Foreign Exchange Regulations applicable for enterprise and developers operating in Economic Zones (EZs) in Bangladesh

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Foreign Exchange Policy Department
Bangladesh Bank
Head Office, Dhaka. www.bb.org.bd.
FE Circular No. 04 Date : 14 February, 2016
All Authorized Dealers of
Foreign Exchange in Bangladesh
Foreign Exchange Regulations applicable for enterprise and developers operating in Economic Zones (EZs) in Bangladesh

1. Introduction : By an Act of Parliament, namely ‘The Bangladesh Economic Zones Act, 2010 (Act No. 42
   of 2010), attached herewith, Economic Zones (EZ) will be established in all potential areas including backward and underdeveloped regions under the auspicious and supervision of the Bangladesh Economic Zones Authority (BEZA). The broad features relating to the operations of the industrial enterprises in the zones will be contained in the 'Principles and Procedures governing setting up of industries in Economic Zones' to be issued by BEZA.
2. Division of an economic zone into several areas: As per the said Act, any economic zone may be divided
   into the following areas :
   (a) Export Processing Area- Specified for export oriented industries; (b) Domestic Processing Area- Specified for industries to be established to meet the demand of the domestic market; (c) Commercial Area- Specified for business organizations, banks, warehouses, offices or any other organization; (d) Non-processing Area- Specified for residence, health, education, amusement etc.
3. Foreign Exchange Transactions by the Entities in EZs
   Foreign exchange regulations applicable for persons resident in Bangladesh shall be applicable equally for the entities in EZs also, if not otherwise directed by Bangladesh Bank. The summary of these regulations are enumerated in Guidelines for Foreign Exchange Transactions (GFET) (Vol.- 1 and 2) published by Bangladesh Bank (BB), Foreign Exchange Circulars and Circular Letters issued/published by Bangladesh Bank (BB) from time to time in its website. However, based on the division of economic zone areas, the exchange regulations may be categorized under the following two broad heads:
   A. Foreign exchange regulations for the units located in ‘Export Processing Areas (EPAs) of EZs.

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B. Foreign exchange regulations for the entities of EZs other than as mentioned in 'A' above. Besides, developers of the EZs including those of with foreign investment (owned wholly or partly by foreign individuals/institutions) will fall under this category in terms of applicable foreign exchange regulations.
4. Foreign exchange regulations for the units located in ‘EPAs of EZs :
For foreign exchange regulation purpose, the units located in the EPAs of EZs shall be categorized as follows:
(a) Type A: 100 percent foreign owned including those owned by Bangladeshi nationals ordinarily resident abroad; (b) Type B: Joint venture projects between foreign and Bangladesh entrepreneurs resident in Bangladesh; (c) Type C: 100 percent Bangladeshi entrepreneurs resident in Bangladesh. (I) Exports from EPAs of EZs : Exports from EPAs of EZs (including sales to Bangladesh like within the same EZ, in other EZs, in EPZs, other areas of Bangladesh) are subject to the usual requirement of declaration of exports in 'EXP' Form and repatriation of export proceeds mentioned in Chapter 8 of the GFET 2009 (Vol-1) and related FE Circular/Circular Letters issued thereafter. For identification, EXP Forms for these exports should be rubber stamped or over printed with words " "EXPORT FROM EZ" in bold letters. Proceeds from such exports by entities of different types shall be retained and used through foreign currency accounts as mentioned in Section V, Chapter 13, GFET (Vol-1). Besides, equity from foreign shareholders and loan received in foreign currency from authorized sources may be credited in such foreign currency accounts of Type A and Type B units of EZs as above. Exporters of such areas may maintain Taka accounts in the same manner as mentioned in Section V of Chapter 13. (II) Sale of Bangladeshi goods or raw materials or nonphysical contents to EZ enterprises : Sales of Bangladeshi goods or raw materials or nonphysical contents to units located in the EPAs of EZs against payment in foreign currency shall be treated as exports from Bangladesh in accordance with Foreign Exchange Regulation Act 1947 (as amended upto Sep 09, 2015). Therefore, normal foreign exchange regulations concerning declaration of exports on EXP Forms in case of export in physical form and repatriation of proceeds is applicable to these exports to the units of EPAs of EZs. (III) Import by units of EPAs : For import by the units of EPAs of EZs, ADs shall abide by the instructions as mentioned in Para 20, Section -II, Chapter 16, GFET, 2009 (Vol-1). For reporting, usual IMP Form reporting procedures will, however, be applicable for imports (including admissible imports from Bangladesh or EPZs or other areas of EZ) by EZ enterprises ( EPAs and other areas) from abroad. (IV) Credit Facilities : For obtaining credit facilities by the units of EZs in EPAs, instructions mentioned in

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Section -II, Chapter 16 of GFET, 2009 (Vol-1) shall be applicable. However, for obtaining medium and long
term debt from abroad/ OBU, borrowing approval applications shall have to be submitted to Bangladesh Bank through BEZA following the procedures as mentioned in FEID Circular Letter No. 03, dated May 06, 2014. (V) Contribution of shareholders in Type B Units : In case of contribution of shareholders in Type B Units , relevant instructions as mentioned in Para 21, Section-II, Chapter 16 GFET, 2009 (Vol-1) shall be applicable. (VI) Import by type C units of EZs : In case of type C units of EZs in EPAs , if foreign currency balance is not sufficient to cover the cost of machinery and equipment to be imported from abroad, the shortfall may be made up, with prior Bangladesh Bank approval, by conversion of Taka into foreign currency . (VII) Repatriation of dividend to non-resident Shareholders of Type A and B units of EPAs of EZs:
ADs/(including OBUs in case of Type A units) may remit dividends favoring non-resident shareholders of Type A and B units of EPAs of EZs without prior permission of Bangladesh Bank following the procedures mentioned in Para 31, Chapter 10, GFET (Vol-1). Besides, before effecting such remittances, instructions/regulations of BEZA (if any) are to be complied on meticulously. (VIII) Repatriation of investment/capital by non-resident share holders Subject to adherence to the instructions of BEZA, Guidelines for effecting remittance of sales proceeds of non-residents' investment in Bangladesh will be similar as mentioned in Para 3, Chapter 9, GFET (Vol-1) and FE Circular 32 , dated August 31, 2014.
5. Foreign Exchange Regulations for the entities of EZs outside EPAs including developers of EZs.
Foreign exchange regulations for the entities of EZs (other than the entities situated in EPAs of the EZs) will be similar with those of situated outside EPZs and EPAs of EZs. Locally owned/controlled zone developers and industrial units in EZs will have to follow the similar exchange regulations like the entities outside EZs and EPZs. Likewise, foreign owned or foreign controlled entities/zone developers of EZs will follow the similar exchange regulations which are applicable for similar entities (foreign owned or foreign controlled) outside EZs and EPZs. However, the BEZA shall make arrangement to facilitate the foreign owned/controlled industrial units and zone developers in respect of concerned issues which may include issuing permission for repatriation of capital and dividends, royalties and technical fees, etc. Foreign exchange regulations for foreign investment in Bangladesh are enumerated in different chapters of the said Guidelines and FE Circulars/Circular Letters issued by Bangladesh Bank from time to time. Such regulations (for foreign investment) shall also be applicable for investment in EZs. (I) Foreign investment in Bangladesh : In case issuance of share in favour of non-residents, transfer of Bangladeshi shares and securities, opening Taka account, remittance of sales proceeds of non-residents'

4 investment in Bangladesh, etc. relevant instructions of Chapter 9 of GFET, 2009 (Vol-1) shall be applicable as well. (II) Repatriation of profit /Dividend abroad:
Procedures for remittance of profit/dividend favoring non-resident shareholders shall be similar with units of EPAs as mentioned in Para 4(VII) of this circular. (III) Borrowing locally (in local currency) and borrowing from abroad: For borrowing locally (in local currency) by the foreign controlled companies, instructions mentioned in Chapter 16, GFET, 2009(Vol.-1) shall be applicable for units in EZs. For borrowing from abroad by the foreign controlled companies, instructions mentioned in Chapter 15 of GFET, 2009(Vol.-1) shall be applicable. Besides, foreign owned/controlled industrial enterprises in Bangladesh may access to interest free loans for working capital other than input procurements from parent companies/shareholders abroad for upto one year without any prior approval of Bangladesh Bank.
6. Working in EZs by foreign nationals: Foreign nationals working in EZs (with valid work permit issued
by BEZA) are allowed to remit through an AD 75% of net salary, 100% of leave salary and actual savings and pension benefits without prior Bangladesh Bank approval [Chapter 11, GFET, 2009 (Vol-1) and FE Circular No 06, 15/04/2013]. Such foreign nationals working/residing in Bangladesh may open and maintain foreign currency accounts in Bangladesh with inward remittance received from abroad. Balances of such accounts are freely remittable abroad [Chapter 13, GFET, 2009 (Vol-1).
7. Reporting : Investment in EZs shall have to be reported to BB as per instructions mentioned in Para 2,
Chapter 9, GFET (Vol-1) and Para 26, Chapter 02 GFET (Vol-2). Besides, all foreign exchange transactions
of EZ units are to be reported through online foreign exchange transaction reporting platform of Foreign Exchange Operation Department, BB. Such transactions are also be reported in monthly returns to BB in relevant statements and schedules, etc. ADs are advised to provide necessary support to the investors of EZs. For any clarification, General Manager, Foreign Exchange Policy Department, BB may be contacted at gm.fepd@bb.org.bd, fepd.femp1@bb.org.bd. This FE Circular is issued under the authority of Section 20(3) of the Foreign Exchange Regulation Act 1947 (Act VII of 1947, amended upto Sep 09, 2015). Please bring the contents of the circular to all concerned. Yours faithfully, (Jagannath Chandra Ghosh) Deputy General Manger Phone : 9530092