Iran hosts Asian Clearing Union summit

The 51st Asian Clearing Union (ACU) summit, mainly focusing on de-dollarization, kicked off on Tuesday at the Central Bank of Iran (CBI).

On the first day of the two-day event, expert committees from the delegations attending the summit held meetings to discuss preliminary issues.

The summit is attended by the governors of the central banks of the ACU member countries in addition to Russia.

The Governor of the Central Bank of Russia Elvira Nabiullina arrived in Tehran on Monday to attend the event.

In the 51st ACU summit, the members are set to discuss various issues including the amendment of the Union's statutes in order to facilitate the acceptance of new members, and determining the new currency basket of the member countries in order to settle exchanges without the need for euro or the dollar.

Exploring the feasibility of using digital currencies of central banks for cross-border payments and the unveiling of the interbank messaging network of the member states of the Union are also among the major topics on the summit’s agendas.

Asian Clearing Union is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.

The main objectives of the clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among the participating countries. 

Currently, the members of ACU are the central banks of Iran, India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka, and Myanmar.

The central banking authorities of member countries have issued detailed instructions and modalities for channeling monetary transactions through the ACU. Membership in the ACU is open to central banks located in the geographical area of ESCAP and non-ESCAP.

 

Governor State Bank of Pakistan, new Chairman of Asian Clearing Union (ACU)

Dr. Murtaza Syed, Acting Governor State Bank of Pakistan (SBP) assumed the charge of Chairman of the Board of Directors of the Asian Clearing Union (ACU) in the 50th meeting of the ACU Board held in Islamabad on May 13, 2022 in both physical and virtual modes.

Established in 1974 with permanent headquarters in Iran, the Asian Clearing Union (ACU) is a payment arrangement system whereby member countries settle payments for intra-regional transactions among their central banks on a net multilateral basis. Currently, the Central Banks of Bangladesh, Bhutan, Iran, India, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the ACU. The main objectives of the clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among the participating countries. 

The Secretary General of ACU, Mrs. Lida Borhan Azad, presented the annual report on the operations of the union for the year 2020, which the Board approved and adopted.

The Board reviewed progress on the ongoing projects being undertaken by the union. It reviewed a new web based messaging system and constituted a sub-committee to finalize the recommendations for its implementation within six months. The Board also considered the report on issues faced by traders under the ACU mechanism and decided to implement the recommendations in the next three months. 

While appreciating the report on the use of domestic currencies for settlement of trade transactions prepared by the Reserve Bank of India (RBI), the Board requested RBI to convene a virtual seminar to enable member countries to gain a fuller understanding of the proposed mechanism. The Governors and head of the delegations of the countries also gave a broad overview of the economic development in their respective economies and shared their experiences in addressing the challenges emerging in the post COVID-19 global landscape.

Governor Central Bank of Myanmar, Than Nyein, Vice Governor Central Bank of Iran, Dr.Mohsen Karimi, Chief Economist Central Bank of Bangladesh Md. Habib ur Rehman, and Executive Director Nepal Rastra Bank Ramu Paudel participated in the meeting physically. Governor Dr. P. Nandalal Weerasinghe, and Deputy Governor of Central Bank of Sri Lanka, T.M.J.Y.P Fernando, Governor Maldives Monetary Authority Ali Hashim, Ms. Yangchen Tshogel Central Bank of Bhutan and Executive Director RBI Radha Shyam Ratho, attended the meeting virtually.

At the conclusion of the Board meeting, Mrs. Lida Borhan Azad relinquished the charge of Secretary General of the ACU after distinguished service of the Union for 15 years. While appreciating the services of Mrs. Lida Borhan, the Board appointed Farhad Morsali as the new Secretary General of the ACU, as recommended by the Central Bank of Iran.

The meeting ended with all member countries emphasizing their commitment to further enhancing their trade and banking relationships. It was decided that central bank digital currencies (CBDCs) would be the special topic on which research would be conducted during Pakistan’s chairmanship of the ACU over the next twelve months.

India trying to win over hearts of its neighbors

According to The Bangladesh Chronicle, India has announced substantial assistance for all the SAARC member countries, except Pakistan. The announcement was made by Indian Finance Minister Nirmala Sitharaman while presenting the 2022-23 budget in the parliament.

South Asian Association for Regional Cooperation

The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in South Asia. It was established in 1985 when the Heads of State of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka formally adopted the charter. Afghanistan joined as the 8th member of SAARC in 2007. To date, 18th Summits have been held and Nepal’s former Foreign Secretary is the current Secretary General of SAARC. The 19th Summit was to be hosted by Pakistan in 2016, which never happened.

India announced Rs 300 crore annual budgetary financial assistance for Bangladesh, up from Rs 200 crore in the outgoing fiscal 2021-22. The allocation of the financial assistance has been provided for the Ministry of External Affairs.

Myanmar will get Rs 600 crore, Rs 200 crore more than last financial year, and Nepal will get Rs 750 crore from India in the coming fiscal.

India has allocated Rs 200 crore as aid to Taliban-ruled Afghanistan in for 2022-23 even though New Delhi does not have diplomatic presence in Kabul where its embassy has remained closed since the Taliban took over Afghanistan in August last.

The government of Ashraf Ghani in Afghanistan had in the last fiscal received around Rs 348 crore from India.

The Maldives at Rs 360 crore (as against Rs 250 crore in 2021-22) also saw an increase in India’s annual aid provision in today’s budget document.

At Rs 2,266.24 crore in 2022-23, Bhutan is once again be the highest recipient of India’s annual financial aid. But this is lower than Rs 3,004.95 crore in 2021-22 fiscal.

The second highest recipient in the coming financial year of the allocation will be the Indian Ocean island of Mauritius — Rs 900 crore.

 

Can India take credit of Maldives election as President UN General Assembly?

This time, President of United Nations General Assembly (UNGA) has to be elected from the Asia-Pacific region. In the election, held on 7th June 2021, Abdullah Shahid, Foreign Minister of Maldives defeated his only rival, the former Afghan Foreign Minister, Dr. Zalmani Rassoul, by a wide margin, 143 to 48, in a total of 191 votes, with no abstentions. 

Afghanistan had held the post as back as in 1966-67.

The election of Shahid as the 76th President of UNGA could not have come at a more opportune time for the island nation. It must be a moment of glory for Maldives as its foreign minister wins the position of UNGA President. Shahid brings with him vast and varied experience as the Foreign Minister under two regimes— Presidents Maumoon Abdul Gayoom (2007-08) and now under President Ibrahim Mohamed Solih, since 2018.

On his election India was prompt in taking credit saying, ‘from a larger neighborhood perspective, election of Shahid and elevation of Maldives in the international arena is a silent acknowledgement of the deployment of India’s soft power at the UN without being an all-important P-5 veto power, as yet. It is this kind of support that neighbors expect from India, given their own inherent inadequacies in terms of size’.

Indian External Affairs Minister Jaishankar was amongst the first to congratulate his counterpart Shahid. “Heartiest felicitations to Foreign Minister of Maldives Abdulla Shahid on his election as President for 76th UN General Assembly,” wrote Jaishankar in a twitter post. “This is a testimony as much to his own stature as to the standing of Maldives. We look forward to working with him to strengthen multilateralism and its much-needed reforms,” he said further.

India claims also to be the first nation to endorse Shahid’s candidacy as early as November last year. In Maldives on an official visit, Foreign Secretary Harsh Vardhan Shringla publicly reiterated the “commitment made by our External Affairs Minister earlier during the Virtual Meeting with Foreign Minister Abdulla Shahid that India will support his candidature”. Secretary Shringla also said that with his “vast diplomatic experience and leadership qualities, Foreign Minister Shahid has the best credentials to preside over the General Assembly in these tumultuous times”.

But, it is on record that India-Maldives bilateral relations suffered recent setbacks despite months of multilateral cooperation on multiple developmental projects in the archipelago, under the Solih stewardship. The avoidable controversy over the Indian decision on tourism development, amongst others, in the remote island territory of Lakshadweep, is one irritant.

Maldives turning foe for India and Israel

Maldives, a small country with a population of around half a million people with Muslim majority, faces likely retaliation from India for supporting Palestinians. In this endeavor,  support of Israel can't be ruled out. While the probability of an assault is low, both the countries can follow the typical 'regime change' mantra of United States.

Maldives have suspended all relations with Israel – including imposing a ban on all Israeli products ‑ because of the atrocities committed against the people of Palestine. Lately, President Ibrahim Mohamed Solih said via Twitter that the people of Maldives stand in solidarity with Palestine.

If one can recall, Ibrahim Mohamed Solih won the most votes and was sworn in as the Maldives new president in November 2018. There was also a change in foreign relations. His predecessor Abdulla Yameen was politically very close to China with some ‘anti-India’ attitude, but President Solih reaffirmed the previous ‘India-First Policy’ and Maldives and India strengthened their close relationship.

The spokesperson to the President, Mohamed Mabrook Azeez, added that the stance of Maldives was clear. “We stand against injustice and in solidarity with the Palestinian people’s struggle to secure their inalienable right to statehood,” Mabrook said.

He further said all relations between Maldives and Israel were now suspended, including the import of Israeli products. Import of most Israeli products was banned by Maldives since 2014. Only special medical products could be imported, and that require a special permit.

During the recent conflict in Palestine the Maldivian public showed their support for the Palestinian cause by using the colours of the Palestinian flag all over the island nation.

The public outcry to ban Israeli tourists from Maldives has also increased. An emergency motion was submitted to the Parliament by opposition party Progressive Party of Maldives (PPM) member, Ahmed Shiyam, calling to ban Israeli tourists.

It is worth mentioning that The Maldives established diplomatic relations with Israel in 1965, as it was the third state to recognize Maldives. But Maldives suspended the ties in 1974.

In 2009, under President Mohamed Nasheed, Maldives signed cooperation agreements with Israel on tourism, health, education, and culture. In 2010, the Israeli government sent a team of eye doctors to treat patients and train local medical personnel in Maldives.

In May 2011, the Maldives’s then-foreign minister, Ahmed Naseem, became the first top official from the Maldives to visit Israel. However, the renewed relationship did not develop into full diplomatic relations.

But in July 2018, under President Abdulla Yameen, Maldives terminated the cooperation agreements with Israel.

In 2020, after UAE and Bahrain recognized Israel and it was reported the government had discussed establishing ties with Israel, but the Maldivian foreign minister denied having initiated discussions regarding establishing ties with Israel.