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Last update: April 2009

Bangladesh

Investing in Bangladesh

 

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About Bangladesh

Although one of the world's poorest and most densely populated countries, Bangladesh has made major strides to meet the food needs of its increasing population, through increased domestic production augmented by imports. (Source European Commission - Asia Invest Programme)

The land is devoted mainly to rice and jute cultivation, although wheat production has increased in recent years; the country is largely self-sufficient in rice production. Nonetheless, an estimated 10% to 15% of the population faces serious nutritional risk. Bangladesh's predominantly agricultural economy depends heavily on an erratic monsoonal cycle, with periodic flooding and drought.

 Although improving, infrastructure to support transportation, communications, and power supply is poorly developed. Bangladesh is limited in its reserves of coal and oil, and its industrial base is weak. However, the country's main endowments include its vast human resource base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas.

Fortunately for Bangladesh, many new jobs--1.8 million, mostly for women--have been created by the country's dynamic private readymade garment industry, which grew at double-digit rates through most of the 1990s. The country has done less well, however, in expanding its export base--garments account for more than three-fourths of all exports, dwarfing the country's historic cash crop, jute, along with leather, shrimp, pharmaceuticals, and ceramics.

The Bangladesh Government continues to court foreign investment, something it did fairly well in the 1990s in private power generation and gas exploration and production, as well as in other sectors such as cellular telephony, textiles, and pharmaceuticals. In 1989, the Bangladesh Government established a board of investment to simplify approval and start-up procedures for foreign investors, although in practice the board has done little to increase investment. Bangladesh also has established successful export processing zones in Chittagong (1983), Dhaka (1994) and Comilla (2000), and has given the private sector permission to build and operate competing export promotion zones (EPZs).

The most important reforms Bangladesh should make to be able to compete in a global economy are to privatize the state-owned enterprises (SOEs), deregulate and promote foreign investment in high-potential industries like energy and telecommunications, and take decisive steps toward combating corruption and strengthening rule of law.

Source: CIA World Factbook 2006 

 

Foreign Direct Investment

Foreign investment is actively encouraged and promoted in Bangladesh with the Bangladesh Government implementing a number of liberal investment policies, which are believed by many to be some of the most liberal in Asia, with no limits on foreign equity participation.

Foreign Investment with particular preference to foreign direct investment is encouraged in all industrial activities excluding those in the list of "Reserved Industries" (production of arms and ammunitions, forest plantation and mechanized extraction within the bounds of a reserved forest, production of nuclear energy and printing and minting currency notes).  Such investment may be undertaken either independently or through joint ventures, either with the local private or public sector.

The Government of Bangladesh particularly encourages foreign investment in the following areas:

  • Export-oriented industries
  • Industries in the EPZ
  • High technology products which are either import substitutes or export oriented
  • Undertakings in which more diversified use of indigenous natural resources are possible
  • Basic industries depending mainly on local raw materials
  • Investment towards improvements in quality and marketing of goods manufactured and the increase of production capacities of existing industries
  • Labour intensive/technology intensive/capital intensive industries

Source: United Nations and Social Commission for Asia and the Pacific 

 

Export Processing Zones

The Bangladesh Export Processing Zones Authority (BEPZA), was created in 1980 by Parliament, along with the Bangladesh Export Processing Zones Authority Act to empower them to create, develop, operate, manage and control the Export Processing Zones (EPZs). BEPZA is the official organ of the Government to promote, attract and facilitate foreign investment in the Export Processing Zones.

The primary objective of EPZs is to provide special areas where potential investors can find a conducive investment climate. The legal framework governing EPZs in Bangladesh and the operation of firms established in EPZs includes the Bangladesh Export Processing Zones Authority Act, 1980 and the Customs (Export Processing Zones) Rules, 1984. Bangladesh Bank has issued several circulars concerning the operation of EPZs, the establishment of companies in EPZs, credit facilities available and conditions to access credit.

Two EPZs are now operational in Bangladesh, Chittagong EPZ (established in 1983) and Dhaka EPZ, in Savar near Dhaka (established in 1993). Three other EPZs are at the implementation stage, namely Comilla, Khulna and Ishurdi.

Bangladesh offers "one window same day service" to investors in EPZs. The service with its simplified procedure sanctions projects generally within one week, issues required import and export permits and required work permits for foreign nationals working in EPZ enterprises and provides required infrastructural facilities in EPZs.

Source European Commission - Asia Invest Programme 

 

Foreign Investment Policy and Regulations

The policy framework for foreign investment in Bangladesh is based on the Foreign Private Investment (Promotion and Protection) Act, 1980, which ensures legal protection to foreign investment in the country against nationalization and expropriation. It also guarantees non-discriminatory treatment between foreign and local investment and repatriation of proceeds from sales of shares and profit.

Other major laws affecting foreign investment are the Bangladesh Export Processing Zones Authority Act (1984), the Companies Act (1994) and the Industrial Policy (1999). In addition, foreign investors are also required to follow the regulations of Bangladesh Bank and NBR for taxation and customs matters.

Source: United Nations and Social Commission for Asia and the Pacific 

 

Investment Incentives

Foreign investment is actively encouraged and promoted in Bangladesh with the Bangladesh Government implementing a number of liberal investment policies, which are believed by many to be some of the most liberal in Asia. There are no distinctions between foreign and domestic private investors regarding investment incentives or export and import policies.

Incentives being offered to investors, include: 100% ownership in most sectors; tax holidays; reduced import duties on capital machinery and spares; duty-free imports for 100% exporters; and tax exemptions on technology remittance fees, on interest on foreign loans, and on capital gains by portfolio investors. There are performance requirements, which do not generally present problems for foreign investors.

The Government of Bangladesh has liberalized the industrial and investment policies in recent years by reducing bureaucratic control over private investment.

The Foreign Investment Act includes a guarantee of national treatment. National treatment is also provided in bilateral investment treaties for the promotion and protection of foreign investment, which have been concluded with 14 countries: the United States, Belgium, China, France, Germany,
Italy, Malaysia, the Netherlands, Pakistan, Romania, South Korea, Thailand, Turkey, and the United Kingdom.

In Bangladesh, foreign entrepreneurs are entitled to the same facilities as domestic entrepreneurs in respect of a tax holiday, payment of royalty, technical know-how, fees, etc. As mentioned earlier, there is no limitation pertaining to foreign equity participation for FDI, i.e. 100 per cent foreign equity is allowed.

Tax holiday facilities are available for five or seven years depending on the location of the industrial enterprise.

  • Dhaka and Chittagong Divisions 5 years  (excluding three hill tract districts of Chittagong Division namely Rangamati, Khagrachhari and Bandarban designated as under-developed areas)
  • Barisal, Khulna, Rajshahi and Sylhet Divisions 7 years and the three Chittagong Hill Tracts

Source European Commission - Asia Invest Programme 

 

Entry into Bangladesh

  1. Business visa: A letter from the sponsoring organisation in UK highlighting the financial coverage of the applicant for the trip along with another letter of invitation from Bangladeshi organisation mentioning the applicant's name and passport number should be furnished with the visa application form

  2. Tourist visa: A letter of invitation (original, in letter head) from the concerned Bangladesh organisation or in case of personal invitation, bank statement of the concerned Bangladesh national along with the invitation letter will be required. The address and telephone number of the person inviting the applicant must be mentioned in the invitation letter

  3. For any other category of visa relevant supporting papers should be submitted along with the visa application form.

Documentary evidence of identification in support of profession is a must.
Incomplete application form or application with incorrect information/insufficient supporting papers will be rejected without citing any reason.

For further information, please go to our Bangladesh visa's section 

 

Setting up a company

Business in Bangladesh may be carried out by a company incorporated locally or a company incorporated outside Bangladesh, but registered in Bangladesh.

The Registrar of Joint Stock Companies and Firms do the incorporation or registration under the provisions of the Companies Act 1994 which safeguard the interest of the investors and provide the Directors with overall power to manage and run the company.

Source European Commission - Asia Invest Programme

For further information, please go to our Bangladesh products to market/setting up a company's section 

 

Types of companies

There are three types of companies:

  • Companies Limited by Shares
  • Companies Limited by Guarantees
  • Unlimited Companies

Companies limited by shares may further be classified as Public Limited and Private Limited companies.

Source European Commission - Asia Invest Programme 

 

Local representation

Agents

It is generally accepted that to do business in Bangladesh a foreign company needs to appoint an influential local partner (usually an agent), who knows how business is done and can navigate a path around Bangladeshi bureacracy. The appointment of the right agent is considered to be fundamental to success. Usually, Dhaka-based agents should be in a position to cover the entire territory of Bangladesh.  

Agency Legislation

Contract Act 1872
prescribes the rights and liabilities of an agent and also of the principal. The agent has the authority to act or carry on a business, and therefore should do every lawful thing necessary to execute such an act or business. If an agent acts beyond the terms of the agency agreement, the principal will not be liable for these acts.

Most agency agreements have a clause which permits both parties to give due notice if it is intended that the agreement is to be terminated. As Bangladesh has not ratified the Arbitration (Protocol and Convention) Act 1937, it is wise to include a clause which agrees to allow an independent arbitrator to settle any disputes between parties.

Source: UK Trade & Investement

 

Approvals/clearances required for new projects

Bangladesh does not request prior approval requirements for foreign investment.

There are no limits for equity participation or restrictions on the repatriation of foreign profits and income. There are no restrictions to the acquisition of local enterprises by foreign investors who may also buy those enterprises earmarked for privatization.

Investment is welcome in all sectors, with the exception of:

  • Manufacturing of arms and ammunition or other defence equipment
  • Forest plantation and mechanized extraction of reserved forests
  • The production of nuclear energy
  • Security printing (currency notes) and minting.

Additionally, foreign investment is discouraged in the following areas:

  • Ready-made garments
  • Banks
  • Insurance companies and other financial institutions.

Source: United Nations and Social Commission for Asia and the Pacific 

 

Taxation in Bangladesh

Bangladesh has concluded tax treaties, assuring investors of fair treatment and the reduction or elimination of double taxation, with some countries, and generally adheres to the principal of national treatment with respect to tax policies.

  • Income tax

Income tax is administrated by the Income Tax Ordinance, 1984 and by the Income Tax Rules 1984. The Income Tax Department of the NBR is the apex body for matters relating to income tax.

The submission of an income tax return is due by 31 December for companies and 30 September for entities other than companies.

  • Corporate tax

The corporate tax rate for industrial companies whose shares are publicly traded is 35 per cent. Companies whose shares are not publicly traded are subject to a corporate tax rate of 40 per cent. The tax rate on the income of all other companies, including banks, financial institutions, insurance companies and local authorities, is 40 per cent.

Companies enjoying a tax holiday are required to invest 30 per cent of their exempted income within two years from the end of the tax exemption period in the undertaking or in a new industrial undertaking or in stocks and shares of a public company or in government bonds or securities.

  • Other taxes

Bangladesh has mostly replaced the former sales and excise taxes with the VAT, imposed at a flat rate of 15 per cent. VAT is not payable for imported capital machinery and spares.

Excise duties still exist on items such as cigarettes, domestic textiles and bank services. A turnover tax is imposed on some small-scale activities, which remain outside the purview of VAT.

Source: United Nations and Social Commission for Asia and the Pacific 

 

Labour Issues/Regulations

The Employment of Labour (Standing Orders) Act, 1965 (as amended in 1985), and the Industrial Relations Ordinance, 1969 (as amended in 1975) (IRO), regulate termination of employment in Bangladesh, but there are about 47 labour-related laws, which regulate: wages and employment; trade union and industrial disputes; working environment and labour administration and related matters:

  • Workmen's Compensation Act, 1923
  • Maternity Benefit Act, 1936
  • Payment of Wages Act, 1936
  • Shops and Establishments Act, 1965
  • Factories Act, 1965

Source: United Nations and Social Commission for Asia and the Pacific

For further information, please go to our Bangladesh products to market employment law's section 

 

Intellectual Property Rights 

Patents, trademarks and copyrights are governed by the following legislative framework:

  • Patents and Designs Act, 1911 and the Patents and Designs Rules, 1933
  • Trade Marks Act, 1940 and the Trade Marks Rules, 1963
  • Copyright Ordinance, 1962, as amended by the Copyright (Amendment) Act, 1974 and the Copyright (Amendment) Ordinance, 1978

Bangladesh is a State party to the Universal Copyright Convention (since 1975) for the protection of literary, scientific and artistic works, the Paris Convention for the Protection of Industrial Property (since 1991), and the Bern Convention for the Protection of Literary and Artistic Works (since 1999).

Bangladesh has also been a member of the WIPO since 1985.

Source: United Nations and Social Commission for Asia and the Pacific

For further information, please go to our Bangladesh useful info, Intellectual Property Right's section

 

Bangladesh Investment Handbook

The Third Edition of Bangladesh Investment Handbook presents most updated information and data relating to investment. New inclusions in this edition are permission process of Branch/Liaision/Representative Offices, procedure of listing Private Sector Infrastructure projects at PICOM, New Industrial Policy of 2005, Revised Visa Policy etc.

Investment promotion and facilitation are, among others, the two key functions of Board of Investment (BOI). As the apex national Investment Promotion Agency (IPA), BOI has been offering comprehensive services to the investors starting from initial counseling even to product marketing advices. Publication of handbooks, newsletters, statistical results and sectoral briefs is an effective tool for disseminating necessary information on such services. "Bangladesh Investment Handbook" is an allinclusive information kit and first-hand guide for the investors.

Source: Board of Investment Bangladesh

Click here to read the report

 

 

 Last update: April 2009

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