By SHAHEERA AZNAM SHAH / Pic By TMR
The US dollar is still the preferred currency among Malaysian and Thai traders despite efforts by the governments of both countries in promoting the usage of their local currencies.
Bangkok Bank Bhd CEO Choo Joon Keong said last year, the central banks of Malaysia, Indonesia and Thailand launched a local currency settlement framework.
It is aimed at increasing the direct settlement of transactions in their local currencies, while reducing the dependency on the US dollar.
However, Choo said while the joint move by Bank Negara Malaysia (BNM), Bank Indonesia and Bank of Thailand is lauded, the adoption of the framework among exporters in Malaysia and Thailand has not been as encouraging.
“In terms of trading between Malaysia and Thailand, if the exporters have a mutual agreement to receive payments in baht or ringgit, they can proceed with it.
“However, the current situation is, most exporters are comfortable in trading in US dollar, and it is hard to convince them to change,” he said at the Top Thai Brands 2018 media briefing in Kuala Lumpur yesterday.
According to BNM, the initiative is part of the continuous effort to promote a wider use of local currencies in facilitating trade and investment in these countries.
Choo said at present, the trading of petroleum, rice, rubber and electronic goods between Malaysia and Thailand are still being carried out in US dollar.
“One of the challenges in convincing them is, as most of the heavily traded goods are in US dollar, they prefer to keep it that way due to the dollar’s reputation as an international currency.
“Although it is endorsed by the government, the move is also seen as a risk to their businesses. I think the exporters are needed to be exposed to the benefits of having local currencies as their trading value to make them convert, because at the moment it is not enough,” he said.
Meanwhile, Thailand Ambassador to Malaysia Narong Sasitorn said trade between Malaysia and Thailand has surged 20% in the first five months of this year from the accumulated figure in 2017.
“In 2017, Malaysia and Thailand’s bilateral trade was worth US$22 billion and we are Malaysia’s fourth-largest trading partner,” he said.
Thailand Embassy to Malaysia’s commercial counsellor Patcha Wutipan said Thailand’s largest investments in Malaysia include petroleum, followed by agriculture-based projects.
“Malaysia used to be one of our biggest investors. But for the past two years, our direct investment in Malaysia has surpassed the value of Malaysia’s investment in Thailand, making us the net investor.
“Our biggest investment in Malaysia is in the petroleum industry as we have a joint collaboration between PTT pcl and Petroliam Nasional Bhd,” she said.
The bilateral trade between Malaysia and Thailand is expected to achieve US$30 billion (RM133 billion) by 2018, with the border trade to play a prominent role.
In 2016, it was reported that the trade between the two countries amounted to US$20.83 billion, with border trading consisting of 65% of the total bilateral trade.
In the same year, Thai tourist arrivals to Malaysia jumped 35.7% to 1.4 million, while Malaysian tourist arrivals to Thailand rose 3.3% to 3.5 million.