Govt now to ease capital repatriation for foreign investors

Highlights:

• Share transfers through e-signature for foreigners
• Lock-in period coming down to 1 year from 3 years
• Pricing firms to determine share prices
• Remitting investments, made from one country, can be transferred to different countries

After granting facilities to foreign investors to send home profits and dividends from Bangladesh, the government is now moving to ease the process of remitting their capital too.

The lock-in period for foreign investors in the capital market is also going to be reduced from three years to one year, including the introduction of e-signature to facilitate the process of share transfers for foreigners in non-listed companies.

In addition, the Bangladesh Bank will ease the transfer and repatriation of the money earned from sales of shares where foreigners have not invested through the Non-Resident Investors' Taka Account.

The central bank will also allow foreign investors to send their share dividends back home or shift them to other countries.

In the case of money repatriation by foreigners, the central bank will have the firms determine the share prices too.

All these decisions were taken recently at a high-level meeting chaired by the Prime Minister's Private Industry and Investment Adviser Salman F Rahman.

The meeting was attended by Central Bank Governor Fazle Kabir, Bangladesh Securities and Exchange Commission (BSEC) Chairman Shibli Rubayat-Ul-Islam and top executives of other government agencies.

Queried by The Business Standard, Salman F Rahman said that although the process of remitting dividends and profits from Bangladesh has been simplified, there are some problems in the repatriation of foreigners' capital. Initiatives are being taken to ease those issues.

"By 2041, Bangladesh will need foreign direct investment worth $50 billion. In the changed global context due to coronavirus, foreign investors have shown considerable interest in investing in Bangladesh. It has been decided to remove the existing obstacles in order to exploit that opportunity," he added.

According to the existing rules of the Registrar of Joint Stock Companies and Firms, shareholders in non-listed companies have to appear in person before the registrar if they want to transfer shares. If the transferee is a foreigner or resides abroad, he or she has to sign the transfer letter in the presence of a notary of that country and get the letter attested by the Bangladesh embassy or consulate in that country.

In many countries, there is no Bangladeshi embassy or consulate. Such a situation often causes problems for investors in those countries.

To address this issue, necessary amendments will be made to the existing rules to introduce the process of transferring shares through e-signature by next December, said Md Mokbul Hossain, registrar at the Office of the Registrar of Joint Stock Companies and Firms.

Listed companies have to maintain a lock-in period of three years from the date of their business commencement. It means they cannot sell or transfer shares within this period.

For their part, foreign investors think the period is a very long one. As a result, many among them are losing interest in investing in Bangladesh.

BSEC Chairman Shibli Rubayat-Ul-Islam said the issue of cutting the lock-in period has been under consideration by the authorities.

He said the high-level meeting decided to reduce the lock-in period to one year and the decision will be finalised at the commission meeting very soon.

According to the existing Foreign Exchange Regulation, approval of the Bangladesh Bank is required for repatriation or transfers of more than $100 million.

In some cases, the valuation of shares by merchant banks is not acceptable to the Bangladesh Bank. As a result, it takes a long time and creates complications in sending money from share sales, causing concern among foreign investors.

To solve this problem, the central bank will form a pool of firms, instead of merchant banks or authorised dealer banks, to determine the prices of shares of foreign investors.