© Board of Investment 2013 www.boi.gov.bd

Nabhash Chandra MandalExecutive Member, Board of Investment

Investment opportunities In

Bangladesh

March 29, 2014

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Bangladesh at a Glance

Official Name : People’s Republic of Bangladesh

Political System : Parliamentary Democracy Population : 152.7 million (Census, 2011) Area : 147,570 km2 Time Zone : GMT+6 Hours GDP total : USD 128.81 bill (FY2012-13) GDP Per Capita : USD 1044 (FY 2013) Total Exports : USD 27.03 billion (FY2012-

13) Total Imports : USD 33.97 billon (FY2012-13) Total FDI : USD 1.73 billion (Y 2013) Forex. Reserve : USD USD19.15 billion (28 Feb.’14) Major Maritime Ports : Chittagong, Mongla Currency : BDT (1 BDT = USD 0.0128)

(Avg FY September, 2012) Major Cities : Dhaka, Chittagong, Khulna

Rajshahi, Sylhet, Barisal, Rangpur Major Maritime Ports: Chittagong, Mongla Dialing Code : +880

INDIA

CHINA

DHAKA

KHULNA

RAJSHAHI

SYLHET

CHITTAGONG

BARISAL

INDIA

INDIA

INDIA

200 miles

500 km Source: Bangladesh Economic Review, 2013, BBS, EPB, Bangladesh Bank

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03. Vision 2021: In Quest of a Happy, Prosperousand Inclusive Bangladesh

Medium Term Economic Targets (2013)

• Raising economic growth rate to 8%

• Reducing poverty rate to 25% from 45%

• Enhancing electricity supply to 7,000 MW

Long Term Economic Targets (2021)

• Boosting economic growth rate to 10% in 2017 and sustaining it till 2021

• Reducing poverty rate to 15%

• Enhancing electricity supply to 20,000 MW

• Raising the economy to the level of a middle-income country

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04. Road to Middle Income Country by 2021

To achieve the status of a middle income country by 2021: Required growth rate : 7.5%- 8% every year Per Capita Income : US$ 1,300 (World Bank Report)

: US$ 1,100 (current) [Bangladesh Bureau of Statistics

(BBS)]

Share of Investment : 30% instead of 26.84%

(FY 2013)

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05. Present status of the country: Bangladesh maintains a very promising economy with stable

growth rate 6%+ Per Capita Income US$ 1044 BD reduced MDG targeted poverty rate to 25% in 2012, before the

targeted yr. (2013) Generated electricity 10,000 MW in December, 2013 BD is one of the top exporters of RMG to US & European countries Has never posted negative economic growth rate during the past 30

yrs. Maintains a open, market based economy Leasing & buying a private land by foreign investors in BD is easier than

India, Pakistan and Srilanka (World Bank Report) Bangladesh is an emerging country for FDI and (World Bank Report)

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‘‘… a peaceful society and stable .. .. ..’’

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06. Sectoral Contribution to GDP:

Duration Sector wise GDP change (%)Agriculture Industry Service Total

Before Liberation in 1950-

1970

70~55 4~10 26~35 100

After Liberation in 1971 44~18 11~30 45~52 100

At present in FY 2013 19 32 49 100

SAARC Country (India) 18.1 26.3 55.6 100

Sectoral Contribution to GDP since 1947:

Year Wise Electricity GenerationYear Generation

Capacity (MW)

Actual Production (MW)

2008-09 5166 4162

2009-10 5271 4606

2010-11 6639 4890

2011-12 8100 6066

2012-13 8525 6350

Planning for Electricity Generation (2015- 2030)

Year MW

2015 13,300

2020 22,500

2025 30,000

2030 39,000

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07. What is told about Bangladesh Citi Investment Research & Analysis termed Bangladesh, China, Egypt,

India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam have the most promising (per capita) growth prospects .

Goldman Sachs branded as Bangladesh is in ‘Next 11’ list after the BRICS nations

The International Monetary Fund (IMF) commented on the economy of Bangladesh as Resilient export and remittance flows have bolstered growth and external stability

The Wall Street Journal (WSJ) dismissed the previous branding of Bangladesh as commented Bangladesh, 'Basket Case' No More - with a higher growth rate, a lower birth rate, and a more internationally competitive economy,

JPMorganChase commented Bangladesh The country ranks fourth in growth in economically active population.

Morgan Stanley has commented Bangladesh is at the very early stages of an investment boom…

New York Times has termed Bangladesh as “an unlikely corner of Asia, strong promise of growth”…

COFACE (Economic & Insurance Institution of France) termed among the 10 countries including Bangladesh have promising growth prospects, business friendly environment- after Goldman Sachs ‘Next 11’ list like the BRICS nations

COFACE countries: 1st 5: Peru, Philippine, Indonesia, Colambia & Srilanka , 2nd 5: Kenya, Tanzania, Zambia, Bangladesh & Ethiopia

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08. World Bank AssessmentWorld Bank on Bangladesh as an FDI destination:

Bangladesh has scored higher than the average rating of around 100 developing countries in the CPIA of the World Bank that assesses four broad areas including economic & public sector management

The areas are a) economic management, b) structural policies, c) policies for social inclusion and d) public sector management and institutions

Bangladesh scores 3.5 out of a maximum 6 points

Developing countries average point is 3.3 (BD score 0.2% higher)

Basic requirements for sound investment are a) good macroeconomic statistics, b) accurate financial statements, c) stable regulatory framework and d) clear understanding of corporate governance structure

Bangladesh possesses all of the above at the present time and the quality of macroeconomic statistics is improving gradually.

Bangladesh is the most convenient destinations for FDI for its investment friendly facilities & regulations

Leasing & buying a private land in BD by foreign investors is much easier than India, Pakistan and Srilanka

”World Bank’s latest report on Investing Across Boarder 2010 covering 87 countries lists BD as one of the most convenient destinations for FDI”..

09. World Bank AssessmentWorld Bank on Bangladesh as an FDI destination:(contd..)

According to the World Bank’s New Business report- 2013:

Bangladesh is ranked 74 for ease in doing a new business instead of previous yrs rank 132

Bangladesh has undertaken significant & continuous reforms in business registration, process simplification and automation in service delivery

Source: World Bank’s New Business Report- 2013

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10. FDI Policy FrameworkThe National Industrial Policy- 2010 of Bangladesh is one of the

best and liberal policies in South Asia. The main features of the policy are:

a) Private sector is treated as the engine of growth

b) 100% foreign equity is allowed along with unrestricted exit.

c) All industrial sectors are open for foreign investors for investment except 4 *reserve sectors for the government.

c) No upper ceiling for foreign investors

d) Equal treatment for both local and foreign investment

e) Export oriented industries are given top priority

f) J/V with local partner either private or public is allowed but not mandatory.

g) Foreign private investment in Bangladesh is secured by law.

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Reserve Sectors: 1. Defense and defense production, 2. nuclear energy, 3. extraction from reserved forests, 4. security printing and mint and air transportation (some domestic routes and international air cargo already opened for private investment.) and railways.

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The broader FDI policy & regulatory framework include, among others, the following:

Business Stage Policy & Regulation

1. General - Bangladesh Industrial Policy (as undertaken from time to time)

1. Business start-up - The Companies Act, 1994- Securities and Exchange Commission Act, 1993

1. Protection - The Foreign Private Investment (Promotion & Protection) Act, 1980

1. Export Zones - Bangladesh Export Processing Zones Authority Act, 1980- Bangladesh Private Export Processing Zones Authority Act, 1996

1. Facilitation - The Investment Board Act, 1989

1. Corporate / Personal Taxation and incentives

- Income Tax Ordinance 1984 and related rules and SROs- National Budget- The Finance Act/Bill

1. International Trade (Export & Import)

- Bangladesh Export Policy (as undertaken from time to time)- Bangladesh Import Order (as undertaken from time to time)

1. Sectoral - Bangladesh Energy Regulatory Commission Act, 2003 (BERC)- Bangladesh Telecommunication Regulatory Commission Act, 2001 (BTRC)- The National Drug Policy, 2005

1. Foreign Exchange - Bangladesh Foreign Exchange Guidelines (issued from time to time)

11. FDI Policy Framework (contd…)

12. Investment Opportunities

Industrious low cost workforce Strategic location, regional connectivity and worldwide access

Strong local market and growth Low cost of energy Proven export competitiveness Competitive incentives, Tax holiday Export & economic zones Bangladesh is the bridge between ASIAN & SAARC nations

Bangladesh ensures adequate protection of intellectual property rights such as patents, designs & trademarks and copy right.

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Bangladesh in global context Duty and quota free access

Duty and quota free access to EUplus Japan, US, Canada, Australia and most other developed countries

Tariff-free access to selected SAFTA markets

Bilateral Investment treaties (BITs) 32 countries and in process with another 08 Double taxation treaties (DTTs) and other

guarantees and bilateral agreements with 28 countries plus 21 in process

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13. Investment Environment - tax and policies

“…Bangladesh foreign trade policy provides duty and quota free access to many of the world’s major markets, for most products…”

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14. Investment Opportunities - incentives

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(“…very competitive range of financial incentives makes the cost of doing business in Bangladesh even more attractive.…”)

Financial incentives Tax holidays (Industries set up within 2015 for 17 industrial sectors):

In Dhaka & Chittagong Divisions (excluding city and adjacent ): 5 years 100% first 2 years : 50% next 2 years: last 1 year 25%.

In Rajshahi, Khulna, Sylhet, Barisal, Rangpur Divisions

and 3 Chittagong Hilly Districts : 7 years 100% for 1st 3 years: 50% for next 3 years: 25% for last 1 year .

For Infrastructural Sectors: 10 yrs. (all over the Country)

Depreciation allowances:Accelerated depreciation allowed for new industries:50%, 30% and 20% for 1st, 2nd, 3rd years on cost of plant & machinery

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• Financial incentives• Businesses exporting 80% or more of goods or services

• Reduced import duty on machinery & spares • (1% for export oriented industries and 3% for other industries)

• Export credit guarantee scheme• Domestic market sales up to 20% allowed to export-oriented companies outside

EPZ (relevant duties apply)

• Cash incentives and export subsidies granted on the FOB value:• 5% for local textiles , 10% for jute products, light engineering products, 12.5%

frozen fish, potato, 15% for leather products, and 17.5% for bicycles.• Remittances facilities:• Up to 75% of of the salaries of the foreigner employed in Bangladesh• Saving and retirement benefits at the time of return• Remittance of royally, technical-know how and technical assistance fees are

allowed: • a. For new industry such fees should not exceed an aggregate limit of 6% of C& F

value of imported machinery • b. For other projects, such fees should not exceed an aggregate limit of 6% of

previous years sale.

15. Investment Opportunities - incentives

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Foreign investment in Bangladesh is secured by law against nationalization and expropriation.

Foreign Private Investment (Promotion and Protection) Law, 1980

Bangladesh is a signatory to ICSID, UNCITRAL, OPIC, MIGA, WAIPA, WIPO and WTO.

Intellectual Property right is protected by Law.

Bilateral investment treaty with India signed in 6 May, 2009 The avoidance of double taxation treaty with India was signed Active presence of Bangladesh India Bangladesh Chamber of

Commerce and Industry.

16. Promotion and Protection of Investment in Bangladesh

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17. A sustained economic growth

Source: Ministry of Finance, others

“…constant unbroken GDP growth…”

Bangladesh at a Glance

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Exports US$bn

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Source: Bangladesh Bureau of Statistics Bangladesh Economic Review 2013

Manufacturing growth % of GDP

“…export driven growth in manufacturing…”

18. Economic Performance - growth

5.86.5 6.0 6.5

7.68.7

10.512.2

14.115.6 16.2

22.0

24.3

27.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4.8

6.7

5.5

6.87.1

8.2

10.8

9.7

7.46.7

5.9

9.5 9.8 9.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FDI by major sectors

. 19. FDI inflow…

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Sector wise FDI Inflows from 2009 to June 2013* (US$ Million)

Sector 2009 2010 2011 2012 2013*  Agriculture & fishing 11.79 13.63 5.59 60.85 14.86Power, Gas & Petroleum 51.15 92.06 238.21 126.65 55.12

 

Manufacturing 211.29 238.78 425.50 515.21 384.76  Construction 0.74 0.21 0.45 2.90 4.79  Trade & Commerce 161.59 186.63 263.39 163.72 248.8

 

Transport, Storage & Communication 250.14

360.31 182.78 375.64 186.66

 

Services 13.45 21.7 20.45 47.69 37.97  Others 0 0.49 1.79 0.03 0.13  

Total 700.16 913.321136.3

8 1292.56 933.09 

Source Country 2010 2011 2012 2013*

Egypt 3.01 152.30 126.6 40.37

USA 56.95 117.74 43.80 52.83

Netherlands 64.92 116.75 79.82 38.52

UK 105.68 116.32 136.94 104.84

South Korea 40.00 113.06 97.59 73.69

Hong Kong 63.84 104.84 54.12 48.93

Australia 13.95 72.80 39.81

Pakistan 18.88 70.54 9.17

Japan 21.79 46.55 30.0877.12

Singapore

Malaysia 97.73

India 43.19 25.74 28.43 26

UAE 36.41

Others 481.11 199.74 646.2Total FDI 913.32 1136.38 1292.56 933.09

20. FDI Inflow: Distribution by Sources/Countries (US$ Mill)

* Data till June 2013Source: Enterprise Survey, Bangladesh Bank

In CY2013*Jan.-June FDI inflow has increased by 88% from 2012 (Jan. June)

Malaysia, British Virgin Islands, and Thailand has shown their interest

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21. Investment OpportunitiesSectoral Opportunitiesortunities

• Infrastructure projects (Power Generation, Gas and Oil Exploration, High-tech Parks, etc.)

• Composite Textiles and Ready Made Garments with backward linkages

• Steel and Engineering• Infocomm Services (IT and IT enabled

services);• Textile and other Industrial Machinery

and Parts thereof• Frozen Shrimp, Frozen Fish for export• Finished Leather and Leather goods• Home Appliances• Telecommunication equipment Semi-

Conductor

• Fresh Fruits & Vegetables, Cooked/Semi Cooked Food items, Canned Juice, Dairy and Poultry, Livestock and Fisheries

• Automobile• Central Effluent Treatment Plants in

Industrial Areas• Paper from green jute and Allied Products• Hotel & Motel• Manufacturing of bicycle and two wheeler

for export• Jute products • Tourism• Shipbuilding• New forms of social capital with mass

transit networks, urban sewerage system, river reclamation, forestry and clean energy projects.

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22. Prospective areas for Investment (as per the National Industrial Policy- 2010)

1. Agro-based & agro-processing industry

2. Jute & jute-mixed goods

3. Flower cultivation

5. Commercial plantation

6. Horticulture

7. Silkworm & silk industry

8. Furniture

9.Handicrafts

10. Home Textiles11. Textiles industry12. Readymade garments

industry13. High value added RMG14. Computer software & ICT goods

15. Electronics

16. Light engineering incl. automobiles18. Pharmaceutical goods19. Leather and leather products.20. Herbal medicines21. Ceramics

22. Frozen Food

23. Integrated shrimp cultivation

24. Infrastructure

25. Jewellery and diamond cutting polishing

26. Oil and gas

27. Tourism industry

28. Basic chemicals/raw materials used in industries.

29. Dye and chemicals used in textiles industry.

30. Cosmetics and toiletries.

31. Information & Communication Technology

32. Health care

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BOI Functions are broadly categorized into three areas:

1. Investment promotion;

2. Investment facilitation (Registration, permission, recommendations etc. including investment aftercare) and

3. Policy advocacy4. Investment after care

For easy entry of investment in Bangladesh from BOI end-

• All process & procedures are simplified for investment registration

• Online Registration & Service Tracking system are introduced in

BOI

• Investor can register his project within a day.

23. BOI Role / Functions

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BOI Service Category

1. Investment Counseling

2. Visa on Arrival

3. Foreign/JV / Local Investment Facilitationa. Registration of New Industriesb. Visa Recommendationc. Work Permit Issued. Recommendation for IP, Machinery Clearance Certificatee. Recommendation for IRC, Bonded Warehousef. Approval of Royalty and Technical Assistance Feesg. Processing and approval of Foreign Borrowingh. Liaison/Branch Office Permission

IP = Import Permit; IRC= Import Registration Certificate

24. BOI services

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25. Private Public Partnership (PPP) Policy 25. Private Public Partnership (PPP) Policy Promulgated by Govt. in 2010 Promulgated by Govt. in 2010

The objectives of this Policy and Strategy are to: Spell out the principles of partnership with private sector for

undertaking various projects related to infrastructure as well as public service delivery;

Define an institutional framework, which is conducive and efficient in handling the PPP projects as well as effective to protect public interest; and

Ensure balance between risk and reward for both the government and private partners while aiming to keep the undertaking attractive for the private sector.

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Govt has promulgated Economic Zones Act in 2010 to build EZ in the country Key Features:

• Comprehensive industrial Infrastructure

• Development under PPP (Private Public Partnership) model

• Owned and regulated by the government, but managed by the private sector

• Encompasses multiple business sectors within each zone

• Combines both bonded and non-bonded area

• EZ includes non processing & domestic area

Economic Zones under implementation…

Mongla, Sirajganj, Anowara, MirershoraiMaulvibazar

Mongla, Sirajganj, Anowara, MirershoraiMaulvibazar

26. Economic Zones:

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Bilateral investment treaty with India signed in 6 May, 2009 The avoidance of double taxation treaty with India was signed Active presence of Bangladesh India Bangladesh Chamber of

Commerce and Industry. BOI arranged road show in major cities of India such as

Mumbai, Chennai, Kolkata last year with active support from CII and IBCCI

Indian corporate houses like CEAT, TATA, BAJAJ, MARICO, AsianPaints, ACI Godrej, Emami, Sun Pharma, Mundi Pharma, Jyothi kallol, TVS Auto etc are actively present in Bangladesh.

Key Features:

Bangladesh-India Business Relations

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Bangladesh- india Business RelationsIndian Investment Projects registered with BOI

ProjectType

No. of Projects

Proposed Investment(USD Million)

PotentialEmployment

(Person)

100% Foreign Investment

86 549.458 17, 538

Joint Venture Investment

198 2331.340 40,231

Total 284 2,880.798 57,769

[Source: June , 2013

Board of Investment]

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[Source: Enterprise Survey, Bangladesh Bank, World Investment Report , UNCTAD]

The trend of actual inflow from India to Bangladesh is increasing…

Bangladesh-India Business RelationsActual FDI from India (Fiscal year basis)

303030

Prime Minister’s Office, Government of the People's Republic of Bangladesh, Jiban Bima Tower (19th Floor), 10 Dilkusha C/A, Dhaka 1000, Bangladesh

Phone: (880-2) 7169580 Fax: (880-2) 956 2312Email: service@boi.gov.bd Web: www.boi.gov.bd

Thank you