FEMA amendments likely to lift FDI ban on Bangla firms
Times of India | 25 Sep, 2007
FEMA amendments likely to lift FDI ban on Bangla firms
Deepshikha Sikarwar, TNN
NEW DELHI: Bangladeshi companies may soon be allowed to invest in India. The Indian government is proposing to do away with the ban on foreign direct investment (FDI) from Bangladesh. It is considering an amendment to the Foreign Exchange and Management Act (FEMA).
The amendment to this act would also pave the way of India-Bangladesh bilateral investment promotion agreement, which has been held up on account of certain provisions in FEMA banning FDI from the neighbouring country.
These restrictions continued to exist in India even though Bangladesh does not put any such ban on investments from India. A large number of Indian companies like the Tata group and some others in the garment industry are in the process of setting up base there. Flexible labour regime and cheaper wage costs are attracting a large number of garment exporters to set up shops there.
Even though the government is planning to amend the FEMA and open doors for FDI from Bangladesh, all investments would have to be routed through the Foreign Investment Promotion Board (FIPB), a government source said.
This means, even in sectors where 100% FDI is allowed on automatic route, companies from Bangladesh would require a go-ahead from FIPB. Also, restrictions on individual investment from across the border may continue.
Under FEMA rules, the FDI scheme is not available to citizens and entities of both Bangladesh and Pakistan. Citizens of these countries are also not allowed to buy property in India. Sri Lanka, which was also part of the negative list, was dropped in 2004. The restrictive regime will continue for investments from Pakistan.
The home ministry and the external affairs ministry are understood to have given their go-ahead to the proposal, which was mooted by the commerce ministry. The issue had been raised time and again by Bangladesh not just bilaterally, but also at SAARC meetings.
These restrictions imposed under FEMA would have also come in the way of South Asian Free Trade Agreement, which also has a provision for an investment treaty. The finance ministry is now giving final touches to the proposal, the source said.
