Private sector is the main engine of economic growth in Bangladesh. The government therefore attaches high priority to private investments, both domestic and foreign, and has been relentlessly working for ensuring an ideal investment climate through policy and institutional supports, infrastructure improvements, administrative and regulation reforms, modernization of financial institutions, and special incentive packages. Government has also established export processing zones as well as economic zones where privileged treatment and special package are offered to investors. Such initiatives have enabled Bangladesh to maintain a GDP growth rate of over 6% on average for more than a decade and also to double its export earnings in just five years despite slow pace in the recovery of global economy. Owing to robust economic growth for consecutive years, Bangladesh has recently graduated to the status of a lower middle-income country with per capita income hovering around US$ 1,314 at the moment.
Bangladesh is now a highly competitive location for commercial ventures in terms of costs, inputs, human resources, size of the domestic market, access to international markets, trade facilitation, investment protection including consistency in policies, socio-political stability etc. Inflow of FDI is on continuous rise for last few years and the inbound FDI rose by 24% year-on-year basis to US$ 1.83 billion last year. Following would give an overview on current investment climate in Bangladesh:
Overall Investment Climate in Bangladesh:
♣ Bangladesh is a homogeneous country with socio-political stability.
♣ Bangladesh is an open-market economy, led by a vibrant and innovative private sector which provides the main stimulus to its growth.
♣ The country is endowed with abundant supply of key factors of production such as hardworking workforce, natural gas, sweet water, fertile land, favourable climate.
♣ A huge pool of trained and motivated workforce at a very competitive cost.
♣ With robust economic growth, domestic demand is in progressive rise in a country of about 160 million people. In many sectors, there is still little competition.
♣ Progressive widening of country’s access to regional and international markets through conclusion of preferential trade agreements.
♣ Bangladesh enjoys GSP benefit and MNF status from many countries.
♣ Enjoys a strategic geographic location connecting South Asia, South-East Asia and East Asia with wide access to international maritime and air routes. Initiatives are going on to connect the country to regional road and rail networks in the near future.
♣ Up to 100% FDI allowed with no ceiling on FDI amount and no restriction on cross-border capital and profit movements.
♣ No regional or zonal restrictions on investment.
♣ No barrier on acquisition of local enterprises by foreign investors.
♣ No restriction on payment settlements in convertible currencies against trade in goods and services.
♣ Offshore, local and international banking facilities.
♣ Various types of tax and duty exemptions for priority sectors and export-oriented industrial units.
♣ One-stop service is provided to foreign investors by the Board of Investment (BOI), Bangladesh Export Processing Zones Authority (BEPZA), and Bangladesh Economic Zones Authority (BEZA).
♣ No general local-content requirement for foreign investment in Bangladesh. However, the Government encourages the use of local raw materials in some non-traditional exports by providing either cash incentives or duty-drawback facilities.
♣ No restriction on purchase or lease of land and buildings, either from the Government or from private parties.
♣ Foreign investment is protected against expropriation and nationalization under law.
♣ According to UNCTAD’s ‘World Investment Reports 2014’, Bangladesh is the second most preferred investment destination in South Asia.
♣ The World Bank has ranked Bangladesh 20th out of 187 countries on Investor Protection, making it the best in the South Asian region.
♣ The Financial Times of London ranked Chittagong Export Processing Zone as the 3rd Best Cost Competitive Zone in the World.
♣ Goldman Sachs has identified Bangladesh as one of the next big eleven emerging markets.
♣ City Investment Research & Analysis has indentified Bangladesh with few other countries like: China, India, Indonesia, and Vietnam having the most promising growth prospects.
♣ The International Monetary Fund (IMF) termed the economy of Bangladesh as resilient in consideration of robust growths in export and remittance flows.
♣ J P Morgan Chase ranked Bangladesh fourth on growth in economically active population.
♣ The New York Times has termed Bangladesh as “an unlikely corner of Asia, strong promise of growth”.
♣ Corporate tax holiday of 5 to 7 years for selected zones and a wide range of sectors. Tax holiday is extended up to 10 years for industrial units in Export Processing Zones (EPZs) and in Economic Zones (EZs).
♣ Accelerated depreciation of up to 100% on cost of plant and machinery for new industries in lieu of tax holiday.
♣ Avoidance of double taxation under bilateral treaties. At present, Bangladesh has bilateral treaty on avoidance of double taxation with 28 countries.
♣ Tariff concessions on import of capital machinery.
♣ Tariff concessions on import of raw materials of the export-oriented industries
♣ Bonded Warehousing facility
♣ Cash incentives and export subsidies ranging from 5% to 20% on the FOB value of selected products
♣ Funds for exports promotion, export credit guarantee scheme
♣ Permission for domestic sales up to 20% of output by export-oriented companies outside EPZs and up to 10% of output by companies in the EPZs and EZs.
♣ Remittance of royalty, technical know-how and technical assistance fees allowed.
♣ Citizenship granted in case of investment of a minimum of US$ 5,00,000 or a transfer of US$ 10,00,000 and permanent resident status granted in case of investment of US$75,000 or above.
Comparative Advantage of Bangladesh:
Bangladesh offers a unique winning combination of high connectivity, rapidly expanding huge domestic market, privileged access to international market, business-friendly environment and competitive cost structure that creates the opportunity for best return on investments.
Vibrant industrial sector in the country
Industrial sector continue to receive priority of the Government. To increase the share of industrial sector to GDP from 30% to 40% by 2021, Government has formulated National Industry Policy 2010 focusing on modernization and diversification of the economic activities, improvement of infrastructure, enhancement of productivity, and promotion of SMEs. Government has been taking decisive measures in pursuant of those policies to progressively enhance the competitiveness of the country in industrial sector. Such initiatives have resulted in robust growth in GDP and export earnings for consecutive years.
Stable and Secured Business Environment
Bangladesh is a largely homogenous society with people living in harmony irrespective of race and religion. The country, therefore, enjoys a stable and peaceful environment. There is a broad consensus among major political parties on private investment related policies. Legal and policy framework remains consistent for decades and efforts continue relentlessly to further improve the overall investment climate.
The Foreign Private Investment (Promotion and Protection) Act of 1980 provides full protection for foreign investments in Bangladesh against expropriation & nationalization; guarantees equitable treatment as well as unhindered exit and profit & capital repatriation. In addition, Bilateral Investment Treaties have been concluded with 30 countries on reciprocal promotion and protection of investments.
Strategic location and high connectivity
Bangladesh is geographically located in the cross road of East Asia, South East Asia and South Asia, three most dynamic regions of Asia. Such unique location provides the country a greater access to international maritime and air routes. Country is also rapidly developing its core infrastructures like roads, highways, surface transport and port facilities to further improve multi-modal connectivity to emerge as a leading regional business and communication hub.
Huge pool of competitive workforce
Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. About 57.3% of the population is under 25, providing a youthful group for recruitment. The country has consistently developed a skilled workforce to cater the demands. English is widely spoken, making communication easy.
Low cost of energy and other utility services
Energy and utility prices in Bangladesh are the most competitive in the region. Industrial clients enjoy preferential treatment in terms of rates and priority. Government has been pursuing drastic measures to rapidly increase electricity generation capacity of the country in order to meet the projected future demand. Establishment of own captive power plants by industrial units is allowed in Bangladesh. Special incentive is accorded for use of renewable energy. Telecommunication charges and internet rates are one of the lowest in South Asia. Most importantly, the country enjoys excellent telecommunication and internet facilities.
Progressively widening access to international market
Bangladesh is strategically located in between India, China and ASEAN markets. As the South Asian Free Trade Area (SAFTA) comes into force, investors in Bangladesh enjoy duty-free access to India and other South Asian countries. At present, Bangladesh enjoys GSP and MNF status from many developed countries.
Flourishing domestic market
Bangladesh enjoys a vast domestic market of 160 million people with rapidly increasing per capital income. Robust economic growth for consecutive years resulted in strong and growing domestic demand. Bangladesh has recently graduated to the status of a middle-income country with per capita income hovering around US$ 1,314 at the moment.
Bangladesh offers the most liberal FDI regime in South Asia, allowing 100% foreign equity with unrestricted entry and exit, unhindered remittance of royalty and repatriation of profits and income, duty free exemptions on import of machinery and raw materials, tax holidays and exemptions, bonded warehouse facility, provision for sale of outputs in local market, and many more.