Policies Towards Foreign Direct Investment

Bangladesh actively seeks foreign investment, particularly in the agribusiness, garment and textiles, leather and leather goods, light manufacturing, electronics, light engineering, energy and power, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure sectors. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Four sectors, however, are reserved for government investment:

• Arms and ammunition and other defense equipment and machinery;
• Forest plantation and mechanized extraction within the bounds of reserved forests;
• Production of nuclear energy; and
• Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with supervising and promoting private investment. The BIDA Act of 2016 approved the merger of the now-disbanded Board of Investment and the Privatization Committee. BIDA is directly supervised by the Prime Minister’s office and the Executive Chairman of BIDA holds a rank equivalent to Senior Secretary, the highest rank within the civil service. BIDA performs the following functions:

• Provides pre-investment counseling services;
• Registers and approves private industrial projects;
• Issues approval of branch/liaison/representative offices;
• Issues work permits for foreign nationals;
• Issues approval of royalty remittances, technical know-how, and technical assistance fees;
• Facilitates import of capital machinery and raw materials; and
• Issues approvals of foreign loans and supplier credits.

BIDA’s website has aggregated information regarding Bangladesh investment policies, incentives, and ease of doing business indicators: http://bida.gov.bd/ 

In addition to BIDA, three other Investment Promotion Agencies (IPAs) – the Bangladesh Export Processing Zone Authority (BEPZA), Bangladesh Economic Zones Authority (BEZA), and Bangladesh Hi-Tech Park Authority (BHTPA) — promote domestic and foreign investment. BEPZA promotes investments in Export Processing Zones (EPZs). The first EPZ was established in the 1980s and there are currently eight EPZs in the country. BEZA plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years, of which 11 are currently fully or partially operational. Site selections for 77 additional EZs have been completed as of March 2020. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Additionally, Bangladesh is setting up several Hi-Tech Parks across the country under the supervision of the Bangladesh Hi-Tech Park Authority.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled. Regulations in the area of telecommunication infrastructure currently include provisions for 60 percent foreign ownership (70 percent for tower sharing).In addition to the four sectors reserved for government investment, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

a) Fishing in the deep sea

b) Bank/financial institutions in the private sector

c) Insurance companies in the private sector

d) Generation, supply, and distribution of power in the private sector

e) Exploration, extraction, and supply of natural gas/oil

f) Exploration, extraction, and supply of coal

g) Exploration, extraction, and supply of other mineral resources

h) Large-scale infrastructure projects (e.g. flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station)

i) Crude oil refinery (recycling/refining of lube oil used as fuel)

j) Medium and large industries using natural gas/condensate and other minerals as raw material

k) Telecommunications service (mobile/cellular and land phone)

l) Satellite channels

m) Cargo/passenger aviation

n) Sea-bound ship transport

o) Seaports/deep seaports

p) VOIP/IP telephone

q) Industries using heavy minerals accumulated from sea beaches

While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping and insurance companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive. In practical terms, foreign investors frequently find it necessary to have a local partner even though this requirement may not be statutorily defined.

In certain strategic sectors, the GOB has placed unofficial barriers on foreign companies’ ability to divest from the country.

BIDA is responsible for screening, reviewing, and approving investments in Bangladesh, except for investments in EPZs, EZs, and High-Tech Parks, which are supervised by BEPZA, BEZA, and BHTPA respectively. Both foreign and domestic companies are required to obtain clearance certificates from relevant ministries and agencies with regulatory oversight. In certain sectors (e.g., healthcare) foreign companies may be required to obtain a No Objection Certificate (NOC) from the relevant ministry or agency stating the specific investment will not hinder local manufacturers and is in line with the guidelines of the ministry concerned. Since Bangladesh actively seeks foreign investments, instances where one of the Investment Promotion Agencies (IPAs) declines investment proposals are rare.

Other Investment Policy Reviews

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD): https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=756 

A Trade Policy Review was done by the World Trade Organization in April 2019 and can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp485_e.htm 

Business Facilitation

In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes. The four IPAs — BIDA, BEPZA, BEZA, and BHTPA — are mandated to provide one-stop services (OSS) to local and foreign investors under their respective jurisdictions. Expected streamlined services include: company registration, taxpayer’s identification number (TIN) and value added tax (VAT) registration, work permit issuance, power and utilities connections, capital and profit repatriation, and environment clearance. In 2019 Bangladesh made reforms in three key areas: starting a business, getting electricity, and getting credit. These and other regulatory changes led to an improvement of eight ranks on the World Bank’s Doing Business score. BIDA offers 18 services under its online OSS as of April 2020, and has a plan to expand to 154 services covering 35 agencies. The Bangladesh government is also planning to integrate the services of all four investment promotion agencies under a single online platform. Progress on realizing a comprehensive OSS for businesses has been slowed by bureaucratic delays and a lack of interagency coordination.

Companies can register their businesses at the Office of the Registrar of Joint Stock Companies and Firms (RJSC): www.roc.gov.bd . However, the online business registration process can be unclear and inconsistent. Additionally, BIDA facilitates company registration services as part of its OSS, which is available at: https://bidaquickserv.org/ . BIDA also facilitates other services including office set-up approval, work permits for foreign employees, and tax registration with National Board of Revenue. Other agencies with which a company must typically register are:

City Corporation – Trade License

National Board of Revenue – Tax & VAT Registration

Chief Inspector of Shops and Establishments – Employment of Workers Notification

It takes approximately 20 days to start a business in the country according to the World Bank. The company registration process at the RJSC now takes one or two days to complete. The process for trade licensing, tax registration, and VAT registration requires seven days, one day, and one week, respectively.

Outward Investment

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the 1947 Act by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note that the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

Corruption remains a serious impediment to investment and economic growth in Bangladesh. While the government has established legislation to combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent. The Anti-Corruption Commission (ACC) is the main institutional anti-corruption watchdog. With amendments to the Money Prevention Act, the ACC is no longer the sole authority to probe money-laundering offenses. Although it still has primary authority for bribery and corruption, other agencies will now investigate related offenses, including:

• The Bangladesh Police (Criminal Investigation Department) – Most predicate offenses.
• NBR – VAT, taxation, and customs offenses.
• The Department of Narcotics Control – Drug related offenses.

The current Awami League-led government has publicly underscored its commitment to anticorruption efforts and reaffirmed the need for a strong ACC, but opposition parties claim that the ACC is used by the government to harass political opponents. Efforts to ease public procurement rules and a recent constitutional amendment that reduced the independence of the ACC may undermine institutional safeguards against corruption. Bangladesh is a party to the UN Anticorruption Convention, but has not joined the OECD Convention on Combating Bribery of Public Officials. Corruption is common in public procurement, tax and customs collection, and among regulatory authorities. Corruption, including bribery, raises the costs and risks of doing business. By some estimates, off-the-record payments by firms may result in an annual reduction of two to three percent of GDP. Corruption has a corrosive impact on the broader business climate market and opportunities for U.S. companies in Bangladesh. It also deters investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

Resources to Report Corruption

Mr. Iqbal Mahmood
Chairman
Anti-Corruption Commission, Bangladesh
1, Segun Bagicha, Dhaka 1000
+88-02-8333350
chairman@acc.org.bd

Contact at “watchdog” organization:

Mr. Iftekharuzzaman
Executive Director
Transparency International Bangladesh (TIB)
MIDAS Centre (Level 4 & 5), House-5, Road-16 (New) 27 (Old),

Dhanmondi, Dhaka -1209
+880 2 912 4788 / 4789 / 4792
edtib@ti-bangladesh.org, info@ti-bangladesh.org, advocacy@ti-bangladesh.org