The government has initiated the process of exploring the need for policy guidelines to facilitate Bangladeshi investment abroad, suiting the country's present economic status, officials said.
For ascertaining such need, the Prime Minister's Office (PMO) recently formed an inter-ministerial committee.
Presently, making equity investment abroad for resident Bangladeshis is not open under the foreign-exchange regulation act. But under sub-section 6 of section-4 of the act, the central bank in consultation with the government can identify areas of equity investments abroad.
In the recent months the Bangladesh Bank has received a good number of applications seeking permission to make equity investment abroad.
However, the central bank has cautioned the government to weigh a number of factors, including the ratio of private-sector investment in the country and foreign-exchange-reserve situation, before allowing Bangladeshi investors to make offshore investment.
Executive Member of the Bangladesh Investment Development Authority (BIDA) Ajit Kumar Paul heads the six-member committee, which has been asked to submit a report in a month.
The committee is tasked to take into consideration the level of economic development of the country and the strategies, foreign-exchange- regulation act, and the need of investment within the country.
Mr Paul told the FE that Bangladeshi officials have been working vigorously to attract foreign investment to the country. Many of the Bangladeshi companies have already attained regional and international standards and thus need to spread their wings beyond borders.
Besides, Mr Paul viewed, to reduce production cost, and to enjoy the advantage of a country of origin and the facility of sourcing raw materials, Bangladeshi companies feel the necessity of making overseas investment.
"If we find that making investment abroad will bring higher returns compared to the local one, we will suggest allowing overseas investment," he said.
Mr Paul said the committee will soon start scrutiny of the policies followed by other countries in this case.
"We will of course check whether it will cause any negative impact on foreign-currency reserves," he said.
He said graduation to the status of middle-income country based only on readymade garment industry would not be possible. Many other options will also have to be explored.
Talking to the FE, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Abdul Matlub Ahmad said there is an urgent need for framing a policy on the country's investment abroad.
"We expect that the government will come up with such a policy within a couple of months," said Mr Ahmad, who is a long-time proponent of allowing able companies to make investment suitably abroad.
The FBCCI chief, however, suggested the government should not allow the equity investment abroad on a wholesale basis.
He also urged ensuring proper monitoring of those investments and repatriation of profits.
Former central bank governor Dr Salehuddin Ahmed said the government should examine the pros and cons before allowing equity investment abroad.
"Since our monitoring and supervision systems are not efficient enough to allow wholesale scale of overseas investment, there is a need to look into the compliance issues before doing so," he said.
Mr Ahmed, however, suggested that overseas investment can be allowed to Bangladeshi companies on a selective basis.
He also mentioned that India has allowed such investment for their companies only after thorough scrutiny.
Responding to a query he said, the government needs to make capital account convertible before allowing investments abroad.
When contacted, executive director of the Policy Research Institute of Bangladesh Dr Ahsan H Mansur told the FE earlier the capital account should have been made convertible when the reserve position was good.
"Though the foreign-exchange-reserve growth has slowed down, it has not declined until now," he said while suggesting allowing equity investment abroad on a limited scale.
Mr Mansur, however, suggested that the government should tag conditions like employment generation for Bangladeshi nationals with making investment abroad.
He also advocated that reporting mechanism of equity investments should be very well to keep track on the capital going abroad.
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