Akij Jute Mills Ltd, a concern of Akij Group, has applied to Bangladesh Bank for taking $20 million out of Bangladesh to purchase a Malaysian company that produces items like fireboard and hardboard.
The overseas investment proposal of Akij Jute Mills is the largest so far any company made to the central bank which follows strict rules so that foreign currency does not flow out of the country.
BB officials said Akij Jute Mills applied to the central bank in August, 2016 through Standard Chartered Bank to get the approval to invest $20 million from its export retention quota (ERQ) by purchasing the company named Robin Resource Sdn Bhd located in Malaysia.
Akij Jute Mills maintains its ERQ account with Standard Chartered Bank.
The BB started processing the application last month but officials found the application to be ‘confusing’ because of lack of clarity on investment destination.
After receiving the letter, the central bank on August 21 sought some clarifications about the cross-boundary investment proposal of Akij Jute Mills. The company replied to the BB queries on September 8, 2016.
On October 19, 2016, Akij Jute Mills wrote a letter to finance minister AMA Muhith requesting him to make a recommendation to the central bank in favour of its proposal.
‘As part of the Akij Group’s and global competition as well as considering the national economic growth, we feel it’s imminent for us to buy a ready global standard company in Malaysia whose holding company is based in Singapore,’ according to the letter.
Akij Jute Mills would like to set up a company in Singapore by acquiring a holding company in Singapore namely Robina Resources Pte Ltd which has two manufacturing plants in Malaysia — Robin Resources Sdn Bhd and Robina Flooring Sdn Bhd, the letter said.
These two companies are producing a wide range of medium-density fibreboard, hardboard and laminate flooring products.
Robin Resources Sdn Bhd and Robina Flooring Sdn Bhd were incorporated and started their production in 1984 and 2000 respectively in Malaysia.
A BB official told New Age on Sunday that Akij Group would want to purchase the Robina Resources Pte’s subsidiary companies located in Malaysia.
Robina Flooring Sdn Bhd is a subsidiary company of Robin Resources Sdn Bhd.
Along with $20 million ERQ equity, Akij Jute Mills will also take $60 million in loans from international lenders to set up the company in Singapore as the proposed size of the investment of the company is $80 million.
‘The central bank is yet to get any clear picture of the Akij Jute Mills’ investment proposal as it wants to set up a company in Singapore but the manufacturing plants it wants to acquire are located in Malaysia,’ the BB official said.
It is still unclear to the BB where Akij Jute Mills will transfer the money, he said.
He said that the central bank should not give approval to the company to invest abroad from its export incomes as the country’s export earnings and inward remittance were now maintaining a lower growth.
Besides, the growth of the country’s foreign exchange reserves has remained stagnant in recent months, he said.
Akij Group managing director Sk Bashir Uddin told New Age on Monday that his company would convert Robina Resources Pte to Akij Incorporation Singapore if the central bank gave the approval for the foreign investment.
‘Akij Group will operate the manufacturing plants in Malaysia from its Singapore office. But, we will not open any office in Singapore if the central bank asks us to operate the manufacturing plants sitting in Malaysia,’ he said.
Bashir said, ‘It will be the first foreign investment by Akij Group and we will transfer the capital following rules and regulations.’
The central bank earlier gave approval to six companies to invest abroad from their ERQs, but it (foreign investment of Akij) would be the single largest foreign investment by any local company if the BB provides the approval in favour of Akij Jute Mills.
The six companies, three of which hail from the health sector, have invested $9.1 million in six countries between 2013 and March 2016, according to the BB.
ACI Healthcare Ltd got the permission to invest $4,47,000 for production and marketing of oral solid dosage in the US.
Incepta Pharmaceuticals Ltd will set up a subsidiary of its own in the UK, investing £10,000 and build a joint venture investment company in Estonia with an investment of €2,500.
Square Pharmaceuticals Ltd got the permission to invest $5 million for expansion of its business in the US.
MJL Bangladesh Ltd received permission to invest $547,000 for expansion of its business in Myanmar and to form a subsidiary in Singapore.
BSRM received a permission to invest $4.67 lakh in Kenya to set up a steel industry in August 2016.
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