Foreign exchange rules to see changes
The government will soon amend foreign exchange regulations to make those time-befitting as the old rules are not enough for the current international trading system, a finance ministry official said yesterday.
The draft of the amendment has already been prepared, said M Aslam Alam, secretary to the bank and financial institutions division under the finance ministry.
He spoke at a seminar on "factoring: a better alternative to letter of credit" at the office of the Dhaka Chamber of Commerce and Industry (DCCI) in the capital. “We are seeking opinions from businesses about the changes to the regulations,” Alam said.
On the introduction of factoring to export and import business, as an alternative to letters of credit, Alam said the system will be "a bit expensive, but risk-free".
Factoring is a transaction in which four factors -- importers, exporters, importing banks and exporting banks -- are involved in the settlement of payment in international trade. By contrast, too many factors are involved in the LC system, which delay a transaction.
Bangladesh now follows the foreign exchange regulations introduced in 1947.
In international trade, factoring is practised widely as the system provides a simple solution no matter whether the exporter is a small organisation or a major one.
In his keynote, Prashanta Kumar Banerjee, director of Bangladesh Institute of Bank Management, said acceptance of factoring in international trade increased 60.91 percent in European countries, 8.81 percent in the USA and 26.80 percent in Asian countries in 2012.
In Bangladesh, some non-bank financial institutions are following the factoring system for payments in domestic trade, but the country is yet to follow the system in international trade, he said.
The acceptance of factoring in China rose 60.15 percent in 2012, he added.
“The international figures indicate that the practice of factoring has been increasing worldwide for its easy and risk-free payment method. So, Bangladesh should also amend rules and join the international factoring association,” Banerjee said.
He said LC-based exports are gradually decreasing as international traders are not ready to do transactions under open-account trade. “International factoring can be introduced on a test basis.”
MS Siddiqui, a member of the standing committee of the DCCI on export policy, said factories based in export processing zones are now following the factoring system in international transactions.
The importers of Bangladesh have to pay millions of additional dollars to international trading partners for some unfavourable rules in the LC system, he said.
Comments