BB asked to make wholesale changes to policies to pull in FDI

The finance ministry has directed the Bangladesh Bank to make wholesale changes to the policies that could be considered systematic faults or dissuade foreign direct investment (FDI) in the post-coronavirus era.

In a letter to the central bank on June 23, the ministry asked it to take initiatives that would provide foreign investors with the scope to transfer profits back home or shift their operations to other countries without hassles.

Vietnam, India and Indonesia are all amending rules and regulations in the financial sector to create investment-friendly environments that will attract more FDIs.

Therefore, the BB should follow suit and bring in reforms after identifying the policies that deter foreign investors, the letter said.

It came as gross inflow of foreign direct investment to Bangladesh fell 13.8 per cent to $3.73 billion in the first 11 months of the last fiscal year, BB data showed. Net FDI dropped 19.04 per cent year-on-year to $1.97 billion.

How the Covid-19 outbreak has brought about radical changes to the global economy and diversification to investment policies were highlighted in the letter.

The pandemic has already created a situation where several industries and foreign investors have been forced to consider moving their operations away from China.

In light of the development, Bangladesh should try to grab this opportunity by creating an adequate business environment to lure investors.

In order to do so, first, the banking system needs to be simplified so that investors face fewer challenges, the finance ministry said.

During a meeting on June 8, Prime Minister Sheikh Hasina instructed banks to take necessary initiatives to ensure easy repatriation of profits for foreign investors.

Bangladesh's currently stable political landscape, availability of skilled workers, ever-growing economy and ongoing infrastructure development are positive indicators for foreign investment, the ministry said.

Besides, non-resident Bangladeshis are now more interested in investing in various sectors, such as agriculture. However, it is often said that they face difficulties when repatriating their profits or try to withdraw matured saving schemes.

Meanwhile, a committee comprising officials from the financial institutions division and the central bank have prepared a Bangla version of the 'Foreign Exchange Regulation Act, 1947', which was uploaded on the former's website.

The initiative is aimed at providing concerned stakeholders with the scope to scrutinise the document and its clauses so that they could make recommendations on how to develop an investment-friendly environment in the country.

The finance ministry said that a draft copy of the revised rules and regulations is being prepared for approval by the cabinet with recommendations from the National Board of Revenue, the finance division, the foreign affairs and commerce ministries, the Bangladesh Economic Zones Authority, the Bangladesh Investment Development Authority, the Economic Relations Division, business organisations, and research firms.

If approved, the planned reforms would be placed before parliament for final approval in order to remove obstacles standing in the way of FDIs as soon as possible.

The letter also suggested that the central bank take necessary actions to establish an investment-friendly environment by removing legal and policy-related hurdles in the banking sector.

The BB already has various policies in place that promote cooperation with foreign investors, said BB spokesperson Md Serajul Islam.

"We have been directed by the higher authorities to execute all official formalities instantly to attract FDIs," he said.

Bangladesh has rules and regulations to attract FDI but bureaucratic complexities sometimes cause delays for foreign investors. These complexities should be removed, he said.

The Beza plans to introduce a generous incentive package to perk up the country's investment climate and attract more foreign investors to economic zones in the post-coronavirus era when companies will search for new destinations to set up operations at reduced costs.

"We have submitted proposals to the Prime Minister's Office on how we can offer policy support and incentives to foreign investors," said Paban Chowdhury, executive chairman of the Beza.

With the pandemic continuing to wreak havoc on the global investment scene, Bangladesh will not remain immune to the fallout and that is why the country should use innovative tactics to rope in investors, he added.

Md Sirazul Islam, executive chairman of the Bida, said there is a prudent need for decisive policy-making for the country to benefit in the long run by increasing FDI inflow.

The Bida has already taken the initiative to amend a number of rules and regulations that were directly impeding FDIs, Islam added.