Locals elbow out overseas consultants in foreign loan negotiations

Shah Alam Nur | Published: December 28, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

Local consultants are now taking the lead in mediating foreign loans in a welcome shift of role-play in consultancy which used to be done by overseas agents, industry-insiders said.
Experts, however, said the local consultancy boom has helped enhance negotiation power in getting foreign credits. And this homespun expertise is resulting in robust growth of loan disbursement. Â
According to a latest survey done by Bangladesh Bank (BB), the Board of Investment (BoI) scrutiny committee approved $5.53 billion foreign loans for local private-sector enterprises from 2009 through March 2014.
According to the survey, the BoI scrutiny committee approved $412 million in 2009, $302 million in 2010, $936 in 2011, $1.579 billion in 2012, $1.555 billion in 2013 and $746 million in the first three months (January-March) of the outgoing calendar year.
According to the BB survey, a good number of sectors like RMG, footwear, knit garments, agricultural products, air transport, telecommunications, chocolate confectionary and food, shipping lines, power generation, pharmaceuticals, cement and steel mills are securing foreign loans for
increasing production capacity.
The survey shows these loans being used mostly to import foreign capital machinery to expand the existing projects and to establish new units as well.
"The local consultants are playing the key role in getting foreign credits from international financial institutions," Abdus Salam Murshedy, managing director of Envoy Group, a leading apparel manufacturer, told the FE.
He said earlier the local entrepreneurs used to seek help from overseas consultancy firms. But local experts have now become capable of negotiating with foreign financial outfits to get credits.
"The local entrepreneurs have spent huge amount in consultancy fees to foreign consultants, but now local experts are getting the charge as a number of domestic consultancy firms have emerged in recent times," said the leading entrepreneur about the paradigm change on the financial front.
Mr Murshedy, also former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said their company, Envoy Textiles Limited, has received $10 million in foreign credits in 2013 for business expansion.
He said for building a green factory, a foreign loan worth more than $15 million is now in pipeline where a local advisory firm is dealing with the matter to help him.
He said the foreign credits are helping increase the number of green factories across the country.
However, a high official of the BoI said, "The country's large private entrepreneurs have been turning to foreign credits for low rates of interest."
He said interest rates in foreign borrowing are below 5.0 per cent but the local banks' average lending rate is 16 per cent.
He said during the period from January to November 2014, the BoI scrutiny committee had approved every month, on average, $180 million worth of foreign credits for local private-sector businesses.
"Lower rates of interests, hassle-free disbursement and the flexible repayment period and conditions are attracting local companies to foreign credits," he said
Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said country's investors are turning to foreign sources, which are putting "unwritten pressure" on local banks to bring down the rate of interests against lending.
He said many local banks had already reduced their lending rates slightly, from 15 per cent, facing the pressure.
"Investors will soon become interested to take loan in local currency if the trend of lowering lending rate continues," he added.
Anwar-Ul-Alam Chowdhury (Parvez), Managing Director of Evince Group, said due to local consulting firms, their negotiation power increased as for getting foreign loan they have to fulfill some criteria.
He said a number of local experts, having experience in international financial institutions like the World Bank, the IMF, ADB and IDB are working as negotiators after their retirement from the global organisations.
According to the BOI, proposals from more than 100 local companies for foreign credits worth $1.00 billion are now awaiting approval by its scrutiny committee.
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