Why Should You Invest in Bangladesh?

Why Should You Invest in Bangladesh?

Bangladesh is now one of the most promising emerging markets in the world, and foreign investors are slowly starting to recognize it as a market to keep an eye on.

Bangladesh suffers from a negative image: the country is seen as being extremely poor, but the scenario has changed in a remarkable way. Bangladesh is under-developed, subject to devastating natural disasters and sociopolitical instability – no debate on these issues. However, the country has the advantage of being in a strategic geographical position between South and Southeast Asia. In addition, its domestic consumption potential and the wealth of its natural resources make the country a good candidate for investment.  The government promotes private sector-led growth; foreign currency is abundant due to remittances, and the central bank respects transferability of foreign currency. A number of more developed countries have outsourced their factory and production house to Bangladesh.

The confidence of foreign investors in Bangladesh has increased, as the country has taken a series of measures to build up investment-friendly infrastructure, develop the energy sector, provide necessary facilities, and support to set up industries; and simplify rules and regulations.

In this article, we will show you reasons why you should consider investing in Bangladesh, among other things the world’s second largest fabric exporter and a rising player in the pharmaceutical industry.

1. Continuously Rapid Economic Growth

Bangladesh will be the third fastest growing economy in the world in terms of achieving high Gross Domestic Product (GDP) in 2019, according to a United Nations report.

The report titled World Economic Situation and Prospects put Bangladesh only behind South Sudan and India. Bangladesh will expand at 7.4% this year, while India at 7.6% and South Sudan to grow at a staggering rate of 8%, it said.

The economic outlook for South Asia is highly divergent across countries. There are some economies, including Bangladesh, Bhutan, and India, where economic conditions are mostly positive, with GDP growth projected to remain robust in the near term.

The UN in its report said Bangladesh economy is also set to continue expanding at a fast pace in the near term, above 7% per year, amid strong fixed investment, vigorous private consumption, and accommodative monetary policy.

Focusing on South Asian economy, the flagship UN report said the regional GDP is expected to expand by 5.4% in 2019 and 5.9% in 2020, after an estimated expansion of 5.6% in 2018. Economic growth is expected to be supported by private consumption and, in some cases, investment demand, even as monetary policy stances tighten in some economies.

Therefore, compared to other emerging markets, the GDP growth of Bangladesh has been outstanding.

2. Strategic Location, Regional Connectivity, and Worldwide Access

Bangladesh is a region of South Asia has a significant role in the perspectives of geo-politics, geo-economics, and geo-strategy for the geographical location. Both potential and limitations have played a great role here, though border disputes is a vital issue to the development process of Bangladesh. On the other hand, located on the border of South and Southeast Asia, Bangladesh is close to other major markets in the region, such as China.

Bangladesh’s capital city Dhaka has easy access to its neighboring countries. It is also the commercial and financial hub of Bangladesh and the most significant economic center of Eastern South Asia.

Furthermore, Bangladesh is situated on the coast of Bay of Bengal which offers excellent conditions for doing trading business within Asian and Middle Eastern markets.

Bangladesh is strategically located between India, China, and ASEAN markets. As the South Asian Free Trade Area (SAFTA) comes into force, investors in Bangladesh enjoy duty-free access to India along with EU, Japan and major developed countries.

3. A Winning Combination and Openness to Foreign Investment

Now Bangladesh is a winning combination with its high connectivity, competitive market, business-friendly environment and competitive cost structure that can give you best returns.

Bangladesh has shown a very welcoming attitude towards foreign investors, allowing foreign investment in most sectors and providing favorable conditions for doing business.

Some of the incentives Bangladesh is offering to foreign investors are:

  • Tax holidays and exemptions

  • Simplified import of raw materials and machinery

  • Facilitation of utility connections

The Bangladesh Economic Zone Authority (BEZA) is also planning to create 100 economic zones all over Bangladesh in the next 15 years.

Foreign direct investment (FDI) to Bangladesh has seen a sharp rise of 32.09% during the January-November period of 2018.

According to Bangladesh Investment Development Authority (BIDA)  data, in January-November of 2018,  Bangladesh saw FDI of $2.84 billion,  up by 32.09%, compared to the total FDI of $2.15 billion in 2017.

Kazi Aminul Islam, executive chairman of Bangladesh Investment Development Authority (BIDA), said that although global FDI fell by 20% in 2018, in line with the country’s current positive trend, Bangladesh’s FDI in 2019 is expected to reach $3.7 billion.

Bangladesh government has almost completed the software development to provide 150 services implementing the newly-enacted law, the One-Stop Service Act, 2018— similar to Singapore’s approach.

According to Bangladesh Investment Development Authority (BIDA) executive chairman, Bangladesh’s position in the World Bank’s Ease of Doing Business Index is significant as the country’s investment environment is presented to the world’s investors through it. BIDA is working to make sure that the country maintains a double-digit position in the index.

The government has taken a time-bound action plan and formed a task force in consultation with each ministry associated with each sub-indicator.

4. Young, Skilled, Industrious, and Competitive Workforce

One of the main driving forces of Bangladesh’s economic growth is its young workforce. As a matter of fact, in 2019, the median age in Bangladesh is just 26.0.

Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. This country is providing an active group for recruitment and has consistently developed a skilled workforce catering to your needs. English is widely spoken, making communication easy.

The country also shows potential in technical education. 15,000 Bangladeshi fresh graduates get into top IT firms such as IBM, Microsoft, and Google every year.

The European Commission listed Bangladesh as an ideal destination for outsourcing. There are Tech Parks situated in Dhaka and Jessore to promote the progress of the ICT sector to create Digital Bangladesh.As confirmed by the latest reports by the Bangladesh Telecommunication Regulatory Commission (BTRC), and We Are Social and Hootsuite, the total number of Internet Subscribers has reached 92.061 Million at the end of February 2019. That makes up more than 50% of the total population of Bangladesh. Among countries with the highest Internet penetration percentage in South Asia, Bangladesh ranked 1st. In fact, Bangladesh’s Internet penetration has surpassed the average of 36% of Southern Asia, and it is close to the world’s average of 53%.

Therefore, Bangladeshis are now gaining more access to the Internet, providing excellent opportunities for online businesses, such as banking services and e-commerce, to thrive in Bangladesh. They are diligent and skilled in all the way.

 5. Growing Population

The population is not a curse for Bangladesh if it can utilize properly. Sometimes it plays a vital role in economic growth. Sufficient human resources are the cause of economic development. In Bangladesh population is more than other developed countries. Currently, we can notice the extreme crisis of manpower in many developed countries.

Prime Minister Sheikh Hasina believes Bangladesh’s population is not something to worry about; rather this manpower, if armed with the right education, can be turned into its best resources. The current population of Bangladesh is 167,626,943 as of Saturday, March 30, 2019, based on the latest United Nations estimates. This makes Bangladesh the 5th most populous country in Asia and the 8th in the whole world. In addition, the UN estimates Bangladesh’s population to reach 265 million by 2050.

6. Economic and Export Zones

Bangladesh offers export-oriented industrial enclaves with infrastructure facilities and logistic support for foreign investors. Building Economic Zones is in the process. The Country is also developing its core infrastructures like roads, highways, surface transport and port facilities for a better business environment.

China to develop Bangladesh industrial zone as part of the South Asia push. China is developing a 750-acre industrial park in Bangladesh which will largely be used by Chinese manufacturing firms part of its push to expand links with South Asia and beyond.

State-run China Harbour Engineering Company will hold a 70 percent share in a joint venture being formed for the park with the Bangladesh Special Economic Zone Authority (BSEZA).

After acquiring 75,000 acres of land and giving licenses for six economic zones to the private sector, the Bangladesh Economic Zones Authority (BEZA) is targeting the acquisition of an additional 100,000 acres of land to establish 100 economic zones across Bangladesh.

BEZA has also already reformed some of the concerned legal frameworks to boost investment in Economic Zones (EZs), and received investment commitments amounting to $17 billion over the last seven months. Experts think, there needed to be an improvement in communication, infrastructure, transportation, and tax systems for proper implementation of EZs.Experts also stressed the need for synergy between the Public-Private Partnership Authority and BEZA to facilitate foreign and private investment for EZ development, as well as to promote the EZs to attract potential foreign investors.

On the other hand, Bangladesh has eight Export Processing Zones (EPZ). Read the objectives of EPZ in Bangladesh, and it means a lot:

i) To foster and generate economic development of Bangladesh by encouraging and promoting foreign investments in zones.

ii) To diversify the sources of foreign exchange earnings by increasing export of Bangladesh through a zone.

iii) To encourage and foster the establishment and development of industries and commercial enterprises in a zone in order to widen and strengthen the economic base of Bangladesh

iv) To generate productive employment opportunity and to upgrade labor and management skills through the acquisition of advanced technology.

7. Competitive Labor And Energy Costs

Low labor And energy costs in Bangladesh is a well-established truth among the world market. The average monthly wage for garment workers in Bangladesh is 8000 BDT (US$ 100). In China, for example, garment workers earn on average about $347 a month.

In fact, increasing costs in developed countries such as Japan, China, UK, and the USA has become the main reason why many companies are moving their manufacturing to other destinations.

8. Trade Agreements

Bangladesh is also a member of the World Trade Organization. No doubt that Bangladesh is a highly experienced player in the international business arena.

Bangladesh signed memberships and agreements include:

*** Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area

  • Pakistan-Bangladesh Free Trade Agreement

  • Trade Preferential System of the Organization of the Islamic Conference

  • Asia-Pacific Trade Agreement

  • Preferential Tariff Arrangement-Group of Eight Developing Countries

  • South Asian Free Trade Area

Furthermore, one of the main trading partners of Bangladesh has been the European Union. Signed in 2001, the EU-Bangladesh Cooperation Agreement provides better conditions for trading by offering duty-free exports.

9. Investment Protection

The Foreign Private Investment (Promotion and Protection) Act, 1980, provides protection for the investment made in Bangladesh against expropriation & nationalization; equitable treatment, exit, and profit & capital repatriation. In addition, Bilateral Investment Treaties have been concluded with 30 countries.

Moreover, the Board of Investment (BOI) was established in 1989 directly under the Prime Minister’s Office to promote investments in Bangladesh. BOI functions are broadly categorized into three groups: Investment protection, promotion, facilitation, and policy advocacy.

BOI services also include:

a. Improvement in the investment climate

b. Pre-investment information, counseling and welcome services (fast track immigration)

c. Registration of foreign, joint-venture, and local industrial projects

d. Approval of work permit for the foreign nationals

e. Facilitation to import of capital machinery and raw materials etc.

f. Processing of foreign borrowings

g. Facilitation of obtaining utility connections and industrial plots

h. Approval of remittance of royalty, technology transfer, technical know-how, and technical assistance fees

i. Online Registration System (ORS) – for registering the project online

j. Business Laws Website – for disseminating business regulations

k. BOI Online Service Tracking (BOST) – for tracking the services of BOI Online

l. Approval of foreign commercial offices (branch/liaison/representative offices)

*** The decisions of the board are deemed as those given by the government and are to be implemented by all concerned agencies. Registration of an industry at BOI is required for availing facilities and infrastructural support provided by the government and BOI gives the registration on receipt of application in its prescribed form only. Registered companies do not need to get any permission from the government for import of raw and packing materials or spare parts unless these appear in the list of restricted items. For import of items under the control list, the BOI conducts verification for proper assessment and then issues a passbook, which is then sent to the office of the Chief Controller of Imports and Exports, who, in turn, issues an Import Registration Certificate.

10. Investment Opportunities in Bangladesh

Bangladesh is now trying to establish itself as the next rising star in South Asia for foreign investment. The government has implemented a number of policy reforms designed to create a more open and competitive climate for private investment, both international and local.The government has moved speedily to translate its policy pronouncements into specific reforms. It has been consistently pursuing an open-door investment policy and playing a catalytic rather than a regulatory role.

Foreign investment is particularly welcome in the export-oriented industries such as textiles, leather goods, electronic products and components, chemicals and petrochemicals, agro-based industries, green jute pulp, paper, rayon products, frozen foods (dominated by shrimp farming), tourism, agriculture, light industries, software, and data processing.

Foreign investment is also desired in high technology products that will help import substitution or industries that will be labor as well as technology intensive.

Some of the foreign private investment opportunities are:

  • Direct (100%) foreign investment or joint venture investment in the Export Processing Zones (EPZs) or outside EPZs.

  • Portfolio investment by purchasing shares in publicly listed companies through the stock exchange.

  • Investment in infrastructure projects such as power generation (private power generation policy announced): Electricity, Solar Power, Oil, Gas, Mineral Exploration, Telecommunication, Ports, Roads, and Highways.

  • Outright purchase or purchase of shares of state-owned enterprises, which are under the process of privatization.

  • Investment in private EPZ.

In order to stimulate rapid economic growth of Bangladesh, particularly through industrialization, the government has adopted an ‘Open Door Policy’ to attract foreign investment to the country. 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.

Bangladesh is on the verge of a significant breakthrough in terms both of international investor confidence and significant inflow of new investment funds. Naturally, there can also be risks, as there will be when investing in any other country. However, these risks can be minimized with a well-elaborated market entry strategy.

Do not hesitate to reach out to InCAP for a consultation. Our consultants will help your business thrive in Bangladesh.

 

Helpful References:
  • Bangladesh Investment Development Authority (BIDA)
  • Board of Investment (Bangladesh)
  • EMERHUB (emerhub.com)
  • Bangladesh Bank (Central Bank of Bangladesh – www.bb.org.bd)
  • The Bangladesh Metropolitan Chamber Of Commerce Hong Kong (BMCCHK – bcchk.org)

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