BANGKOK (Reuters) – The central banks of Thailand, Indonesia, Malaysia and the Philippines will chart out a framework this week to promote trade and investment in local currencies, in a latest move by emerging economies to trim exposure to volatile global markets.
The four central banks will sign a letter of intent on a local currency settlement framework on Friday in the northern province of Chiang Rai, Thailand. The finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) plan to meet on April 4-5, according to the Bank of Thailand (BOT).
“ASEAN currencies tend to move (in line) together, and so we are not subject to foreign exchange rate volatility of major currencies,” BOT Governor Veerathai Santiprabhob told Reuters late Monday.
The central banks of Thailand, Indonesia and Malaysia had launched a similar framework in 2017, and will involve the Philippines this year.
The use of local currencies among ASEAN nations will help save foreign exchange transaction costs for businesses amid volatility faced by currencies in advanced economies.
ASEAN is Thailand’s biggest export market, accounting for about 27 percent of total exports in 2018. Last year, Thailand exported $30.3 billion of goods to Malaysia, Indonesia and the Philippines, and imported goods worth $24.8 billion from these three countries.
Thailand also plans to sign a memorandum of understanding on payment with Laos on Thursday. There will also be talks on cooperation over cross-border QR code payment between Thailand, Singapore and Cambodia, according to the Thai central bank.
Many emerging economies face increasingly volatile financial markets and rising trade protectionism as well as capital outflows.
The ASEAN member-nations comprise Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.