BB allows local partners to arrange guarantees for foreign contractors

Bangladesh Bank (BB) has allowed local companies working as strategic partners, local agents or authorised representatives of foreign firms to arrange bank guarantees and standby letters of credit (SBLCs) in foreign currency for government and other local project authorities.

The move is aimed at facilitating the participation of foreign companies in projects in Bangladesh awarded through international tenders.

The central bank issued the instruction on Thursday through FEPD-1 Circular No. 31. It said foreign companies winning contracts or work orders under international tenders may require bid bonds, performance guarantees or SBLCs before commencing their work.

Under the new rule, authorised dealer (AD) banks can issue such guarantees or SBLCs on behalf of resident Bangladeshi entities in favour of the relevant government authorities, agencies, state-owned companies, project authorities or procurement entities. 

In simple terms, a Bangladeshi company that is officially working with a foreign contractor can now help arrange the financial guarantee required by the foreign company to undertake a project in Bangladesh.

However, the facility comes with several conditions. The contract must permit such guarantees or SBLCs, and the local company must have a genuine business or contractual relationship with the foreign company.