This article will reflect on the Investment Protection Laws and Policies in Bangladesh, the facilities/incentives of FDI, and how Lawyers play a vital role in Foreign Direct Investment (FDI). This is because knowing about the Investment laws and policies of a foreign country is the first step taken by investors before deciding to invest in that country.
What is Foreign Direct Investment?
FDI is an investment from a party in one country into a business or corporation in a foreign country to form a lasting interest. Such an investment can be made by obtaining a lasting interest and control or by expanding one’s business into a foreign country. Lasting interest in a company is recognized when an investor obtains at least 10% of the voting right in a foreign company.
Sectors in Which FDI is Allowed in Bangladesh
Foreign private investments are welcomed in all areas of the economy of Bangladesh. However, there are four reserved sectors for government investment in which private investment is not allowed. The reserved sectors are:
- Arms and ammunition and other defense equipment and machinery
- Forest plantation and mechanized extraction within the bounds of reserved forests
- Production of nuclear energy
- Security printing.
The Authority that Governs FDI in Bangladesh
Bangladesh Investment Development Authority (BIDA) is the principal authority responsible for encouraging, promoting, and supervising private investment in Bangladesh.
Facilities/ Incentives of FDI in Bangladesh
FDI in Bangladesh allows various incentives/facilities that attract foreign investors to invest in Bangladesh. The facilities are listed below:
- For FDI, there is no limitation on foreign equity participation, i.e. 100 percent foreign equity is allowed in Bangladesh.
- 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.
- A foreign technician employed in foreign companies will not be subjected to personal tax for up to 3 (three) years. However, beyond that period his/ her income tax payment will be governed under the law eliminating double taxation within the country of citizenship. Moreover, the FDI policy allows corporate tax holidays for 7 years (15 years in the power sector).
- 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 percent of their salary and will enjoy facilities for full repatriation of their savings and retirement benefits.
- Foreign entrepreneurs are, therefore, entitled to the same facilities as domestic entrepreneurs concerning tax holidays, payment of royalties, technical know-how fees, etc.
- 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.
- To facilitate investment, prior approval of the Bangladesh Bank is no longer required for the following:
- 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 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 installments 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 BOI 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 BOI 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 BOI.
- Extension of term loans by banks on normal banking considerations to foreign firms operating in Bangladesh, subject to compliance with the instruction of GFET-2009, Vol-1, chapter-16, para 4(B).
- Extension of working capital loans to all foreign-owned/controlled industrial and trading firms/companies by banks based on bank customer relationships and normal banking practice.
- Obtaining interest-free repatriable short-term foreign currency loans by foreign firms investing in Bangladesh from their head offices or any other sources through any authorized dealer.
Investment Protection in Bangladesh
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 nationalization and expropriation. It also guarantees non-discriminatory treatment between foreign and local investment and repatriation of proceeds from sales of shares and profit. In addition, Bangladesh has concluded bilateral agreements for the avoidance of double taxation and investment treaties for the promotion and protection of investment with 18 countries.
If a dispute arises, the options of alternative dispute resolutions (ADR) are available under the Arbitration Act of 2001. Bangladesh has signed the International Convention for the Recognition and Enforcement of Foreign Arbitral Awards. In addition, Bangladesh is a member of the International Centre for Settlement of Investment Disputes (ICSID). Bangladesh offers investors a steady and resourceful environment appropriate for the establishment or expansion of any business.
Moreover, Bangladesh has executed Avoidance of Double Taxation Agreements (DTA) with many countries including China. Therefore, the facilities of FDI in Bangladesh as mentioned above are attainable undoubtedly. Get help from a reputed Lawyer for Foreign Direct Investment in Bangladesh.
Role of Lawyers in Foreign Direct Investment
A well-experienced lawyer is very essential in FDIs. This is because a good lawyer will be required to guide foreign investors regarding the investment procedures in Bangladesh. A lawyer will be required for:
- guiding on the facilities available for FDI, the investment protection laws, and policies.
- Contract formation: to invest, various contracts need to be formed and only a lawyer can help an investor with that.
- Company formation: in the case of foreign investment through company formation in Bangladesh, again a need for a lawyer arises.
- Due diligence report: if you think of investing in a company in Bangladesh, you will need a due diligence report on the company concerned and a lawyer will prepare the due diligence report.
- Disputes: lastly, for settling any dispute either through a court case or by ADR an efficient lawyer will be required.
These are the key areas relating to FDI where a lawyer plays a major role. Subsequently, for any investment to take place a lawyer will be required to guide the foreign investor as to their rights and duties in Bangladesh.
LEGAL ADVICE ON FDI AT CLP
The Barristers, Advocates, and lawyers at CLP in Gulshan, Dhaka, Bangladesh are highly experienced in dealing with matters related to FDIs. In addition to handling various issues related to domestic clients regularly, it also has experience in consulting and assisting numerous international clients with utmost care and attention throughout their legal troubles. For queries or legal assistance, please reach us at: