Bangladesh UK Investment:

The Bangladesh Government continues its endeavour to attract foreign investment. Foreign investment is encouraged in almost all industrial activities excluding those in the list of "Reserved Industries" such as arms and ammunitions, production of nuclear energy, printing and minting currency notes etc.

Foreign investment in Bangladesh can be either 100% foreign owned or joint ventures.

In December 2008 the total outstanding FDI stock of Bangladesh was $4,817.05 million where the contribution of gas and petroleum sector was $1,203.40 million, telecom $1,045.96 million, textile $925.03 million, banking $728.40 million, power $251.45 million, cement $139.07 million, food products $104.18 million and of fertiliser $103.71 million.

UK has emerged as one of the biggest sources of FDI for Bangladesh. British investment registered with Board of Investment in Bangladesh in 2008 was to the tune of USD 205 million, elevating UK to the top position among countries investing in Bangladesh. Major areas of British investment in Bangladesh include oil and gas, textile, tea garden, financial and other service sectors. So far, about 214 units of British FDI projects have been registered with the Board of Investment of Bangladesh with a total investment outlay of US$ 2,588 million. Sectorwise distribution of proposals from UK registered with BOI that investments are heavily concentrated in the service sector which is basically banking, gas exploration, coal mining, telecommunication etc

Some of the major British concerns present in Bangladesh are:

Export Promotion Bureau (EPB), Bangladesh is entrusted with the overall responsibility to promote export of Bangladesh. Its major activities are to explore markets for the exportables, disseminate trade related information among the stakeholders, organise international trade fair etc. EPB assist Ministry of Commerce in formulating export related

Board of Investment of Bangladesh facilitates foreign investment. Services available from BOI are:
a. Pre-investment information and counselling
b. Special welcome service to foreign investor
c. Investment implementation and commercial operation

The Bangladesh Export Processing Zones Authority (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 area and physical facilities including land, building and utility services to the potential investors and 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, the Customs (Export Processing Zones) Rules, 1984 and several circulars issued by Bangladesh Bank. Six EPZs are now operational in Bangladesh namely Chittagong, Dhaka, Comilla, Mongla, Uttara and Iswardi. Two other EPZs are at the implementation stage, namely Adamjee EPZ at Narayanganj and Karnaphuli EPZ at Chittagong.

Privatisation Commission of Bangladesh is entrusted with the overall resposibility to dispose off State Owned Enterprise (SOE). Currently, 21 SOEs have been included in the Commission's current programs to sell them to the private entrepreneur.

Investment Climate

Bangladesh offers an unique investment climate compared to the other South Asian economies.

• Geographic location of the country is ideal for global trade with very convenient access to international sea and air route.
• Hardworking and low-cost labour force suitable for any labour-intensive industry.
• Broad non-partisan political support for market oriented reform and the most investor-friendly regulatory regime in South Asia.
• Bangladesh is endowed with abundant supply of natural gas, water and its soil is very fertile.
• Although Bangla is the official language, but English is generally used as second language.
• As a result of low per capita income of only US$ 599, present domestic consumption is not significant. However there exists a middle class with moderate purchasing power. As economic growth picks up, the purchasing power will also grow substantially. And a country of more than 140 million people constitutes a significant market.
• Most Bangladeshi products enjoy complete duty and quota free access to EU, Japan, USA, Australia and many other developed countries.
• Investment in Bangladesh is well protected by law and by practice
• Agreements for avoidance of double taxation have already been signed with 25 countries and negotiations are going on with many other countries

Investment Incentives

Bangladesh government is highly keen to stimulate the economy and transform a poverty-stricken economy to industrialized economy within short time. Government has liberalized the industrial and investment policies in recent years by reducing bureaucratic control over private investment and opening up many areas. Incentives offered by the government are as follows:

(a) Tax Holiday
Tax holiday facility is available for 5 or 7 years depending on the nature and location of the industrial enterprise.

Dhaka and Chittagong Divisions (excluding 3 hill tract districts of Chittagong Division) 5 years
Khulna, Sylhet, Barisal and Rajshahi Divisions And 3 Chittagong hill tract districts 7 years

Industrial undertaking eligible for tax holiday are textile, jute goods, high value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, MS Rod, CI Sheet, fertilizer, insecticide & pesticide, computer hardware, petro-chemicals, agriculture machinery, boilers, compressors, basic raw materials of drugs, chemicals, pharmaceuticals, agro-processing, ship building and diamond cutting. Physical infrastructure investment eligible for tax holiday are Sea or river port, container terminals, internal container depot, container freight station, LNG terminal and transmission line, CNG terminal and transmission line, gas pipe line, flyover, mono rail, underground rail, telecommunication other than mobile phone, large water treatment plant & supply through pipe line, waste treatment plant, solar energy plant, export processing zone.

However power generation company can enjoy tax holiday for 15 years and industries set up in the Export Processing Zone for 10 years. Tax holiday facilities are provided in accordance with the existing tax laws and granted by National Board of Revenue (NBR).

(b) Accelerated Depreciation:
New industrial undertakings not enjoying tax holiday can enjoy accelerated depreciation allowance on cost of machinery in the first year of commercial production at 50%, in the second year at 30% and in the third year at 20%.

(c) Concessionary Duty on Imported Capital Machinery:
Import duty, at the rate of 7.5% is payable on capital machinery and spares imported for initial installation of the industry or Balancing, Modernization, Rehabilitation and Extension (BMRE) of the existing industries. For 100% export oriented industries, no import duty is charged in case of capital machinery and spares. Value Added Tax (VAT) is not payable for imported capital machinery and spares.

(d) Rationalization of Import Duty:
Duties and taxes on import of goods which are produced locally is higher than those applicable to import of raw materials for producing such goods.

(e) Other Incentives:
q    Tax exemption on royalties, technical know-how fees received by any foreign collaborator, firm, company and expert.
q   Tax exemption on the interest on foreign loans under certain conditions.
q    Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements.
q   Exemption of income tax up to 3 years for the foreign technicians employed in industries specified in the relevant schedule of income tax ordinance.
q    Facilities for full repatriation of invested capital, profit & dividend.
q     Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.
q    Special facilities and venture capital support is provided to export-oriented industries under "Priority Sectors"
q     There is no discrimination in case of duties and taxes for the same type of industries set up by foreign and local investors and in the public and private sectors.

Export-oriented industrialization is one of the major objectives of the Industrial Policy 1999. Export-oriented industries are given priority and public policy support is ensured in this respect. An industry exporting at least 80% of its manufactured goods or an industry contributing at least 80% of its products as an input to export oriented industry or a business entity exporting at least 80% of services is considered as an export-oriented industry. To attract investment in 100 percent export-oriented industries, following incentives and facilities are provided:

q        Duty free import of capital machinery

q        Bonded Warehouse and back-to-back Letter of Credit facilities are allowed.

q        Exporter receives duty drawback at a flat rate directly from the relevant commercial banks.

q        There are arrangements for providing loans up to 90 percent of the value against irrevocable and confirmed Letter of Credit/Sales Agreement.

q        To ensure backward linkage, incentives are extended to the "deemed exporters" supplying indigenous raw materials to export-oriented industries.

q        Income tax rebate is allowed to export earning.

q        Raw materials, which are included in the banned/restricted list, but required in the manufacture of exportable commodities, are allowed to import.

q        The imports of specified quantities of duty-free samples for manufacturing exportable products are allowed.

Apart from the above-mentioned facilities, other facilities announced and provided in the Export Policy are applicable to export-oriented and export-linkage industries.

Incentives at Export Processing Zones (EPZ) :

Investment in the Export Processing Zones enjoys following special incentives:

(i) Fiscal Incentives:
q  Tax holiday for 10 years.
q  Duty free import & automatic bonded warehouse facility.
q  Exemption from dividend tax
q  Expatriates are exempted from income tax for 3 years
q  Remittance of Royalty, Technical and Consultancy Fees allowed
q  Duty & Quota Free Access to EU, Canada, Australia etc.

(ii) Non-fiscal incentives:
q   Investment protected under Foreign Private Investment (promotion and protection) Act, 1980
q   100% foreign ownership permissible
q   No ceiling on foreign investment
q   Foreign currency loan from abroad under direct automatic route
q   Non - resident Foreign Currency Deposit (NFCD) Account permitted

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. In addition, foreign investors are also required to follow the regulations of Bangladesh Bank and NBR for taxation and customs matters.

Doing Business in Bangladesh:

Setting Business: 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.

Approvals: All foreign investment in Bangladesh is to be registered with the Board of Investment. There are no limits for equity participation. Investment is welcome in all sectors, with the exception of:
q   Manufacturing of arms and ammunition or other defence equipment
q   Forest plantation and mechanized extraction of reserved forests
q   The production of nuclear energy
q   Security printing (currency notes) and minting.

Taxation: National Board of Revenue (NBR) is the apex body for matters relating to taxation (income tax, VAT and Customs duty) in Bangladesh.

Income Tax: Income tax is administrated by the Income Tax department of NBR and governed by the Income Tax Ordinance, 1984 and by the Income Tax Rules 1984. Bangladesh has concluded tax treaties with 25 countries to assure foreign investors of fair treatment and avoid double taxation.

VAT: 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. But turnover tax is imposed on some small-scale activities, which remain outside the purview of VAT.

Customs Duty: Customs duty and supplementary duty are imposed on imported finished goods as well as raw material as per schedule declared by the government.

Labour Issues/Regulations: The Labour Law 2004, Employment of Labour (Standing Orders) Act, 1965, and the Industrial Relations Ordinance, 1969, regulate conditions 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.

Competitive Sector for Investment in Bangladesh:

 Bangladesh, traditionally known for jute and tea exports, has recently attracted world- wide attention for readymade garments and leather exports. Bangladesh foresees an expansion of her agricultural sector, as well as increased diversity in non traditional industries and business. Below is a short account of a few potential investment sectors where investment from UK may flow.

1) Textile

2) RMG and Backward Linkage:

3) Leather goods
a) Finished Leather
b) Leather Goods

4) Frozen food

5) Information Technology
a) Data Processing
b) Software Development

6) Agro-based Industry
a) Canned Juice / Fruit
b) Dairy and Poultry

7) Ceramic
a) Tableware
b) Sanitaryware
c) Insulator

8) Light Engineering
a) Machinery Parts
b) Consumer Items

9) Natural Gas-based Industries
a) Electricity
b) Fertilizer
c) Petro-chemicals

10) Electronics
a) Semi-Conductor
b) Cell Phone Assembly
c) Other Electronics

11) Jute and Jute goods

12) Tourism

13) Ship Building

Bangladesh government is highly keen to stimulate the economy and transform a poverty-stricken economy to industrialized economy within short time. Government has liberalized the industrial and investment policies in recent years by reducing bureaucratic control over private investment and opening up many areas. Bangladesh's regulation of inward investment is recognised as the most liberal in South Asia. Apart from the general investment climate many incentives are offered by the government to attract foreign investment such as tax holiday, accelerated depreciation, concessionary duty on import of capital machineries and many more. Moreover special incentives are offered to the investors who invest in the Export Promotions Zones. So far 10 UK companies have invested in the EPZs where total investment is US$ 31.2 million.

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

Incentives to Non-Resident Bangladeshis (NRBs):

Investment of NRBs is treated at par with FDI. Special incentives are provided to the NRBs to encourage investment in the country. NRBs enjoy facilities similar to those of foreign investors. Moreover, they can buy newly issued shares/ debentures of Bangladeshi companies. A quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account. An additional rebate of 5% on the total sale price of SOEs sold by the Privatisation Commission is granted when the buyer including the NRBs pays the full amount in foreign currency. DFID has recently expressed its interest to develop a Special Economic Zone in Bangladesh that may be ideal place for investment for the NRBs.

1. Agro Processing
2. Shrimp
3. Frozen fish and vegetable
4. Textile
5. ICT
6. Business Process Outsourcing (Call Center)
7. Tourism
8. Hospitality
9. Real Estate
10. SOE Acquisition
11. Wage Earner's Development Bond
12. US Dollar Bond
13. Portfolio and Security Investment