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.

 

India levies 20% export duty on rice

Reportedly, India has slapped a 20% export duty on a number of rice grades to discourage the shipment of the grain to tame prices in the domestic market, a move that poses repercussions for importing countries.

India has imposed the tax on the exports of paddy, husked rice and semi-milled or wholly milled rice effective immediately.

The move raises concerns regarding the impact on the prices of rice in Bangladesh, which slashed import duty on rice to 15% to encourage private imports and contain prices.

It came less than two weeks after a dry spell affected the cultivation of Aman, the second-biggest source of grain for the country after Boro.

“This is uncomfortable news for us because the private sector is supposed to import a lot of rice. We are also supposed to import 100,000 tons of rice under a government contract,” said Md Ismiel Hossain, Food Secretary.

The food ministry is looking for alternative sources.

Bangladesh government has signed a contract to buy 230,000 tons of rice from Vietnam. The cabinet recently approved a plan to buy 200,000 tons rice from Myanmar.

“We are trying to import rice from Thailand. Recently, they have responded positively,” Hossain said.

Bangladesh, the world’s third-biggest producer of rice, first cut the import duty on rice to 25% from 62.5% to increase the supply to cool off rice prices in the fourth week of June amid repeated floods.

Since then, the government has permitted private firms to import more than one million tons rice, mostly from India.

Lately, prices of fine rice declined 3.65% in Dhaka city. But the price of coarse grain, a benchmark followed by the government to track the price of the staple, has gone up by 1.2%, according to the Trading Corporation of Bangladesh.

Chitta Majumder, Managing Director of Majumder Group of Industries said the move by India may not raise the import cost of his firm as it has placed orders for the rice grades that have not drawn any fresh levy.

“But if the export duty is slapped on the rice imported by others, the local market may become unstable,” he warned.

The tax would discourage buyers from making purchases from India and prompt them to shift towards rivals Thailand and Vietnam, which have been struggling to increase shipments and raise prices, reports Reuters.

India has excluded parboiled and basmati rice from the export duty, but white and brown rice will draw the duty, which accounts for more than 60% of India’s exports, said BV Krishna Rao, President of the All India Rice Exporters Association.

India has been the world’s largest rice exporter in the last decade. Its export earnings grew 9%YoY to US$9.6 billion in 2021-22.

Out of the 21 million tons rice shipment in 2021-22, India exported more than 17 million tons of non-basmati rice and the rest of the volume was aromatic and long grain basmati rice, data from the Indian Commerce Ministry showed.

In terms of volume, Bangladesh, China, Benin and Nepal are major export destinations of Indian rice.

India’s rice production in the 2022-23 could decline to 128.5 million tons mainly because of deficiency in monsoon rains, especially in eastern India where rice planting has shrunk. This could be the first decline in rice production since 2015-16.

The fresh levy on rice exports came four months after India imposed strict curbs on the shipment of wheat due to depleting domestic stocks.

 

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.

Fifty years of Nepal-Bangladesh relations

Nepal and Bangladesh celebrated 50 years of diplomatic relations on April 8, 2022. Nepal was the seventh country to recognize Bangladesh as an independent country in 1972. 

During Bangladesh’s Liberation War, Nepalese political leaders provided ideological and material support for a free Bangladesh.

With Nepal recognizing Bangladesh’s independence, the then Pakistani leadership broke off its relationship with the former. The Bangladesh government has always regarded Nepalese politicians highly for their contribution to the independence of Bangladesh.

Since establishing diplomatic ties, the two countries have enjoyed excellent relations and supported each other on various international and regional political and economic forums. Nepal and Bangladesh began their official trade with the opening of the Kakarvitta-Phulbari-Banglabandha transit route in 1997.

Bangladesh welcomed Nepal to use the Mongla Port facilities for its third country trade as well as rail corridor transit via Rohanpur for easy and cost-effective bilateral trade. In 1978, the two countries established a Joint-Economic Commission (JEC) at the Finance Ministry level to enhance bilateral trade and investments. Foreign office consultations mechanism was also established in July 2012 in Dhaka at the Foreign Secretary level to discuss and review bilateral ties.

Power is the key to strengthening ties in the days to come, due to the huge energy requirements of Bangladesh for its rapidly growing industries. Bangladesh could invest in Nepal’s hydropower and import surplus energy from Nepal, as the latter has the potential to generate 43,000 MW, whereas Bangladesh’s requirements in 2035 will be 35,000 MW.

Dhaka has already formulated a strategic energy policy to import 10,000 MW from Nepal. Last year, the Bangladesh Power Development Board requested the Indian Ministry of Energy to permit Bangladesh to import 450 MW of hydro power from Nepal. India has given a positive response towards the proposal and soon the cross-border power trade may begin.

The first Nepal-Bangladesh Business Forum was jointly hosted by the Bangladesh Embassy led by the then Ambassador Mashfee Binte Shams and the Asian Institute of Diplomacy and International Affairs (AIDIA) in Kathmandu some years back. AIDIA facilitated field visits of various hydropower sites for business leaders. AIDIA played a key role in bringing FNCCI-FBCCI onto one table for signing an MoU on January 24, 2016.

The government of Nepal aims at signing the Bilateral Investment Promotion and Protection Agreement (BIPPA) with Bangladesh to secure the US$ one billion FDI from the Bangladesh government, and another US$2 billion from the private sector which will help generate and export power to Bangladesh from Nepal. It will enable Nepal to be a net energy exporting country in South Asia and help reduce its trade deficit with Bangladesh and improve its foreign currency reserves.

To take the bilateral relationship forward and create a strong bond, the two countries are reviewing the last five decades of their experience to formulate active policies in the field of hydropower, trade, infrastructure development, and more. Nepal aims at learning from the rapid rise of Bangladesh and harnessing the potentials in bilateral engagements.

For instance, Bangladeshi conglomerate Summit Power invested in West Bengal for power generation and another company Summit Alliance Port Limited is operating the inland waterways terminals in Kolkata and Kalughat. Likewise, Pran RFL has been establishing food processing plants in some states of Nepal, but has not been able in exploiting the opportunities Bangladesh offers due to our weak economic strategies. Therefore, the government is encouraging and supporting the private sector of Nepal to engage with Bangladeshi companies.

 

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.

 

Meeting of Foreign Ministers of SAARC countries scheduled for 25th September cancelled

A meeting of foreign ministers of South Asian Association for Regional Cooperation (SAARC) countries, scheduled on Saturday, 25th September 2021 in New York, has been cancelled.

It is being stated by certain quarters that Pakistan wanted the Taliban to represent Afghanistan in the SAARC meet.

India along with some other members objected to the proposal and due to lack of consensus or concurrence, the meeting has to be cancelled.

Nepal is the host of the meeting, which is annually held on the sidelines of the United Nations General Assembly.

An official letter sent by the SAARC secretariat to the foreign ministries of the eight countries stated it received a note verbal or unsigned diplomatic correspondence from Nepal’s foreign ministry that stated the informal meeting of foreign ministers will not take place because of the lack of concurrence from all member states.

Corona virus likely to move from India to neighboring countries

The world is watching India’s coronavirus crisis but Asia’s developing nations are all at risk. From Laos, Vietnam and Thailand in Southeast Asia to Bhutan and Nepal bordering India, countries have been reporting significant surges.

The reported spikes in these handfuls of nations have been steep enough to raise the alert against potential dangers of an uncontrolled spread. The increase is mainly because of more contagious virus variants, though complacency and lack of resources to contain the spread have also been cited as reasons.

In Laos last week, the health minister sought medical equipment, supplies and treatment, as cases jumped more than 200-fold in a month.

In Nepal hospitals have been quickly filling up and running out of oxygen supplies. With infections surging, will Nepal be the next Covid-19 hotspot?

In Vietnam, authorities on Tuesday closed schools in Hanoi as Vietnam battles its first wave of Covid-19 cases via community transmission in more than a month.

In Thailand health facilities are under pressure, as 98% of new cases are from a more infectious strain of the pathogen, while some island nations in the Pacific Ocean are facing their first Covid waves.

Although nowhere close to India’s population or flare-up in scope, the reported spikes in these countries have been far steeper, signaling the potential dangers of an uncontrolled spread. The resurgence – and first-time outbreaks in some places that largely avoided the scourge last year – heightens the urgency of delivering vaccine supplies to poorer, less influential countries and averting a protracted pandemic.

Also on top of the list are Bhutan, Trinidad and Tobago, Suriname, Cambodia and Fiji, as they reported the epidemic erupting at a high triple-digit pace.

All countries are at risk as disease appears to be becoming endemic and will likely remain a risk to all countries for the foreseeable future.

The situation is very serious as new variants require a new vaccine and a booster for those already vaccinated. The economic hardship of poorer countries makes the battle even tougher.

The new cases emerged shortly before a three-day public holiday in Vietnam when many families travel across the country, raising the risk of a wider outbreak.

In Sri Lanka, authorities have isolated areas, banned weddings and meetings and closed cinemas and pubs to cap a record spike following last month’s local New Year festivities. The government says the situation is under control.

The Covax program to distribute vaccines around the world had planned to ship 1.9 million doses in the first half of this year. However, India’s surge in cases has resulted in global shortages.

The situations in many countries prove that vaccines are far from a panacea. Some vaccines, which had been considered highly effective, caused severe side effects, including even death, leading many countries to stop their use.