Bangladesh is the most densely populated non-city-state country in the world, with the eighth largest population (over 165 million) within a territory the size of Iowa. Bangladesh is situated in the northeastern corner of the Indian subcontinent, sharing a 4,100 km border with India and a 247-kilometer border with Burma. With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh will likely continue to attract increasing investment, despite severe economic headwinds created by the global outbreak of COVID-19.
Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade, with the exception of the COVID-induced economic slowdown in 2020. Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $35.81 billion of apparel products in fiscal year (FY) 2021, second only to China, and continued remittance inflows, reaching a record $24.77 billion in FY 2021. (Note: The Bangladeshi fiscal year is from July 1 to June 30; fiscal year 2021 ended on June 30, 2021.) The country’s RMG exports increased more than 30 percent year-over-year in FY 2021 as the global demand for apparel products accelerated after the COVID shock.
The Government of Bangladesh (GOB) actively seeks foreign investment. Sectors with active investments from overseas include agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure. The GOB 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.
Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion through the end of September 2021, with the United States being the top investing country with $4.1 billion in accumulated investments. Bangladesh received $2.56 billion FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD). The rate of FDI inflows was only 0.77 percent of GDP, one of the lowest of rates in Asia.
Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labor laws, and corruption continue to hinder foreign investment. Government efforts to improve the business environment in recent years show promise but implementation has yet to materialize. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.
As a traditionally moderate, secular, peaceful, and stable country, Bangladesh experienced a decrease in terrorist activity in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan Bakery terrorist attack in 2016. A December 2018 national election marred by irregularities, violence, and intimidation consolidated the power of Prime Minister Sheikh Hasina and her ruling party, the Awami League. This allowed the government to adopt legislation and policies diminishing space for the political opposition, undermining judicial independence, and threatening freedom of the media and NGOs. Bangladesh continues to host one of the world’s largest refugee populations. According to UN High Commission for Refugees, more than 923,000 Rohingya from Burma were in Bangladesh as of February 2022. This humanitarian crisis will likely require notable financial and political support until a return to Burma in a voluntary and sustainable manner is possible. International retail brands selling Bangladesh-made products and the international community continue to press the Government of Bangladesh to meaningfully address worker rights and factory safety problems in Bangladesh. With unprecedented support from the international community and the private sector, the Bangladesh garment sector has made significant progress on fire and structural safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in Export Processing Zones (EPZs).
The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector.
Capital markets in Bangladesh are still developing, and the financial sector is still highly dependent on banks.
|TI Corruption Perceptions Index||2021||147 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||116 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||USD 723||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||USD 2,030||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign 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, 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.
- Provides aftercare facilities.
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, 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:
- 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 2022, of which 10 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:
- 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:
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.
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
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. BIDA offers 56 services under its OSS as of February 2022and 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): www.roc.gov.bd . 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: https://bidaquickserv.org . 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 required as of 2021 seven days, one day, and one week respectively.
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. However, the government is considering an overseas investment guideline to allow outbound investment opportunities for local exporters and any company operating in the domestic market for 10 years. This will allow local companies and NGOs with outbound investments to enlist in foreign stock markets. However, Bangladesh’s total outbound investment in a single fiscal year would be capped at 5 percent of the central bank’s foreign exchange reserves for that fiscal year under the regulation being considered. Bangladesh Investment Development Authority (BIDA) has been working to formulate a workable policy regarding this since 2016.
3. Legal Regime
Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. Various chambers of commerce have called for privatization and for a greater voice for the private sector in government decisions, but at the same time many chambers support protectionism and subsidies for their own industries. The result is policy and regulations which are often unclear, inconsistent, or little publicized. Registration and regulatory processes are frequently alleged by businesses to be used as rent-seeking opportunities. The major rule-making and regulatory authority exists at the national level under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s Office (PMO). The PMO is actively engaged in directing policies, as well as foreign investment in government-controlled projects.
Bangladesh has made incremental progress in using information technology both to improve the transparency and efficiency of some government services and develop independent agencies to regulate the energy and telecommunication sectors. Some investors cited government laws, regulations, and lack of implementation as impediments to investment. The government has historically limited opportunities for the private sector to comment on proposed regulations. In 2009, Bangladesh adopted the Right to Information Act providing for multilevel stakeholder consultations through workshops or media outreach. Although the consultation process exists, it is still weak and in need of further improvement.
The Environment Conservation Act 1995 (ECA ’95) as amended in 2010 and the Biodiversity Act of 2018 are the main acts governing environmental protection in Bangladesh. The ECA ’95 replaced the earlier environment pollution control ordinance of 1992 and provides the legal basis for Environment Conservation Rules, 1997 (ECR’97). The objective of the Biodiversity Act is equitable sharing of benefits arising out of the use of biological resources. The main objectives of ECA’95 are conservation of the natural environment, improvement of environmental standards, and control and mitigation of environmental pollution. According to the act, all industrial projects require before being undertaken an Environmental Clearance Certificate from the Director General. In issuing the certificate, the projects are classified into the following four categories – Green, Orange-A, Orange-B, and Red.
Environmental Clearance for the Green category is through a comparatively simple procedure. In the case of Orange-A, Orange-B and Red Categories, site clearance is mandatory at the beginning, then Environmental Impact Assessment approval and finally Environmental Clearance is issued. The Environment Clearance is to be renewed after three years for the Green category and one year for Orange-A, Orange-B and Red categories. Red Category projects require an Environmental Impact Statement prior to approval.
Ministries and regulatory agencies do not generally publish or solicit comments on draft proposed legislation or regulations. However, several government organizations, including the Bangladesh Bank (the central bank), Bangladesh Securities and Exchange Commission, BIDA, the Ministry of Commerce, and the Bangladesh Telecommunications Regulatory Commission have occasionally posted draft legislation and regulations online and solicited feedback from the business community. In some instances, parliamentary committees have also reached out to relevant stakeholders for input on draft legislation. The media continues to be the main information source for the public on many draft proposals. There is also no legal obligation to publish proposed regulations, consider alternatives to proposed regulation, or solicit comments from the general public.
The government printing office, The Bangladesh Government Press ( http://www.dpp.gov.bd/bgpress/ ), publishes the “Bangladesh Gazette” every Thursday and Extraordinary Gazettes as and when needed. The Gazette provides official notice of government actions, including issuance of government rules and regulations and the transfer and promotion of government employees. Laws can also be accessed at http://bdlaws.minlaw.gov.bd/ .
Bangladesh passed the Financial Reporting Act of 2015 which created the Financial Reporting Council in 2016 aimed at establishing transparency and accountability in the accounting and auditing system. The country follows Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards, which are largely derived from International Accounting Standards and International Financial Reporting Standards. However, the quality of reporting varies widely. Internationally known firms have begun establishing local offices in Bangladesh and their presence is positively influencing the accounting norms in the country. Some firms can provide financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting records. Regulatory agencies do not conduct impact assessments for proposed regulations; consequently, regulations are often not reviewed based on data-driven assessments. Not all national budget documents are prepared according to internationally accepted standards.
The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) aims to integrate regional regulatory systems among Bangladesh, India, Burma, Sri Lanka, Thailand, Nepal, and Bhutan. However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated.
Local laws are based on the English common law system but most fall short of international standards. The country’s regulatory system remains weak and many of the laws and regulations are not enforced and standards are not maintained.
Bangladesh has been a member of the World Trade Organization (WTO) since 1995. WTO requires all signatories to the Agreement on Technical Barriers to Trade (TBT) to establish a National Inquiry Point and Notification Authority to gather and efficiently distribute trade-related regulatory, standards, and conformity assessment information to the WTO Member community. The Bangladesh Standards and Testing Institute (BSTI) has been working as the National Enquiry Point for the WTO-TBT Agreement since 2002. There is an internal committee on WTO affairs in BSTI and it participates in notifying WTO activities through the Ministry of Commerce and the Ministry of Industries.
General Contact for WTO-TBT National Enquiry Point:
Email: firstname.lastname@example.org; email@example.com
Focal Point for TBT:
Mr. Md. Golam Baki,Deputy Director (Certification Marks), BSTI
Email: firstname.lastname@example.orgTel: +88-02-48116665Cell: +8801799828826, +8801712240702
Focal Point for other WTO related matters, except sanitary and phytosanitary systems:
Mr. Md. Hafizur Rahman,Director General, WTO Cell, Ministry of Commerce
Email: email@example.comTel: +880-2-9545383Cell: +88 0171 1861056
Mr. Mohammad Ileas Mia,Director-1, WTO Cell, Ministry of Commerce
Email: firstname.lastname@example.orgTel: +880-2-9540580Cell: +88 01786698321
Bangladesh is a common law-based jurisdiction. Many of the basic laws, such as the penal code, civil and criminal procedural codes, contract law, and company law are influenced by English common law. However, family laws, such as laws relating to marriage, dissolution of marriage, and inheritance are based on religious scripts and therefore differ among religious communities. The Bangladeshi legal system is based on a written constitution and the laws often take statutory forms that are enacted by the legislature and interpreted by the higher courts. Ordinarily, executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations and is also enforceable by the courts. However, as a common law system, the statutes are short and set out basic rights and responsibilities but are elaborated by the courts in the application and interpretation of those laws. The Bangladeshi judiciary acts through: (1) The Superior Judiciary, having appellate, revision, and original jurisdiction; and (2) The Sub-Ordinate Judiciary, having original jurisdiction.
Since 1971, Bangladesh has updated its legal system concerning company, banking, bankruptcy, and money loan court laws, and other commercial laws. An important impediment to investment in Bangladesh is its weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, which means procedural delays carry no penalties. Bangladesh does not have a separate court or court division dedicated solely to commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts.
Some notable commercial laws include:
- The Contract Act, 1872 (Act No. IX of 1930).
- The Sale of Goods Act, 1930 (Act No. III of 1930).
- The Partnership Act, 1932 (Act No. IX of 1932).
- The Negotiable Instruments Act, 1881 (Act No. XXVI of 1881).
- The Bankruptcy Act, 1997 (Act No. X of 1997).
- The Arbitration Act, 2001 (Act No. I of 2001).
The judicial system of Bangladesh has never been completely independent from interference by the executive branch of the government. In a significant milestone, the government in 2007 separated the country’s judiciary from the executive but the executive retains strong influence over the judiciary through control of judicial appointments. Other pillars of the justice system, including the police, courts, and legal profession, are also closely aligned with the executive branch. In lower courts, corruption is widely perceived as a serious problem. Regulations or enforcement actions are appealable under the Appellate Division of the Supreme Court.
Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, and the Bangladesh Economic Zones Act of 2010.
Bangladesh industrial policy offers incentives for “green” (environmental) high-tech or “transformative” industries. It allows foreigners who invest $1 million or transfer $2 million to a recognized financial institution to apply for Bangladeshi citizenship. The GOB will provide financial and policy support for high-priority industries (those creating large-scale employment and earning substantial export revenue) and creative industries – architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming. Specific importance is given to agriculture and food processing, RMG, ICT and software, pharmaceuticals, leather and leather products, and jute and jute goods.
In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas. In 2019, Parliament approved the Bangladesh Flag Vessels (Protection) Act 2019 with a provision to ensure Bangladeshi flagged vessels carry at least 50 percent of foreign cargo, up from 40 percent. In 2020, the Ministry of Commerce amended the digital commerce policy to allow fully foreign-owned e-commerce companies in Bangladesh and remove a previous joint venture requirement.
The One Stop Service (OSS) Act of 2018 mandated the four IPAs to provide OSS to local and foreign investors in their respective jurisdictions. The move aims to facilitate business services on behalf of multiple government agencies to improve ease of doing business. In 2020, BIDA issued time-bound rules to implement the Act of 2018. Although the IPAs have started to offer a few services under the OSS, corruption and excessive bureaucracy have held back the complete and effective roll out of the OSS. BIDA has a “one-stop” website that provides information on relevant laws, rules, procedures, and reporting requirements for investors at: http://www.bida.gov.bd/ .
Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for businesses, potential sectors, and how to do business in Bangladesh. The website also has an eService Portal for Investors which provides services such as visa recommendations for foreign investors, approval/extension of work permits for expatriates, approval of foreign borrowing, and approval/renewal of branch/liaison and representative offices.
Bangladesh formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce. Parliament then passed the Competition Act in 2012. However, the BCC has not received sufficient resources to operate effectively.
In 2018, the Bangladesh Telecommunication Regulatory Commission (BTRC) finalized Significant Market Power (SMP) regulations to promote competition in the industry. In 2019, BTRC declared the country’s largest telecom operator, Grameenphone (GP), the first SMP based on its revenue share of more than 50 percent and customer shares of about 47 percent. Since the declaration, the BTRC has attempted to impose restrictions on GP’s operations, which GP has challenged in the judicial system.
Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, Bangladesh has not nationalized or expropriated property from foreign investors. In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands. However, the government has taken steps to privatize many of these industries since the late 1970s and the private sector has developed into a main driver of the country’s sustained economic growth.
Many laws affecting investment in Bangladesh are outdated. Bankruptcy laws, which apply mainly to individual insolvency, are sometimes disregarded in business cases because of the numerous falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies. A Bankruptcy Act was passed by Parliament in 1997 but has been ineffective in addressing these issues. Some bankruptcy cases fall under the Money Loan Court Act-2003 which has more stringent and timely procedures.
4. Industrial Policies
Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 1, 2019 and June 30, 2024. The thrust sectors enjoy tax exemptions graduated from 90 percent to 20 percent over a period of five to ten years depending on the zone where the business is established. Industries set up in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are also eligible for tax holidays. Details of fiscal and non-fiscal incentives are available on the following websites:
Strategic sectors eligible for tax exemptions include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, home appliances, insecticides, pesticides, petrochemicals, fruit and vegetable processing, textile machinery, tissue grafting, tire manufacturing industries, agricultural machineries, furniture, leather and leather goods, cell phones, plastic recycling, and toy manufacturing.
Eligible physical infrastructure projects are allowed tax exemptions graduated from 90 percent to 20 percent over a period of 10 years. Physical infrastructure projects eligible for exemptions include deep seaports, elevated expressways, road overpasses, toll roads and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.
Independent non-coal fired power plants (IPPs) commencing production after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years six to eight, and a 25 percent exemption for years nine to 10. For new coal-fired IPPs commencing production before June 30, 2023 (provided operators contracted with the government before June 30, 2020), the tax exemption rate is 100 percent for the first 15 years of operations. For power projects, import duties are waived for imports of capital machinery and spare parts.
The valued-added tax (VAT) rate on exports is zero. For companies exporting only, duties are waived on imports of capital machinery and spare parts. For companies primarily exporting (80 percent of production and above), an import duty rate of 1 percent is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators. Import duties are also waived for EPZ industries and other export-oriented industries for imports of raw materials consumed in production.
The GOB provides special incentives to encourage non-resident Bangladeshis to invest in the country. Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies. Further, non-resident Bangladeshis can maintain foreign currency deposits in Non-resident Foreign Currency Deposit (NFCD) accounts.
In the past several years, U.S. companies have experienced difficulties securing the investment incentives initially offered by Bangladesh. Several companies have reported instances where infrastructure guarantees (ranging from electricity to gas connections) are not fully delivered or tax exemptions are delayed, either temporarily or indefinitely. These challenges are not specific to U.S. or foreign companies and reflect broader challenges in the business environment.
Bangladesh government does not provide any specific incentives for businesses owned by women.
In 2020, the Government of Bangladesh established that all power generation companies will enjoy full tax exemption with the exception of coal-based generation. This incentive will be available to all power generation companies who start operation before December 31, 2022. The government is seeking to increase use of renewable energy and has offered incentives such as tax breaks for net-metered solar rooftop installation.
Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established the first EPZ in Chattogram in 1983. Additional EPZs now operate in Dhaka (Savar), Mongla, Ishwardi, Cumilla, Uttara, Karnaphuli (Chattogram), and Adamjee (Dhaka). Korean investors are also operating a separate and private EPZ in Chattogram.
Joint ventures, wholly foreign-owned investments, and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs.
In 2010, Bangladesh enacted the Special Economic Zone Act allowing for the creation of privately owned SEZs to produce for export and domestic markets. The SEZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh.
5. Protection of Property Rights
Although land, whether for purchase or lease, is often critical for investment and as security against loans, antiquated real property laws and poor record-keeping systems can complicate land and property transactions. Instruments take effect from the date of execution, not the date of registration, so a bona fide purchaser can often be uncertain of title. Land registration records have been historically prone to competing claims. Land disputes are common, and both U.S. companies and citizens have filed complaints about fraudulent land sales. For example, sellers fraudulently claiming ownership have transferred land to good faith purchasers while the actual owners were living outside of Bangladesh. In other instances, U.S.-Bangladeshi dual citizens have purchased land from legitimate owners only to have third parties make fraudulent claims of title to extort settlement compensation. A 2015 study by leading Bangladeshi think tank Policy Research Institute (PRI) revealed one in seven households in the country faced land disputes. Bangladesh ranks 184 among 190 countries for ease of registering property in the World Bank’s Doing Business 2020 Report.
While property owners can obtain mortgages, parties generally avoid registering mortgages, liens, and encumbrances due to the high cost of stamp duties (i.e., transaction taxes based on property value) and other charges. There are also concerns that non-registered mortgages are often unenforceable.
Article 42 of the Bangladesh Constitution guarantees a right to property for all citizens, but property rights are often not protected due to a weak judicial system. The Transfer of Property Act of 1882 and the Registration Act of 1908 are the two main laws regulating transfer of property in Bangladesh but these laws have no specific provisions covering foreign and/or non-resident investors. Currently, foreigners and non-residents can incorporate a company with the Registrar of Joint Stock Companies and Firms. The company would be considered a local entity and would be able to buy land in its name.
Intellectual property rights (IPR) and rights enforcement is not a priority for the Government of Bangladesh and it has not invested heavily in IPR protection. As a result, counterfeit goods are readily available in Bangladesh, and a significant portion of business software is pirated. Several U.S. firms, including fast-moving consumer goods manufacturers, film studios, pharmaceutical products, apparel goods, and software firms, have reported systematic violations of their IPRs. Investors note police are willing to investigate counterfeit goods producers when informed but are unlikely to initiate independent investigations.
The Government of Bangladesh has recently taken steps to develop its IP system. In February 2021, the Cabinet gave its final approval of a draft Bangladesh Patents Bill and in-principal approval of a draft Bangladesh Industry-Designs Bill to replace the Patents and Designs Act 1911. The bills aim to make necessary updates to existing regulations and improve IPR in Bangladesh. However, as of March 2022 the potential impact of the bills remains uncertain because the government had yet to make the drafts public for stakeholder review. The bills require approval by the Parliament before going into effect. A National IP policy was developed in 2018 but has not been fully implemented. Public awareness of IPR is slowly growing through efforts from industry associations like the Intellectual Property Rights Association of Bangladesh, AMCHAM, Bangladesh, and REACT. Bangladesh is a member of the World Intellectual Property Organization (WIPO) and acceded to the Paris Convention on Intellectual Property in 1991.
Bangladesh has slowly made progress toward bringing its legislative framework into compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The government enacted a Copyright Law in 2000 (amended in 2005), a Trademarks Act in 2009, and a Geographical Indication of Goods (Registration and Protection) Act in 2013, in addition to the recent action on bills replacing the Patents and Designs Act.
Several government agencies are empowered to act against counterfeiting, including the National Board of Revenue (NBR), Customs, Mobile Courts, the Rapid Action Battalion (RAB), and the Bangladesh Police. However, enforcement agencies do not have appropriate resources nor are given the appropriate attention or priority to execute complaints filed by IP right holders. Accordingly, enforcement actions such as raids and seizures have become costly, time-consuming, and often nonproductive. In a positive development, in December 2019, the National Board of Revenue implemented the Intellectual Property Rights of Receipts of Imports: Rules of Implementation 2018. The rules intend to help stakeholders, though the bond requirement, for taking any enforcement action is a concern for the stakeholders. As per Rule 5 of the Intellectual Property Rights (Imported Goods) Enforcement Rules,2007, Industry is required to execute a specific bond of an amount equal to 110 percent of the value of the goods and furnish security in the form of a Bank Guarantee of an amount equal to 25 percent of the bond value within three days from date of confiscation of the goods. It is an issue as it is challenging to get all internal approval and get the bond executed within three days. Secondly, the bond is on hold until the case is disposed of, and thirdly it isn’t easy to do the valuation of a product.
The Department of National Consumer Rights Protection (DNCRP) is charged with tracking and reporting on counterfeit goods, and the NBR/Customs tracks counterfeit goods seizures at ports of entry. However, reports are not publicly available.
Resources for Intellectual Property Rights Holders:
Intellectual Property Counselor for South Asia
U.S. Patent and Trademark Office
Foreign Commercial Service
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
6. Financial Sector
Capital markets in Bangladesh are still developing, and the financial sector remains highly dependent on bank lending. Current regulatory infrastructure inhibits the development of a tradeable bond market.
Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), both of which are regulated by the Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance. The DSE market capitalization stood at $64.8 billion at the end of January 2022, rising 16.3 percent year-over-year as stock prices rose amid speculative behavior and increased liquidity due to relaxed monetary policy.
Although the Bangladeshi government has a positive attitude toward foreign portfolio investors, participation in the exchanges remains low due to what is still limited liquidity for shares and the lack of publicly available and reliable company information. The DSE has attracted some foreign portfolio investors to the country’s capital market. However, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization. As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors.
In 2019, BSEC undertook a number of initiatives to launch derivatives products, allow short selling, and invigorate the bond market. To this end, BSEC introduced three rules: Exchange Traded Derivatives Rules 2019, Short-Sale Rules 2019, and Investment Sukuk Rules 2019. Other recent, notable BSEC initiatives include forming a central clearing and settlement company – the Central Counterparty Bangladesh Limited (CCBL) – and promoting private equity and venture capital firms under the 2015 Alternative Investment Rules. In 2013, BSEC became a full signatory of the International Organization of Securities Commissions (IOSCO) Memorandum of Understanding.
BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” providing real time connectivity with exchanges and depository institutions. As a result, the market abuse detection capabilities of BSEC have improved significantly. A mandatory Corporate Governance Code for listed companies was introduced in 2012 but the overall quality of corporate governance remains substandard. Demutualization of both the DSE and CSE was completed in 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously. However, both domestic and foreign investor confidence on the stock exchanges’ governance standards remains low.
The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse. Through a bidding process DSE selected a consortium of the Shenzhen and Shanghai stock exchanges in China as its strategic partner, with the consortium buying the 25 percent share of DSE for taka 9.47 billion ($112.7 million).
According to the International Monetary Fund (IMF), Bangladesh is an Article VIII member and maintains restrictions on the unapproved exchange, conversion, and/or transfer of proceeds of international transactions into non-resident taka-denominated accounts. Since 2015, authorities have relaxed restrictions by allowing some debits of balances in such accounts for outward remittances, but there is currently no established timetable for the complete removal of the restrictions.
The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established through the enactment of the Bangladesh Bank Order of 1972. General supervision and strategic direction of the BB has been entrusted to a nine-member Board of Directors, which is headed by the BB Governor. A list of the bank’s departments and branches is on its website: https://www.bb.org.bd/aboutus/dept/depts.php .
According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs). Some 61 “scheduled” banks in Bangladesh operate under the control and supervision of the central bank as per the Bangladesh Bank Order of 1972. The scheduled banks, include six SOCBs, three specialized government banks established for specific objectives such as agricultural or industrial development or expatriates’ welfare, 43 PCBs, and nine FCBs as of February 2021. The scheduled banks are licensed to operate under the Bank Company Act of 1991 (Amended 2013). There are also five non-scheduled banks in Bangladesh, including Nobel Prize recipient Grameen Bank, established for special and definite objectives and operating under legislation enacted to meet those objectives.
Currently, 34 non-bank financial institutions (FIs) are operating in Bangladesh. They are regulated under the Financial Institution Act, 1993 and controlled by the BB. Of these, two are fully government-owned, one is a subsidiary of a state-owned commercial bank, and the rest are private financial institutions. Major sources of funds for these financial institutions are term deposits (at least three months’ tenure), credit facilities from banks and other financial institutions, and call money, as well as bonds and securitization.
Unlike banks, FIs are prohibited from:
- Issuing checks, pay-orders, or demand drafts.
- Receiving demand deposits.
- Involvement in foreign exchange financing.
Microfinance institutions (MFIs) remain the dominant players in rural financial markets. The Microcredit Regulatory Authority (MRA), the primary regulator of this sector, oversees 746 licensed microfinance institutions as of October 2021, excluding Grameen Bank which is governed under a separate law. In 2020, the MRA-listed microfinance institutions had 33.3 million members while Grameen Bank had an additional 9.3 million members.
The banking sector has had a mixed record of performance over the past several years. Industry experts have reported a rise in risky assets because of poor governance as well as the economic fallout of the COVID-19 pandemic. Total domestic credit stood at 50.4 percent of gross domestic product at end of November 2021. The state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh and Standard Chartered Bangladesh are the largest local private and foreign banks respectively. The gross non-performing loan (NPL) ratio was 8.1 percent at the end of September 2021, down from 8.9 percent in September 2020. However, the decline in the NPLs was primarily caused by regulatory forbearance rather than actual reduction of stressed loans. At 20.1 percent SCBs had the highest NPL ratio, followed by 11.4 percent of Specialized Banks, 5.5 percent of PCBs, and4.1 percent of FCBs as of September 2021.
In 2017, the BB issued a circular warning citizens and financial institutions about the risks associated with cryptocurrencies. The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and cautioned users may incur financial losses. The BB issued similar warnings against cryptocurrencies in 2014.
Foreign investors may open temporary bank accounts called Non-Resident Taka Accounts (NRTA) in the proposed company name without prior approval from the BB to receive incoming capital remittances and encashment certificates. Once the proposed company is registered, it can open a new account to transfer capital from the NRTA account. Branch, representative, or liaison offices of foreign companies can open bank accounts to receive initial suspense payments from headquarters without opening NRTA accounts. In 2019, the BB relaxed regulations on the types of bank branches foreigners could use to open NRTAs, removing a previous requirement limiting use of NRTA’s solely to Authorized Dealers (ADs).
In 2015, the Bangladesh Finance Ministry announced it was exploring establishing a sovereign wealth fund in which to invest a portion of Bangladesh’s foreign currency reserves. In 2017, the Cabinet initially approved a $10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) to be created with funds from excess foreign exchange reserves but the plan was subsequently scrapped by the Finance Ministry.
8. Responsible Business Conduct
The business community is increasingly aware of and engaged in responsible business conduct (RBC) activities with multinational firms leading the way. While many firms in Bangladesh fall short on RBC activities and instead often focus on philanthropic giving, some of the leading local conglomerates have begun to incorporate increasingly rigorous environmental and safety standards in their workplaces. U.S. companies present in Bangladesh maintain diverse RBC activities. Consumers in Bangladesh are generally less aware of RBC, and consumers and shareholders exert little pressure on companies to engage in RBC activities.
While many international firms are aware of OECD guidelines and international best practices concerning RBC, many local firms have limited familiarity with international standards. There are currently two RBC NGOs active in Bangladesh:
- CSR Bangladesh:
- CSR Centre Bangladesh:
Along with the Bangladesh Enterprise Institute, the CSR Centre is the joint focal point for the United Nations Global Compact (UNGC) and its corporate social responsibility principles in Bangladesh. The UN Global Compact is the world’s largest corporate citizenship and sustainability initiative. The Centre is a member of a regional RBC platform called the South Asian Network on Sustainability and Responsibility, with members including Bangladesh, Afghanistan, India, Nepal, and Pakistan.
While several NGOs have proposed National Corporate Social Responsibility Guidelines, the government has yet to adopt any such standards for RBC. As a result, the government encourages enterprises to follow generally accepted RBC principles but does not mandate any specific guidelines.
Bangladesh has natural resources, but it has not joined the Extractive Industries Transparency Initiative (EITI). The country does not adhere to the Voluntary Principles on Security and Human Rights.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
Bangladesh is one of the most climate-vulnerable countries in the world. The government established the Bangladesh Climate Change Strategy and Action Plan (BCCSAP) to address the adverse effects of climate change. In this plan, 44 programs under six thematic areas were identified. The Bangladesh Climate Change Trust Fund (BCCTF) was created in 2010 from the Government’s own revenue sources to combat climate change impacts as well as to implement the BCCSAP. The BCCTF has funded $449.3M in approximately 800 projects to implement key aspects of the BCCSAP. Taking into account the challenges of environment, environment and biodiversity conservation and management, the government has finalized the National Environment Policy 2018 and published it in 2019 with the aim of developing the overall environmental conservation management of the country. The Department of Environment, under the Ministry of Environment, Forest and Climate Change, has adopted a “blue-economy” action plan to conserve marine environment, prevent marine pollution, ensure environmental management, and conserve marine and coastal biodiversity while ensuring marine resource extraction and mainstream development activities.
Bangladesh aims to reach 30 percent renewable energy by 2030 and at least 40 percent by 2041. Bangladesh launched the Mujib Climate Prosperity Plan (MCPP) in November 2021. The MCPP is built on the foundation of the Eighth Five Year Plan (2021-2025) and shifts Bangladesh’s trajectory from one of vulnerability to resilience and then prosperity. The plan highlights engagement with domestic implementation partners including the Public Private Partnership (PPP) Authority and the Bangladesh Investment Development Authority (BIDA). The MCPP expects investment opportunities of approximately $80 billion in resilient projects in energy, water, transport, supply chains and value chains. Optimized finance structures to attract FDI and mobilize domestic private sector capital include the use of public private partnerships as a key solution to climate investment with the PPP Authority. The Bangladesh Bank can use different tools to incentivize investment in low-carbon and climate-resilient infrastructure.
The MCPP further outlines opportunities for technology-transfer partnerships and building manufacturing capacity in Bangladesh including in areas such as green hydrogen, solar, electric vehicles, modernized power grid and other resilient infrastructure.
According to a BloombergNEF’s Climatescope report, in 2021 Bangladesh ranked 24 among 109 countries as an emerging attractive market for energy transition investment. Bangladesh ranks 69th in the MIT Technology Review’s Green Future Index. The overall ranking shows the performance of the economies relative to each other and aggregates scores generated across the following five pillars: carbon emissions, energy transition, green society, clean innovation and climate policy. In the Global Green Growth Institute’s Global Green Growth Index, Bangladesh Ranked 18th among 33 Asian countries. This index measures sustainability targets for four green growth dimensions – efficient and sustainable resource use, natural capital protection, green economic opportunities, and social inclusion.
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 Laundering 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.
- The National Board of Revenue – 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 fighting corruption and reaffirmed the need for a strong ACC, but opposition parties claim the ACC is used by the government to harass political opponents. Efforts to ease public procurement rules and a recent constitutional amendment diminishing 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.
Mohammad Moinuddin AbdullahChairmanAnti-Corruption Commission, Bangladesh1, Segun Bagicha, Dhaka 1000+88-02-8333350 email@example.com
Contact at “watchdog” organization:
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
firstname.lastname@example.org, email@example.com, firstname.lastname@example.org
10. Political and Security Environment
Prime Minister Hasina’s ruling Awami League party won 289 parliamentary seats out of 300 in a December 30, 2018 election marred by wide-spread vote-rigging, ballot-box stuffing and intimidation. Intimidation, harassment, and violence during the pre-election period made it difficult for many opposition candidates and their supporters to meet, hold rallies, and/or campaign freely. The clashes between rival political parties and general strikes that previously characterized the political environment in Bangladesh have become far less frequent in the wake of the Awami League’s increasing dominance and crackdown on dissent. Many civil society groups have expressed concern about the trend toward a one-party state and the marginalization of all political opposition groups.
Americans are advised to exercise increased caution due to crime and terrorism when traveling to Bangladesh. Travel in some areas have higher risks. For further information, see the State Department’s travel website for the Worldwide Caution, Travel Advisories, and Bangladesh Country Specific Information.
11. Labor Policies and Practices
Bangladesh’s comparative advantage in cheap labor for manufacturing is partially offset by lower productivity due to poor skills development, inefficient management, pervasive corruption, and inadequate infrastructure. According to the 2016-2017 Labor Force Survey, 85 percent of the Bangladeshi labor force is employed in the informal economy. Bangladeshi workers have a strong reputation for hard work, entrepreneurial spirit, and a positive and optimistic attitude. With an average age of 26 years, the country boasts one of the largest and youngest labor forces in the world. However, training is not well aligned with labor demand. Bangladesh’s labor laws specify acceptable employment conditions, working hours, minimum wage levels, leave policies, health and sanitary conditions, and compensation for injured workers. Freedom of association and the right to join unions are guaranteed in the constitution. In practice, however, compliance and enforcement of labor laws are weak, and companies frequently discourage or prevent formation of worker-led labor unions, preferring pro-factory management unions. In a notable exception to the national labor law, Export Processing Zones (EPZs) do not allow trade unions and heavily restrict other labor activity normally permitted under the broader Bangladesh Labor Act. The EPZ labor law does allow worker welfare associations, to which 74 percent of workers belong, according to the government.
Since two back-to-back tragedies killed over 1,250 workers – the Tazreen Fashions fire in 2012 and the Rana Plaza collapse in 2013 – Bangladesh made significant progress in garment factory fire and structural safety remediation, thanks mostly to two Western brand-led initiatives, the Alliance for Bangladesh Worker Safety (Alliance), comprised of North American brands, and the Accord on Fire and Building Safety in Bangladesh (Accord), which was formed by European brands. Major accidents and workplace deaths in the garment sector dropped precipitously as a result – only four workers died in 2021. Monitoring and remediation of RMG factories exporting to non-Western countries was overseen by the government, with assistance from the International Labor Organization (ILO) under the National Initiative. By 2021, fewer than half the factories under the National Initiative had completed initial remediation of safety issues, and both the Alliance and Accord had closed their Bangladesh operations. North American brands continued to monitor manufacturers’ safety maintenance and training through a new organization, Nirapon. The Accord, under High Court order, transitioned its staff and operations to the newly formed RMG Sustainability Council (RSC), overseen by a board consisting of manufacturers, brands, and worker representatives. The government has announced plans to form an Industrial Safety Unit to oversee factory safety in National Initiative garment factories as well as all manufacturing. On July 8, 2021, a devastating fire at the Hashem Foods Factory Ltd took the lives of 54 workers including 19 children. In the wake of the fire on July 15, the Prime Minister’s Office announced the formation of a 24-member national committee led by the Bangladesh Investment Development Authority (BIDA) and headed by the Prime Minister’s Private Sector Advisor Salman Rahman. The committee prioritized 32 industrial sectors considering their propensity for and likelihood of accidents. BIDA announced in December 2021 it would produce a sector-wide report after analyzing the inspection data and will take steps to enforce workplace safety compliance in the non-export sectors.
The U.S. government suspended Bangladesh’s access to the U.S. Generalized System of Preferences (GSP) over labor rights violations following a six-year formal review conducted by the U.S. Trade Representative. The decision, announced in 2013 in the months following the Rana Plaza collapse, was accompanied by a 16-point GSP Action Plan to help start Bangladesh’s path to reinstatement of the trade benefits. While some progress was made in the intervening years, several key issues have not been adequately addressed. Despite revisions intended to make Bangladesh more compliant with international labor standards, the Bangladesh Labor Act (BLA) and EPZ Labor Act (ELA) still restrict the freedom of association and formation of unions and maintain separate administrative systems for workers inside and outside of export processing zones.
Under the current BLA, legally registered unions are entitled to submit charters of demands and bargain collectively with employers, but this has rarely occurred in practice. The government counts nearly 1,000 registered trade unions, but labor leaders estimate there are fewer than 100 active trade unions in the country’s dominant sector, RMG, and only 30 to 40 are capable enough to negotiate with owners. The law provides criminal penalties for conducting unfair labor practices such as retaliation against union members for exercising their legal rights, but charges are rarely brought against employers and the labor courts have a large backlog of cases. Labor organizations reported most workers did not exercise their rights to form unions, attend meetings, or bargain collectively due to fear of reprisal. From January to December 2021, a total of 6 workers died and 163 were injured due to police interference and about 137 of them belonged to the garment sector. The garment sector is reeling from the skilled labor crisis and missing opportunities to secure new orders from eager buyers coming to Bangladesh to procure garments after COVID-19-related factory closures in Vietnam, Cambodia, and Burma. The local apparel industry has long courted buyers who historically have sourced from other countries to buy from Bangladesh producers. However, in 2020, at the peak of Covid-19, Bangladesh apparel industries furloughed around 357,000 workers; following lockdown restrictions, the sector re-hired just a handful of the workers. Some of those furloughed returned to their villages and others switched to new professions. Industry groups are focusing on developing automation technologies and processes to boost productivity and increase production capacity.
The labor law differentiates between layoffs and terminations; no severance is paid if a worker is fired for misconduct. In the case of downsizing or “retrenchment,” workers must be notified and paid 30 days’ wages for each year of service. The law requires factories and establishments to notify Bangladesh’s Department of Inspection for Factories and Establishments a week prior to temporarily laying off workers due to a shortage of work or material. Laid off workers are entitled to their full housing allowance. For the first 45 days, they are also entitled to half their basic wages, then 25 percent thereafter. Workers who were employed for less than one year are not eligible for compensation during a layoff. However, the press and trade unions report employers not only fail to pay workers their severance or benefits, but also their regular wages. In 2021 alone, workers and organizers staged 172 labor protests in the garment sector over back wages, factory layoffs, and demands to reopen closed factories. No unemployment insurance or other social safety net programs exist, although the government had begun discussing how to establish them with the help of development partners and brands. In early 2022, the Government of Bangladesh announced a universal pension scheme from fiscal year (FY) 2022-23.
The government does not consistently and effectively enforce applicable labor laws. For example, the law establishes mechanisms for conciliation, arbitration, and dispute resolution by a labor court and workers in a collective bargaining union have the right to strike in the event of a failure to reach a settlement. In practice, few strikers followed the cumbersome and time-consuming legal requirements for settlements and strikes or walkouts often occur spontaneously. The government was partnered with the ILO to introduce a dispute settlement system within its Department of Labor.
The BLA guarantees workers the right to conduct lawful strikes, but with many limitations. For example, the government may prohibit a strike deemed to pose a “serious hardship to the community” and may terminate any strike lasting more than 30 days. The BLA also prohibits strikes at factories in the first three years of commercial production, and at factories controlled by foreign investors.
The U.S. government funds efforts to improve occupational safety and health alongside labor rights in the readymade garment sector in partnership with other international partners, civil society, businesses, and the Bangladeshi government. The United States works with other governments and the International Labor Organization (ILO) to discuss and assist with additional labor reforms needed to fully comply with international labor conventions. In early 2021, the government submitted a draft action plan to the EU and ILO describing how it planned to bring its laws and practices into compliance with international labor standards over time. In February 2022, the government submitted the progress report to ILO and the report will be discussed in the ILO Governing Body on March 21. The U.S. government is closely monitoring the development and implementation of the plan to ensure it sufficiently addresses long-standing recommendations.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical Source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) ($M USD)||2020-21||$354,242||2020||$323,057||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2020-21||$4055||2020||$723||BEA data available at https://apps.bea.gov/international/factsheet/|
|Host country’s FDI in the United States ($M USD, stock positions)||N/A||N/A||2020||$2||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||2020-21||5.71%||2020||6.01%||UNCTAD data available at|
*Host Country Source: Bangladesh Bank, Bangladesh Bureau of Statistics
|Direct Investment from/in Counterpart Economy Data (December 2020)|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$18,439||100%||Total Outward||$314||100%|
|The United States||$3,823||20.7%||United Kingdom||$88||28.0%|
|The United Kingdom||$2,140||11.6%||China, P.R. Mainland||$49||15.6%|
|China, P.R. Mainland||$986||5.3%||United Arab Emirates||$39||12.4%|
|“0” reflects amounts rounded to +/- USD 500,000.|
14. Contact for More Information
Embassy of the United States of America
Madani Avenue, BaridharaDhaka — 1212
Tel: +880 2 5566-2000