Foreign direct investment in bangladesh

Konok Kumar Mondal #1407016

Foreign direct investment

A foreign direct investment is a controlling ownership in a business enterprise in one country by an entity based in another country.

Key Economic Indicators of Bangladesh

GDP size $223.941 billion (2016) Expected GDP Growth Rate- 7.10% ( 2016) Per Capita Income- $1466 (April, 2016) Inflation Rate- 5.6% ( 2016) Investment Contribution to GDP- 13% ( July 2015-May 2016) FDI- $1.53 billion (2015) Export- 192.41Billion BDT (February 2016) Import- 239Billion BDT (February 2016) Gold Reserves 13.78 tones (apx) Remittance $1397.49 million Foreign currency reserve over $24billion.

Source: BOI and Bangladesh Bank

Why Bangladesh? Industrial low cost laborPer hour labor cost in Bangladesh is $0.62 in 2014 the lowest among the developing countries. Low cost of energy Water Supply : Tariff :  22.43 euro cents / cu-m. Gas Supply : Tariff :  6.45 euro cents / cu-m. Power Supply : Tariff :  6.11 euro cents / kwh. Good ranking in FDI magazine by CTG EPZ is 200 out of 700 global economic

zones Proven export competitor

Bangladesh is one of the top exporters of readymade garments to US and Europe. Bangladesh also has some preferential treatment benefits in European countries.

Why Bangladesh?

Strategic Location

Why Bangladesh? Competitive Incentives

Fiscal and non-fiscal incentives

Tax Exemptions

Generally 5 to 7 years.

For power generation

exemption isallowed for 15

years

Double taxation can be avoided on the basis of

bilateral agreements.

Duty

No import duty for export

oriented industry

For other industry it is @ 5% ad valorem

Remittance and Exit

Full repatriation of invested

capital, profit and dividend

Wind up on investment either

through a decision of the AGM or EGM

Repatriation of the sales proceeds after securing

proper authorization from the Central Bank

Export Processing Zone (EPZ)

Eight EPZs so far

Directly supervised by Prime ministers office

Specially allocated for FDI of manufacturing

sectors

Why Bangladesh? Export and economic zones

Facilities Provided by Bangladesh Export Processing Zone Authority (BEPZA)

Duty free import and export of raw materials and finished goods

GSP facility available

Duty & quota free access to EU, Canada, Norway, Australia etc.

Enjoy MFN (most favored nation) status

No ceiling on foreign and local investment

Foreign Currency loan from abroad under direct automatic route

Non-resident Foreign Currency Deposit (NFCD) Account permitted

Off-Shore banking available

Relocation of foreign industries allowed

Sub-contracting with export oriented Industries inside and outside EPZ allowed

Facilities Provided by Bangladesh Export Processing Zone Authority (BEPZA)Duration and rate of tax exemption for Chittagong, Dhaka, Comilla, Adamjee,& Karnaphuli EPZ for the industries set up after January 01, 2012:

Why Bangladesh? Risk factors of FDI are the minimum in Bangladesh Since independence non of the governments of Bangladesh had imposed any

unfavorable policy against foreign investors.

Stable exchange rate – Over the last few years Bangladesh managed to maintain the foreign currency exchange rate at a stable position.

Exchange rate on 20.06.2015 British Pound = 122.9tk Euro =87.88tk American Dollar =78.39tk Low sovereign risk - Bangladesh has never defaulted in its debt repayment as

Bangladesh has over $24 billion of foreign currency reserve. Growing market

Increasing purchasing power with per capital income $1314.

Board of investment- one stop service center.

1. Pre-Investment Information and Counseling Service

2. Investor Welcome Service (faster immigration)

3. Registration /approval of foreign, joint-venture and local

project

4. Registration /approval of Branch/Liaison/Representative

Offices

5. Approving work permit for the Foreign Nationals

6. Facilitating utility connections (electricity, gas, water &

sewerage, telecom etc.)

7. Assistance in obtaining industrial plots

8. Pre-Investment Information and Counseling Service

9. Approving remittance of royalty, technical know-how and

technical assistance fees

10. Facilitating import of capital machinery & raw materials

11. Approving foreign loan suppliers' credit, PAYE scheme.

Sectors in which Bangladesh gives most incentives

Energy Infrastructure, Pharmaceutical Textiles Agriculture Healthcare Telecom Climate change Education Shipbuilding and light engineering

Import Registration Certificate (IRC)

For the Import Registration Certificate (IRC) one needs to register with the BOI and the Chief Controller of Imports & Exports. The following supporting documents are needed:

a. Trade License photocopy b. Valid membership of association (e.g. FBCCI) c. Passport photocopy of the Managing Director d. Bank solvency certificate (original) e. Original receipt (challan) of bank deposit for the fees

 Export Registration Certificate (ERC)

For the Export Registration Certificate (ERC) the following documents are needed:

a. Attested copy of: i. Trade License ii. Valid membership of association or chamber iii. AOA iv. MOA v. Incorporation certificate b. Original of Bank receipt (challan) for deposit of the fees

Factors influencing FDI in Bangladesh