Home ›› 04 Mar 2023 ›› Front
A customs rule mandating joint venture (JV) companies to give at least two per cent of ownership to the managing director is discouraging foreign investors from pouring money into the shipping and logistics sector.
Claiming the provision contradicts the Foreign Private Investment (Promotion & Protection) Act, 1980, the Bangladesh Investment Authority (BIDA) has recently sent a letter to the National Board of Revenue (NBR) to clarify the provision’s legal basis.
In the letter, BIDA also claimed that the customs authorities are currently not issuing any licence to open companies using local or foreign direct investment (FDI). BIDA took the initiative after receiving a letter from the Japan-Bangladesh Chamber of Commerce and Industry (BCCI) that urged authorities to withdraw the obligatory customs provision and resume licence issuing.
Unrealistic rule with no legal basis
Business leaders of the country have criticised the customs for its unfavourable rules and position that are hindering the growth of the shipping and logistics sector.
BIDA, in its letter to NBR, said under the Foreign Private Investment (Promotion & Protection) Act, 1980, the government is obliged to accord fair and equitable treatment to foreign private investment which shall enjoy full protection and security in Bangladesh.
The BIDA letter said, “The Customs House Chattogram issued an order on May 13, 2021 which did not include the provision of keeping at least two per cent ownership for the managing director in case of joint venture investment.”
“The legal basis of the provision cannot be found in the order.”
However, the order states that the managing director shall be appointed from the local initiators’ side.
Later, the investment promotion agency sent two letters to the Customs House Chattogram authorities on August 14 and December 8 last year urging them to clarify the matter, but the customs authorities have not replied yet.
Md Maruful Alam, deputy director (Registration- Foreign Industry Section) of BIDA, said, “We urged the revenue board to clarify the matter. If there is no such provision then why does the customs house ask the companies to comply with the provision.”
“We also urged them to give an explanation on the rationality of not providing the licence for opening a shipping company.”
Meanwhile, investors too stressed that there is no scope to accommodate such provision as per the corporate laws and practices.
They alleged that the customs authority is simply copying the provision from the Clearing and Forwarding Agents Licensing Rules without any proper understanding.
They said if the customs authority withdraws such provision, the country will save a huge forex reserve.
At present, shipment fare costs Bangladesh more than Tk 30,000 crore a year, of which around Tk 3,000 goes into the pockets of local shipping companies.
According to ASYCUDA World and ASYCUDA Business Intelligence data, the Chattogram Seaport, the country’s main trade gateway, handled 32,55,358 containers in FY 2021-22, up from 30,97,236 containers in FY 2020-21.
Besides, the country imported goods worth $73,301 million and exported goods worth $37,600 million through the port, the database said, indicating the shipping and logistics industry has immense potential to grow in the country.
However, rather than providing policy support to the sector, the customs authorities are pulling it down by scaring off new investment.
Terming the customs provision on JV companies as ‘unrealistic’, JBCCI’s former president Asif A Chowdhury said, “The customs authority just copied and pasted the provision from C&F licensing rules. And they did it without understanding properly.”
The managing director is a representative of a company and can also switch jobs, Asif said, adding that an owner will not be able to do the same. “Then how does the company comply with the provision to secure the licence?” he questioned.
“There is no scope to put such bar on the investment. It will decline the foreign investment in the emerging sector,” Chowdhury warned.
Echoing a similar tone, Zahid Hussain, former lead economist of the World Bank’s Dhaka office, said it would be irrational and ridiculous if the customs included such obligatory provision.
He said, “The customs is responsible for dealing with duties not licensing.”
Hussain asked, “It is alright if any company shares its partnership to motivate officials. But an obligatory provision will only decline the sector’s growth and force it to turn away investment.
“The responsibilities of the regulatory bodies are ensuring an investment-friendly environment so that the investors can easily expand their investment.”
“If the government plays a pivotal role in creating such an environment, the shipping sector can be expanded in the near future and compete in the global market. It can be a big source of foreign currency earnings and save forex reserves.”
Senior officials of the NBR did not respond to calls from The Business Post seeking their comments on the issue.
