Business Sectors & Investment Incentives in Bangladesh

Md. Joynal Abdin*

Business Consultant & Digital Marketer

Co-Founder & CEO of Bangladesh Trade Center

Major business sectors of Bangladesh economy could be classified into three broad heads, namely industrial (manufacturing) sectors, Service sectors, agriculture (agro-processing) sectors. Major sectors of Bangladesh economy are as follows:

1. Industrial (Manufacturing) Sectors of Bangladesh:

• Agro-based and agro-processing industry
• Readymade Garments Industry
• Pharmaceuticals
• Leather and Leather products
• Light Engineering Industry
• Jute and Jute products
• Plastic Industry
• Ship Building
• Environment friendly ship breaking
• Frozen Fish Industry
• Home Textiles
• Renewable Energy (Solar Power, Windmill)
• Active Pharmaceuticals Ingredient Industry and Radio Pharmaceuticals Industry
• Herbal Medicinal Plant
• Basic chemicals/dye and chemicals
• Radio-active (diffusion) Application Industry (e.g. developing quality of decaying polymer/preservation of food/ disinfecting medicinal equipment)
• Development of Polymer Industry
• Automobile Industry
• Handicrafts
• Energy Efficient Appliances/Manufacturing of Electronic goods/Development of Electronic materials
• Tea Industry
• Ceramics
• Tissue Grafting and Biotechnology
• Jewelry
• Toy
• Cosmetics and toiletries
• Agar –Ator Industry
• Furniture
• Cement Industry

2. Major Service Sectors:

• IT-based activities (system analysis, design, developing system solutions, information service, call centre service, offshore development Centre, business process outsourcing etc.)
• Agro-based activities such as fishing, fish preservation and marketing
• Construction industry and housing
• Overseas Employment
• Entertainment
• Ginning and baling
• Hospitals and clinics
• Nuclear and Analytical Service (e.g. nuclear treatment etc.)
• Horticulture, flower cultivation and flower marketing
• Human Resource Development, Knowledge society with high quality merit and efficiency
• Tourism
• Testing Laboratory
• Photography
• Telecommunication
• Transport and communication
• Warehouse and container service
• Engineering Consultancy
• Filling Stations (Petrol pump, CNG conversion centre etc.)
• Private Inland Container Depot and Container Freight Station
• Tank Terminal
• Chain Super Market/Shopping Mall
• Aviation Service
• Inspection and testing service
• Regional Feeder vessel and coastal ship service.
• Dry socking and ship servicing
• Modernised Cleaning Service for High-rise Apartments, Commercial Building
• Auto mobile service
• Technical Vocational Institute
• Production and Marketing of poultry and dairy products
• Advertising Industry and modelling e.g. print modelling, TV commercials, ramp modelling, catwalk, fashion
• Production, supply and distribution of power in the private sector
• Outsourcing and Security Service (Private Security forces/manpower supply)
• Sea-ship movement trade

3. Agriculture (agro-processing) Sectors:

• Processed fruit products (jam, jelly, juice, pickles, asrbat, syrup, sauce etc.)
• Fruits processing (tomato, guava, sugarcane, jackfruit, lichie, pineapple, coconut etc.) vegetables and lentil
• Processing of bread and biscuits, vermicelli, laccha, chanachur, noodles etc.
• Manufacturing of flour, sujee
• Processing of mushroom and spirulina
• starch, glucose and other dextrose product
• Milk Processing (pasteurization, milk powder, ice-cream, condensed milk, sweet, cheese, butter, ghee, chocolate, curd etc.)
• Processing of Potato products (chips, potato, flex, starch etc.)
• processing of powder spice
• Refining and hydrogenation of edible oil
• Salt processing
• Processing of prawn and other fishes and freezing
• Manufacturing of herbal cosmetics
• Manufacturing of Unani and ayurvedic medicines
• Fish feed and fish meal processing for poultry and livestock
• Seed processing and preservation
• Manufacturing of jute products (rope, thread, twain, canvass, bag, carpet, sandals etc.)
• Production of silk textile
• Manufacturing of agro-equipment’s
• Manufacturing of rice, puffed rice, chirra etc.
• Production of flavored rice
• Tea processing
• Production of coconut oil
• Processing of rubber tape, shellac
• Cold storage (processing and preservation of edible potato and seed potato, fruits, vegetables etc.)
• Production of wood, bamboo and cane furniture (exclusive of cottage industry)
• Flower preservation and export
• Meat processing
• Production of Bio slurry, mixed manure and urea
• Production of bio-pesticides, neem pesticides etc.
• apiculture
• Particle board
• Sweetening products
• Soya food production & processing
• Mustard oil producing industry (if local variety is used)
• Rubber goods making project.
• Rice bran oil.
• Seed industry
• Milk and poultry production and supply.
• Horticulture, floriculture, flower cultivation, flower and vegetable marketing (lemon, mushroom, battle leaf and honey is included in this industry).

Business Sectors & Investment Incentives in Bangladesh, this is the summary of two chapters from the book “Most Prospective Sectors to Invest in Bangladesh” of the Author. To purchase the book click here.

Business Sectors & Investment Incentives in Bangladesh, this is the summary of two chapters from the book “Most Prospective Sectors to Invest in Bangladesh” of the Author. To purchase the book click here.

Investment incentives offered by Bangladesh:

Bangladesh achieved independence from Pakistan through a bloody liberation war for 9 months at a cost of 3 million lives. After liberation war major Investment was in reconstruction of the bridges, railway lines, water ways, ports and a large number of developing houses destroyed or burnt during the war. The first five years plan was prepared in a spirit to achieve socialism in the country. There was thus emphasis on investment in public sector. In the early 1980s the trend reversed and started a new trend of privatizing state-owned enterprises (SOE). Many SOEs were sold out to private owners, at the same time new enterprises started to be developed in private sector.

The government has designed and implemented different policy reforms for creating more open and competitive environment for local and foreign investment. Considerable reforms and policy changes have been brought in recent years to promote the congenial atmosphere for foreign direct investment in Bangladesh. Private investment from foreign sources is welcome in all areas except four strategic industries reserved for public sector only namely Arms and ammunitions and other defense equipment and machinery; Production of nuclear energy; Forest plantation and machinated extraction within the bounds of reserve forest; and Security printing currency notes and minting. The foreign private investment (promotion and protection) Act, 1980 has been passed that ensures legal protection to foreign investment against nationalization and expropriation. It also guarantees repatriation of capital and dividend; and equitable treatment with local investors with regard to indemnification, compensation, restitution, or other entitlement as is accorded to investment. The government has made bilateral agreements for avoidance of double taxation with 26 countries and negotiations are going on with 23 countries.

Investment treaty for promotion and protection of investment between Bangladesh and twenty countries have been concluded and negotiations are going on with 9 other countries. Besides these, Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency), OPIC (Overseas Private Investment Corporation) of USA, ICSID (International Centre for Settlement of Investment Disputes) and a number of WIPOs (World Intellectual Property Organization) a Permanent committee on development and cooperation related to industrial prosperity. Adequate provision is also made available for intellectual property rights, such as patents, design and trademarks and copy right.

The government has already enacted bankruptcy law. A law commission has been constituted with a view to identify the anomalies and weaknesses in the existing laws and legal system. One of the main tasks of this commission is updating the existing laws in relation to industries, trade and business.

All these are expected to improve general business environment along with the environment of FDI. Efforts are being made to reform the bureaucratic administration in order to make it efficient and supportive of better services for inflow of FDI and economic development oriented activities. Substantial modifications have been made to up-date the laws dealing with financial sector. The Companies act 1994 and labor Act 2006 have been enacted for facilitating inflow of FDIs in Bangladesh.

In order to improve the environment of private foreign investment and FDI, several EPZs have been established in Chittagong, Dhaka, Khulna under the Bangladesh Export Processing Zones Authority (BEPZA) in 1980. The private Export Processing Zones (PEPZs) Act has also been enacted to encourage the establishment of “Private Export Processing Zones” by the local and foreign investors. These EPZs are well enriched with the necessary infrastructural facilities and are completely protected from any law and order problems or union activities.

The BEPZA approves all projects to be located in the EPZS and offers “One window same day service” to the investors in the EPZs. The government has also approved the private power generation policy of 1996 and tax exemption on income of the company for 15 years from the date of commercial production is allowed.

The Government has undertaken several steps to make import liberalization and industrial deregulations more effective including announcing its strategy of reducing effective protection over the medium term, continuing its efforts to lower and simplify tariffs, publishing a clear tariff schedule, developing an action plan for legal reforms and a blue pint for deregulation, and putting an action plan for implementing its exports development strategy. These efforts have improved the investment environment in Bangladesh.

Bangladesh is one of the promising economies with a large domestic market, availability of labor with competitive price, low utility charges, two Seaports and a potential Deep Seaport facility, long-term tax holiday, 100% repatriation facility, and easy access to largest regional market like India and China.

Facilities and Incentives for a foreign investor:

• Tax exemption on  royalties,  technical  knowhow  and  technical  assistance  fees  and  facilities  for  their repatriation
• Tax exemption on interests on foreign loans
• Tax exemptions on capital gains from transfer of shares by the investing company
• Remittances of  up  to  50%  of  salaries  of  the  foreigners  employed  in  Bangladesh  and  facilities  for repatriation of their savings and retirement benefits at the time of their return
• No restrictions on issuance of work permits to project related foreign nationals and employees
• Facilities for repatriation of invested capital, profits and dividends
• Provision of transfer of shares held by foreign shareholders to local investors
• Reinvestment of remittable dividends would be treated as new investment
• Level playing field: foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned ones

Fiscal incentives:

• Corporate tax holiday of 5 to 7 years for selected sectors
• Reduced tariff on import of raw materials capital machinery
• Bonded warehousing
• Accelerated depreciation on cost of machinery is admissible for new industrial undertaking (50% in the first year of commercial production, 30% in the second year, and 20% in the third year)
• Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange
• Reduced Corporate Tax for 5 to 7 years in lieu of tax holding and agricultural deprecation.

Financial incentives for export oriented industries:

• Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the selected products
• 90% loans against letters of credit (by banks)
• Permission for  domestic  market  sales  of  up  to  20%  of  export-oriented  companies  outside  EPZ  (relevant duties apply)

Additional Facilities / Incentives:

• 100% foreign equity allowed
• Unrestricted exit policy
• Remittance of royalty, technical know-how and technical assistance fees
• Full repatriation facilities of dividends and capital at exit
• Citizenship by investing a minimum of US$ 5,00,000
• Permanent resident permits on investing US$ 75,000
• An investor  can  wind  up  investment  either  through  a  decision  of  the AGM  or    He  or  she  can repatriate the sales proceeds after securing proper authorization from the Central Bank

Other factors of Investment Environment:

Bangladesh offers investment friendly environment compared to the other South Asian Countries. Salient features are enumerated below:

• Largely a homogenous society with no major internal or external tension Bangladesh has a population with great resilience in the face of adversity.
• The people of Bangladesh, a liberal democratic country irrespective of race and religion are living in harmony for years.
• Bangladesh enjoys broad non-partisan political support for market-oriented reforms and offers the most investor-friendly regulatory regime in South Asia.
• This country has a large trainable, enthusiastic, and hardworking low-cost labor force suitable for any labor-intensive industry.
• A bridge between ASEAN and SAARC nations, the Geographical location of Bangladesh is ideal for global trades with very convenient access to international sea and air routes.
• Bangladesh is endowed with abundant supply of natural gas, coal, water and very fertile soil.
• Although Bangla is the official language. English is widely spoken as second language.
• Increasing trend of per capita forecasting its purchasing power is increasing in the local market.
• All Bangladesh products other than armaments enjoy complete duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. However, for apparel export to USA, Bangladesh has a quota regime which ended on 1^st January 2005.

• Export earning is continuously increasing.
• Increasing trend of remittance.

Business Sectors & Investment Incentives in Bangladesh, This is the summary of two chapters from the book “Most Prospective Sectors to Invest in Bangladesh” of the Author. To purchase the book click here.

*Author’s Short Profile:

Mr. Md. Joynal Abdin is a Business Consultant & Digital Marketer based in Dhaka, Bangladesh. He is also Co-Founder & CEO of Bangladesh Trade Center. Previously he served at Dhaka Chamber of Commerce & Industry (DCCI) as Executive Secretary; DCCI Business Institute (DBI) as Executive Director; SME Foundation as Deputy Manager; and the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) as Assistant Secretary.

The list of services Mr. Abdin is offering includes but not limited to Business Research and Documentations like Feasibility Study, Project Proposal Preparation, Writing Business Manual, Standard Operating Procedures etc.; Export Market Selection and Product Positioning at Home and Abroad; Buyers-Sellers Matchmaking; Website Development; Search Engine Optimization (SEO); and Social Media Marketing etc.

Business Sectors & Investment Incentives in Bangladesh, This is the summary of two chapters from the book “Most Prospective Sectors to Invest in Bangladesh” of the Author. To purchase the book click here.

Developing Bangladesh          Bangladesh Trade Center            Read More…