BoT considers expansion of local currency settlement

BoT considers expansion of local currency settlement

The Bank of Thailand is studying an expansion of its collaboration in local currency to intra-Asean direct investment, apart from existing trade settlement.

The central bank is considering broadening the scope of local currency settlement for direct investment with Bank Indonesia (BI) beyond the existing cooperation in trade, said assistant governor Alisara Mahasandana.

The move reflects progress after the Bank of Thailand and BI joined forces on baht-rupiah trade settlement about a year ago.

Such a collaboration could occur with other regional currencies to promote Asean local currency settlement, Mrs Alisara said.

At present, there is only bilateral cooperation in baht-ringgit settlement for direct investment under collaboration between the central bank and Bank Negara Malaysia (BNM).

The Bank of Thailand and BNM began collaboration on baht-ringgit trade settlement in 2016 and expanded to direct investment settled in baht and ringgit a year later.

Mrs Alisara said local currency settlement will help business operators reduce transaction costs and foreign exchange risks, particularly amid foreign exchange volatility seen in the currencies of advanced economies.

The wider use of local currencies in the Asean Economic Community also enhances economic and financial integration, as well as spurring development of foreign exchange and financial markets across the region.

"Asean intra-trade and investment have been displaying a positive trend in accordance with the economic growth of the region," Mrs Alisara said. "For Thailand, cross-border trade with neighbouring countries has also increased significantly."

Thai business operators use local currencies for cross-border trade settlement, especially with neighbouring trade partners such as Cambodia, Laos, Myanmar and Vietnam.

But US dollar-baht trade settlement still represents the largest portion, at about 80% of total expenses in trade volume. US-Thai trade volume represents just 10% of Thailand's total export volume.

In related news, Finance Minister Apisak Tantivorawong said Asean member states have talked with Ant Financial Services Group, an affiliate company of China's Alibaba Group, about linking the QR payment codes of Asean with Alibaba's QR code.

The move will foster convenience in regional transactions because Asean QR codes can be disseminated globally, Mr Apisak said.

Thailand's QR code has open-source software, making connectivity with Alibaba's QR code easy, he said.

Bank of Thailand governor Veerathai Santiprabhob said Thailand's PromptPay money transfer platform will be linked with Singapore's PayNow, a peer-to-peer fund transfer service, by the second quarter of 2020.

Thailand and Singapore will work on the linkage procedure to prepare for such connectivity, Mr Veerathai said.

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