Overview of Bangladesh's Foreign Exchange Management Framework
Bangladesh's foreign exchange management is overseen by Bangladesh Bank (BB). All foreign exchange transactions are governed under the Foreign Exchange Regulation Act (FERA, 1947), and currency exchange and remittances are conducted through AD (Authorized Dealer) banks. While the current account (trade and services) operates with relative openness, the capital account (investment and borrowing) is subject to strict controls.
For Korean companies operating in Bangladesh, foreign exchange issues arise at four distinct stages: capital inflow, trade payment settlement, profit dividend remittance, and capital repatriation (exit). A precise understanding of Bangladesh Bank's regulations and approval procedures at each stage is essential.
Foreign Exchange Transaction Types and Regulations
A detailed classification of the major foreign exchange transaction types conducted by foreign-invested companies in Bangladesh, including applicable regulations, limits, approving authorities, and required documentation.
| Transaction Type | Legal Basis | Limit | Approving Authority | Processing Time | Required Documents |
|---|---|---|---|---|---|
| Capital Inflow (FDI) | FDI Policy 2015 | Unlimited | AD Bank | 3–5 days | BIDA certificate, investment plan |
| Dividend Remittance | FERA + FE Circular | 100% of net profit | BB + AD Bank | 2–4 weeks | Audit report, tax clearance, BB form |
| Royalties & Technology Fees | BB Guidelines | Up to 6% of revenue | BB prior approval | 4–8 weeks | Technology agreement, BB approval |
| Management & HQ Fees | BB Circular | Up to $50K/year | AD Bank | 1–2 weeks | Contract, invoice |
| Loan Principal & Interest | BB Approval | Within approved scope | BB approval | 2–4 weeks | Loan agreement, repayment schedule |
| Capital Repatriation (Exit) | FERA + BB | Up to original investment | BB approval | 4–12 weeks | Liquidation documents, tax clearance, audit |
| Import Payments (L/C) | Import Policy | Up to $1M per transaction | AD Bank | Immediate–3 days | L/C, shipping documents |
| Import Payments (T/T) | BB Circular | Up to $50K per transaction | AD Bank | 1–3 days | PI, contract |
| Export Proceeds | Export Policy | Unlimited | AD Bank | Immediate | Export declaration, B/L |
| Business Travel Allowance | BB Circular | $6,000/person/year | AD Bank | Immediate | Passport, invitation letter |
Dividend Remittance vs. Capital Repatriation vs. Royalties
A comparison of the three main mechanisms for repatriating funds to a Korean parent company. Dividend remittance is the most common; royalties (technology fees) require prior approval from Bangladesh Bank.
Profit Remittance (Dividend) Procedure
A step-by-step guide to the complete procedure for remitting dividends to a Korean parent company. Under Bangladesh Bank regulations, foreign-invested companies may remit 100% of net profits abroad, provided the prescribed procedure is followed exactly.
Bangladesh's foreign exchange management applies comparatively strict capital controls, but BIDA-registered foreign-invested companies are guaranteed the right to remit 100% of net profits as dividends. The key to execution is following the procedures precisely and preparing the BB forms and supporting documentation to an impeccable standard. Hedging strategies to address exchange rate risk (8–10% annual depreciation) and tax optimization through the Korea-Bangladesh Double Taxation Agreement are what ultimately determine the real return on investment for Korean companies.