INVESTMENT OPPORTUNITIES IN BANGLADESH:

STRATEGIC LOCATION:

China and India between them have vast and increasingly prosperous populations, which are
projected to grow to three billion by 2050. Bangladesh is well situated in every sense to take
advantage of this opportunity. With improving education, technology and economic growth,
Bangladesh’s own market of 146.6 m people is becoming increasingly attractive to business and
foreign investors. The cost of doing business in Bangladesh has significantly and visibly
decreased in recent times.

 Location with advantageous trading agreements

 All Bangladeshi products (other than armaments) enjoy complete duty and quota free access to
EU, Japan, Canada, Australia and most other developed countries.
 Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA); Overseas
Private Investment Corporation (OPIC), USA; International Center for Settlement of Investment
Disputes (ICSID); World Intellectual Property Organization (WIPO).
 Bilateral agreements to avoid double taxation have been signed with 28 countries with a further
nine countries under negotiation.

INVESTMENT CLIMATE:
Bangladesh offers an unparalleled investment climate compared to the other South Asian
economies. Here are key pointers to Bangladesh's investment climate today.

1) BANGLADESH EXPORT COMPETITIVENESS

Bangladesh, despite being a least developed economy, has a proven record in export
competitiveness. From 2003 to 2007 Bangladesh achieved annual export value growth of 19.6%,
a testimony to its export competitiveness.
  Manufacturing output has seen steady growth, recently in double figures. Bangladesh
provides significant benefits to exporters.
 Bangladesh offers a most liberal FDI regime in South Asia, with no prior approval
requirements or limits on equity participation and repatriation of profits and income in
most sectors.
 Bangladesh enjoys tariff-free access to the EU, Canada, Australia and Japan. Bangladesh
is the top manufactured products exporter to the least developed countries as well as to
Europe, with more than 50% market share.

Source: United Nations Statistics Division http://unstats.un.org

2) FOREIGN DIRECT INVESTMENT IN BANGLADESH:

Foreign Direct Investment (FDI) has played a key role in the modernization of the Bangladesh
economy for the last 15 years.

 Inflows of foreign direct investment

There was an inflow of $666m foreign direct investment in 2007 which rose significantly in
2008 to $1086m. As of June 2009, inflows of foreign direct investment recorded to $358m.
 Inflows of foreign direct investment during 2001-2009*

Source: Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance

 Foreign and joint venture investment

In the year 2009-10 (February), there were 89 new foreign and joint venture investment projects
registered which amount to $590m. The projects were invested to mainly in the service,
engineering, clothing and agricultural sectors.

Sector wise foreign and joint venture investment during 2009-2010*

Source:Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance

3) EXPORT PROCESSING ZONES:

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. Bangladesh’s 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 friendly investment climate, and location free from cumbersome
procedures. Businesses from 32 countries have so far invested in the existing 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.
 Intra and inter zone exporting and sub-contracting.
 Fully serviced plots.
 Ready made 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.
 Sale of old/scrap machineries in domestic market.
 Business and administration support services.
 Customs clearances on site.
 Recreational amenities.

4) TRANSPORT INFRASTRUCTURE

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.
  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. RHD also control
a total number of 4,659 bridges and 6,122 culverts. RHD are currently operating about 161 ferry
boats in 81 crossings on its road network throughout the country.As of January 2010, Local
Government Engineering Department (LGED) has so far constructed a total of 133,514 km and
971,498 bridges/culverts.

 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. Bangladesh can be reached by air from any part of the world.

 Rail

The Bangladesh Railway provides an efficient service to places of interest.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 and a total of 440 stations at the end of the year 2008-2009.

 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. Total length of inland waterways is 24000km. There
are two major ports in the country. Chittagong, the oldest port, and the Mongla port in Khulna
region serve the western part of Bangladesh.

5) SUPPORTIVE GOVERNMENT POLICIES:

The democratic government is highly keen to stimulate the economy and transform a poverty-
stricken economy within short time. Government has liberalized the industrial and investment
policies in recent years by reducing bureaucratic control over private investment and opening up
many areas. Major incentives are as follows:

1. Tax Generally 5 to 7 years. However, for power generation exemption is allowed for
Exemptions 15 years.
2. Duty : No import duty for export oriented industry. For other industry it is @ 5% ad
valorem.
3. Tax Law : i. Double taxation can be avoided in case of foreign investors on the basis of
bilateral agreements.
ii. Exemption of income tax upto 3 years for the expatriate employees in
industries specified in the relevant schedule of Income Tax ordinance.

4. Exit : An investor can wind up on investment either through a decision of the AGM or
EGM. Once a foreign investor completes the formalities to exit the country, he
or she can repatriate the sales proceeds after securing proper authorization from
the Central Bank.
5. Ownership : Foreign investor can set up ventures either wholly owned on in joint
collaboration with local partner.

6) INDUSTRIOUS LOW-COST WORKFORCE

Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest
wages and salaries in the region. 57.3% of the population is under 25, providing a youthful group
for recruitment. The country has consistently developed a skilled workforce catering to investors
needs. English is widely spoken, making communication easy.

7) Low cost of energy

Energy prices in Bangladesh are the most competitive in the region. Transportation on green
compressed natural gas is less than 20% of the diesel price.

8) FISCAL NAD NON FISCAL INCENTIVES:

Bangladesh offers some of the world’s most competitive fiscal non-fiscal incentives. These
fiscal and no fiscal incentives includes:.

 Permanent resident permits on investing US$ 75,000 and citizenship on investing US$ 500,000.
 Tax holidays
o In the Dhaka & Chittagong Divisions: 100% in first two years: 50% in the year three and
four: and 25% in the year five.
o In the Rajshahi, Khulna, Sylhet, Barisal Divisions and three Chittagong Hilly Districts:
100% for first three years, 50% for next three years, 25% for year seven.
 Depreciation allowances
o 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
o Businesses exporting 80% or more of goods or services qualify for duty free import of
machinery and spares, bonded warehousing.
o 90% loans against letters of credit and funds for export promotion.
o Export credit guarantee scheme.
o Domestic market sales of up to 20% is allowed to export oriented business located
outside an EPZ* on payment of relevant duties.
o Cash incentives and export subsidies are granted on the FOB** value of selected
exports ranging from 5% to 20% on selected products.

*EPZ=Export Processing Zone

**FOB=Free on Board