BANGLADESH needs to make progress in five key areas in the coming days to attract both domestic and overseas investments, as per a report of a local daily on the recommendations at the third resurgent dialogue. The five factors will further facilitate investment, promoting greater coherence between trade and investment policy, fine tuning incentives, a proper retention strategy and domestic-FDI linkage. The recommendations came in uncertain times; Covid-19 impact and policy implications for Bangladesh’.
Bangladesh has very strict foreign exchange control laws. Foreign Exchange Regulation Act 1947 (FERA) is the basic law in this regard and provides the legal basis for regulating certain payments, dealings in foreign exchange as well as securities. Therefore, Bangladesh has exchange control regulations whereby money can only go abroad officially (thus in a foreign currency) under certain specific categories of remitter. Basically the categories are importers, who need to make their payments to their foreign suppliers in foreign currency; students studying abroad and hence need to meet their tuition fees and living costs; repatriation of Foreign Direct Investment from abroad; and specific instances of foreign currency needs that require permission from the central bank on a case to case basis, for example international conference fees.
One major impact of strict exchange control regulations is illegal capital flight or money laundering by a process of informal international money transfer called ‘hundi’. By this, many of our citizens have been able to achieve their foreign remittance goals and foreign investment ambitions illegally, leading to foreign currency leaving the country as well as local currency transactions that lead to obtaining foreign currency abroad and thus have no benefit to the local economy as such transactions are not regulated, tracked nor taxed, causing thousands of crores of taka loss of revenue to the country’s exchequer.
So, to bring this ‘grey’ economy back into the real economy the government must allow formal channels to operate which would make it easier to send legally earned money abroad. At the very least the government should allow foreign firms to send and receive money without going through authorised dealers as and when they see fit. If a foreign firm can’t buy and sell goods and raw materials when they want, they would incur significant losses which would lower their competitiveness. This can easily be the time when Bangladesh can allow some firms which are leaving China to come in and boost our growth. Now is not the time to limit our mindset to a law which is over 70 years old — especially if we want to achieve high investment levels.
We wish the government had the will or capacity to be active in a constructive way. This is the problem with intellectuals. They cannot take real situations in consideration when expounding their bookish knowledge. That is why even the government sidelined our intellectuals as of no importance.
