Johor Bahru forum urges faster rupiah-ringgit adoption to cut costs and deepen regional ties

Indonesia is intensifying efforts to reduce reliance on the US dollar in cross-border transactions with Malaysia, positioning local currency use as a strategic tool to boost efficiency, strengthen economic sovereignty, and support more resilient bilateral growth.

Indonesia and Malaysia Renew Push for Local Currency Use

The Indonesian Consulate General in Johor Bahru, together with Bank Indonesia’s Singapore representative office, held a strategic forum in Johor Bahru on April 1, 2026, to encourage wider use of local currencies in bilateral transactions. The event focused on how Local Currency Transaction, or LCT, can help Indonesia and Malaysia reduce exposure to global volatility and make trade and payments more efficient.

The push comes as both countries face rising geopolitical uncertainty and increasing risks linked to dependence on third-party currencies such as the US dollar. Officials said exchange-rate volatility, layered conversion costs, and external market pressure have made dollar-based settlements less efficient and less attractive for regional transactions.

LCT Already Exists, but Adoption Remains Limited

Indonesia and Malaysia have had an LCT framework in place since 2016, allowing bilateral transactions to be settled directly in rupiah and ringgit without using an intermediary currency. Yet implementation remains far from optimal. In 2025, only about 16.3 percent of bilateral trade was settled in local currencies, equal to roughly RM10.6 billion.

That figure shows progress, but also highlights how much room remains for growth. Most trade and financial activity between the two countries still depends on global currencies, even though the infrastructure for direct local-currency settlement is already available.

Payment Connectivity and Practical Business Gains

Executive Analyst at Bank Indonesia’s Singapore office, Budi Satria, described LCT as a tactical solution to improve the efficiency of cross-border transactions. He said support from modern payment systems such as QRIS in Indonesia and DuitNow in Malaysia can strengthen financial connectivity and create direct benefits for businesses, including MSMEs.

Speakers at the forum said LCT can eliminate double conversion costs through the US dollar, reduce logistics-related expenses, and provide more stable exchange-rate certainty. These gains are especially relevant for exporters, importers, remittance providers, schools, hospitals, and other institutions handling frequent cross-border payments.

Johor’s Role Makes the Issue More Urgent

Indonesian Consul General in Johor Bahru, Sigit S. Widiyanto, stressed that ties between Indonesia and Malaysia, especially with Johor, are unusually close across geography, trade, tourism, and social exchange. He noted that eight of the 11 international passenger ferry terminals linking the two countries are located in Johor, underlining how central the area is to bilateral connectivity.

Mobility between the two countries is also substantial. In 2025, about 2.6 million Malaysian tourists visited Indonesia, while 3.8 million Indonesians traveled to Malaysia for tourism, education, and healthcare. That scale of movement strengthens the case for a payment system that is more direct, predictable, and less exposed to global currency swings.

The “LAJU” Approach to Faster Adoption

To accelerate adoption, Sigit introduced the “LAJU” concept. The framework stands for Local Currency, Accelerate Adoption, Joint Growth, and Unlock Potential. Through this approach, local currency use is positioned not just as a technical settlement option, but as a broader economic strategy aimed at improving efficiency, supporting sovereignty, and unlocking underused potential in trade, tourism, education, and talent mobility.

The forum also emphasized that both governments and the banking sector need to do more to build public confidence. Participants said the main obstacles remain the psychological dominance of the US dollar and the limited understanding of how local-currency exchange mechanisms work in practice.

Education and Transparency Still Needed

Forum participants agreed that stronger education and greater transparency from appointed cross-currency dealers will be necessary to increase public and business adoption of LCT. Without better communication, many users may continue choosing dollar-based transactions out of habit rather than actual cost efficiency.

Around 90 participants from sectors including banking, remittance services, healthcare, education, and import-export attended the forum. Their presence reflected growing interest in shifting the conversation from policy theory to practical implementation across sectors that already move money frequently between Indonesia and Malaysia.

The renewed push for rupiah-ringgit transactions shows that Indonesia and Malaysia are looking beyond short-term trade facilitation toward a more resilient regional financial relationship. Wider LCT adoption could lower transaction costs, reduce external currency exposure, and strengthen day-to-day economic links between businesses and consumers on both sides. For Indonesians and Singaporeans, this matters because Johor, Batam, and Singapore remain tightly connected through travel, trade, remittances, and services. A more efficient local-currency system between Indonesia and Malaysia could eventually reinforce broader financial integration across the region.

Sources: Batam Today (2026) , VOI (2026)

Keywords: Local Currency Transaction, KJRI Johor Bahru, Bank Indonesia Singapore, Rupiah Ringgit, Sigit S Widiyanto, Budi Satria