Strategic Location of Bangladesh
China and India between them have vast and increasingly prosperous populations, which are projected to grow to three billion by 2050. Bangladesh is well situated in every sense to take advantage of this opportunity. With improving education, growing adoption to technology as well as sustained economic growth, Bangladesh’s own market of 146.6 m people is becoming increasingly attractive to business and foreign investors. The cost of doing business in Bangladesh has significantly and visibly decreased in recent times.
Advantageous Trading Agreements
All Bangladeshi products (other than armaments) enjoy complete duty and quota free access to EU, Japan, Canada, Australia and most other developed countries.
Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA); Overseas Private Investment Corporation (OPIC), USA; International Center for Settlement of Investment Disputes (ICSID); World Intellectual Property Organization (WIPO).
Bilateral agreements to avoid double taxation have been signed with around 30 countries with a further dozen countries under negotiation. Attractive Business and Investment Climate
Bangladesh inherits a largely homogeneous society, in which people live in harmony and peace, irrespective of race and religion. It is a democratic country, providing broad and non-partisan political support for market-oriented reforms and for active encouragement of foreign investors.
The Foreign Private Investment (Promotion & Protection) Act 1980 provides protection for investments made in Bangladesh. Bangladesh Export Competitiveness:
Bangladesh, despite being a steadily growing economy, has a proven record in export competitiveness. Here is a summary of the facts. Bangladesh has achieved annual export value growth of 20% during past years, a testimony to its export competitiveness. Whilst not wishing to be complacent, and being mindful of difficult global trade conditions in the world, these positive trade differentials are likely to be with Bangladesh well into the future.
Manufacturing output has seen steady growth, recently in double figures. Bangladesh provides significant benefits to exporters.
Bangladesh offers a most liberal FDI regime in South Asia, with no prior approval requirements or limits on equity participation and repatriation of profits and income in most sectors.
Bangladesh enjoys tariff-free access to the EU, Canada, Australia and Japan. Bangladesh is the top manufactured products exporter to the least developed countries as well as to Europe, with more than 50% market share.
Competitive Cost Base:
In January 2010, JETRO conducted a comparative survey of investment-related costs in 29 major cities and regions in Asia. The following comparison is based on that survey with some selected cities.
Bangladesh offers a truly low competitive cost base. Wages and salaries are still lowest in the region, a strong business advantage. Yet this is an increasingly well-educated, adaptive and peaceful population with many skilled workers.
Dhaka's skilled labor cost base is still less than the other major cities. Dhaka's management grades are 2-3 times less than in Singapore, Shanghai, Bangkok.
Industrial estate rent in Dhaka is cost effective than Shanghai, Jakarta, Bangkok.
Office rents are also very competitive with other international cities. Dhaka's housing rent for foreigners are less expensive than Singapore, Mumbai, Karachi, Hanoi.
Cost of diesel in Dhaka is found to be more competitively priced than most other large cities.
Vehicles increasingly use LPG as Dhaka gasoline costs are competitive with most other cities.
Source: The 20th Survey of Investment-Related Cost Comparison in Major Cities and Regions in Asia JETRO©, April 2010.
BOI notes that the figures are not absolutes, but serve as a guide. Whilst the actual costs vary each month the general trends remain similar. No precise figures are shown with the graphs because they are only a ‘snapshot’ of costs on the day of survey. Fiscal and Non-fiscal Incentives
Bangladesh offers some of the world’s most competitive fiscal non-fiscal incentives. BOI can advise further on this matter.
In summary and in most cases, these amount to the following:
Remittance of royalty, technical know-how and technical assistance fees. Repatriation facilities of dividend and capital at exit.
Permanent resident permits on investing US$ 75,000 and citizenship on investing US$ 500,000.
In the Dhaka & Chittagong Divisions: 100% in first two years: 50% in the year three and four: and 25% in the year five.
In the Rajshahi, Khulna, Sylhet, Barisal Divisions and three Chittagong Hilly Districts: 100% for first three years, 50% for next three years, 25% for year seven.
Accelerated depreciation for new industries is available at the rate of 50%, 30% and 20% for the first, second and third years respectively, on the cost of plant and machinery.
Cash and added incentives to exporting industries
Businesses exporting 80% or more of goods or services qualify for duty free import of machinery and spares, bonded warehousing.
90% loans against letters of credit and funds for export promotion.
Export credit guarantee scheme.
Domestic market sales of up to 20% is allowed to export oriented business located outside an EPZ* on payment of relevant duties.
Cash incentives and export subsidies are granted on the FOB** value of selected exports ranging from 5% to 20% on selected products.
*EPZ=Export Processing Zone **FOB=Free on Board
Investment Climate in Bangladesh
Bangladesh offers an unparalleled investment climate compared to the other South Asian economies. Here are eight key pointers to Bangladesh's investment climate today.
1. Bangladesh is a largely homogeneous society with no major internal or external tensions and a population with great resilience in the face of adversity (e.g. natural calamities).
2. Bangladesh is a liberal democracy. The population of this country irrespective of race or religion have been living in harmony and understanding for thousands of years. 3. Broad non-partisan political support for market oriented reform and the most investor-friendly regulatory regime in South Asia.
4. Trainable, enthusiastic, hardworking and low-cost (even by regional standards) labor force suitable for any labor-intensive industry.
5. The geographic location of the country is ideal for global trade, with very convenient access to international sea and air routes.
6. Bangladesh is endowed with abundant supply of natural gas, water and its soil is very fertile.
7. Although Bengali (Bangla) is the official language, English is generally used as a second language. The majority of the educated population can read, write and speak in English.
8. As a result of low per capita GDP, present domestic consumption is not significant. However, it should always be considered that there exists a middle class with over 10% of the population. As economic growth picks up, the purchasing power will also grow substantially.
Bangladeshi products enjoy duty free and quota free access to almost all the developed countries. This access to the global market is further helped by the fact that the policy regime of Bangladesh for foreign direct investment is by far the best in South Asia. Most Bangladeshi products enjoy complete duty and quota free access to EU, Canada, Australia and Norway. Though in limited scale, Bangladesh products already found their access with lower duty in the markets of Thailand, India and Pakistan. However, talks are underway with China, Russia, Malaysia and other neighboring countries in this regard. Export Processing Zone:
Export Processing Zones (EPZs) are export oriented industrial enclaves which provide the infrastructures, the facilities, administrative and support services for a wide variety of enterprises. Bangladesh’s highly successful EPZs in Dhaka and Chittagong are now complemented by new EPZ developments and other valuable real estate developments around the country. Along with government, EPZs are constructed by Public-Private partnership and by private ownership.
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 an EPZ is to provide special areas where potential investors would find a congenial investment climate, and location free from cumbersome procedures. Businesses from 32 countries have so far invested in the existing zones.
For the interested in setting up business in an EPZ, the Board of Investment will be pleased to advise and introduce them to BEPZA. More information: BEPZA (http://www.epzbangladesh.org.bd) Incentives & Facilities Fiscal Incentives:
1. 10 years tax holiday for the Industries to be established before 1st January, 2012 and Industries to set up after 31st December, 2011 tax holiday period will be: Tax exemption period Rate of tax exemption First 02 years (1st and 2nd Year) 100% Next 02 years (3rd and 4th Year) 50% Next 01 years (5th Year) 25%
2. Duty free import of construction materials
3. Duty free import of machineries, office equipment & spare parts etc.
4. Duty free import and export of raw materials and finished goods
5. Relief from double taxation
6. Exemption from dividend tax
7. GSP facility available
8. Accelerated depreciation on machinery or plant allowed
9. Remittance of royalty, technical and consultancy fees allowed
10. Duty & quota free access to EU, Canada, Norway, Australia etc. Non – Fiscal Incentives
1. 100% foreign ownership permissible
2. Enjoy MFN (most favored nation) status
3. No ceiling on foreign and local investment
4. Full repatriation of capital & dividend
5. Foreign Currency loan from abroad under direct automatic route
6. Non-resident Foreign Currency Deposit (NFCD) Account permitted
7. Operation of FC account by 'B' and 'C' type Industries allowed
1. No UD, IRC, ERC and renewal of Bond license
2. Work permits issued by BEPZA
3. Secured and protected bonded area
4. Off-Shore banking available
5. Import on Documentary Acceptance (DA) basic allowed
6. Bank of Back L/C
7. Import and Export on CM basis allowed
8. Import from DTA (Domestic Tariff Area)
9. 10% sale to DTA (Domestic Tariff Area)
10. Customs clearance at factory site
11. Simplified sanction procedure
12. Sub-contracting with export oriented Industries inside and outside EPZ allowed
13. Relocation of foreign industries allowed
14. Accords Residentship and Citizenship
15. One Window same day service and simplified procedure.
Source: Board of Investment Bangladesh