KUALA LUMPUR: Datuk Seri Anwar Ibrahim revealed that approximately RM58 billion of Malaysia’s trade with three trading partners is conducted in ringgit. During the Prime Minister’s Question Time in the Dewan Rakyat on Tuesday (Oct 17), the Prime Minister specified that around 25% or RM39.2 billion of Malaysia’s bilateral trade with China is transacted using the ringgit and renminbi. He stated that they have achieved significant success with China in this regard.
In addition, Malaysia’s trade with Indonesia, amounting to RM10.7 billion, and with Thailand, amounting to RM8.2 billion, is also conducted in ringgit and the local currencies of the respective countries. Anwar highlighted that although there is still progress to be made, Vietnam and Cambodia have acknowledged the local currency settlement framework, which was agreed upon during the 43rd Association of South-East Asian Nations (ASEAN) Summit in Jakarta.
The Prime Minister emphasized that Malaysia is actively pursuing de-dollarization along with other ASEAN nations in order to reduce dependency on the US dollar. He compared Malaysia’s 125 basis-point increase in the overnight policy rate (OPR) to the US Federal Reserve’s 525 basis-point interest rate hike since early 2022. As a result of the US rate hike, regional currencies, including Malaysia’s, have weakened.
Anwar was responding to a question posed by Datuk Seri Noraini Ahmad on the de-dollarization plans and its effect on trade with other countries. Noraini also inquired about expanding the de-dollarization approach to other countries, particularly BRICS nations (Brazil, Russia, India, China, and South Africa), and how Malaysia intends to safeguard investments from the United States.
In response, Anwar acknowledged that the US dollar remains the predominant and strongest currency in international trade, with many countries opting to use it. He remarked that Singapore, despite accounting for 15% of Malaysia’s trade, is uninterested in using the ringgit as a trading currency. However, China has been receptive to trading in ringgit. Anwar expressed doubt that Japan and Hong Kong would show interest in using the ringgit for trade.
Furthermore, Anwar disclosed that South Korea also lacks enthusiasm for trading in ringgit, and India has restricted the use of the Indian rupee for trade outside the country. However, Vietnam, Malaysia’s 10th export market, has agreed to expedite negotiations on the matter. Anwar concluded that there have been no efforts thus far to extend the de-dollarization approach to Africa and Latin America, but he believes that the successful implementation of the ASEAN-China framework presents an opportunity to strengthen the currencies of both countries.
Last week, Anwar stated that Malaysia has actively and aggressively started utilizing the ringgit for trade with several countries. This shift towards de-dollarization is aimed at increasing demand for the local currency.
