World should consider alternatives to dollar’s monopoly on trade: ex-ambassador Munshi Faiz Ahmad

The former Bangladesh ambassador to China believes currency swaps and other options would ease strains on foreign reserves

Countries should consider alternatives to the US dollar’s current monopoly on international trade, such as the currency swap deals offered by China which would ease strains on foreign reserves, says Munshi Faiz Ahmad, who was Bangladesh’s top diplomat in Beijing.

“It’s a very important point, especially in these times when the world is facing all kinds of sanctions imposed by the Americans, but which also hurts the American people quite badly too.”

“International trade has become difficult because of these sanctions,” said retired diplomat Faiz Ahmad, who shared his thoughts on the rising global presence of China during the third episode of bdnews24.com’s “Inside Out” on Sunday.

The video of the interview is available on bdnews24.com and its Facebook and YouTube channels.

“Foreign exchange is difficult to buy. We talk about the lack of availability of the dollar and its rising price. So, naturally, everybody’s trying to find an alternative, but the Chinese have been at it for some time already,” said the former diplomat, who spent five years as Bangladesh’s leading representative in China between 2007 and 2012.

“[China] has been making currency swapping deals with many countries already. I think countries like Bangladesh and others who are suffering now, because of the monopoly of the dollar in international finance, [should] think twice and find out if we can also get into this arrangement of currency swapping, which will reduce our dependence on the dollar and the American channel of money transfers and transactions.”

CHINA NOT TRYING TO REPLACE US ON WORLD STAGE

China’s presence on the world stage was strengthened by the nation’s growing economy. However, Ahmad says that the country is not trying to replace the US as a global superpower.

“It is not in any way trying to take America’s place because it correctly recognises the US as the most developed country, most powerful nation in the world, and it will remain there for a long time to come.”

The Chinese economy is doing well and may grow larger than the US in nominal terms in the coming decade, but the country still has a huge population whose standards of living must be raised to the levels in the West, Ahmad said.

“But the hope is, that by 2049, perhaps they will be there. And they first want to become a moderately developed country. And then a moderately developed socialist country, by the middle of this century.”

China took the approach of soft diplomacy with these factors in mind, said Ahmad, also Bangladesh’s former deputy high commissioner to the UK.

“China understands very well that getting embroiled in any kind of serious conflict is going to set them back. And they do not want it, they will try their best, under any circumstances, to avoid serious conflict.”

However, the nation is not afraid of competition, he said.

“They don't mind competition, because competition is good.”

WRONG TO BLAME CHINA FOR SRI LANKA, PAKISTAN DEBT BURDEN

The soft power approach has led China to invest billions in the development projects of South Asian countries like Sri Lanka and Pakistan, and African nations. As the turmoil in the world economy worsens, many of these nations have been taken to the brink. This has renewed criticism of Chinese-backed loans.

But Ahmad, also a former chairman of the Bangladesh Institute of International and Strategic Studies, or BIISS, believes that the world has misconceptions about debt to China.

China is not trying to lay debt traps, according to him.

“Borrowing from China doesn't mean that you get into trouble automatically,” he argued. “When you get in trouble is when you are not doing your own homework.”

The issue is that many of these projects are not useful enough to justify their price tags and thus they are not able to generate enough revenue to pay back the original loans, he said.

“When you borrow money from others, you must make sure that you’re in a position to pay it back. That the terms and conditions are right for you.”

Countries make the decision to take loans from China, so China should not bear all the blame when such arrangements turn out badly. Bangladesh borrows money from them at an interest rate of around 2 percent, while Sri Lanka and other nations borrowed at much higher rates, leading to issues, Ahmad said.

CHINA IS ASSERTIVE, BUT NOT AGGRESSIVE

The country’s main international interest is to promote peace because that is what they believe will deliver continuous development, Ahmad said.

“Some people think that they are being a little bit more assertive. Not aggressive. Some people try to use the word aggressive. I use the word assertive in various places, various methods, but they will do everything possible to promote peace and friendship throughout the world.”

Ahmad pointed to their intervention’s success in brokering a calming of tensions between Iran and Saudi Arabia recently. “Not many people thought this was possible.”

“But when we see this happen, I think the Americans are looking on with wide eyes, trying to figure out what’s happening. So I think the Americans are a little worried that they're not going to remain the supreme mediator of the world, the monopoly mediator of the world.”

However, this does not mean Bangladesh should be naïve about seeking help from China, Ahmad said.

“At one time, we believed that China was an epitome of honesty and integrity, but as they open up, they are open to all kinds of things around them -- positive and negative. Corruption has also entered the Chinese system. And there we have to be careful about that.”

Still, as someone who spent over a decade in China as a student and diplomat, he believes that there is a path to a stronger friendship that benefits Bangladesh and China.

“When we talk about ‘friendship to all, malice to none’, that is what we mean.”

“If [Bangladesh] can follow that principle, we can make friends with China, we can make friends with America.”