Draft guidelines for overseas equity investment ready

The proposed 'Overseas Equity Investment Guidelines 2018' are set to be ready for receiving approval from the government shortly, officials said.
When contacted, senior secretary of Financial Institutions Division Md Eunusur Rahman said recently, "The draft 'Capital Account Transactions (Overseas Equity Investment) Guidelines 2018" may be placed before the cabinet committee on economic affairs (CCEA) in the last week of this month or the first week of next month."
Sources said the finance minister approved the summary of Capital Account Transactions (Overseas Equity Investment) Guidelines at the end of May.
Now the draft guidelines along with the summary may be sent to cabinet division, they added.
According to the proposed guidelines, the highest ceiling on investment has been set at 20 per cent of export earnings or up to 25 per cent of their net annual income from exports.
Parent company and overseas subsidiary company have to submit audited financial statements including important documents to the National Board of Revenue (NBR) and the Bangladesh Bank (BB) to ensure monitoring on overseas investment regularly, the guidelines said.
As per one provision included in the guidelines, the report on business environment will have to be submitted to the BB and the Ministry of Foreign Affairs aiming to bargain with foreign governments and explore the possibility of fresh investment and trade facilities and brighten the image of the country as well.
According to the draft guidelines, the entrepreneurs may be allowed to make investments in the countries where there are no restrictions on Bangladeshi nationals to work and repatriate their incomes to Bangladesh.
There is another provision that suggests not to making investments in the countries or areas identified by the Financial Action Task Force (FATF) as 'risky. Besides, equity investment by Bangladeshi entrepreneurs would not be allowed in the countries where the United Nations, European Union, and Office of Foreign Asset Control (OFAC) have imposed sanctions.
Entrepreneurs also would not be able to make equity investment in the areas/countries where there is no diplomatic relations, the guidelines said.
Bangladeshi entrepreneurs will have to take prior permission from the government for the purpose, according to the draft 'Capital Account Transactions (Overseas Equity Investment) Guidelines 2018', prepared by the BB.
The central bank prepared the guidelines in line with a decision taken by the CCEA amid a plea from a good number of Bangladeshi entrepreneurs for allowing them to make overseas investments.
The sub-section 6 of the section 4 of the Foreign Exchange Regulation Act 1947 empowered the BB to specify, in consultation with the government, the classes of permissible capital account transaction.
Besides, the section 5 of the act accords power to the BB to give general or special authorisation to effect payments abroad in connection with foreign exchange transactions.
The guidelines said the entrepreneur who wants to make overseas investments has to be an exporter with adequate balance in its Exporters' Retention Quota (ERQ) account.
The entrepreneur needs to be financially-sound according to audited accounts of his or her company in the past five years.
The applicants should have clean track record of repatriation of export proceeds within the period, payment of import obligations having no bill of entry unmatched, including local payment against back to back letters of credit (LCs).
The entrepreneurs also have clean record in loan repayments in the financial system and having no unresolved restructured large loan and tax payment.
The overseas investment proposal for business activity abroad shall ordinarily be of similar nature of the entrepreneurs' business engagement in the home country.
The equity investment proposals should be economically-viable and have the potential for future earnings of foreign exchange coupled with other advantages to the country including raising exports from Bangladesh and employment opportunities for Bangladeshi nationals.
The countries with which Bangladesh has dual taxation avoidance agreement, and where investment from Bangladesh and the repatriation of capital including capital gain, dividend, and other admissible earnings including technical know-how fees, royalty, consultancy fees, commission or other entitlements are allowed.
The approval for new outward investments will be "disfavoured in situations of widening Balance of Payments (BOP) deficits and declining foreign exchange reserves", the guidelines noted.
It said any misuse of the funds would be treated as an offence of money laundering under the Money Laundering and Prevention Act.
In such cases, the owner, the directors and the beneficiary owners of the company shall be liable to punitive action under the law.
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