Laws Governing Foreign Investment in Bangladesh

 

Bangladesh offers generous opportunities for investment under its liberalised Industrial Policy and export-oriented, private sector-led growth strategy. All but four sectors (i.e. (1) arms and ammunition and other defence equipment and machinery, (2) forest plantation and mechanised extraction within the bounds of reserved forests, (3) production of nuclear energy, and (4) security printing and mining)  are open for private investment in Bangladesh. The government’s role is that of a facilitator which helps create an enabling environment for expanding private investment, both domestic and foreign. The Bangladesh Investment Development Board (BIDA), established by the government for accelerating private investment, provides institutional support services to intending investors.

General facilities/ incentives

Tax holiday

Tax holiday facilities will be available for 5 or 7 years depending on the location of the industrial enterprise. For industrial enterprises located in Dhaka and Chittagong Divisions ( excluding Hill Tract districts of Chittagong Division) the tax holiday facility is for 5 years while it is 7 years for locations in Khulna, Sylhet, Barisal, and Rajshahi, Divisions and the 3 Chittagong hill districts.
Tax holiday facilities are provided in accordance with existing laws. The period of tax holiday will be calculated from the month of commencement of commercial production. Tax holiday certificate will be issued by NBR ( National Board of Revenue) for the total period within 90 days of submission of application.

 

Tax Exemption Facility in Bangladesh

Tax exemptions are allowed in the following cases:

* Tax exemption on royalties, and technical know-how fees received by any foreign collaborator, firm, company and expert.

* Exemption of income tax up to 3 years for foreign technicians employed in industries specified in the relevant schedule of the income tax ordinance.

* Tax exemption on income of the private sector power generation company for 15 years from the date of commercial production.

* Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.

Accelerated Depreciation in Bangladesh

Industrial undertakings not enjoying tax holidays will enjoy accelerated depreciation allowance. Such allowance is available at the rate of 100 per cent of the cost of the machinery or plant if the industrial undertaking is set up in the areas falling within the cities of Dhaka, Narayangonj, Chittagong and Khulna and areas within a radius of 10 miles from the municipal limits of those cities. If the industrial undertaking is set up elsewhere in the country, accelerated depreciation is allowed at the rate of 80 per cent in the first year and 20 per cent in the second year.

Concessionary Duty on Imported Capital Machinery in Bangladesh

Import duty, at the rate of 5% ad valorem, is payable on capital machinery and spares imported for initial installation or BMR/BMRE of the existing industries. The value of spare parts should not, however, exceed 10% of the total C & F value of the machinery. For 100% export-oriented industries, no import duty is charged  in case of capital machinery and spares. However, import duty @ 5% is secured in the form of a bank guarantee or an indemnity bond will be returned after installation of the machinery. Value-added Tax ( Vat)  is not payable for imported capital machinery and spares.

Private investment from overseas sources is welcome in all areas of the economy with the exception of the four reserved sectors (mentioned earlier). Such investments can be made either independently or through venture on mutually beneficial terms and conditions. Foreign investment is, however, especially desired in the following major categories of industries:

*  Export-oriented industries

*  Industries in the Export Processing Zones ( EPZs)

*  High technology products that will be either import-substitute or export-oriented.Facilities/Incentives

(a) For foreign direct investment, there is no limitation pertaining to foreign equity participation, i.e. 100 per cent foreign equity is allowed. Non-resident institutional or individual investors can make portfolio investments in stock exchanges in Bangladesh. Foreign investors or companies may obtain full working loans from local banks. The terms of such loans will be determined on the basis of the bank-client relationship.

(b) A foreign technician employed in foreign companies will not be subjected to personal tax for up to 3 (three) years, and beyond that period his/ her personal income tax payment will be governed by the existence or non-existence of agreement on avoidance of double taxation with the country of citizenship.

(c) Full repatriation of capital invested from foreign sources will be allowed. Similarly, profits and dividends accruing to foreign investment may be transferred in full. If foreign investors reinvest their repatriable dividends and or retained earnings, those will be treated as new investments. Foreigners employed in Bangladesh are entitled to remit up to 50 per cent of their salary and will enjoy facilities for full repatriation of their savings and retirement benefits.

(d) Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs with respect to tax holidays, payment of royalties, technical know-how fees etc.

(e) The process of issuing work permits to foreign experts on the recommendation of investing in foreign companies or joint ventures will operate without any hindrance or restriction. Multiple entry visas” will be issued to prospective foreign investors for 3 years. In the case of experts,” multiple entry visas” will be issued for the whole tenure of their assignments.

Other Incentives

Citizenship by investing a minimum of US $ 500,000 or by transferring US$ 1,000,000 to any recognised financial institution ( Non-repatriable ).
Permanent residentship by investing a minimum of US$ 75,000 ( non-repatriable).
Special facilities and venture capital support will be provided to export-oriented industries under “Thrust sectors” . Thrust Sectors include Agro-based industries, Artificial flower-making, Computer software and information technology, Electronics, Frozen food, Floriculture, Gift items, Infrastructure, Jute goods, Jewellery and diamond cutting and polishing, leather, Oil and gas, Sericulture and silk industry, Stuffed toys, Textiles, Tourism.
Investment Protections / International Agreements

Legal Protection: The policy framework for foreign investment in Bangladesh is based on ‘The Foreign Private Investment  (Promotion & Protection ) Act. 1980,’  which ensures legal protection to foreign investment in Bangladesh against nationalisation and expropriation. It also guarantees non-discriminatory treatment between foreign and local investment and repatriation of proceeds from sales of shares and profit.

International Agreements: Bangladesh has concluded bilateral agreements for avoidance of double taxation and investment treaties for the promotion and protection of investment with the following countries:

Bilateral agreements: Belgium, Canada, China, Denmark, France, Germany, India, Italy, Japan, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Thailand, The Netherlands, United Kingdom ( including  Northern Ireland ). Negotiations are ongoing with U.S.A, Iran, Philippines, Qatar, Australia, Nepal, Turkey, Indonesia, Cyprus, Norway, Finland and Spain.

Investment treaty: Belgium, Canada, France, Germany, Iran, Italy, Japan, Malaysia, Pakistan, Philippines, Poland, Republic of Korea, Romania, Switzerland, Thailand, The Netherlands, Turkey, United Kingdom, USA, Indonesia. Negotiations are ongoing with India, Hungary, Oman, Maldova, DPRK, Egypt, Austria, Mauritius, Uzbekistan.

In addition, Bangladesh is a signatory to MIGA ( Multilateral Investment Guarantee Agency), OPIC ( Overseas Private Investment Corporation ) of USA, ICSID  (International Centre for Settlement of Investment Disputes) and a member of the WIPO  (World Intellectual Property Organization) permanent committee on development co-operation related to industrial property.

Incentives to Non-Resident Bangladeshis ( NRBs)

Investment of NRBs will be treated on par with FDI. Special incentives are provided to encourage NRBs to invest in the country. NRBs will enjoy facilities similar to those of foreign investors.  Moreover, they can buy newly issued shares/debentures of Bangladeshi companies . A quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account.

RELAXATION / LIBERALISATION OF EXCHANGE CONTROL   REGULATIONS

Bangladesh ‘Taka’ is convertible for current external transactions. Individuals/firms resident in Bangladesh may conduct all current external transactions, including trade and investment-related transaction, through banks in Bangladesh authorised to deal in foreign exchange ( Authorised Dealers ) without prior approval of the Bangladesh Bank. Non- resident direct investment in industrial enterprise in Bangladesh and non-resident portfolio investment through  stock exchanges in Bangladesh also do not require prior approval of the Bangladesh Bank. Remittance of post-tax dividend/profit on non-resident direct or portfolio investment do not require prior approval. Sale proceeds, including capital gains on non-resident portfolio investment, may also be remitted abroad without prior approval. Repatriation of sale proceeds of non-resident investment in unlisted companies is allowed by Bangladesh Bank on the basis of the net asset value of the shares of the company.  Investors may obtain relevant procedural details by contacting any  Authorised Dealer bank in Bangladesh.

To facilitate investment, prior approval of the Bangladesh Bank is no longer required for :

*  remittance of profits to their head offices by foreign firms and companies operating in Bangladesh
*  issuance of shares to non-residents against investment for setting up industries in Bangladesh.
*  remittance of dividends on such shares to the non-resident investors.
*  portfolio investment by non-residents including foreign individuals/enterprises in shares and securities through stock exchanges in Bangladesh.
*  remittance of dividends on portfolio investment by non-residents through stock exchanges in Bangladesh.
*  remittance of sale proceeds, including capital gains of portfolio investments of non-residents  through stock exchanges in Bangladesh
*  remittance of principal and interest instalments on loans/suppliers credits obtained by industrial units from foreign lenders with approval of the BOI. 100% foreign-owned ( Type A) industrial units in the EPZs (Export Processing Zone) do not require prior permission of BIDA for such foreign borrowing.
*  remittance in repayment of principal and payment of interest of such loans.
*  remittance of technical fees and royalties against technical assistance/royalty agreements in conformity with BIDA guidelines.
*  remittance of savings of expatriate personnel at the time of their leaving Bangladesh, out of the salaries and benefits stated in their employment contracts as approved by BIDA.
*  extension of working capital loans to all foreign-owned/controlled industrial and trading firms/companies by banks on the basis of bank customer relationships and normal banking practice.
*  obtaining of interest-free repatriable short-term foreign currency loans by foreign firms investing in Bangladesh from their head offices or any other sources through any authorised dealer.

 

Executive Summary

Bangladesh presents a dynamic and increasingly attractive landscape for foreign direct investment (FDI), underpinned by one of the most liberal FDI regimes in South Asia. The government actively promotes an “Open Door Policy” aimed at stimulating rapid economic growth through industrialization, generally permitting 100% foreign ownership across a broad spectrum of industrial sectors. This proactive stance has resulted in substantial net foreign investment, with the Bangladesh Investment Development Authority (BIDA) playing a pivotal role in facilitating numerous domestic, foreign, and joint venture projects. Key sectors that have consistently drawn significant overseas capital include the Ready-Made Garments (RMG) industry, Information Technology and IT-Enabled Services (IT/ITES), Pharmaceuticals, Agribusiness, Energy and Power, and Light Engineering.

The investment environment in Bangladesh is characterized by a strategic balance: while the regime is designed to be highly liberal for capital entry, the country maintains a strict foreign exchange control framework managed by Bangladesh Bank. This means that while establishing a presence and injecting capital is generally straightforward, the movement of funds, particularly outward remittances, is subject to rigorous regulation and oversight. Investors must therefore navigate a nuanced environment where the ease of entry is complemented by a controlled approach to capital mobility.

The regulatory architecture for foreign investment is multi-layered, built upon foundational legislation such as the Foreign Private Investment (Promotion & Protection) Act, 1980, which provides essential legal safeguards against nationalization and guarantees the repatriation of capital and returns. The Foreign Exchange Regulation Act, 1947, and the Guidelines for Foreign Exchange Transactions, 2018, are central to governing cross-border financial flows. Key regulatory and promotional bodies—BIDA, Bangladesh Bank (BB), Bangladesh Export Processing Zones Authority (BEPZA), and Bangladesh Economic Zones Authority (BEZA)—each contribute distinct functions in promoting, regulating, and facilitating investment.

Bangladesh offers a diverse array of incentives, including tax holidays, duty exemptions, and specialized facilities within its Export Processing Zones (EPZs) and Economic Zones (EZs), all designed to attract and retain foreign capital. Recent policy adjustments by Bangladesh Bank, such as the easing of local borrowing rules for foreign-owned companies, further underscore the government’s commitment to enhancing the investment climate. The proliferation of these specialized zones, each with its own set of incentives and streamlined procedures, represents a deliberate strategy by the government. This approach aims to create more efficient and attractive “regulatory islands” that can bypass some of the broader systemic challenges present in the general investment landscape, thereby offering tailored environments for specific types of foreign investment.

 

Legal and Regulatory Framework for Foreign Investment

The legal and regulatory framework governing foreign investment in Bangladesh is comprehensive, comprising several key acts and a network of principal regulatory bodies. Understanding this framework is crucial for any prospective investor.

Foundational Legislation

The cornerstone of foreign investment protection in Bangladesh is the Foreign Private Investment (Promotion & Protection) Act, 1980. This pivotal legislation provides fundamental legal safeguards for foreign investments, explicitly ensuring protection against nationalization and expropriation. It guarantees non-discriminatory treatment between foreign and local investments, fostering a level playing field. Furthermore, the Act secures the repatriation of capital, returns from investment, and any residual amounts upon the liquidation of an industrial undertaking. It also guarantees the repatriation of compensation in the event of losses sustained due to civil commotion, insurrection, or riot. This Act is vital for building investor confidence, as it provides a clear legal foundation for the security and recovery of investments.

The Foreign Exchange Regulation Act, 1947 (FERA), complemented by the detailed Guidelines for Foreign Exchange Transactions (GFET), 2018, establishes Bangladesh’s strict foreign exchange control regime. Bangladesh Bank, as the central bank, is the primary regulator responsible for enforcing these rules, which govern all foreign exchange transactions, including both the inflow and outflow of funds. While inward foreign investments generally do not require prior Bangladesh Bank approval, specific or general approval from the Bank is often required for remitting monies outside Bangladesh. Additionally, post-facto reporting obligations are common for various transactions, including share allotment, share transfers, and dividend repatriation. The extensive scope of FERA 1947, as detailed in its provisions, covers authorized dealers, restrictions on foreign exchange dealings, payments, import/export of currency and bullion, and the regulation of securities, thereby establishing a comprehensive control mechanism that underpins all cross-border financial flows.

The Companies Act, 1994, provides the overarching legal framework for the incorporation, operation, and winding up of companies in Bangladesh. This Act dictates the procedures for establishing various corporate entities, including wholly-owned subsidiaries and joint ventures, which are common structures for foreign investment.

The Bangladesh Investment Development Authority Act, 2016, is instrumental in defining the role of BIDA. This Act established BIDA as the principal agency for private investment promotion and facilitation, effective September 01, 2016.It mandates BIDA to provide a wide range of services designed to accelerate industrial development, including pre-investment information and counseling, project registration, approval for branch and liaison offices, work permits for foreign nationals, and facilitation of utility connections.

The coexistence of multiple foundational acts, some dating back several decades (e.g., FERA 1947), alongside more recent legislation like the BIDA Act 2016 and the Offshore Banking Act 2024, indicates a regulatory landscape built on layers of historical and contemporary legal frameworks. This layered structure can introduce complexity and potential overlaps in regulations, necessitating careful interpretation and navigation by investors. The ongoing evolution of these laws means that investors must remain vigilant to legislative updates and their implications for their operations.

 

Principal Regulatory Bodies

The foreign investment landscape in Bangladesh is shaped by several key regulatory and promotional bodies, each with distinct mandates.

The Bangladesh Investment Development Authority (BIDA) serves as the central “one-stop service” provider for investors. Its mandate encompasses promoting, attracting, and facilitating private investment across the country. BIDA’s services are extensive, ranging from providing pre-investment counseling and registering projects to approving work permits for foreign nationals, facilitating utility connections, and offering aftercare support. To streamline application submissions and enhance efficiency, BIDA operates an Online One-Stop Service (OSS) portal.

Bangladesh Bank (BB), as the nation’s central bank, is the primary regulator of the foreign exchange regime. It is responsible for enforcing the Foreign Exchange Regulation Act, 1947, and the Guidelines for Foreign Exchange Transactions, 2018. The Bank exercises stringent control and monitoring over the inflow and outflow of foreign funds, approves various remittances, and oversees the operation of different types of foreign currency accounts. Recent policy adjustments, such as easing local borrowing rules for foreign firms, demonstrate Bangladesh Bank’s active role in shaping the financial aspects of the investment environment.

The Bangladesh Export Processing Zones Authority (BEPZA) is a specialized government body dedicated to promoting, attracting, and facilitating foreign investment exclusively within Export Processing Zones (EPZs). EPZs are designed to offer a highly conducive investment climate, characterized by simplified procedures and a comprehensive package of fiscal and non-fiscal incentives tailored for export-oriented industries. BEPZA also directly issues work permits for foreign employees within EPZs, embodying a “one-window” service approach.

The Bangladesh Economic Zones Authority (BEZA) was established under the Bangladesh Economic Zones Act, 2010, with the ambitious goal of developing 100 new economic zones (EZs) by 2025. These EZs differ from EPZs by allowing production for both export and domestic markets, and they are primarily funded through private capital. BEZA offers financial incentives, including exemptions from various taxes, customs, and excise duties. The fact that the Prime Minister chairs BEZA’s governing board underscores the high-level political commitment to this initiative.

The presence of multiple, distinct investment promotion and regulatory bodies—BIDA, Bangladesh Bank, BEPZA, and BEZA—reflects a segmented approach to FDI. While BIDA serves as the general facilitator for all private investment, BEPZA and BEZA manage specialized zones that often feature more streamlined regulatory environments and enhanced incentives. This segmentation offers opportunities for investors to leverage tailored benefits but also necessitates careful navigation to determine which authority’s jurisdiction applies to their specific investment, as the incentives, approval processes, and operational flexibility can vary significantly across these different frameworks.

 

Establishing a Foreign Investment Entity in Bangladesh

Foreign investors seeking to establish a presence in Bangladesh have several structured options, each with distinct legal implications and procedural requirements.

Permissible Investment Structures

Foreign investors are afforded considerable flexibility in choosing their legal presence in Bangladesh. They can opt to establish wholly-owned subsidiaries or form joint ventures with local or other foreign partners. In most sectors, 100% foreign ownership is permissible, offering complete control to the foreign investor. These entities are recognized as separate legal personalities, incorporated under the provisions of the Companies Act, 1994. Establishing a subsidiary provides a robust legal structure, ring-fencing the parent company’s liability and allowing for full commercial operations within Bangladesh.

Alternatively, foreign companies may establish a Liaison Office or a Branch Office. Liaison offices typically function as communication channels between the foreign parent company and Bangladeshi customers, primarily promoting business interests and exploring opportunities for a more permanent presence. They generally lack legal personality and are usually restricted from engaging in direct commercial or revenue-generating activities. Branch offices, while also typically lacking separate legal personality, may be permitted to engage in specific commercial activities as approved by BIDA.BIDA approval is a prerequisite for establishing either of these office types. The distinction in legal personality between a subsidiary and a liaison or branch office is a critical factor for investors, as it directly impacts liability exposure, the permissible scope of operations, and long-term strategic planning. While liaison or branch offices offer a lighter footprint for initial market entry or specific non-commercial activities, a subsidiary provides the full operational capacity and legal independence necessary for comprehensive business ventures.

 

1. BIDA Approval and Registration Process

Obtaining BIDA permission is a fundamental initial step for foreign investors aiming to operate legally in Bangladesh.The process has been designed for efficiency through BIDA’s Online One-Stop Service (OSS) portal.

The step-by-step guide for new business setup through BIDA involves several key stages:

1. Determine Investment Type: The investor must first identify the appropriate legal structure for their venture, whether it is a joint venture, a wholly-owned subsidiary, or a liaison/branch office.
2. Prepare Required Documentation: This phase is crucial for a smooth approval process. It necessitates a meticulously completed application form, a Board Resolution from the parent company, the parent company’s Certificate of Incorporation and Memorandum of Association (MOA), audited financial statements, the proposed office address in Bangladesh, passport copies of all directors, and a detailed business plan including financial projections. It is imperative that all foreign documents are properly notarized and, where required, translated into English to avoid delays.
3. Submit Application Online: All applications are submitted digitally via the BIDA OSS portal, accessible at https://bidaquickserv.org/.
4. Pay Application Fee: A non-refundable application fee is required, which varies depending on the type of entity. For instance, the fee for establishing a liaison office is typically around BDT 25,000.
5. Review and Approval: Upon submission, BIDA undertakes a review of the documents. This process generally takes between 15 to 30 working days. During this period, BIDA may request additional documents or clarifications if needed.
6. Post-Approval Steps: BIDA approval is a foundational step, but it is not the final one. After receiving BIDA’s approval, investors must complete further formalities with other authorities. These include opening a local bank account, registering with Bangladesh Bank for inward remittance purposes, and obtaining VAT registration, a Taxpayer Identification Number (TIN), and a trade license from relevant local authorities.

While BIDA’s OSS portal signifies a significant move towards digital efficiency and a “one-stop” approach for initial application submission, the requirement for extensive documentation, the possibility of requests for clarification, and the subsequent need for post-approval registrations with other government bodies (such as Bangladesh Bank, the National Board of Revenue, and local government entities) indicate that the “one-stop” service primarily centralizes the initial application process rather than eliminating subsequent multi-agency compliance steps. Investors should therefore anticipate and plan for these sequential post-BIDA approvals, ensuring all documentation is accurate to prevent potential delays.

 

Foreign Equity and Share Transactions

Bangladesh’s regulations for foreign equity and share transactions are designed to facilitate investment while maintaining oversight of capital flows and market integrity.

Issuance of Shares Against Foreign Investment: For the issuance of shares against foreign investment, no prior permission from Bangladesh Bank (BB) is required. This applies provided that the foreign equity is received through formal banking channels or the investment is made in the form of imported capital machinery for which payment has been settled abroad. It is crucial that the remittance is received and the capital machinery is cleared from Bangladesh Customs

before the shares are issued.

Transfer of Shares: The regulatory requirements for share transfers vary depending on the parties involved:

• Resident to Non-Resident: Prior permission from Bangladesh Bank is required for this type of transfer, particularly if it involves the remittance of funds outside Bangladesh. A valuation report is mandatory if the deal value exceeds Tk 1 million. The sale proceeds must be credited to the seller’s resident bank account from abroad before the share transfer can be completed, and an intimation must be made to Bangladesh Bank’s Foreign Exchange Investment Department (FEID) within 14 days through the concerned Authorized Dealer (AD).
• Non-Resident to Non-Resident: Prior Bangladesh Bank permission is not required for transfers between two non-resident entities. However, the transfer must be at the fair value of the target company, and a valuation report from an eligible valuer is mandatory if the deal value exceeds Tk 1 million.
• Non-Resident to Resident: Prior Bangladesh Bank approval is generally required for this transfer. However, certain conditions allow for exemption: if the transfer/deal value per share does not exceed the Net Asset Value (NAV) per share and meets other specific criteria (e.g., no revaluation reserve, intangible assets, or expenses/losses shown as assets); or if the transfer value is up to Tk 10 million without a valuation report; or if the transfer value is up to Tk 100 million with a valuation report provided by an eligible valuer. In all other scenarios, prior approval is necessary, with required documents submitted through the concerned Authorized Dealer.

Valuation Requirements for Share Transfers: Bangladesh Bank accepts the fair value of shares based on an appropriate combination of three recognized valuation approaches: net asset value approach, market value approach, and discounted cash flow approach. The most suitable approach is determined by the nature of the company. Valuation reports must be issued by a Merchant Banker licensed by the Bangladesh Securities and Exchange Commission (BSEC) or a Chartered Accountant listed by Bangladesh Bank and/or BSEC.

The detailed and differentiated rules for share transfers, particularly the thresholds for valuation reports and the varying requirements for prior Bangladesh Bank approval, reflect a sophisticated regulatory strategy. This approach aims to maintain financial stability, prevent illicit capital flows, ensure fair market practices, and protect government tax revenues. Investors must be thoroughly aware of these specific regulations, especially when planning any future divestment or restructuring that involves share transfers, and are strongly advised to engage local legal and financial advisors for all valuation and transfer processes to ensure full compliance.

 

Investment Incentives and Facilities for Foreign Investors

Bangladesh offers a robust array of incentives and facilities designed to attract and support foreign investment, reflecting its commitment to fostering a competitive and appealing business environment.

A. General Protections and Guarantees

A cornerstone of Bangladesh’s investment policy is the non-discriminatory treatment guaranteed to foreign investors. The Foreign Private Investment (Promotion & Protection) Act, 1980, explicitly ensures that foreign investments receive treatment on par with local investments. This principle is consistently applied, even extending to BIDA’s registration process, which is identical for local, foreign, and joint venture industries. This commitment to equal treatment aims to foster a fair and predictable operating environment for international businesses.

Furthermore, the 1980 Act provides explicit guarantees for the repatriation of capital, returns, and compensation. Foreign investors are assured the right to repatriate their invested capital, the returns generated from it, and any residual amounts remaining after the liquidation of their industrial undertaking. The Act also guarantees the repatriation of compensation in the event of losses incurred due to civil commotion, insurrection, or riot. These legal assurances are fundamental for investors, providing clarity and confidence regarding their ability to recover funds or exit their investments. While these legal guarantees are strong in principle, the practical implementation, particularly concerning bureaucratic efficiency and dispute resolution mechanisms, remains an area where continuous improvement is sought. Investors should rely on these legal protections but also prepare for potential administrative complexities.

 

Fiscal Incentives

Bangladesh offers a comprehensive suite of fiscal incentives, with generally few formal distinctions between foreign and domestic private investors.

Tax Holidays and Exemptions: Current regulations provide for tax holidays for designated “thrust” (strategic) sectors and infrastructure projects established between July 1, 2019, and June 30, 2024. Specific exemptions include income tax exemptions for up to three years for foreign technicians employed in certain specified industries, and a significant 15-year income tax exemption for private sector power generation companies, commencing from the date of commercial production.

Duty-Free Import of Capital Machinery and Raw Materials: For industries that are 100% export-oriented, there is no import duty charged on capital machinery and spare parts. While a 5% duty is initially secured via a bank guarantee or indemnity bond, this amount is returned after the machinery is installed. Other industries benefit from a concessionary import duty rate of 5% ad valorem on imported capital machinery and spares, provided the value of spares does not exceed 10% of the total Cost and Freight (C&F) value of the machinery. Companies operating within Export Processing Zones (EPZs) also enjoy extensive duty-free import privileges covering construction materials, machinery, office equipment, spare parts, raw materials, and finished goods.

Accelerated Depreciation Allowances: To further incentivize investment, accelerated depreciation allowances are available. An allowance of 100% of the cost of machinery or plant is permitted if the industrial undertaking is established in major urban centers such as Dhaka, Narayangonj, Chattogram, and Khulna, or within a 10-mile radius of their municipal limits. For industrial undertakings established elsewhere in the country, accelerated depreciation is allowed at a rate of 80% in the first year and 20% in the second year.

Exemption from Dividend Tax and Royalties: Exemption from dividend tax is a notable incentive available to investors. Furthermore, tax exemption is provided on royalties and technical know-how fees received by foreign collaborators, firms, companies, and experts. The remittance of royalty, technical, and consultancy fees is generally allowed, with specific limits defining when prior BIDA approval is required.

Recent Income Tax and VAT Proposals (Finance Ordinance 2025): The proposed Finance Ordinance 2025, slated for effectiveness from July 1, 2025, introduces several adjustments to the fiscal landscape. Corporate tax rates are proposed at 20% for publicly traded companies that list more than 10% of their paid-up capital through an Initial Public Offering (IPO). For assessment years 2026-27 and 2027-28, this rate is maintained at 20% if all income is received through bank transfers; otherwise, it increases to 22.5%. The tax rate for non-listed companies is proposed to increase to 27.5% from the previous 25%. Minimum tax rates are also adjusted, with a new minimum tax of Tk 1,000 for new taxpayers in assessment years 2026-27 and 2027-28. Investment tax rebates continue to be available based on taxable income, actual investment, or a cap of Tk 1 million.

Regarding Value Added Tax (VAT), advance tax rates for the import of raw materials by manufacturers are reduced from 3% to 2%, while those for commercial importers are increased from 5% to 7.5%. VAT rates are also increased for online goods sales and certain manufacturing stages. Conversely, VAT exemptions are introduced for liquefied natural gas (LNG), computer monitors, aircraft lease rent, and packaged liquid milk. Significantly, industry-specific VAT exemptions, such as those for mobile phone manufacturing and pharmaceutical ingredients, are extended until June 2030.

The detailed and sector-specific nature of these fiscal incentives, coupled with ongoing adjustments in the Finance Ordinance, indicates a dynamic and targeted approach to investment promotion. This necessitates continuous monitoring by investors to effectively leverage the most favorable tax and duty structures, particularly as some incentives are time-bound. This active use of fiscal policy aims to direct investment towards strategic areas and encourage specific business behaviors.

 

Special Investment Zones

Bangladesh has strategically developed various special investment zones to provide highly conducive environments for different types of foreign investment.

Export Processing Zones (EPZs): Managed by the Bangladesh Export Processing Zones Authority (BEPZA), these zones are specifically designed to stimulate rapid economic growth, primarily through export-oriented industrialization.EPZs are promoted as offering a “congenial investment climate free from cumbersome procedures” and provide a comprehensive suite of incentives.

• Incentives & Operational Benefits: Companies operating within EPZs benefit from a 10-year tax holiday, duty-free import of construction materials, machinery, raw materials, and finished goods. They also receive relief from double taxation, exemption from dividend tax, and enjoy access to GSP (Generalized System of Preferences) facilities, enabling duty and quota-free exports to major markets such as the EU, Canada, Norway, and Australia.Non-fiscal incentives include the allowance for 100% foreign ownership, full repatriation of capital and dividends, and permission to obtain foreign currency loans directly from abroad. Operationally, EPZs offer simplified customs clearance at factory sites, work permits issued directly by BEPZA, access to offshore banking facilities, and a “one-window same day service” for various approvals. While primarily export-oriented, EPZ companies are generally permitted to sell up to 10% of their production to the Domestic Tariff Area (DTA).

Economic Zones (EZs): Overseen by the Bangladesh Economic Zones Authority (BEZA), these zones represent a broader approach to industrial development. Unlike EPZs, EZs allow for production aimed at both export and domestic markets, and their development is primarily funded by private capital through Public-Private Partnership (PPP) models.BEZA has an ambitious target of establishing 100 EZs by 2025.

• Incentives & Development Focus: EZs offer financial incentives such as exemptions from various taxes, customs, and excise duties. The high-level political commitment to this initiative is evident, with the Prime Minister chairing BEZA’s governing board. BEZA is actively working to ensure adequate utility connections and robust road infrastructure within these zones to support industrial operations. Examples of EZs include government-to-government initiatives (such as Chinese, Indian, and Japanese Economic Zones) and Public-Private Partnership (PPP) zones like Mirsarai EZ and Mongla EZ.

Hi-Tech Parks: These are specialized economic zones specifically established to attract science and technology-based FDI. The government offers significant tax reliefs within these parks, including a 50% tax relief. Notable examples include Bangabandhu Hi-Tech City and Jashore Software Technology Park, which aim to foster innovation and technological advancement.

The strategic differentiation between EPZs (which are export-focused and managed by BEPZA) and EZs (which cater to both domestic and export markets and are largely developed through PPP models under BEZA) reflects a sophisticated industrial policy. This approach aims to diversify FDI beyond traditional export sectors and leverage private sector investment for broader industrial development. This segmentation allows Bangladesh to tailor incentives and regulatory environments to specific investment profiles, offering distinct advantages depending on an investor’s market strategy.

1. Non-Fiscal Incentives and Facilitation

Beyond fiscal advantages and specialized zones, Bangladesh provides several non-fiscal incentives and facilitation services to enhance the investment climate.

Work Permit and Visa Facilitation for Foreign Nationals: BIDA plays a crucial role in approving work permits for foreign nationals. The process for issuing work permits to foreign experts, based on recommendations from investing companies, is designed to operate without hindrance. To ensure long-term stability for key personnel, multiple entry visas are issued for the entire tenure of assignments for experts. BIDA also offers dedicated visa and work permit support as part of its comprehensive services to investors.

Simplified Procedures and One-Stop Services: A significant effort has been made to simplify and expedite business setup and regulatory approvals through BIDA’s One-Stop Service (OSS) portal. Similarly, Export Processing Zones (EPZs) are known for providing “one-window same day service,” aiming to minimize bureaucratic delays and streamline operations for companies within their jurisdiction.

Options for Citizenship and Permanent Residency: Bangladesh offers unique non-financial incentives for individual investors. Foreign investors can obtain citizenship by investing a minimum of US500,000orbytransferringUS1,000,000 to a recognized financial institution, though these investments are non-repatriable. For those seeking a long-term presence without full citizenship, permanent residency can be obtained by investing a minimum of US$75,000, also on a non-repatriable basis. The provision of these individual incentives, alongside streamlined visa and work permit processes, indicates a recognition that attracting human capital and offering long-term stability to key personnel are as vital as financial incentives for successful FDI. These benefits can be particularly appealing for individual entrepreneurs or smaller firms where the investor’s personal relocation and long-term presence are integral to the project’s success.

1. Cross-Border Financing Policy and Repatriation

Bangladesh’s cross-border financing policy is meticulously managed by Bangladesh Bank, balancing the need to attract foreign capital with the imperative of maintaining financial stability and foreign exchange reserves.

1. External Commercial Borrowing (ECB)

External Commercial Borrowing (ECB) serves as a vital mechanism for industrial growth in Bangladesh, particularly for financing new projects, expanding existing facilities, and importing capital goods.

Eligibility Criteria for Private Enterprises: Private enterprises that are registered with BIDA (formerly the Board of Investment, BOI) and incorporated under the Companies Act of 1994 are eligible to apply for ECB. These entities can seek various forms of foreign loans, including commercial loans, financial loans, bank loans, buyer’s credit, or supplier’s credit.

Permitted and Prohibited Purposes for ECB: ECB funds are primarily intended for productive investments that contribute to industrial capacity, such as the import of capital machinery for new projects or the expansion of existing production facilities. However, it is explicitly stipulated that foreign loans obtained through ECB cannot be utilized for working capital requirements or for investment in the capital market. This limitation reflects a cautious approach to foreign debt, prioritizing long-term industrial investment over short-term liquidity or speculative activities.

Approval Process and Regulatory Oversight: To secure foreign loans through ECB, companies must obtain approval from the Scrutiny Committee of BIDA. This committee is notably chaired by the Governor of Bangladesh Bank, underscoring the strategic importance and strict oversight of ECB given its implications for foreign exchange reserves and national debt. The application process requires the submission of a comprehensive set of documents, including the Certificate of Incorporation, Memorandum and Articles of Association, the Term-sheet or Loan Agreement, a feasibility report, financial analysis, and equity forms.

Exemptions for EPZ-Based Companies: A significant advantage is extended to 100% foreign-owned investment projects located within Export Processing Zones (EPZs). These entities are exempt from obtaining prior clearance from BIDA or Bangladesh Bank for foreign currency loans from overseas financial institutions or corporations. This exemption further simplifies operations and financing within these specialized zones.

The strict limitations on the use of ECB, prohibiting its deployment for working capital or capital market investments, coupled with the high-level approval process chaired by the Bangladesh Bank Governor, reflect a prudent and strategic approach to foreign debt. This policy aims to ensure that foreign currency inflows are channeled into genuine, value-adding productive investments that enhance industrial capacity, thereby managing foreign exchange risks and promoting sustainable economic growth. Investors must clearly delineate the purpose of their foreign loans and ensure strict adherence to these permitted uses.

1. Foreign Currency Accounts for Investors

Bangladesh Bank provides a range of foreign currency account options, designed to facilitate various types of foreign investment and cross-border transactions.

Temporary Non-Resident Taka Account (NRTA): Foreign investors can open a Temporary NRTA with an Authorized Dealer (AD) in the name of their proposed venture. This account serves as a temporary holding for foreign equity and allows for necessary preliminary expenditures before the company’s formal incorporation. No prior Bangladesh Bank permission is required for opening this account, and any balances remaining are freely remittable abroad if the proposed venture does not materialize.

Foreign Currency Account (FCA) for Investee Companies: Companies that receive foreign equity (inward remittance), particularly those outside specialized zones, are permitted to keep these funds in a foreign currency account (FCA) in the name of the investee company for a period of up to one year. The balances in these accounts can be utilized for meeting overseas capital expenditures.

Non-Resident Investor’s Taka Account (NITA) for Portfolio Investment: Non-resident investors, including individuals and institutions, can open a NITA with any Authorized Dealer in Bangladesh. Funds remitted from abroad in freely convertible foreign currency can be deposited into this account and are freely usable for purchasing Bangladeshi shares and securities. Balances in the NITA are also freely transferable to a Foreign Currency Account (FCA) of the same person with the respective AD or can be remitted abroad in equivalent foreign exchange. Dividends and interest earnings on shares and securities purchased through the NITA, net of applicable taxes, can be credited to this account. Similarly, the sale proceeds of stocks/shares, after withholding any payable capital gains tax, can be credited to the NITA. It is important to note that no local funds from sources other than those specified (e.g., inward remittance, dividends, sale proceeds) can be credited to a NITA, and no loan facilities are allowed against these accounts.

Non-Resident Foreign Currency Deposit (NFCD) Accounts: Non-residents are permitted to maintain NFCD accounts for an indefinite period. Funds brought in by non-resident Bangladeshis can be deposited into these foreign currency accounts at any time after their return to Bangladesh.

Resident Foreign Currency Deposit (RFCD) Accounts: Persons ordinarily resident in Bangladesh may maintain RFCD accounts with foreign exchange brought in upon their return from visits abroad. Amounts brought in with a customs declaration (Form FMJ) and up to US5,000broughtinwithoutadeclarationcanbecreditedtothisaccount.BalancesinRFCDaccountsarefreelyremittableabroadandcanalsobeusedbyaccountholdersfortheirforeigntravel.Theseaccountscanbeinterest−bearingifheldforatermofnotlessthanonemonthandwithaminimumbalanceofUS1,000 or equivalent.

The diverse array of specialized foreign currency accounts demonstrates Bangladesh Bank’s concerted effort to provide tailored solutions for various types of foreign capital, including direct investment, portfolio investment, individual savings, and exporter earnings. This flexibility, however, is accompanied by specific rules for each account type, reinforcing the controlled yet facilitative nature of the foreign exchange regime. Understanding the specific characteristics and permitted uses of each account type is crucial for efficient and compliant financial management of foreign funds in Bangladesh.

1. Repatriation of Funds

Bangladesh’s policy on the repatriation of funds aims to balance investor confidence with the management of foreign exchange reserves, resulting in varying approval requirements based on the type of fund.

Remittance of Dividends and Profits: For non-resident shareholders, no prior approval from Bangladesh Bank is required for remitting cash dividends, provided they are net of tax. Similarly, branches of foreign firms (excluding banks) are free to remit their post-tax profits to their head offices without prior Bangladesh Bank approval. However, for profits transferred from foreign subsidiaries to parent companies, prior Bangladesh Bank approval is required, and applications must be submitted through the applicant’s bank. A consistent prerequisite across all profit and dividend remittances is the payment of all applicable taxes beforehand.

Repatriation of Capital and Capital Appreciation: The full repatriation of capital invested from foreign sources is permitted, along with any capital appreciation. This is contingent upon the initial investment having received approval from the government or Bangladesh Bank, and the subsequent disinvestment also being approved. Actual remittances are subject to any conditions that may be applicable from time to time regarding the quantum and installments of repatriation.

Repatriation of Proceeds Upon Company Liquidation: In the event of a company’s liquidation, any money payable to non-resident shareholders, after all liabilities and expenses have been met, is repatriable abroad. This process, however, requires prior permission from the Foreign Exchange Investment Department (FEID) of Bangladesh Bank.

Remittance of Salaries and Savings by Foreign Nationals: Foreign nationals temporarily residing in Bangladesh are allowed to remit up to 50% of their salary. They also enjoy facilities for the full repatriation of their savings and retirement benefits, typically requiring prior permission from Bangladesh Bank.

The varying levels of approval required for different types of repatriation (e.g., dividends being easier, while capital and liquidation proceeds are more scrutinized) illustrate a risk-based approach by Bangladesh Bank. This strategy aims to balance the assurance of repatriation for investors with the critical need to manage the country’s foreign exchange reserves and prevent capital flight. While repatriation is legally guaranteed, the process is not uniform, and investors should understand the specific requirements for each type of fund they intend to repatriate, planning accordingly for potential administrative steps, particularly for larger capital movements.

1. Recent Policy Adjustments by Bangladesh Bank

Recent policy adjustments by Bangladesh Bank signal a proactive and responsive approach to addressing macroeconomic challenges and investor feedback, aiming to bolster financial stability and improve the ease of doing business.

Eased Local Borrowing Rules: Bangladesh Bank has revised its foreign exchange policy to ease local borrowing for foreign-owned or foreign-controlled companies operating in the country. A significant change includes increasing the allowable debt-equity ratio from 50:50 to 60:40. This adjustment specifically applies to Taka term loans intended for capacity expansion or Balancing, Modernisation, Rehabilitation and Expansion (BMRE) purposes. This relaxed provision is applicable to companies that have been engaged in manufacturing or service activities in Bangladesh for at least three years, irrespective of their local equity content. This strategic move is designed to facilitate greater access to domestic financing, directly addressing previous constraints such as “limited financing instruments” , and thereby attracting and retaining foreign investment.

Impact of Floating Exchange Rate Regime: A pivotal reform undertaken by Bangladesh Bank is the adoption of a floating exchange rate regime, a key recommendation from the International Monetary Fund (IMF). This strategic shift has yielded positive results, significantly bolstering the country’s foreign exchange reserves, which increased by nearly $6 billion to $26.32 billion as of June 29. This increase in reserves, now sufficient to cover approximately five months of imports, has instilled greater confidence among international agencies, encouraging the disbursement of further promised funds. The enhanced foreign exchange reserves are expected to have several positive ripple effects: they will significantly boost local currency liquidity for the government, help bridge revenue shortfalls, ease interest rates within the banking sector, and empower banks to expand import financing. This structural reform improves the country’s external financial position and signals a greater market orientation, which is crucial for overall investor confidence.

These recent policy adjustments by Bangladesh Bank collectively demonstrate a commitment to creating a more stable and predictable financial environment. By improving access to capital and reducing currency risks, these reforms serve as positive indicators of the government’s dedication to fostering a more favorable investment climate, directly responding to previously identified economic uncertainties and challenges.

1. Key Sectors for Foreign Investment Opportunities

Bangladesh’s strategic geographical location, coupled with its large consumer base (connecting to over 3 billion consumers) and a rapidly expanding middle class, positions it as a market with significant investment opportunities. The government, through its liberalized industrial policy, actively promotes various sectors for foreign direct investment. This detailed promotion, often accompanied by targeted incentives, reveals a strategic industrial policy aimed at diversifying the economy and moving up the value chain beyond traditional sectors. Investors aligning their strategies with these promoted industries are likely to maximize their access to incentives and government support.

The following table provides an overview of key sectors highlighted by BIDA as promising investment opportunities:

Sector Name	Key Statistics & Potential	Relevant Incentives/Notes
Ready-Made Garments (RMG) & Textiles/Apparels	2nd largest RMG exporter globally; $47.38B export value; 230+ LEED certified factories; 52 duty-free export markets	Leader in sustainable production; Primary driver of export earnings; Eligible for EPZ incentives
IT & IT-Enabled Services (ITES)	#9 globally in total mobile connections; $2.1B IT services market by 2025; 650K+ registered freelancers	Hi-Tech Parks specifically developed for this sector; “Thrust Sector”
Pharmaceuticals & API	Meets 98% domestic medicinal demand; $6B pharma market size; Exports to 150+ destinations	Industry-specific VAT exemptions until June 2030; “Thrust Sector”
Agribusiness	70M+ metric tons annual agri output; 13% CAGR in agro-sector performance; $7.3B packaged food market	Designated “Thrust Sector”
Energy & Power	7% annual power demand growth; 20% renewable target by 2030; Private investment allowed in generation/gas exploration	15-year income tax exemption for private power generation companies
Light Engineering	80K enterprises; $8.2B domestic demand; 28.3% CAGR (2017-2022)	Designated “Thrust Sector”
Leather & Footwear	#8 largest global footwear producer; 3600+ footwear making units; 45% YOY export growth (CY24)	Designated “Thrust Sector”
Plastics	6000+ factories; $3B domestic market; 20% annual market growth
Medical Device	$925M+ annual market demand; Projected $3B market size by 2030; 10.3% CAGR in healthcare spending since 2010
Semiconductor	$1T global market by 2033; $8M+ exports in 2024; 20K+ graduates in EEE & CSE
Infrastructure	Large-scale projects are “controlled sectors” requiring NOC	Designated “Thrust Sector”; Eligible for tax holidays
Other Thrust Sectors	Artificial flower-making, Floriculture, Gift items, Jute goods, Jewellery and diamond cutting and polishing, Oil and gas, Sericulture and silk industry, Stuffed toys	Special facilities and venture capital support

This detailed promotion of specific sectors by BIDA and the government, coupled with targeted incentives such as VAT exemptions for pharmaceuticals and tax holidays for power generation, illustrates a strategic industrial policy. This approach aims to diversify the economy and facilitate its progression up the value chain beyond traditional export sectors. The government is clearly signaling its priorities, enabling investors to align their strategies with these areas to maximize access to incentives and government support, while also indicating where future policy backing is likely to be concentrated.

 

Challenges and Considerations for Foreign Investors

While Bangladesh offers compelling opportunities and a liberal investment regime, foreign investors should be aware of several challenges and considerations that can impact their operations and profitability.

I. Navigating Regulatory and Bureaucratic Hurdles

Despite significant efforts towards establishing “one-stop services” through BIDA’s OSS portal , the investment process can still be characterized by “complex bureaucratic processes” and “bureaucratic delays”. The multi-agency regulatory landscape, which requires various licenses and permissions from different government bodies, contributes to this complexity. Issues such as “regulation overlap” and “implementation discrepancies” have been noted, indicating a gap between policy intent and operational reality. This suggests that while the government is actively working to streamline processes, underlying systemic issues related to inter-agency coordination and institutional capacity are still being addressed. Investors should therefore anticipate administrative friction and allocate sufficient time and resources for approvals. Engaging experienced local legal and advisory firms is highly recommended to navigate these complexities effectively.

II. Infrastructure and Energy Supply Constraints

Inadequate infrastructure is consistently cited as a significant hindrance to foreign investment in Bangladesh. A particular concern is energy supply: persistent energy shortages have severely impacted industries like textiles, which are heavily reliant on a consistent power supply. While there is a growing focus on renewable energy, with over 6 million solar home systems installed and a target of 20% renewable energy by 2030, the expansion of such initiatives is hindered by high investment costs, a lack of supportive banking systems, and limited land availability. These energy constraints can directly impact operational costs and production schedules for energy-intensive industries, potentially offsetting other investment incentives. Due diligence must therefore include a thorough assessment of infrastructure reliability, especially energy supply, for the specific location and industry, with investors potentially needing to factor in costs for backup power generation.

III. Intellectual Property Rights (IPR) Enforcement

The protection of intellectual property rights (IPR) remains a notable concern for foreign investors. Bangladesh has limited resources dedicated to IPR enforcement, and counterfeit goods are readily available in the market. This poses a significant risk for foreign investments involving proprietary technology, brands, or creative works, as it exposes them to potential revenue loss, brand dilution, and undermines the value of their intangible assets. Weak IPR enforcement can act as a disincentive for technology-intensive or brand-sensitive foreign investments, impacting their long-term viability and competitiveness. Companies with significant intellectual property should develop robust IPR protection strategies, including local registration, and be prepared for potential enforcement challenges.

IV. Dispute Resolution Mechanisms

A critical systemic weakness identified in Bangladesh’s investment climate is the inconsistency in dispute resolution mechanisms. The country currently lacks dedicated commercial courts, with corporate disputes primarily handled by only two benches within the High Court Division (HCD). This leads to prolonged delays, with many trade-related disputes pending for nearly a decade and tying up substantial capital (estimated at Tk 2.5 lakh crore). The severe shortage of judges and the underutilization of alternative dispute resolution (ADR) methods like mediation and arbitration further exacerbate the backlog. Despite the existence of the Arbitration Act, 2001, which regulates arbitration processes, the effectiveness of dispute resolution remains a challenge. The lack of a dedicated investment dispute resolution tribunal, despite recommendations for its establishment, highlights a gap in the legal infrastructure. This directly impacts investor confidence and the perceived risk of doing business, as it affects the enforceability of contracts and the timely resolution of commercial disagreements. Investors should consider incorporating international arbitration clauses in their contracts and factor in potential legal costs and timelines for dispute resolution.

V. Macroeconomic and Political Stability

Bangladesh’s investment climate is also influenced by broader macroeconomic and political factors. The economy has faced challenges such as persistent inflation (9.94% in January 2025, with a 12-month average of 10.34%) , an increasing trade deficit, and energy shortages. Global factors, including the Russia-Ukraine conflict, have contributed to disrupted supply chains and increased prices for essential commodities. Domestically, political uncertainty and labor unrest, particularly in the garment sector, have led to production slowdowns. While Bangladesh Bank has implemented monetary policy measures, including maintaining a 10% policy rate and aiming to reduce inflation to 7-8% by June 2025, and has adopted a floating exchange rate regime to bolster reserves , these macroeconomic headwinds can impact the cost of doing business and overall investor sentiment. The World Bank notes that declining private and public investment, constrained by political uncertainty and rising costs, is expected to moderate GDP growth. These factors necessitate careful monitoring by investors to assess potential impacts on their operational environment and profitability.

VII. Recommendations

Bangladesh presents a compelling, albeit complex, landscape for foreign investment. Its liberal FDI regime, underpinned by strong legal protections against expropriation and guarantees for capital repatriation, provides a solid foundation for investor confidence. The government’s proactive stance, demonstrated through the establishment of specialized investment promotion agencies like BIDA, BEPZA, and BEZA, and the provision of a wide array of fiscal and non-fiscal incentives, clearly signals its commitment to attracting and nurturing foreign capital. The strategic development of EPZs, EZs, and Hi-Tech Parks, each with tailored benefits, allows for diversified investment opportunities across key growth sectors such as RMG, IT/ITES, Pharmaceuticals, and Energy. Recent policy adjustments by Bangladesh Bank, including eased local borrowing rules and the adoption of a floating exchange rate, further enhance financial stability and access to capital.

However, prospective investors must approach the market with a clear understanding of the existing challenges. Navigating the multi-layered regulatory framework and persistent bureaucratic hurdles, despite efforts towards “one-stop services,” requires diligence and often local expertise. Critical infrastructure deficiencies, particularly in energy supply, can impact operational efficiency. Furthermore, the effectiveness of intellectual property rights enforcement and the current state of commercial dispute resolution mechanisms, characterized by judicial backlogs and a lack of specialized courts, represent significant areas of concern that can affect the security and enforceability of investments. Macroeconomic factors, including inflation and political stability, also warrant continuous monitoring.

 

Based on this comprehensive analysis, the following recommendations are offered for foreign investors considering Bangladesh:

1. Strategic Entry Point Selection: Carefully evaluate whether the investment aligns with the specific benefits and operational environment of Export Processing Zones (EPZs), Economic Zones (EZs), or Hi-Tech Parks. These specialized zones often offer significantly streamlined processes and enhanced incentives that can mitigate broader systemic challenges.
2. Robust Due Diligence and Local Expertise: Conduct thorough due diligence on all aspects of the proposed investment, paying particular attention to the specific regulatory requirements of the chosen sector and location. Engage experienced local legal counsel and financial advisors from the outset to navigate the complex multi-agency approval processes, ensure compliance with foreign exchange regulations, and manage post-approval formalities.
3. Proactive Financial Planning: Understand the nuances of cross-border financing, including the specific purposes for which External Commercial Borrowing (ECB) is permitted and the distinct rules governing various foreign currency accounts. Plan for repatriation of funds by understanding the varying approval requirements for dividends, capital, and liquidation proceeds.
4. Risk Mitigation for Operational Challenges: Factor in potential administrative delays and infrastructure constraints, especially concerning energy supply, into project timelines and financial projections. For industries reliant on proprietary technology or brands, develop robust intellectual property protection strategies and consider the implications of the current IPR enforcement environment.
5. Dispute Resolution Strategy: Given the limitations in the domestic judicial system for commercial disputes, prioritize contractual agreements that include provisions for international arbitration. This can offer a more efficient and predictable mechanism for resolving potential disagreements.
6. Continuous Monitoring: Remain informed about ongoing policy changes, particularly those related to fiscal incentives (e.g., Finance Ordinance updates) and foreign exchange regulations. The dynamic nature of Bangladesh’s policy environment necessitates continuous monitoring to leverage new opportunities and ensure ongoing compliance.

By adopting a well-informed and strategic approach, foreign investors can effectively leverage Bangladesh’s liberal investment policies and growth opportunities, while prudently managing the inherent complexities and challenges of the market.