BB sets foreign currency rules for economic zones

Bangladesh Bank yesterday issued a new notice on foreign exchange regulations for enterprises and developers in planned economic zones as the government seeks to attract more investors.

The foreign exchange regulations applicable for units in the existing export processing zones will also be applicable for entities in EZs, if not otherwise directed by the BB. 

The central bank has divided industrial units into three categories: A, B and C.

Type A units are 100 percent foreign-owned, including those owned by Bangladeshi nationals ordinarily resident abroad.

Type B units are joint-venture projects between foreign and local entrepreneurs. Type C units are those fully owned by Bangladeshi entrepreneurs who permanently reside in the country.

The units under the three types will maintain foreign currency accounts with authorised dealers.

The Type A units may open and maintain such accounts with offshore banking units of scheduled banks of Bangladesh.

Proceeds from exports by entities of different types of EZs must be retained and used through the foreign currency accounts.

Besides, equity from foreign shareholders and loan received in foreign currency from authorised sources may be credited in the foreign currency accounts of Type A and Type B units.

In case of inward remittance on account of equity, banks may issue a certificate with the amount credited in foreign currency account mentioning equivalent taka. 

Moreover, authorised external loan proceeds may be credited in foreign currency accounts of Type C units. Exporters of such areas may maintain taka accounts in the same manner, according to the central bank notice. Exports of goods from EZs, including sales within EZ, to other EZs, EPZs or other areas of Bangladesh are subject to the usual requirement of declaration of exports and repatriation of export proceeds.

Sales of permissible Bangladeshi goods or raw materials to enterprises located in EZs must be against convertible foreign currency only to be received from foreign currency accounts maintained by the EZ units with ADs or offshore banking units by Type A units.

Moreover, selling of such goods including non-physical contents to enterprises against payment in foreign currency shall be treated as exports from Bangladesh.

Therefore, normal foreign exchange regulations related to declaration of exports in case of overseas sales in physical form and repatriation of proceeds shall be applicable for exports to EZs from other areas of Bangladesh.

Existing instructions will be applicable for obtaining credit facilities by the units of EZs. However, if they want to obtain medium and long-term debt from abroad or offshore banking units in case of Type A units, applications have to be submitted to the BB through the Bangladesh Economic Zones Authority. ADs or offshore banking units may remit dividends favouring non-resident shareholders of Type A and B units without prior permission of the BB.

The notice said locally owned zone developers will have to follow the similar exchange regulations like the entities outside EZs and EPZs.

Likewise, foreign-owned entities or zone developers will follow similar exchange regulations that are applicable for similar entities outside of the EZs and EPZs.

ADs or offshore banking units may remit royalty, technical know-how and technical assistance fees of enterprises from the foreign currency accounts for Type A units without prior permission from the BB or BEZA if the total fees and other expenses do not exceed a certain amount.

For new projects, the amount cannot exceed 6 percent of the cost of imported machinery. It cannot exceed 6 percent of previous year's sales as declared in the income tax returns for ongoing projects.

Remittance of such fees in excess of the limit is subject to prior specific approval from the BEZA, said the central bank. 

The notice said foreign nationals working in EZs, with valid work permit from the BEZA, will be allowed to remit through an AD 75 percent of net salary, 100 percent of leave salary and actual savings and all pension benefits without prior BB approval. Investment in EZs shall have to be reported to the central bank.

Besides, all foreign exchange transactions of EZ units are to be reported through online foreign exchange transaction reporting platform of the Foreign Exchange Operation Department of the BB. Such transactions are also to be reported in monthly returns to the BB. The government plans to set up 100 economic zones in Bangladesh in the next 15 years.

The BEZA has approved proposals for 22 economic zones and eight sites have been primarily selected to set up the parks.

Exports will grow by $40 billion a year and one crore jobs will be created if 70,000-75,000 acres of land can be allocated to the economic zones, according to an estimate by the BEZA.

The BEZA aims to establish economic zones in all potential areas in Bangladesh, including backward and underdeveloped regions, with a view to encouraging rapid economic development through increase and diversification of industry, employment, production and export.