Some measures that could boost our foreign currency reserve

Offshore banking units should introduce FC term/fixed deposit products to attract people to invest through banking channels. Photo: Reuters

Discussing the forex reserve crisis in Bangladesh - that derived from the lack of strategically crucial policies - has become pointless. So, I would not write much about the problem of the acute shortage of greenbacks in Bangladesh. Rather, I would like to recommend some initiatives that may be taken to ensure a sustainable foreign currency reserve.

Allow all Bangladeshi citizens to open Foreign Currency accounts

The government should allow all Bangladeshi citizens, either resident or non-resident, to open a Foreign Currency account to deposit and remit foreign currency in their account or through their friends and family living abroad. 

This will allow aircrews, pilots, mariners, lawyers, accountants, IT professionals, financial advisors, architects and other professionals to bring their salaries, fees and commissions directly into Bangladeshi banks. 

Issuing foreign currency debit cards against their FC bank account so they can use their money easily abroad will also increase reserves. This will enhance their reliance and boost their confidence in banking with local banks.

The government should only provide incentives when they convert their greenback into local currency.

Introduce FC term/fixed deposit products through all offshore banking units

Offshore banking units should introduce FC term/fixed deposit products to attract people to invest through banking channels. 

This will not only divert the hundi into formal channels but also reduce national interest outflow and ultimately help to keep the FC reserve on an uptrend.

Allow asset management companies to introduce small-size FC mutual funds

Asset management companies will collect funds from non-resident Bangladeshi, foreign individuals and companies to invest in FC term/fixed deposit products of OBUs (Offshore Banking Units) of local banks and FC Bonds to be issued by exporting companies.

Introduce fuel, utilities and port charges for exporters and foreign shipping and airline companies

The government can introduce utility, fuel and gas bills at FC instead of local currency for exporters, foreign shipping, and airline companies. The government can offer discounts for the time being to make it popular.

Introduce Relaxed Remittance Policy (RRP)

Like our neighbouring countries, we should introduce a Relaxed Remittance Policy (RRP). 

The government should allow Bangladeshi companies and citizens to bring foreign currency for their declared investment abroad, reducing the dependency on hundi and encouraging companies and individuals to maintain their FC accounts in Bangladesh. 

Also, we need to allow them to maintain business accounts of their foreign companies in OBUs of Bangladeshi Banks.

Stimulus or interest-free loan package for capital market intermediaries

The Ministry of Finance should immediately allocate interest-free funds for capital market intermediaries like asset management companies, investment/merchant banks and stock brokers to invest in the capital markets through their dealer accounts. 

Bangladesh has around 400 capital market intermediaries, and the fund size should be Tk50 billion for at least five years to boost the investment market. This fund should be disbursed incrementally based on the market index to signal that the government provides support to migrate the market to an emerging level.

VAT and tax-free service export to the international market

We should immediately lift all VAT and tax on service exporting companies like airlines, shipping, telecom, Internet, consultancy, advisory, medical and education registered in Bangladesh. 

These companies are required to make payments to their international vendors, pass a complex path and pay VAT and tax, which discourages bringing their FC to Bangladesh. As a result, they prefer to maintain offshore companies and bank accounts to smoothen their transactions. 

Introduce E-visa for foreign tourists

Like most tourist countries, introducing an E-visa for foreign tourists will automatically increase the number of tourists in Bangladesh. That would be another source of sustainable FC reserve as most wealthy people do not like to waste their time collecting visas. 

Giving incentives to local tour operators for bringing foreign tourists to Bangladesh can be another effective policy to make the tourism industry vibrant.

Waive registration fees for purchasing land and apartments by FC remittance

Waiving registration fees for purchasing land and apartments by FC remittance will make the real estate market vibrant and pull FC into Bangladesh. 

However, the owner must pay income tax and gain sales tax to be earned from these assets. This will attract all passive investors to remit their funds in Bangladesh for investment.

Introduce social benefits for Bangladeshi ex-pats 

We can plan to introduce social benefits for Bangladeshi expats to convince them that Bangladesh thinks about their welfare. Priority passes can be issued in medical centres, airports and banks for expats remitting $100,000 per year or more.

Suspend all betting apps based on crypto and forex immediately

Cybercrime investigation by Bangladesh Police and the Bangladesh Financial Intelligence Unit of Bangladesh Bank should be more vigilant. They should actively suspend all betting apps based on crypto and forex immediately. 

The ICT ministry should collaborate with them to form a task force to stop these activities as these have created a hundi market.

The above steps may seem very tough to implement. But what alternatives do we have to attract local and foreign investors to build their confidence that we are an investment-friendly and growing economy? 

We should have the scope and basket for investment so that people and investors become interested in keeping their money in either local or foreign currency in Bangladesh, instead of outward capital flight or resorting to hundi. These steps will boost the FC reserve, create employment opportunities, and generate government revenue, adding value to the national GDP.

M Shahidur R Khan is the Chief Operating Officer at BMSL Asset Management Company Ltd.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.