Why Should You Invest in Bangladesh?

With the help of the experienced and highly qualified team, ABC Partners provides one-stop solutions for incorporating your business of any kind, may it be a company limited by shares or guarantee or with unlimited liability. However, it might be significant to explain why Bangladesh is becoming a recent hotspot for investments.

Due to its excellent geographical location, Bangladesh is facilitated by the finest maritime shipping routes connecting all the major ports and the cities in south-east Asia, eastern Asia, the middle east, Europe, and the USA. On top of that, products manufactured in Bangladesh enjoy duty free and quota-free (DFQF) access in numerous countries due to its economic status of ‘Least Developed Country’ (LDC). Bangladesh is expected graduate from LDC in 2026 therefore, the Government is gearing up to contract Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) with the prominent partner countries. There are, currently, 14 FTAs in place either in the consultation stage or in effect, the last one being with Bhutan which was finalised in December 2021. Amongst other countries Turkey, China, Brazil, Thailand, Malaysia, Pakistan, and India are a few to mention. Currently, Bangladesh is attempting to negotiate with the European Union for the ‘Generalised Scheme of Preferences Plus’ (GSP+). Once finalised, GSP+ would open the door to the massive European market without any custom duties levied on Bangladeshi products. However, in order to achieve the GSP+ privileges Bangladesh has to satisfy 27 international conventions as set out by the European Union which includes amending existing labour law, eradication of child labour, acceleration of the legislative process pertaining to the labour law, registering the trade unions, protection of the environment and the human rights and good governance. As per official website of the GSP a tripartite committee has been formed however it was put on hold due to the pandemic. Furthermore, it is apparent that the Ministry of Commerce is requesting to WTO along with the other LDCs to continue the DFQF access for further 12 years as most of the economies were affected by the pandemic. In a nutshell, it is ostensible that the government is undertaking every possible measure to keep the economy steady and strong.

In addition to that, to attract foreign direct investments (FDIs) and domestic investments Bangladesh has established Export Processing Zones (EPZs) and Economic Zones (EZs) in numerous places of the country especially in the underprivileged areas. Benefits of establishing these zones are bifold; one is to allow the companies to import their machineries and raw materials duty free provided they export their products and to improve the local economy by employing local workers. As per the World Investment Report 2022, published by United Nations Conference on Trade and Development (UNCTAD) published on 9^th June, 2022, Bangladesh has become the second favoured destination for FDIs in the South Asia. The report also reiterated that FDI inflows in Bangladesh has rose by 13 percent to $2.9 billion which is almost approximate to the pre-CoVid inflows. The international project finances has also increased to 14 which is triple than previous year. It amounted to $4.7 billion as the report illustrates. The report also stated that Bangladesh is formulating “Sustainable Development Goals” (SDG) to deal with the climate change and to boost up the economy. The government also put guidelines in place for sustainable banking system to direct more investments into the major SDGs, for instance small to medium enterprises, creating more jobs for the people to reduce unemployment rates, and upgrading the social infrastructure and of course the agriculture, the root of the economy of Bangladesh. The report proves that the government strategy worked marvelously. On top of that the companies are allowed tax holidays and tax reductions for upto 12 years where the first 10 years the companies are exempted 100 percent depending on the types of the businesses. The companies are also completely exempted of income tax on dividends, capital gains from share transfer, royalties, technical know-how and many more.

Bangladesh follows the double taxation regime with over 30 major trading countries which allows the companies not to pay the taxes twice. Expatriate employees also enjoy 3 years tax exemption facilities in certain sectors. The companies could repatriate their full capital investments i.e., the FDIs to the source country including their profits and dividends which accrued due to the FDIs. Not only that, if the investors intend to reinvest their dividends and the profit it would be treated as a brand-new investment which also means another tax exemption for up to 12 years depending on the type of business.

The companies which do not enjoy the tax holidays because of their type of business, could still be benefitted from the accelerated depreciation provided they set up their businesses in some specific areas, for example within the 10 miles radius of Dhaka, Chittagong, Khulna, Narayanganj. If the company is set within these areas, the set accelerated rate would be 100 percent of the total cost of the machinery or plants and if it is set somewhere else within the country the rate would be 80 percent in the first year and 20 percent in the second. 

The foreign investors could open their own company with 100 percent ownership. They could partake in Initial Public Offerings (IPOs) in the stock market without any regulatory constraints. Moreover, the individual investors have their capital gain from the listed shares entirely tax free whilst the companies enjoy the lowest tax rate applicable. The foreign investor could apply for their permanent residency by investing a minimum of USD 75,000 which is of course non-repatriable or could apply for citizenship by investing a minimum of USD 500,000 or by transferring USD 1,000,000 electronically to any recognised financial institution which is also non-repatriable.

Bangladesh is also blessed with other major factors which make the investment more lucrative and profitable for the investors such as a vibrant industrial sector, security and protection of the invested monies, strategic location of the country with high maritime and air connectivity, influx number of hardworking and skilled workforce, lost cost utilities available in the region, progressive domestic and international market and competitive incentives for the investors and the investments. Bangladesh has articulated National Industry Policy 2010 which concentrates on modernisation and modification of the economic endeavours, upgrading the infrastructures, improvement of the productivities and the advancement of Small and Medium sized enterprises (SMEs).

Albeit Bangladesh is a Muslim majority country, the citizens of Bangladesh live in peace and harmony irrespective of their race and the religion. Even the political parties have mutual accord and consensus amongst them for the betterment of the country. All the citizens and the political parties unanimously agreed upon the policies pertaining to private investment be it domestic or foreign. Also, to put the foreign investors’ minds at peace, the Government of Bangladesh enacted the Foreign Private Investment (Promotion and Protection) Act 1980 which provides full protection of the investors’ monies against expropriation and nationalization. The Act also allows repatriation of the capital invested without any hindrances. Moreover, treaties on bilateral investment focusing on mutual protection and promotion of private investments have been concluded with 30 countries.

Another advantage of investing in Bangladesh is a hard-working, qualified, and well-educated workforce with the most inexpensive salaries in the southeast Asia. More than half of the population is under 30 years of age driven by the passion to do something great in their lives. The cheapest workforce is coupled with the lowest price of utilities. The price is very competitive in the region and the industrial areas like the EPZs and EZs are facilated with preferential services in terms of rates and supply. The government is working hard to increase clean electricity production by installing nuclear power plants and hydro-electricities. The industries could establish their own power plants and extra incentives are accorded for using renewable energy.

The citizenry and the government of Bangladesh left no stone untuned to improve their personal and social standard of living which is evident from the Goldman Sachs review on the Next 11 (N-11). Bangladesh was listed as one of the next 11 major emerging market after Brazil, Russia, India, and China (BRICs). The World Bank also effusively praised about the social and economic development and economic recovery after CoVid-19 pandemic. It also precisely articulated the fact that the country has performed wondrously in poverty reduction and has become one of the fastest growing economies in the world. The International Monetary Fund (IMF) similarly has noticed the robust growth of the economy of the country through resilient foreign cash inflow by exporting products, services and skilled workforce.

To sum up the current climate of investing in Bangladesh, it should be said that Bangladesh is building up a steady and strong economy in response to global economic change. The country protects the investors and their monies with 100 percent expatriation of the profit or the capital should the foreign investors wish to retrieve their invested monies. The incentives of investing in the EPZs and the EZs coupled with the cheap workforce and utilities, Bangladesh provides the best environment to invest in the world which is second to none. It is the right time the capitalists invested their funds to open a business in Bangladesh should it be a private or public limited company, or a joint venture. What ABC, with its ample experience and expertise in this sector could do, is to make the incorporation procedure even more convenient and effortless.