The governor of the Bank of Thailand (BOT) has signalled that he wants to boost trade between his country and neighbouring Laos.

This would mean reducing the two countries' dependency on US dollar-based letters of credit (L/Cs) and implementing several measures to promote cross-border trading denominated in local currencies.

Baht-denominated L/Cs

According to BOT Governor Pridiyathorn Devakula, Thailand's central bank is currently revising existing rules to make settlements in the Thai baht and the Lao kip more convenient.

This he says would allow Lao businesses to open baht-denominated L/Cs and stimulate the circulation of more kip in border trade between the two countries.

Frequent settlements

The central banker said he would like commercial banks in both countries to make settlements between each other every day, or at least on a weekly basis with the aim of boosting cross-border trading.

"We would like banks from both countries to exchange currencies without complicated rules. We'd like intra-regional currencies to circulate more," Devakula said during the signing of bilateral agreements between the BOT and the Bank of Laos.

He added that he wanted Thai banks to open branches in border areas, where Lao banks are already situated.

Local currencies preferred

Lao businesses can currently only open L/Cs in US dollars, while cross-border traders use the baht far more often than the kip. The BOT would like to support local currency circulation rather than the dollar, Devakula said.

Annual trade between the two nations currently totals 20 billion baht, of which 90 per cent takes place on the border between the two countries. Thai exports are mainly consumer products, construction materials and fuel, while Lao exports are chiefly wood and wood products.

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