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OPPORTUNITIES FOR THE FOREIGN
INVESTORS
Bangladesh has adopted a very liberal industrial
policy to attract foreign investments. Liberalised Industrial Policy indicates
export-oriented, private sector-led growth strategy of the government. One of
the main features of the industrial policy, announced in 1999, is to attract
foreign direct investments (FDIs) in both export-oriented and domestic
industries. There is no limitation pertaining to equity participation. This
clarifies that up to 100 percent foreign private investment would be allowed.
Except five reserved sectors, all industries are open for private investment.
Those earmarked for public sector investment are namely:
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Arms, ammunition and other defense equipment and machinery
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Production of nuclear energy
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Forest plantation and mechanised extraction within the bounds of
reserved forests
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Security printing (currency notes) & minting and
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Railways & air* (except certain domestic routes and air cargo).
* National flag carrier Biman Bangladesh Airlines is now
looking for strategic partnership with an internationally reputed airline to
use its potentials.
On the other hand, potential sectors for investment include
textile, jute goods (diversified jute products), leather goods, frozen food,
natural resources, power sector (electricity), telecommunication, air
transportation, electronics, light engineering industries, tourism,
agriculture, agro-based industries, computer software development, data entry
and data processing.
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INFRASTRUCTURE
FACILITIES AND UTILITY SERVICES
Road transport: Bangladesh has
about 18,738 km of paved roads. Ports and important business centres
are well connected by roads and highways.
Railways: Bangladesh Railways has a network of about 4,400 km
connecting all the administrative and business points of the country.
Railways container service form Chittagong Port to Dhaka is available.
Airways: Bangladesh is connected with important major cities of
the world air. Many of the world's reputed airlines have their air
link with ZIA International Airport, Dhaka.
Marine transportation: Bangladesh has two sea-ports-Chittagong
& Mongla. World's reputed shipping lines are operating through these
two ports.
Electricity: Generation, transmission and distribution of
electricity in Bangladesh are the responsibility of a statutory body
namely, the Power Development Board (PDB). In Bangladesh, electric
power is generated in hydro, steam, gas turbine and diesel power
plants, all the generating stations are interconnected through a
national grid. The Dhaka Electric Supply Authority (DESA) started
operation to maintain uninterrupted supply of electricity varies from
Tk. 2.45 to Tk. industrial consumption rte of electricity varies from
Tk. 2.45 to Tk 5.0 (US$ 0.054 to US$0.20) per 1000 litres.
Water: Water is supplied by the Water and Sewerage Authority (WASA)
in the metropolitan areas. Water rate is Tk 40.70 (US$0.90) per 1000
gallons or Tk. 8.9 (US$ 0.20) per litres.
Gas: Natural gas supply is available in major industrial areas
of Dhaka and Chittagong Divisions. Gas tariff for industrial
consumption is Tk. 3.64 (US$ 0.08) per cubic meter including
supplementary duty and VAT.
Telecommunication: Comprehensive telecommunication service such
as fully automatic telex, fax, e-mail, internet, telephone including
international direct dialing are available with important courtiers of
the world.
Industrial land: Once and industrial project is registered, the
entrepreneur is eligible to apply for allotment of land to the
government price of land in most of the industrial estates/ areas are
relatively lower than the market rate. These estates are developed
with necessary infrastructure facilities such as electricity, gas
water, sewerage etc.
Industrial plots are allotted by BEPZA and BSCIC in industrial areas
developed by the, Plots in other Industrial estates/ areas owned by
the government or owned / controlled by any local authority, are
allotted by the recommendation of the BOI.
Protection Of Foreign
Investment
Foreign Investment Protection Act
The Foreign Private Investment (Promotion and Protection) Act 1980
provides for lair and equable treatment to foreign private investment.
It ensures legal protection to foreign investment in Bangladesh
against nationalization and expropriation. It also guarantees
repatriation of capital and returns from it and equitable treatment
with local investors with regard to indemnification, compensation
etc., in the event of loss due lo civil commotion etc. Similarly,
adequate protection is available for intellectual property rights,
such as patents, designs, trademarks and copyrights.
Guarantees Through Multilateral Agencies
Bangladesh is signatory of MIGA (Multilateral Investment Guarantee
Agency), OPIC (Overseas Private Investment Corporation) of America and
ICSID International Centre for Settlement of Investment Disputes).
MIGA is the Multilateral Investment Guarantee Agency of the World Bank
group to encourage the flow of foreign direct investment (FDI) to, and
among, developing member countries by providing guarantees to foreign
investors against loss caused by noncommercial risks. MIGA's guarantee
protects investors against losses arising from the risks of currency
transfer, expropriation and war and civil disturbances. MIGA may only
ensure new investment, privatization and financial restructuring.
OPIC is the most important US government agency which is in a position
to promote greater investment interest in countries including
Bangladesh by providing loan financing and investment insurance to
America investors. OPIC also support efforts by Bangladesh to attract
increased foreign private investment. In order to secure its
investment in Bangladesh any organization may seek OPIC insurance
coverage.
The ICSID is an international organization established for the
settlement of investment disputes between states and nationals of the
different states. ICSID seeks to encourage greater flows of
international investment by providing facilities for the conciliation
and arbitration of disputes between governments and foreign investors.
Abolition of Restrictions on Equity
Private investment from foreign sources is welcome in all areas expect
five reserved for public sector investments. There is, however no
restriction on the amount of investment or equity shares. 100 percent
foreign investment and joint ventures with local private partners or
with the public sector are freely allowed.
Securities and Exchange Commission
To supervise the smooth functioning of securities and capital, the
Securities and Exchange Commission (SEC) was established in 1993
through an Act of Parliament. It has the important responsibility to
ensure proper issuance of securities. Protection of due interest of
the investors in the capital market is also a major objectives of SEC.
The Commission's main functions include the following: -
Regulating the business of stock exchange and the securities market;
Registering and regulating the business of stockbrokers,
sub-brokers, share transfer agents, bankers and managers of an issue
trustees of trust deeds, registrars to an issue, underwriters,
portfolio managers, investment advisers and other intermediaries in
the securities market.
Registering, regulating and monitoring of collective investment
schemes including all forms of mutual funds;
Prohibiting fraudulent and unfair trading practices related to
securities or any securities market;
Promoting investment education and training of all intermediaries
of securities market;
Prohibiting insider trading in securities;
Regulating substantial acquisition of shares or stocks and take-overs
of companies,
Compiling, analysing and publishing indices on the financial
performance of any issuer of securities;
Conducting research for the above purposes.
Comparative Advantages For Investment In Bangladesh
Bangladesh has the following comparative advantages for foreign
investment over other Asian countries;
Low cost and easily trainable labour is abundantly available in
Bangladesh. Out of the total population of 127 million, the labour
force comprises more than 50 million.
Bangladesh is one of the three Asian countries (the other wo being
Sri Lanka and China) who offers unconditional 100 percent foreign
equity or ownership in industrial investments.
Inflation rate is the lowest (1.3 percent) among the Asian
countries.
There is no restriction on issuing work permit to a foreign
national.
Bangladesh is most liberal in granting permanent resident ship and
citizenship lo foreigners. None reportable investment of only U.S.$
75.000 in an industrial project is the only condition of granting
permanent resident ship and a minimum investment of U.S.$ 500,000 or
transferring U.S.$ 1,000,000to any recognised financing institution
which should be nonrepatriable is the condition for panting Bangladesh
citizenship.
Tax holiday allowed for new investment in Bangladesh is the
minimum, 5 to 9 years in most of the areas on some conditions, and 12
years in special economic zones (in the Chittagong Hill Tracts).
Bangladesh enjoys Most Favoured Nation (MFN) status from a number
of countries including the U.S.A., with whom bilateral treaty of trade
and investment has been signed. The countries with which Bangladesh so
far signed bilateral investment treaties are U.S.A., U.K.. Germany.
Romania, Belgium, Republic of Korea. Thailand, Turkey, France and
Italy.
As one of the least developed countries, Bangladesh enjoys
Generalised System of Preference (G.S.P.) facilities for favourable
export to the U.S.A.
Avoidance of double taxation agreements have been signed with
Japan, U.K., Italy, Canada. Sweden. Malaysia, Singapore and the
Republic of Korea.
Legal protection to all foreign investments in Bangladesh is
provided by an Act of Parliament passed in 1980 against
nationalisation and expropriation. Noncommercial risks of investment
in Bangladesh are also insured by the Multilateral Investment
Guarantee Agency (MIGA).
Foreign Exchange regulations have been relaxed lo the maximum
limit by the recent introduction of free convertibility of Taka, the
Bangladesh currency. This has accelerated the free flow of
international business transactions.
Repatriation of foreign capital investment along with
profits/dividends has been made easy and simplified. Now no prior
permission of any authority is required for their repatriation.
Cost of land and energy prices are one of the lowest in, the
region. There is a huge proven and recoverable deposit (about 11
trillion cubic feet) of natural gas in Bangladesh. A potential reserve
of 50-70 trillion cubic feet is known.
Bangladesh has two seaports with modern facilities, Internal
transport and communication system has vastly improved over the years.
Most important, Bangladesh) people are hospitable, friendly and
resilient and greatly value the role of foreign investment in their
country.
Foreign Investment: Bangladesh
Private investment from overseas sources is welcome in all areas of
the economy with the exception of only five industrial sectors
(reserved for public sector) as mentioned earlier. Such investments
can be made either independently or through joint venture on mutually
beneficial terms and conditions. In other words, 100% foreign direct
investment as well as joint venture both with local private sponsor or
with public sector is allowed.
Foreign investment, however, is specially desired in the following
categories:
Export oriented industries;
Industries in the Export Processing Zones;
High technology products that will be either import substitute or
export oriented;
Undertaking in which more diversified use of indigenous natural
resources is possible;
Basis inudstries based mainly on local raw materials;
Investment towards improvement of quality and marketing of goods
manufactured and/ or increase of production capacities of existing
industries
Labour intensive/technology intensive/capital intensive
industries.
An indicative list of private sector investment opportunities in
Bangladesh Private investment is welcome in all areas of the economy
except five reserve sectors.
An indicative list of private sector investment opportunities is given
below:
Food and Allied Products:
Dairy farming and dairy products;
Poultry farming & poultry products;
Shrimp, crab and other fish culture, processing and preservation
of other species of fish;
Fishmeal production;
Fruits and vegetables processing & canning and other agro based
industries.
Textile Industry:
Composite textile mills;
Specialized textile mills;
Sericulture, reeling and filature.
Leather and Rubber Products;
Leather finishing;
Footwear including shoe upper, sole etc;
Tyres and tubes;
Leather goods, such as gloves, bags, jackets etc.
Chemicals and Allied Industries;
Soda ash; paper and pulp (based on jute wastes and cuttings);
Paper covering including artificial flowers and toys;
Jute goods; dyes, pigments and colour (basic manufacture);
Pharmaceutical chemicals (basic manufacture);
Plastics products including acrylic pipes and toys;
Special chemicals such as extraction of amino, organic and other
acids from agricultural wastes; chemicals for tanneries; manufacture
of basic pesticides.
Glass and Ceramic
Cement including Portland and white cement Sheet and plate glass
Fluorescent tubes and electronic ballasts parts and components of
power hydrants, water supply and sewerage equipment.
Engineering Industries ship building and machinery and equipment;
sponge iron; railway engine and ancillary equipment; agricultural
machinery and equipment; gas distribution machinery, meters and
fittings; air conditioners, air coolers and refrigerators including
compressors; electrical appliances and accessories; electric motors
including fan motor,
DC fan motors and their parts; mechanically propelled vehicles and
components; electronic goods; television, radio and their components;
scientific and precision instruments including laboratory equipment
optical lenses, prisms, microscopes etc.; disposable needles and
syringes.
Office equipment such as typewriter, photocopier, calculator, fax and
telex machine; component of fishing reel, fishing foods and equipment;
telecommunication equipment and their parts; electronic watch and
clock;
Construction machinery and equipment; Others: computer software and
software applications; gems cuttings and polishing; sports goods;
tourism, hotel & resort facilities; photographic and video camera,
lens;oil gas, mineral explorations; power and electric generator;
export oriented flower and orchid farming as well as artificial
flower; mechanical toys; imitation jewelery; exportable gift items;
computer data entry, data processing; other high tech and export
oriented industries.
INCENTIVES AND
FACILITIES FOR THE INVESTORS
Tax holiday: Tax holiday is allowed
to industries for the following periods according to the location of
the establishment:
Dhaka, Sylhet and Chittagong Division: 5 Years (excluding 3
hill districts) Other Divisions: 7 Years (including 3 hill districts
of Chittagong Division)
The period of tax holiday is calculated from the month of commencement
of commercial production or operation of the industrial undertaking.
The eligibility of tax holiday is to be determined by the NBR. Tax
holiday facility can be availed by industries set up in Bangladesh
within June 30, 2000 A.D.
Accelerated depreciation: Accelerated depreciation in lieu of
tax holiday is allowed at the rate of 80% of actual cost of machinery
or plant for the year in which the unit starts commercial production
and 20% for the following years. The rate of depreciation is 100% for
areas specified by the NBR.
Concessionary duty on imported capital machinery: Import duty
at the rate of 7.5 percent ad valorem is payable on capital machinery
and spares imported for initial installation or BMR/BMRE of the
existing industries. The value of spare parts should not, however,
exceed 10 percent of the total C & F value of the machinery. Out of
this 7.5 percent rate of duty payable, export - oriented industries
and industries located in the under developed areas, may enjoy a
further concession of the import duty in following manner:
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100 per cent
export oriented industries: |
No import duty
is charged in case of capital machinery and spares listed in NBR’s
relevant notification. However, import duty @ 7.5% is secured in
the form of AB bank guarantee or an indemnity bond to be returned
after installation of the machinery. |
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Minimum 70 per
cent export oriented industries outside development areas: |
Import duty @ 5%
is charged in case of capital machinery and spares listed in NBR’s
relevant notification. Additional import duty @2.5% is secured in
the form of a bank guarantee of cash deposit to be returned after
installation of the machinery. |
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Minimum 70 per
cent export oriented industries in development areas: |
Import duty @ 5%
is charged in case of capital machinery and spares listed in NBR’s
relevant notification. Additional import duty @2.5% is secured in
the form of a bank guarantee of cash deposit to be returned after
installation of the machinery. |
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Other industries
in development areas: |
Import duty @
7.5% is charged in case of capital machinery and spares listed in
NBR’s relevant notification. |
Value Added Tax (VAT) is not payable for imported capital machinery
and spares. Please see at
Rationalisation of import duty: Duties and taxes on import of goods
which are produced locally will be higher those applicable to import
of raw materials for producing such goods.
Incentives to non-resident Bangladesh: Special incentives are provided
to encourage non-resident Bangladeshis for investment in the country.
Non-resident investors for investment in the country. Non-resident
Bangladesh investors will enjoy facilities similar to those of foreign
investors. Moreover, They cab buy newly issued shares/debentures of
Bangladesh companies. A quota of 10% has been fixed for non-resident
Bangladesh in primary public shares. Furthermore, they can maintain
foreign currency deposits in the Non-resident Foreign Currency Deposit
(NFCD) Account.
Other Incentives:
Tax exemption on royalties, technical know-how fees received by
any foreign collaborator, firm, company and expert.
Tax exemption on the interest on foreign loans under certain
conditions.
Avoidance of double taxation in case of foreign investors on the
basis of bilateral agreements.
Exemption of income tax up to 3 years for the foreign technicians
employed in industries specified in the relevant schedule of income
tax ordinance.
Tax exemption on income of the private sector power generation
company for 15 years form the date of commercial production subject to
fulfillment of conditions laid down in private sector power generation
policy of Bangladesh.
Tax exemption on income of the expatriate personnel working in
private sector power Generation Company for 3 years form the date of
their arrival subject to fulfillment of conditions laid down in
private sector power generation policy of Bangladesh.
Tax exemption on dividend income of non-resident shareholders
during tax exemption period of an industry set up in export processing
zone and also after the expiry of tax exemption period if the dividend
is re-investment in the project.
Exemption of tax on income from industrial undertaking set up in
export processing zone for 10 years from the date of commercial
production.
Tax exemption on capital gains form the transfer of shares of
public limited companies listed with a stock exchange.
Additional Incentives To Export Oriented And Export Linkage
Industries: Encouraging export-oriented industries is one of the
major objectives of the Industrial Policy, 1991 and as such the
government ensures all support and co-operation to the exporters as
per Export Policy. Some of the facilities and incentives offered are
as follows:
Concessionary duty as per SRO is allowed on the import of capital
machinery and spare parts for setting up export-oriented machinery and
spare parts for setting up export-oriented industries of BMRE of
existing industries. For 100% export-oriented industries no import
duty is payable.
Facilities such as special bonded warehouse against back-to-back
letters of credit for notional import duty and non-payment of Value
Added Tax (VAT) facilities are available as per SRO of the government.
System for duty drawback is being simplified and concised. There
exporter will be able to get back the duty draw-back directly form the
concerned commercial bank.
Bank loan up to 90 percent of the value against irrevocable and
confirmed letters of credit/ sales agreement is available.
For granting export performance benefit, the list of export
products and the rate of Export Performance Benefit (XPB) is reviewed
form time to time.
With a view to ensuring backward linkage, export-oriented
industries including export-oriented ready-made garment industries
using indigenous raw materials instead of imported one are given
additional facilities and benefits at prescribed rates. Similar
incentives are extended to the suppliers of raw materials to
export-oriented industries.
Export- oriented industries are allocated foreign exchange for
publicity campaign and for opening offices abroad.
Export-oriented industries are allocated foreign exchange for
publicity campaign and for opening offices abroad.
Entire export earning from handicrafts and cottage industries is
exempted from income tax. In case of all other industries,
proportional income tax rebate on export earnings is given between 30
and 100 percent. Industries which export 100 percent of their products
are given tax exemption up to 100 percent.
Facility for importing raw materials is given for manufacturing
exportable commodities under banned/-restricted list.
Import specified quantities of duty-free samples for manufacturing
exportable products is allowed. The quantity and value of samples is
determined jointly by the concerned sponsoring agency and the National
Board of Revenue (NBR).
Local products supplied to local projects against foreign exchange
under international tender are treated as indirect exports and the
producer is entitled to avail all export facilities.
Export oriented industries like toys, luggage & fashion articles,
electronic goods, diamond cutting & polishing, jewelry, stationary
goods, silk cloth, gift items, cut & artificial flowers orchid,
vegetable processing and engineering consultancy services identified
by the government as thrust sectors are provided special facilities in
the form of cash incentives, venture capital and other facilities.
Export oriented industries are exempted form paying local taxes
(such as municipal taxes).
Leather industries exporting least 80% manufactured products will
be treated as 100% export oriented industries.
Manufactures of indigenous fabrics (such as woven, knit, hosiery,
grey, printed, dyed, grameen check, handloom, silk and other
specialized fabrics) supplying their products to 100% export oriented
grameen industries are entitled to avail a cash subsidy equivalent to
25% of the value of the fabrics provided the manufacturers of the
fabrics do not enjoy duty draw back of duty free bonded ware house
facility.
Apart form the above-mentioned facilities, other facilities as
announced and provided in the Export Policy are also applicable for
export-oriented and export-linkage industries.
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