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BB to allow local firms to invest abroad: governor

News Published: Monday, Jul 08, 2013

Published: Monday, July 8, 2013

BB to allow local firms to invest abroad: governor

Star Business Report

The central bank is set to allow local corporate firms to invest abroad, coming out of its decade-old shyness about the matter.

“The economy is in good shape, and so are the reserves. Our companies are increasingly becoming financially sound, so if they want to invest abroad, let them be,” Atiur Rahman, Bangladesh Bank (BB) governor, said yesterday. He added that the central bank is open to good proposals.

“However, our decision will be on a case-to-case basis — we are doing an experiment. We cannot do it on a large scale,” Rahman told reporters after addressing a seminar on international financing for private sector to promote economic growth, organised by Policy Research Institute (PRI).

The move would be welcomed by many local firms who have been raring to spread their geographical reach.

For example, PRAN-RFL Group has been seeking permission from the BB for nearly a decade to invest in the northeast region of India.

The BB has already given the nod to a local firm to invest in Myanmar, Rahman said.
At the programme, analysts shared difference of their opinions regarding allowing the private sector to borrow from international market.

Ahsan H Mansur, executive director of PRI, said borrowing by private sector from international market should be opened up.

“It creates impetus for liberalisation,” he said, adding that borrowing from the international market would be cheaper than the local banking sector, where interest rates are very high.
“It will also create pressure on the local banks to bring down their interest rates. Why should we have to pay 19 percent interest rate where it is possible to get loan at 2-3 percent rate of interest?”

The former IMF top official also said the country needs major investments in both export earning sectors and infrastructure to accelerate its economic growth.
“Bangladesh’s taka is strongest in South Asia. We need to capitalise it,” he added.
Ifty Islam, managing director of AT Capital, too, is in favour of allowing corporates to borrow abroad.

“Now is the right time. With the government set to launch a sovereign bond, it also makes sense to allow Bangladeshi corporates to borrow in international bond market.”
The BB governor, however, said that the country has already started allowing private sector to borrow from the international market.

“But, we shall need to continue to remain cautious, closely monitoring the volume and maturity profile of external debt build-up, both in the public and private sectors, to protect debt sustainability.”

“You all are aware of the many recent and past crisis episodes from excessive external indebtedness, both in developing and developed economies,” he added.

Mirza Azizul Islam, former adviser to the caretaker government, shared the same view.
He said the repayment of loans is based on foreign currency and if the various sectors of the economy are not strong enough to earn enough foreign currencies, there is a potential risk.
He said the borrowing by private sector from international market might be allowed in selective sectors.

Zaidi Sattar, chairman of PRI; Fridtjof Rusten, chief financial officer of Grameenphone; Muhammad Aziz Khan, chairman of Summit Group, also spoke at the discussion chaired by former finance minister M Syeduzzaman.