‘Formulate prudent policy for alternative investment’

Jannatul Islam

9th June, 2020 09:46:12 printer

‘Formulate prudent policy for alternative investment’

The government should formulate policy as well as create fund under Bangladesh Bank to inspire ‘alternative investment’ in the country.

On the eve of budget session, fund managers claimed that the venture capital and private  equity become ‘promising financial trends’ globally, however, such investment scenario is reverse due to complications of such policy in the country.

Finance Minister Mustafa Kamal is scheduled to place the national budget for the upcoming fiscal at the parliament on June 11.

Talking to daily sun, fund managers apprehended that the future of alternative investment in the country has become almost uncertain as most of the firms are now counting additional stamp duties alongside the corporate tax at three levels.

This new type of investment has become familiar in the country when Venture Capital and Private Equity Association of Bangladesh (VCPEAB) started its journey in 2016, aiming to strengthen the investment environment through alternative investment.

VCPEAB General Secretary Shawkat Hossain said fund managers are counting ‘extra taxation’ for supporting new entrepreneurs in the country which is quite surprising.

“The government or Bangladesh Bank may create a fund which will be invested in the registered Alterative Investment Fund management company’s Fund,” Shawkat explained to daily sun.

Presently ICB is managing EEF, for which Private Sector may be given a chance.  Alternative Investment funds will be very meaningful and succeed when matching investments will be made by private and alternative investment fund, he said.

This investment is a new financial concept covering mainly two types of finance — venture capital (VC) and private equity funds. More than 17 alternative fund managing firms have been working in Bangladesh in collaboration with local and international investors.

The fund manager further said the government should inspire businessmen through tagging ‘alternative investment as eligible investment for tax purpose to promote the sector.

He also recommended exempting income tax for alternative fund management companies for ten years.

“Tax on this small income, if any, will be very ruinous to AIFM industry. Fund manager of alternative investment is at a nascent stage. The rule has been passed very recently. It deals with much riskier portfolio (venture capital) than asset management company (mutual fund),” said Shawkat, Director of Financial Inclusion and Investments at LightCastle Partners.

According to the fund manager, the government should attract high net worth individuals (HNI) investors in Alternative Investment fund recognised by BSEC.

“HNI investment may be given tax exemption like investment in insurance, mutual fund, voluntary contribution to religious or charitable institute, CSR, Economic Zones and Hi-Tech park,” he added.

In Bangladesh, fund managers have been paying 35 percent corporate tax, which is almost 20 percent higher than other mutual funds, they said.

Officials of major VC fund managers in the country are counting tax in three phases.

The VC fund is the lone way to finance businesses at early stage with higher risk in return of investment. It is especially dedicated to the entrepreneurs related to information technology-enabled services.