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Bangladesh

Executive Summary

Bangladesh is the most densely populated non-city state country in the world, with the world’s eighth largest population (over 165 million) in 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 km 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 attract increasing investment.

Buoyed by a growing middle class, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade.  Much of this growth continues to be driven by the ready-made garments (RMG) industry, which exported USD 36.66 billion of products in FY 2017-18, second only to China, and continued remittance inflows, reaching nearly USD 15 billion in FY 2017-18.  Forecasts based on the first nine months of the 2018-19 fiscal year estimate Bangladesh is on track to reach USD 40 billion in garment exports for the fiscal year.

The Government of Bangladesh (GOB) actively seeks foreign investment, particularly in the agribusiness, garment/textiles, leather/leather goods, light manufacturing, energy, information and communications technology (ICT), 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. Bangladesh received USD 3.0 billion in foreign direct investment (FDI) in FY 2017-18, up from USD 2.45 billion the previous year.  However, the rate of FDI inflows is only around 1 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, and corruption continue to hinder foreign investment.  New government efforts to improve the business environment show promise but implementation has yet to be seen. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

A series of terrorist attacks in 2015-17, including the July 1, 2016 Holey Bakery attack in Dhaka’s diplomatic enclave, resulted in increased security restrictions for many expatriates, including U.S. Embassy staff.  National elections, which were held on December 30, 2018, are prone to instances of political violence. The influx of more than 700,000 Rohingya refugees since August 2017 has also raised security concerns.

International brands and the international community continue to press the GOB to meaningfully address worker rights and factory safety problems in the country.  With support from the international community and the private sector, Bangladesh has made significant progress on fire and workplace safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in the Export Processing Zones (EPZs).  

The GOB has limited resources for 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.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 149 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2018 176 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2018 116 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in Partner Country ($M USD, stock positions) 2017 $460 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $1,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Bangladesh actively seeks foreign investment, particularly in the agribusiness, garment and textiles, leather and leather goods, light manufacturing, energy, information and communications technology (ICT), 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;
  • Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with promoting 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 performs the following functions:

  • Provides pre-investment counseling services
  • Registers and approves of 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 for foreign loans and supplier credits

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

The Bangladesh Export Processing Zone Authority (BEPZA) acts as the investment supervisory authority in export processing zones (EPZs).  BEPZA is the one-stop service provider and regulatory authority for companies operating inside EPZs. In addition, Bangladesh plans to establish over 100 Economic Zones (EZs) throughout the country over the next several years.  The EZs are designed to attract additional foreign investment to locations throughout the country. The Bangladesh Economic Zones Authority (BEZA) is responsible for supervising and promoting investments in the economic zones (EZs).  

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).

Four sectors are reserved for government investment and exclude both foreign and domestic private sector activity:

  • 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.

In addition, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

  1. Fishing in the deep sea
  2. Bank/financial institution in the private sector
  3. Insurance company in the private sector
  4. Generation, supply and distribution of power in the private sector
  5. Exploration, extraction and supply of natural gas/oil
  6. Exploration, extraction and supply of coal
  7. Exploration, extraction and supply of other mineral resources
  8. Large-scale infrastructure projects (e.g. flyover, elevated expressway, monorail,     economic zone, inland container depot/container freight station)
  9. Crude oil refinery (recycling/refining of lube oil used as fuel)
  10. Medium and large industry using natural gas/condescend and other minerals as raw material
  11. Telecommunication service (mobile/cellular and land phone)
  12. Satellite channels
  13. Cargo/passenger aviation
  14. Sea-bound ship transport
  15. Sea-port/deep seaport
  16. VOIP/IP telephone
  17. Industries using heavy minerals accumulated from sea beach

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.

Business Registration

The Bangladesh Investment Development Authority (BIDA), formerly the Board of Investment, is responsible for screening, reviewing, and approving FDI in Bangladesh.  BIDA is directly supervised by the Prime Minister’s office and the Chairman of BIDA has Minister-equivalent rank. There have been instances where receiving approval was delayed.  Once the foreign investor’s application is submitted to BIDA, the authorities review the proposal to ensure the investment does not create conflicts with local business. Investors note it is frequently necessary to separately register with other entities such as the National Board of Revenue.  According to the World Bank, business registration in Bangladesh takes 19.5 days on average with nine distinct steps: http://www.doingbusiness.org/data/exploreeconomies/bangladesh/   .  

BIDA’s resources on Ease of Doing Business, Investment Opportunity, Potential Sectors, and Doing Business in Bangladesh are also available at:  

Requirements vary by sector, but all foreign investors are also required to obtain clearance certificates from relevant ministries and institutions with regulatory oversight.  BIDA establishes time-lines for the submission of all the required documents. For example, if a proposed foreign investment is in the healthcare equipment field, investors need to obtain a No Objection Certificate (NOC) from the Directorate General for Health Services under the Ministry of Health.  The NOC states that the specific investment will not hinder local manufacturers and is in alignment with the guidelines of the ministry. Negative outcomes can be appealed, except for applications pertaining to the four restricted sectors previously mentioned.

A foreign investor also must register its company with the Registrar of Joint Stock Companies and Firms (RJSC&F) and open a local bank account under the registered company’s name.  For BIDA screening, an investor must submit the RJSC&F Company Registration certificate, legal bank account details, a NOC from the relevant ministry, department, or institution, and a project profile (if the investment is more than USD 1.25 million) along with BIDA’s formatted application form.

Other Investment Policy Reviews

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD) and can be found at: http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=444&Sitemap_x0020_Taxonomy=Investment percent20Policy percent20Reviews percent20(IPR);#20;#UNCTAD percent20Home  .

Bangladesh has not conducted an IPR through the Organization for Economic Cooperation and Development.

A Trade Policy Review was last done by the World Trade Organization in October 2012 and can be found at:  https://www.wto.org/english/tratop_e/tpr_e/tp370_e.htm  .

With EU assistance, Bangladesh conducted a trade policy review, the “Comprehensive Trade Policy of Bangladesh” which was published by the Ministry of Commerce in September 2014.  Current Bangladesh government export and import policies are available at: http://www.mincom.gov.bd/site/page/30991fcb-8dfc-4154-a58b-09bb86f60601/Policy  .

Business Facilitation

The Government has had limited success reducing the time required to establish a company.  BIDA and BEZA are both attempting to establish one-stop business registration shops and these agencies have proposed draft legislation for this purpose.  In February 2018, the Bangladesh Parliament passed the “One Stop Service Bill 2018,” which aims to streamline business and investment registration processes.  Expected streamlined services from BIDA include: company registration, name clearance issuance, tax certificate and taxpayer’s identification number (TIN), value added tax (VAT) registration, visa recommendation letter issuance, work permit issuance, foreign borrowing request approval, and environment clearance.  BIDA started its online one-stop service (OSS) on a trial basis in January 2018. Businesses are currently getting 15 types of services online. BIDA aims to automate 150 processes from 34 government agencies once the OSS becomes fully operational.

Companies can register their business at the Office of the Registrar of Joint Stock Companies and Firms:  www.roc.gov.bd  .  However, the online business registration process is not clear and cannot be used by a foreign company to attain the business registration as certain steps are required to be performed in-person.  

In addition, BIDA has branch/liaison office registration information on its website at: http://bida.gov.bd/  .  

Other agencies with which a company must typically register are as follows:

  • City Corporation – Trade License
  • National Board of Revenue – Tax & VAT Registration
  • Chief Inspector of Shops and Establishments – Employment of workers notification.

The company registration process now takes around 15 workdays to complete.  The process to open a branch or liaison office is approximately one month. The process for a trade license, tax registration, and VAT registration requires seven days, two days, and three weeks, 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.

4. Industrial Policies

Investment Incentives

Details regarding fiscal and non-fiscal incentives are available on the BIDA website: http://bida.gov.bd/?page_id=146  . Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 01, 2011 and June 30, 2019.  Industries set up in Export Processing Zones (EPZs) are also eligible for tax holidays. Thrust sectors subject to exemption include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, energy efficient appliances, insecticides, pesticides, petro-chemicals, fruit and vegetable processing, textile machinery, tissue grafting, and tire manufacturing industries. Physical infrastructure projects eligible for exemptions include: deep sea ports, elevated expressways, road overpasses, toll road 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.

In addition to the above tax rebate, manufacturers located in rural areas and commencing commercial operations between July 1, 2014 and June 30, 2019 are eligible for tax exemptions of up to 20 percent for the first 10 years of production.

Independent non-coal fired power plants (IPPs) commencing production (COD) after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years 6-8, and a 25 percent exemption for years 9-10.  For coal-fired IPPs contracting with the GOB before June 30, 2020 and COD before June 30, 2023, 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 that only export, import duties are waived for imports of capital machinery and spare parts.  For companies that primarily export (80 percent of production and above), an import duty rate of one 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.

Special incentives are provided to encourage non-resident Bangladeshis to invest in the country.  Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies.  A quota of 10 percent of primary shares has been fixed for non-resident Bangladeshis. Furthermore, 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 the GOB.  Several companies have reported instances of infrastructure guarantees (ranging from electricity to gas connections) not being fully delivered or tax exemptions being delayed, either temporarily or indefinitely.

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established an 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.

Investments that are wholly foreign-owned, joint ventures, and wholly Bangladeshi-owned companies are all permitted to operate in and enjoy equal treatment in the EPZs.  Approximately one dozen U.S. firms—mostly textile producers—are currently operating in Bangladesh EPZs. Investors have begun to view intermittent infrastructure services, including electricity and gas connections, and increasing costs as making the EPZs less attractive.

In 2010, Bangladesh enacted the Special Economic Zone Act that allows for the creation of privately owned economic zones (EZs) that can produce for export and domestic markets.  The EZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh. The International Finance Corporation provided assistance to the GOB to establish an EZ authority, the Bangladesh Economic Zones Authority (BEZA), modeled after BEPZA, to implement the new law and oversee the establishment of EZs. The government recently announced plans to create up to 100 new EZs and invited private companies to develop the zones.  Several EZs are moving forward under this initiative: http://www.beza.gov.bd/  .  However, assurances regarding access to necessary infrastructure and other resources, including gas and power, have not been made.  

Performance and Data Localization Requirements

Performance Requirements

The Bangladesh Investment Development Authority (BIDA) has set restrictions for the employment of foreign nationals and the issuance of work permits as follows:

  • Nationals of countries recognized by Bangladesh are eligible for employment consideration;
  • Expatriate personnel will only be considered for employment in enterprises duly registered with the appropriate regulatory authority;
  • Employment of foreign nationals is generally limited to positions for which qualified local workers are unavailable;
  • Persons below 18 years of age are not eligible for employment;
  • The board of directors of the employing company must issue a resolution for each offers or extension of employment;
  • The percentage of foreign employees should not exceed 5 percent in industrial sectors and 20 percent in commercial sectors, including among senior management positions;
  • Initial employment of any foreign national is for a term of two years, which may be extended based on merit;
  • The Ministry of Home Affairs will issue necessary security clearance certificates.

In response to the high number of expatriate workers in the ready-made garment industry, BIDA has issued informal guidance encouraging industrial units to refrain from hiring additional semi-skilled foreign experts and workers.  Overall, the government looks favorably on investments that employ significant numbers of local workers and/or provide training and transfers of technical skills.

The GOB does not formally mandate that investors use domestic content in goods or technology.  However, companies bidding on government procurement tenders are often informally encouraged to have a local partner and to produce or assemble a percentage of their products in country.

Data Storage Requirements

According to a legal overview by the Telenor Group, for reasons of national security or in times of emergency, several regulations and amendments, including the Bangladesh Telecommunication Regulatory Act, 2001 (the “BTRA”), Information and Communication Technology Act 2006 (the “ICT Act”), and the Telegraph Act 1885 (the “1885 Act”), grant law enforcement and intelligence agencies legal authority to lawfully seek disclosure of communications data and request censorship of communications.  A draft Digital Security Act of 2016 (the “Digital Security Act”) was adopted by the Parliament in October 2018.

On the grounds of national security and maintaining public order, the GOB can authorize relevant government authorities (intelligence agencies, national security agencies, investigation agencies, or any officer of any law enforcement agency) to suspend or prohibit the transmission of any data or any voice call and to record or collect user information relating to any subscriber to a telecommunications service.  

Under section 30 of the ICT Act, the GOB, through the ICT Controller, may access any computer system, any apparatus, data, or any other material connected with a computer system, for the purpose of searching for and obtaining any such information or data.  The ICT Controller may, by order, direct any person in charge of, or otherwise concerned with the operation of a computer system, data apparatus, or material, to provide reasonable technical and other assistance as may be considered necessary. Under section 46 of the ICT Act, the ICT Controller can also direct any government agency to intercept any information transmitted through any computer resource, and may order any subscriber or any person in charge of computer resources to provide all necessary assistance to decrypt relevant information.

There is no direct reference in the BTRA to the storage of metadata.  Under the broad powers granted to the BTRA, however, the GOB, on the grounds of national security and public order, may require telecommunications operators to keep records relating to the communications of a specific user.  Telecommunications operators are also required to provide any metadata as evidence if ordered to do so by any civil court.

The ICT Controller enforces the ICT Act and the Bangladesh Telecommunication Regulatory Commission (BTRC) enforces the BTRA.  The Ministry of Home Affairs grants approval for use of powers given under the BTRA. The ICT Act also established a Cyber Tribunal to adjudicate cases.  If approved, the Digital Security Act would create a Digital Security Agency (DSA) empowered to monitor and supervise digital content. Also under the Digital Security Act, for reasons of national security or maintenance of public order, the Director General (DG) of the DSA would be authorized to block communications and to require that service providers facilitate the interception, monitoring, and decryption of a computer or other data source.  

The Bangladesh Road Transport Authority’s (BRTA) Ride-sharing Service Guideline 2017 came into force on March 8, 2018.  The new regulations included requirements that ride sharing companies keep data servers within Bangladesh.

5. Protection of Property Rights

Real Property

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 never be certain of title. Land registration records have historically been 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.

Property owners can obtain mortgages but 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 judiciary system.  The Transfer of Property Act of 1882   and the Registration Act of 1908   are the two main laws that regulate transfer of property in Bangladesh but these laws do not have any 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

Counterfeit goods are readily available in Bangladesh.  The GOB has limited resources for intellectual property rights (IPR) protection.  Industry estimates that 90 percent of business software is pirated. A number of U.S. firms, including film studios, manufacturers of consumer goods, and software firms, have reported violations of their IPR.  Investors note that police are willing to investigate counterfeit goods producers when informed but are unlikely to initiate independent investigations.

The Software Alliance, also known as BSA, is a trade group established by Microsoft Corporation in 1988.  It opened a Bangladesh office in early 2014 as a platform to improve IPR protection in Bangladesh. Public awareness of IPR is growing, thanks in part to the efforts of the Intellectual Property Rights Association of Bangladesh: http://www.ipab.org.bd/ .  Bangladesh is not currently listed in the U.S. Trade Representative’s Special 301 or Notorious Markets reports.  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 July 2000 (amended in 2005), a Trademarks Act in 2009, and Geographical Indication of Goods (Registration and Protection) Act in 2013. The Department of Patents, Designs and Trademarks (DPDT) drafted a new Patent Act in 2014 prepared in compliance with the requirements of the TRIPS Agreement.  However the draft act still remains under Ministry of Industries review and this effort has not made measurable progress during the past year.

A number of government agencies are empowered to take action against counterfeiting, including the NBR/Customs, Mobile Courts, the Rapid Action Battalion (RAB), and local Police.  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.  Reports are not publicly available.

9. Corruption

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:

  • Bangladesh Police (Criminal Investigation Department) – Most predicate offenses.
  • NBR – VAT, taxation, and customs offenses.
  • 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 it has still not joined the OECD Convention on Combating Bribery of Public Officials.

Corruption is common in public procurement, tax and customs collection, and 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
Email: chairman@acc.org.bd

Contact at “watchdog” organization:

Advocate Sultana Kamal
Chairperson
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
Email: 
edtib@ti-bangladesh.org, info@ti-bangladesh.org, advocacy@ti-bangladesh.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 that was marred by wide-spread vote-rigging, ballot-box stuffing, and intimidation.  Harassment, intimidation and violence during the pre-election period made it difficult for many opposition candidates and their supporters to meet, hold rallies, and 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 of the country and crackdown on dissent.  Many civil society groups have expressed concern about the apparent 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.  Some areas have increased risk. 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.  Bangladeshi workers have a strong reputation for hard work, entrepreneurial spirit, and a positive and optimistic attitude. With an average age in Bangladesh of 26 years, the country boasts one of the largest and youngest labor forces in the world.

Bangladesh has labor laws that specify 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, compliance and enforcement of labor laws are inconsistent, and companies frequently discourage the formation of labor unions.  Export Processing Zones (EPZs) are a notable exception to the national labor law in that they do not allow trade union participation, but the government is considering amendments to change that (see below). Historically, unions have been heavily politicized and labor-management relations contentious.

Bangladesh’s garment sector has undergone several reforms since the April 2013 Rana Plaza building collapse and the November 2012 Tazreen Fashions factory fire that together killed over 1,230 workers.  With support from the international community and the private sector, Bangladesh has made significant progress on fire and workplace safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in the Export Processing Zones (EPZs).  

In June 2013, President Obama suspended Bangladesh’s Generalized System of Preferences (GSP) trade benefits.  Accompanying this decision was a 16-point Action Plan that set forth specific steps to address workers’ rights and safety in Bangladesh.  In July 2013, the EU, the International Labor Organization (ILO), the GOB, and the United States jointly developed a Sustainability Compact.  

Bangladesh has made significant progress in factory fire and structural safety remediation, thanks in part to two industry-led initiatives, the Alliance for Bangladesh Worker Safety (Alliance), which represents U.S. brands, and Accord on Fire and Building Safety in Bangladesh (Accord), which represents European brands.  Inspection and remediation of RMG factories outside the purview of the Alliance and the Accord are handled by the GOB, with assistance from the ILO, under the National Initiative. Only 20 percent of factories under the National Initiative, however, have completed remediation. The GOB has established a Remediation Coordination Center (RCC) to take over responsibility from the Alliance and Accord.

The Alliance successfully concluded its factory inspection and remediation operations at the end of 2018, as scheduled, but has quietly established a local NGO (Nirapon) to monitor remediated factories to ensure there is no backsliding.  Meanwhile, the Accord continues to seek to remain in Bangladesh to complete the remediation of the 1,600 factories under its remit. A Bangladeshi court initially ruled that Accord could not continue operations in Bangladesh past November 2018, but has subsequently instructed the Bangladesh government to try to work out a mutually acceptable, time-bound transition plan with the Accord.  The next court hearing to review where those negotiations stand is scheduled for May 2019.

Significant work remains to address freedom of association restrictions.  In December 2016, a widespread crackdown on union members drew international condemnation.  In response, the international community pressed the GOB to implement several labor reforms.  

The U.S. government suspended Bangladesh’s access to the U.S. General System of Preferences (GSP) over labor rights violations following a six-year formal review conducted by USTR.  The decision, announced in 2013, in the months following the Rana Plaza collapse that resulted in more than 1,100 deaths, was accompanied by a 16-point GSP Action Plan to help guide Bangladesh’s path to reinstatement of the trade benefits.  While some progress has been made in the intervening years, several key issues remain unaddressed. Preliminary analysis of recent revisions to the Bangladesh Labor Act (BLA) and Export Processing Zone (EPZ) law indicate they fail to allow free association and the formation of unions particularly in the ready-made garment (RMG) sector, and fall short of international labor standards.  The U.S. government funds efforts to improve occupational safety and health alongside labor rights in the readymade garments (RMG) sector in partnership with other international partners, civil society, businesses, and the GOB. The United States is also working with the EU, Canada, and the International Labor Organization (ILO) to continuously improve working conditions in the RMG sector via the Sustainability Compact, a coordination platform launched in 2013.  Labor unrest in December 2018 and January-February 2019 followed a disproportionate wage hike announced by the GOB, which increased the pay of entry-level workers by 50 percent, but left the wages of more skilled employees unchanged. In a subsequent crackdown, some 11,000 workers who participated in the mostly peaceful protests were reportedly terminated or forced to resign, and many of them were blacklisted and unable to find new employment.

The Bangladesh parliament in 2018 passed a series of amendments to the Bangladesh Labor Act and the Export Processing Zone (EPZ) law to address some concerns voiced by the International Labor Organization (ILO).  The European Union (EU) noted that 50 sections of the BLA had been amended.  The amendments reduced the membership requirement for the formation of trade unions from 30 to 20 percent and repealed conditional provisions for the employment of child labor in hazardous industries, while shortening time limits for the registration of unions from 60 to 55 days.  The amendments also established a festival allowance for the labor force and provided legal protections for women deprived of maternity leave.

The EU’s preliminary assessment of the EPZ law amendments indicated the BLA changes were made applicable to EPZ.  For example, the 20 percent threshold was now applicable to “Worker Welfare Associations” (WWA), which are allowed in EPZs in lieu of trade unions.  The Government of Bangladesh (GOB)’s Department of Inspection for Factories and Establishments (DIFE) had also been given the authority to inspect factory conditions within EPZs. 

The ILO’s Committee of Experts (COE) is analyzing the BLA amendments.  The term “Committee of Experts” refers to a group of jurists who examine reports from governments on any of the eight fundamental and four governance ILO Conventions they (the governments) may have ratified.  Bangladesh ratified the Labor Inspection Convention, 1947 (No. 81) in 1972.  Meanwhile, the COE continues to wait for an official English translation of the EPZ law amendments before it can begin its analysis of the contents of the amendments.  There is no timeframe for the COE’s completion of the review.

The EU felt the reduction of the membership requirement to 20 percent was an “eyewash” because the GOB had erected other barriers to prevent trade union registration.  The Bangladesh office of the Solidarity Center (SC) shared EU’s concerns and feels the BLA amendments were most “obstructive” in the area of registering new unions, including the 20 percent vote required to recognize a union, which could easily be manipulated by factory management to favor “yellow” or corrupt, undemocratic unions over independent unions.  SC feels the main challenge with the BLA was not its lack of protections, but its lack of implementation.

12. OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) and the Government of Bangladesh signed an updated bilateral agreement in May 1998: https://www.opic.gov/sites/default/files/docs/asia/bangladeshbilateral.pdf .  However, OPIC is not currently authorized for operation in the courty.  Investors should check OPIC’s website for updates: https://www.opic.gov/doing-business-us/OPIC-policies/where-we-operate  .  More information on OPIC services can be found at: www.opic.gov  .  

Bangladesh is also a member of the Multilateral Investment Guarantee Agency (MIGA): http://www.miga.org  .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Economic Data Year Amount Year Amount USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $249,700 2016 $221,400 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=BD  
Foreign Direct Investment 2017 $2,200 2016 $2,300 UNCTAD World Investment Report 2018  
U.S. FDI in Partner Country ($M USD, stock positions) 2017 $460 2016 $458 https://www.bea.gov/international/factsheet/factsheet.cfm?Area=631  
Host Country’s FDI in the United States ($M USD, stock positions) 2017 $2 2016 N/A https://www.bea.gov/international/factsheet/factsheet.cfm?Area=631  
Total Inbound Stock of FDI as % host GDP 2017 0.86% 2016 1.05% https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2130  


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $14,091 100% Total Outward $328 100%
United States $3,316 23.5% United Kingdom $84 25.6%
United Kingdom $1,559 11.1% China, P.R.: Hong Kong $76 23.2%
Singapore $934 6.6% Nepal $44 13.4%
Australia $860 6.1% India $42 12.8%
South Korea $811 5.8% United Arab Emirates $31 9.5%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets (June, 2018)
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $3,584 100% All Countries $10 100% All Countries $3,574 100%
-United States $587 16.4% Pakistan $10 100% United States $587 16.4%
Germany $581 16.2% N/A N/A N/A Germany $581 16.3%
United Kingdom $383 10.7% N/A N/A N/A United Kingdom $383 10.7%
Spain $235 6.6% N/A N/A N/A Spain $235 6.6%
France $201 5.6% N/A N/A N/A France $201 5.6%
Investment Climate Statements
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