Aug 10, 2011

Traders advised to use Asian Clearing Union (ACU) transfers

TRADERS can be lessen suffering caused by complicated international transactions to some countries by using the Asian Clearing Union (ACU) mechanism, according to a meeting organised by the Central Bank of Myanmar and the country’s premier business body last week.

The meeting to explain the ACU was jointly set up by the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and the Central Bank was held in Yangon on July 28.

Daw Khin Ohnmar Aye, the deputy general manager of Myanmar Foreign Trade Bank (MFTB), said that using the ACU allowed traders to settle accounts in either dollars or euros to circumvent US sanctions and better facilitate intra-regional trade.

The ACU was established in 1974 and includes Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives.

Myanmar’s only significant trading partners in the union are Bangladesh and India, even though it joined ACU 30 years ago.

Daw Khin Ohnmar Aye said traders have been reluctant to use the ACU because they think it is inefficient.

However, U Thaung Htun, the deputy general manager of Myanmar Investment and Commercial Bank (MICB), said transfers through ACU were actually very fast.

“There are no delays when using the ACU to transfer money and it also reduces the normal problems and suffering involved,” he said.

Traders can open an account in MFTB, MICB or Myanmar Economic Bank (MEB) under Central Bank and can then they can trade directly – using euros – with any counterparts in other member states. The ACU no longer uses US dollars as a result of economic sanctions levelled against a number of member states such as Iran and Myanmar.

“The dollar settlement field is narrower now,” he said, adding that only Singapore, Thailand, Malaysia and Vietnam trade with dollars, with South Korea, Japan and China using other currencies.

“When traders open a letter of Credit to import goods, and then pay for those goods, they also have to go through EU clearing agents, which sometimes reject payments as a result of EU trade policies.

“That forces traders to find another way, which is difficult and expensive,” he said.

One fisheries exporter who attended the meeting said he would be testing ACU transfers in future.

“We will try this out with our normal trading operations,” he said.

The fisheries exporter said ACU transfers would work in relation to Bangladesh, which uses dollars and euros but not India, which only uses euros. U Win Aung, a beans and pulses trader who mainly exports to India, said the complicated nature of exporting goods from Myanmar might rule out ACU transfers.

“This method would work if we dealt 100 percent with buyers in India. But there are always third parties in Singapore as well that we have to pay,” he said.

Traders in Singapore act as third-party agents between Myanmar sellers and Indian buyers to avoid sanctions.

Source: Myanmar Times