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Investment in Bangladesh

How to get registered, facilitated, and reap the benefits

In the era of globalisation, most Third World countries have been exposed to an unequal competition with the developed countries to capture market and keep pace with the changes to survive in the present world of competitiveness amid harsh conditional loans and shrinking development aid. And to keep pace with the post-modern world and face the challenges of the 21st century, the present government of Bangladesh offers one of the most liberal policies and substantial incentives to foreign entrepreneurs in South Asia for encouraging the inflow of foreign direct investment (FDIs) in every possible way to march forward. In order to attract increased FDIs, the government has taken all-out efforts to improve its infrastructure facilities, providing training to its officials to serve better any queries of investors and implementing different measures and policies already taken to facilitate investors on a priority basis.

The splendid opportunities and potentials the country can provide to any prospective investor are its major reserve of natural resources, in particular natural gas and human resources, for industrialization. The country offers low-cost labour forces with immense potentials, who can help make any entrepreneur dazzling by cutting his product cost to such an extent that would give the entrepreneur an upper hand in capturing market through a very competitive price. But as a first step to invest in this part of the world, a foreign investor requires to know the following information how he or she can proceed on in their goal and get the registration and other formalities done to harvest the golden crops.

Sponsoring Agencies And Their Areas Of Responsibilities

The term ' Sponsoring Agency' means an agency engaged in promoting, assisting supervising and administering as well as offering pre and post registration assistance to industries. The list of sponsoring agencies responsible for private sector industrial development and their areas of responsibilities are as follows:

Sl No.	Name Of The Sponsoring Agencies	Areas Of Responsibilities
01.	Board of Investment (BOI) Prime Minister's Office, Jiban Bima Tower (19th Fl) 10, Dilkusha C/A, Dhaka-1000	All industries in the private sector except those under BEPZA and BSCIC.
02.	Bangladesh Export Processing Zones Authority (BEPZA).	Industries located in EPZs
03.	Bangladesh Small and Cottage Industries Corporation (BSCIC)	Small and cottage industries.

Procedure For Obtaining Facilities And Services Provided For Setting Up Industries
The Industrial Policy 1991 (revised in 1992) has clearly emphasized importance on the role of the private sector in industrial development. The role of the government has been changed from regulatory to promotional. As a result of this policy, sanctioning and other procedures for obtaining different facilities and services have been simplified.

Industrial Policy ensures equal treatment for local and foreign investment. According to the policy no formal permission of the government is required to set up industries and for BMR/BMRE of the existing industries with the entrepreneurs' own fund or with the fund form private banks or private financing institutions. Industries set up under foreign loan; suppliers` credit, Pay-As-You-Earn (PAYE) scheme and non-repatriable foreign exchange are deemed to have been set up with own fund.

However, for availing institutional facilities such as, import entitlement for raw materials under restricted list, infrastructure facilities (industrial plot, electric, gas, telephone, water & sewerage connection, etc.) industries are required to be registered with the concerned sponsoring agency. To avail of the facilities and services provided by the BOI for setting up of industries the procedures mentioned below are to be followed by the entrepreneurs.

Registration of joint venture/100% foreign investment proposals in the private sector
No prior approval or no objection certificate is required for setting up of a joint venture/100% foreign direct investment. To avail of facilities and the institutional support services provided by the govt. entrepreneur/investors are advised to apply for registration to BOI in a simple prescribed form.

Registration of self financed local investment proposals including industries sanctioned/ financed by financial institutions or commercial banks.
The entrepreneurs of such projects are to fill up a simple prescribed application form and submit to BOI for registration. After a first hand scrutiny of the information, BOI issues registration letter.

Permission for setting up joint venture industrial units with the public sector corporations
Any individual entrepreneur either local or foreign can set up an industry with Public Sector Corporation. Such joint venture is required to be registered with the BOI if the private sectors contribution is more than 50% of the project cost and in such case it is treated as private sector project. For any public sector, which makes contribution out of their own fund, needs approval of the concerned ministry. If the contribution of the corporation is 50% or above, it is treated as a public sector project. The public sector project is processed by the concerned ministry for approval of the Planning Commission.

Procedure for import of raw & packing materials and spare parts by industrial units
No permission is required for import of free list items. For items in the restricted list, BOI, BEPZA and BSCIC are responsible for issuance of import entitlement. Import Registration Certificate (IRC) will be issued by the concerned authority in favour of the industrial enterprises within 30 days of receiving applications. Items included in the banned list cannot be imported unless otherwise specified.

In case of import of raw and packing materials of the pharmaceutical industry, the Drugs Administration Directorate under Ministry of Health & Family Welfare prepares Block Lists on half-yearly basis. BOI/BEPZA/BSCIC provides all other assistance relating to imports in the private sector in their respective jurisdictions. In this connection procedure followed by BOI is as under:

On receipt of application in the prescribed form along with copies of (1) TIN certificate, (2.) Trade License, (3) Membership Certificate of relevant trade association/ chamber, (4) Certificate from the nominated bank regarding opening of account, (5) Incorporation Certificate, in case of limited companies and (6) Letter of registration with BOI, necessary field inspection is done to determine annual production capacity and half yearly/import entitlement of raw & packing materials.

The entrepreneur is then advised to deposit IRC fees (on the basis of annual import entitlement) by Treasury Challan to the Bangladesh Bank/Treasury. On receipt of the copy treasury Challan, recommendation is referred to the office of the Chief Controller of Imports & Exports (CCI&E) for issuance of ad-hoc IRC.

The entrepreneur will then approach nominated bank for opening Letters of Credit for import. After starting commercial production the entrepreneur may apply to BOI for regularization of the ad-hoc import entitlement. On receipt of application for regularization of the entitlement, utilization of ad-hoc import entitlement is verified through field inspection and if found satisfactory BOI recommends to CCI&E for regularization. Import entitlement may, however, be refixed on verification of the actual requirement.

Guidelines for registration/approval of Foreign Loan, Suppliers' Credit, PAYE Scheme, etc.
Entrepreneurs in the private industrial sector arranging foreign credit in the form of loan, suppliers' credit, PAYE scheme etc. falling within the following guide-lines are not required to obtain prior approval from BOI for contraction such credit:

The effective rate of interest should not exceed LIBOR+4% (effective interest is the sum of the stated annual rate of interest and the annualized fees such as commitment fee, syndication fee, front-end fee, project appraisal fee etc.)

The down payment, if any, in case of suppliers' credit should not exceed 10% of the credit amount.

Repayment period should not be less than 7 years.

A copy of the foreign loan agreement signed by both parties should be submitted to BOI for registration. Period approval of BOI is required for the proposals which do not fall within the aforesaid guidelines.

Remittance of royalty, technical know-how and technical assistance fees
Royalty: Royalty is a fee paid by the local manufacturer to its foreign collaborator in consideration of lenience to use the brand name and trade mark of the foreign manufacturer on the local product(s) and or; assignment of rights under inventions by the foreign company as well as current manufacturing experience.

Technical know-how and technical assistance fees:
Technical know-how and technical assistance fee is a fee paid by the local unit to its foreign collaborator in consideration of preparation of factory layout, engineering specifications of the project, assistance in selecting machine, supervision of civil construction and installation of machinery and equipment, know-how and assistance in production, testing, safety and quality control, assistance by way of marking available patented process and/ or know-how and right to avail of the technical information resulting from research and development, training of local personnel, technical assistance in management and marketing in deserving cases and assistance in other technical matters etc.

No prior permission of BOI is required for entering into agreements for remitting fees for the purpose of royalty, technical know-how and technical assistance if the total fees and other expenses connected with technology transfer (service fee, marketing commission etc.) are within the following prescribed limits:

For new projects such fees and other expenses should not exceed an aggregate limit of 6% of the CIF value of imported machinery.

Recurrent annual fees for royalties and other expenses such as fees for technical know-how, technical assistance, operational services, marketing of products etc. should not exceed an aggregate limit of 6% of the previous year's sales of the firms are declared in the tax return.

Once the technical transfer agreements falling within the above limits are signed, these are required to be furnished to BOI for registration. Proposals which are covered under the prescribed limits will require prior approval of BOI for which application have to be submitted along with necessary documents and copy of the relevant draft agreement.

Procedure for obtaining work permit
Work permit for foreign nationals is a pre-requisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance in the prescribed from of BOI. For expatriate employment the guidelines followed are:

a. National of the countries recognized by Bangladesh is considered for employment.
b. Employment of expatriate personnel be considered only in industrial establishments which are sanctioned / registered by the appropriate authority.
c. Employment of foreign nationals is normally considered for the job for which local experts / technicians are not available and persons below 18 years of age are not eligible for employment.
d. Decision of the Board of Directors of the concerned company for new employment/ extension is to be furnished.
e. Number of foreign employees should not exceed 5% of the total employees including top management personnel.
f. Initially employment of any foreign national is considered for a term of 2 years, which is extensible on the basis of merit of the case.
g. Necessary security clearance by the Ministry of Home Affairs.

Procedure for obtaining industrial plot
Entrepreneurs requiring industrial plot for setting up of industry in any industrial areas / estates apart form BEPZA and BSCIC, may approach BOI mentioning the size of plot required by them along with copies of sanction / registration letter and industrial layout plan for justifying actual requirement. After receiving the application BOI provides assistance to get the industrial plot.

Most of the industrial areas/ estates are owned / controlled by city development authorities in three divisional head quarters, RAJUK in Dhaka, CDA in Chittagong and KDA in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies namely, (a) Public Works Department and (b) Housing and Settlement Directorate. BOI also recommends for acquisition of land to the concerned if required to by the industrial units. In such cases the entrepreneurs are required to submit relevant papers and information in connection with the land to be acquired by the Deputy Commissioners (D.C.) concerned.
b Procedure for obtaining electricity, gas, water, sewerage & telephone connection for industries
Entrepreneurs may apply either directly to the concerned authority for obtaining utility services or approach BOI for assistance along with copy of registration/ sanction letter.

Incorporating A Company Bangladesh
Business in Bangladesh may be carried on by a company incorporated locally and a company incorporated outside but registered in Bangladesh. The incorporation / registration is done by the Registrar of Joint Stock Companies and Firms.

Company Structure: The Companies are incorporated and registered under the provisions of the Companies Act, 1994. The basic objective of the Companies Act is to safeguard the interest of the investors. The companies Act provides the Directors with overall power to manage and run the company. There are three types of companies:

a. Companies limited by shares (Private and Public Limited Companies).
b. Companies limited by guarantees.
c. Unlimited companies.
Companies Limited by Shares: There are two broad categories of companies limited shares, Public and Private.

Private Companies: Private Company` means a company which by its articles,

a. Restricts the right to transfer the shares, if any;
b. Limits the number of its members from 2 to 50 excluding persons who are in the employment of the company;
c. Prohibits invitation to the public to subscribe for the shares or debentures of the company.

By Abu Sayed Khan