The frameworks follow a pact between the three members of the Association of Southeast Asian Nations, or a 10-country bloc also known as Asean, signed in 2015 aimed at promoting cross-border trade and investments.
Last year, trade within Southeast Asia contributed $521 billion, or 23.5% of total trade, while intra-Asean investments rose to a record level of $24 billion in 2016, accounting for 25% of total foreign investment flows into the region.
"Intra-Asean partnership is critical for regional integration in support of our economies and financial systems," said Bank Negara Malaysia Governor Muhammad Ibrahim. "We expect this to be strengthened further, supported by the strong growth of intra-Asean trade."
Malaysia's bilateral trade volume totalled $13.8 billion with Indonesia and $13 billion with Thailand in 2016. However, only 5.8% and 11.4% of Malaysia's trade with Indonesia and Thailand, respectively were settled in local currencies, Muhammad noted.
Economists said the nascent move could help increase the use of local currencies among Asean countries, although any effect on trade and investments could be seen only in the longer-run.
"Asean is looking for more integration but not going the Eurozone path of creating common currency," said CIMB Investment Bank's Economist Michelle Chia. "Using more of our own currencies is a matter of getting liquidity and this cross-country cooperation is the first step."
Banks appointed to support the rupiah-ringgit framework include Bank Rakyat Indonesia and CIMB Group Holdings, while Bank Mandiri and Bangkok Bank Public were among those appointed for the rupiah-baht framework.
All three frameworks--rupiah-ringgit, rupiah-baht, and expanded baht-ringgit-- will be effective from Jan. 2, Bank Indonesia, Bank Negara Malaysia, and Bank of Thailand said in a joint statement. The effort aims at cutting transaction costs, broaden trade settlement options, and boost efficiency.
"These initiatives are part of the continuous effort to promote a wider use of local currencies to facilitate and boost trade and investment in these countries," the central banks said.
The central banks have also named banks such as Malayan Banking and The Siam Commercial Bank for the ringgit-baht framework. In addition, the baht-ringgit settlement framework is also expanded to include direct investment to enrich the existing trade transactions.
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