Sunday, March 8, 2020

Exchange Controls in Bangladesh

Bangladesh operates an exchange controlled economy under the Foreign Exchange Regulation Act, 1947. All inward and outward remittances are regulated by the Central Bank of Bangladesh (that is, Bangladesh Bank). Foreign investor rights are protected under the Foreign Private Investment (Promotion   and Protection) Act, 1980 which ensures legal protection against nationalisation and expropriation. It also guarantees non-discriminatory treatment between foreign and local investment, and repatriation of proceeds from sales of shares and profits. Bangladesh Bank has outlined relevant procedures and formalities for all inward and outward remittance in its Guidelines for Foreign Exchange Transaction. The Guidelines cover the procedures for, among others:

• Foreign dealings in securities

• Remittance of royalty/technical assistance fees

• Foreign ownership

• Mergers and acquisitions

• Divestments

• Remittance of profit, dividends, capital gains

• Foreign and local borrowings

• Retention quota of exporters

Any transaction that has not been outlined in the Guidelines for Foreign Exchange Transactions must obtain specific approval from the Bangladesh Bank.

Bangladeshi ‘Taka’ (BDT) is convertible for current external transactions. Individuals or firms resident in Bangladesh may conduct all current external transactions, including trade and investment related transactions, through banks in Bangladesh authorised to deal in foreign exchange (Authorised Dealers) without prior approval from Bangladesh Bank.

Similarly, non-resident direct investment in industrial enterprise and non-resident portfolio investment through stock exchanges do not require prior approval of the Bangladesh Bank.

Remittance of post-tax dividends or profits on non-resident direct or portfolio investment does not require prior approval. Sales proceeds, including capital gains on non-resident portfolio investment, may also be remitted abroad without prior approval.

Prior approval from Bangladesh Bank is required for the repatriation of sale proceeds of non-resident equity investment in public limited companies that are not listed on the stock exchange, and private limited companies. In determining the repatriable amount, Bangladesh Bank works out the net asset value of the shares on the basis of audited financial statements as on the date of the sale and the net asset value is thus calculated is considered repatriable.

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