EYES abroad

Capital flight has become a serious concern for Bangladesh's struggling economy. Silently but enormously, money is being laundered to safe destinations worldwide. Latest data shows Bangladeshis' deposits with Swiss banks rose by 36pc last year. In a three-part series, The Daily Star will try to reinforce why people and money are flying away from home.

Political instability and unfriendly business environment in Bangladesh have prompted a number of businesspeople to invest in commercial ventures and properties abroad, and move their families there for a secure future.

Most of them have chosen countries in Europe and North America as destinations for safe investments, seeing no respite from political turmoil in the country, several businesspeople have told The Daily Star.

A knitwear factory owner in Narayanganj invested in properties in the US in January to secure his assets. A sense of insecurity prompted him to buy properties abroad.

A businessman in the capital plans to invest in Belize, a little-known country in Central America.

Concerned over the January-March political turmoil, a Gazipur-based woven maker dropped the plan to expand his factory this year. He has been trying to set up a joint venture apparel unit in Vietnam.

These are only some of the businesspeople who have chosen to make investments abroad in recent months. The Daily Star talked with more than a dozen businesspeople who have either invested or mull investments abroad.

Bangladesh saw a spate of violence and arson attacks for over three months after the BNP-led-alliance launched a non-stop blockade on January 6 and enforced a series of shutdowns to force the Awami League-led government to call an early national election.

The trend of investing outside the country is reflected in data from the Washington-based Global Financial Integrity (GFI).

According to the GFI, illicit capital flight from Bangladesh was $13.16 billion (Tk 102,648 crore) between 2003 and 2012. And of the amount, $2.67 billion (Tk 20,802 crore) flowed out of the country in 2006 alone when political instability was at its peak.

Latest data of the Swiss National Bank shows Bangladeshi nationals' deposits with various Swiss banks rose by over 36 percent year-on-year in 2014.

The amount increased to Tk 4,283 crore (506 million Swiss franc) last year from Tk 3,149 crore (372 million franc) in the previous year. In 2012, it was Tk 1,991 crore.

Zahid Hussain, lead economist at Dhaka office of the World Bank, said people keep money in Swiss banks for safety. And the money, kept outside the country for safety, is generally earned through dubious methods, he said.

“Political uncertainty coupled with a sense of insecurity about money earned through such means makes the owners of those funds seek safety. This might have been the case in 2014.

“People don't keep their money with Swiss banks for profit as their deposit rates are very low,” Zahid told The Daily Star recently.

Over the last decade, a large number of businesspeople have shifted their investments to South East Asian and Western countries. But there is lack of reliable data that can give a clear picture of the overall situation.

"Canada, Singapore, Malaysia, the USA, the UAE and the UK have been the preferred destinations of rich Bangladeshis for years for buying property," says a businessman, seeking anonymity.

Most of them are successful businesspeople whose children are studying abroad, he said.

The choice of location depends on investors' objectives. Malaysia, Sri Lanka, Singapore, Mauritius and the UAE are popular destinations for investment.

And those looking for a place to settle prefer a country that is suitable for their families as well as business ventures. In this case, Canada, the UK and the US are the preferred destinations.

Businesspeople don't go to countries that restrict foreign ownership of real estate. Inheritance rights as well as tax laws figure prominently among their considerations.

Singapore, for instance, allows foreigners to buy apartments or condominiums, but one has to get government clearance for purchasing land. Thailand allows foreigners to hold land only on lease. Some countries such as the UAE, Singapore, Mauritius and Cyprus don't tax capital gains.

“Why wouldn't the businessmen have their families settled abroad? Why would they sit idle here?” asked the owner of a conglomerate.

“If entrepreneurs face problems in doing business at any place, they go elsewhere.”

Until December last year, the conglomerate was going ahead with expansion plans. But now it is forced to shelve those.

“We don't want to get stuck again as was the case in 2007. We learnt a costly lesson,” said the businessman in February, referring to a project that got stuck for two years during the tenure of the last caretaker government.

In recent months, domestic and foreign investments have fallen in the wake of political turmoil, shows data from the Board of Investment (BoI).

Only nine proposals, which include both foreign and joint venture involving $41 million, were registered with the BoI in January this year, down by nearly 40 percent from that in January last year.

“The number of local investment proposals also dropped by almost half in January and February this year compared to that in the corresponding period last year,” said a senior BoI official.

It is not only domestic political uncertainty that pushes Bangladeshi businesspeople to settle abroad. Constraints to private investments and lucrative offers by many Western and Asian countries encourage many to buy properties there.

Two well-known indicators -- the Global Competitiveness Index by the World Economic Forum and the Ease of Doing Business Index by the International Finance Corporation -- reflect Bangladesh's poor investment climate compared to that in its peer countries.

Between 2008 and 2014, Bangladesh made some progress in improving competitiveness, but its competitors such as China, India, Indonesia, Vietnam and Sri Lanka did better.

As a result, the competitiveness gap between Bangladesh and these countries has widened. In the Ease of Doing Business Index 2015, Bangladesh ranked 173rd among 189 countries. It had secured 170th position in 2014.

Also, lucrative offers from various countries allure Bangladeshis to take money there. Cyprus, Hungary, Portugal, Ireland, Malaysia, Bahamas and the UAE are trying to revive their economies by attracting foreigners to their property markets. Some countries offer residency to the buyer if the property value is above a certain threshold.

“There are mainly two groups of Bangladeshi buyers: those looking to buy apartments for their children studying abroad and others who want to invest in commercial ventures in the UK and Singapore,” said a Bangladeshi businessman who frequently visits London.

At present, Singapore doesn't offer residency to foreign buyers. However, a number of Bangladeshi businesspeople have made investments there.

“I know dozens of Bangladeshi businessmen who live in Singapore with their families. Some of them are very rich,” said a businessman who often visits the island nation.

Their number is much higher in Canada and Malaysia. Hundreds of businesspeople have invested in properties in these two countries, making either of the two their second home, several businesspeople told The Daily Star.

Many Bangladeshis have obtained residence permit in Malaysia under business visas by starting a business such as a hotel or trading firm in the names of their wives and children, they added.