1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Bangladesh actively seeks foreign investment. Sectors with active investments from overseas include 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. 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.
- Security printing (items such as currency, visa foils, and tax stamps).
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.
- Issues approvals of foreign loans and supplier credits.
In addition to BIDA, there are three other Investment Promotion Agencies (IPAs) responsible for promoting investments in their respective jurisdictions.
- Bangladesh Export Processing Zone Authority (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. Website: https://www.bepza.gov.bd/
- Bangladesh Economic Zones Authority (BEZA) plans to establish approximately 100 Economic Zones (EZs) throughout the country over the next several years. Site selections for 97 EZs have been completed as of February 2021, of which 11 private EZs are already licensed and operational while development of several other public and private sector EZs are underway. While EPZs accommodate exporting companies only, EZs are open for both export- and domestic-oriented companies. Website: https://www.beza.gov.bd/
- Bangladesh Hi-Tech Park Authority (BHTPA) is responsible for attracting and facilitating investments in the high-tech parks Bangladesh is establishing across the country. Website: http://bhtpa.gov.bd/
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:
- Fishing in the deep sea.
- Bank/financial institutions in the private sector.
- Insurance companies in the private sector.
- Generation, supply, and distribution of power in the private sector.
- Exploration, extraction, and supply of natural gas/oil.
- Exploration, extraction, and supply of coal.
- Exploration, extraction, and supply of other mineral resources.
- Large-scale infrastructure projects (e.g., elevated expressway, monorail, economic zone, inland container depot/container freight station).
- Crude oil refinery (recycling/refining of lube oil used as fuel).
- Medium and large industries using natural gas/condensate and other minerals as raw material.
- Telecommunications service (mobile/cellular and land phone).
- Satellite channels.
- Cargo/passenger aviation.
- Sea-bound ship transport.
- Seaports/deep seaports.
- VOIP/IP telephone.
- 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. 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 approval 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 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 by eight ranks on the World Bank’s Doing Business score, moving up from 176 to 168 of the 190 countries rated. BIDA offers more than 40 services under its OSS as of March 2021 and has a plan to expand to 154 services covering 35 agencies. The GOB 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): . However, the online business registration process, while improving, can at times be unclear and inconsistent. Additionally, BIDA facilitates company registration services as part of its OSS, which is available at: . BIDA also facilitates other services including office set-up approval, work permits for foreign employees, environmental clearance, outward remittance approval, 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 generally 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, as of February 2021.
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 Foreign Exchange Regulation Act of 1947 by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.