Since time immemorial, the spirit of free enterprise, competition and innovative entrepreneurship have been the dominant driving forces in the economic life of Bangladesh which has always encouraged external trade and investment. The British East India Company had set up office in this region as early as 1740s.
The institutions of capitalism like private property, individual initiatives, banks and other financial institutions have been well honed and practiced here much earlier than in other parts of East and Southeast Asia.
Being a plural, open, globally oriented society, Bangladesh always welcomes foreign entrepreneurs in its economy. It is now being considered as the most liberal and business friendly economy in this region and an attractive destination for foreign private business and investment. Its investment climate offer generous and attractive packages of incentives to investors. There is no discrimination between the local and foreign investors. Prevailing laws and practices fully guarantee the safety of the investment and their returns. Bangladesh has a larger supply of relatively industrious low cost labour, with flexibility to match in job demands including professionals, technologists and middle and low-level skilled personnel.
Despite the recent global financial markets crash, Bangladesh maintained its trend growth because of its resilience and capacity to deal with crises. There is a tremendous opportunity for the growth of private equity and other new forms of capital funding for private enterprise. The fiscal, commercial, monetary and other sectoral policies of the government are supportive of private sector growth on scales not known before. Bangladesh offers a strong local market, easier global market access and proven export competitiveness. Its middle class consumers are larger in numbers than the total population of Malaysia, Singapore and Thailand.
As a private sector led growth economy, Bangladesh is keen to provide and ensure a sustained conducive business climate. Undertaking pragmatic reforms and enhancing the facilitative role of the regulatory agencies and institutions are the prime agenda of government. The present government attaches high priority to private investment, both domestic and foreign, and is committed to making substantial improvement in the existing investment climate.
The present government of Honourable Prime Ministry Sheikh Hasina is committed to strengthening Board of Investment (BOI) services and encourages investors for safe and win-win investments to achieve the Vision 2021 which would see Bangladesh as a middle income country.
Bangladesh is strategically located for the global trade with access to international sea and air routes and is endowed with abundant supply of the key factors of production like hardworking workforce, natural gas, sweet water, fertile land, favourable climate and social tranquillity. Bangladesh has a sizable domestic market of about 152 million people and there is a great potential for dramatic increase of domestic consumption with continuous and accelerating growth in national income. Apart from the local market, most Bangladesh products enjoy duty and quota free access to the European Union, USA, Canada, Australia, New Zealand, Japan and other developed countries.
The people of Bangladesh have in general great entrepreneurial capability and the present government strongly believes that a dynamic private sector functioning in a free market economy within proper institutional framework can create adequate national wealth to support country's achieving the Vision 2021.
General economic conditions of Bangladesh:
The economy at a glance:
GDP :US$112 billion(FY2011-12)
GDP Per Capita: US$848 (2012)
GDP Growth: 6.32%
Exports : US$24.287 billion (2012)
Imports : US$35.44 billion (2012)
FDI :US$1.136 billion (2011)
Forex Reserve : USD US $11.753 billion (December, 2012)
Vision 2021: We envision 'a middle income country where poverty will be drastically reduced; where the citizens will be able to meet every basic need and where development will be on fast track, with ever-increasing rates of growth. " The Medium Term Economic Targets:(2013) under vision 2021: Raising economic growth rate to 8%; Reducing poverty rate to 25%; Reducing absolute poverty rate to 15% from 45% by 2021: Enhancing electricity supply to 7,000 MW: The Long Term Economic Targets (2021) under vision 2021: Boosting economic growth rate to 10% in 2017 and sustaining it until 2021; Reducing poverty rate to 15%; Enhancing electricity supply to 20,000 MW; Raising the economy to the level of a middle-income country by 2021 GDP per capita at US $1500.
Country Credit rating: Recently concluded (September, 2012) Moody's Investors' service has rated Bangladesh BA3 which implies continuity of sound macroeconomic fundamentals and better credit worthiness. This rating broadly incorporates financial and balance of payments robustness, continued economic stability and sustained growth at around 6 per cent per annum over the last one decade. Stable prices, exchange rates, high foreign currency reserves and growing home remittances from overseas Bengali workerscontribute a lot to this perception. Policy consistency along with steady progress in trade openness has helped steady economic growth averaging over 6% per annum.
Per capita income has doubled since 2000, reaching US $848 (2012). Bangladesh is among the 6 countries in Asia & Africa recognised by UNDP for progress in Millennium Development Goals.
Why Bangladesh?
Bangladesh is a winning combination with its competitive business-friendly environment and cost structure that can give the best returns:
-- Industrious low-cost workforce
-- Strategic location, regional connectivity and world-wide access.
-- Strong local market and growth
-- Low cost of energy
-- Proven export competitiveness
-- Competitive incentives
-- Export and Economic Zones
-- Positive investment climate.
Bangladesh offers the most liberal investment climate in South Asia. The Foreign Private Investment (Promotion and Protection) Act, 1980, which deals with promotion and protection of investment in Bangladesh, ensures equal treatment for local and foreign Investors and legal protection to foreign investment in Bangladesh against nationalisation and expropriation. It also guarantees repatriation of capital and dividend. Adequate protection is available for intellectual property rights, such as patents, designs, trademarks and copyrights.
Bangladesh is a signatory to Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group, Overseas Private Investment Corporation (OPIC) of USA, International Centre for Settlement of Investment Disputes (ICSID) and also a member of World Association of Investment Promotion Agencies (WAIPA), World Intellectual Property Organisation (WIPO) and World Trade Organisation (WTO). According to a recent comparative study conducted by the Board of Investment and JETRO on Cost of Doing Business between the competing locations, Bangladesh is one of the most competitive locations, in many indicators, among the ASEAN, Far Eastern and South Asian countries. There are lucrative incentives for foreign investors like 100% ownership, tax and duty exemptions.
Country Policy & Institutional Assessment (CPIA) by the World Bank:
-- Bangladesh has scored higher than the average rating of around 100 developing countries in the CPIA of the World Bank. Bangladesh scores 3.4 out of a maximum 6 points which is .01% higher than the average score of the developing countries
-- The FDI friendly index in the World Bank's latest report Investing Across Borders (IAB) 2010 covering 87 countries lists Bangladesh as one of the most convenient destinations for FDI for its investment friendly facilities& regulations.
-- Bangladesh is in the top of the list of countries which provides the strongest land or property lease rights to foreign investors along side Canada, Singapore, UK, USA, France & Spain.
-- Leasing a private land by foreign investors is easy in Bangladesh while buying private land here is much easier than buying it in India, Pakistan and Sri Lanka.
-- Bangladesh is one of the most open countries to foreign equity ownership, as measured by World Bank's IAB indicators.
-- All of the 33 sectors covered by the World Bank IAB indicators are fully open to foreign capital participation in Bangladesh with no constraints.
The New BRICs- The Next-11
-- Bangladesh is one of the 11 countries identified as the New BRICs (The Next-11) with Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. The reasons are i. attractive destination for infrastructure investment ii. human capital iii. technology adoption, a key factor in the virtual world of connectivity.
Citi Investment Research & Analysis of Citigroup in its Global Economics View published in February, 2011 identified Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam as countries with the most promising (per capita) growth prospects -3G countries meaning that these countries over the next 5, 10, 20 and 40 years are expected to deliver high growth and profitable investment opportunities.
Asian Development Bank commented that Bangladesh has made major progress in recent years, with sustained macroeconomic stability, improved health and education, gender parity in primary and secondary education, and a steady decline in poverty.
Goldman Sachs has also bracketed Bangladesh in 'Next-11'.
The International Monetary Fund (IMF) commented on the economy of Bangladesh that the resilient export and remittance flows have bolstered growth and external stability, and sheltered the financial system and nonfinancial corporate from external shocks.
J.P. Morgan Chase commented Bangladesh that the country ranks fourth in growth in economically active population. Five-year economic growth is strong at 6.1% (CAGR).
Morgan Stanley has also remarked that Bangladesh is at "the very early stages of an investment boom".
Industrial policy 2010:
The salient features
-- Private Initiative is the main driving force of economic development and the government will create favourable atmosphere to augment private investment in country's industrialisation process.
-- Prioritisation of agro-based and labour intensive industrialisation.
-- Ensure facilities and infrastructural support to Small and Medium Enterprises (SMEs)
-- Giving Priority to Electricity, Gas, Port Facilities, Roads, Railway Communication and Telecommunication.
-- Full utilisation of gas and coal will be ensured to generate power. At the same time, natural resources, solar power and municipal refuse will be used to produce electricity and bio-gas.
-- Ensure the availability of equity, fund and loans to the industrial entrepreneurs to establish or administer industrial projects.
-- Take steps for simplification of procedures, introducing IT enabled services to one stop centers of Registrar of Joint Stock Companies, Board of Investment and in other offices.
-- Provide all necessary assistance and support including land and capital to the women entrepreneurs to establish industries in various sectors.
-- Take necessary reform measures for ensuring Intellectual Property Right in areas of technological development and innovation in industrial sectors.
-- Ensuring support for production of environment friendly products and the government will ensure whether all the compliances regarding health and friendly environment are followed according to the WTO Rules and Procedures.
Thrust Sectors for investment:
-- Agro-based & agricultural item/foods processing industry
-- Human Resources Development
-- Ship Building & Environmental Ship Breaking Industry
-- Renewable Power (Solar, Wind)
-- Tourism Industry
-- Chemicals and Dyes
-- ICT Goods and Services
-- Readymade garments industry
-- Active Pharmaceuticals Ingredient Industry & Radio Pharmaceuticals Industry
-- Herbal Medicine Industry
-- Polymer Making Industry
-- Jute Based Industr
-- Leather Industry
-- Hospital & Clinic
-- Auto-mobile
-- Plastic Industry
-- Furniture
-- Handicrafts
-- Energy efficient electric appliances
-- Frozen Fish Industry
-- Tea Industry
-- Home Textile
-- Ceramics (Table ware, Tiles, Sanitary items)
-- Bio-technology
-- Jewellery
-- Toys
-- Container Service
-- Warehouse
-- Cosmetics & Toiletries
-- Light Engineering Industry
Facilities and incentives for foreign investors:
General Incentives
-- Tax exemption on interests on foreign loans
-- Tax exemptions on capital gains from transfer of shares by the investing company
-- Exemption of income tax for up to three years for the expatriate personnel employed under an approved industrial set up
-- Remittances of up to 50% of salaries of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return
-- No restrictions on issuance of work permits to project related foreign nationals and employees
-- Facilities for repatriation of invested capital, profits and dividends
-- Provision of transfer of shares held by foreign share holders to local investors
-- Taka the Bangladesh currency would be convertible for international payments for the foreign investors
-- Reinvestment of remittable dividends would be treated as new investment
-- Foreign owned companies are on the same footing as locally owned ones
Fiscal incentives
-- Corporate tax holiday of 5 to 7 years for selected sectors
-- Reduced tariff on import of raw materials capital machinery
-- Bonded warehousing
-- Accelerated depreciation on cost of machinery is admissible for new industrial undertaking (50% in the first year of commercial production, 30% in the second year, and 20% in the third year)
-- Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange
Financial incentives for export oriented industries
-- Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the selected products
-- 90% loans against letters of credit (by banks)
-- Funds for export promotion
-- Export credit guarantee scheme
-- Permission for domestic market sales of up to 20% of export-oriented companies outside EPZ (relevant duties apply)
Additional facilities/incentives:
-- 100% foreign equity allowed
-- Unrestricted exit policy
-- Remittance of royalty, technical know-how and technical assistance fees
-- Full repatriation facilities of dividends and capital at exit
-- Citizenship by investing a minimum of US$5,00,000
-- Permanent resident permits on investing US$75,000
-- An investor can wind up investment either through a decision of the AGM or EGM. He or she can repatriate the sales proceeds after securing proper authorisation from the Central Bank
Special incentives for the power sector
Incentives for Private Sector Power Generation for Private Sector Power Generation Policy of Bangladesh (revised in November 2004) provides a number of fiscal incentives for foreign investment in the Power sector. Some of them are depicted below:
-- The private power companies shall be exempted from corporate income tax for a period of 15 years.
-- The companies will be allowed to import plant and equipments and spare parts up to ten percent (10%) of the original value of total plant and equipment within a period of twelve (12) years of Commercial Operation without payment of customs duties, VAT (Value Added Tax) and any surcharges as well as import permit fee except for indigenously produced equipment manufactured according to international standards.
-- Repatriation of equity along with dividends will be allowed freely.
-- Exemption from income tax in Bangladesh for Repatriation of equity along with dividends will be allowed freely.
-- Tax exemption on royalties, technical know-how and technical assistance fees and facilities for their repatriation.
-- Tax exemption on interest on foreign loans.
-- Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements.
-- Remittance of up to 50% of salary of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return.
-- No restrictions on issuance of work permits to project related foreign nationals and employees.
-- Provision of transfer of shares held by foreign shareholders to local shareholders/ investors.
-- Re-investment of remittable dividend to be treated as new foreign investment.
-- Facilities for repatriation of invested capital, profits and dividends.
-- Companies are eligible for all other concessions which are available to industrial projects.
For detail please visit the website of Board of Investment of Bangladesh at - www.boi.gov.bd Prepared by Board of Investment of Bangladesh