New Age
Staff Correspondent
Economists have welcomed Bangladesh Bank’s decision to ease capital repatriation rules for foreign investors, saying the move could improve the investment climate, while warning that weak monitoring could increase the risk of capital flight.
The central bank recently allowed authorised dealer banks to approve repatriation of up to Tk 100 crore from share sales by foreign investors without prior approval from Bangladesh Bank, raising the ceiling from Tk 10 crore.
The measure applies to foreign investors selling shares in private and public limited companies that are not listed on stock exchanges.
Selim Raihan, executive director of the South Asian Network on Economic Modeling, told New Age that the decision to raise the repatriation approval ceiling was a pragmatic step toward improving the investment climate.
He said simplifying and speeding up the repatriation process addressed a long-standing concern of foreign investors over the ability to exit investments and transfer legitimate earnings abroad.
The measure could boost investor confidence and make Bangladesh more competitive in attracting foreign direct investment at a time when many countries are competing for global capital, Raihan said.
However, he cautioned that the relaxation also increased the need for strict compliance and monitoring.
‘If asset valuations and documentation are not rigorously verified, there is a risk of capital flight or money laundering through over- or under-invoicing,’ he said, adding that the effectiveness of the policy would depend on strong due diligence by banks and continued regulatory oversight by the central bank.
Under the revised rules, banks can process the repatriation if the fair value of the transaction is determined by an independent valuer using approved valuation methods.
Bangladesh Bank said the relaxation was aimed at simplifying procedures and making the country more attractive for foreign direct investment.
Previously, most such transactions required prior central bank approval, which often slowed the process.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said easing the repatriation process had long been a demand of foreign investors.
Removing such barriers was important for encouraging foreign direct investment inflows, he said, adding that the decision sent a positive signal about efforts to reduce investment obstacles.
At the same time, Hussain said, deeper structural challenges continued to discourage foreign investment.
He pointed to complex regulations, bureaucratic procedures, land and labour issues and taxation uncertainties as major constraints.
‘Unless these structural obstacles are addressed gradually, the impact of this measure alone will be limited,’ he said.
Hussain also stressed the need for stronger monitoring, warning that legal loopholes could increase the risk of misuse and money laundering if the relaxation was not properly supervised.
Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, said the decision was business-friendly and indicated the central bank’s attempt to remove procedural barriers to foreign investment.
He said the move would send a positive signal to international investors.
However, he said the effectiveness of the new rules would depend on how valuation methods were applied.
The circular allows three recognised valuation methods — the net asset value method, the market approach and the discounted cash flow method — which should be applied in line with internationally accepted standards, he said.
Rahman noted that differences between valuations conducted by foreign firms and local institutions had often created complications in repatriating investment proceeds in the past.
Under the new rules, banks must form internal committees to review valuation reports and approve repatriation requests.
Banks are also required to complete repatriation within five working days if no discrepancies are found and report such transactions to the central bank within 14 days.
Source: https://www.newagebd.net/post/economy/293606/economists-back-bb-move-warn-of-capital-flight-risks
