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Opinion

An alternative to foreign loans

Ali Idris
The country still depends on foreign loans given by the World Bank, ADB and also other countries of the world for financing its annual development plans and other infrastructural projects. Every year shortages of internal revenue arise while implementing the annual development plans in the national budget and to meet the shortages the country has to resort to foreign loans or loans from internal banking system. Apparently the foreign loans appear to be cheap with interest rales ranging from 2 percent to 6 percent per annum, but at the end of the day total costs rise from 20 percent to 30 percent per annum . How it happens is described below:
A) Salaries and allowances, accommodation cost , air fare ,
insurance premium for life and health, leave fare and entertainment , etc paid to the consultants and technicians of the donors/ loan providers add to the cost of loan.
b)The exchange value of the currency of loan appreciates rapidly against Taka resulting in considerable increase of the principal and interest after 10 to 20 years.
c)In the event of commodity or suppliers credit, the price fixed by the donor cannot be negotiated or verified and thus most often has to be accepted at accelerated price.
This way ultimate implementation leads to lesser numbers of projects and higher amount of cost. Consequently the economic development of the country slows down. Hence if the government avails itself of less costly loans economic development will be expedited and dignity of the country no way
embarrassed because availing loans from outside most often means complying with conditions not desirable and not conducive to wellbeing of the masses. The alternative source of loans in Taka at lesser cost is proposed below
Alternative source
Fortunately about 50,000 expatriates and NRBs currently reside and work in various countries of the world. The remittances sent by them now amount to about Tk 50,000 crore annually. It may be estimated that the bank balances of the NRBs may amount to thousands of crores of Taka. The expatriates and NRBs save a portion of their remittances in the existing savings schemes viz. wage earner bonds, non-resident EC account, Dollar Bonds, etc and spend the remaining in non-productive
investments. Both expatriates and NRBs look for risk-free investments as they cannot afford or manage to engage in joint ventures or in proprietorship businesses in the country . If they are given an opportunity to invest in shares of a bank which is guaranteed by the government itself, they will come up with all their savings which will amount to thousands of crores. The money available in the savings schemes cannot be used in long term mega projects by the government, but the savings converted into capital of the proposed Bank can be used in financing the mega projects for long terms.
Establishment of the proposed bank
The bank can be called "Bangladesh NRB and Expatriates Bank." It will not be formed under the
Companies Act or Banking Companies Act. A special ordinance or Act should be passed for establishing the bank. The Act or ordinance will define the capital structure/ amount, shareholdings, duties and responsibilities of the shareholders, directors, advisors, sharing of profit/losses etc. The shares are proposed to be held by the expatriates/ NRBs only, the government will not hold any share. The authorised capital of the bank can be TK 1,00,000 crore which may be paid- up phase by phase through IPO. The liabilities of the shareholders will be guaranteed by the government which, in exchange, will take loans and avail other facilities. Though the expatriates /NRBs will hold 100 percent shares of the bank, it is proposed that they will have 50 percent vote and the government
will have 50 percent vote in the Board . All decisions will be taken with consensus of both the parties . In the event of disagreement majority votes of the advisors will be applied to arrive at decision. The advisors may be Bangladesh Bank, Bangladesh Economics Samity, BSB. BSRS, the Engineers Institute, ICB, Bangladesh Bankers Samity, FBCCI, ICAB, ICMAB, etc.
Activities and management
The activities of the bank arc proposed to be giving loans to the government for financing the important national infrastructural and revenuegenerating projects. ADP projects which are not revenuegenerating may be financed if the government, undertakes to
pay a good rate of return/ interest to the bank. The projects financed by the bank will be implemented through international bidding and at competitive price. Tenor, rates of interests, repayment instalments etc will be determined by consensus of the shareholders, government, and the advisors. The shareholders may, in addition to interest, enjoy a part of the net profits earned by the projects as determined by all the three parties. AU transactions of the bank and its projects will be exempt from income tax. The Bank will be listed in Dhaka and other international stock exchanges of the world. The shareholders may buy and sell their shares in those exchanges. The management will be run by veteran , experienced local or expatriate managing director and officers reporting to
the Board.
Utility to government, people and country Accumulated savings of about 50 lac expatriates and NRBs which is either lying idle or earning very little amount of interest will penetrate into the country and be converted into share capital. This capital will be a huge source of finance in foreign exchange for the country. This money will end continuous dependence on foreign loans and add dignity to the country. Thus economic development of the country will be accelerated , expatriates and NRBs will cam higher return on their savings , their ownership of shares of the Bank will create a sense of responsibility and connection to the country.
Ah Idris FCA is a finance executive. E mail: abidris446@yahoo.com