Country misses forex as mariners barred from investing

Opaque definition of remittance entangles wage earners’ bond

BB directive for vacating IRD prohibition yet to work

Arafat Ara
| Published: October 07, 2023 23:00:24

Bangladesh is missing out millions of dollars in remittance annually from merchant mariners as they are barred from investing their earnings in diaspora bond for definition-related complexities.
The mariners, commonly known as seafarers who spend most of their life on vessels, do not stay long in any country as they have to sail from port to port to perform professional duties. And simply for this reason that they are not defined as remitters.
The Internal Resources Division (IRD) issued a notification in 2020 barring them from investing in the diaspora bond having attractive yields with a death-risk benefit.

As a result, the sailors, mostly educated and skilled workforce, have invested their hard-earned foreign currencies abroad since 2020, while their native country faces depletion of foreign-exchange reserves.
Before 2020, the seafarers, numbering more than 16,000, used to invest in the diaspora bond titled Wage Earners Development Bond (WEDB), bearing a maximum 12-percent yields, since its introduction in the early 1980s.
“Approximately, $500 million worth of their total income is now being invested outside of the country each year as they are currently not eligible to invest in the WEDB,” says Bangladesh Merchant Marine Officers’ Association (BMMOA) President Captain Md Anam Chowdhury.
Mr. Chowdhury strikes a note of worry over such a substantiality amount of forex flying abroad for fencing off its inflow. “The rate of investment in abroad by mariners is growing rapidly in recent periods. This is very much unfortunate that policymakers are not heeding the issue at a time when the country’s foreign-exchange reserves depleting fast.”
Two-thirds of the sailors’ incomes are being invested abroad. They are investing in rich countries like Singapore, Malaysia, Dubai, the UK, the USA, and Canada. They are making investment especially in real assets-like buildings and apartments– abroad and some are on risky investments, for example, in stocks on many international stock markets.
Bangladeshi merchant mariners earn more than $600 million per annum, according to insiders. They work abroad both on foreign and national flag vessels, according to the BMMOA.
Of the 16,000, some 11,000 belong to officer category while 5000 crew. At least 7000 seafarers–5000 officers and 2000 crew members–always stay on boards. Officers, on average, earn $14,000 to $16,000 a month, while crew between $1600 and $2000 each. But sector people have said the average monthly salary of both categories is around $8000 each.
“If we assume $8000 a month in earning by a mariner and If they are in number 7000— multiply it by 12 months, we get roughly yearly turnover worth $670 million.”
Bangladesh has lost more than US$ 1.6 billion in remittances in the last four years as mariners have invested most of their earnings abroad during this period, people familiar with the quagmire told the FE writer.
The foreign exchanges are now very important to reduce the reserve loss. The regular inflow of such remittances could have helped stabilise the volatile forex market. Bangladesh’s forex market began to get volatile since the beginning of the war in Ukraine in February 2022.
The prohibitive restriction has impacted overall remittance inflows from them, according to another senior seafarer.
“When they send remittances to Bangladesh, not all funds for investing in the WEDB–some they invest in stock market as they have quota for IPOs, some for their relatives and some for purchases of real assets in the country,” says Captain AS Chowdhury, a senior seafarer who now works as head of the leading Singapore-owned shipping company.
So, once they feel discouraged from sending money into the country, the inflows snowballed. Now they completely feel discouraged, so all investment opportunities in Bangladesh have been missed.
The mariners, especially the officers, hailed from affluent families, need not send money for their families on a regular basis and many family members stay abroad, he said about the traditional family history of many marine officers.
“Most of the officers’ families stay abroad, so there is no need to send money to the country for family expenses,” he added.
Although the IRD disagrees, all others agree to allow investment. The Internal Resources Division of the Ministry of Finance issued a circular in August 2020 stating that seafarers will not be able to buy the WEDB, as per the Wage-Earner Development Bond Rules 1981. And since then, the mariners have been off-limits to the scope of investing in the bond.
The IRD, through its circular on August 16, 2020, said that mariners, pilots, and cabin crew working in foreign-owned shipping, and airways companies, and also the same professionals employed in overseas offices of Bangladeshi-owned shipping, and airways companies are not allowed to buy the bonds with their earnings. The central bank also issued a circular on the same issue in September that year.
However, the Bangladesh Bank later realized its importance, and retracted.
“Although the BB and the Ministry of Finance have shown interest in allowing investments in the bond, so far there has been no result,” says another seafarer, wishing anonymity.
The central bank requested the IRD in a letter on November 24, 2022 to allow mariners and pilots to purchase the bond to increase the inflow of remittances.
The central bank in its letter pointed out those Bangladeshi wage earners working abroad can invest in this bond, as per section-3 of the WEWB-1981 rules.
In the definition of wage earners in section 2(10) of the act ‘Wage earner means a Bangladeshi national gainfully employed abroad but not paid by government or a statutory, autonomous or semi-autonomous body and also includes a Bangladeshi national who has his origin in Bangladesh, but for any reason, has assumed foreign nationality’.
“That is, non-resident Bangladeshi mariners, crew and pilots, and cabin crew working in foreign-owned shipping or airways appear as remittance earners as per the definition of wage earners.” the letter reads.
However, according to the Overseas Employment and Migrants Act 2013, migration means the departure of a citizen from Bangladesh for the purpose of employment in a trade or profession in any foreign country.
Although the mariners have written to various government departments to get back the benefits of investing in this bond, other key people working in the international airlines have not shown up yet. One reason may be they are poorer in numbers than the mariners.
Tareq Muhammad Zakaria, senior assistant secretary (Member) at the IRD, who is also a designated officer for the Savings Scheme cell, said as per the decision of the Ministry of Finance, mariners cannot buy the WEDB.
He argues that, according to the WEDB rules, the seafarers are not entitled to purchase the saving tool as they do not stay in any country for long.
The central bank made a request to the IRD, but it was not approved yet, he also mentioned.
He, however, said, “This does not mean that the opportunity will remain forever. It may be changed in the future.”
In response to a query how seafarers had got the scope to buy this bond before 2020, Tareq Muhammad Zakaria said that he did not know how they could have bought the instrument in the past.
Contacted, Mohammad Shariful Islam, director of the National Savings Directorate (DNS), said there is no problem from their side.
“If the government allows mariners to buy this bond, we will start to sell to them again,” he added.
Bangladesh is graduating from LDC to a developing nation, but most people do not have adequate investment opportunities to cover their old-age expenses. Only some 1.3 million government employees have well-protection through pension system.
The government recently launched a universal pension system which, according to many actuaries, is not profitable or attractive.
Mariners say about 90 per cent of them are serving on a contract basis and they have no post-job benefits —gratuity, pension, or even provident fund.
Since they live outside the country, it is tough for them to run a business in their home country.
“As a result, this government bond was the only savings tool for them during retirement,” Mr Anam mentioned.
He said currently crew in particular send a small amount of remittances home to meet family expenses. “And since wage earners don’t get a good rate from the official channel, there remains a possibility of using hundi by a section of crew members.”
In the meantime, both remittance and WEDB procceeds are on a downturn. Bangladesh’s inflow of remittance has been decreasing for the last several years. Even during the first quarter of the current fiscal year, the remittance earnings dropped by more than 13 per cent
Experts suggest mariners should be given back this opportunity as soon as possible as the country is losing a significant amount of foreign currency.
Professor Dr Muinul Islam, a former chairperson at the Department of Economics of Chattogram University, terms it a wrong decision of the government to stop merchant mariners from investing in this bond.
“Mariners should be given back the opportunity to buy this bond as soon as possible,” the economist says.
On the other hand, Bangladesh Bank data showed the sales of WEDB declined drastically in the past couple of years.
The gross sales of WEDB were worth Tk 13.41 billion in the Fiscal Year(FY) 2019-20, Tk 15.66 billion in FY 2020-21, Tk 8.66 billion in FY 2021-22, and Tk 7.07 billion in FY 2022-23.
The government launched WEDB for wage earners in 1981. The upper limit of purchase of this bond is Tk 10 million. The maximum rate of yield is 12 per cent, and it is divided into different slabs of investment. The lowest rate is 9.0 per cent.
Bangladesh Bank data showed Bangladeshi workers remitted US$21.61 billion home in the FY 2022-23, $21.03 billion in 2021-22, $24.77 billion in 2020-21, and $ 18.20 billion in the FY 2019-20.
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