Dhaka (Mizzima) - Bangladesh has requested Burma to take the initiative to open letters of credit (LCs) with its commercial banks directly instead of going through any third country, officials in Dhaka said on Tuesday.
The visiting Burmese expert-level delegation, led by Maung Maung, Director of Account Department of the Central Bank of Myanmar, assured Bangladesh of solving the issue through discussion with their trade bodies, banks and other related stakeholders.
The assurance came at a wrap-up meeting with officials of the central bank of Bangladesh, held at the conference room of the Bangladesh Bank (BB) in the capital, Dhaka on Tuesday.
"We've requested our counterpart to encourage their exporters to take the initiative for opening LCs with commercial banks of Bangladesh directly rather through any third country," BB Senior Executive Director Khandakar Muzharul Haque told Mizzima after the meeting.
Currently, payments for foreign trade are settled between the two countries through a third country like Singapore or Thailand.
During the two-day talks, the Burmese delegation asked the local commercial banks to keep sufficient funds in the foreign currency account, officially known as NOSTRO accounts, to make timely payments.
Local bankers and BB officials informed the Burmese delegation that there is no scope of shortage of fund, which may cause delay in payment under the existing Asian Clearing Union (ACU) mechanism.
"We place funds with the central bank of Bangladesh and then the BB sends advice to the related member central banks to credit the funds with the commercial banks," Deputy Managing Director of the National Credit and Commerce (NCC) Bank Limited SM Shamsul Alam told Mizzima while explaining the fund transfer system under the ACU mechanism.
Mr. Alam attended the meeting with the visiting four-member Burmese delegation on Monday along with four other representatives of commercial banks.
The visiting delegation also observed that very few NOSTRO accounts are maintained by the commercial banks of Bangladesh with Burma’s banks.
In reply local bankers said that a number of banks have already opened their NOSTRO accounts with Burmese commercial banks aiming to strengthen bilateral banking arrangement between the two countries.
The meeting also discussed increasing bilateral trade activities between the two countries using the ACU mechanism, BB officials and bankers said.
The volume of bilateral trade between the two countries has been rather ‘insignificant’ for years because of lack of proper initiatives.
Dhaka exported goods and commodities worth only $9.17 million to Rangoon in the fiscal year 2008-09 while its imports during the period stood at $66.49 million.
Bangladesh mainly exports pharmaceutical products, leather, woven garments and other manufacturing goods to the Southeast Asian country and imports wooden articles, vegetable products, processed food and fish.
The ACU is an arrangement comprising Bangladesh, Bhutan, India, Iran, Burma, Nepal, Pakistan and Sri Lanka to settle payments for intra-regional transactions among the participating central banks on a multilateral basis.
The main objective of the clearing union is to promote trade among the member countries by making the transaction easier, economising the use of foreign exchange reserves and minimising transfer costs.
The union started its operations in November 1975 to boost trade relations among member countries. Bangladesh and Burma joined the union as the sixth and seventh members in 1976 and 1977 respectively.
Bhutan joined the ACU on December 9, 1999.
