Foreign Exchange & Foreign Trade
Foreign Exchange
Meaning: 'Foreign Exchange' means Foreign
Currency. If we consider 'Foreign Exchange'
as a subject, then it means all kinds
of transaction related to Foreign Currency, as well as currency instruments, such as Draft, MT, TT,
TC, Payment Order & Foreign
Trade. In other wards Foreign Exchange deals with Foreign Financial
Transactions.
Export Documents handling.
Necessity of Foreign Exchange
No country is self-sufficient in this world. Every one is
more or
less dependent on another, for goods or services. Say, Bangladesh has
cheap manpower whereas Saudi Arabia has cheap petroleum. So Bangladesh is
dependent on Saudi Arabia for petroleum and Saudi Arabia is dependent on Bangladesh for
cheap manpower. People of one country are going to another country for Education,
Medical Service etc. One country exports Agricultural commodities, another country exports
Industrial products. All these transactions needs Foreign Currency & are related to Foreign Exchange.
Activities
of Foreign Exchange
There
are three kinds of Foreign Exchange
a. Import.
b. Export
c. Remittance
Foreign Trade:
Meaning: No country is self-sufficient in all the goods.
Some countries have special advantage to produce some items. Bangladesh can
manufacture readymade garments easily due o lower cost of labour. So Bangladesh
is exporting readymade garments to USA whereas USA is exporting machinery o
Bangladesh due to their favourable production to that item. Hence kinds of
cross border Transaction or exchange of goods
Foreign Trade includes:
a.
Import .
b.
Export
Relation between Foreign Exchange & Foreign Trade:
If Foreign Exchange
means all the financial transactions in international market. Then Foreign
Trade is a part of Foreign Exchange. Then
Foreign Exchange means Foreign Currency,
then it is the media of Exchange Foreign Trade.
Local Regulations for
Foreign Exchange:
Our Foreign Exchange transactions are being controlled by
the following local regulations.
a. Foreign Exchange
Regulation Act: Foreign Exchange Regulation (FER) Act. 1947 enacted on 11th
March 1947 in the then British India, provides the legal basis for Regulating
the Foreign Exchange. This Act was
adapted in Pakistan and lastly in Bangladesh.
b. Guidelines
for Foreign Exchange Transaction: This Publication
issued by Bangladesh Bank in the year 1996 in two volumes then revised
&summarized in 2009, finally in 2018. This is a compilation of the instructions to be
followed by the Authorized Dealers in
Transactions relating to Foreign Exchange.
c. FE Circular: Bangladesh Bank issues F.E circular from time to time, to control the Export Import Business
& Remittance, to control the Foreign Exchange.
d.
Export-Import Policy: Ministry of Commerce issues Export Policy & Import Policy giving basic formalities for
Import & Export business.
e. Public Notice: Some
times CCI&E issues public Notice for any kind of change in
Foreign Exchange Transaction.
J. Instructions
from Different Ministry: Different
Ministry of the Govt. sometimes
instruct the Authorised Dealer
directly or through Bangladesh Bank
to follow something required for the Government.
g. Shariah Principle: Along with all the
above regulations Islamic Bank also
bound to follow the Principle of Islamic Shariah in Foreign
Exchange.
i. Import
and Export Control Act-1950.
j.
Importers, Exporters and Indentors (Registration Order)- 1981.
International
Regulations for F. Exchange
There
are also some international organizations, influencing our Foreign Exchange
transactions. Few of them are discussed
bellow.
a. ICC:
International Chamber of Commerce
is a worldwide Non-Governmental Organisation of thousands of companies.
It was founded in 1919. ICC National committees
throughout the World present ICC views to their Governments and alert Paris Headquarters to national business concerns. ICC has issued some publications like ISBP, UCPDC, URC& URR , Incoterms 2020 etc.
which are being followed by all the member countries. There is also a
international Court of Arbitration to solve the international business
disputes.
b.
W.T.0: World
Trade Organization is another International Trade Organization
established on 1st January 1995 GATT
(General Agreement on Tariff & Trade) was established on
01-01-1948 after completion of ifs 8th round; the organization has been abolished
& replaced by WTO. This organisation has vital role in International Trade,
through its 164 members countries.
Authorised Dealers & Money
changers
Meaning: As per section 2
of foreign Exchange Regulation. Act 1947, Authorised Dealer means a
person, for the time being authorised under section 3 to deal in Foreign
Exchange. In other words Authorized Dealer means a Bank, authorized by Bangladesh
Bank to deal in Foreign Exchange under the FER Act 1947. There are some
persons or firms, authorised by Bangladesh Bank to deal in Foreign Exchange with limited scope, are
called Authorised Money Changers.
Licence for Authorised Dealer
To get a
Licence for Authorised dealer, a Bank will apply the General Manager, Foreign
Exchange Policy Department,
Bangladesh Bank, Head
Office, Dhaka complying the following conditions.
1. The Bank must have adequate manpower trained in Foreign Exchange.
2. Prospect
to attract reasonable volume of Foreign Exchange business in the desired location.
3. The Bank meticulously complies with the instruction of Bangladesh Bank.
4. The Bank will commit to deal in Foreign
Exchange with in the
limit & will submit periodical returns
as instructed by Bangladesh Bank.
Functions of Authorised
Dealer
Authorised Dealer can handle all kinds of Foreign Exchange transaction as per FER Act 1947 under the
instruction of Bangladesh Bank.
Following are the main function of an Authorised Dealer.
1.
Exchange of
Foreign Currencies.
2.
To make
arrangement with Foreign Correspondent.
3.
Buying &
Selling Foreign Currencies
4.
Handling of
Inward & Outward Remittance
5.
Opening
of L/C & Settlement of Payment.
6.
Investment in
Foreign Trade.
7. Opening
& Maintenance of Accounts with Foreign Banks
'under intimation to Bangladesh Bank.
8.
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