BANGLADESH

Why Bangladesh is your Investment Destination?

Bangladesh is virtually located as a bridge between the emerging markets of South Asia and fastest growing markets of South East Asia and ASEAN countries. With the proposed concept of a “Bay of Bengal Growth Triangle” with its apex Chittagong port extending south-west to Calcutta, Madras and Colombo and the south-eastern arm extends through Yangon, to Thailand, to Penang with the third arm to Colombo, this region should have growing attention of the investment world.

Bangladesh has the potential to be an entry port to the region, a potential small scale Singapore, for the region covering Bangladesh, Nepal, Bhutan, eight north-east Indian states (of Assam, Meghalaya, Manipur, Imphal, Arunachal, Nagaland, Mizoram and Tripura) and resource-rich northern Myanmar, a land locked region. Bangladesh is poised to become a regional hub where activities relating to assembling, manufacturing, trading and services, would be some of the areas that are picking up over the years. This geopolitico-economic location of Bangladesh indicates its history of being a nation of sea-farers, traders and suppliers.

The country has a policy of private sector led, liberal economic approach; export oriented, gradually transforming into assembling & manufacturing; seeking for rapid expansion of the service sector. Also looking for substantial joint venture and Direct Foreign Investment (DFI) from abroad in medium and large-scale industries and enterprises, including infrastructure building.

The following facts deserve attention in relation to assessment of Bangladesh as an investment destination:

i) Bangladesh has never defaulted in its debt-service liabilities to multi-lateral and bilateral donors.
ii) Bangladesh never experienced negative growth during last 43 years of its independence.
iii) Bangladesh exports readymade garments, knitwear, brand name wind cheaters, walking shoes, leather goods, shoes and other products, urea fertilizer, pharmaceutical, shrimps and prawn, vegetables, jute and jute products etc. to sophisticated markets of EU, USA, Japan and many other countries. Garments and related export account for more than US $4 billion.
iv) The frequency and intensity of natural disasters are far less in Bangladesh than those in the Philippines, Japan and even the USA, Bangladesh is located outside the major earthquake zones.

An attractive investment destination


Following are some positive aspects which make Bangladesh an attractive location to foreign investors:

i) We have opened up our economy with rapid liberalization of import policies helping globalization of our economy;
ii) According to a Survey of the Economist-risk factors for FDI in Bangladesh are minimum compared to many other countries of this region;
iii) Cost of production especially cost of labor both skilled and semi-skilled is comparatively lower;
ix) Cost of living is also quite low and reasonable and there is no communal or ethnic problems;
v) English language is widely spoken and understood;
vi) Working capital loan as well as term loan from local commercial banks allowed to the industries setup with foreign capital;
vii) Citizenship by investing a minimum of US $5,00,000 or by transferring US $10,00,000 to any recognized financial institutions (non-repatriable);
viii) Permanent residentship is granted to an expatriate by investing a minimum of US $75,000 (non-repatriable);
ix) Avoidance of Double Taxation Agreements and Bilateral Investment Promotion Treaties have been signed with many countries including U.K.

Legal security for investment

i) Foreign Private Investment (Promotion and Protection) Act, 1980 ensures legal protection to foreign investment.
ii) Bangladesh is a member of Multi-Lateral Investment Guarantee Agency (MIGA), Overseas Private Investment Corporation (OPIC) of USA and International Centre for Settlement of Industrial Disputes (ICSID)
iii) Member of World Intellectual Property Organization (WIPO) and World Association of Investment Promotion Agencies (WAIPA).

In order to entice investors, the government has put in place an extensive programe of incentives, which include :

  • no ceiling on investment.
  • tax-holidays.
  • tax-exemption and duty-free importation of capital machinery and spare parts for 100% export-oriented industries.
  • residency permits for foreign nationals.
  • capital, profit and dividend repatriation facilities.
  • hundred percent foreign equity allowed.
  • exemption of income tax up to three years for expatriate employees.
  • term loans and working capital loans from local banks allowed.
  • reinvestment of repatriable dividends treated as new investment
  • double-taxation avoidance, as per bilateral agreements already concluded.
  • tax exemption on the interest payable on foreign loans and on royalties and technical know-how fees.
  • tax exemption on the interest payable on foreign loans and on royalties and technical know-how fees.
  • open exchange controls.
  • multiple-entry visas for foreign investors.
  • investors can take advantage of the generalized system of preference, which allows duty-free access to American, European and Japanese markets.
  • Taka is convertible for current account transactions.

The Country also offers:

  • extremely competitive labor costs, perhaps the lowest in Asia.
  • easily trainable workforce of 56 million.
  • a large domestic market, with disposable income growing especially among the middle class
  • strategic location as the bridge between South and East Asian high-growth regions as well as links with other markets e.g. India, Pakistan, Malaysia, Singapore etc.
  • low land and energy costs.
  • good road/bridge/rail infrastructure, which are being improved; two sea-ports being further developed.
  • enjoys Most Favored Nations status.
  • legal protection to foreign investment against nationalization and expropriation.
  • equitable treatment with local investors regarding indemnification, compensation etc.

All sectors of industry (except five) are open for private investment. The five sectors reserved for public investment only are defense and defense production, nuclear energy, extraction from reserved forests, security printing and mint and air transportation (some domestic routes and international air cargo already opened for private investment.) and railways.

Some of the foreign private investment opportunities are:

  1. direct (100%) foreign investment or joint venture investment in the Export Processing Zones (EPZs) or outside EPZs (with the exception of the five industries mentioned earlier).
  2. portfolio investment by purchasing shares in publicly listed companies through the stock exchange.
  3. investment in infrastructure projects such as power generation (private power generation policy announced); oil, gas and mineral exploration, telecommunication, ports, roads and highways.
  4. outright purchase or purchase of shares of state-owned enterprises, which are under process of privatization.
  5. investment in private EPZ (Private EPZ Act recently passed).

Foreign investment is particularly welcome in the export-oriented industries such as textiles, leather goods, electronic products and components, chemicals and petrochemicals, agro-based industries, green jute pulp, paper, rayon products, frozen foods (dominated by shrimp farming), tourism, agriculture, light industries, software and data processing.

Foreign investment is also desired in high technology products that will help import substitution or industries that will be labor as well as technology intensive.

The country’s drive for foreign investment is being spearheaded by the Board of Investment, which was created to facilitate the setting up of manufacturing and other industries in the private sector, both local and foreign. It is a promotional organization dedicated towards providing investment assistance to all investors.

Board of Investment (BOI) of Bangladesh

The Government of Bangladesh established the Board of investment for accelerating private investment in Bangladesh. The Board is headed by the Prime Minister. Other members are Ministers and Secretaries of concerned ministries. It is vested with necessary powers to take decisions for speedy implementation of new industrial projects and provide operational support services to the existing ones. The BOI is a high-powered government apex body for promotion and development of foreign and local private investment in the country. The major functions of the Board are as follows:

  • Promotion of investment
  • Providing all kinds of facilities for capital investment and rapid industrialization
  • Registration of industrial projects
  • Creation of infrastructural facilities for industries
  • Issuance of work permit to expatriate personnel
  • Providing import facilities to industrial units
  • Approval of the terms and conditions for foreign private loans and supplier credits beyond the prescribed limit
  • Approval of payment of technology transfer fees (royalty, technical know-how and technical assistance fee) beyond the prescribed limits to foreign nationals/organizations
  • Recommendation for allotment of land in the industrial areas/estates for industrial purpose.

In addition, the BOI assists investors in obtaining the following services expeditiously:

  • Electricity, gas, water, sewerage and telecommunication connections, custom clearance for imported machinery, spare parts and raw materials
  • Clearance regarding environment pollution
  • All other facilities and services that may be required for speedy setting up of an industry.