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Embassy of the Kingdom of the Netherlands (EKN), Dhaka, Bangladesh Dhaka: 2011 Address: Embassy of the Kingdom of the

Netherlands Road 90, House 49 Gulshan 2, DHAKA Bangladesh E-mail: dha-ea@minbuza.nl http://www.netherlandsembassydhaka.org/

Investing in Bangladesh:
A Guide for New Investors

Dhaka, June 2011

Map 1: Map of Bangladesh


R R B A T T

Table of Contents
List of Abbreviations ............................................................................................................................................................ vii Message from the Ambassador ....................................................................................................................................... ix 1 Favorable Conditions, Constraints and Niche Markets in Bangladesh ............................................. 1 2 Introduction to Bangladesh, its Geography and its Economy .............................................................. 5 3 Structure of the Government of Bangladesh ................................................................................................ 8 4 Steps for Establishing a Company in Bangladesh: Preliminaries ........................................................ 11 5 Getting the Required Documents: Steps for Establishing a Company in Bangladesh ............. 15 5.1 Clearance of Company Name ........................................................................................................................ 15 5.2 Opening a Bank Account ................................................................................................................................ 15 5.3 Certificate of Incorporation (Investment Permit) ................................................................................... 16 5.4 Business Registration ........................................................................................................................................ 17 5.5 Tax Identification Number (TIN) ................................................................................................................... 17 5.6 Value Added Tax (VAT) Number .................................................................................................................... 17 5.7 Trade License ....................................................................................................................................................... 18 5.8 Industrial Registration Application............................................................................................................... 18 5.9 Tax Privileges........................................................................................................................................................ 18 5.10 Import Registration Certificate (IRC)............................................................................................................ 19 5.11 Export Registration Certificate (ERC)........................................................................................................... 19 5.12 BOI Recommendation Letter (for visa) ....................................................................................................... 19 5.13 Visa Application .................................................................................................................................................. 20 5.14 Work Permit ......................................................................................................................................................... 20 5.15 Acquisition of Land ........................................................................................................................................... 20 5.16 Environmental Clearance Certificate .......................................................................................................... 21 5.17 Social Compliance ............................................................................................................................................. 21 5.18 Driving License ................................................................................................................................................... 22 5.19 Overview of Costs of Registration ................................................................................................................ 22

6 Indicative Costs of Doing Business .................................................................................................................... 24 7 Transport and Energy Infrastructure in Bangladesh ................................................................................. 26 8 Financial System and Loan Facilities in Bangladesh ................................................................................. 30 9 Obtaining Utility Connections ............................................................................................................................. 34

A Guide for New Investors in Bangladesh

10 Employers Organizations ...................................................................................................................................... 35 11 Labor Force and Tripartite Dialogue ................................................................................................................. 37 12 Good Business Practices .......................................................................................................................................... 38 13 Practical Information on Dhaka and Other Cities ....................................................................................... 41

List of Annexes
Annex 1 Export Processing Zones (EPZ) and the Economic Zones (EZ) Act 2010 ........................... 47 Annex 2 Chittagong Port ............................................................................................................................................ 49 Annex 3 Climatic Indicators of Bangladesh ...................................................................................................... 51 Annex 4 Application Forms ....................................................................................................................................... 52 Annex 5 List of Business Licenses, Agencies and Websites ....................................................................... 53 Annex 6 Investment Incentives ............................................................................................................................... 54 Annex 7 Translations of Specific Bangla Words ............................................................................................... 59 Annex 8 Sector Study: Water .................................................................................................................................... 60 Annex 9 Ranking of Bangladesh and Selected Countries on Several Indices ................................... 66

List of Maps
Map 1 Map 2 Map 3 Map 4 Map 5 Map of Bangladesh ..................................................................................................................................... iv Transport Network of Bangladesh ...................................................................................................... 27 Map of Dhaka City ....................................................................................................................................... 43 Map of Gulshan, Baridara and Banani ............................................................................................... 45 Map of Chittagong District and City ................................................................................................... 50

Embassy of the Kingdom of the Netherlands in Dhaka

List of Abbreviations
AD AISD AL AOA ASEAN BB BDCC BDT BEF BEI BGMEA BKMEA BEPZA BGSL BILS BIWTA BIWTC BNP BOI BOST BRTA BSCIC BTTB CBC CCI&E CDA CIFE CPA CSR DBCCI DCC DDCI DESA DESCO Authorised Dealers (in foreign exchange) American International School of Dhaka Awami League Articles of Association Association of South East Asian Nations Bangladesh Bank Bangla Dutch Chamber of Commerce (in Groningen) Bangladesh Taka Bangladesh Employers Federation Bangladesh Enterprise Institute Bangladesh Garment Manufacturers and Exporters Association Bangladesh Knitwear Manufacturers and Exporters Association Bangladesh Export Processing Zones Authority Bakhrabad Gas System Ltd. Bangladesh Institute of Labor Studies Bangladesh Inland Water Transport Authority Bangladesh Inland Water Transport Corporation Bangladesh Nationalist Party Board of Investment BOI Online Service Tracking Bangladesh Road Transport Authority Bangladesh Small and Cottage Industry Corporation Bangladesh Telegraph and Telephone Board Customs Bond Commissionerate Chief Controller of Imports and Exports Chittagong Development Authority Chief Inspector of Factories and Establishment Chittagong Port Authority Corporate Social Responsibility Dutch Bangla Chamber of Commerce & Industry (in Dhaka) Dhaka City Corporation Dhaka Chamber of Commerce and Industry Dhaka Electric Supply Authority Dhaka Electric Supply Company

A Guide for New Investors in Bangladesh

VII

DOE DPDT DSE EIU EKN EPB EPZ ERC EU EVD FDI FOB FS&CD FY GOB GSP ICT IDCOL ILO IRC JGTDSL JV KDA LFMEAB MOA MOLE NBFI NBR NRC NRTA PDB PMO PPP RAJUK REB RJSC&F TGTDCL TIN USC VAT WASA

Department of Environment Department of Patents, Designs & Trademarks Dhaka Stock Exchange Economist Intelligence Unit Embassy of the Kingdom of the Netherlands Export Promotion Bureau Export Processing Zone Export Registration Certificate European Union (Dutch) Economic Information Service (Economische Voorlichtings Dienst) Foreign Direct Investment Free on Board Fire Service and Civil Defense Fiscal Year Government of Bangladesh Generalized System of Preferences Information and Communication Technology Infrastructure Development Company Limited International Labor Organization Import Registration Certificate Jalalabad Gas Transmission & Distribution System Ltd. Joint Venture Khulna Development Authority Leather goods & Footwear Manufacturers & Exporters Association of Bangladesh Memorandum of Association Ministry of Labor and Employment Non-Bank Financial Institution National Board of Revenue Netherlands Recreation Centre (Dutch Club) Non-Resident Taka Account Power Development Board Prime Ministers Office Public Private Partnership Dhaka City Development Authority (Rajdhani Unnayan Kartripakkha) Rural Electrification Board Registrar of Joint Stock Companies and Firms Titas Gas Transmission & Distribution Company Ltd. Tax Identification Number Utility Service Cell (of the BOI) Value Added Tax Water and Sewerage Authority

Embassy of the Kingdom of the Netherlands in Dhaka

MESSAGE FROM THE AMBASSADOR

Asia is the worlds economic powerhouse, Bangladesh is part of this dynamic environment. During the last decennium Bangladesh has realised impressive economic growth, approximately 6% annually, and managed to decrease the percentage of people living below the poverty line from 40% in 2005 to 31.5% in 2010. Bangladesh is a new emerging market with a young population of close to 165 million and a fast increasing middle class. As a consequence, this growing internal market offers ample opportunities for trade and investment in consumer goods and luxury items. The Government of Bangladesh aims at diversifying the economic base of the country by facilitating investments in an identified series of priority areas. Furthermore it provides incentives to the earmarked sectors that will lead the growth of the export performance such as Ready Made Garments, Pharmaceuticals and Shipbuilding. It is a well known fact that the country faces challenges such as the lack of proper road and rail infrastucture and frequently interrupted power supply. Since the Government of Bangladesh has unveiled plans to address these challenges and actually facilitates investments in these areas the aforementioned constraints provide actually business and investment opportunities. Issues of governance and the absence of implementing policies in general remains, however, a serious impediment for attracting FDI and require constant attention. The brochure Investing in Bangladesh will give you an insight in the above mentioned issues and will provide you with answers to your initial questions when considering investing in this destination of the future. The Netherlands Embassy at Dhaka looks forward to assist you further to set up business in Bangladesh.

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Alphons Hennekens Ambassador

IX

Garments
Workers make clothes at a garment factory in Dhaka. Bangladeshs exports, dominated by the sale
Mominul Haque Dulu

of low-cost garments to mass-market retailers like Wall-Mart, have fared well.

Pharmaceuticals
Bangladesh, one of the least developed countries, is trying to boost its pharmaceutical exports to, for example, the Middle East as the country enjoys unique concessions as a least developed country in the drug patent rules of the World Trade Organization (WTO).

Shipbuilding
Shipbuilding has been the fastest growing export sector in the past year
tarif71@hotmail.com

Embassy of the Kingdom of the Netherlands in Dhaka

01

Favorable Conditions, Constraints and Niche Markets in Bangladesh

Bangladesh can be considered as a rapidly emerging market pushed forward by its export industries: exports have grown by 40 % in the period from July 2010 to January 2011. This is remarkable in a time when most economies are still suffering from the effects of the global financial crisis. The main products responsible for this growth are knitwear and woven products, together responsible for over three-quarters of Bangladeshs exports. Interestingly, the fastest growing sector in this period was shipbuilding (with almost 1,400 % gro wth).1 Apparel exports increased mainly because of the shift of international buyers from China to Bangladesh; due to the increasing costs of production in China, this country has a decreasing competitiveness, and significantly it is losing market to Bangladesh.2 The other opportunity that promises to strengthen Bangladeshs position further is related to the new rules of EUs Generalized System of Preferences (GSP), in particular the changed Rules of Origin, which are in place since the 1st of January 2011. In the first two months of 2011 this has already resulted in a rise of exports of garment products.3 In addition, Japan is also planning to adjust its trade rules in favor of least developed countries (including Bangladesh) from April 2011.

Bangladeshs exports have grown with 40% in the second half of 2010.

The shift towards Bangladesh could have been much larger were it not for the energy crisis in particular the inability of the grid to meet the demand. As a result of the regular power outages potential new ventures are being deferred and private sector job creation is stalled; in addition, some reports indicate that Chinese, Taiwanese and Korean investors are delaying concrete plans to build factories in Bangladesh, especially in Export Processing Zones (EPZs), until the energy crisis is being solved, although the energy situation in EPZs is better than elsewhere.4 The government has announced plans to deal with the energy shortage on a priority basis, but progress seems slow. The political situation is currently quite stable, although the image of the country as an investment destination could be damaged if labor unrest and hartals flare up once too often.

1. Data from Export Promotion Bureau, EPB (cf. The Daily Star 8 February 2011). Total export earnings were 12.2 billion US$ in the period July 2010-January 2010, and grew by 40 % compared to the same period a year earlier. 2. Sources: Interviews with Dutch Textiles buyers in Bangladesh (cf. EKN 2010: Opportunities and Constraints for Dutch Entrepreneurs in Bangladesh; A Work Plan for EKN), and EPB: The Daily Star (20/02/2011): Garment exports to go big. 3. Compared to the same period in 2010, the earnings from EU countries have doubled, the number of GSP certificates issued by EPB has risen by 20%, and the pieces of garment items exported has also risen by 20% (The Daily Star 03/04/2011). 4. Cf. EKN (2010): op. cit.; and The Daily Star (7 December 2010): Power crunch stalls top houses hiring.

A Guide for New Investors in Bangladesh

Bangladesh as an emerging market offers a number of favorable conditions to Dutch and other firms for doing business: it has a series of cost competitive advantages, it offers a large domestic market and it has a strategic location near to the fastest growing economies of the world. At the same time, the main constraints will also be identified. This chapter will be concluded with a brief indication of selected niche markets which deserve special mention.

Favorable Conditions
Bangladesh is a cost competitive investment destination in several respects. Firstly, it offers a young, industrious workforce with the lowest wages in the region, and English is the second language after Bengla. Secondly, industrial estates, offices and housing for foreigners in the country are often cheaper than in other South and South East Asian countries. Thirdly, Bangladesh enjoys tariff-free access to the European Union (through EUs Generalized System of Preferences, GSP), Canada, Australia and Japan. Fourthly, it has a proven export competitiveness that can be illustrated as follows: Bangladesh offers some of the worlds most competitive fiscal and non-fiscal investment incentives. Bangladesh offers the most liberal FDI regime in South Asia, allowing 100% foreign equity with unrestricted exit policy, easy remittance of royalty, and repatriation of profits and incomes. Bangladesh offers export-oriented industrial enclaves, Export Processing Zones (EPZ) with infrastructural facilities and logistical support for foreign investors. Bangladesh has recently embraced a more flexible and competitive economic zones regime with the enactment of the Economic Zones Act 2010 which paves the way for private economic zones (cf. Annex 1). The Foreign Private Investment (Promotion & Protection) Act 1980 provides protection for investments made in Bangladesh.

Lastly, in itself the energy prices in Bangladesh are the most competitive in the region; however, currently there is a shortage of electricity and gas supply (and a stop on new connections) which the government is trying to counter on a priority basis.
Box 1.1: International ratings: WB Doing Business Rank 2011: Bangladesh occupies the 107th place among 183 countries, well above India and Indonesia (cf. Annex 9). Goldman Sachs s Next 11: Bangladesh was indicated as one of eleven emerging markets in 2005 indicating its potential of becoming one the worlds larger economies. JP Morgan s Frontier Five: Bangladesh was listed in 2007, just as Vietnam, as one of five countries with impressive economic and investment potential. Standard & Poors and Moodys sovereign credit ratings: Bangladesh received its credit ratings (BB- and Ba3) in 2010 (reconfirmed in April 2011). Moodys rating puts Bangladesh on par with Vietnam. The ADB list of Asian growth drivers: Bangladesh has failed to manage a place on the list of eight Asian countries (incl. Malaysia and Vietnam), which are projected to account for 95 % of Asias growth between 2010 and 2050 (The Daily Star 21/03/2011).

Recent international ratings are generally quite positive on Bangladeshs economic potential (cf. Box 1.1). Also rather positive are the national indices and rankings concerning governance, gender and wellbeing, but the rankings for Dhaka on livability, people risk and social networking are extremely low (cf. Annex 9). With about 160 million inhabitants and a middle class that is rapidly growing in size compared to the other classes, there is an increasing domestic demand for example for consumer goods. Bangladesh is strategically located near the emerging economic giants, India and China, and near to the ASEAN markets.

Embassy of the Kingdom of the Netherlands in Dhaka

At the same time, some economic data prompt a cautious outlook. Firstly, Bangladesh has the lowest FDI inflow in South Asia (0.8% of GDP). Secondly, the country continues to add 2 million people to its labor force every year and unemployment is currently at 8% while underemployment is much higher.

Constraints: High Risk, High Profit


The main challenges for the country remain in the areas of energy, transport infrastructure, and governance. More specific risks could also be mentioned, such as the recent increases in food prices, possible disruptions of Chittagong Port and the maintenance of general industrial harmony, but below only the first three challenges will be discussed. Bangladesh is currently confronted with an energy crisis, especially due to a shortage of gas for electricity generation; load shedding could affect business and investment decisions. However, the government has declared power supply as a priority. Contracts are being signed for rental power supply infrastructure in order to relieve short-term shortages, and longer term expansion of capacity is being reviewed (for example, contracts have been concluded with Russia in the area of nuclear energy). The transport infrastructure of the country requires improvements in different areas, which in turn can be translated into increasing business opportunities. Cases in point are the supervision and construction of the Padma Bridge, the Dhaka Elevated highway (the contract was awarded in December 2010 to an Italian-Thai consortium), the Dhaka Chittagong Highway, the Dhaka Mymensing highway, and the plans to upgrade railroads and inland waterways. This shows that the Government is committed to tackle these constraints with priority. In terms of Governance it is significant to mention Box 1.2: Doing Business Rank 2011 that Bangladesh has gradually improved its ranking In the World Bank Doing Business Rank 2011 Bangladesh on the Corruption Perceptions Index (CPI) composed occupies the 107th rank among 183 countries; it not only by Transparency International from the very bottom improved its ranking but it also leaves countries like India and Indonesia behind. Of the nine indicators Bangladesh ranks of the list in 2005 (158th, jointly with Chad) to the highest on protecting investors (20th) and lowest on enforc134th place out of 178 countries in 2010. In addition, ing contracts (179th); the most improvement was made in starting a business; for details see Annex 9. Bangladeshs ranking is on par with the Philippines Source: World Bank Group (2010): Doing Business Rank 2011. (same rank), higher than Pakistan (143), but lower than Vietnam (116) and Indonesia (110). These indices are discussed in more detail in Annex 9. Corruption can sometimes be a barrier for doing business in Bangladesh, and although the Anti-Corruption Commission (ACC), installed by the Caretaker Government, started its task with high profile cases, its independence seems currently to be challenged. A weak and slow legal system can be another impediment to investment in Bangladesh resulting in uncertain enforceability of contracts (See also Box 1.2). The judicial system does not provide for interest to be charged in tort judgments, and hence there is no penalty for delaying proceedings. While the Supreme Court and High Court (appellate level courts) are independent, the lower courts are part of the executive branch of government. In some cases the Bangladesh Export Promotion Bureau (EPB) could be helpful in assisting in dispute settlement of export-related transactions. Major Bangladeshi trade and business associations can also be helpful in assisting in transaction disputes.5

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5. Cf. the US Department of State (2006): Chapter 5 at: http://www.manufacturebd.com/images/doing_business_in_bangladesh-a_country_guide.pdf

A Guide for New Investors in Bangladesh

In sum, the favorable conditions mentioned above in combination with the constraints mentioned here lead to a situation that can be characterized as High Risk, High Profit in particular in certain niche markets discussed below.

Niche Markets
The key sectors of the Bangladesh economy are thriving, fuelled by the vision of international companies that recognize the unique opportunities that the country has to offer. Over 100 companies have invested in the country in the last three years, but FDI has remained relatively low: US$ 3.1 billion in 2009-2010 of which about 60% is in the service sector (esp. telecom). The Board of Investment (BOI) has identified ten key sectors, to which we can add Pharmaceuticals and Shipbuilding: Power Industry ICT & Business Services Garments and Textiles Life Sciences Agribusiness Frozen Foods Ceramics Electronics Light Engineering Leather and Leather Goods Pharmaceuticals Shipbuilding

Source: http://www.boi.gov.bd/key-sectors

Information on export products can be found on the website of the Export Promotion Bureau (EPB) of the Ministry of Commerce (http://www.epb.gov.bd/). Reference is also made to the picture page in the present brochure before Chapter 6. In Annex 8 we present an example of a Sector Study which provides more detailed information on specific niche markets which are promising for Foreign Investors. It concerns a Market Scan on the Bangladesh Water Sector, commissioned by the Embassy of the Kingdom of the Netherlands in Dhaka, Bangladesh, in 2010.

Vegetable Market in Bangladesh

Embassy of the Kingdom of the Netherlands in Dhaka

Katalyst

02
Geography

Introduction to Bangladesh, its Geography and its Economy

Bangladesh with over 160 million inhabitants on a landmass of 147,570 square kilometers is one of the most densely-populated countries in the world. Despite articulate ambitions of the Government of Bangladesh to become a middle-income country by 2021, at present it remains a low-income country with 31.5 percent of its population living below the poverty line, and a per capita income of US$ 750.6

Fishing in the Floodplains of Bangladesh

Geography is a strong determinant of Bangladeshs development. The country is bordered by India on the west, north, and north-east, by Myanmar on the south-east, and by the Bay of Bengal on the south. Eighty percent of its area consists of floodplains created by more than 300 rivers and channels, including three major rivers: the Ganges, the Brahmaputra, and the Meghna. It has a 710 km long coastal belt that is home to nearly 35 million people. Bangladeshs geographical position and very high population density make it extremely vulnerable to natural disasters including floods, droughts and cyclones. Global climate change has increased these vulnerabilities substantially. The two most important cities in Bangladesh are Dhaka, which is the capital, and Chittagong, the main harbor city. The transport networks of the country are discussed in Chapter 7, while more details on the harbor of Chittagong are provided in Annex 2.

Climate
Weather in Dhaka can be described as follows: Hottest month, July, 23-35C (average daily minimum and maximum); coldest month, January, 11-28C (average daily minimum and maximum); driest months, December and January, 5 mm average monthly rainfall;
Source: Bangladesh Bureau of Statistics (BBS): Statistical Pocket Book 2009. http://www.bbs.gov.bd/Home.aspx

6. Cf. Sources: a) Bangladesh Sixth Five Year Plan: FY2011-FY2015: Accelerating Growth and Reducing Poverty. Draft March 2011,Planning Commission, Ministry of Planning, GoB; and b) Household Income and Expenditure Survey (HIES) 2010, Bangladesh Bureau of Statistics (Dhaka).

A Guide for New Investors in Bangladesh

Katalyst

wettest month, July, 567 mm average monthly rainfall.

Further details are given in Annex 3.

Facts and Figures


The main language spoken is Bengali or Bangla, while Urdu and Hindi are minority languages; English is used often as a second language. The religion of the large majority of inhabitants is Muslim (89.7% in 2001 census); other religions are Hindu (9.2%); Buddhist (0.7%); and Christian (0.3%). Numbers are commonly expressed in crores and lakhs; 1 crore = 10 million, written 1,00,00,000; 1 lakh = 100,000, written 1,00,000 (see Annex 7 for a translation of selected Bangla words). The Bangladesh Time is 6 hours ahead of GMT.

Currency: Bangladesh Taka (BDT)7


The currency is the Taka (BDT) being divided in 100 paisa. The exchange rate in January 2011 was: BDT 70 = US$1; BDT 93 = Euro1. The Dhaka Stock Exchange (DSE) Index was on 28th November, 2010 as follows: DSE Index was 7215.78, and General was 8698.94. However, on 11 January 2011 the Securities and Exchange Commission (SEC) stopped trading in the midst of the biggest crash in the countrys capital market history. The general index of Dhaka Stock Exchange (DSE) went down and dropped 660 points or 9.25% within just 40 minutes of trading. In February and March 2011 the index remained volatile. A Commission has been installed to investigate the main actors involved, the reasons behind the crash and its aftermath.

Export/Import
The main export and import products and countries are summarized in the table below. For more information on economic data, see: http://www.boi.gov.bd/about-bangladesh/ bangladesh-at-a-glance
Major Exports 2009/10* Readymade Garments Fish & Prawns Jute Products Leather & Hides Leading Markets 2009 US Germany UK France % of total 20.2 12.7 8.6 6.5 % of Total 69.0 3.2 2.4 2.0 Major Imports 2009/10* Capital Goods Textiles Petroleum & Petroleum Products Iron & Steel Leading Suppliers 2009 China India Kuwait Singapore % of Total 16.2 12.6 7.6 4.6 % of Total 20.9 19.1 11.5 6.7

*The Fiscal Year (FY) runs from July 1st to June 30th Source: Economist Intelligence Unit: http://country.eiu.com/article.aspx?articleid=507601435&Country=Bangladesh

7. Cf. Economist Intelligence Unit: http://country.eiu.com/article.aspx?articleid=1487600733&Country=Bangladesh

Embassy of the Kingdom of the Netherlands in Dhaka

Digital Bangladesh
The vision of the present Government is to make Bangladesh Digital by 2021. The philosophy of Digital Bangladesh comprises: Ensuring peoples democracy and rights, transparency, accountability, establishing justice and ensuring delivery of government services in each door through maximum use of technology-with the ultimate goal to improve the daily lifestyle of general people. 8 This includes for example E-Registry, E-Commerce and Online Service Tracking. Currently these services are being developed, and often documents are not yet available as downloads (or only in Bangla); instead one has to collect them from various offices. BOI Online Service Tracking (BOST) is an online interactive e-governance solution that facilitates the investors to track their service requests made to BOI. 9

Digital Bangladesh: Visit the website: http://www.digitalbangladesh.gov.bd/

Media
There are good English language newspapers, such as The Daily Star, The Independent, New Age and Daily Sun. There is also an excellent website with the latest news items: http://www.bdnews24. com/. State-run television channel BTV airs English news every night. Other privately owned satellite channels such as ATN NEWS, ATN BANGLA, Boishakhi, Diganta TV and Banglavision air daily news bulletins in English (mainly evening hours). Besides, these local news channels, the international channels such as BBC, CNN and Al-jazeera are also aired in Bangladesh. In order to get access to these local and international channels (except the state television channel BTV) one has to subscribe for a package with an area based local provider (contact with employer or house owner to find out the company in your area).

An ICT Centre providing information on agriculture

Miriam Otto

02
Bangladesh has a high density of mobile phone users with over 70 million users from January 2011
Miriam Otto

8. Cf. http://www.boi.gov.bd/about-bangladesh/government-and-policies/digital-bangladesh-overview 9. Cf. http://www.boi.gov.bd/boi-interactive/online-service-tracking

A Guide for New Investors in Bangladesh

03

Structure of the Government of Bangladesh

The characteristics of the national government of Bangladesh are as follows (October 2010): Official Name Form of Government Peoples Republic of Bangladesh Bangladesh has been a parliamentary democracy since a constitutional amendment in 1991 The Prime Minister is chief executive and head of the Council of Ministers (the cabinet), which she selects; the presidency is a largely ceremonial role, although the president appoints members of the cabinet and the judiciary and has the power to dissolve parliament. A unicameral parliament, consisting of 300 members directly elected from geographical constituencies for five-year terms, plus 45 seats reserved for women elected by sitting lawmakers. The most recent election was held on December 29th 2008. A caretaker government will be appointed in January 2014 to supervise the next election, which must then be held within 90 days. An alliance headed by the Awami League (AL) won more than two-thirds of the seats in parliament at the December 2008 election, which was overseen by a nonpartisan caretaker government. The AL dominates the alliance, with a two-thirds majority in parliament in its own right. Four other parties in the alliance also won seats: the Jatiya Party, the Jatiya Samajtantrik Dal (JSD), the Workers Party of Bangladesh and the Liberal Democratic Party (LDP). AL; Jatiya Party; JSD; Workers Party of Bangladesh; LDP; Bangladesh Nationalist Party (BNP); Jamaat-e-Islami; Bangladesh Jatiya Party (BJP) President Zillur Rahman Prime Minister Sheikh Hasina

The Executive

National Legislature

National Elections

National Government

Main Political Organizations

President Prime Minister

Source: Economist Intelligence Unit: Country Report Bangladesh (October 2010).

Embassy of the Kingdom of the Netherlands in Dhaka

Key Ministers:
Agriculture Civil Aviation & Tourism Commerce Communication Education Finance Fisheries & Livestock Food & Disaster Management Foreign Affairs Home Affairs Industries Labour & Employment Law, Justice & Parliamentary Affairs Local Government & Rural Development Planning Shipping & Inland Water Transport Textile & Jute Industry Water Resources Central Bank Governor Begum Motia Chowdhury G M Quader Lt. Col. (Retd.) Faruq Khan Syed Abul Hossain Nurul Islam Nahid Abdul Maal Abdul Muhit Abdul Latif Biswash Dr. Abdur Razzak Dr. Dipu Moni Advocate Sahara Khatun Dilip Barua Engineer Khandaker Mosharraf Hossain Barrister Shafiq Ahmed Syed Ashraful Islam Ari Vice Marshal (Retd.) A K Khandaker Shahjahan Khan Abdul Latif Siddiqui Ramesh Chandra Sen Atiur Rahman

Source: Economist Intelligence Unit: Country Report Bangladesh (October 2010).

Tiers of Government
The different tiers of national, regional and local governments vary in part for rural and for urban areas. The following tiers can be distinguished: 10 Tiers of Government National Government Divisions (Province) Zila Parishad (District) Rural: Upazila Parishad (Sub-District) (ex: Thana) Union Parishads Gram (Palli) Sarkar/ Parishad Urban: City Corporations Municipalities (Pourashavas) Zones, Wards & Mahallas Mayor Chairman --6 310 Determined by the Government Elected Elected --Chairman Chairman Village Head 482 4,223 About 40,000 Elected Elected Selected bodies Head of Government Prime Minister Divisional Commissioner Deputy Commissioner No. of Units * 1 6 64 Status Elected Not elected Not elected

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* Numbers are approximate since it changes according to the joining and/or separation of units. 10. Based on: Kamal Siddiqui (2005): Local Government in Bangladesh; Revised Third Edition. Dhaka: UPL. CGS/BRAC (2006): The State of Governance in Bangladesh 2006. Knowledge, Perceptions, Reality. Dhaka: BRAC. Various articles in Daily Newspapers, including: The Daily Star (4 December 2010): Municipality Polls next month.

A Guide for New Investors in Bangladesh

House of the People (Jatiya Sangsad)

The first elections in 2011 were the Municipal elections in January, and they were held in 257 out of 310 Municipalities. These were mainly peaceful, and held in a democratic way; the main opposition party, BNP, won just a few more mayoral posts than the ruling Awami League party (each about 40%), while AL-rebel candidates won more posts than the BNP-rebel candidates (about 9% and 5% respectively). This should be followed later in the year by the elections for the Union Parishads and the Dhaka City Corporation which have been postponed several times for various reasons.

Policies & Protection


The Bangladesh economy is managed within the framework of a market economy with .. government interventions intended to correct market distortions, to ensure equality of opportunities and to ensure equity and social Important websites on policies: justice for all. as it is indicated in the draft Sixth Five Economic Relations Division (ERD): http://www. Year Plan.11 While trade protection has come down erd.gov.bd/ sharply from its very high levels in the early 1990s, Planning Commission (PC): http://www.planthe draft Plan indicates that Bangladesh remains comm.gov.bd/about.asp amongst the most heavily protected countries in the world.

Useful websites on Laws


Regarding legislation and specific laws, several websites can be consulted for the most up-to-date information: Government of Bangladesh: http://www.bangladesh.gov.bd/ Bangladesh Election Commission: http://www.ecs.gov.bd/English/index.php The website for the Ministry of Law, Justice and Parliamentary Affairs: http://www.minlaw.gov.bd/indexin.htm The web site for the codified laws: o o Alphabetically: http://bdlaws.minlaw.gov.bd/alp_index_update.php Chronologically: http://bdlaws.minlaw.gov.bd/chro_ind

11. cf. Bangladesh Sixth Five Year Plan: FY2011-FY2015: Accelerating Growth and Reducing Poverty. Draft March 2011, Planning Commission, Ministry of Planning, GoB.

Embassy Embassy of of the the Kingdom Kingdom of of the the Netherlands Netherlands in in Dhaka Dhaka

Peter Beninger

04

Steps for Establishing a Company in Bangladesh: Preliminaries

There are several preliminary steps which are advisable to take before continuing to establish the company itself.

In the Home Country


Before going to Bangladesh one should make sure to have all the required documents, which may well include a certified translation in English of the Memorandum of Association and/or the Articles of Association of the company or mother company. For Dutch companies up-to-date information can be obtained by contacting the following organisations: 1) The Economic Information Service (EVD) of the Ministry of Economic Affairs, Agriculture and Innovation (ELI) in the Hague: http://www.evd.nl/home/index.asp 2) The Embassy of the Peoples Republic of Bangladesh in the Hague: http://www.bangladeshembassy.nl/ 3) De Bangla Dutch Chamber of Commerce (BDCC) in Groningen: http://www.bdcc.eu/

Local Agent/Partner
The registration of a company in Bangladesh can Box 4.1: Screen Local partner be time-consuming because of the relatively Many local agents admit to having paid bribes and using large number of rules and regulations. Therefore, undue influence to get a contract awarded in public procureit is advisable to secure oneself of local assistance, ments. Although local agents routinely sign documents agreeing to comply with the Foreign Corrupt Practices Act, many of for example a good local partner or consultant them continue to conduct under-the-table deals without the who is experienced in these matters. According U.S. companies knowledge or approval. Companies need to exercise significant caution when hiring local agents and thorto most of the experienced foreign entrepreneurs oughly educate the agent about acceptable business pracin Bangladesh this investment will pay itself back tices. Companies also should monitor local agents activities as closely as possible. Personal interviews are useful in discussing easily. A Power of Attorney may be necessary for a business proposal with a potential agent or distributor. the local agent/partner. At the same time, it is often Source: US Dept. of State (2006): Chapter 3 at: http://www. strongly advised to screen carefully any potential manufacturebd.com/images/doing_business_in_bangladesha_country_guide.pdf068. agents working on your behalf. For example, the U.S. Embassys experience suggests that a significant proportion of local agents do not adhere to U.S. standards of business ethics, and that continuing monitoring is required (cf. Box 4.1). The Netherlands Embassy can also be requested for advice in such matters.

A Guide for New Investors in Bangladesh

11

Board of Investment (BOI)


The first point of contact in Bangladesh for a foreign investor is usually the Board of Investment (BOI), which is part of the Prime Ministers Office (PMO). BOI provides information on the investment opportunities in Bangladesh and the incentive packages on offer. Other services are: Assistance can be obtained in completing application forms and referring investors to the relevant department within the BOI.

If the investor is to locate in an export processing zone then BOI will introduce the company to the Bangladesh Export Processing Zones Authority, who will facilitate the early start up processes. BOI can provide information on the procedures required to establish a company in Bangladesh and the time that registering and establishing a company will typically take. Information is provided on the types of companies that can be formed, the general costs of doing business in Bangladesh, how to obtain the necessary work permits for you and your staff, remitting funds to Bangladesh, and so on. Once you decide that you want to set up a company in Bangladesh your registration with BOI can be managed electronically, through the BOI Online Registration process (http://www.boi.gov.bd/)

Type of Business
You will need to set up an appropriate company structure. By this stage you will need to know: if you intend to operate as a branch/liaison representative office (or Buying House) or if you intend to establish an industrial project.

This is relevant to the type of business structure you will then need to form. Business in Bangladesh can be carried out by a company formed and incorporated locally or by a company incorporated abroad but registered in Bangladesh. The incorporation or registration is done by the Registrar of Joint Stock Companies and Firms (RJSC&F) which will be discussed in the next chapter. Companies may be private or public limited companies or unlimited companies. In establishing a place of business of a foreign company, the company has to be registered with the RJSC&F as the place of business. Such registration is required in respect of capital issue and obtaining clearance from the Bangladesh Bank. To open or extend a branch/liaison representative office of a foreign company, the company has to apply to the BOI. After starting commercial operations BOI will be following up with what you need subsequently. Investors need to submit a half-yearly performance report to the BOI on production and employment in their projects. Any changes to the information provided in the registration should be indicated to the BOI. Check this website for the help that can be provided regarding investments: http://www.boi.gov.bd/how-to-invest/roadmap-to-investment

Embassy of the Kingdom of the Netherlands in Dhaka

EU Investors
All EU investors are also invited to visit the website of the EU Delegation in Dhaka, Bangladesh, as a local reference point for rules related to trade and investment in this country, and two related websites: EU Delegation in Dhaka: http://www.eudelbangladesh.org/en/index.htm Bangladesh - European Community Country Strategy paper (CSP) 2007-2013: http://www.eudelbangladesh.org/en/eu_and_country/ Bangladesh_CSP_en_2007-2013.pdf The EU Export Helpdesk: http://exporthelp.europa.eu/index_en.html

Another very useful website (though not updated since 2006) is entitled Doing Business In Bangladesh: A Country Commercial Guide for U.S. Companies by the U.S. & Foreign Commercial Service and U.S. Department of State (2006): http://www.manufacturebd.com/images/ doing_business_in_bangladesh-a_country_guide.pdf. Throughout the present Brochure references will be made to the relevant pages of this website. The following flow-chart provides an overview of the steps needed for company registration and the institutions involved (the numbers refer to the respective sections in Chapters 4 and 5).

04

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13

STEPS IN THE REGISTRATION PROCESS Preparations in the Home Country 4.1 Find and Screen a Local Partner 4.2 Contact the BOI 4.3 Select Appropriate Company Structure 4.4 Check with EU Trade Section and Websites 5.1 Clearance of Company Name 5.2 Opening a Bank Account 5.3 Certi cate of Incorporation (Investment Permit) 5.4 Business Registration Home C. Partner BOI BOI Website EU RJSRF Bank RJSRF BOI NBR 5.6 Value Added Tax (VAT) Number 5.7 Trade License 5.8 Industrial Registration Application 5.9 Tax Privileges NBR DCC BOI NBR BOI & CCI&E CCI&E 5.12 BOI Recommendation Letter (for visa) 5.13 Visa Application 5.14 Work Permit 5.15 (optional) Acquisition of Land BOI Embassy BOI BOI BOI & DOE 5.17 Social Compliance 5.18 Driving License CIFE BRTA

Embassy of the Kingdom of the Netherlands in Dhaka

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Getting the Required Documents: Steps for Establishing a Company in Bangladesh12

The steps foreign entrepreneurs have to take in order to register their companies properly in Bangladesh are discussed in this chapter. An overview of these steps has been given in the flow-chart in Chapter 4.

5.1 Clearance of Company Name


The company name selected should not be identical with or closely resemble the name of an existing company. An application in plain paper along with required nominal fees is to be submitted to the Registrar of Joint Stock Companies and Firms (RJSR&F) for verification and clearance of the proposed name. According to RJSC&F, the Name Clearance procedure for a Joint Venture includes the following: Sponsors of the Companies are requested to follow the following procedure: for Joint venture companies, the entire equity of the foreign sponsors is required to be paid in foreign exchange; as such the 5% pre-registration deposit must also be made in foreign currency. The bank shall specifically mention this FOREX transaction in its certificate with the names of the sponsors.

5.2 Opening a Bank Account


With the name clearance certificate one has to open a bank account, which according to the Foreign Exchange (ForEX) Guidelines of the Bangladesh Bank is stipulated as follows: Authorised Dealers (ADs) in foreign exchange, such as commercial banks, may open Non-Resident Taka Account (NRTA) in the name of the proposed company/enterprise of foreign investors contemplating to invest in Bangladesh without prior approval of Bangladesh Bank. Such accounts may be credited with inward remittances received from abroad only. Upon registration/commencement of the business, a new account in the name of the company may be opened following usual procedure. However account opened previously should be closed immediately and balances lying therein shall be transferred to the new account.13 Foreign Exchange (ForEX) Guidelines of the Bangladesh Bank: http://www.bangladesh-bank.org/regulationguideline/foreignexchange/feguidevol1all.pdf

12. This chapter has benefited greatly from the information received from Mr. Maarten Verbruggen en Mr. Rob Jongkees of DeltaDesh, and therefore we would like to thank them sincerely. 13. Bangladesh Bank, 31st May 2009, page number 59, Chapter 9, Article 2C in ForEX Guidelines: http://www.bangladesh-bank.org/regulationguideline/foreignexchange/feguidevol1all.pdf

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This leads to the following implications and advice: a. One has to open a temporary Bank Account after the name clearance where the foreign investor(s) will send their equity requirement. The documents required to open this NRTA are: i. Name clearance copy ii. Draft MOA iii. Draft AOA iv. Board minutes of meeting with reference to JV agreement

b. The equity of the local partner can only be deposited after incorporation of the company. c. Select a local bank branch that is nearby (a favorable attitude at this branch towards the specific project can also be helpful). Transfer equity from abroad: after receiving the foreign remittance from the foreign investor(s) in the bank, the bank will issue an encashment certificate in the personal name of the foreign investor (required in order to be able to transfer parts of the invested amount out of Bangladesh at a later stage). After receiving the Certificate of Incorporation (see Section 5.3 below), the NRTA in the bank has to be changed to normal current account. Documents required: a. Final MOA b. Final AOA c. Incorporation Certificate The bank will now open a current account (A/C) in the name of the company with signatories authority according to the Board minutes of meeting and/or JV agreement. At this point the local partner in the joint venture has to transfer his/her equity contribution into the Bank account. More information on finance and banking is included in Chapter 8.

5.3 Certificate of Incorporation (Investment Permit)


All the required documents now need to be submitted to the RJSCF in order to complete and finalize the incorporation of the company and to acquire a Certificate of Incorporation (cf. Annex 5, Nr. 3). The documents required are: a. Encashment certificates for the foreigners b. Income Tax Certificates for the Local investors c. Final MOA d. Final AOA e. JV agreement f. Board minutes of meeting with reference to JV agreement

Embassy of the Kingdom of the Netherlands in Dhaka

5.4 Business Registration


Application to the BOI for Registration of Joint Venture Investment (cf. Annex 5, nr. 8). The BOI registration makes the company eligible to avail the incentives and facilities provided by the government. Required documents are: a. Application Forms b. Certificate of Incorporation c. MOA d. AOA e. Joint Venture Agreement f. Attested copy of deed agreement for rental premises g. Project Profile h. Background of the promoters (shareholders) i. j. List of Machineries indicating quantity and price Copy of the relevant Loan documents

k. Pay Order/Bank draft for the fee In case a different type of company than a joint venture is being registered, other requirements are among others the following: Factory: Approval of Factory Plan (cf. Annex 5, nr. 1); Bonded Warehouse License (cf. Annex 5, nr. 2); Registration of Local Investment Project (cf. Annex 5, nr. 9).

5.5 Tax Identification Number (TIN)


The application for a Tax Identification Number (TIN) has to be submitted to the National Board of Revenue (NBR) with the following supporting documents (cf. Annex 5, nr. 11): a. Copy of AOA b. Copy of MOA c. Copy of Incorporation certificate d. Prescribed government forms e. Deposit the receipt (challan) of the bank for the application fee For the Tax Holiday Certificate one also needs to contact the NBR (see Annex 5, nr. 10).

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5.6 Value Added Tax (VAT) Number


The Value Added Tax (VAT) number can be acquired as well from the NBR, whereby the following documents are required (cf. Annex 5, nr. 15): a. Trade License b. TIN c. MOA d. AOA e. Rental agreement of the factory premises

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Owing to the narrowness of the tax base, revenue is generated largely by customs and excise. Personal income is subject to a progressive tax, and corporation tax varies between 25% and 45%. (cf. EIU 2010). For more details on taxation reference is made to Chapter 6.

5.7 Trade License


Trade License application for the new company has to be made with the Dhaka City Corporation. Required are: a. TIN certificate copy b. VAT registration copy c. Bank introduction letter d. Copy of the MOA e. Copy of the AOA f. Prescribed forms of the government g. Office rent agreement paper copy There are two types of trade licenses, one for commercial and one for manufacturing firms: see Annex 5, nrs. 12 and 13). For the Trade Marks Registration, see Annex 5 (nr. 14).

5.8 Industrial Registration Application


Application for BOI Industrial Registration with following supporting documents: a. Project Profile b. MOA c. AOA d. Land Information & Document e. Machinery Details f. Financing sources g. TIN BOI will issue an Industrial License and register foreign investment.

5.9 Tax Privileges


Apply to the National Board of Revenue (NBR) for tax exemption on the import of the capital machinery. Documents required: a. Project Profile b. AOA c. MOA d. Incorporation certificate e. List of Machineries and costs to be imported f. Industrial License

For more detailed information on the broader investment incentives, see Annex 6.

Embassy of the Kingdom of the Netherlands in Dhaka

5.10 Import Registration Certificate (IRC)


For the Import Registration Certificate (IRC) one needs to register with the BOI and the Chief Controller of Imports & Exports, CCI&E (cf. Annex 5, nr. 7). The following supporting documents are needed: a. Trade License photocopy b. Valid membership of association (e.g. DBCCI) c. Attested copy of: i. AOA ii. MOA iii. Incorporation certificate d. Passport photocopy of the Managing Director e. Bank solvency certificate (original) f. Original receipt (challan) of bank deposit for the fees

The forms for the Import and Export Registration Certificates (IRC and ERC) are on the website only available in the Bangla language (cf. http://www.ccie.gov.bd/). Both Forms in English have to be collected from the office of the Chief Controller Import and Export (CCI&E) of the Ministry of Commerce.

5.11 Export Registration Certificate (ERC)


For the Export Registration Certificate (ERC) the following documents are needed (cf. Annex 5, nr. 5): a. Attested copy of: i. Trade License ii. Valid membership of association or chamber (e.g. DBCCI)

iii. AOA iv. MOA v. Incorporation certificate b. Original of Bank receipt (challan) for deposit of the fees For any information required on Exports, check out the website of the Export Promotion Bureau (EPB), Bangladesh, of the Ministry of Commerce (http://www.epb.gov.bd/).

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5.12 BOI Recommendation Letter (for Visa)


Two types of Visa exist: the PI-type for a Private investor, and the E-type for an Employee. An application has to be made to the BOI for a PI Visa for foreign investors. The documents required are: a. Business introduction letter b. Forwarding letter c. Passport photocopies

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5.13 Visa Application


Foreign Nationals have to apply for Visa in any foreign mission of GoB, e.g. in the Netherlands, along with: a. BOI recommendation letter b. Company letter introducing the business This Visa must be renewed yearly or bi-yearly depending on various factors (e.g. country of origin). The form required can be downloaded (see Annex 4, nr. 7).

5.14 Work Permit


A work permit for foreign nationals is a prerequisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance to the BOI in the prescribed from. For expatriate employment the guidelines are as follows: 1. Nationals of countries recognized by Bangladesh are considered for employment. 2. Employment of expatriate personnel will be considered only in industrial establishments which are registered by the appropriate authority. 3. Employment of foreign nationals is normally considered for the job for which local experts/technicians are not available. 4. Persons below 18 years of age are not eligible for employment. 5. A decision of the board of directors of the concerned company for new employment/ employment extension is to be furnished in each case. 6. The number of foreign employees should not exceed 5% of the total employees, including top management personnel. 7. Initially employment of any foreign national is considered for a term of two years, which may be extended on the basis of merit of the case. 8. Necessary security clearance has to be obtained from the Ministry of Home Affairs. BOI Form: See Website: obtaining-a-work-permit: Residence permit: No evidence can be found that a residence permit is required in addition to this work permit (and the Visa mentioned in the previous section). http://www.boi.gov.bd/how-to-invest/forms-a-procedures/

5.15 Acquisition of Land


Being one of the most densely populated countries in the world, it is not surprising that land has become the scarcest factor of production in Bangladesh. This is reflected in galloping land prices especially in the large cities.14 Entrepreneurs requiring industrial land for setting up a facility in any industrial area/estate apart from those of Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Small and Cottage Industry Corporation (BSCIC), should approach the BOI, and provide them with the plot size required, copies of the sanction/registration letter and the industrial layout plan. After receiving the application BOI provides assistance to get the industrial plot.

Embassy of the Kingdom of the Netherlands in Dhaka

Rules and regulations for land registration do change regularly, and at the time of writing these were considered to be quite strict; for example, one has to come up with attested photographs of both the buyer and the seller (for updated information the Bangla-Dutch Chamber of Commerce or any of the other chambers can be contacted; see Chapter 10 for their contact details). A word of caution is necessary at this point: the Acquisition of land beyond government-owned land (khans land) could face long-term litigation. Export Processing Zones (EPZs) are export oriented industrial enclaves which provide the infrastructures, the facilities, administrative and support services for a wide variety of enterprises. Bangladeshs highly successful EPZs in Dhaka and Chittagong are now complemented by new EPZ developments and other valuable real estate developments around the country. The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, and a location free from cumbersome procedures. Businesses from 32 countries have so far invested in the existing zones. For further information reference is made to Annex 1. In addition to the Export Processing Zones, there are also 67 Industrial Estates spread throughout the country and administered mainly by the BSCIC. These have no special regulatory regime, and all are welcome to locate there, but only a few of them offer attractive locations and adequate infrastructure to the investor, and investor services are minimal. Most of the industrial areas/estates are owned/controlled by city development authorities in three divisional headquarters: RAJUK (Rajdhani Unnayan Kartripakkha) in Dhaka, Chittagong Development Authority (CDA) in Chittagong and Khulna Development Authority (KDA) in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies, namely (a) Public Works Department and (b) Housing and Settlement Directorate.15

5.16 Environmental Clearance Certificate


The company has to apply to the BOI Utility Service Cell (USC) for Environmental Clearance Certificate (cf. Annex 5, nr. 4). BOI USC will obtain the necessary clearance from the Department of Environment (DOE) who will visit the factory for inspection.

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5.17 Social Compliance


The registration for Social Compliance can be acquired from the Chief Inspector of Factories and Establishments (CIFE). Any manufacturing company employing ten or more workers is required to be registered under the Factories Act 1965 at the office of CIFE. This act is primarily intended to regulate working conditions and to ensure safety in the factory. The prescribed Application Form has to be collected from the office of CIFE, filled in and submitted with all requirements. The CIFE office issues registration within the stipulated period. A different example concerns the acquisition of the Fire License (cf. Annex 5, nr. 6).

14. cf. Bangladesh Sixth Five Year Plan: FY2011-FY2015: Accelerating Growth and Reducing Poverty. Draft, March 2011, Planning Commission, Ministry of Planning, GoB. http://www.plancomm.gov.bd/about.asp 15. Source: http://boi.gov.bd/how-to-invest/obtaining-industrial-plot

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5.18 Driving License


The driving license can be acquired from the Bangladesh Road Transport Authority (BRTA) which has the following web address: http://www.brta.gov.bd/. The various types of driving licenses, the forms to be downloaded and the costs are mentioned at the following website: http://www.brta.gov.bd/app_form_next.php In practice, however, most expatriates living in Dhaka employ a driver, which is useful for their knowledge of local conditions, the language, parking and safety. Salaries range from BDT 8.000 to 15,000 per month and are negotiated with the driver, according to previous experience and the length of the working week.

5.19 Overview of Costs of Registration


Listed below is a detailed summary of the bureaucratic and legal hurdles an entrepreneur must overcome in order to incorporate and register a new firm, along with their associated time and costs. Specifically, it examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economys per-capita gross national income (GNI).The information provided here was collected as part of the Doing Business project of The World Bank Group, which measures and compares regulations relevant to the life cycle of a small to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in June 2010. In total it took a period of 19 days (since step 6 is simultaneous with Step 5), and 11,300 Taka. The example concerns a standardized Company, a Private Limited Liability Company, located in Dhaka, as follows:
No. Procedure Verify online the uniqueness of the 1 proposed company name with RJSC&F 2 3 4 5 6 7 Pay adhesive stamp fees at a designated bank File documents with the RJSC&F for registration Make a company seal Register with the tax authority Register for VAT Obtain a trade license 1 day 1 day 1 day 9 days 7 days, simultaneously with procedure no charge 5 6 days BDT 5,000 BDT 2,000 BDT 2,925 registration fees + BDT 1,200 registration filing fees BDT 30-50 no charge 1 day BDT 100 Time to Complete Associated Costs

Source: http://www.doingbusiness.org/data/exploreeconomies/bangladesh/starting-a-business

Embassy of the Kingdom of the Netherlands in Dhaka

Exportable Products as presented, for example, by the Export Promotion Bureau, Bangladesh (EPB) of the Ministry of Commerce*
Fruits Leather Garments

Vegetable

Jute Products

ICT Products

Pharmaceuticals

Handicrafts

Woven Garments

Knitwear

ICT Products

Shrimps

Food Products

Bicycle

Home Textiles

Tea

Potteries

Ceramics Products

Ship Building

* Source: http://www.epb.gov.bd/index.php?NoParameter&Theme=default&Script=exportproductshow

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06

Indicative Costs of Doing Business

The cost of doing business in Bangladesh is in general highly competitive in comparison to other economies in the region. The following table based on information from BOI summarizes the relevant costs typically incurred by businesses. As prices change on a regular basis it is advisable to check the website of the BOI mentioned below the table to view the latest prices and/or check with one of the employers organizations (cf. Chapter 10). Regarding the tax structure mentioned, this depends of course on the country of origin and the individual situation, but in general expatriates are not obliged to pay personal income tax in Bangladesh. Summary of Business Costs Land Average price of developed land in the different industrial belts varies depending on location (price per square meter). Construction Average per square meter Gas Tariff Average per 000 meter Power Tariff Average per kw/h Human Resources: Labor Force Average per month depending on skill level Human Resources : Management Salaries Mid-level: average US$ per month depending on the skills and experience Top-level: average US$ per month depending on the experience Sea Freight (in US$ approx. per FCL, Full Container Load): Destinations * Rotterdam, Netherlands New York, USA Sydney, Australia Hong Kong, China Jebel Ali, United Arab Emirates Tax Structure Personal income: On the first Tk. 165,000 On the next Tk. 275,000 On the next Tk. 325,000 On the next Tk. 375,000 On the balance US$ 10.0-15.0 100-125 64 0.07 50-100 400-500 1000-2500 20FCL 1,625 3,050 1,250 550 850 40FCL 2,970 3,750 2,100 870 1,420

Nil 10% 15% 20% 25%

Embassy of the Kingdom of the Netherlands in Dhaka

Corporate Income: Publicly traded company Non-publicly traded company Bank, insurance and financial company Mobile phone operator company
Source: http://www.boi.gov.bd/about-bangladesh/costs-of-doing-business, with the exception of: * : Information obtained from Hap International Movers, Dhaka, Bangladesh (April 2011).

27.5% 37.5% 45% 45%

The above costs are for reference purposes only. For specific and detailed information, you may contact relevant service agencies, business consultants, employers organisations (cf. Chapter 10), etc.

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A Guide for New Investors in Bangladesh

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07

Transport and Energy Infrastructure in Bangladesh

Transport and energy are two crucial elements in any investment decision.

Transport Network16
The transport sector of Bangladesh consists of a variety of modes. As the country is essentially a flat plain all three modes of surface transport, i.e. road, railway and water, are widely used in carrying both passengers and cargo. The airline network is also extensive and effective. These different types of transport are summarized in Map 2.

1) Road

In Bangladesh, among the various modes of transport, road transport system has been playing a significant role in transporting passengers and goods. The Roads and Highways Department (RHD) manage several categories of road. RHD has total length of 20,948 km of roads under its control. RHD also controls a total number of 4,659 bridges and 6,122 culverts. RHD are currently operating about 161 ferry boats in 81 crossings (13 on national highways, 11 on regional highways and 57 on feeder roads) on its road network throughout the country. As of January 2010, the Local Government Engineering Department (LGED) has so far constructed a total of 133,514 km of upazila and union roads (approximately half dirt road and half paved roads) and 971,498 bridges/culverts. The 4.8 km long Bangabandhu Bridge (formerly known as Jamuna Bridge) was opened to traffic in 1998, and currently is the eleventh longest in the world. It has established a strategic link between the East and the West of Bangladesh. It is generating multifaceted benefits to the people and promoting inter-regional trade. Apart from quick movement of goods and passenger traffic, it is facilitating transmission of electricity and natural gas and has integrated the telecommunication links. The planned Padma Multipurpose Bridge Project is The planned Padma Multipurpose Bridge Project intended to serve similar purposes in particular in opening up the south-western region. It also includes a railway level. The costs are estimated at $2.9 billion to be provided by contributions of World Bank, ADB, IDB & JICA.

16. This section is mainly based on: http://www.boi.gov.bd/about-bangladesh/transport-infrastructures

Embassy of the Kingdom of the Netherlands in Dhaka

Map 2: Transport Network of Bangladesh

07

Source: http://www.boi.gov.bd/about-bangladesh/transport-infrastructures

A Guide for New Investors in Bangladesh

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2) Air

The Civil Aviation Authority is a public sector entity entrusted to construct, maintain and supervise airports and regulate air traffic. The national flag carrier Biman flies to 26 international and eight domestic destinations. There are now 13 operational airports and Short Take-off and Landing (STOL) ports in Bangladesh. These are Dhaka, Barisal, Chittagong, Comilla, Coxs Bazar, Iswayrdi, Jessore, Rajshahi, Syedpur, Sylhet and Thakurgaon. Of these, the airports at Dhaka, Chittagong and Sylhet serve international routes. Air cargo and Short Take-off and Landing (STOL) services have been handed over to the private sector by the government. Bangladesh can be reached by air from any part of the world. Several international carriers fly to and from Dhaka (e.g. Emirates, Singapore Airlines, Qatar Airways, Thai Air and Malaysian Airlines). Biman Bangladesh airlines connects Dhaka with 27 major cities of the world. Within the region and within the country several private airlines are operating such GMG, United and Regent airways.

3) Rail

The Bangladesh Railway provides service to places of interest such as Chittagong, Sylhet, Khulna, Mymensingh, Bogra, Rajshahi & Dinajpur, starting from Dhaka. The inter-city Express Service is available to and from important cities at cheap fares. About 32% of the total area of Bangladesh is effectively covered by railways. Bangladesh Railway had a total network of 2,835.04 km (Broad Gauge 659.33 km, Dual Gauge 374.83 km and Meter Gauge-1,800.88 km) and a total of 440 stations at the end of the year 2008-2009. Train services between Dhaka-Kolkata have been commenced on 14 April 2008 in order to establish communication between Bangladesh and India. After inclusion of a railway track over the Bangabandhu Bridge, a railway link between east and west zone has been established.

4) Waterways

Country-made crafts are the most widely used carriers on the rivers. These carry passengers and merchandise on a large scale. The landscape of Bangladesh is dominated by about 250 major rivers which flow essentially north-south.The alluvial flood plain formed by these rivers covers most of the country. Wherever there is a river and a village, a launch or steamer will ply for trade. Bangladesh Inland Water Transport Authority (BIWTA) has been established by the government for maintenance of navigability of ports and channels while

Inland water transport

Embassy of the Kingdom of the Netherlands in Dhaka

tarif71@hotmail.com

the state-owned corporation (BIWTC) provides passenger, and cargo services in inland waterways and coastal areas of the country. Selected information on waterways is summarized in the following table: Length of inland waterways Length of navigable waterways: Monsoon Dry season Least available depth range Annual water discharge Annual quantum of silt No. of passenger carried/year Quantum of cargo carried/year
Source: Bangladesh Inland Water Transport Authority (BIWTA): http://www.biwta.gov.bd/

24,000 km 5,968 km 3,865 km 3.90 to 1.50 meter 1,400 bn cubic meter 2.5 bn tons 87.80 m 0.58 m tons

The entire coast along the Bay of Bengal is 710 km long. There are two major ports in the country. Chittagong, the oldest port, has been an entry-port for at least 1,000 years (cf. Annex 2). The Mongla port in Khulna region serves the western part of Bangladesh, and in future is planned to serve India (especially in the West and North of Bangladesh) as well as Bhutan and Nepal. Recently the Government has indicated its desire to develop a third port, Pathuakali, in between Chittagong and Mongla.

Energy
As indicated in Chapter 1 the energy crunch is currently a crucial constraint to doing business in Bangladesh. This applies especially to electricity and gas. A moratorium on new electricity and gas connections severely hampers the establishment of new businesses. In addition the frequent power outings result in interruptions in the production and/or in increased production costs through the use of (diesel) generators. Renewable energy (e.g. solar power) is receiving increased attention, for example the Solar Home Systems (SHS) but cannot make up for the lack of energy as such. More background information on the Power Industry in Bangladesh can be found at: http://www.boi.gov.bd/key-sectors/power-industry

07

Inland waterways

A Guide for New Investors in Bangladesh

29

Miriam Otto

08
Private

Financial System and Loan Facilities in Bangladesh

Finance and Banking System: Overview


The financial sector in Bangladesh is continuously evolving towards a more modern and efficient system of finance which is supportive of greater investment and inclusive economic growth. The financial system of Bangladesh consists of The Bangladesh Bank, scheduled banks, non-bank financial institutions, micro finance institutions, insurance companies, co-operative banks, credit rating agencies and stock exchange. The Banking infrastructure (March 2010) of the country can be summarized as follows: Type of bank State owned Specialized Foreign Total No. 4 4 30 9 47 No. of branches 3,391 1,365 2,387 58 7,201

For more details, see BOIs website: http://www.boi.gov.bd/about-bangladesh/finance-andbanking The Foreign Investment Act of 1980 guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees. Although the repatriation of funds is indeed guaranteed in practice it takes sometimes substantial time to materialize. Foreign investors are free to make investments in Bangladesh in the industrial enterprises except for a few reserved sectors. A bilateral (investment) treaty between the Netherlands and Bangladesh on Double Taxation Avoidance exists since 1993.17 An industrial venture may be set up in collaboration with local investors or may even be wholly owned by the foreign investors. Similarly, there is no restriction under the Foreign Exchange Regulations Act on the import of securities into Bangladesh. However, no securities can be exported or taken out of Bangladesh without general or special permission from Bangladesh Bank (the central bank). The Guidelines for Foreign Exchange Transactions regarding foreign direct and portfolio investment are issued by the Bangladesh Bank (BB), and can be downloaded at these two websites: http://www.bangladesh-bank.org/regulationguideline/foreignexchange/ feguidevol1all.pdf http://www.boi.gov.bd/how-to-invest/forms-a-procedures/guideline-for-foreigndirect-and-portfolio-investments
17. Date of Signing: 13/07/1993; Statutory Regulatory Order, SRO No: 267-L/94 dated 14/9/1994, NBR, Min. of Finance.

Embassy of the Kingdom of the Netherlands in Dhaka

For more details on selected financial subjects reference is made to the relevant websites in the following table. Subjects Exchange Control and Remittances Relevant Website http://www.boi.gov.bd/how-to-invest/forms-a-procedures/ exchange-control-a-remittance

http://www.boi.gov.bd/how-to-invest/forms-a-procedures/ Foreign Loans, Suppliers registrationapproval-for-foreign-loan-suppliers-creditCredit, PAYE Scheme etc. paye-scheme-etc Letters of Credit/Due Diligence Finance and Banking http://www.manufacturebd.com/images/doing_business_ in_bangladesh-a_country_guide.pdf http://www.boi.gov.bd/about-bangladesh/finance-andbanking

The Role of the Bangladesh Bank


As a foreign entrepreneur/investor the role of the Bangladesh Bank is at least indirectly of importance (cf. for example Section 5.2). Below background information is provided concerning the broader role of this Bank. The core functions of the Bangladesh Bank (BB) are: 1. BB as the central bank of Bangladesh executes all the functions that a central bank traditionally performs as elsewhere in the world. The core functions of BB are briefly discussed as follows: 2. BB formulates and implements monetary policy aiming at stabilizing domestic monetary value and maintaining competitive external per value of taka for fostering growth and development of countrys productive resources in the best national interest. BB formulates and implements intervention policies in the domestic money market and foreign exchange market. BB intervenes in the money market with some policy instruments such as: a. Open market operation (treasury bills/bonds, repo, reverse repo auctions) b. Variations in reserve ratios such as Cash Reserve Requirements (CRR) and Statutory Liquidity Ratio (SLR) c. Secondary trading d. Discounting rate/bank rate and e. Moral suasion 3. BB monitors and supervises scheduled banks and non-bank financial instructions (NBFIs) that include off-site supervision and on-site supervision in order to enhance the safety, soundness, and stability of the banking system to ensure banking discipline, protect depositors interest and retain confidence in the banking system. 4. BB holds sole responsibility of the management of international reserve representing aggregate of BBs holding of gold, foreign exchange SDR and reserve position in the IMF. 5. BB, as the central bank of Bangladesh reserves sole responsibility to issue bank note

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6. BB performs as a clearing house for the scheduled banks to clear and settle inter-bank payment arising through drawing cheque, drafts, bills, etc. to one another. 7. BB acts as a banker to the government 8. BB functions as a lender of the last resort for the government as well as for the countrys scheduled banks 9. BB acts as an advisor to the government 10. BB directs the growth expediting programs for the national interest. Additionally, BBs functions include some other promotional activities such as development of new instruments, guidelines for money and financial market participants, providing training to the banks and NBFIs, monitoring and encouraging corporate social responsibilities (CSR) executed by banks and NBFIs and so on (Source: http://www.bangladesh-bank.org/) The Mission of the BB includes separate elements for the business community and for Bangladeshis abroad: For the business community: We shall maintain liquidity conditions and credit policies ensuring adequate credit flows at market driven flexible interest rates for all productive economic activities, including in sectors like agriculture and SMEs where markets have not been very responsive. We shall foster macroeconomic stability through monetary and external sector management. We shall promote and support development of new financial products, services and instruments. We shall maintain a secure and quick payment system for settlement of claims. For Bangladeshis abroad: We shall facilitate remittances from your earnings abroad to Bangladesh through legitimate banking channels free of involvement of money launderers or terrorism financiers. We shall support and promote development of new investment opportunities for your remittances to Bangladesh.

Loan Facilities in Bangladesh


In order to establish the different kinds of development credits (short, medium or long-term) that are provided by financial institutions in Bangladesh, and to find out for which purpose, at what interest rates, for how many years, and which documents are required, one is advised to consult the website of the BOI (http://www.boi.gov.bd/about-bangladesh/ finance-and-banking) and the Bangladesh Bank (http://www.bangladesh-bank.org/). Specifically for renewable energy projects financing can be acquired from the Infrastructure Development Company Limited (IDCOL), which was established in 1997 by the GOB. The Company was licensed by Bangladesh Bank as a non-bank financial institution (NBFI) in 1998. Since its inception, IDCOL is playing a major role in bridging the financing gap for developing medium and large-scale infrastructure and renewable energy projects in Bangladesh. For more information see: http://www.idcol.org/

Embassy of the Kingdom of the Netherlands in Dhaka

Supporting Programs from the Dutch Government


We strongly suggest that potential investors check the webpage of the Embassy (http:// www.netherlandsembassydhaka.org/), and that of the EVD (www.evd.nl) for the following support programs: Supporting Programs from the Dutch Government PSI: Private Sector Investment ORIO Matchmaking Facility PUM: Dutch Senior Experts FMO CBI 2Explore 2G@together

Kavita Van der Loop

Embassy of the Kingdom of the Netherlands in Dhaka: economic diplomacy involves Holland branding during major sport events, such as the ICC Cricket World Cup in early 2011.

The United States Embassy in Dhaka


The website of the US Embassy in Dhaka is worth consulting, in particular: http://dhaka.usembassy.gov/doing_business.html. It provides a list of the services offered by the embassys U.S. Trade Center (USTC) to American businesses seeking export and investment opportunities in Bangladesh.

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09

Obtaining Utility Connections

Entrepreneurs should either apply directly to the concerned utility authority for obtaining utility services, or they can approach BOI for assistance, as long as they provide a copy of the company registration/sanction letter. A Utility Service Cell (USC), a one-stop-service, within BOI is responsible to help investors in obtaining the necessary utility services in locations outside of the export processing zones (consult the website: http://www.boi.gov.bd/aboutboi/key-organogram/371-facilities-a-services-and-one-stop-service). For utility services in locations within the export processing zones, BEPZA is the responsible authority for obtaining utility services. Although entrepreneurs are encouraged to contact BOIs Utility Service Cell (USC) for obtaining utility services, in the following table an overview is given of the respective providers for information: Utility Connection Electricity: Provider Power Development Board (PDB) Dhaka Electric Supply Authority (DESA) Dhaka Electric Supply Company (DESCO) and Rural Electrification Board (REB) Gas: Titas Gas Transmission & Distribution Company Ltd. (TGTDCL) Bakhrabad Gas System Ltd. (BGSL) Jalalabad Gas Transmission & Distribution System Ltd. (JGTDSL) Telephone: Water: Sewerage: Tubewell Licensing: Bangladesh Telegraph and Telephone Board (BTTB) Water and Sewerage Authority, WASA (in rural areas self-generated) Water and Sewerage Authority, WASA (in rural areas self-generated) Water and Sewerage Authority, WASA

Source: BOI (2007): Bangladesh Investment Handbook. Dhaka: BOI, May 2007, 3rd Edition.

As a word of caution, utility connections can at times be difficult to obtain. Not only do such connections take their own time and effort, but in some periods (e.g. second half of 2010) new connections for electricity and gas were simply not available due to a policy implemented as a result of the energy shortage in the country.

Embassy of the Kingdom of the Netherlands in Dhaka

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1) Federations:

Employers Organizations

A great variety of employers organizations exists in Bangladesh, with the major distinctions between national federations, chambers of commerce and industries, and industrial associations. They can be distinguished as follows:

a. Bangladesh Employers Federation (BEF) b. Federation of Bangladesh Chambers of Commerce and Industry (FBCCI): all Business Associations (cf. item 2 below) are affiliated with this federation c. Bangladesh Chamber of Industries (BCI)

2) Business Associations: a. Chambers of Commerce, registered with the Ministry of Commerce b. Industry Associations, registered with the Ministry of Industry

It is in general advisable to become a member in one or more of these organizations, be it the Dutch-Bangla Chamber of Commerce and Industry (DBCCI) or one of the specialized industry associations, in order to receive up-to-date information, and be able to call upon them when questions arise. The details are summarized in the table below, and the websites in the next table. The main Employers Organizations in Bangladesh and selected characteristics.
Empl. Organ Federations Acronym BEF FBCCI BCI CCI * MCCI DCCI CCCI FICCI KCCI RCCI SCCI BCCI Name Bangladesh Employers Federation Federation of Bangladesh CCI Bangladesh Chamber of Industries Metropolitan CCI Dhaka CCI Chittagong CCI Foreign Investors CCI Khulna CCI Rajshahi CCI Sylhet CCI Bogra CCI Year Established 1951/1998 1973 1985 1904/1980 1958 1963 1905/1987 1934 1950 1966 1962 Changed name in 1987 (before it was Agrabad CCI) Changed name in 1980 (before it was Narayanganj CCI) Details Changed name in 1998 (before it was called the Bangladesh Employers Association BEA)

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BWCCI IA * BGMEA BKMEA BJMA BTMA BFLLFEA

Bangladesh Women CCI B. Garment Manufacturers & Exporters Association B. Knitwear Manufacturers & Exporters Association B. Jute Mills Association B. Textile Mills Association B. Finished Leather, Leather-goods & Footwear Exporters Ass.

2001 1978/9 1996 1983 1983 1985

Mission is to support the women business community Set up a regional office in Chittagong in 1985 Enhances social compliance status of its members Revival of jute production could boost the association Caters for private yarn and fabric manufacturing and Dyeing-Printing-Finishing mills 207 tanneries are associated

* CCI = Chamber(s) of Commerce and Industry. IA = Industry Association(s). Sources: (i) Kochanek, Stanley A. (1993): Patron-Client Politics and Business in Bangladesh. University Press Limited (UPL), Dhaka. (ii) ILO/Dr A. Al Faruque (2009b): Current Status and Evolution of Industrial Relations System in Bangladesh. Geneva/Printed in India (82 pp.). (iii) BEF: http://www.ioe-emp.org/en/member-federations/index.html?tx_gsifeuserlist_pi1%5BshowUid%5D=10

The websites of the main Employers Organizations in Bangladesh.


Employers Organization Bangladesh Employment Federation (BEF) Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Metropolitan Chamber of Commerce and Industry (MCCI) Dhaka Chamber of Commerce and Industry (DCCI) Chittagong Chamber of Commerce and Industry (CCCI) Foreign Investors Chamber of Commerce and Industry (FICCI) Khulna Chamber of Commerce and Industry (KCCI) Rajshahi Chamber of Commerce and Industry (RCCI) Bangladesh Garment Manufacturers & Exporters Association (BGMEA) Bangladesh Knitwear Manufacturers & Exporters Association (BKMEA) Bangladesh Jute Mills Association (BJMA) Bangladesh Textile Mills Association (BTMA) Bangladesh Women Chamber of Commerce and Industry (BWCCI) Dutch-Bangla Chamber of Commerce and Industry (DBCCI) in Dhaka Bangla-Dutch Chamber of Commerce (BDCC) in Groningen Website http://www.ioe-emp.org/en/member-federations/index.html?tx_gsifeuserlist_pi1%5BshowUid%5D=10 http://www.fbcci-bd.org/ http://www.mccibd.org/ www.dhakachamber.com www.chittagongchamber.com www.ficci.org.bd www.khulnachamber.com www.rajshahichamber.org www.bgmea.com www.bkmea.com www.bjmc.gov.bd www.btmadhaka.com http://www.bwcci-bd.org/index.php?view=home http://www.dbcci.org/ http://www.bdcc.eu/

Information on Trade Fairs can be received from these organizations, as well as from the Export Promotion Bureau (EPB) of the Ministry of Commerce: http://www.epb.gov.bd/

Embassy of the Kingdom of the Netherlands in Dhaka

Employment Conditions
The minimum age for workers in Bangladesh is 16 years in factories and establishments. Contracts are made in the form of a letter of offer. Workers may also be engaged on verbal agreements. Workers in the public or private sector typically work eight and a half hours daily (including half an hour for meal or prayer), or 48 hours per week. Friday and Saturday are the weekly holidays (the weekend). In government organizations and in some private organizations as well, a probationary period exists for skilled or semi-skilled workers varying between three months to one year. During this period either party may serve one months notice for terminating or resigning the job. In the private sector, the dignity of labor is ensured in accordance with the principles enunciated in the International Labor Organization (ILO) conventions and recommendations, usually captured under the phrase Social Compliance, which is often enforced from the side of the markets of developed countries.

11

Labor Force and Tripartite Dialogue

Labor Laws and Policies


In Bangladesh the following major labor laws are now in operation: Labor Acts 2006 Private Road Transport Labor Welfare Fund Law 2005 Labour Welfare Foundation Law 2006 Minimum Wages Board Laws Child Labor Policy Domestic Worker Protection and Welfare Policy 2010

The main labor policies are:

This information including proposed amendments to the Labor Law and Labor Policy, can be found on the website of the MOLE but only in the Bangla language (http://www.mole. gov.bd/).

Tripartite Dialogue
A useful overview paper has been written under the auspices of EKN entitled Tripartite Dialogue in Bangladesh: Trade Unions and Employers Organizations; A position paper (December 2010). This is available at the website of Embassy and explains the role of the various types of trade unions and employers organizations as well as the efforts to form platforms to engage in a tripartite dialogue with the government on issues of industrial relations and workers rights; the ILO and the Bangladesh Institute of Labour Studies (BILS) also play a role in this dialogue.
Organizations Involved in Tripartite Dialogue Ministry of Labour and Employment (MOLE) International Labour Organization (ILO) Bangladesh Institute of Labour Studies (BILS) Bangladesh Employment Federation (BEF) Website http://www.mole.gov.bd/ http://www.ilo.org/dhaka/lang--en/index.htm http://www.bils-bd.org/main.html http://www.ioe-emp.org/en/members-regions/index. html?tx_gsifeuserlist_pi1%5BshowUid%5D=10

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12

Good Business Practices 18

Corporate Social Responsibility


Entrepreneurs realize more and more that investments and economic activities in developing countries have not only a direct but also an indirect impact on the local society, region or even the whole country. This is one of the driving forces behind the emergence of Corporate Social Responsibility (CSR); companies are increasingly recognizing that to secure their long-term success, they need to address wider societal and environmental problems and adhere to social and environmental compliance. In short CSR stands for positive value creation for people, profit and planet and to provide answers on legitimate questions from the society as a whole. Companies have to take responsibility for these aspects in a positive and balanced manner. If CSR is done in a well thought-out way this will benefit the company and create many new opportunities. For example reducing use of pesticides will not only have a positive effect on the environment it will also improve farm economics. Good and inspiring working conditions will reduce staff turnover and good relations with the local community will prevent the problems of petty theft. Moreover, companies which are actively pursuing CSR may minimize the risks of reputation damage in the marketplace. Setting up a new company requires a lot of effort and resources and many investors tend to think Lets first get the business up and running, later well do something about CSR. Although this approach is understandable it is neither wise nor advisable. Much better is to start from the beginning with well thought-out human resources and environmental strategies. At the same time one is advised to start building a good relationship and possible activities with the local community. The Government of Bangladesh has no explicit policy on CSR, but some of the ministries, such as the Ministry of Commerce and the Ministry of Information, are encouraging private industry to engage in CSR activities, which are also tax deductible, for example donations. Some CSR activities are being carried out in Bangladesh, many of them by companies that are members of textile associations such as the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). The Dhaka Chamber of Commerce and Industry (DDCI), and think tanks like the Bangladesh Enterprise Institute (BEI) and banks (Standard Chartered Bank) are involved in other initiatives. The United Nations Global Compact brings together representatives of private industry, UN agencies, employee associations and civil-society organizations to promote social and environmental initiatives. Companies also enjoy the support of two private institutions with
18. This Section is in part based on: (i) Investing in the Agricultural Sector of Ethiopia; A Guide for New Investors. Ethiopian Investment Agency with support of the Netherlands Ministry of Agriculture, Nature and Food Quality and the Embassy of the Kingdom of the Netherlands in Addis Ababa, Ethiopia: October 2008; and (ii) http://www.csr-weltweit. de/en/laenderprofile/profil/bangladesch/index.nc.html

Embassy of the Kingdom of the Netherlands in Dhaka

CSR expertise: the Bangladesh Enterprise Institute (BEI) and the CSR Center Bangladesh. BEI facilitates partnerships and programs in the private sector that are working to achieve Bangladeshs development goals, and it also organizes the local Global Compact network. The CSR Center Bangladesh identifies cases in which companies are not adequately implementing social and environmental standards, and also provides tools to help them improve their performance. It also serves as a network for the exchange of views and experiences. Both institutions provide a good contact point for companies seeking to become involved in CSR activities in Bangladesh (see table below). Platform/Organization UN Global Compact UN Global Compact Local Network Bangladesh Bangladesh Enterprise Institute (BEI) CSR Center Bangladesh Website http://www.unglobalcompact.org/ http://www.unglobalcompact.org/Networks AroundTheWorld/local_network_sheet/BD.html http://globalcompactasiapacific.org/gcasia/ CountryNetworks/Bangladesh.aspx http://www.bei-bd.org/ http://www.csrcentre-bd.org/ (under construction); see also: http://www.csr-weltweit.de/en/laenderprofile/ profil/bangladesch/index.nc.html

Social Business
A special type of business is the new kind of capitalism promoted by Muhammad Yunus in his recent book Building Social Business (2010, UPL, Dhaka). In this book he explains the seven principles of social business (cf. p. 3): 1. The business perspective is to overcome poverty, or one or more problems that threaten people and society not to maximize profit. 2. The company will attain financial and economic sustainability. 3. Investors get back only their investment amount. No dividend is given beyond the return of the original investment. 4. When the investment amount is paid back, profit stays with the company for expansion and improvement. 5. The company will be environmentally conscious. 6. The workforce gets market wage with better-than-standard working conditions. 7. Do it with joy!! There is already experience with this kind of business through such companies as Danone, BASF Grameen Ltd. and Grameen Shakti, and recently interest is shown by OTTO GmbH. Large companies, like Danone, can easily use their CSR-funds and then social business can indeed become sustainable and income-generating, in particular when it concerns small or medium-sized projects.

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Dos and Donts


CSR is an integral part of modern business; it requires a clear vision and strategy. At the same time it should be realized that there are some simple basic principles. Here are some of the basic principles mentioned: Know what you stand for as a company. Have good secondary conditions of employment. For instance a good leave policy for family circumstances, like maternity leave or weddings or deaths in the family. Ensure a safe working environment and make sure that dangerous chemicals are properly stored and locked away and that workers wear the necessary protective clothing. When you are not satisfied with an employee, give him/her a warning first. For people to do good work, the most important is to train them well. Make sure people know what they have to do and know how they should do it. Give them clear job descriptions and be there to teach or train them.

Embassy of the Kingdom of the Netherlands in Dhaka

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Tourism Dhaka

Practical Information on Dhaka and Other Cities

Bangladesh is bordered by India on all sides except for a small border with Burma on the south-east and the Bay of Bengal to the south. Together with the Indian state of WestBengal, it makes up the ethno-linguistic region of Bengal. The name Bangladesh means The Country of Bengal in the official Bengali language.19

Prior to the time of Bangladeshs liberation in 1971, most tourists kept their visits to mainly Dhaka and Chittagong. Since 2000, however tourism in other areas of Bangladesh has increased in popularity. Some of the more popular destinations are Coxs Bazar, Teknaf, Sundarbans, Kuakata, Paharpur and Tetulia.

Dhaka (Bangla: XvKv; formerly known as Dacca and Jahangir Nagar, under Mughal rule), is the capital of Bangladesh and the principal city of Dhaka District. Dhaka is a megacity and one of the major cities of South Asia. Located on the banks of the Buriganga River, Dhaka, along with its metropolitan area, has a population of almost 12 million, making it the largest city in Bangladesh. It is one of the most densely populated cities in the world and forms the worlds 9th largest agglomeration. Dhaka is known as the City of Mosques and renowned for producing the worlds finest muslin. Dhaka is also known as the Rickshaw Capital of the World. Approximately 400,000 cycle rickshaws run each day. Today it serves as one of the centers for culture, education and business in the region.

Old Dhaka by night

Secondary Cities in Bangladesh


Very few foreign entrepreneurs have established themselves permanently in one of the secondary cities, such as Chittagong, Khulna or Rajshahi. Therefore, no separate section is included on such cities, but instead reference is made to the internationally acclaimed Tourist Guides such as Bradt and Lonely Planet.

19. Sources used in this chapter are among others: http://www.boi.gov.bd/about-bangladesh/expatriate-living-conditions/culture-and-nature, and http://www.boi.gov.bd/about-bangladesh/expatriate-living-conditions

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Miriam Otto

Expatriate Living Conditions in Dhaka


International comparisons generally indicate that Dhaka is among the least popular cities of the world to live in. For example, the 2011 Livability Index of the Economist Intelligence Unit (EIU) ranks Harare as the most unlivable city in the world followed by Dhaka on second place (139th out of 140 cities surveyed). The criteria used were based on such factors as stability, health care, environment and culture, education and infrastructure (The Daily Star, 24/02/2011). Similarly, an AON Consulting study has labeled Dhaka the riskiest city for employers; ranked last out of 90 cities, it scores even lower than Phnom Penh, Lagos, Karachi and Teheran. AONs People Risk Index looks at demographics, education, employment practices and government regulation. The cities mentioned above with the highest risk ratings have a few key factors in common: rapid urbanization, low literacy and poor spending on education (The Daily Star, 30/09/2010). Popular wards to live in among expatriates include Gulshan, Baridhara and Banani. In up-market Gulshan and Baridhara apartments cost around BDT. 80,000 to 150,000, while in Banani and DOHS it starts from BDT. 40,000 upwards; this concerns 3 to 4 room apartments with the more expensive ones having a surface area of up to 4,000 sq. Ft. An overview of typical daily living costs in Dhaka is given in the following website: http://www.boi.gov.bd/ about-bangladesh/expatriate-living-conditions

Orientation Map of Dhaka


The orientation Map of Dhaka City on the next page indicates the locations of such areas as (moving from South to North): The Old town near the Buriganga River around Kotwali; The area with many relevant government offices (e.g. the BOI): Motijheel; Nearby is also Banga Bhaban, the official residence of the President, which was built in the Moghul architectural style; Kamalapur Railway Station in the East where the containers from Chittagong arrive; Dhaka University in the New Market area;

Hazaribag with a concentration of leather Industries (to be relocated in the coming years to Savar in the north-western part of Dhaka); Dhanmondis upper-class residential area includes many of the cultural institutes and galleries, as well as shopping centres; Tejgaon industrial area; The Jatiya Sangsad Bhaban is the National Parliament Building (in the map indicated as National Assembly Hall), located at Sher-e-Bangla Nagar. It is designed by the famous architect Louis I Kahn, and is known for its distinctive architectural features (see photograph in chapter 3); Gulshan and Baridhara contain most of the Embassies, including the Embassy of the Kingdom of the Netherlands. It is located in what is marked as Gulshan-2 in Map 3 below; the Dutch Club is also located in this area (http://www.dutchclubdhaka.org/ default.asp); The Hazrat Shahjalal International Airport in the North; Finally, not on the Map, to the North of the airport is the new residential area of Utara.

Embassy of the Kingdom of the Netherlands in Dhaka

Map 3: Map of Dhaka City

Netherlands Embassy

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Source: Dhaka Calling; Monthly Tourist Guide. January 2011. Prime Art Press Dhaka.

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Hotels
Dhaka offers several 5 star hotels. They include the following: Pan Pacific Sonargaon Hotel, Radisson Water Garden Hotel, The Westin Hotel, Seagull Hotel, Ruposhi Bangla Hotel, Regency Hotel and Resort and Hotel Sarina. These hotels provide deluxe accommodation, restaurants, health clubs and entertainment facilities. For further information reference is made to Dhaka Calling. A Monthly Tourist Guide which is available in the larger hotels and bookshops.

Schools
A range of private, international schools are present in Dhaka city. The American International School of Dhaka, AISD (http://www.ais-dhaka.net/) is the only one that provides education of grades one to twelve including the International Baccalaureate (IB); it is located in Baridhara near the British High Commission (cf. Map 4). A selection of some of the other international school is as follows: International School Dhaka; Australian International School, Dhaka; The Aga Khan School, Dhaka; Canadian International School, Dhaka; Grace International School, Dhaka; and the International Turkish Hope School.

Healthcare
Basic health care needs can be met at the Travelers Clinic of the ICDDR,B. the International Centre for Diarrheal Disease Research, Bangladesh (http://www.icddrb.org/). They have foreign physicians who also practice at certain days at the American International School of Dhaka (AISD; see above). Notable hospitals in Dhaka include: United Hospital; Square Hospital ; Apollo Hospital; and Labaid Cardiac Hospital.

Netherlands Recreation Centre http://www.dutchclubdhaka.org/default.asp

Entertainment and Recreation


Dhaka city offers entertainment, such as cultural shows, concerts, fashion show events, and international cuisine, and are found in the popular districts of Dhanmondi and Gulshan/ Baridhara/Banani. Dhaka city offers a range of private clubs, starting with the Dutch Club (http://www.dutchclubdhaka.org/default.asp); other clubs are: American Recreation Association (ARA), Nordic Club, British High Commission, International Club, Gulshan Club, Bagha Club, etc.

Embassy of the Kingdom of the Netherlands in Dhaka

Map 4: Map of Gulshan, Baridara and Banani

BADDA

Netherlands Embassy

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Source: http://en.wikipedia.org/wiki/Gulshan_Thana

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LIST OF ANNEXES
Annex 1 Export Processing Zones (EPZ) and the Economic Zones (EZ) Act 2010 ............ 47 Annex 2 Chittagong Port ...................................................................................................................... 49 Annex 3 Climatic Indicators of Bangladesh .................................................................................... 51 Annex 4 Application Forms .................................................................................................................. 52 Annex 5 List of Business Licenses, Agencies and Websites ...................................................... 53 Annex 6 Investment Incentives .......................................................................................................... 54 Annex 7 Translations of Specific Bangla Words ............................................................................ 59 Annex 8 Sector Study: Water ............................................................................................................... 60 Annex 9 Ranking of Bangladesh and Selected Countries on Several Indices .................... 66

Embassy of the Kingdom of the Netherlands in Dhaka

Export Processing Zones (EPZ) and the Economic Zones (EZ) Act 2010
Export Processing Zones (EPZs) are export oriented industrial enclaves which provide the infrastructures, the facilities, administrative and support services for a wide variety of enterprises. Bangladeshs highly successful EPZs in Dhaka and Chittagong are now complemented by new EPZ developments and other valuable real estate developments around the country.

Annex 1

BEPZA
The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones. The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, and location free from cumbersome procedures. Businesses from 32 countries have so far invested in the existing zones. More information on BEPZA can be found at: http://www.epzbangladesh.org.bd/. Currently eight EPZs exist with others due to open in the next few years. The following table provides data on these eight EPZs. No. of industries Name of EPZ Chittagong Dhaka Comilla Mongla Uttara Ishwardi Adamjee Karnaphuli Total Manufacturing 157 95 21 08 06 07 15 13 325 Under Implementation 34 25 24 09 01 21 37 63 215 Investment (m US$) 751.42 686.42 90.70 4.23 4.46 25.49 80.01 66.97 1,709.64 Export (m US$) 10,998.03 8,991.51 379.88 43.25 1.59 10.80 143.35 80.52 20,648.92

Employment 145,578 71,423 6,533 221 2,389 2,075 8,983 9,014 246,216

01

Source: Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance; http://www.boi.gov.bd/about-bangladesh/export-processing-zones

EPZ benefits and incentives


The following are just some of the special incentives offered to businesses located in an EPZ: 10 year tax holidays Concessionary tax for five years, after the first ten Duty and tax free exports from the zone

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Annex 1
Intra and inter zone exporting and sub-contracting Fully serviced plots Readymade factory buildings Available infrastructure facilities Warehouses and bonded areas Duty free import of machinery, raw materials, construction materials and spare parts Sale of 10% finished product to domestic tariff area Sale of 10% surplus raw material to domestic tariff area Sale of 10% defective finished goods and domestic tariff area items 100% backward linkage and accessories items are allowed to be sold in export oriented industries (deemed as exports) Sale of old/scrap machineries in domestic market Business and administration support services Customs clearances on site Recreational amenities

The location of the eights EPZs are indicated on Map 5

Economic Zones Act, 2010


In August 2010, the GOB enacted the Bangladesh Economic Zones Act, 2010. Although their current EPZs have been effective in creating jobs and increasing investment, the GOB recognized that they have not provided investors with the flexibility they demand with respect to selling to the local market and purchasing heir inputs from the local market. The EZ Act 2010 provides the investor with a more flexible zone regime which allows the private sector to develop zones, investors to sell into the local market, and further streamlines administrative processes. The first economic zones are programmed to be opened by 2013.20

20. For further information contact the Prime Ministers Office in Tejgaon, Dhaka (Ph. +880-2-8151308)

Embassy of the Kingdom of the Netherlands in Dhaka

Annex 2 Chittagong Port

Western Marine

Containers in Chittagong

Vessels ready to be launched for export in May 2011

The history of shipbuilding in Bangladesh goes back a long way. It is little known today that Bangladesh was the center of building ocean-going vessels in Asia between the 15th and 17th century. In the early 19th century, the shipyards of Chittagong built many commercial ships of up to 1,000 tons and also British navy vessels that participated in the battle of Trafalgar in 1805 (see for example: http://m.koreatimes.co.kr/www/news/ special/2011/04/211_63043.html). Chittagong is the second largest city in Bangladesh, and most of the large industries of Bangladesh are situated here. It is the chief port of Bangladesh, organized by the Chittagong Port Authority, CPA (See: http://www.cpa.gov.bd/index.php). The port has extensively developed facilities for ocean steamers, such as sufficient feeder vessels as the draught is not sufficient for mother vessels to reach the port itself. Chittagong is situated on the Karnaphuli River some 19 km (12 mi) from its mouth at the Bay of Bengal (cf. Map 6 on the next page), with a population of over 3.6 million (2008).

T Western Marine

02

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Annex 2
Map 5: Map of Chittagong District and City

Source: http://www.chittagongsomity.us/historical.pdf

Embassy of the Kingdom of the Netherlands in Dhaka

Annex 3 Climatic Indicators of Bangladesh


Average monthly temperatures and precipitation:
Climate data for Dhaka Month Average high C (F) Average low C (F) Precipitation mm (inches) Jan 24.4 (76) 14.4 (58) 8 (0.3) Feb 26.7 (80) 17.2 (63) 20 (0.8) Mar 30.6 (87) 22.2 (72) 58 (2.3) Apr 31.7 (89) 25 (77) 117 (4.6) May 32.8 (91) 26.1 (79) 267 (10.5) Jun 31.1 (88) 27.2 (81) 358 (14.1) Jul 32.2 (90) 27.2 (81) 399 (15.7) Aug 31.1 (88) 27.2 (81) 318 (12.5) Sep 30.6 (87) 26.7 (80) 257 (10.1) Oct 30.6 (87) 25 (77) 163 (6.4) Nov 28.3 (83) 20.6 (69) 30 (1.2) Dec 25 (77) 16.1 (61) 5 (0.2) Year 29.4 (85) 22.8 (73) 1,979 (77.9)

Forces of nature

Lien Jongkees

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Annex 4 Application Forms


Prospective investors in Bangladesh are required to fill in the following application forms at various stages of the registration process: 1) Application for Registration of Foreign Investment (in English) 2) Application for Registration of Local Investment (in Bangla) 3) Application for Open Extension of Branch Office (in English) 4) Application for Employment of Foreign Nationals in the private sector (in English) 5) Application for Employment of Foreign Nationals in a Branch Office (in English) 6) Application for Approval of Remittances (in English) 7) Visa Application Form (in English) 8) Application for New Bonded Warehouse License (in Bangla) 9) Application for Import Registration Certificate (in Bangla) 10) Approval of Foreign Borrowings: Application Form & Checklist (in English) 11) Application for Foreign Borrowings: Procedures and Guidelines (in English) These forms can be downloaded from the following BOI website page: http://www.boi.gov.bd/how-to-invest/forms-a-procedures

Embassy of the Kingdom of the Netherlands in Dhaka

Annex 5 List of Business Licenses, Agencies and Websites


Below is a List of Business Licenses, the relevant Agencies and the links to their websites:
Sl. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Name Approval of Factory Plan Bonded Warehouse License Certificate of Incorporation Environmental Clearance Certificate Export Registration Certificate (ERC) Fire License Import Registration Certificate (IRC) Registration of Foreign Investment/ Joint Venture Registration of Local Investment Projects Tax Holiday Certificate Tax Identification Number (TIN) Trade License for a Commercial Firm Trade License for a Manufacturing Firm Trade Marks Registration VAT Registration Agency Office of the Chief Inspector of Factories and Establishment (CIFE) Link http://www.mole.gov.bd

Customs Bond Commissionerate (CBC) http://www.nbr-bd.org/ Register of Joint Stock Companies and Firms Department of Environment (DOE) Office of the Chief Controller of Imports & Exports (CCI&E) Fire Service and Civil Defense (FS&CD) Office of the Chief Controller of Imports & Exports (CCI&E) Board of Investment (BOI) Board of Investment (BOI) National Board of Revenue (NBR) National Board of Revenue (NBR) Dhaka City Corporation Dhaka City Corporation Department of Patents, Designs & Trademarks (DPDT) National Board of Revenue (NBR) http://www.roc.gov.bd/ http://www.doe-bd.org/ http://www.mincom.gov.bd http://www.fireservice.gov.bd/ http://www.mincom.gov.bd http://www.boi.gov.bd/ http://www.boi.gov.bd/ http://www.nbr-bd.org/ http://www.nbr-bd.org/ http://www.dhakacity.org/ http://www.dhakacity.org/ http://www.dpdt.gov.bd/ http://www.nbr-bd.org/

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Sources: The websites mentioned, and: http://www.businesslaws.boi.gov.bd/index.php?option=com_eregistry.

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Annex 6 Investment Incentives 21


In order to encourage the inflows of FDI the Government of Bangladesh offers one of the most liberal investment policies and attractive packages of fiscal, financial and other incentives to foreign entrepreneurs in South Asia. The Board of Investment (BOI) can advise further on this matter. In summary and in most cases, these investment incentives amount to the following according to the BOI: Remittance of royalty, technical know-how and technical assistance fees Repatriation facilities of dividend and capital at exit.

Permanent resident permits on investing US$ 75,000 and citizenship on investing US$ 500,000 Tax holidays In the Dhaka & Chittagong Divisions: 100% in first two years: 50% in the year three and four: and 25% in the year five In the Rajshahi, Khulna, Sylhet, Barisal Divisions and three Chittagong Hilly Districts: 100% for first three years, 50% for next three years, and 25% for year seven

Depreciation allowances Accelerated depreciation for new industries is available at the rate of 50%, 30% and 20% for the first, second and third years respectively, on the cost of plant and machinery Cash and added incentives to exporting industries Businesses exporting 80% or more of goods or services qualify for duty free import of machinery and spares, bonded warehousing 90% loans against letters of credit and funds for export promotion Export credit guarantee scheme Domestic market sales of up to 20% is allowed to export oriented business located outside an Export Processing Zone (EPZ) on payment of relevant duties Cash incentives and export subsidies are granted on the Free on Board (FOB) value of selected exports ranging from 5% to 20% on selected products.

In more detail the above mentioned investment Incentives to stimulate private sector direct investment are as follows:

21. Based on the following websites: http://boi.gov.bd/ http://www.businesslaws.boi.gov.bd/index.php?option=com_content&view=article&id=55&Itemid=74&lang=en, and http://www.financialinfobd.com/index.php?option=com_content&task=view&id=173&Itemid=303.

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1. Tax Exemptions
Generally five to seven years tax exemptions are available for many business investments. However, for electric power generation tax exemptions are provided for up to 15 years.

2. Duty
No import duty is applicable for export oriented industry. For other industries it is 5% ad valorem.

3. Income Tax
Double taxation can be avoided in most cases as the country (Bangladesh) benefits from many bilateral investment agreements: the bilateral agreement with the Netherlands is discussed in Chapter 8. Exemptions of income tax up to three years for the expatriate employees in industries are specified in the relevant schedules of the income tax ordinance.

4. Remittances
Facilities for full repatriation of invested capital, profits and dividends are the norm in most situations

5. Exit
An investor can wind up an investment either through a decision of an annual or extraordinary general meeting. Once a foreign investor completes the formalities to exit the country, he or she can repatriate the net proceeds after securing proper authorization from the central bank (Bangladesh Bank).

6. Ownership
Foreign investors can set up ventures, either wholly owned or in joint collaboration, with local partners.

7. Investing in the Stock Market


Foreign Investors are allowed to participate in Initial Primary Offerings (IPOs) and right issues without any regulatory restrictions. Also, incomes from dividends are tax-exempt for investors.

06

8. Incentives and Facilities for the Investors


Industries are eligible for tax holidays for the following periods according to the location of the establishment. The period of tax holiday is calculated from the month of commencement of commercial production or operation of the industrial undertaking. The eligibility of a tax holiday is to be determined by the National Board of Revenue (NBR). The tax holiday facility is applicable to industries set up in Bangladesh before June 30, 2012. Accelerated depreciation in lieu of a tax holiday is allowed at the rate of 80% of actual cost of machinery or plant for the year in which the unit starts commercial production and 20% for the following years. The rate of depreciation is 100% for years specified by the NBR.

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Annex 6
9. Concessionary Duty on Imported Capital Machinery
Import duty at the rate of 7.5% ad valorem is payable on Capital Machinery and Spares imported for initial installation or Balancing, Modernization, Rehabilitation and Expansion(BMR/BMRE) of the existing industries. The value of spare parts should not, however, exceed 10% of the total cost and freight value of the machinery. Out of this, 7.5% rate of duty payable, export-oriented industries and industries in the under developed areas, may enjoy a further concession of the import duty in the following manner:
No import duty is charged in case of capital machinery and spares listed 100% export oriented industries: in NBRs relevant notification. However, import duty at 7.5% is secured in the form of a bank guarantee or an indemnity bond to be returned after installation of the machinery. Minimum 70% export oriented industries in developed areas: Minimum 70% export oriented industries in developed areas: Import duty at 2.5% is charged in case of capital machinery and spares listed in NBRs relevant notification. Additional duty at 5% is secured in the form of a bank guarantee or cash deposit to be returned after installation of the machinery. Import duty at 5% is charged in case of capital machinery and spares listed in NBRs relevant notification. Additional import duty at 2.5% is secured in the norm of a bank guarantee or cash deposit to be returned after installation of the machinery. Import duty at 5% is charged in case of capital machinery and spares Other industries outside developed areas: Other industries in developed areas: listed in NBRs relevant notification. Additional import duty at 2.5% is secured in the form of a bank guarantee or cash deposit to be returned after installation of the machinery. Import duty at 7.5% is charged in case of capital machinery and spares listed in NBRs relevant notification.

Value Added Tax (VAT) is not payable for imported capital machinery and spares. Duties and taxes on import of goods which are produced locally will be higher than those applicable to import of raw materials for producing such goods.

10. Non-Resident Bangladeshis (NRBs)


Special incentives are provided to encourage non-resident Bangladeshis for investment in the country. Non-Resident Bangladeshi investors 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 NonResident Bangladeshis in primary shares. Furthermore, they can maintain foreign currency deposits in the Non-Resident Foreign Currency Deposit (NFCD) account.

11. Other incentives


Tax exemptions on royalties, technical know-how fees received by any foreign collaborator, firm, company and expert Tax exemption on the interest on foreign loans under certain conditions Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements

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Exemption of income tax up of to three years for the foreign technicians employed in industries specified in the relevant schedule of the income tax ordinance Tax exemption on income of private sector power generation company for 15 years from the date of commercial production Facilities for repatriation of invested capital, profits and dividends Six months multiple entry visa for investors Citizenship by investing a minimum of US$ 500,000 or by transferring US$ 1,000,000 to any recognized financial institution (non repatriable) Permanent residency by investing a minimum of US$ 75,000 (non-repatriable) Tax exemption on dividend income of non-resilient shareholders during tax exemption period of an industry set up in Export. Processing Zone and also after the expiry of tax exemption period if the dividend is re-investment in the same project Exemption of tax on income from industrial undertakings set up in export processing zone for ten years from the date of start of commercial production Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange

12. Additional Incentives to Export Oriented and Export Linkage Industries


Encouraging export oriented industries is one of the major objectives of the Industrial Policy in place, and as such the government ensures all support and co-operation to the exporter as per the export policy. Some of the facilities and incentives offered are as follows: Concessionary duty as per Special Revenue Order (SRO) is allowed on the import of capital machinery and spare parts for setting up export-oriented industries or BMRE of existing industries. For 100% export-oriented industries no import duty is payable Facilities such as special bonded warehouse against back-to-back letters of credit or notional import duty and non-payment of Value Added Tax (VAT) facilities are available as per SRO of the government System for duty drawback is being simplified and concise. The exporter will be able to get back the duty draw-back directly from the concerned commercial bank Bank loans, of up to 90% if the value against irrevocable and confirmed letters of credit/sales agreement is available For granting export performance benefits, the list of export products and the rate of export performance benefit (XPB) are reviewed from time to time With the intention of encouraging backward linkages, export-oriented industries including export-oriented readymade garment industries using indigenous raw materials instead of imported materials are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export-oriented industries

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Annex 6
Export-oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad Entire export earnings from handicrafts and cottage industries are exempted from income tax. In case of other industries, proportional income tax rebates on export earnings is given between 30% and 100%. Industries which export 100% of their products are given tax exemption up to 100% Facilities for importing raw materials are given for manufacturing exportable commodities under banned/restricted list Import of specified quantities of duty-free samples for manufacturing exportable products is allowed. The quantity and value of samples is determined jointly by the concerned sponsoring agency and the NBR Local products supplied to local projects against foreign exchange under international tender are treated as indirect exports and the producer is entitled to avail of all export facilities Export oriented industries like toys, luggage and fashion articles, electronic goods, leather goods, diamond cutting and polishing, jewellery, stationery goods, silk cloth, gift items, cut and artificial flowers and orchid, vegetable processing and engineering consultancy services identified by the government as thrust sectors are provided special facilities in the form of cash incentives, venture capital and other facilities Export oriented industries are exempted from paying local taxes (such as municipal taxes) Leather industries exporting at least 80% manufactured products will be treated as 100% export oriented industries Manufactures of indigenous fabrics (such as woven, knit, hosiery, grey, printed, dyed, garment check, hand-loom, silk and specialized fabrics) supplying their products to 100% export oriented garment industries are entitled to avail a cash subsidy equivalent to 25% of the value of the fabrics provided the manufacturers of the fabrics do not enjoy duty draw back or duty-free bonded warehouse facility Apart from the above mentioned facilities, other facilities as announced and provided in the export policy are also applicable for export-oriented and export-linkage industries Tax exemption on dividend income of non-resident shareholders during tax exemption period of an industry set up in an export processing zone and also after the expiry of tax exemption period if the dividend is re-invested in the same project Exemption of tax on income from industrial undertakings set up in an export processing zone for ten years from the date of commercial production Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange

Embassy of the Kingdom of the Netherlands in Dhaka

Annex 7 Translations of Specific Bangla Words


Babosha Challan Crore Gram (Palli) Sarkar Hartal Labh Lakh Lokshan Mahalla Parishad Pourashava Sramik Taka Thana Upazila Zila Parishad Business Official receipt Ten million (annotated as 1,00,00,000) Village Demonstration or strike resulting in a complete shutdown of public life (offices and private enterprises) Profit 100,000 (annotated as 1,00,000) Loss Urban ward Council or Administration Municipality Labor Bangladesh Currency Police station (cf. Upazila, Sub-district) Sub-district District

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Annex 8 Sector Study: Water


A Market Scan on the Bangladesh Water Sector has been commissioned in 2010 by the Embassy of the Kingdom of The Netherlands in Dhaka, Bangladesh, which was undertaken by Mott MacDonald (Arnhem, the Netherlands). The Executive Summary of the Final Report, dated December 2010, is provided below; it gives a clear overview of the market opportunities in this sector. The full report can be found on the website of the Embassy: http://www.netherlandsembassydhaka.org/.

Market Scan on the Water Sector in Bangladesh: Executive Summary Introduction


1. The study Market Scan on the Bangladesh Water Sector aims to provide an insight into the business opportunities that are available within the various water markets in Bangladesh and whether the Dutch private sector would be interested to transact in that market. The perception of the Dutch private sector about doing business in Bangladesh and a matching of market opportunities with interests of private sector from both countries is a strong focus of this study. In preparing the study surveys of Dutch and Bangladesh private sectors as well as relevant public organizations and donors with significant portfolio have been carried out. Data and information from the surveys, discussions with several key players in the Dutch and Bangladesh public and private sectors, reviews of recent relevant studies on different aspects of the water sector provided the basis for the Consultants findings and conclusions outlined in this report.

The Water Sector and Water Markets


2. The water sector covers a range of different markets and themes. The water sector is defined by positing an outline of the water chain and combining product types such as services, works, and goods/supplies. The resulted definition corresponds reasonably close to those defined by the Water Mondiaal Mission Report, the publication Dutch Water Sector 2009-2010, which provides a directory of companies under various market segments. The water market segments then includes (i) water surface (flood protection and drainage), (ii) Water harvesting, (iii) water use for consumption purposes (urban and rural drinking water, agricultural water), (iii) water use for non-consumption purposes (river and sea transport, dredging, tourism), and (iv) water discharge (wastewater). Chapter 2 of the report provides a broader definition and outlines a typology of the full water markets. The inclusion of the

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Annex 8
above water markets is rationalized in terms of identification of specific opportunities for business development through product market combinations. Several of the markets have been left out from this study because of a lack of market opportunity and involvement of the private sector, small size of the market, and that market is locally dominated. 3. The water markets, as identified above, have solid growth potentials and need expansion in order to contribute and support economic growth in Bangladesh. A brief analysis of markets in (i) Dredging, (ii) Shipbuilding, (iii) InlandWaterTransport and ContainerTerminal, (iv) Urban and Rural Drinking Water, (v) Sewerage, (vi) Seeds, (vii) Irrigation Pump Technology, (viii) Water-Based Tourism, and (ix) Flood Protection and Drainage indicates an increased level of private sector engagement, robustness of the market, and fiscal and other incentive regimes in place. In all these markets the private sector has established itself, and it will more in the near future, as the key player. Foreign firms have also entered several markets such as Dredging, Shipbuilding, Water Treatment Plants, Water-Based Tourism, and Effluent Treatment Plants forming joint venture operations with Bangladeshi counterparts indicating the markets soundness and feasibility.

Public Sector Roles and Performance


4. While the water sector has been significantly supported by funding agencies, the public sector within the water market plays a dominant role in overall planning, design, and implementation of programs and projects. In the majority of the cases, the agencies within the public sector act as the regulatory body and ensure the management and operation of relevant activities. Public sector is directly and indirectly involved in the planning, programming, management and operations of all activities for water resource management, water and sanitation supply, flood protection and drainage, and coastal zone management. It also through its policy and regulatory roles impact other areas such as shipbuilding, inland water transport, tourism, wastewater, and water treatment where increasingly private sector engagement is seen. A large number of departments and agencies supporting 10 different ministries have shared responsibility for such an extensive engagement of the public sector. It is to be noted that success has been achieved in terms of managing cyclones and disasters, tackling emergency issues, establishing decentralized planning and community based participation that has increased accessibility of water and sanitation services. However, performance of most agencies is poor and governance remains weak. The critical issues relating to public sector institutional performance are: Lack of coordination: While each agencys roles are strongly interconnected, they are ineffective in coordinating activities leading to a failure in project implementation and addressing market needs. Lack of an integrated Approach: There is no comprehensive analysis of the financing requirements necessary to achieve the objectives of the projects and ensure the sustainability of the investments. Neither there is an analysis of the projects suitability within existing plans and strategies. Capacity: There is a lack of manpower or manpower with appropriate skills, lack of technology, database, and institutional strategy. In some cases, this has led donors to add clauses to loans stating that additional staff will need to be employed prior to the

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Annex 8
provision of the loan. However, recruitment of suitably qualified staff, particularly in rapidly growing new fields (e.g. water quality management, database and information management) remains difficult, with many posts left unfilled. Strategies and ad hoc operations: Many existing plans and policies (National Water Policy, National Water Master Plan) provide a clear and effective framework for projects and operation but they are not followed during implementation. Fund Allocation and disbursement: Often it is reported that the funds are insufficient resulting in the agencys inability to meet investment and O&M costs. Service charges for water consumption are low and inadequate to cover even O&M costs. Corruption and transparency: The issue is a significant challenge within the water sector.

The Bangladesh Private Sector Engagement in Water Markets


5. Until recently even within the non-consumption areas of the water sector such as inland waterways, wastewater, tourism, the public sector is engaged in direct management and operations. Private sector contractors are engaged in works and services mostly restricted to small-scale contracts awarded to small and medium size firms. Selection of contractors/service providers is based on low cost proposals resulting in low quality construction and maintenance works. Where large-scale schemes exist, for example in case of BWDB and BIWTA, contracts are fixed terms and there is a tendency to break the overall value into smaller parts. A lack of forum to hold dialogue with private sector operators exacerbates a long-tradition of distrust between the two parties making it difficult to jointly pursue challenges of and solutions for the water sector by attracting private sector management and finance. The GOB has recently put in place a Policy and Strategy for Public Private Partnership 2010. Without a PPP law or pertinent regulation that underpins any envisaged PPP it still is not sure how much of investment in infrastructure, particularly in the water sector could be attracted. There are several PPP frameworks arrangements being implemented such as in power generation (IPP), central effluent treatment plants in Export Processing Zones, water treatment plants, and these may provide further boost and lessons for increased PPP arrangements in water infrastructure projects. 6. Although private sector has been a key player in Bangladeshs achievement of sustained economic growth its involvement in the water sector has been limited. The water policy emphasizes private sector involvement in the water sector essentially to provide specific services in carrying out public institutions mandates. It does not mention the potential role of the private parties in financing or operating water infrastructure. A lack of clear policy and investment program by the government on PSP in the water markets is the principal reason for limited involvement of the private companies. Findings from the market research indicate substantive involvement of the private sector in non-consumption areas such as in shipbuilding, river port and transportation, dredging, industrial wastewater treatment, water-based tourism, pump technology, and water treatment. Commercial prospects and increased growth in those markets are attracting private sector activity and interests with the ability to provide better

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Annex 8
technology, management, and financing. In the traditional water sector such as water resources, coastal zone management, drinking water and sanitation, flood protection and drainage private businesses provide consultancy services and contract works and that will continue in the future. Unless there is a change in business models under which the public sector operates the above sectors and fair and transparent procurement processes are established private sector participation under B2G framework in traditional water sectors would remain local and within small and medium size contracting companies. 7. A sound enabling environment and investment climate is key to attracting any foreign investment, including Dutch private sector investments. Bangladesh has a good investment code comparable to regional country codes and it has appropriate incentive structures in place to attract foreign investment. There are though several investment climate constraints that thwart increased foreign investments in the country. Lack of serviced land and availability of land at an economic price, increased shortage of electricity, gas, and water, poor road network and transportation, difficulties with financial transactions such as L/C guarantees, customs regulations, all are contributing to a low level of investments, poor image that is further exacerbated by unstable political and security issues. With increased level of foreign investments in the country exploiting its comparative advantage of inexpensive labor, strategic location, and a long-term growth prospect, the removal of investment climate constraints could usher the country in sustainable growth path. The investment climate constraints that has created an image of the country as a difficult place to work in and operate impacts the perceptions of the Dutch private sector.

The Dutch Private Sector Engagement in the Water Sector and Perceptions of Bangladesh
8. More than half of the surveyed companies are currently transacting and/or considering carrying out business in Bangladesh, but this number is a result of the focus of the survey/questionnaire. It would be accurate to state that a large number of Dutch companies involved in the water sector do not operate in South Asia and more specifically in Bangladesh. Among the surveyed companies all are internationally active and while Europe appears to be the primary market, interests in the Asian market are high, and more specifically in the South Asian market. They also operate in at least one of the Delta countries of Indonesia, Vietnam, Bangladesh, Egypt and Mozambique. Dutch companies possess superior technology, top end know-how, and proven products and services and these are the key strengths of their operations in the international markets. These strengths indicate high-end markets where quality is sought after. What companies consider strengths in the water market vary from the type of market offers made. For services offers, for instance consultancy companies, having local contacts is a significant strength compared to other types of market offers. Besides the above, the Works group considers local contacts and the ability to finance as strengths, while the Services group considers the Dutch public sector support as a key strength. 9. Those operating in the Dutch private sector water markets, having been engaged in Bangladesh in the past or is currently operating, views the market as satisfactory and

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Annex 8
possessing a positive or neutral risk-reward ratio. The majority of the companies operate with some forms of local presence such as association with local firms, working with agents, and partners. Where a local office is set up and operated by a Dutch company or other foreign companies the results are very satisfactory. Much of this though would depend on market opportunities, management organization, and a strategic goal for long-term investment. In terms of barriers to doing business Dutch companies engaged in services sector indicate poor local management skills, lack of market information, low labor productivity, red tape, and supervising activities from the Netherlands as top ranked issues. The goods and supplies companies on the other hand see significant barriers in the business environment such as banking operations, organizing trade finance, profit repatriation, payment collections, fiscal structure, all financial aspects and lower down business environment aspects such as security risks and administrative hassle and corruption. 10. Those Dutch companies contemplating to entering the Bangladesh market perceive red tape and corruption as top barriers to doing business. Those companies still considering to entering the market in Bangladesh have similar views, placing a heavy emphasis on Business Environment barriers. Bangladeshs image as a corrupt, complex administrativeandbureaucratic structure, uncertain rules and policies, are reflected in most responses. It is noted that there are differences in perceptions between the services/ works groups and goods/supplies groups as the former does business specifically in Bangladesh (B2G framework) where projects are financed by the international financing institutions (IFI), while the latter are directly engaged (B2B framework) with Bangladeshi private sector where projects are financed from commercial sources. Most IFI financed projects tendered by the public sector goes through unfair bidding practices. This view is also expressed by the Bangladeshi private sector. Some perceptions such as poor and deteriorating economic conditions, lack of knowledge of market and information is perhaps due to the inability of the Bangladesh Investment Board to promote Bangladesh as an attractive investment destination.

Facilitating Identified Business Opportunities


11. Business opportunities for Dutch private sector in Bangladeshi water sector have been identified mainly in the water non-consumption areas where B2B engagement is feasible. Opportunities in river and sea transport are highly perceived by Dutch companies already engaged in Bangladesh, as well as urban drinking water, wastewater and drainage and sewerage markets. Those companies operating in other countries of South Asia and not in Bangladesh perceive market opportunities to exist in surface and ground water, rural drinking water and agricultural water. The Bangladesh private sector indicates the need for partnering with foreign companies in order to fill gaps in management, technology, skills, and knowledge of specific technical areas. Interests from Bangladeshi private sector range from forming joint venture partnership to design, construct, and operate shipyards, inland container terminal, water treatment plants, effluent treatment plants, and providing water-based tourism marketing and technical assistance.

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12. In order to ensure B2B and B2G/G2G engagement as outlined above further activities need to be carried out and they are outlined as follows. Supporting companies providing goods and supplies could include (i) preparation of specific market information briefs and leaflets, (ii) facilitating acquaintance with Bangladesh in order to overcome negative perceptions by supporting BOI in preparing appropriate promotion materials, publications, strategy, use of local companies for match-making, due diligence studies, (iii) supporting market entry to make initial contact, improvement of entry barriers such as partnering with commercial banks, (iv) broader networking and capacity building. Supporting companies engaged in the services sector could include (i) national and international policy domains by entering into public/private dialogue, (ii)supportingPPframeworkandcapacity,(iii)exploringco-financingeffortsforlargeprojectsto position Dutch expertise/companies, and (iv) engaging in specific studies such as port development (more ports, more shipbuilding, more maritime business), climate adaptation measures, etc.

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Annex 9

Ranking of Bangladesh and Selected Countries on Several Indices

The World Bank Doing Business Ranking 2011 indicates that Bangladesh (107th) ranks substantially higher than India and Indonesia, but lower than Vietnam.

The ranking of Bangladesh varies greatly according to the specific topic.

The ranking of Bangladesh on the Democracy Index 2010 is much higher (83rd) than that of Vietnam, but lower than India and Indonesia (Economist Intelligence Unit).

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Transparency Internationals Corruption Perception Index (CPI) indicates that Bangladesh ranks fairly low: 134th out of 178 countries. However, it has improved since 2005 when Bangladesh ranked at the very bottom out of 158 countries.

MAIN INDICES AND RANKINGS OF BANGLADESH/DHAKA


Organisation A) Economic Development World Bank Group World Economic Forum WEF World Bank Group Goldman Sachs JP Morgan Asian Develop-ment Bank - ADB Standard & Poor Moody Anholt-GfK Roper B) Human Development UNDP Economist Intelligence Unit AON C) Governance Transparency International Economist Intelligence Unit Freedom House Corruption Perception Index Democracy Index Freedom of the Press CPI DI FoP 2010 2010 2010 134 83 118 178 167 196 75 50 60 Human Development Index Livability Ranking of cities (Dhaka) People Risk Index of Cities (Dhaka) HDI LR PRI 2010 2011 2010 129 139 90 169 140 90 76 99 100 Doing Business Ranking Global Competitiveness Index Logistics Performance Index Next 11 Frontier Five List of 8 Asian Growth Drivers Sovereign credit rating Sovereign credit rating Nation Brands Index (12-Netherlands) DB GCI LPI ----------NBI 2011 20102011 2010 2005 2007 2011 2010 2010 2008 107 107 79 1 of 11 countries 1 of five countries Did not qualify BBBa3 Not included 183 139 155 11 5 8 ----50 58 77 51 Index/Ranking Acronym Year Rank of Bangladesh / Dhaka Total nr. of countries Indexed to 100

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D) Gender Inter-Parliamen-tary Union (IPU) E) Social Networking Ericsson/Arthur D. Little F) Wellbeing University of Leicester Erasmus Univ. Rotterdam Satisfaction with Life Index Happiness in Nations SLI HiN 2006 20002009 104 100 178 149 58 67 Networked Society City Index (Dhaka) NSCI 2011 23 25 92 % of women in National Parliament WNP 2011 63 187 34

Sources of Main Indices of Bangladesh/Dhaka:

INDEX
WBs Doing Business WEF: Global Competitiven. WBs Logistics Performance Goldman Sachss Next 11 JP Morgans Frontier Five ADBs Asian Growth Drivers S&Ps Sov. credit rating Moody Sov. credit rating Nation Brands Index UNDPs HDI EIUs Livability Ranking

Source / Website
http://www.doingbusiness.org/ http://www.weforum.org/issues/global-competitiveness http://info.worldbank.org/etools/tradesurvey/mode1b.asp http://www2.goldmansachs.com/ideas/brics/book/BRICs-Chapter13.pdf http://www.at-capital.com/index.php?option=com_content&task=view&id=25&Itemid=50 http://www.thedailystar.net/newDesign/news-details.php?nid=178490 http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245226449301 http://www.moodys.com/ http://www.gfkamerica.com/practice_areas/roper_pam/nbi_index/index.en.html http://hdr.undp.org/en/statistics/ http://www.eiu.com/site_info.asp?info_name=The_Global_Liveability_Report&rf=0 http://www.aon.com/thought-leadership/asia-connect/Attachments/research-center/People-Risk-

AONs People Risk

Highlights-15Sep10.pdf?elq_mid=11046&elq_cid=1596104&elq=0bccd65c34ff436884726b7d28a 3a846

Corruption Perception Index EIU Democracy Index Freedom of the Press IPUs Women in Nat. Parll. Networked Society City Satisfaction with Life Index Happiness in Nations

http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results http://graphics.eiu.com/PDF/Democracy_Index_2010_web.pdf http://www.freedomhouse.org/template.cfm?page=560&year=2010 http://www.ipu.org/wmn-e/classif.htm http://www.ericsson.com/thinkingahead/the-networked-society-blog/2011/05/11/city-life-indexshows-true-value-of-connections/ http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index http://worlddatabaseofhappiness.eur.nl/hap_nat/nat_fp.php

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