When I returned from an assignment in India in 1988, I was posted at the wage earner’s branch of the what was then called ANZ Grindlays Bank, working as its branch operations officer as a stop-gap before my transfer to Grindlays’ country treasury division.
I remember Mr Allah Malik Kazemi of Bangladesh Bank telling me: “When you are receiving foreign exchange, don’t worry at all. When you are remitting outside, be careful and ensure compliance to all guidelines.”
Since then, Bangladesh’s economy has advanced much farther and has grown much faster, becoming worth nearly $200bn. Our export has crossed $30bn, inward remittance is at $15bn, and more importantly, our foreign exchange reserve is almost worth $24bn.
Yet, there are stringent controls in place on foreign exchange inflow and outflow. One can’t bring in more than $5,000 in cash without making a declaration at the airport. Our individual travel quota has been increased from $5,000 to $7,000 recently, along with a few other relaxations in the foreign exchange regime.
Though I am aware of Bangladesh being a “money laundering risk” country, and most of the monetary transactions are carried out in cash only, my friends could not figure out why, with this high foreign exchange reserve, a steady growth in foreign exchange receipts, and the central bank being quite watchful (read laundering money), what exactly is the problem with a returning passenger bringing in $10,000 with them and depositing it in their NFCD or RFCD accounts?
Banks in return can support the vibrant entrepreneurs with foreign currency loans at attractive rates. The client himself or herself can enjoy a lot of incentives with his/her possession of the foreign currency.
There will be less individuals going to banks or the central bank for outward remittance approvals.
Similarly, our overseas travels have increased manifold, with regional traffic almost reaching the limit. I don’t see much of a problem in increasing the travel quota too, up to $10,000 or $15,000.
Yes, Bangladesh Bank seniors and officials as a whole are very helpful, and at times very prompt.
But what do they do when their table is full with tiny little outward remittance requests? Even with a positive mindset, they can’t do much, because of the constraints being put in their way through the 1947 Foreign Exchange Regulation Act.
Prudential guidelines issued at frequent intervals cannot keep pace with our business growth and diversity warrants. Bangladesh foreign exchange regime is still quite controlled.
These controls are mostly based on an East India Company mindset, which seeks to limit the flow of foreign currency abroad by bureaucratic fiat. Businesses and individuals have to endure unfairly restrictive hurdles to transfer funds abroad.
The difficulties imposed on Bangladeshi companies wishing to seek to invest and compete internationally places our economy at a major disadvantage to competing nations, especially those marked under Goldman Sachs’s Next 11 list.
One could guess how, far from doing good, the current laws create incentives for corruption in bypassing the law and facilitate the growth of illegal and un-taxed money channels. It is the rigidity of exchange control procedures which support corrupt officials and encourage informal and illegal channels, undermining the aim and spirit of anti-money laundering laws.
Given the success of export industries and expatiates, remitting money has helped build up record foreign currency reserves, but capital controls are actively stopping these flows from being put to the most productive use. Consumers also suffer as the policy prevents them from taking advantage of lower global market prices on many products.
The best way to get out of this trap is to lift currency controls so that there is not much incentive for people to hide their capital and income. The government should not see it as its job to restrict people sending legitimately-earned money abroad for legitimate reasons.
Our economy can only benefit from this. Removing controls would, with one stroke, both curb illegality and increase opportunities to attract and make new investments.
Bangladesh Bank has been contemplating going for further deregulation in the foreign exchange regime for a long while. Development partners were seen keen to help them out to update the 1947 foreign exchange regulation, but the pace is very low. Blemishes are being added to the Law Ministry or even the Finance Ministry.
We are lagging behind our peers in liberalising markets. Our potential growth is being hampered, and entrepreneurs and remitters are being actively discouraged.
Do we want this? Absolutely not. We need to move now.
