Bangladesh. Country Profile

Transcription

1 ` Bangladesh Country Profile

2 Contents Country Overview 1 Clearing Systems 3 Foreign Exchange Controls 4 Taxation 5 Investment Opportunities 6 Trade Regulations 7 Citi Solutions and Services 9

3 Country Overview Banking Holidays in Bangladesh 2012 Eid-e-Miladun-Nabi(S) (1) February 05 Shahid Day and International Mother Language Day Birthday of the father of the Nation Bangabandhu Sheikh Mujibur Rahman February 21 March 17 Independence and National Day March 26 Bengali New Year s Day April 14 May Day May 01 Buddha Purnima (Baishakhi Purnima) (1) June 04 Bank Holiday July 01 Shab-e-Barat (1) July 06 Janmashtami August 09 National Mourning Day (1) August 15 Shab-e-Qadar (1) August 16 Juma-tul-vida (1) August 17 Eid-ul-Fitr (1) August Durga Puja (Bijoya Dashami) October 24 Eid-ul-Adha (1) October Key Facts Capital City Dhaka Population 142,319,000 (as per latest census 2011) Currency Bangladeshi Taka Currency SWIFT Code BDT Exchange Rate (1) USD/BDT (July 2012) GDP (2) USD billion (2011) GDP Growth Rate (1) 6.71% (June 2011) Exports (1) USD billion (FY ) Imports (1) USD (FY ) Inflation Rate (1) 8.56% (June 2012) Credit Rating (S&P) BB- (June 2011) Source: IMF/CIA World Factbooks. (1) (2) Moharrum (Ashura) (1) November 25 Victory Day December 16 Christmas Day December 25 Bank Holiday December 31 (1) Subject to Moon Sighting. Bangladesh Country Profile 1

4 Country Overview Banking System The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4 State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 non-bank financial institutions. Moreover, MRA has given license to 298 Micro-credit Organizations. The financial system also embraces insurance companies, stock exchanges and co-operative banks. Bangladesh Bank, as the central bank, has legal authority to supervise and regulate all the banks. It performs the traditional central banking roles of note issuance, and being banker to the government and banks. It formulates and implements monetary policy, manages foreign exchange reserves and supervises banks and non-bank financial institutions. The commercial banking system dominates the financial sector with limited role of Non-Bank Financial Institutions and the capital market. The Banking sector alone accounts for a substantial share of assets of the financial system. The banking system is dominated by the 30 domestic private banks, which together control more than 61% of deposits and operates 2827 branches (36% of the total) as of March 31, The Capital market, an important ingredient of the financial system, plays a significant role in the economy of the country. The Securities and Exchange Commission exercises powers under the Securities and Exchange Commission Act It regulates institutions engaged in capital market activities. Bangladesh Bank exercises powers under the Financial Institutions Act 1993 and regulates institutions engaged in financing activities including leasing companies and venture capital companies. Citi in Bangladesh Citi started operation in Bangladesh by setting up a representative office in In 1995, a full service branch was opened in Dhaka. Citi expanded its business in Bangladesh by opening a branch in the port city Chittagong in 2000 and another branch at Gulshan, Dhaka in Citi has established a strong presence in Bangladesh, It now has 4 branches, 4 service outlets and employs over 190 employees. Citi s clients in Bangladesh comprise both public and private sector institutions. Citi is the recipient of numerous awards recognizing its successes in Bangladesh, including Best International Trade Bank in Bangladesh by Trade Finance (2011) and Best Corporate/Institutional Internet Bank in Bangladesh by Global Finance for four years in a row. Head Office Address Citibank, N.A. 109 Gulshan Avenue Dhaka-1212 Bangladesh Location of Branches Motijheel, Dhaka (Also functions as the Country Processing Center) Gulshan (Corporate Office), Dhaka Dhanmondi, Dhaka Offshore Banking Unit (OBU) Desk at Dhaka EPZ Offshore Banking Unit (OBU) Desk at Adamjee EPZ Agrabad, Chittagong Offshore Banking Unit (OBU) at Chittagong EPZ Service Outlet at Uttara, Dhaka 2 Bangladesh Country Profile

5 Clearing Systems BACPS (Bangladesh Automated Cheque Processing System) was rolled out by Bangladesh Bank on October 7, At present Dhaka, Chittagong, Barisal, Sylhet and Rajshahi clearing houses are covered under BACPS. All instruments at these clearing houses are processed through BACPS. The automated clearing system significantly reduces settlement time to one day for clearing checks at these clearing houses which previously used to take a week or more. Bangladesh Bank has also rolled out BEFTN (Bangladesh Electronic Fund Transfer Network) across the country from February 28, 2011 to facilitate electronic fund transfer between the banks. CitiDirect Citi s award winning internet banking platform is already equipped for integration with BEFTN for the clients. BEFTN provides a secure and a faster settlement of interbank fund transfer which brings efficiency to the client s fund management and eliminates paper-based processing. Funds Availability Schedule Clearing System Cut-off Time Funding Date Client DR/ CR Date Client Value Date Local Currency Electronic Transfers 6:00 PM Day 0 Day 1 Day 1 Local Currency Manager s Check Other Banks Local Currency Book-to-book Foreign Currency Transfers Check Deposit (Dhaka-Ctg) 4:00 PM (Sun-Thurs) 4:00 PM (Sun-Thurs) 1:00 PM (Sun-Thurs) 4:00 PM (Sun-Thurs) Day 0 Day 1 Day 1 Day 0 Day 0 Day 0 Day 0 Day 1 Day 1 Day 0 Day 1 (1) Day 1 Bangladesh Country Profile 3

6 Foreign Exchange Controls Current Foreign Exchange Practices The government has significantly liberalized the task of foreign exchange administration from the central bank (Bangladesh Bank) to commercial banks. Bangladesh Bank has set certain parameters regarding foreign exchange dealings and delegating more discretionary powers to commercial banks. All foreign currency denominated transactions require post-facto reporting to Central Bank some of which are also subject to pre/post-facto approvals. Structure of the Market Since 1993, Bangladesh Taka is current account convertible on account of Foreign Exchange regime. As yet there is no capital account convertibility. Until May 2004, Taka was a managed float where the Bangladesh Bank would give a band of buying and selling rates and the commercial banks would quote to their customers a price within that band. From time to time, Bangladesh Bank would revise the band depending upon their economic and monetary policy. As Bangladesh has a trade deficit, the currency was being typically devalued and for last 10 years the average devaluation rate was about 6%. On May 31, 2004, Taka was declared floating and the central bank stopped providing any band. Commercial banks decide the customer FX rate depending upon the supply and demand of the interbank market. However, the currency is still not capital account convertible and various restrictions on the transaction of foreign currency still exist. Instruments in the Market Typical instruments are the spot and forward. However, there is no active forward market. Bangladesh Bank allows commercial banks to provide forward hedge for importers. Some derivatives are also allowed on a caseby-case prior approval basis from the central bank. Currency Convertibility Local currency is freely convertible domestically only. The currency is not capital account convertible and various restrictions on the transaction of foreign currency still exist. Currency conversion should be made through customer s designated bank on submission of necessary documents and attestations. Bangladesh Bank scrutinizes for post-facto approval. Remittance of Dividends and Profits Allowed. And it should be made by the Bangladeshi companies concerned to authorized dealers subject to submission of necessary documents. Repatriation of Capital Allowed; subject to submission of necessary documents. For more detailed information, please refer to URL of the Central Bank: Bangladesh Bank ( 4 Bangladesh Country Profile

7 Taxation Corporate Income Tax Tax is applicable at the rate of 42.5% for banks, insurance companies, and financial institutions. Mobile phone operator companies are taxed at the rate of 45%, with a lower rate of 35% for publicly traded mobile operator company. And all the other publicly traded companies are taxed at the rate of 27.5%. For non-listed companies, tax is applicable at the rate of 37.5%. Regardless of loss or profit, the companies are required to pay 0.5% of gross profit as a minimum tax. Withholding Tax Dividends paid to a non-resident are subject to a 20% withholding tax unless the tax is reduced under a tax treaty. And interests and royalties paid to a non-resident are subject to a 10% withholding tax unless the tax is reduced under a tax treaty. Other Tax The federal government imposes customs duty, excise tax, goods and services Tax (GST), as well as a production levy on crude oil, some condensates and naturally occurring liquefied petroleum gas. Employers are liable to a fringe benefits tax levied at 48.5% on the taxable value of fringe benefits (e.g., private use of a car) provided to their employees. States impose a payroll tax, stamp taxes, and land tax on land owned. Municipalities levy rates (property taxes) on the unimproved value of land owned. Tax Holiday Tax holiday is allowed for certain industrial undertaking, tourist industry and physical infrastructure facility established between July 1, 2011 and June 30, 2013 in fulfilment of certain conditions. Value Added Tax The general rate of value added tax in Bangladesh is 15% imposed on goods and services. Capital Gain Tax Capital gain tax of 10% for institutional investors has been introduced in the Bangladesh capital market since July 1, For more detailed information, please refer to URL of the Tax Authority: National Board of Revenue ( Bangladesh Country Profile 5

8 Investment Opportunities SND (Special Notice Deposit) Accounts for Corporate Local companies can open interest bearing Short Notice Deposit (SND) accounts. Operation in such accounts is under strict control and guideline of Central Bank. Clients are required to provide 7 days prior notice for any withdrawals in order to be eligible for receiving interest in an SND account. Also auto sweep facility from SND account is not allowed since it violates the spirit of 7 days prior notice. However, one way sweep from a current account to SND account is allowed. Banks, on the other hand, may open such Taka SND accounts in the names of foreign diplomatic missions and their expatriate personnel, foreign airlines and shipping lines operating in Bangladesh, international non-profit organizations including charitable organizations, UN organizations and their respective expatriate personnel. Interest can be paid thereon provided that the amount of interest accrued on balances of these accounts will be disbursed locally in non-convertible Taka and no part of the earned interest can be remitted abroad at any stage. Conditions of SND operation would also prevail for such entities while providing interest. Government Papers Government of Bangladesh issues government papers for domestic borrowing, and these papers are available in different terms with matching interest rates. Citizens can purchase these papers from commercial banks whereas the commercial banks in turn purchase these papers from Bangladesh Bank. Interest in government papers, which have maturity of more than 12 months, is not paid in case they are redeemed within one year after purchasing them. Mutual Fund Mutual Funds is one of the recent phenomena in the Bangladesh market, though the concept was introduced way back in 1980s by Investment Corporation of Bangladesh ( ICB ), a state owned investment entity. The idea of the Mutual Funds was to institutionalize the retails based investment in the country s capital market. It was not until the year 2000 when the first mutual fund was launched by a privately owned asset management company. The concept of Mutual Fund boomed later onwards. At present, there are 36 mutual funds that are traded in the market inclusive of both open ended and close ended funds. Currently, there are 11 licensed asset management companies including ICB managing these funds. Stock Market There are two stock exchanges in the market, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). DSE was established as a public limited company in April 1954 while CSE in April There are 238 broker dealer members in DSE and 148 in CSE. CSE already offers online trading through internet while DSE is expecting to launch this service at the end of September this year. The activities of these exchanges are regulated by the Securities and Exchange Ordinance, 1969, Companies Act 1994 and Securities & Exchange Commission Act, The market regulator is the Securities and Exchange Commission. Instruments Traded: Equities, mutual funds, debentures and corporate bonds. Market Capitalization: DSE Market Capitalization: USD 32 billion (As of April 25, 2012) CSE Market Capitalization: USD 25 billion (As of April 25, 2012) Companies Listed: The total number of Listed companies in DSE and CSE are 232 and 204 respectively. There are 283listed securities traded in DSE and 248 in CSE. 6 Bangladesh Country Profile

9 Trade Regulations Import Import is allowed under the following methods in Bangladesh: Import against Irrevocable Letter of Credit (LC) Import under Documentary Collection (Document against Acceptance/Document against Payment) for raw materials and capital machinery Open Account Import is allowed for Type A entities only and for other entities up to US$50M per financial year Advance Payment is allowed only under certain conditions: the purchase contract with Supplier has to specifically require advance payment; the Supplier has to furnish repayment guarantee acceptable to the Bank from a bank abroad Import LC can be issued under usance terms for capital machinery, industrial raw material, coastal vessels, agricultural implements, chemical fertilizer and lifesaving drugs. Usance interest, if any, should not be at a rate higher than 6% for the relative period. The prices of goods for import should be internationally competitive and reflect prevailing market price. Import of Finished Goods by commercial importer can be only under Sight payment terms. All Importers are required to have a valid Import Registration Certificate issued by the Chief Controller of Imports and Exports (CCI&E) to be able to import. Remittance in excess of value of the LC is not permissible without prior approval of the Central Bank except for payment of normal bank charges of the foreign correspondents. Banks can open back-to-back import LCs against export LCs/export contracts received by export oriented industrial units operating under the Bonded Warehouse system. Importers cannot import under CIF Incoterm without pre-facto approval from the Ministry of Commerce. Banks are also allowed to discount/purchase accepted usance/deferred bills against import from abroad through their Off-shore Banking Unit. Export Export from Bangladesh is allowed under Irrevocable Sight Letter of Credit, Export Contract or Advance Payment. Open Account export is allowed only for Type A customers (100% foreign owned entities) in the country s special economic zones (Export Processing Zones). Export from Bangladesh has to be declared through EXP Forms (in Quadruplicate) for the purpose of clearance of goods through customs and reporting to the Central Bank. The EXP Form needs to be jointly signed by the exporter and the exporter s bank. All shipping documents covering goods exported from Bangladesh and declared on EXP form must be passed through the medium of a Bank within 14 days from the date of shipment. Exporters have to declare on the EXP form that the invoice value also constitutes fair value of the goods. Export Proceeds should be repatriated to the country within 4 months of export. Any overdue bills need to be reported to the Central Bank on a quarterly basis. In respect of export of goods from Bangladesh to foreign countries by land route or by sea, the Railway Receipt, Bill of Lading and any other documents of title to cargo should be drawn only to the order of the Negotiating Bank. However, in case of export of goods, full payment for which has been received in advance through the designated exporter s bank, the document of title of cargo can be endorsed by the designated exporter s bank to the order of the Importer abroad. Bangladesh Country Profile 7

10 Trade Regulations For export of goods from Bangladesh to foreign countries by air, the Airway Bill should be drawn to the order of the Importer s Bank abroad. However, in case of export of goods, the documents may be made out to the order of the exporter s bank and further endorsed to the order of the Importer if full payment has been received in advance through the designated exporter s bank. However, in the case of export from Type A industrial units operating in the Export Processing Zones, the Bill of Lading/Airway Bill/other documents of cargo can be drawn to the order of the exporter s bank and the bank may blank endorse or endorse in favour of the consignee as per terms of the LC/export contract. 100% export oriented units can retain a certain percentage of earned export proceeds in a foreign currency account (Exporter s Retention Quota Account) and later use the funds for bona fide business purposes. Export Oriented Ready Made Garments Industry also enjoys various incentives from the government. Commission, brokerage or other trade charges due to be paid to foreign importers or agents by exporters in Bangladesh relating to the particular shipment may be deducted from the relative bill amount or the amount of the sale proceeds or remitted from Bangladesh after the full proceeds have been realized only up to a maximum of 5% of the value of the goods. 8 Bangladesh Country Profile

11 Citi Solutions and Services Account Services Allowed No Restrictions Material Allowed Straight Forward Regulations, Approval, or License Allowed Challenging Regulatory Approval, or License Allowed Subject to a Complex Set of Rules Strictly prohibited Non-Residents Residents Operating Accounts (1) (2) Onshore Local Currency Onshore Foreign Currency Offshore Local Currency Offshore Foreign Currency Overdrafts Onshore Local Currency Onshore Foreign Currency Interest-Bearing Accounts (3) (5) Onshore Local Currency Operating Accounts Onshore Foreign Currency Operating Accounts Time Deposits Onshore Local Currency: One Week Minimum Tenor Onshore Foreign Currency: No Minimum Tenor Domestic Notional Pooling (6) Onshore Local Currency Onshore Foreign Currency Inter-Company Lending Non-Resident to Resident Resident to Non-Resident Local Currency Foreign Currency Non-Residents Residents Local Currency Foreign Currency (Onshore) Bangladesh Country Profile 9

12 Citi Solutions and Services Central Bank and Other Regulatory Requirements All cross-border payments would also require supporting documents to be reported to the central bank Other Payment and Clearing Considerations for Treasury Notes: Netting of payments between parties is disallowed Non-residents making pay-on-behalf-of residents is disallowed 1. Special notice deposit account is available only in BDT. 2. Foreign currency current accounts may be opened under certain circumstances only, such as for exporters to retain export proceeds. 3. Current accounts are non-interest bearing. However it is possible to automate fund movements from current accounts to special notice deposit accounts to earn interest. 4. Interest rate on special notice deposit account is typically tiered according to balance and be similarly applicable to all account holders. 5. Bank interest received is subject to withholding tax of 10% for residents and non-residents. 6. Notional pool strongly rests on the bank s ability to enforce its right to set off balances in one account versus overdrafts in another account across legal entities. This right has not been sufficiently ascertained under Bangladesh law. 10 Bangladesh Country Profile

13 Notes

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