What benefits does the remittance-hungry country offer its expats?

According to a report appearing in the Daily Star on 11 August, Bangladesh Bank is relaxing the foreign exchange regulations in order to increase the flow of foreign currency and overcome the volatility in the foreign currency market. It was said that permission from the central bank would no longer be required to sign any agreement with concerned companies to bring in foreign exchange from overseas. However, once the agreement is signed, the central bank would have to be informed of the amount of foreign currency that has been brought in. Also, the previous requirement for a letter from the Bangladesh embassy in the concerned country regarding the signatory foreign exchange agency, has also been lifted.

According to Bangladesh Bank, over the past six financial years, remittance fell for the first time in the 2021-22 fiscal, by 15 per cent. Till 9 August, the forex reserves had been USD 39.66 billion. In the corresponding period last year, this was USD 48 billion. Notably, over 6 per cent of Bangladesh GDP comes from its overseas remittance. After exports, this remittance is the major source of foreign exchange in Bangladesh.

Earlier, at an event inaugurating 24 technical training centres in various upazilas, prime minister Sheikh Hasina had drawn the attention of the expatriate welfare and overseas employment ministry, saying that steps must be taken to facilitate Bangladesh's migrant workers to send back money through an easy process. Economists blame the government's erroneous policies and decisions to a great extent for the decrease in foreign exchange reserves. The government gets foreign exchange from the expatriates in two ways. One, expatriate workers regularly send money back home to their families dependent on their income. Two, opportunities are created for the expatriates to invest in the country. During the first government of Khaleda Zia, a law was passed in parliament for two bonds to be introduced for the expatriates. But in 2020 the government changed the law and limited the investment ceiling to Tk 10 million and removed the scope for reinvestment.

According to government records, over 10 million Bangladeshi nationals are working overseas at present. Most of them are unskilled and work in Malaysia or countries of the Middle East. While their wages are low, they send their entire earnings to their families back home. It takes years for many of them to repay their debts. They are not able to invest much. But physicians, engineers, teachers, consultants and the expatriates with a relatively higher income, send a large part of their earnings back as investment. They invest in foreign currency and get it back here in local currency. Rather than investing in the purchase of houses, flats or land, many invest in government bonds because the housing sector businesses are not always able to provide the clients with plots as promised. The clients are made to wait for years. So the expatriates prefer to invest in expatriate bonds rather than in plots or land. But due to the government's arbitrary decision, many have been discouraged to buy bonds. This had put a serious dent in investments.

According to a report of Prothom Alo on 6 April, the government released a new circular almost halving the profits on the US dollar premium bond and the US dollar investment bond for the expatriate Bangladeshis. Both the bonds would provide profits in four phases so long, now this has been reduced to three. Previously while the maximum investment in the two bonds was dollars equivalent to Tk 10 million, the ceiling has been removed. Yet, the interest rate has been decreased. For so long the profit on investment up till USD 100,000 in US dollar premium bonds was 6.5 per cent. Now it is 4.5 per cent. Similarly in the second year, it will be 5 per cent instead of 7 per cent and in the third year, 5.5 per cent instead of 7.5 per cent.

Also, in the case of investments from USD 100,001 to USD 500,000, at the end of the first year the profit will be 3.5 per cent, at the end of the second year 4 per cent and at the end of the third year, 4.5 per cent. And for investments of USD 500,001 and above, in the first year the profit will be 2.5 per cent, in the second year 3 per cent and in the third year 3.5 per cent.

In the case of US dollar investment bonds, investments up till USD 100,000 will yield profits of 4 per cent instead of 5.5 per cent at the end of the first year, 4.5 per cent instead of 6 per cent at the end of the second year, and 5 per cent at the end of the third year. In another circular of Bangladesh Bank on 1 August, it was said the new interests rates will be added to the non-resident foreign exchange benchmark reference rate. That means the 2.25 per cent interest rate will apply to the three-year dollar investment benchmark reference rate. Meanwhile, the 3.25 per cent interest will be added to the benchmark reference rate for three to five years.

There is another bond for expatriate Bangladeshis, introduced by the National Savings Directorate. This is the Wage Earner Development Bond. Nothing was mentioned about the profit and the decrease in phases of this bond. The profit rate of this bond is 12 per cent after 5 years.

With the investment ceiling being fixed, the scope for reinvestment being removed and with the Covid outbreak, expatriates' investment in the bonds had dropped. This recently caught the government's attention. On 21 December 2020 the government had set a ceiling of Tk 10 million per expatriate for investment in the three bonds. And automatic renewal of the investment was also closed down. In the latest circular of the finance ministry, while the ceiling has been lifted in investment in the US dollar bond, nothing has been said about reinvestment. There is also confusion as to who will and who will not receive expatriate bond facilities.

A Bangladeshi sailor working on a vessel travelling overseas, mentioned another problem in a letter sent by e-mail. He said, "I work for an overseas vessel, not owned by the Bangladesh government. In that consideration, I am entitled as a 'wage earner'. Bangladesh Bank, that is, the government, by means of a notice cancelled the rights of certain categories of wage earners from buying wage earner bonds (saving certificates purchased in foreign currency), and sailors are included in this category." The sailor reasoned that as the Wage Earner Development Bond was to be purchased with legitimately earned foreign currency, then the sailors too should be entitled to purchase this. Sailors, like other expatriates, contribute to the country's forex reserves and so deserve to enjoy these facilities too.

An expatriate from Bahrain wrote, expatriates send back money in two ways through legal channels -- in dollars through foreign currency accounts and in taka through general accounts. Wage Earner Bonds can be bought with dollars sent to the foreign currency accounts. The wage earner reinvestment system was intact till November 2021. Then suddenly the government stopped the re-investment system. At the same time it limited the purchase of bonds to Tk 10 million. It later lifted the Tk 10 million ceiling, but did not restart the reinvestment facility. As a result, the expatriates lost interest in investment. When the reinvestment facility was in place, many expatriates invested in bonds rather than buying land or houses and this brought in large amounts of foreign currency to the country. But without the reinvestment facility, may are not bringing their earnings back home, but going to countries where investment is easy.

Certain expatriates living in Australia, Canada, the US and the UK, have also expressed the same sentiment. They say that if the government wanted the expatriates to invest, it should then lift all restrictions from the expatriate investment bonds. They should be allowed to reinvest. Those working in the country, receive pension and a lot of other benefits. Why should there be restrictions in the investment of those who work their entire lives overseas and invigorate the country's economy?

* Sohrab Hassan is joint editor of Prothom Alo and a poet. He may be contacted at [email protected]