persistently high inventory levels in both domestic and international markets. The move follows a four-month export halt announced in February. The extension was announced on Saturday by the DRC's Regulatory and Oversight Authority for Strategic Mineral Substances Markets (ARECOMS), the national body responsible for regulating the trade of critical mineral substances. Established in 2019, ARECOMS oversees the regulation of strategic minerals such as coltan, cobalt and germanium. Its mandate includes stabilizing markets, formalizing the artisanal sector, and ensuring compliance with international anti-money laundering and counter-terrorism financing regulations. According to an official statement, the extended ban covers all cobalt extracted from industrial, semi-industrial, small-scale and artisanal mining operations, and takes effect immediately from the date of signature, June 21. ARECOMS said that a new decision will be issued before the end of the suspension period, which may either modify, extend, or lift the current export ban, depending on market developments. According to London-based data analytics and consulting firm GlobalData, the DRC's cobalt production is projected to reach 244 kilotonnes in 2024. The country is the world's largest cobalt producer, supplying over 80 percent of global output. Cobalt is a critical raw material used across various industries, particularly in the production of rechargeable batteries for electric vehicles, smartphones, and other electronic devices. The DRC's cobalt mining industry is primarily concentrated in the Katanga region, where both industrial and artisanal operations are prevalent.