Foreign Direct Investment (FDI) in Bangladesh

1.1 The Legal Cornerstone: Protection for Foreign Investors

The foundational legal framework protecting foreign direct investment (FDI) in Bangladesh is the Foreign Private Investment (Promotion and Protection) Act, 1980. This pivotal legislation establishes a robust legal basis for the security of foreign capital, mandating fair and non-discriminatory treatment for foreign investors on par with local counterparts.

It provides explicit guarantees against expropriation and ensures the right to repatriate capital and returns, creating a secure and welcoming environment for international businesses.

1.4 Sectoral Analysis: Open, Controlled, and Reserved Industries

Foreign investment is permitted in most sectors. However, certain sectors prohibit all forms of investment, while others require prior government approval.

2.1 Choosing the Right Business Vehicle

The choice of business entity is a critical strategic decision that dictates your operational scope and liability. Foreign investors have three primary options.

2.2 Company Incorporation Process

3.1 Capitalization and Funding

An enterprise can be funded through a mix of equity and debt. Equity is brought in as cash or capital machinery. Foreign loans require BIDA approval, while local Taka loans are fully accessible.

3.2 Foreign Exchange Regulations

All transactions are regulated by the Bangladesh Bank under the Foreign Exchange Regulation Act, 1947. A key policy allows investors to hold remittances in a foreign currency account for up to one year, offering crucial flexibility.

4.1 Repatriation of Profits and Dividends

Bangladesh offers a liberal regime for profit repatriation. No prior approval from the Bangladesh Bank is required to remit declared dividends, provided all taxes have been paid.

4.3 Disinvestment and Capital Repatriation: The Valuation Challenge

Exiting an investment is a critical part of the lifecycle. While transferring shares is straightforward, repatriating sale proceeds is tightly regulated by the Bangladesh Bank.

The central issue is valuation. The central bank will only approve repatriation up to the "fair value" it accepts, which requires a formal Valuation Report. This is a key risk factor that requires expert management.

5.1 Winding Up and Liquidation of a Company

For a solvent company, a Members' Voluntary Winding Up under the Companies Act, 1994 is the standard procedure. It involves appointing a liquidator to settle liabilities and dissolve the company.

5.2 Final Repatriation of Residual Assets

The final step is repatriating residual funds after all debts are paid. This requires explicit prior permission from the Bangladesh Bank's Foreign Exchange Investment Department (FEID) and a final tax clearance certificate.

6.1 Key Strategic Recommendations

6.2 Comprehensive Compliance Checklist

7.1 Key Laws and Regulations Governing FDI

Foreign investment in Bangladesh is governed by a framework of acts, policies, and regulations. Understanding these is crucial for compliance and strategic planning. Below are the primary legal instruments:

7.2 Essential Resources & Further Reading

For your convenience, we have compiled a list of essential government websites and in-depth guides from our experts to help you navigate your investment journey.