Foreign investments

Financial sector, legislation prepared to encourage foreign investment

Bangladesh’s banking sector, capital market and legal framework are well prepared to foster foreign investment, with the government working swiftly on remaining tasks, speakers said at different sessions on the second day of the International Investment Summit. 2021, Monday.

In a session titled “Financial Services: Ensuring Sustained Growth,” central bank officials and banking professionals said the country’s banking sector poses no risk to investors even during the pandemic; instead, he offered full support.

The much-discussed NPLs in the banking sector were manageable and would not be a problem for the business ecosystem as the central bank tried to control it, Bangladesh Bank Governor Fazle Kabir said.

“And we have a financial ecosystem based on electronic payment for foreign investors, as well as online transaction facilities, a liberal exchange rate regime, an easy exit policy, liberal financial flows and a comprehensive green financing plan.” , he added.

“So investors can come here without fear.”

During the session, Selma Rasavac, IFC Regional Advisory Services Director for South Asia, said: “As an emerging economy, Bangladesh needs more international funding. increase investments in different sectors in the coming years. ”

Planning Minister MA Mannan, Finance Division Secretary Abdur Rouf Talukder and Bangladesh Bankers Association President Ali Reza Iftekhar also spoke on the occasion.

Capital market: the rising tiger

The country’s capital market offers an excellent opportunity for international investors, as the market diversifies more quickly into the areas of fixed income, asset-backed securities, alternative investments and collective investment schemes to offer more options to investors, in particular international funds and non-resident individuals. Bangladesh Securities and Exchange Commission (BSEC) Commissioner Dr Shaikh Shamsuddin Ahmed said in a keynote address.

In the “Capital Markets: The Rising Tiger” session, he said, the government offers various tax incentives to capital market investors, while technology-dependent market infrastructure makes it easy to invest. in the market from any part of the world.

Along with the introduction of debt instruments to finance large infrastructure and to provide investors with fixed income alternatives, BSEC is also working to open commodity trading on the stock exchange in the port city of Chittagong Stock. Exchange.

Dhaka Stock Exchange Managing Director Tarique Amin Bhuiyan said the country’s first stock exchange has opened its international office to serve foreign investors and is increasing partnerships with market intermediaries around the world to attract investors.

Green Delta Capital CEO Rafiqul Islam said foreign stands of brokerage firms would facilitate inbound portfolio investments and Islamic instruments have the most potential.

Almost a quarter of the country’s debt securities were Sharia-compliant and the country is expected to expand it as Islamic instruments can attract the widest range of investors, while traditional bonds are not investable for compliant investors. to Sharia law.

Appropriate distribution internationally can help Bangladesh reach or even overtake Malaysia as an Islamic finance hub in five years, he hoped.

Adeeb H Khan, Senior Partner, Rahman Rahman Huq, KPMG in Bangladesh, said Bangladesh has adopted the International Financial Reporting Standard (IFRS) better than any other country in the region.

The banks’ reporting standard might deviate slightly from IFRS due to central bank guidance here, he added.

Citing the progress made in financial reporting and auditing after the formation of the Financial Reporting Council, he said: “International investors should now have confidence in Bangladesh’s financial statements. “

Maurits Pot, founder and chief investment officer of Dawn Global Management, UK, which manages exchange-traded funds (EFT) in frontier markets, which also includes Bangladeshi stocks, said the ETF is the industry to fastest growing in the world and that Bangladesh is the region’s only frontier market. under the cover of his company which does not yet have an ETF.

Foreign investors have been net sellers for the past five years in the Bangladesh capital market and he thinks the funds would come back here, but in different ways: it can be ETFs, fixed income or mutual funds, instead of active investments in specific stocks of the company.

He urged that more quality companies be listed on the stock exchange, especially in the digital technology sector, while the liquidity of the securities market should also be increased to attract foreign investors.

Arif Khan, vice president of Shanta Asset Management Limited, said the entry process for foreign portfolio investors should be made easier.

He recommended opening a Hassle-Free Online Non-Resident Investor Online (NITA) Taka Account, an e-KYC, and urged custodian banks to play a more favorable role for foreign portfolio investors.

Khan also expressed optimism that the capital market would see strong growth from its current base GDP-to-market cap ratio of 15%.

He urged to strengthen the base of institutional investors, especially the mutual fund industry, to avoid frequent market volatility amid the dominance of retail investors.

Christina Ongoma, Head of Investments, Upstream Financial Institutions Group Asia, International Finance Corporation, spoke at the session moderated by Chittagong Stock Exchange Chairman Asif Ibrahim.

In the speech of the session chair, the Prime Minister’s Economic Advisor Dr Mashiur Rahman explained the country’s economic progress and said that Bangladesh is at the crossroads of a major transformation of its economy, which requires large investments.

He also insisted on improving the investment / GDP ratio because the savings / GDP ratio was good here.

The changing legal infrastructure

In a separate discussion session on legal infrastructure, the president of the Metropolitan Chamber of Commerce and Industry, lawyer Nihad Kabir, analyzed the country’s legal framework for investment, trade and commerce. .

Foreign investors are very concerned about taxation, dispute resolution, business registration, exit policy, and the country’s land and labor laws.

Bangladesh offers moderate and sometimes generous legislation in most areas, while still lagging behind in terms of speed and simplification of processes, she said.

She also praised recent developments in reducing corporate taxes, accelerating the registration of company land, efforts to resolve trade disputes by other means, and the incentives and protection of foreign investment in the country, as well as Bangladesh’s bilateral treaties with 36 countries to avoid double taxation.

Former legal secretary Mohammad Shahidul Haque said the bold and accelerated legislation of a decade ago had quadrupled electricity production and boosted export processing zones, high-tech parks and hotspots. economic.

The spirit of the legislation is intact and the government will reframe old laws regarding foreign exchange, contracts and arbitration, keeping the Fourth Industrial Revolution in mind, legal secretary Md Moinul Kabir said.

Legal expert Barrister KM Tanjib-Ul-Alam said foreign companies are having a free hand and doing business in Bangladesh across a wide range of sectors and are enjoying a nice comeback.

Lawyer Sameer Sattar praised the government for allowing mediation in dispute settlement and said it should sign the Singapore convention for international investor confidence

Dr Rumana Islam, Professor, Department of Law, University of Dhaka, stressed the need for increased collaboration between universities and the state while formulating legal frameworks for trade and investment.

Bilateral investment treaties are more focused on investment and the interests of the country must be better taken into account, she said.

Law Minister Anisul Huq said that to achieve the government’s target in terms of economic indicators such as investment to GDP, private investment to GDP and FDI ratios per relative to GDP, his office is working on all the necessary legal reforms.

Affirming that foreign investment in Bangladesh is risk-free, he said, “On behalf of the government, I assure you that all measures are taken to attract, protect and promote foreign investment in Bangladesh.

Dr M Masrur Reaz, President of Policy Exchange Bangladesh, moderated the session.

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