The Bank and Financial Institutions Division will place a proposal at the next meeting of the Cabinet Committee on Economic Affairs (CCEA), seeking permission for three business groups of the country to make equity investments in as many foreign countries. The division has prepared the proposal in line with a letter from the Bangladesh Bank, sources said. The CCEA meeting is scheduled on Sunday (May 14).
According to the proposal, Akij Jute Mills Ltd applied to the central bank to make equity investments worth USD 20 million in Malaysia. The Ha-Meem Group wants to invest USD 10.44 million in Haiti to set up a garment factory. The Nitol-Niloy Group wishes to invest USD 37.44 million in Gambia to establish a commercial bank titled the Gambia Commerce and Agriculture Bank Ltd.
But the central bank is yet to give its nod to the companies. It instead wrote to the Bank and Financial Institutions Division recently: “Applications for equity investment abroad by local companies is increasing by the day. The pressure on the reserves of the Bangladesh Bank would increase if the
applications are considered. There is no guarantee that the equity investments of these companies would return to the country.”
“The growth of foreign exchange reserves of the country has slowed down. The flow of remittances is also declining due to increasing import costs of capital machinery, essentials and fuel. Foreign transactions declined to USD 0.79 billion from the end of last year. The existing reserves are enough to meet the import cost of essentials and service for seven to eight months,” the letter added.
It further said: “The government has decided to form a USD 10-billion fund from the Bangladesh Bank reserves and call it the Bangladesh Sovereign Assets Fund. Besides, an Export Development Fund worth USD 2.5 billion has already been formed to import industrial machinery and equipment with the aim to increase exports. The amount of long- and mid-term reserves of the private sector external debt is USD 9.4 billion.”
“On the other hand, the government is establishing 100 economic zones across the country. Local businessmen can invest in those,” the central bank letter said.
The Bangladesh Bank has also asked the division to think whether it was justified to invest abroad instead of home. The letter pointed out: “Currently, Tk. 277,956.29 crore is lying unutilised in banks.”
After receiving the letter, the secretary of the Bank and Financial Institutions Division informed its matter to the finance minister, who told the division to place a proposal before the CCEA in this regard, according to sources.
The Foreign Exchange Regulation Act, 1974, restricts equity investment abroad. For offshore equity investment, the government’s permission has to be taken, says the FER Act, 1974.