Experts for exercising caution
Saturday, 15 May 2010
FE Report
A former central bank governor and a finance adviser asked the government to exercise caution while approving outflow of investment amid growing pressure from the business community to make capital account partially convertible.
Bangladesh Bank governor Dr Atiur Rahman, according to a recent media report, had disclosed that the central bank was planning to approve capital account convertibility as a 'test case'.
"First we have to analyse the benefit of such investment when the country needs huge amount of investment within the country," former Bangladesh Bank governor Dr Salehuddin Ahmed told the FE.
Domestic sectors like power, infrastructure and shipbuilding can be very lucrative where private investors can invest as there is dearth of such facilities in the country, he said.
The government should carefully scrutinise foreign exchange reserve size, capital repatriation prospects and benefit of the country before giving green signal to the convertibility, he said.
"During my time, I had also received such proposals but my first concern was to have foreign exchange reserve sufficient enough to finance at least three months' imports," he added.
Citing the example of India, he said the country also made the capital account partially convertible after analysing the prospects for many years.
"India now has a foreign reserve of over $200 billion but Bangladesh has only $10 billion and we should consider the factor carefully," Dr Salehuddin said.
Former finance adviser Mirza Azizul Islam said the country cannot afford to open its capital account.
Bangladesh does not have such huge reserves or assured inflow of foreign exchange, which may help the government to take investment outflow decision, he said.
He, however, said the central bank can give capital outflow decision on case-by-case basis after scrutinising proposals very carefully.
"Business climate in the investment destined country, capital repatriation prospect and other factors should be examined thoroughly before allowing investment outflow decision," he added.
The business community has long been demanding opening up of the capital account to allow them to invest abroad.
Businessman-turned-minister M Faruk Khan said the central bank should allow businessmen to invest abroad.
"There are some businessmen in the country who have enough wealth to invest abroad and they should be allowed to flourish in foreign countries," he said.
A former central bank governor and a finance adviser asked the government to exercise caution while approving outflow of investment amid growing pressure from the business community to make capital account partially convertible.
Bangladesh Bank governor Dr Atiur Rahman, according to a recent media report, had disclosed that the central bank was planning to approve capital account convertibility as a 'test case'.
"First we have to analyse the benefit of such investment when the country needs huge amount of investment within the country," former Bangladesh Bank governor Dr Salehuddin Ahmed told the FE.
Domestic sectors like power, infrastructure and shipbuilding can be very lucrative where private investors can invest as there is dearth of such facilities in the country, he said.
The government should carefully scrutinise foreign exchange reserve size, capital repatriation prospects and benefit of the country before giving green signal to the convertibility, he said.
"During my time, I had also received such proposals but my first concern was to have foreign exchange reserve sufficient enough to finance at least three months' imports," he added.
Citing the example of India, he said the country also made the capital account partially convertible after analysing the prospects for many years.
"India now has a foreign reserve of over $200 billion but Bangladesh has only $10 billion and we should consider the factor carefully," Dr Salehuddin said.
Former finance adviser Mirza Azizul Islam said the country cannot afford to open its capital account.
Bangladesh does not have such huge reserves or assured inflow of foreign exchange, which may help the government to take investment outflow decision, he said.
He, however, said the central bank can give capital outflow decision on case-by-case basis after scrutinising proposals very carefully.
"Business climate in the investment destined country, capital repatriation prospect and other factors should be examined thoroughly before allowing investment outflow decision," he added.
The business community has long been demanding opening up of the capital account to allow them to invest abroad.
Businessman-turned-minister M Faruk Khan said the central bank should allow businessmen to invest abroad.
"There are some businessmen in the country who have enough wealth to invest abroad and they should be allowed to flourish in foreign countries," he said.