Indonesia and South Korea’s relationship extends beyond the entertainment industry, significantly impacting the economic sector. The recent signing of a Local Currency Transaction (LCT) agreement promises to streamline bilateral economic and business transactions between the two countries.
Indonesia and South Korea have shared a strong economic relationship for 50 years. In 2022, the trade between the two countries reached $24.5 billion, a 33.2% increase from 2021, with South Korea being the seventh-largest investor in Indonesia.
The bilateral trade and industry relations are often linked with transactions involving international settlement currencies like the US dollar.
Relying on the US dollar as a settlement currency has its drawbacks, particularly for Indonesia, which engages heavily in export-import activities.
Fluctuations in the US dollar exchange rate significantly impact Indonesia’s import-export activities, leading to economic volatility and instability.
The LCT agreement aims to stabilize exchange rates and support national economic strengthening. This move reduces dependency on the US dollar and minimizes risks from global economic vulnerabilities.
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Indonesia has implemented LCTs with several partner countries, and the recent agreement with South Korea marks a strategic step in enhancing bilateral trade relations.
For both Indonesia and South Korea, the LCT agreement represents a significant advancement in their economic relationship. It promises more stable and efficient business transactions, potentially benefiting a wide range of sectors in both countries and contributing to their economic growth.
The recent Local Currency Transaction agreement between Indonesia and South Korea is set to facilitate smoother economic and business transactions. This agreement, reducing reliance on the US dollar, is expected to enhance bilateral trade and investment while mitigating risks associated with currency fluctuations. The move symbolizes a deepening economic partnership between the two nations.
Source: Kompasiana, Bisnis (2023)
