An offshore bank is a bank located outside the country of residence of the depositor, typically in a

low tax jurisdiction or tax haven that provides financial and legal advantages. These advantages
typically include: (i) greater privacy; (ii) low or no taxation; (iii) protection against local political or
financial instability. While the term originates from the Channel Islands being "offshore" from the
United Kingdom and most offshore banks are located in island nations until this day, it is, thus, used
figuratively to refer to such banks, regardless of location.
Offshore banking has now become an important segment of the international financial system. The
term offshore bank basically means a foreign bank. Offshore banks provide a continuum of services
in connection with financial management such as deposit taking, money transmissions, creation of
provision of foreign exchange, trade finance, credit facilities, investment and fund management,
corporate administration, and trustee services. Often, offshore banks are willing to accept deposits
from depositors who are the citizens of a variety of countries, instead of requiring all deposits to
come from citizens in their own countries. More depositors mean more money for the bank for its
operations and investments. As such, banks may have good reasons for having foreign depositors
with them.

Offshore banks like Bangladesh operate with a lower cost base and can provide higher interest rates
than the rate in the home country due to lower overheads and a lack of government intervention.
Advocates of offshore banking often characterise government regulation as a form of tax on
domestic banks, reducing interest rates on deposits.

Offshore finance is one of the few industries, along with tourism, in which geographically remote
island nations can competitively engage themselves in related operations. As offshore banks are
mostly located in a jurisdiction with sound economic and political conditions, it provides stability. It
helps developing countries to source investment and promote accelerated growth in their
economies, and redistribute world finance from the developed to the developing world. It is then a
great way for developing countries to enhance their economic growth. The most prominent feature
of the offshore banking is tax benefits, i.e., most of the offshore banks make payment of interest
without deducting the tax.

In Bangladesh, there is a ten-year period of tax holiday for companies based in Export Processing
Zones (EPZs) companies. Offshore banks are free to accept deposits or to borrow, from
persons/institutions not residents in the Bangladesh including Bangladesh nationals working abroad.
Offshore banks are also free to accept deposits from, or to borrow from, Type - A (wholly foreign
owned) units in the EPZs in Bangladesh. However, such banks are not to accept deposits from
persons/institutions residents in Bangladesh including Type - B and Type - C units in the EPZs in
Bangladesh.

Offshore banks offer banking services that may not be available from domestic banks such as higher-
or lower-rate loans, based on risk and investment opportunities, not available elsewhere. Above all,
offshore banking system provides flexibility, i.e., it provides a flexible structure to business owners
and expatriates requiring global access to their fund.

Foreign direct investment (FDI) plays an extraordinary role in global business. It can provide a firm
with new markets and marketing channels, cheaper production facilities, access to new technology,
products, skills and financing. For a host country or the foreign firm which receives the investment, it
can provide a source of new technologies, capital, processes, products, organisational technologies
and management skills. All these can provide a strong impetus to economic development.

In its classic definition, FDI is defined as a company from one country making a physical investment
into building a factory in another country. The direct investment in buildings, machinery and
equipment is in contrast with making a portfolio investment, which is considered an indirect
investment.

Bangladesh needs to develop offshore fund to fulfill its policy of attracting foreign investment.
Private capital in Bangladesh is not plentiful and technical know-how is limited. Because of this,
there is ample scope and, indeed, a strong need to encourage investment from abroad.

The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to
promote, attract and facilitate foreign investment in the EPZs. The primary objectives of an EPZ is to
provide special areas where potential investors would find a congenial investment climate, free from
cumbersome procedures. Attracting foreign and local investment is the prime objectives of EPZs
towards economic development. An EPZ is defined as a territorial or economic enclave in which
goods may be imported and manufactured and re-shipped with a reduction in duties/and/or
minimal intervention by custom officials. An EPZ provides: (i) plots/factory building in custom
bonded area; (ii) infrastructural facilities; (iii) administrative facilities; and (iv)fiscal and non-fiscal
incentives. In our country, there are eight (08) EPZS in the concentration around 30
industries/sectors ranging from textile to musical instruments that are in places locating at its
different parts.

As far as facilities in Bangladesh EPZs are concerned, some positive points can here be highlighted: (i)
law and order situation of the country; (ii) infrastructure facilities in EPZ areas; (iii) reduction of lead
time; (iv) cost of doing business; (v) friendly policy of govt.; (vi) incentives; (vii) win-win ventures;
(viii) success story; (ix) signatory to MIGA (Multilateral Investment Guarantee Agency); (x) signatory
to ICSID (International Centre For Settlement Of Investment Dispute); (xi) member of WIPO (World
Intellectual Property Organisation) (xii) member of OPIC (Overseas Private Investment Corporation);
and (xiii) Asia's low cost production base.

In order to cater to the need of financial support, off-shore banking facilities are being provided to
the foreign owned/join venture units in the EPZs of Bangladesh. Presently, 06 (six) foreign banks
operating in Bangladesh have been licentiated for doing off-shore banking. Apart from that, 23 local
banks of Bangladesh also provide off-shore banking. Besides, according to the Bangladesh Bank (BB),
more local banks are in the pipe-line to have off-shore banking licence from them.