Over the past decades, Bangladesh has become a major attraction for international investment. Be it H&M, Zara or GAP, the fact that renowned brands have manufacturing units in Bangladesh is a testament to the claim that Bangladesh is a dream destination for investors from across the globe in numerous sectors.
Having accorded statutory protection to foreign investments and ensured equal treatment for local and foreign investors, Bangladesh welcomes foreign investments and guarantees equal, and in many respects, favourable treatment to foreign investors. The government assures protection against nationalisation and expropriation through the Foreign Private Investment Act of 1980 which inclusively assures the repatriation of capital and dividend for foreign investors. Bangladesh has also made adequate legislative provisions to protect intellectual property rights.
In supplement to the Foreign Private Investment Act of 1980, the government has established a FDI Policy (Foreign Direct Investment Policy) advocating simple yet efficient mechanism for investing in Bangladesh. The policy eases setting-up businesses by simplifying the process of leasing and buying private land, incorporating an entity, allowing corporate tax holiday for 7 years (15 years in the power sector) and implementing an exemption of income tax of foreign employees for up to 3 year in some respects.
Foreign investments in Bangladesh vary in both expenses and duration. Although different businesses have different procedures, the typical requirements to set up a business include a trade license, VAT registration, import/export registration certificate (if applicable), licence from authorities, bank account, taxpayer’s identification number (TIN) and membership of the trade body.
Sole proprietorship (sole trader-ship) is a type of business where the proprietor is held solely liable for any occurrence pertaining to the business. The laws related to the individual are the legislation applicable to a sole proprietorship. Partnerships are also a common form of business. A partnership is an agreement between 2 to 20 individuals consenting to share profits and risks among themselves for a business. To be recognised as such, it is important that an agreement or contract be made between the partners.
A limited company is a company in which the shareholders’ liabilities are limited to their investments (or guarantees) in the company. The Companies Act of 1994 requires all to be registered in Bangladesh via the registrar of joint stock companies and firms. A private limited company places firm restrictions on the rights to transfer of shares, and is comprised of between two and 50 members (excluding employees). Private companies do not allow public subscription for the debentures or shares of the company.
Public limited companies are allowed to welcome the public to subscribe to the shares and debentures of the company through a guide congruent with the Companies Act of 1994, the Securities and Exchange ordinance of 1969 and the Securities and Exchange Commission Act 1993. Public limited companies require at least seven members and three directors to be acknowledged as such.
Another form of business commonly undertaken in Bangladesh is joint ventures. These are business agreements between entities agreeing to establish a business collectively for a specific purpose. The parties involved split all costs, risks and profits. Joint ventures can be limited by guarantee, or by shares. Supplementary requirements to set up a joint venture include a copy of the joint venture agreement, a Memorandum of Association (MOA), an Article of Association (AOA), the names and addresses of shareholders and directors, and a copy of the rental agreement or lease deed.
Foreign investors looking to set up a business in Bangladesh can do so through branches/liaison/representative offices. These offices are expected to confine their activities to the boundaries set by the National Board of Investment (BOI). The offices will be required to provide an inward remittance of at least $50,000 in a period of two months after the permission letter has been issued along with six months of operational expenses.
Branches/liaison/representative offices will be required to submit documents to BOI including a filled, signed, and stamped application form, MOA and AOA of the head company, and the nationalities of the directors along with accounts of the immediately preceding financial year.
Immigration in Bangladesh looks at prospective investors favourably. The government has strove over the years to improve employment conditions as well as social security. To enforce and sustain equity and a welcoming business environment, the Bangladeshi government has outlawed prejudice on the basis of nationality, giving all people equal employment opportunities with very few restrictions.
Prospective international investors may apply for visas for periods ranging from one month to five years. Branches/liaison/representative offices must obtain a work permit from the BOI. Such offices however are free and encouraged to hire employees locally. The number of expatriate employees in an industrial enterprise cannot exceed the ratio of 1:20 (foreign: local) for industrial settings and 1:5 (foreign: local) for commercial establishments.
In cases of disputes, alternative dispute resolutions are possible under the Arbitration Act of 2001. Bangladesh has signed the International Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Bangladesh is also member of International Centre for Settlement of Investment Disputes (ICSID). The current legislation also allows the enforcement of foreign arbitral awards without much hindrance.
Although venturing in a business may be daunting, Bangladesh offers investors a stable and resourceful environment suitable for the establishment or expansion of any business, and after much consideration, it can be stated that Bangladesh is in fact a “dream investment destination.”