An Assignment problem and prospect of international business in Bangladesh ….

Executive Summary
We have learnt much about the International Business. But don’t now how they are applied in
the real lives. To find this out i.e. how they are applied in the real lives we were given this
project. We tried our best to fetch all the possible information and include them in a relevant
manner. We have tried our level best to complete the paper more meaning fully but at the same
time we express our regret for our failure of mentioning many other important information due to
very limited space allotted for assignment.
Types of Investment
 Domestic Investment
 Foreign Direct Investment
 Autonomous Investment
 Induced Investment
Foreign Direct Investment (FDI)
FDI can be defined long term investment of a “parent” enterprise from “home” economy into a
subsidiary, affiliate, or branch enterprise in a foreign “host” economy. FDI flows include assets,
property
Determinants of Investment
 Marginal Efficiency of Capital (MEC)
The higher the MEC the higher is the investment. The higher is the capital stock the lower is the
MEC.
 Marginal Efficiency of Investment (MEI)
Marginal efficiency of investments can be define as the highest rate of expected return from a
given investment after covering the cost of the capital except the rate of interest.
 Elements of Uncertainty
 Rise in income level
 Invention and Innovation
 Existing stock of capital
 Rate of Interest
 Size of Population
 Political Climate
Bangladesh in Brief
Bangladesh’s 147,570 sq km (roughly the size of England and Wales) are situated on a fertile
alluvial plain formed by large rivers, the Padma and the Jamuna. Its topography is flat with no
great mountains or deserts, and its rivers are vast. Bangladesh is bordered by India to the north-
east and west, Myanmar to the south-east, and the Bay of Bengal to the south.
Economy
From a mainly feudal agrarian base, the economy of Bangladesh has undergone rapid structural
transformation towards manufacturing and services. The contribution of the agriculture sector to
GDP has dwindled from 50 percent in 1972-73 to around 20 percent in 1999-2000. The
agricultural sector is, however, still the main employment provider. The staple crop is rice, with
paddy fields accounting for nearly 70% of all agricultural land.
Industrial production growth has averaged more than 6% over the last 5 years. The export sector
has been the engine of industrial growth, with ready-made garments leading the way, having
grown at an average of 30% over the last 5 years. Primary products constitute less than 10
Climate
The climate in Bangladesh is sub-tropical, with temperatures ranging from a daytime low of 18`c
in the cold season to a maximum of 40`c in the summer. Annual rainfall ranges from 200 to 400
cm. The country has four main seasons, winter (Dec-Feb), summer (Mar-May), Monsoon (Jun-
Sep) and autumn (Oct-Nov).
Social Development.
In the area of health, over 80% of the country’s children are immunized against the six `killer`
diseases. Infant mortality has decreased significantly. There has been a sharp decline in the
fertility rate.
The increased participation of women in poverty alleviation programs as well as in Bangladesh’s
ready-made garments sector, which provides jobs for more than 1 million women, has helped
create an awareness of women’s issues at all levels.
Socio-Economic Introductory in Bangladesh
Vital Statistics
General Vital Statistics
Population (Million), 2001 (Adjusted) 130.03
2004(Projected) 137.2
Population growth rate (percentage), 2004 1.48
Male Female Ratio, 2002 105.4
Population Density/Sq. Km. 2004 (Projected) 928
Income Distribution and Poverty
Rate of Poverty Based on Cost of Basic Need Method (CBN), (HIES-2000)
Based on Upper poverty Line
National 49.80
Rural 53.10
Urban 36.60
Based on Lower Poverty line
National 33.37
Rural 37.40
Urban 19.10
Employment and Labor Forces
Labor Force Survey, 2002-03
Number of Civilian Labour Force (Crore) 4.43
Male 3.45
Female 0.98
Percentage of total Labour force
Agricultural Labor 51.69
Industrial Labor (Manufacturing, Power, gas) 13.56
Other Labor 34.75
Transportation (Km.) June 2004
National Highway 3723
Regional Highway 4832
Feeder Road Type-A 13823
Railway 2854.96
Financial Statistics
Total Number of Commercial Banks 49
Local Bank 39
Foreign Bank 10
Financial Institution 28
Item 1999-00 2000-01 2001-02 2002-03 2003-04
(Provisional)
GDP in Crore Tk) 237086 253546 273201 300580 332567
GNI in Crore Tk) 245799 262388 285743 317163 350759
Population (in Crore) 12.81 12.99 13.16 13.34 13.52
Per capita GDP(In Tk) 18511 19525 20754 22530 24598
Per capita GNI (In Tk) 19192 20206 361 23773 25944
Per capita GDP (In 368 362 378 389 421
US$)
Per capita GNI (In 381 374 411 444
US$)
GDP, GNI, per capita GDP and GNI at Market
Foreign Investment in Bangladesh (History)
With the exception of a few reserved sectors, foreign investors are free to make investments in
Bangladesh in industrial enterprise. An industrial entity may be set up in collaboration with local
investors or may even be wholly owned by the foreign investors. No permission is needed to set
up such enterprises if the entrepreneurs use their own funds. However, to avail of facilities and
institutional support provided by the government, entrepreneurs/sponsors are advised to apply for
registration with the Board of Investment (BOI). For items in the control list, the office of the
Chief Controller of Imports & Exports (CCI & E) prescribes the basis and conditions of import
entitlement
Investment
According to the provisional estimates of BBS, the national savings and investment reached
24.49 and 23.58 percent of GDP respectively in FY 2003-04; growth in investment, however, is
the ever highest in Bangladesh. The contributions of public sector and private sector towards
national investment are estimated to be 6.12 percent and 17.47 percent respectively.
Fiscal Year Total Investment Public Investment Private Investment
1995-96 19.99 6.42 13.58
1996-97 20.72 7.03 13.70
1997-98 21.63 6037 14.26
1998-99 22.19 6.72 15.47
1999-00 23.02 7.41 15.61
2000-01 23.09 7.25 15.84
2001-02 23.15 6.37 16.76
2002-03 23.41 6.20 17.21
2003-04 2358 6.12 17.47
Investment as percentages of Gross Domestic Product
Industrial Investment Status
The economy of Bangladesh has been gradually drawing the attention of private sector investors
since its opening up in early ’90s. Manufacturing is becoming increasingly vibrant claiming a
significant share in the total investment. During 1991-92 to 2002-03, cumulative private
investment registered with Board of Investment (BOl), the apex private investment promoting
and facilitating body, totaled US$ 25,933 million. The registered investments consist of 47.65
percent as local and 52.35 percent as foreign (100 percent and Joint Venture). Table presents the
time-series data during FY 1991-92 to FY 2002-03. In FY 1991-92, total private investment
registered amounted US$ 116 million, whereas in 2002-03, it reached US$ 2,395 million.
FDI Inflow Survey
Sector 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 Share FDI
in 2002- Inflow
03 Survey
Agro-based 15.90 7.95 63.65 5.95 0.72 .28 64.46 17.50% 2002
Food and 48.89 346.47 19.97 2.41 0.62 4.34 21.46 5.82% was
Allied successf
Textiles 106.94 92.76 50.28 41.03 201.57 50.64 37.83 10.27% ully
Printing and 9.00 – 2.00 0.18 122.01 2.35 058 0.16% conducte
Packaging d by
Tannery and 4.05 21.09 8.62 0.63 – – 1.78 0.48% BOI, for
Rubber the first
Chemical 113.64 53.85 336.51 962.43 201.35 44.84 74.90 2033% time in
Glass and – 99.39 53.26 142.13 17.11 5..30 3.19 0.87% Banglad
ceramic esh in
Engineering 21.31 10.62 96.84 20.98 29.77 57.86 25.65 6.96% February
Service 596.59 2279.30 1290.85 770.99 650.70 134.93 137.25 37.25% 2003.lt
miscellaneous137.21 528.62 3.56 172.27 48.03 0.98 1.33 036% was the
1053.50 3440.05 1925.54 2119.88 1271.88 301.52 368.42 100% first-ever
attempt
to gather credible data on actual FDI inflow on the basis of definition given by UNCT AD.
The World Investment Report 2003 (UNCTAD-2003) mentioned that “FDI flows to Bangladesh
and other countries in the sub-region declined. However, in the case of Bangladesh, FDI flows in
2002 would have been higher if investment in kind were included.
Sector-wise distribution of foreign private investment projects register with BOI
FDI inflow by Components
 Total FDI inflow during January-June 2003 is US$ 287.667 million.
 Equity is the major portion of the inflow constituting 59%.
 Reinvestment stands for about 34% of the total investment.
 Intra-company borrowing comprises of7% of the FDI.
The highest growth has been experienced in reinvestment marking 276%. It definitely shows the
confidence of the existing investors on the investment climate and performance of the economy
as a whole.
Growth in the equity (49’%) was immensely contributed by increase cash inflow (78.6%) which
should be reflected in the country’s Balance of Payment Statement.
Distribution of FDI inflow by components
Sectoral Distribution of FDI
In growth of manufacturing sector is evident from the findings of the survey.
Manufacturing continues to receive the highest FDI (74.6%).
A tremendous growth in the manufacturing sector indicates prospective growth of the industry in
the upcoming years. It will also facilitate creating job Opportunities and SME development.
Textile is the highest recipient of FDI (33.69%) followed by chemicals (30.43%). Textile sector
is largely contributed by the garments in EPZs. However, chemical sector is largely contributed
by cement (60%) followed by garment accessories.
A detail study on cement sector of Bangladesh is available in BOI quarterly newsletter
“Bangladesh Investment Review”, Vol. I, Issue I, published for the period April- June 2003.
Energy and gas sector has sharply declined (only 10.6%) to attract FDI during this period. Given
the present utility infrastructure situation of the country and projecting taster growth of industry
in coming years, energy and gas could be attractive sector for investment in future.
Sectors 2000-01 2001-02 2002-02
Value in million US$
Agro-based 0.72 0.28 27.30
Food 0.62 4.34 2.61
Textile 201.57 50.64 2.64
Printing & Publication 122.01 2.35 0.58
Leather & Rubber 0.00 0.00 0.36
Chemical 201.3 44.84 2.27
Glass ceramic and others 17.11 5.30 0.84
Engineering 29.77 57.86 21.68
Service Industry 650.7 137.6 42.3
Miscl. 48.0 0.98 112.00
Total 1271.88 304.15 212.55
FDI Inflow by Sources
European Union and Western Europe; South, East and South East Asia; and North America are
the main sources of FDI in Bangladesh.
Europe as a whole is the largest source (44%) of FDI in Bangladesh during January- June
2003. This was mainly geared up by French investment in cement sector. South, East and South
East Asia is the secol1d largest source (39%) of FDI led by Hong Kong (13.94%), South Korea
(1 0.62%) and Malaysia (9.28 %.).
Distribution of FDI inflows by Sources
European investments spread over manufacturing and service sectors like textile, cement, agro
chemical, leather goods, drugs and pharmaceuticals, tele-communication, LPG bottling,
lubricants, power generation, industrial gas etc.
Investments from South, East and South East Asian nations like China, Hong Kong, India,
Malaysia, Pakistan, Singapore, Sri Lanka, Taiwan and Thailand are concentrated on
manufacturing sectors.
Fiscal Year Local Investment Foreign Total Growth (in
Investment million US$)
1991-92 91 25 116 –
1992-93 90 53 143 23%
1993-94 457 804 1261 782%
1994-95 846 730 1576 25%
1995-96 1171 1516 2687 70%
1996-97 1108 1054 2162 -20%
 1997-98 1137 3440 4577 112%
1998-99 1183 1926 3109 -32%
1999-00 1324 2119 3443 11%
2000-01 1420 1271 2691 -22%
2001-02 1531 302 1833 -32%
2002-03 2027 368 2395 31%
Total 12385 13608 25993 –
Share (%) 47.65% 52.35% 100% –
Distribution of private investment projects (local and foreign) registered with BOI
Distribution by FDI inflow by sources
Investment in EPZs
GDP, Saving and Investment
The real GDP growth rate has been provisionally estimated at 5.52 percent in FY 04. This
marginal increase (0.26 percent) is mainly caused by an increase in production in the industry
and service sector. It is in tune with the Medium Term Macroeconomic Framework (MTMF)
projection at 5.5 percent for the current fiscal year. According to the projection of this
framework the real growth of GDP will rise from 6.0 percent in the next fiscal year FY 05 to 6.5
percent in FY 06. It is widely recognized that acceleration of the growth of GDP is largely
dependent on the flow of investment in the country. Attaining projected growth of GDP as set in
the MTMF would therefore require investment level to the tune of 26 percent of GDP and this is
based on the assumption that the Incremental Capital Value Addition Ratio (ICVR) is around 4
percent in Bangladesh.
The importance of GDP, savings and investment is immense. It is noted that the growth of GDP
is largely dependent on capital intensity as well as on the efficiency in utilization of capital. For
this reason savings and investment as percent of GDP are the most important indicators.
Actual Investment Statistics
Actual Foreign Direct Investment
The FDI Inflow Survey conducted by BOI found that during January-December 2003, total FOI
inflow in Bangladesh was US$ 441.4 million. It may be mentioned here that due to the strategic
policy change by the Board, the FOI target in 2003 was US $ 400 mil1ion. Table 8.6 presents the
comparative statement of actual FDI inflow in Bangladesh.
Actual Local Investment
Sample surveys of the BOI on registered local investment projects found that about that 85
percent of the registered local projects are either implemented or at the different stages of
implementation.
Private Investment Registration
Private investors initially register their investment proposals with Board of Investment
expressing their intent to invest in the respective proposals. After detailed feasibility studies
investment proposals are implemented in phases. As a result the actual investment projection
could be made possible on the basis of registration statistics.
Importance of FDI
The most Heavily Indebted Poor Countries and low income countries of the world remain largely
dependent on bilateral and multilateral aid for their development strategies. However, since 1990
total Overseas Development Assistance (ODA) has dropped by more than half. Much greater
importance is now being placed on alternative sources of capital to finance national development
(ECOSOC 2000) and Foreign Direct Investment (FDI)1 is now the largest source of foreign
private capital reaching developing countries (Figure 1). Global flows of FDI have grown
phenomenally over the last ten years. Total inflows rose by nearly four times, from US $174
billion in 1992 to US$ 644 billion in 1998. However, total flows to developing economies fell
between 1997 and 1998 (UNCTAD 1999). Regionally, prospects look least good for Africa
(Table 1.). Of the middle to low income countries, Asia has experienced the fastest rate of
growth in FDI but also the greatest volatility.
99- 00- 01- 02-
Country 96-97 97-98 98-99 Total
00 01 02 03
USK 8 1378 382 1178 309 3 12 3270
UK 73 32 827 16 28 4 64 1044
Hong
485 157 13 35 1 60 5 756
Kong
Singapore 132 33 273 20 86 2 – 547
Norway 0 0 0 0 518 – 1 547
Malaysia 44 288 16 6 11 1 5 372
S. Korea 85 90 14 5 43 25 4 266
India 45 5 155 8 32 15 5 268
Japan 12 59 68 24 1 1 69 222
Germany 13 24 58 2 116 2 1 214
Top Ten FDI (1996-97-2002-2003)
GDP Change in Balance of International
Growth Rate Consumer Prices Trade Reserves
(%) (%) ($ million) ($ million)
Afghanistan … … … …
Bangladesh 5.3 4.4 2707 2470
Bhutan 6.5 1.8 76 374
India 7.3 5.3 27192 105806
Maldives 8.4 4.0 258 161
Nepal 2.6 4.8 926 1116
Pakistan 5.1 3.1 359 9525
Sri Lanka 5.5 2.6 1706 2329
A comparison between south Asia countries in terms of Economic indicators
The Secretary General’s report “Financial Resources and Mechanisms” to the eighth UN
Commission on Sustainable Development indicates increased international dialogue about
whether FDI is a significant source of development finance. For all its potential, there is far
greater awareness of the complex nature of FDI and the possible negative impacts of rapid and
large growth for least developed countries. A crucial question is how FDI might be better applied
to support more sustainable forms of development, particularly in those countries with
burgeoning debts and widening income disparity to the rest of the world. This briefing paper
seeks to review some of the pros and cons of FDI, to broadly consider possible roles and
responsibilities of institutions in order to utilize FDI in a more effective manner and suggest
some key questions that will need to be faced.
How can FDI be better applied to Sustainable Development?
Accessibility and stability of FDI
If FDI is to take a greater role in building developing country economies, further assessment of
the factors which influence and are influenced by FDI flows is necessary. Foreign companies are
thought to be attracted to recipient countries for a whole range of factors, e.g. political stability,
market potential & accessibility, repatriation of profits, infrastructure, and ease of currency
conversion. Privatization and deregulation of markets are seen as central means to attract FDI,
however this can leave the poorest or most indebted countries open to destabilizing market
speculation (ECOSOC 2000). National legislation can support better investment security for
local markets, fair competition and corporate responsibility through defining equitable, secure,
non-discriminatory, transparent investment practices.
Socially Responsible Investment
Ethical and socially responsible FDI can be encouraged through national, bilateral and
international investment guidelines and regulation e.g. consumer rights, information provision,
commercial probity, labor standards and corporate culture (UNCTAD 1999). Several institutions
have developed or are currently working on responsible practice. The ILO has 180 conventions
referring to social responsibility and it also has more specific “Tripartite Declaration of
Principles” (1977), concerning TNCs and social policy2. UNCTAD has developed a “Code of
Restrictive Business Practices”. Eradication of poverty and reduction of gender inequality, where
women make up nearly 70% of the world’s poorest, should be prioritized.
Environmental protection
Greater efforts need to be made to assess the linkages between environmental impacts and FDI,
although it may be difficult to isolate FDI impacts from other activities. Authorities and
businesses can apply Environmental Management Systems (EMS) to assess the potential impacts
of FDI ventures, e.g. ISO 4001 which details techniques such as Life-Cycle-Analysis,
Environmental Impact Assessments (EIA) and Environmental Audits. These all require
investment in inspection, monitoring, regulation and enforcement to ensure effective
implementation. The resources required to effectively adopt these approaches are often lacking
in many developing countries, suggesting a vital need for targeted international assistance
(UNCTAD 1999). Greater environmental commitment can also bring long term corporate gains
e.g. greater efficiency and better quality of practice.
Legal Environment
Legal Protection
The policy framework for foreign investment in Bangladesh is based on ‘The Foreign Private
Investment (Promotion & Protection) Act 1980 which ensures legal protection to foreign
investment in Bangladesh against nationalization and expropriation. It also guarantees non-
discriminatory treatment between foreign and local investment, and repatriation of proceeds from
sales of shares and profit.
Government of Bangladesh is agreeably helping to provide proper legal facility for the foreign
investors. So in the question of legal environment and FDI prospect it can be told that the legal
environment is quite sound for the foreign investors.
Political Environment
It is very harmful for such a developing economy like Bangladesh. If the government wants to
increase its FDI performances than political climate obviously have to be sound to attract the
investors from the different countries of the world.
Population
Population is another issue in the question of FDI. We have a huge number of population in a
ratio with our total lands. Huge population always indicates that the huge amount of demand and
which will make the foreign investors interested to invest such country.
Population (Million), 2001 (Adjusted) 130.03
2004(Projected) 137.2
Population growth rate (percentage), 2004 1.48
Male Female Ratio, 2002 105.4
Population Density/Sq. Km. 2004 (Projected) 928
Labor Force Survey, 2002-03
Number of Civilian Labor Force (Core) 4.43
Male 3.45
Female 0.98
Percentage of total Labor force
Agricultural Labor 51.69
Industrial Labor (Manufacturing, Power, gas) 13.56
Other Labor 34.75
The following data are showing that we have a huge number of population an so also a huge
number of unemployed labor force which is an important factor that attract people to in vest our
country.
Government’s Visions
Investment Facilities in Bangladesh
Bangladesh offers generous opportunities for investment under its liberalized Industrial Policy
and export-oriented, private sector-led growth strategy. All but four sectors-
 Arms and ammunition and other defense equipment and machinery.
 Forest plantation and mechanized extraction within the bounds of reserved forests
 Production of nuclear energy, and
 Security printing and miningare open for private investment in Bangladesh. The
government’s role is that of a facilitator which helps create an enabling environment for
expanding private investment, both domestic and foreign. The Board of Investment
(BOI), established by the government for accelerating private investment, provides
institutional support services to intending investors.
General Facilities/ Incentives
Tax holiday
Tax holiday facilities will be available for 5 or 7 years depending on the location of the industrial
enterprise. For industrial enterprises located in Dhaka and Chittagong Divisions (excluding Hill
Tract districts of Chittagong Division) the tax holiday facility is for 5 years while it is 7 years for
locations in Khulna, Sylhet, Barisal, and Rajshahi, Divisions and the 3 Chittagong hill districts.
Tax exemption
Tax exemptions are allowed in the following cases-
Tax exemption on royalties, technical know-how fees received by any foreign collaborator, firm,
company and expert. Exemption of income tax up to 3 years for foreign technicians employed in
industries specified in the relevant schedule of the income tax ordinance.
Tax exemption on income of the private sector power generation company for 15 years from
the date of commercial production.
Accelerated depreciation
Industrial undertakings not enjoying tax holiday will enjoy accelerated depreciation allowance.
Such allowance is available at the rate of 100 per cent of the cost of the machinery or plant if the
industrial undertaking is set up in the areas falling within the cities of Dhaka, Narayangonj,
Chittagong and Khulna and areas within a radius of 10 miles from the municipal limits of those
cities. If the industrial undertaking is set up elsewhere in the country, accelerated depreciation is
allowed at the rate of 80 per cent in the first year and 20 per cent in the second year.
Concessionary duty on imported capital machinery
Import duty, at the rate of 5% ad valorem, is payable on capital machinery and spares imported
for initial installation or BMR/BMRE of the existing industries. The value of spare parts should
not, however, exceed 10% of the total C & F value of the machinery. For 100% export oriented
industries, no import duty is charged in case of capital machinery and spares. However, import
duty @ 5% is secured in the form of bank guarantee or an indemnity bond will be returned after
installation of the machinery. Value added Tax (Vat) is not payable for imported capital
machinery and spares.
Foreign Investment
Private investment from overseas sources is welcome in all areas of the economy with the
exception of the four reserved sectors (mentioned earlier). Such investments can be made either
independently or through venture on mutually beneficial terms and conditions. Foreign
investment is, however, especially desired in the following major categories of industries:
 Export oriented industries;
 Industries in the Export Processing Zones (EPZs)
 High technology products that will be either import substitute or export oriented.
Facilities / incentives
For foreign direct investment, there is no limitation pertaining to foreign equity participation, i.e.
100 percent foreign equity is allowed. Non-resident institutional or individual investors can make
portfolio investments in stock exchanges in Bangladesh. Foreign investors or companies may
obtain full working loans from local banks. The terms of such loans will be determined on the
basis of bank-client relationship.
A foreign technician employed in foreign companies will not be subjected to personal tax up to
3 (three) years , and beyond that period his/ her personal income tax payment will be governed
by the existence or non-existence of agreement on avoidance of double taxation with country of
citizenship.
Full repatriation of capital invested from foreign sources will be allowed. Similarly, profits and
dividend accruing to foreign investment may be transferred in full. If foreign investors reinvest
their repatriable dividends and or retained earnings, those will be treated as new investment.
Foreigners employed in Bangladesh are entitled to remit up to 50 percent of their salary and will
enjoy facilities for full repatriation of their savings and retirement benefits.
Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs
with respect to tax holiday, payment of royalty, technical know-how fees etc.
The process of issuing work permits to foreign experts on the recommendation of investing
foreign companies or joint ventures will operate without any hindrance or restriction. Multiple
entry visa” will be issued to prospective foreign investors for 3 years. In the case of experts,”
multiple entry visa” will be issued for the whole tenure of their assignments.
Other Incentives
 Citizenship by investing a minimum of US $ 500,000 or by transferring US$ 1,000,000 to
any recognized financial institution (Non-repatriable).
  Permanent residentship by investing a minimum of US$ 75,000 (non-repatriable)
 Special facilities and venture capital support will be provided to export-oriented
industries under “Thrust sectors”. Thrust Sectors include Agro-based industries, Artificial
flower-making, Computer software and information technology, Electronics, Frozen
food, Floriculture, Gift items, Infrastructure, Jute goods, Jewellery and diamond cutting
and polishing, leather, Oil and gas, Sericulture and silk industry, Stuffed toys, Textiles,
Tourism.
Investment Protections / International Agreements
Legal Protection
The policy framework for foreign investment in Bangladesh is based on ‘The Foreign Private
Investment (Promotion & Protection) Act 1980 which ensures legal protection to foreign
investment in Bangladesh against nationalization and expropriation. It also guarantees non-
discriminatory treatment between foreign and local investment, and repatriation of proceeds from
sales of shares and profit.
International Agreements
Bangladesh has concluded bilateral agreements for avoidance of double taxation and investment
treaties for promotion and protection of investment with the following countries:
Bilateral agreements
Belgium, Canada, China, Denmark, France, Germany, India, Italy, Japan, Poland, Romania,
Singapore, South Korea, Sri Lanka, Sweden, Thailand, The Netherlands, United Kingdom (
including Northern Ireland ). Negotiations are ongoing with U.S.A, Iran, Philippines, Qatar,
Australia, Nepal, Turkey, Indonesia, Cyprus, Norway, Finland and Spain.
Investment treaty
Belgium, Canada, France, Germany, Iran, Italy, Japan, Malaysia, Pakistan, Philippines, Poland,
Republic of Korea, Romania, Switzerland, Thailand, The Netherlands, Turkey, United Kingdom,
USA, Indonesia. Negotiations are ongoing with India, Hungary, Oman, Moldova, DPRK, Egypt,
Austria, Mauritius, and Uzbekistan.
In addition, Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency),
OPIC (Overseas Private Investment Corporation) of USA, ICSID (International Centre for
Settlement of Investment Disputes) and a member of the WIPO (World Intellectual Property
Organization) permanent committee on development co-operation related to industrial property.
Incentives to Non-Resident Bangladeshis (NRB’s)
Investment of NRBs will be treated on par with FDI. Special incentives are provided to
encourage NRBs to invest in the country. NRBs will enjoy facilities similar to those of foreign
investors. Moreover, they can buy newly issued shares/debentures of Bangladeshi companies. A
quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain
foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account.
Relaxation / Liberalization of Exchange Control Regulations
Bangladesh ‘Taka’ is convertible for current external transactions. Individuals/firms resident in
Bangladesh may conduct all current external transactions, including trade and investment related
transaction, through banks in Bangladesh authorized to deal in foreign exchange (Authorized
Dealers) without prior approval of the Bangladesh Bank. Non- resident direct investment in
industrial enterprise in Bangladesh and non-resident portfolio investment through stock
exchanges in Bangladesh also do not require prior approval of the Bangladesh Bank. Remittance
of post-tax dividend/profit on non resident direct or portfolio investment does not require prior
approval. Sale proceeds, including capital gains on non-resident portfolio investment may also be
remitted abroad without prior approval. Repatriation of sale proceeds of non-resident investment
in unlisted companies is allowed by Bangladesh Bank on the basis of the net asset value of the
shares of the company. Investors may obtain relevant procedural details by contacting any
authorized Dealer bank in Bangladesh.
To facilitate investment, prior approval of the Bangladesh Bank is no longer required for-
 Remittance of profits to their head offices by foreign firms and companies operating in
Bangladesh.
 Issuance of shares to non-residents against investment for setting up industries in
Bangladesh.
 Remittance of dividends on such shares to the non-resident investors.
 Portfolio investment by non-residents including foreign individuals/enterprises in shares
and securities through stock exchanges in Bangladesh.
 Remittance of dividends on portfolio investment by non-residents through stock
exchanges in Bangladesh.
 Remittance of sale proceeds, including capital gains of portfolio investments of non-
residents through stock exchanges in Bangladesh.
 Remittance of principal and interest installments on loans/suppliers credits obtained by
industrial units from foreign lenders with approval of the BOI. 100% foreign owned
(Type A) industrial units in the EPZs (Export Processing Zone) do not require prior
permission of BOI for such foreign borrowing.
 Remittance in repayment of principal and payment of interest of such loans.
 Remittance of technical fees and royalties against technical assistance/royalty agreements
in conformity with BOI guidelines.
 Remittance of savings of expatriate personnel at the time of their leaving Bangladesh, out
of the salaries and benefits stated in their employment contracts as approved by BOI.
 Extension of term loans by banks on normal banking considerations to foreign firms
operating in Bangladesh.
 Extension of working capital loans to all foreign owned/controlled industrial and trading
firms/companies by banks on the basis of bank customer relationship and normal banking
practice.
 Obtaining of interest-free repatriable short-term foreign currency loans by foreign firms
investing in Bangladesh from their head offices or any other sources through any
authorized dealer.
Investment in shares/securities by non-residents:
i. Non-residents are free to invest in shares / securities quoted in the stock exchanges, with
foreign exchange sent or brought into Bangladesh.
ii. They may also invest in new, yet-to-be-listed public issues of Bangladeshi shares/securities.
In such cases investors are not required to transact through any registered broker/member of
stock exchange.
5% shares of Initial Public Offering (IPO) of a company is reserved for Non-Resident
Bangladeshi (NRB). Non-Resident Bangladeshi (NRB) can purchase/subscribe securities in
foreign currency through “Foreign Currency Account for IPO” opened for the purpose only by
the issuing company. Over subscription can be repatriated after completion of formalities.
iii. Permission of Bangladesh Bank is not required for issue and transfer of shares in favor of
non-residents against their investments in joint ventures in Bangladesh.
iv. Non-resident share holders can freely transfer their shares to other non residents.
Remittance of profits:
Branches of foreign firms/companies including foreign banks, insurance companies and financial
institutions are free to remit their post-tax profits to their head offices through banks authorized
to deal in foreign exchange (Authorized Dealers) without prior approval of Bangladesh Bank.
Remittance of dividend/capital gain
Prior permission of Bangladesh Bank is not required for-
— Remittance of dividend income to non-residents in respect to their investments in
Bangladesh;
— Remittance of dividend declared out of previous year’s accumulated reserves; and
— Dividend and sale proceeds (including capital gains) of shares of companies listed in
a Stock Exchange in Bangladesh. Such remittance may be affected prior to actual payment of
taxes provided that the amount payable to the tax authorities at the applicable tax rate is withheld
by the company. Remittance of sale proceeds of shares of companies not listed in Stock
Exchange requires prior Bangladesh Bank permission, which is accorded for amounts not
exceeding the net asset values of the shares.
Foreign and Local Borrowings
Foreign loans
Industrial enterprises in Bangladesh (local, foreign or joint venture) may borrow abroad with
prior Board of Investment (BOI) approval. Remittances towards payment of interest and
repayment of principal as per terms of BOI approved borrowing may be made through ADs
without prior Bangladesh Bank approval.
Local borrowings
Banks in Bangladesh may extend working capital loans or term loans in local currency to
foreign-controlled or foreign-owned firms/companies (manufacturing or non-manufacturing)
operating in Bangladesh on the basis of normal banker-customer relationship, without reference
to Bangladesh Bank
Banks in Bangladesh are free to grant local currency loans to joint venture industries in EPZ up
to the amount of short term foreign currency loans obtained from abroad.
Convertibility on Trade Account
Bangladesh Taka is fully convertible for settlements of trade related transactions. Import license
is not required for import of items not in the control list. An importer has automatic access to
foreign exchange for import of all items outside the control list, and also for import of control list
items as per general or specific authorization of the office of the Chief Controller of Imports and
Exports.
Exchange Facilities for Exporters
New Exporters
Annual foreign exchange quota for business travel abroad for new exporters has been set at US $
6000. Bonafide requirement beyond US $ 6000 is accommodated by Bangladesh Bank upon
written request submitted with supporting documentation.
Retention Quota for merchandise exporters
Merchandise exporters may retain up to 50% of realized FOB value of their exports in foreign
currency accounts in US$, Euro, Japanese Yen. For export items with high import contents (such
as naphtha, furnace oil, bitumen, readymade garments etc.), the retention quota is 10%. The
computer software and data entry/processing service exporters may also retain up to 50% of
realized export proceeds in foreign currency accounts. Funds from these accounts may be used to
meet bonafide business expenses, such as business visits abroad, participation in export fairs and
seminars, import of raw materials, machineries and spares etc. Funds from these accounts may
also be used to set up offices abroad without prior permission of Bangladesh Bank. Exporters
may, at their option, retain the foreign currency in interest bearing renewable term deposit
accounts in Bangladesh with a minimum amount of USD 2,000 or Pound Sterling 1,500
equivalent.
Retention quota for service exporters
Service exporters may retain 5% of their repatriated income in foreign currency accounts. Funds
may be drawn from these accounts to meet expenses for bonafide business expenses abroad. This
quota may also be kept in interest bearing renewable term deposit accounts. However, foreign
exchange earnings on account of indenting commission or agency commission for export from
Bangladesh may not be credited to such accounts since these incomes originate from Bangladesh
sources.
Declaration of Foreign Exchange on Form ‘FMJ’
Incoming passengers may bring in amount of foreign exchange with declaration on form FMJ at
the time of arrival. No declaration is necessary for amounts up to US$ 3,000. For non-residents,
the entire amount brought in with declaration, or up to US$ 3,000 brought in without declaration
may be freely taken out at the at the time of departure. Up to US$ 3,000 brought in without
declaration may also be retained and taken out freely by a person ordinarily resident in
Bangladesh.
Foreign currency accounts
NFCD Accounts
Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as the
account holders desire. Amounts brought in by non-resident Bangladeshis can be deposited in
foreign currency account any time after return to Bangladesh
F.C Accounts of non-resident Bangladeshis
Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or
persons of Bangladesh origin working or self employed abroad can now be maintained as long
as the account holders’ desire.
RFCD Accounts
Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign
exchange brought in at the time of their return to Bangladesh from visits abroad. These accounts
are termed as Resident Foreign Currency Deposit (RFCD) accounts. The amount brought in with
declaration to customs authorities on form FMJ and up to US $ 5000 brought in without
declaration may be credited to this account. However, proceeds of export of goods or services
from Bangladesh and commission earnings arising from business deals in Bangladesh cannot be
credited to such accounts. Balances of such accounts are freely remittable abroad. Balances of
RFCD accounts may also be used by the accounts holders for their travel abroad in the usual
manner. RFCD accounts may be opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or
Japanese Yen and may be maintained as long as the account holders desire. Interest may be paid
on these deposits if these are for a term of not less than one month and the balance is not less
than US $ 1000 or Pound Sterling 500 equivalent.
F.C Accounts of other entities
ADs do not require prior permission of Bangladesh Bank for opening of foreign currency
accounts of :
– Non-resident foreign persons/firms;
– Diplomatic missions in Bangladesh and their expatriates;
– Diplomatic bonded warehouses (duty free shops);
– Local and joint venture contracting firms employed to execute projects financed by
foreign donors/international donor agencies;
– Bangladesh nationals working in the international bodies in Bangladesh and drawing pay
and allowances in foreign currency.
Maintaining of bank accounts abroad
Bank accounts outside Bangladesh opened by Bangladesh nationals while working abroad may
now are maintained even after their return to Bangladesh.
Miscellaneous Remittances
 Remittance of membership fees
 Evaluation and Visa Processing Fee
 Visa fee
 Family maintenance
Government to Increase FDI
Economic Growth
Over the past two decades, particularly during the 1990’s, the economic growth in Bang1adesh
registered a remarkable progress. The average growth rate of Gross Domestic Product (GDP)
was around 5 percent in this decade. Implementation of a wide array of reforms during the early
1990 s made it possible to achieve this higher rate of growth. Four percent growth rate on an
average over a period of the last two decades brought an opportunity for transition to a higher
grow path. Attaining of per capita GDP growth at 3.3 percent during the 1990’s is an impressive
achievement.
Fiscal Sector Developments
The prudent fiscal policy pursued by the present government restored discipline in fiscal sector.
As a result, the fiscal deficit in FY2002-03 declined to 3.5 percent of GDP from 4.7 percent in
FY2001-02. The budget deficit in FY2003-04 has been estimated at 4.2 percent of GDP.
According to preliminary estimates, recurrent expenditure during FY2003-04 is well within the
target .Up to June 2004 of current fiscal year, the ADP expenditure stood at Tk. 16976 crore (88
percent).
Foreign Trade and External Sector Development
The previous government stalled trade liberalization reforms initiated in early nineties. Indeed
this had perceptible negative impact on external trade. The present government has resurrected
the process and intensified it further; As a result, there was turnaround in export trade in
FY2002-03 posting a growth of 9.39 percent from a negative growth in 2001-02. The amount of
export in FY2003-04 substantially increased by 16.10 percent to US$ 7603 million compared to
the export earnings of FY 2002-03. Import trade also grew remarkably. During FY 2003-04, it
registered a growth around 12.9 percent that reflects a strong pick up of domestic demand
including investment and consumption.
Various facilitation measures for augmenting inflow of remittances helped to grow remittance at
the rate of 32.89 percent in FY2001-02 and 22.42 percent in 2002-03 exceeding US$ 3 billion
mark. In FY2003-04, it registered a robust growth of 10.12 percent compared to preceding fiscal
year and remittances stood at US$ 3.4 billion.
Inflation
According to consumer price index, constructed on the basis of 1985-86 as the base year, the rate
of inflation in FY 2002-03 stood at 5.14 percent. In food and non-food sectors, inflation stood at
4.94 and 5.52 percent respectively. In a growing economy such inflationary trend is considered
tolerable. It is however to be noted that, the rate of inflation remained low ill Bangladesh since
the 1990s. Maintaining this low rate of inflation has largely been possible due to rise in food
production and downward trend in prices of consumer goods in the international market.
Index 1996- 1997-98 1998-99 1999- 2000- 2001- 2002- 2003-
97 00 01 02 03 04
General 103.96 112.96 120.94 124.31 126.72 130.26 135.97 143.90
(%change) (3.96) (8.66) (7.06) (2.79) (1.94) (2.79) (4.38) (5.83)
Food (%change) 3.96 114.51 125.16 128.52 130.30 132.43 137.01 146.50
(3.67) (10.46) (9.30) (2.68) (1.38) (1.63) (3.46) (6.93)
Non-food 103.67 110.73 115.10. 118.64 122.25 127.89 135.13 141.03
(%change) (4.47) (5.99) (3.95) (3.08) (3.04) (4.61) (5.66) (4.37)
Customer price index and inflation
Monetary Policy and Monetary Management
Monetary policy for FY 2002-03 was formulated to accelerate the pace of economic activities of
the country and to maintain the trend of economic growth. As the country’s monetary
management was steered in the light of a moderately expansionary monetary policy, the money
supply and credit expansion remained slightly expansionary during FY2002-03.
Trade in private Sector Credit and Interest Rates
During FY 2003-04 credit private sectors by commercial banks registered a growth of about
16.20 percent over the previous year. In FY2003-04, disbursement of industrial term loan
registered a phenomenal growth of 6.50 percent over the disbursement in the last fiscal year.
This seems to suggest robust manufacturing activity in. FY 2003-04. This is again a positive
outcome resulting from lowering of interest rates by the government and central bank. The
interest rates on 9l-day treasury bills declined from 8.8 percent in June 2003 to about 4 percent in
March 2004 while that of 364-day, treasury bill declined from 9.9 percent to 6.4 percent during
the 9-month period.
External Sector
Despite prevailing adverse global economic situation, the current account balance of the balance
of payment in Bangladesh registered a surplus of US$240 million in 2001-02, which was 0.5
percent of GDP. This trend continued in FY 2002-03 and the surplus stood at US$ 328 million,
which was 0.63 percent of GDP. Notably, excepting India and Pakistan none of the least
developed countries in South Asia achieved this surplus in the recent past. On the other hand, the
trade-deficit situation is also improving gradually.
Financial Sector Reforms:
The financial sector development strategy
The Government focuses on substantial improvement in the mobilization and allocation of
savings through financial sector deepening and development of financial instruments and
markets while also expanding the access of the poor to finance through targeted expansion of
SME finance and micro-credit.
Reform of the NCBs
There have been initiatives to improve management of the four NCBs.
Development of financial markets
Among other things, measures to develop financial markets focus on development of a domestic
bond market and improving the efficiency of the inter bank money market.
Targeted intervention to expand SME finance
SME sector can play all important roles in creating employment opportunities in rural and urban
areas, development of human resources and poverty reduction developing export trade
motivating private sector involvement and developing entrepreneurship. SME sector has
therefore become a focal point in the overall development strategy of the Government. In
developing the SME sector, the fundamental problem lies with limited access to credit facilities
arid high financing cost, The private sector banks are generally reluctant to extend credit to the
SME sector, The main reasons are high risk and supervision cost. To meet the challenge and
reduce the perceived risk lending to SME sector, the Bangladesh Bank has embarked on a
program to expand and redesign the existing refinance window of Bangladesh Bank into Small
Enterprise Fund (SEF).
Monetary and Exchange Rate Management
In order to improve monetary and exchange rate management as well as bank supervision,
Bangladesh Bank in recent years has taken a range of measures. Several among them are listed
below-
Millennium Development Goals
Achieve universal primary education
Ensure that all boys and girls complete a full course of primary schooling.
Promote gender equality and empower women.
Ensure environmental sustainability.
Develop a global partnership for development.
Reforms Initiatives
A Public Expenditure Review Commission and a Revenue Reforms Commission were
constituted for streamlining and improving the effectiveness of public expenditures and
enhancing revenue efforts.
The Government has undertaken a series of reform measures in the energy and power sector in
order to create an appropriate enabling environment for improved public sector performance,
attract multi-lateral and private investment, rationalize tariff rates and improve collections, and
the consumers get ‘value for money’.
The trade regime has been further liberalized by reducing the maximum tariff rate by 5 percent.
Supplementary duty scheme has been rationalized by reducing the number of rates from 31 to 5.
Import license fee on all imports has been withdrawn.
The Government has designed an integrated policy framework for effective participation in
globalization process in the post -MFA period.
National Strategy for Economic Growth, Poverty Reduction and Social Development
Immediately after taking office the present Government, besides identifying the priority areas of
reform, took up the task of preparing a ‘National strategy for Economic Growth, Poverty
Reduction and Social Development’ in line with the UN Millennium Development Goals
(MDG).
Acceleration of Pro-poor Growth
A stable macroeconomic framework
Development of private sector
Sound and effective financial systems
Strengthening institutional capacity
Rural development
Expansion of productive sectors
Improvement of existing capacity and quality of infrastructure development.
 Promotion of Good Governance
Investment in Human Development
Women Development
Ensuring social protection
Financial System of Bangladesh
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4
nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic
private banks, 10 foreign banks and 28 non-bank financial institutions. The financial system also
embraces insurance companies, stock exchanges and co-operative banks.
 Central Bank and its policies
Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all the
banks. It performs the traditional central banking roles of note issuance and of being banker to
the government and banks. It formulates and implements monetary policy manages foreign
exchange reserves and supervises banks and non-bank financial institutions.
 Interest Rate Policy
 Capital Adequacy
 Loan Classification and Provisioning
 Foreign Exchange System
 Exchange Rate Policy
 Bank Licensing
 Commercial Banks
Medium Term Macroeconomic Framework
To facilitate the implementation of the ‘National Strategy for Economic Growth, Poverty
Reduction and Social Development’, a Medium Term Macroeconomic Framework (MTMF) has
been specified. The framework has been worked out on the basis of the estimated values of FY
2002-03 as the benchmark. The purpose is to comprehend the dynamics of the economy
identifying key macroeconomic fundamentals and formulate and implement realistic budget.
Economic Sectors
The following paragraphs are intended to present briefly tI1e results of progress detailed in the
important sectors of the economy.
Agriculture
Industry
Power and Energy
Transport and communication.
Poverty reduction
Human recourses development
Private sector Development
The FDI census in Bangladesh
The Bangladesh Board of Investment (BOI) conducted a census of foreign direct investors in
February 2003 to gather comprehensive primary data and actual FDI inflows based on projects
registered with BOI and the Bangladesh Export Processing Zones Authority.
Results-
FDI inflows in 2002 were $328 million (compared with $ 58 million on a balance of payments
basis reported by the Central Bank of Bangladesh). Half of it was financed by equity, 31 % by
reinvested earnings and 19% by intra-company loans. While FDI flows have traditionally been
concentrated in the power and energy industries, 44% of the total FDI flows in 2002 went to the
manufacturing sector.
The major sources of investment in 2002 were Asia (45%), followed by Europe (32%) and North
America (17%). Norway was the single largest investor (19%), followed by the United States
(17%), Singapore (14%) and Hong Kong (China) and Malaysia (9% each). Most of the FDI from
Norway was in telecoms and from the United States in the services sector (g.e. power generation,
oil and gas, liquefied petroleum gas bottling, medicare service). Investments from Asia,
particularly South, East and South-East Asia, were concentrated in manufacturing.
The major investors include ASE and Unocal (United States), BASF (Germany), Cemexs
(Mexico), Holcim and Nestle (Switzerland), Lafarge and Total FinaElf (France), Taiheyo
(Japan), Telenor (Norway) and TMI (Malaysia).
This is an example of how careful FDI statistics need to be interpreted, given the different ways
in which they are compiled. According to the commitments made in the Mid-term Strategic
Promotional Plan 2003-04 of BO1, the first half yearly FDI Inflow survey of 2003 was
undertaken by BOI in cooperation with BEPZA. This report, the second of its kind, presents the
findings of the survey in detail.
FDI Inflow Survey Findings
During January-June 2003, a total of US$ 287 million of FDI received in Bangladesh which is
71% higher than the corresponding period of last year.
Consumer Price Index and Inflation
Savings
Data on savings and investment are inadequate but available information indicates slowly rising
trend in domestic savings and investment expressed as a percentage of GDP. Domestic savings
as a percentage of GDP rose from 18.2 of FY03 to 18.3 in FY04.
Exchange Rate
The exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks
themselves, based on demand-supply interaction. The Bangladesh Bank is not present in the
market on a day-to-day basis and undertakes purchase or sale transactions with the dealer banks
only as needed to maintain orderly market conditions.
Fiscal Year Rate
1993-94 40.00
1994-95 40.20
1995-96 40.84
1996-97 42.70
1997-98 45.46
1998-99 48.06
1999-00 50.31
2000-01 53.96
2001-02 57.43
2002-03 57.90
2003-04 58.94
2004-05 59.68
Exchange Rate of Dollar ($)
Foreign Exchange Reserve
Date Amount
 30.06.1993 2121
30.60.1994 2765
30.06.1995 3070
30.60.1996 2039
30.60.1997 1719
30.60.1998 1793
30.60.1999 1523
30.60.2000 1602
30.60.2001 1307
30.60.2002 1583
30.60.2003 2470
30.60.2004 2705
Foreign Exchange Reserves in (million US$)
Private Sector Development
In a market economy private sector is considered as the main driving force of envelopment. The
present government has therefore taken elaborate measures to expand the participation of private
sector in overall development activities. In addition, efforts have been continuing to implement
reforms and liberalization programs to strengthen the structure of the free market economy as
well as to develop an efficient and competitive private sector. Direct intervention by the
government in production related and commercial activities are increasingly becoming limited.
Government is now repositioning its role of a regulator to that of a facilitator and partner. In
order to make the private sector more transparent, robust, dynamic and modern, Government is
bringing in changes, modifications in the privatization policies. It is also firmly committed to
privatize the state owned enterprises (SOEs) transparently keeping in view the welfare of
the employees. Besides investment in the traditional sectors, initiatives are also there to
encourage private entrepreneurs in different service sectors like power, gas, mineral resources,
transportation and communication, education lli1d health. The initiatives taken within the
framework of various policies that have been formulated and implemented to support this goal
are having substantial positive impact on the overall development of the country.
In recent time, the slowdown of the world economy coupled with political unrest in international
arena had its adverse impact on Bangladesh economy too. In spite of that, the multifaceted
measures of the government for stimulating investment, production and export as well as for
infusing dynamism in the stock market were successful to boost up the economy and as a result,
GDP is growing secularly. In this regard, private sector has made its mark.
Developing a Private Investment Friendly Environment
Industrial Policy Reform
Formation of the Privatization Commission
Role of the Board of Investment
Developing the Capital Market
Privatization Activities in Various Sectors of the Economy
Infrastructure
Oil and Gal
Power
Tele communication
Transport Sector
  Air Transportation Sector
 Tourism
 Bangladesh Railway (BR)
 Roads and Highways
 Water Transport
Banking and Insurance
Education
Agriculture
Conclusion
Because of the scarcity of capital in the country, financing institutions investing in the industrial
sector have to conduct pre-investment study properly. With this end in view, the investment
criteria that are suitable should be examined and then applied. Special care should be taken in
respect of big and medium scale industries because they require big amount of capital to be
invested. While setting up large and medium scale industries, entrepreneurs and financing
institutions should consider improving the conventional investment tactics, examine and review
the different investment criteria, and then conduct the feasibility study on the basis of that
criterion which is most suitable. If necessary, more than one criterion can be used to conduct
feasibility study. Investment criteria have been explained in brief in Annex 4.
Creating re-investment opportunities in manufacturing goods in the industrial sector is an
important factor. So, production activities in the industrial sector should be administered in such
a way that re-investment opportunities are created.
The principles of productivity gain sharing are appropriately followed in many developed and
developing countries in order to attain continuous growth in the production sector. The objective
is to distribute profit between workers, owners and the government on an equal basis. This
concept can also be pursued in running industrial enterprises in our country. To this end, a
minimum productivity standard should be set in each industrial enterprise.
Foreign direct investment will be encouraged in all industries in Bangladesh except those in the
reserved lists, banking, insurance and other financial institutions. This type of investments can be
made in local public and private sectors individually or jointly. The capital market will be open
for portfolio investments.
The legal framework for foreign investments has been drawn up on the basis of the Foreign
Investment (Development and Preservation) Act 1980. The framework is as follows:
• Equal treatment of both local and foreign investments;
• Safeguarding foreign investments from state expropriation; and
• Assurance of repatriating finance and profit deriving from share disposal.
There will be no restrictions to foreign investment in terms of equity participation, i.e., 100%
foreign equity can be invested. While selling up industries with complete foreign investment or
in joint venture, there will be no restrictions to the sale of shares through public issue irrespective
of paid-up capital. However, foreign investors or institutions can purchase shares through Stock
exchange, and necessary guidelines on this will be drawn up. Foreign investors or institutions
can avail loan from local banks to meet their running costs. Conditions for such type of loan will
be determined on the basis of the relations between the bank and the borrower.
Foreign investors can avail of the same facilities as local investors in terms of tax holiday,
royalty payment, and technical fees Etc. Personal income taxes need not be paid by foreign
technicians appointed in foreign companies for up to three years, and after that period, they have
to pay on the basis of a dual taxation revocation agreement or any other agreement reached with
their respective countries.
In respect of foreign investment, full repatriation facility of invested capital will be given. Profits
and dividends are also repatriable. If foreign investors choose to reinvest their repatriable
dividend or earned profit, then this will be treated as new investment. Foreign citizens appointed
in Bangladesh will be entitled to a remittance of 50% of their wage and full repatriation of their
savings and retirement benefits.
There will be no restrictions to the issuing of work permit for efficient foreign professionals on
the basis of the recommendations of local and foreign investing companies or joint venture
companies. Multiple entry visa will be issued to foreign investors for three years and to efficient
professionals for the whole period of their appointment.
In respect of foreign investments in thrust sectors, preference will be given to small and medium
scale investors when allotting plots in BSCIC industrial enclaves.
Investments by non-resident Bangladeshis will be treated as foreign direct investment.
Steps will be taken to protect intellectual property in respect of new goods and formulae.
International norms and systems will be followed in respect of providing investment assurance
and conflict resolution.
Initiatives will be taken to expand the facilities of EPZ areas to those 100% export-oriented
industries that are established in non-EPZ areas.
In accordance with the Board of Investment Act 1989, the Board of Investment will provide
necessary assistance and facilities to boost private investment in Bangladesh. The Board, formed
under the leadership of the Prime Minister, with Ministers and Secretaries representing relevant
ministries, will take necessary decisions in order to help establish new industries and provide
assistance to already established industries.
Recommendations
It is the government who should come first to take all the initiatives to make the outside people
interested about our economy to rise the opportunity for the investors to invest in our country.
Political leaders should try to make the political situation stable so that it helps the investor to
make their investing decision at ease. That economy will not improve where the politics
dominates the economy. To improve the situation of the economy what should be done the
economy should dominate the politics.
A developing country like Bangladesh its Foreign Direct investment is the key to its
development. , its FDI performances should be very satisfactory for its development.