Bangladesh, known for the resilience of its people and the vibrancy of its civil society, has been making determined efforts towards economic emancipation of its people. Pluralism and participatory governance has been shaping it polity and socio-cultural milieu over the decades.
Resilience of the people is gradually getting reflected in the resolve of the nation to stimulate the economy and create gainful employment to the teeming millions. Inspired by the resolve, the successive Governments pursued a policy of liberalisation in the industrial and investment policies by reducing regulatory requirement and opening up many sectors for private investments. Policy environment has allowed the private sector in Bangladesh to flourish at a steady pace in the last two decades.
The economic advancement and social development are getting due acknowledgement. The World Bank commented recently that Bangladesh is the 10th most rapidly growing economy among the 31 large developing countries with population above 20 million with GDP averaging 5% since 1990.
With the present rate of growth, many tend to believe that Bangladesh may become a middle-income country within 2050. Based on the promising growth performance and potential, the New York based global investment banking, securities and investment management firm Goldman Sachs considered Bangladesh as one of the next-11 emerging economies to follow Brazil, Russia, India and China.
Policy reforms have brought significant changes in the regulatory framework for business and investment. Bangladesh offers a competitive location for doing business in terms of costs, inputs, human resources, market access, business facilitation etc. Investments in Bangladesh in the right sector guarantee higher yields with lesser risks. As per ease of doing business jointly estimated by the World Bank and the IFC in 2006, Bangladesh ranked 65 among 155 countries surveyed, with Sri Lanka at 75, India at 116, and Vietnam at 99.
The confidence of the global business community is well reflected in the 84% increase (amounting to US $845 million) in FDI inflow in Bangladesh in 2005-2006. According to World Investment Report 2006, Bangladesh is now ahead of India in terms of FDI performance index. A component-wise analysis of FDI inflow in 2005 shows that about 50% of FDI came as equity, 29% as reinvestment, and the rest as intra-company borrowing. The higher reinvestment rate indicates unwavering confidence of foreign investors on overall investment climate and competitiveness of related business sectors.
A sector-wise analysis of FDI inflow in 2005 demonstrates that FDI in Bangladesh have been widely spread among key business sectors concentrating on telecommunication (33%), manufacturing (26%), energy and power (25%0 and trade and commerce (15%). In 2005, FDI has originated from 30 different sources dominated by the developed economies (over 51%).
Interestingly, a significant share came from the developing economies (43%). Malaysia, Pakistan, Egypt are featuring prominently among the list of source developing countries. In 2006-2007, Bangladesh received expression of intent to invest from many renowned investors. A number of large proposals worth about $10 billion were at various stages of negotiation and approval.
A. POSSIBLE SECTORS FOR INVESTMENT: Enormous investment opportunities exist in the RMG and textile sectors with wide choices such as establishment of new textile /RMG unit, joint ventures, acquisition of public sector textile mills and indirect investment through financial services and instruments. Growing demand of yarn in the local market point to spinning as an investment option.
Frozen fish (hatcheries, sustainable aqua-culture, feed meals plant, and processing), integrated leather park (with export focus), relocation, outward investment and joint venture in electronics (home appliances, telecom equipment, semi-conductors), agro-based industry (dairy and poultry, fruits and vegetables, processed food items), ceramics, light engineering ( machine parts and consumer items), Information technology (data processing, software development and hardware manufacturing) and pharmaceuticals promise to be good areas for FDI.
Likewise, natural gas based industries such as the ones on power generation, transmission and distribution, fertiliser, petrochemicals, CNG have their own competitive advantages. Investment in transport and service sectors cannot also be discounted. The decision to invest in Bangladesh may be considered based on its strengths and advantages, congenial business environment and a very supportive policy framework towards attracting foreign investment.
SOME OF THEM ARE SUMMARISED BELOW:
-- B. General Investment Climate
-- a. General Features
-- Bangladesh offers a conducive investment climate compared to the other South Asian economies.
-- Bangladesh is a largely homogenous society and a population with great resilience in the face of adversity (eg natural calamities).
-- Bangladesh is a liberal democratic country. The people irrespective of race and religion have been living in harmony for years.
-- It enjoys broad non-partisan political support for market-oriented reforms and offers the most investor-friendly regulatory regime in South Asia.
-- Bangladesh possesses a good blend of skilled and trainable, keen, and hardworking labour force that is low-cost even by regional standards.
-- Geographical location of the country is ideal for global trades with very convenient access to international sea and air routes. Bangladesh is the bridge between ASEAN and SAARC nations.
-- Bangladesh is endowed with abundant supply of natural gas, coal, water and very fertile soil.
-- English is widely spoken as the second language.
-- There exists a middle class, expanding steadily, with significant purchasing power. Because of the sheer size of the population base, even a small middle class may constitute a significant market.
-- Almost all Bangladeshi products enjoy duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. Despite quota phase out on 01 January 2005 for the US apparel market; Bangladeshi apparel has successfully taken up a better position in US market and experiencing substantial growth in an even competitive market.
-- b. Legal Framework for Foreign Investment.
-- Investment in Bangladesh is well protected by law and by practice. Major laws related to private investment-both foreign and local - are:
-- The Foreign Private Investment (Promotion and Protection) Act of 1980
-- The Investment Board Act of 1989
-- The Companies Act 1994
-- The Bangladesh Private Export Processing Zones Authority Act of 1996
-- The Industry Policy 2005
-- The Import Policy Order and the Export Policy Order.
-- Private Sector Infrastructure guideline 2004
-- In addition, foreign investors are required to follow the regulations of the Bangladesh Bank - and the National Board of Revenue for taxation and customs matters.
-- c. Bilateral Investment Agreements
The Foreign Private investment (Promotion and Protection) Act 1980 includes guarantee of fair and equitable treatment to foreign private investment. Such national treatment is also provided in bilateral investment treaties (BITs) for the promotion and protection of foreign investment, which was concluded with about 30 countries including UK, USA, Canada, China, Germany, Japan, ROK and Singapore. Negotiations on concluding BITs have also been going on with another 15 countries including India, Hungary, Oman, Maldova, Egypt, Russia, Ukraine, Australia, Spain, and Saudi Arabia.
-- Separate bilateral agreements for avoidance of Double Taxation Treaties (DTTs) have also been signed with around 25 countries. Negotiations on DTTs are progressing with above 20 countries.
Bangladesh is a party to the Multilateral Investment Guarantee Agreement (MIGA), Overseas Private Investment Corporation (OPIC) of USA, International Center for Settlement of Investment Disputes (ICSID) and a member of the World Intellectual property organisation (WIPO) permanent committee on development cooperation related to industrial property. Bangladesh ensures adequate protection for intellectual property rights, such as patents, designs & trademarks and copyrights.
-- d. Credit Rating and Country Risks
Bangladesh does not have any sovereign credit rating till date. However, the creditworthiness of Bangladesh is regularly quantified on monthly basis by the various Export Credit Rating Agencies (ECAs). These ECAs are members of the Berne Union.
Regular country risk analysis is also conducted and reported by most of the investment banks and economic research agencies like Economist Intelligence Unit (EIU) of the Economist etc. Under the Credit Rating Companies Act 1996, two companies were established to conduct corporate credit rating in Bangladesh, namely Credit Rating Information and Services Ltd and Credit Rating Agency of Bangladesh Ltd.
-- C. Infrastructure Readiness
-- a. Utilities
-- Utility provisions for industrial undertaking include gas, electricity, water, waste management, sewerage etc in Bangladesh are as below:
-- In EPZs, all kind of utility facilities and supports are pre-installed and ready for utilisation. There is no disruption in power, gas and water. Industrial waste management and sewerage system do sufficiently ensure a conducive environment.
-- BSCIC Industrial Estate provide utility facilities including plot allotment.
-- Other industrial areas are also being brought under the uninterrupted and sufficient coverage of utility services.
-- BOI Utility Services Cell provides one window service to the investors.
-- Private investors can avail utility services through BOI Utility Services Cell. Senior Officials from the respective utility service offices of the Government provide counseling, accept applications and facilitate full services within a stipulated period.
-- b. Transportation
-- Since the mid 80s, construction of road network all over the country has been massively undertaken. Today, almost all parts of the country are networked with road connection. Roads are well supported by sufficient numbers of bridges and culverts. The Jamuna Multipurpose Bridge has connected the east and west by road and rail network. Likewise, there are many a bridges built over other rivers such as Padma (Ganges)and Meghna. Well-developed navigable waterways in the country also provide transportation facilities even to the low remote areas. Both passengers and domestic freight are carried over at cheaper cost.
-- Over 20 International Airlines directly operate regular international flights from world business destinations of South, East and South East Asia, Middle East and Europe to Bangladesh. Besides, Biman Bangladesh Airlines, the national airways, is also networked to a good number of international and domestic destinations. A Number of private sector airways are connecting to domestic, regional and international destinations. Private Helicopter Services are also available to reach any place of the country. In 2007, Bangladesh declared open sky policy to facilitate air transportation.
-- Between two international seaports-Chittagong and Mongla, Chittagong is the gateway for both export and import serving more than 80% of all international sea freights. Chittagong port is also well connected to domestic road, rail and air routes. The government is concerned to enhance the efficiency of the ports and invites private sector participation in port management and establishment. Recently, the turn back time for ships has been reduced significantly and the efficiency in cargo handling has improved noticeably. The government is actively working on a deep-sea port and has allowed building of private ports.
-- Most of the international shipping and freight-forwarding companies/agents are present in the country providing transportation services to the investors.
-- c. Communication
In August 2002, Government has opened up the telecom sector (fixed line) to the private sector participation.
Government has already given license to private sector for fixed line operations. Such market-oriented move for telecom sector would enhance the telecommunication service of the country to a desired level.
Mobile telephony has seen spectacular growth in Bangladesh in the recent years. Subscribers have crossed 35 million. Foreign operators dominate the sector. The mobile phone call charges have been reduced to very reasonable levels. This is perhaps the most competitive in the whole of South Asia.
In broadcasting area, Bangladesh has over 12 private and public TV channels. The coverage is extensive and the Channels offer free flow of information and entertainment.
62 Internet Service Providers (ISPs) are in the Internet market. Divisional and District towns, and major industrial areas have been brought under Internet servicing.
Bangladesh has joined the consortium of SEA-ME-WE-4 submarine cable, which starts its commercial activities from 21st May 2006. This has brought improvement in speed of communication and is facilitating growth of data entry and software sectors.
With about 9,859 domestic postal stations including 164 Guaranteed Express Post (GEP) providing stations and Express Mail Service (EMS) agreement with 49 countries, postal services in Bangladesh has been serving the nation. International courier service companies like DHL, FedEx, UPS etc are also present to serve the investors.
-- D. Facilitation & Promotion
The role and importance of private sector investment in accelerating industrial development of Bangladesh were significantly identified and outlined by the visionary leadership and put into the policy framework of the Government in early 1980s. Formal legislative move was made through enactment of the Foreign Private Investment (Promotion and Protection) Act, 1980 and the Bangladesh Export Processing Zones Authority Act 1980. With the changing global economic scenario, the need for specialised institutions in promoting private investment, both foreign and domestic, had emerged. As a result, BOI was established in 1989. Following are the four key investment promotion and facilitation agencies of Bangladesh.
-- a. Bangladesh Small and Cottage Industry Corporation (BSCIC).
Back in 1957, BSCIC was established by parliamentary legislation, which was amended in 1992 to match the industrialisation and macro economic policies of the Government. It provides comprehensive services to development and expansion of small and cottage Industries (SCIs).
THE MAJOR FUNCTIONS OF BSCIC INCLUDE:
-- Promotion and registration of small and cottage industries;
conducting advisory and industrial promotion services including scouting and training of entrepreneurs, skill development of artisans and craftsman and creation of job opportunities;
-- construction and development of industrial estates with necessary infrastructural facilities for the SCIs
-- development of linkages between SCIs and other medium and large industries. An initiative has been taken to establish SME Foundation.
-- b. Bangladesh Export Processing Zones Authority (BEPZA)
Under the BEPZA Act 1980, it was established to set up and operate export-processing zones in Bangladesh with a view to providing a congenial investment climate free from procedural complications. EPZs are export-oriented industrial enclaves that provide infrastructural facilities, administrative and support services to the investors along with rewarding incentives.
The first EPZ in Bangladesh was established in 1983 in Chittagong and the second one in Dhaka in 1993. Five (05) more EPZs in Mongla, Ishwardi, Uttara (Nilphamari), Comilla and Adamjee (Narayanganj) are in operation. Another EPZ named Karnaphuli EPZ in Chittagong was inaugurated on 12th September 2006.
Three types of ownership prevail in the EPZs-100% foreign ownership (A-type), Joint ownership (B-type) and local ownership (C-type), investments in EPZs represents 30 countries like South Korea, China, Japan, USA, Germany, Pakistan, Malaysia, Taiwan, India, Singapore, Panama, Denmark, Thailand, France, UAE, Sweden, Italy, Belgium, the Netherlands and Canada etc. At present over 250 industries are operating and producing different famous brand products, which are exporting throughout the world.
-- c. Privatisation Commission
After the independence of Bangladesh, all major industries like jute, textiles, chemicals etc were nationalised under a nationalisation program. In 1993, Privatisation Board (now Privatisation Commission) was set up and entrusted with the overall responsibility of privatising State-Owned Enterprises (SOEs) that have been identified by the government.
Since the establishment of Privatisation Commission, so far more than 70 SOEs have been privatised. Among them, majority SOEs were privatised by direct sale and the rest through transfer of share.
As the SOEs have an already developed infrastructure and facilitates, investing by acquisition of these SOEs is a gainful option to the private investors.
-- d. Board of Investment (BOI).
As enacted, BOI was established to encourage investment in the industry in private sector and to provide necessary facilities and assistance in the establishment of industries. Hon'ble Prime Minister/ Chief Adviser heads it with membership from all relevant Ministries, and institutions including the Chambers. The Board functions can be broadly categorised into investment promotion, investment facilitation and policy advocacy.
THE SERVICES AVAILABLE FROM BOI INCLUDE:
-- Pre-investment information and counseling including assistance in company formation and registration
-- Special welcome service to foreign investors including immigration support, hotel accommodation and counseling arrangement.
-- Investment implementation and commercial operation notable among which are industry registration, identification/ allocation of plot, utility connections, terms and conditions of loan, credit etc, import of equipment and raw materials, work permit, repatriation of remittance etc.
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