Just after the Eid vacation, a colleague wanted to buy a Dhaka-Kolkata-Dhaka route ticket. He was quoted Taka 16 thousand equivalent on line.
Since local law does not allow buying overseas travel ticket on line, the gentleman had to pay Taka 20 thousand to the travel agent to buy the same ticket. Bangladesh’s business and business travels or as such private travels have increased manifold over the years. Our airlines are flying to new destinations; similarly new airlines are landing at HSJ International Airport. But travel quota for SAARC and non-SAARC countries is capped at USD 12 thousand. This is coming out to be minuscule when we talk of increasing hotel and travel costs all over the world.
However, despite a lot of constraints and somewhat love for the “Approval Raj,” the Bangladesh Bank has offered a lot of support and “hand-holding” to the growing private sector in Bangladesh. Starting from allowing back-to-back import L/Cs for apparel exports, it continued with export retention quotas, holding foreign exchange for overseas business development, loans from foreign bilateral and multilateral agencies, parent company loans, issuance of repatriation guarantee, increase of travel quotas, special quotas for treatment abroad, remittance of tuition fees for studying abroad, remittance of foreign consultant fees and technical fees, repatriation of profit or dividend against foreign direct investment and investment in traded securities in the bourses. In fact, most of the Bangladesh Bank officials are busy processing approval requests for various private sector entities on a day-to-day basis. Even after 46 years of independence, almost every third inward or outward remittance requires central bank clarification, or consent, or mostly approval. While individual remittance has gone through reasonable reforms or liberalisation, enterprise-level inward and outward inflow still remains an issue which warrants a lot of filtering, making the outward flows still very complex and cumbersome.
After independence, we inherited a war-torn economy with a very low foreign exchange reserve. Therefore, we appreciated the slow pace of reforms in the foreign exchange regime. In 2001, our net foreign exchange reserve dropped to lower than $1bn. The then Governor of the central bank contacted his many counterparts in the Middle East to provide some foreign currency liquidity support to take care of increasing commodity imports and imports for exports. The good thing was, despite all the challenges, our trade was happening, and L/Cs were opened, routed, and confirmed through the global banks. Where L/Cs were being opened and settlement monitoring was heightened, Bangladesh Bank didn’t follow the route of RBI, such as putting up a 300% cash margin for opening L/Cs or “no export, no import” commandments.
Bangladesh Bank is still trying to hand-hold private enterprises through quick disposal of their FCY inflow-outflow requests. This is taking a lot of their time in the absence of clear guidelines. Emerging realities also don’t allow them to take shelter under existing guidelines for foreign exchange transactions or relevant core risk management guidelines. Development partners, especially the IMF, have been talking of further liberalisation of the current account transactions and updating the outdated Foreign Exchange Regulation Act (FERA) 1947. Although it looks very odd for an independent country like Bangladesh to chalk out its growth path to a middle income country with this 1947 cross border transaction rule, the reality tells us that we don’t know when our distinguished members of the parliament could approve a new foreign exchange regulation act, suited more to the dreams of a forward-looking and fast-growing trading nation. The archaic 1947 act is not allowing Bangladesh Bank’s “very helpful officials” to do much in attending to emerging issues in international trade and remittance flows. They have been issuing prudential guidelines to:
Increase travel quota (though still miniscule against the increasing travel needs of individual business persons or professionals), creating space within the student quota, remittance of withdrawal proceeds by a foreign investor, expansion of the EDF programme, and extension of the deferred payment for USANCE L/Cs or increasing the space for e-wallets. They have issued many circulars in this regard in recent times. Our foreign exchange reserve is on its way to $35bn, yet a traveller can’t deposit more than $5,000 on his/her return to his/her account if not declared at the airport, or easily buy tickets for overseas travels. Remitting a single dollar outside the country for investment abroad still raises a lot of eyebrows and at best being considered against export retention quota holding. Establishing the local representative office or agency by global corporations is still a tough exercise. The consular section at the local US or European country embassies or Indian high commission reportedly increased the issuance of non-immigrant or business visas manifold. When I asked the US consular head the reasons behind the move, she promptly replied:
“Bangladesh’s economy is growing at a steady pace; its entrepreneurship is growing fast, they need to connect with their US counterparts for their exports and raw materials or capital equipment sourcing or know-how purchases; there are more and more Bangladeshi students qualifying for good US colleges and universities; more Bangladeshi graduates are making their presence felt in the US professional world, and these realities are convincing us to facilitate their entry to the US for our own interest.” During the last Eid vacation, Indian High Commission was heard to have issued around 200 thousand visit visas to Bangladeshis.
The whole world has started to accept Bangladesh as a global player in its chosen field. The buyers want our capacity to increase, see our performance improve, for our workers’ productivity to go up, and entrepreneurs to reduce their ‘doing business’ costs. Nothing can happen if our regulatory regime does not become more friendly and helpful. Even if the regulators are helpful, they can’t do much without the right tools and guidelines. We need to change, revise, and upgrade our foreign exchange rules. It has to happen fast. Bangladesh not only requires continuous liberalisation in current account transactions, time is possibly ripe to start thinking about capital account convertibility in order for us to be ahead of our peers or competitors in the identified opportunity spaces.
The writer is a leading banker & economic analyst in Bangladesh