Investing Information for investors

Bangladesh is a moderate, secular and liberal democracy with immense potentials. It has earned global reputation in poverty alleviation, primary school enrollment, women empowerment, family planning, infant, under-five mortality rate and maternal mortality ratio reduction, lowering number of communicable diseases and child immunization. It has also made its mark in achieving comprehensive food security despite worldwide economic downturn. The greatest notable achievement of Bangladesh is undoubtedly its upgradation from Low Income Country to Lower Middle Income Country status as per the World Bank classification.

Bangladesh has been maintaining a steady GDP growth of more than six percent over the last decade. It has been possible due to government’s strong macro-economic fundamentals and prudent fiscal policy. Of late, the country has achieved 7.05 percent economic growth for the first time. Present per capita income of Bangladesh is US $1,466. Foreign exchange reserves have surpassed an all-time high mark of US $29 billion placing it next to India among the South Asian countries. Remittances sent by migrant workers reached US $15.31 billion in the Fiscal Year 2014-15. Consequently, Bangladesh is globally recognized as a role model of development.

Global banks and Multi-national institutions are highly optimistic about Bangladesh’s brilliant investment prospects. According to IHS Inc, a US based global information company, Bangladesh is placed among Asia Pacific’s top ten Foreign Direct Investment (FDI) hot spots. World Bank ranks Bangladesh 17th for investor protection. Goldman Sachs identifies Bangladesh as one of the ‘Next Eleven’ emerging economies, along with BRIC for its promising investment and future growth. JP Morgan Chase & Co. recognizes Bangladesh as one of the “Frontier Five” markets along with Kazakhstan, Kenya, Nigeria and Vietnam. Standard and Poor (S & P) as well as Moody’s have rated Bangladesh second only to India in South Asia for credit worthiness.

Investment facilities

Bangladesh offers one of the most liberal and investment friendly milieus in South Asia. The country has a unique geo-strategic position near India, China and ASEAN region. It also has a fast growing domestic market with approximately 165 million people within the age group of 25. Bangladesh possesses energetic, easily trainable low-cost workers suitable for any labor intensive industry. Majority of Bangladeshi products enjoy duty and quota-free access to EU, Japan, USA, Australia, and other developed countries. Labour and land costs are perhaps the lowest in Asia. Energy prices are most competitive in the region. Interests of foreign investors are well protected by the Foreign Private Investment (Promotion and Protection) Act, 1980 and bilateral agreements between Bangladesh and 28 other countries. Facilities include tax holiday for several years, duty free access for importing capital machinery, 100% foreign ownership with unrestricted exit policy, 100% profit repatriation, reinvestment of profit or dividend as FDI, multiple visa, work permit to foreign executives, Permanent resident permits on investing US$ 75,000 and citizenship on investing US$ 500,000. In addition, adequate protection of intellectual property rights, concessionary duty on the import of machinery and export subsidies are also available. For export oriented industries, duty free import of machinery and spare parts, bonded ware house facility, up to 90% bank loan against LC is available. Of late, 30 new Economic zones have been created to attract more foreign investments. A special economic zone has been allocated exclusively for Spanish investors. Current industrial policy offers special fiscal incentives in agriculture, food processing, ship building, renewable energy, tourism, ICT, apparels, pharmaceuticals and ceramics sector.

Export Incentives in Bangladesh

Introduction

1.1 The word export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an “exporter” who is based in the country of export whereas the overseas based is referred to as an “importer” (foreign buyer). In international trade “exports” refers to selling goods and services produced in home country to other foreign markets.

1.2 Bangladesh exports about 168 different products and services to almost 186 countries. The main exportable are Readymade Garments, Knitwear, Home Textile, Frozen Food, Leather & Leather goods, Jute and goods which contribute near about 89% of our total export. On the other hand the main export destination of Bangladesh are USA, Canada, EU Countries including U.K, Germany, France, Italy, Sweeten etc contributing almost 93% of total export. The export statistics reveals that Bangladesh is proceeding with positive export growth since 1974-75 . Anexxure-17 presents the export trend from the year1974-75 to 2010-11 as well as the export performance in July-June, 2011.

2. Procedure of Export

2.1 A company or individual businessmen with trade license is capable of doing export business. But before that he/the company has to obtain export registration certificate (ERC) from the office of Chief Controller of Import and Export (CCI&E), 111-113 Motijheel Commercial Area, Dhaka. Generally Trade License, Bank Balance Certificate, Membership from respective trade associations are required for obtaining ERC.

2.2 For starting a business in Bangladesh, it starts with registering the company name at the Office of the Registrar of Joint Stock Companies & Firms. The office is located at 24-25 Dilkusha, Commercial Area, Dhaka. This Office accords registration of Companies, Associations and Partnership Firms under the Companies Act, other related acts, rules, orders and ensures lawful administration of them.

2.3.1 The new entities should also obtain trade license from the city corporation where it is located. Depending on the type of the business it may also have to obtain license or certificate from BSTI, BRTA, etc.

2.3.2 For some products the exporters have obtain quality assurance certificate from BSTI/ Department of Fisheries (DOF)/ Respective Trade Associations etc.

2.4 The exporter can export with or without Letter of Credit (LC). The Contract/ Agreement with foreign buyer or CAD or Advance TT methods etc. are also allowed for export. The exporters then submit EXP form to bank and prepare bill of export. With all these documents exporters then approach at the customs authority of the port through which they want to ship his exportable. After examining all the papers the customs authority allows them to export and after boarding the products the authority gives them a bill of lading. After shipment the customs authority assures them stamping a seal in the back of bill of lading and provide Export General Manifest (EGM).

3. Export Law, Rules and Policies

The Export and Import Control Act 1950 (Annexure-1) provide the Government power to administer the import and export of Bangladesh under which a three yearly Export Policy is published. The Export Policy (Export Policy 2009-12, Annexure-2) generally guide the over all export of Bangladesh and help facilitate the exporters. The salient features of the Export Policy 2009-12 are as follows:

3.1 Products which cannot be exported and which can be freely exportable

3.1.1 Export Prohibited Products: Some Products cannot be exported. The list of such prohibited products can be found in Annex -1 of the Export Policy 2009-12.

3.1.2 Products under Conditional Export: Products which are exportable under some conditions can be exported only after fulfilling those conditions. Such products have been listed in Annex-2 of Export Policy 2009-12.

3.1.3 Exportable Products: All other products except the products enlisted in Annex-1 and Annex-2 of the Export Policy 2009-12 i.e. export prohibited products and the products under conditional export shall be freely exportable.

3.1.4 Export of Samples which don't have commercial values: Samples of exportable can be exported freely but with some conditions outlined in para 2.2.1.2 of Export Policy 2009-2012.

3.2 Entre-pôt and Re-export Trade

Entre-pôt trade and re-export shall have to be conducted under the procedures stipulated in the Public Notice No. 42 (2003-2006)/import dated June 28, 2005 (14 Ashar 1412 Bangla) (Annexure-3) issued by the Office of the Chief Controller of Import and Export.

3.2.1 Entre-pôt trade means the export of an imported product at a price at least 5% higher than the import price. No change whatsoever in the quality, quantity, shape or any other aspect is necessary in this respect. Products under entre-pôt trade shall not come out of the port boundary. However, the products can be brought out of the port boundary under special authorization.

3.2.2 “Re-export” means the export of an imported product within a specific period of time with a value addition of at least 10% to the imported price by changing the quality or shape or both of the products by means of local reprocessing.

3.3 Export facilities and incentives

The government formulates the Export Policy principally with a view to facilitate the exporters so as to develop and promote export of Bangladesh. Chapter 3-7 of the Export Policy detail the techniques of export development and of providing facilities to the exporters. The policy details the lists of export facilities. Chapter-1 of the Export Policy 2009-12 introduces the title of the policy, its scope and strategy, Chapter-2 describes the general rules of export, Chapter-3 explain export diversification mechanism, Chapter-4 lists the general facilities of export, Chapter-5 describes about sector based facility, Chapter-6 presents about service export and Chapter-7 highlights some special facilities and incentives.

3.3.1 Cash incentives: As listed in Annexure-4, for 17 exportable, the government is providing 5-20% cash incentives against FOB price of exported items. The exporter can directly claim for cash incentive in his merchant bank.

3.3.2 Duty Drawback: Duties which are paid at customs authority is refundable in case of re-export business or imported materials which after making finished products will be exported.

3.3.3 Bonded Facilities: For bonded ware house with a view to 100% export materials can be imported without any duties.

3.3.4 Assistance in searching for foreign market: For exploring foreign market Export Promotion bureau (EPB) organize/help the exporters participate about 30-35 international trade fair every year. EPB generally bear the costs of stalls including other incidental costs. Normally the exporters will have to bear only traveling and their accommodation cost. Besides, EPB and Ministry of Commerce often organize Marketing Mission abroad for searching new export market. The Mission comprises representatives from business leaders and exporters.

3.3.5 Export Loan at lower rate of interest: At only 7% rate of interest export loans are being provided. Besides, there is a fund named Export Promotion Fund (EPF) in Export Promotion Bureau (EPB) which provide export loan for ICT and handicrafts exportable at only 4.5% rate of interest without any co-lateral. There is an Export Development Fund (EDF) in Bangladesh Bank to provide export loans up to USD 400 million(Annexure-5).

3.3.6 Awarding CIP status and National Export Trophy: Every year CIP status (Annexure-6) and National Export Trophy (Annexure-7) are awarded to the best exporters of different sectors in recognition of producing new products, diversifying of products, enhancing exports, etc.

4. Export Preferences to (trade relations with) Foreign Countries

Bangladesh maintains excellent trade relations with foreign countries. Bangladesh became a member of World Trade Organization (WTO) from its inception. Bangladesh is also the member of South Asian Free Trade Area (SAFTA), Asia Pacific Trade Agreement (APTA), BIMSTEC and, Organization of Islamic Conference (OIC). Through those organizations and some times bilaterally Bangladesh enjoy preferential treatment on export trade. Of all those preferential treatments the most important one is Generalized System of Preference (GSP). In this system as an LDC, we get some preferential advantages including duty free or concession and quota free access. We are getting GSP in 37 Countries including 27 EU countries and 10 others like USA, Canada, Japan, Norway, Switzerland etc.