Business in Bangladesh

Why invest in Bangladesh?

· The people of Bangladesh irrespective of race and religion have been living in complete harmony and understanding for centuries.

· The country enjoys broad popular support for market economy reforms and offers the most investment-friendly regulatory regime in South Asia.

· Bangladesh owns a trainable, enthusiastic, hardworking and low-cost (even by regional standards) work force suitable for any labor-intensive industry.

· English is widely understood in Bangladesh and it is a common language in the public and private sectors.

· Even though Bangladesh’s per capita GDP is low, the present domestic consumption is significant. However, there is a growing middle class with significant purchasing power. In a country of 145 million people, a middle class may constitute a significant market and even though Bangladesh has large poor population, our growing middle income group constitutes about 50 million with adequate money to spend.

· Bangladeshi products enjoy complete duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. However, for apparel export to USA and Canada, Bangladesh’s trade volume is increasing.

Facilities and incentives

· Tax holiday from 5 to 10 years depending on location of industries.

· 15 years tax holiday for private power generation companies.

· Exemption of tax on interest on foreign loan.

· Tax exemptions on royalties, technical know-how & technical assistance fees.

· Avoidance of double taxation on the basis of bilateral agreements.

· Six months Multiple Entry Visa for the Investors.

· Taka, the nation’s currency, is convertible for international payments in the current account.

· Re-investment of repatriable dividend treated as new investments.

· Working capital loan as well as term loan from local commercial banks allowed to the industries set up with foreign capital.

· Citizenship by investing a minimum of US$ 500,000 or by transferring US$ 1,000,000 to any recognized financial institution (repatriable).

· Permanent residence by investing a minimum of US$ 75,000 (repatriable) 100% Foreign Equity allowed.

· Unrestricted Exit Policy.

Natural Resources and other facilities

· Bangladesh, the largest deltaic zone of the world is richly endowed with natural resources like vast easily trainable, low cost manpower, abundant supply of Gas, Coal, Stones, huge water bodies etc.

· Strategic geographical locations as the gateway to South East Asia (Asian Highway).

· Easy and preferential access to a market of about 1.45 Billion people of South Asia under South Asian Free Trade Area (SAFTA) from 2006.

· Duty free/ quota free access to all export items of LDCs like Bangladesh under “Everything But Arms (EBA)” initiative of E.U.

· Preferential market in EU, USA, Japan, Canada, Australia, ROK, Thailand, China etc.

Strategy of Private Sector-led-Export

· Liberalization of import policy including simplification of procedures.

· Rationalization of the tariff structure.

· Items under quantitative restrictions have been reduced to only 65 (4 digit of code).

· Pursuing a floating rate of exchange of local currency Taka.

· Allowing IMF consistent facilities of re-export and entreport trade.

Export processing Zones

Export Processing Zones in the port city Chittagong and capital city Dhaka with necessary fiscal and infrastructure for export oriented enterprises. Another Export Processing Zone, near the capital city (at Gazipur) is under implementation.

Courtesy Service

Board of Investment extends courtesy service such as airport reception, hold & transport booking and fixing appointments with the Government and Chamber Officials in accordance with the needs of foreign entrepreneurs visiting Bangladesh. For availing courtesy service, entrepreneurs need to contact BOI in advance.

Communication Facilities

Adequate Sea, Rail, Road and Air services facilitate both domestic and international transportation.

Telecommunication

Internet, Telex, Fax, International Direct Dialing services and email facilities.

Banking and Financing

Bangladesh offers adequate banking facilities to the investors for establishment of industries and to facilitate their business transactions. 14 private and 13 foreign commercial banks, 10 financing institutions and 3 nationalized commercial banks having network of correspondent and branches operation all other the country and abroad.

Preferential market access opportunities as an LDC

Bangladesh has been enjoying such access under GSP facility and concession of tariff from about 32 countries. These countries have extended duty free quota free access, zero tariff access, tariff preference on some specific number of products and sometime for all products. These countries are Austria, Canada, EC, Finland, Japan, New Zealand, Norway, Sweden, Switzerland, USA, Bulgaria, Czechoslovakia, Hungary, Poland, Russia, Australia, India, Thailand, Estonia, and Belarus. But all these preferential access are subject to various Rules of Origin (RoO).

Highest priority sector

The Highest priority sector will refer to the products that have high export potential.

Products listed as highest priority sector

Software and ICT products
Agro-products and agro-processing products

Light engineering products (including auto-parts & bicycles)

Leather products
High priced readymade garments

Incentives and facilities for highest priority sectors

Project loan with lower interest rate on priority basis
Income tax exemption
Financial incentives including cash assistance
Export loan on easy term and lower interest rate
Air transport facility with exempted transport fare
Tax return / bond facility
Assistance for setting up infrastructure and related units to reduce production cost
Expansion of institutional and technical facilities for development product quality and quality control
Assistance in marketing products
Assistance in exploring markets abroad
Assistance in foreign investment

General Incentives

In addition to incentives stated earlier for the private investor, foreign investors are also entitled to the following:

    * Tax exemption on capital gains from the transfer of shares by the investing company;
    * Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements
    * No restriction in issuing work permits to foreign nationals in Bangladesh
    * Facilities for repatriation of invested capital, profits and dividends
    * Provision for transfer of shares held by foreign shareholders to the local shareholders/investor with the permission of the BOI and the Exchange Control Department of the Bangladesh Bank
    * Treatment of repatriable dividends as new foreign investment
    * Allowing long term loan and working capital loan to foreign investors from local commercial banks ; and
    * Permanent residentship to a foreign citizen investing a minimum of US$ 75,000 or equivalent amount (non.repatriable) ; similarly citi~hip to any foreign citizen investing US$ ~,000 or transferring US$ 1,000,000 to any recognized Bangladeshi financing institution (nonrepatriable).

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Additional Incentives for Export Oriented/Linkage Industries

Encouraging export oriented industries is one of the major objectives of the Industrial Policy, 1991 and as such government ensures all support and co-operation on priority basis as per export policy. Some of the facilities and incentives offered are as follows:

    * Concessionary duty is allowed on the import of capital machinery and spare parts for setting up export oriented industries or BMRE of existing industries. For 100 percent export oriented industries no import duty is payable;
    * Facilities such as special bonded warehouse against back-to-back letter of credit or national import duty and payment of value added tax (VAT) facilities are available;
    * The system of duty drawback is being simplified and streamlined. Back loan upto percent of the value against irrevocable and confirmed letters of credit/sales agreements available;
    * With a view to ensuring backward linkages, export oriented industries including export oriented readymade garment industries using indigenous raw materials instead of imported ones, are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export oriented industries;
    * The expert oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad;
    * The entire export earning from handicrafts and cottage industries is exempt from income tax. In case of all other industries, proportional income tax rebate on export earnings is given between 30 and 100 percent. Those industries which export 100 percent of their products are given tax exemption upto 100 percent;
    * For manufacturing exportable commodities, import of raw materials under the Control List is allowed;
    * The import of specified quantities of duty free samples for manufacturing exportable products is allowed. The quantity and value of samples an determined jointly by the concerned sponsoring agency and the National Board of Revenue;
    * The local products supplied to local projects against Foreign exchange international tender are treated as indirect exports and the producer is entitled to all export facilities;
    * Export oriented industries producing toys, luggage and fashion articles, electronic goods, leather goods, diamond cutting and polishing, jewellery, stationery goods, silk cloth, gift items, cut and artificial flowers and orchid vegetabLe processing and engineering consuttaney Aces are 3dentiiied by the government thrust seetors and provided with special facilities through cash incentives, venture capital and other facilities; and
    * Export-oriented industries are exempt from paying local taxes such as municipal tax.

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Remittance Facilities

Remittance of profits of branches of foreign firms/companies, dividends/capital gains, salaries and savings by expatriates, royalty and technical fees, training and consultancy fees, receivables collected by shipping companies and an lines towards freight and passage can be effected through authorized dealers without prior approval of the Bangladesh bank.

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Additional Incentives for EPZ Industries

In addition to the incentives and facilities available to industries in general, the industries in the Export Processing Zones are allowed to enjoy the following facilities:

    * Freedom from National Import Policy restrictions;
    * offshore banking facilities;
    * Relocation of existing industries from abroad;
    * Back to back letter of credit facility for certain types of industries for import of raw materials;
    * Availability of food stuff and beverage on payment of nominal tax for foreigners working in EPZ;
    * Exemption of customs duties and sales tax on imported motor vehicles for executive of enterprises;
    * One stop serviee> to investors; and
    * All customs formalities, within EPZs.

Additional Incentives for Small and Cottage Industries BSCIC registered units are exempt from payment of advanee income tax on import of their raw materials.

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Foreign Investment Protection Act

The Foreign Private Investment (Promotion and Protection) Act, 1980 provides for fair and equitable treatment to foreign private investment. It ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation. It also guarantees repatriation of capital and returns from it and equitable treatment with local investors with regard to indemnification compensation etc., in the event of loss due to civil commotion etc. Similarly, adequate protection is available for intellectual property rights, such as patents, designs, trade marks and copyrights.

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Investment Treaties & Bilateral Agreements
Investment treaties for promotion and protection of investment between Bangladesh and the following countries have been concluded:
USA, Republic of Korea, UK, Thailand, Germany, Turkey, Romania, France, Belgium, Italy.

Negotiations are going on with a few other East Asian and European countries including the Netherlands and Switzerland.

Avoidance of Double Taxation - Bilateral Agreements
Bilateral agreements have been concluded by the Bangladesh government with the following countries for avoidance of double taxation:
Japan, Italy, Singapore, Sweden, Republic of Korea, United Kingdom (including Northern Ireland), Canada, Malaysia, Romania, Shri Lanka, France, Germany, Indian Pakistan.

Negotiations are going on for similar agreements with Belgium, the Netherlands and the USA.

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Guarantees Through Multilateral Agencies

Bangladesh is a signatory of HIGA (Multilateral investment Guarantee Agency), OPIC (Overseas Private IHvestment Corporation) of America and ICSID (International Centre for Sgttlement of Investment Disputes). MIGA is the Multilateral Investment Guarantee Agency of the World Bank group to encourage the flow of foreign direct investment (FDI) to, and among, developing member countries by providi g guarantees to foreign investors against loss caused by non-commercial risks. MIGA's guarantee protects investors against losses arising from the risks of currency transfer, expropriation and war and civil disturbances. MIGA may only ensure new investment, privatization and financial restructuring.

OPIC is the most important US government agency which is in a position to promote greater investment interest in countries including Bangladesh by providing loan financing and investment insurance to American investors. OPIC also supports efforts by Bangladesh to attract increased foreign private investment. In order to secure its investment in Bangladesh any organization may seek OPIC insurance coverage.

The ICSID is an international organization established for the settlement of investment disputes between states and nationals of different states. ICSID seeks to encourage greater flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors.

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Abolition of Restrictions on Equity

Private investment from foreign sources is welcome in all areas except 5 reserved public sector investments. There is, however, no restriction on the amount of investment or equity shares. 100 percent foreign investment and joint ventures with local private partners or with the public sector are freely allowed.

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Securities and Exchange Commission

To supervise the smooth functioning of securities and capital, the Securities and Exchange Commission (SEC) has been established recently (1993) through an Act of Parliament. It has the important responsibility to ensure proper issuance of securities. Protection of ue interest of the investors in the capital market is also a major objective of SEC. The Commission's main functions include the following:

    * Regulating the business of stock exchange and the securities market;
    * Registering and reg lating the business of stock-brokers, sub-brokers, share transfer agents, ban ers and managers of an issue, trustees of trust deeds, registrars to an issue, nderwriters, portfolio managers, investment advisers and other intermediaries in the securities market;
    * Registering, regulati g and monitoring of collective investment schemes including all forms of utual funds;
    * Prohibiting fraudulent and unfair trading practices related to securities or any securities market;
    * Promoting investment education and training of all intermediaries of securities market;
    * Prohibiting insider trading in securities;
    * Regulating substantial acquisition of shares or stocks and take-overs of companies;
    * Compiling, analyzing nd publishing indices on the financial performance of any issuer of securities; and
    * Conducting research for the above purposes.

Investment guarantee

Foreign Private Investment (Promotion & Protection Act 1980) ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation. It also guarantees repatriation of capital & dividend and equitable treatment with local investors. Adequate protection is available for intellectual property rights, such a patents, designs and trade marks and copyrights. Bilateral Investment Guarantee Agreements have been signed with a number of countries. Bangladesh is a signatory to MIG, OPIC of USA, ICSID and member of WIPO Permanent Committee on development cooperation related to industrial property.

Potential areas for investment

Textiles and Clothing
Leather and Leather Products Industry
Electronics Industry
Frozen Food & Fisheries Industry
Light Engineering including Automobile Industries
Pharmaceuticals
Ceramics
Hotel and Tourism Industries
Infrastructure
Building and Construction
Computer Software Development and Data Entry Industry
Oil and Gas
Power
Telecommunication
Air Transportation
Agro-based and agro Processing Industries
Horticulture
Commercial Plantation
Furniture
Jewelry and Diamond Cutting & Polishing
Basic Chemicals

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