Investor's Guide

 

Investor's Guide


Business Setup at a Glance

Implementing a wholly owned or joint venture industrial project in Bangladesh is a rather simplified process. The entire process is presented in the following diagram. For details of each cell, please click.

   
Arrival in Bangladesh
   
   
   
   
Complete Immigration
& customs formality
   
 
Reception by BOI
Welcome Service at Zia
Obtain environmental clearance, infrastructure & utility facilities on a priority basis with the assistance of Utility Service Cell of BOI
 
Meet BOI
for necessary counseling &
apply for registration
 
   
Service Center issues Registration Letter within 7 days on receipt of fully documented application
 
Register with the Chief Inspector of factories & Establishments which regulates working
conditions and ensures safety measures in the factory
   
 
Register company With the Registrar of Joint Stock companies & Firms
SET UP PLANT
 
   
Secure Trade License from Local Government Authority
Import Machinery & equipment by opening Letter of Creditor as Equity Investment

Apply in prescribed forms to the Registration and Incentives Wing of BOI for foreign borrowing, technology transfer fees & expatriate work permit
     
Register for the VAT
Release consignments at the custom point ata concessionary rate of import duty
 

Immigration Procedure:

Business travelers may request for visas with a year duration and multiple entries. Bangladesh issues following categories of business visas.

  • Single-entry for three months
  • Multiple-entry for three months
  • Multiple-entry for six months
  • Multiple-entry for one year
Extensions for each of the above are also permitted.

Modified Rules of Landing Permit / Visa on Arrival

The Government of Bangladesh issued a circular on 18th April 2002 updating the provisions of Landing Permit (LP) / Visa On Arrival (VOA) for travelers without valid visa. The foreign investors and businesspersons could avail LP/VOA from ZIA for at best 30 days under the following conditions:

  • The foreign investors shall be identified on the basis of certification from Board of Investment (BOI)/ BEPZA / Ministry of Industries. Officials from the BOI will be on duty round-the-clock to facilitate certification of the relevant documents to get VOAs / LPs.
  • The foreign businesspersons who are directly associated with import of Bangladeshi products shall be identified on the basis of the certificate by the relevant associations of export-oriented commercial/industrial organizations or the FBCCI or the BGMEA. The certificate shall include Tax Identification Number (TIN) of the respective local commercial/industrial organizations.
The conditions of issuing LP/VOA include following:
  1. In no circumstances, the period of LP/VOA shall be extended;
  2. The LP/VOA applicant shall have endorsement of US$500 in the passport / in cash;
  3. The LP/VOA Fee will be determined on Reciprocity Policy with the respective countries;
  4. The applicant shall have Return Air Ticket;
  5. The applicant shall utilize same port for entry and departure.
Also please contact Bangladesh mission in your country.
Incorporating a Company :

Business in Bangladesh may be carried on by a company formed and incorporated locally or by a company incorporated abroad but registered in Bangladesh. The incorporation or registration is done by the Registrar of Joint Stock Companies and Firms (Link, if any) under the provisions of the Company's Act 1994 (Link, if any). Companies could be classified in following categories:
  1. Limited Companies:
    a. Company Limited by Shares
    i. Public Limited Company and
    ii. Private Limited Company
    b. Company Limited by Guarantees.
  2. Unlimited Companies
    Unlimited companies and companies limited by guarantees may or may not have share capital.

    Private Limited Company :
  • Restricts the rights to transfer the shares,
  • Limits the number of its members to minimum 2 and maximum 50 excluding the persons employed in the company
  • Prohibits any invitation to the public to subscribe for the shares or debentures of the company and
  • Entitles to commence business from the date of its incorporation.

    Public Limited Company :

    On the other hand a public limited company:

     
  • May issue invitation to the members of the public to subscribe the shares and debentures of the company through a prospectus which complies with the requirements of the Companies' Act 1994 and the Securities and Exchange Commission Act 1993 as amended from time to time.
  • Has minimum 7 members but there is no maximum limit.
  • Has at least 3 Directors.
  • May a private company converted into a public company.

Necessary forms for incorporation and registration are available with the Office of the Registrar of Joint Stock Companies and Firms. Nominal fees are charged for registering the memorandum and articles of Association.

Memorandum of Association :

Memorandum of Association of the company still state the name of the company, whether it is public limited or private limited and the location of the registered office at the company. The memorandum should clearly spell out the main objectives, the authorized capital-division of this capital into shares of fixed amount and liability of its members.

Articles of Association :

The articles of association are the regulations governing the internal management of the affairs of the company and the conduct of its business.
 

Registration with BOI:

Business in Bangladesh may be carried on by a company formed and incorporated locally or by a company incorporated abroad but registered in Bangladesh. The incorporation or registration is done by the Registrar of Joint Stock Companies and Firms under the provisions of the Company's Act 1994. Companies could be classified in following categories:

  1. Joint venture/100% foreign investment proposals in the private sector

    No prior approval or no objection certificate is required for setting up of a joint venture / 100% foreign direct investment. To avail of facilities and the institutional support services provided by the govt. entrepreneur/investors are advised to apply for registration to BOI in a simple prescribed form.
     
  2. Self financed local investment proposals including industries sanctioned/ financed by financial institutions or commercial banks.

    The entrepreneurs of such projects are to fill up a simple prescribed application form and submit to BOI for registration. After a first hand scrutiny of the information, BOI issues registration letter.

     
  3. Permission for setting up joint venture industrial units with the public sector corporations

    Any individual entrepreneur either local or foreign can set up an industry with public sector corporation. Such joint venture is required to be registered with the BOI if the private sectors contribution is more than 50% of the project cost and in such case it is treated as private sector project. For any public sector which makes contribution out of their own fund needs approval of the concerned ministry. If the contribution of the corporation is 50% or above, it is treated as a public sector project. The public sector project is processed by the concerned ministry for approval of the Planning Commission.

    Registration with Factories Act:

    Any manufacturing company employing ten or more workers is required to be registered under the Factories Act, 1965 with the office of the Chief Inspector of Factories and Establishment. The act is primarily to regulate working conditions and to ensure safety in the factory.

    Obtaining Work Permit :

    Work permit for foreign nationals is a pre-requisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance in the prescribed from of BOI. For expatriate employment the guidelines are as follows:

    1. National of the countries recognized by Bangladesh are considered for employment.

    2. Employment of expatriate personnel be considered only in industrial establishments which are sanctioned / registered by the appropriate authority.

    3. Employment of foreign nationals is normally considered for the job for which local experts / technicians are not available and persons below 18 years of age are not eligible for employment.

    4. Decision of the Board of Directors of the concerned company for new employment/ extension is to be furnished.

    5. Number of foreign employees should not exceed 5% of the total employees including top management personnel.

    6. Initially employment of any foreign national is considered for a term of 2 years which may be extended on the basis of merit of the case.

    7. Necessary security clearance has to be obtained from the Ministry of Home Affairs

    Registration/Approval for Foreign Loan, Suppliers' Credit, PAYEE Scheme etc.:

    Entrepreneurs in the private industrial sector arranging foreign credit in the form of loan, suppliers' credit, PAYEE scheme etc. falling within the following guide-lines are not required to obtain prior approval from BOI for contraction such credit:

    • The effective rate of interest should not exceed LIBOR+4% (effective interest is the sum of the stated annual rate of interest and the annualized fees such as commitment fee, syndication fee, front-end fee, project appraisal fee etc.)

    • The down payment, if any, in case of suppliers' credit should not exceed 10% of the credit amount.

    • Repayment period should not be less than 7 years.

    A copy of the foreign loan agreement signed by both parties should be submitted to BOI for registration. Period approval of BOI us required for the proposals which do not fall within the aforesaid guide-lines.

    Obtaining Industrial Plot :

    Entrepreneurs requiring industrial plot for setting up of industry in any industrial areas / estates apart form BEPZA and BSCIC, may approach BOI mentioning the size of plot required by them along with copies of sanction / registration letter and industrial layout plan for justifying actual requirement. After receiving the application BOI provides assistance to get the industrial plot.

    Most of the industrial areas/ estates are owned / controlled by city development authorities in three divisional head quarters., RAJUK in Dhaka, CDA in Chittagong and KDA in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies namely, (a) Public Works Department and (b) Housing and Settlement Directorate.

    BOI also recommends for acquisition of land to the concerned if required to by the industrial units. In such cases the entrepreneurs are required to submit relevant papers and information in connection with the land to be acquired by the Deputy Commissioners (D.C.) concerned.

     

    Environmental Legislation :

    Under the Environment Conservation Act 1995, all industrial project shall obtain environmental clearance from the Department of Environment. The main criteria for obtaining clearance are set out in the Environment Conservation Rules 1997 which was established under the Act. Different levels of assessment are required depending on the particular industry concerned.

    Obtaining Utility Connections :

    Entrepreneurs may apply either directly to the concerned authority for obtaining utility services or approach BOI for assistance along with copy of registration/ sanction letter. Utility Service Cell is specially responsible within BOI to help investors in obtaining necessary utility services.

    Human Resources and Employment :

    Bangladesh offers an abundant supply of disciplined, easyly trainable and low-cost work force suitable for any labor-intensive industry. Of late, there is an increasing supply of professionals, technologists and other middle and low level skilled workers. They receive technical training from universities, college, technical training centers, polytechnic institutions etc. The expenditure incurred by an employer to train his employee is exempted from income tax.

    a. Employment Conditions:

    The minimum age for workers in Bangladesh is 16 years in factories and establishments. Contracts are made in the form of a letter of offer. Workers may also be engaged on verbal agreements. In government organizations and in some private organizations as well, a probation period exists for skilled or semi-skilled workers varying between three moth's to one year and during this period either party may serve one month's notice for termination from or giving up to the job. In the private sector, the dignity of labor is ensured in accordance with the principles enunciated in the ILO convention and recommendations.

    b. Labor Laws:

    In Bangladesh 47 labor laws are now in operation. These relate to (a) wages and employment, (b) trade union & industrial disputes, (c) working environment and (d) labor administration and related matters. The main labor laws are:

    • Workmen's Compensation Act, 1923,
    • Payment of Wages Act, 1936
    • Maternity Benefit Act, 1936
    • Employment of Labor (Standing Orders) Act, 1965
    • Shops & Establishments Act, 1965
    • Factories Act, 1965
    • Industrial Relations Ordinance, 1969
       

    c. Settlement of Labor Disputes:

    Contract or agreement is usually made between the management and the Collective Bargaining Agent (CBA) on settlement of industrial disputes as per provisions of Industrial Relations Ordinance, 1969. In case a bipartite negotiation fails, conciliation machinery of the government is requested by the aggrieved party to intervene and the conciliation process is undertaken. If succeeds agreement is signed between the parties and the Conciliation Officer becomes a witness. If it fails, the party raising the dispute, may go for strike or lockout as the case may be. The government may, however, prohibit the same after one month in the interest of the public. In the essential services like, (a) electricity, gas, oil & water supply etc. (b) hospital & ambulance service, (c) fire brigade, (d) railway & Bangladesh Biman and (e) ports etc., strike is prohibited.

    d. Wages and Fringe Benefits:

    In the public sector, wages and fringe benefits of the workers are determined by the government on the recommendation of the National Wages Commission established from time to time. Such commissions were appointed in 1973,1977,1984, 1989 & 1992. Wages & fringe benefits declared by the government in 1977 having 20 grades of wages.The public sector employees are, however, covered by the Pay Commission declared by the government from time to time.

    In the private sector, the wages & fringes benefits of the workers and employees are determined through collective bargaining process. Sometimes private industries follow the public sector wages & salary structure for their workers and employees respectively.

    e. Leave & Holidays:

    Leave & holidays of the workers & employees are regulated by the Factories Act, 1965 and shops Establishment Act, 1965.

    f. Social Security:

    Workmen Compensation, Maternity Benefit (Tea Estate) Act, 1950, Maternity Benefit Act, 1939, Employment of Labor (standing orders) Act, 1965 etc. deal with provident fund and gratuity.

    g. Labor Union:

    Industrial Relations Ordinance, 1969 deals with trade union in Bangladesh. In any industrial and commercial establishment, a trade union may be formed with 30% of the total number of workers employed. If there is more than one union in any establishment, Collective Bargaining Agent is determined by the Registrar of Trade Union through sector ballot for a term of two years. Only the Collective Bargaining Agent is authorized to raise industrial disputes and negotiate with the management. The Director of Labor of the government acts as the Registrar of Trade Union in Bangladesh. Till December 1996; 4955 trade unions (worker's union - 4104 & employers association- 851) exits in Bangladesh having 17, 30, 927 members.

    Industrial Relations Ordinance, 1969 provides that any worker or employer/ has the right to form a union/association without previous authorization. But such a union/association can not function as a trade union without being registered under the law.

    h. Working Hours:

    Workers in the public or private sector remain at their job for eight and a half hours daily (including half an hour for meal or rest) with Friday as weekly holiday marking 48 working hours a week. Work in excess of these , is paid as overtime. The rate of overtime is 2 hours pay for 1-hour job.


    Exchange Control & Remittance
    :
     
    Remittance of Royalty, Technical Know-How and Technical Assistance Fees :

    No prior permission of BOI is required for entering into agreements for remitting fees for the purpose of royalty, technical know-how and technical assistance if the total fees and other expenses connected with technology transfer (service fee, marketing commission etc.) are within the following prescribed limits:
    • For new projects such fees and other expenses should not exceed an aggregate limit of 6% of the CIF value of imported machinery.

       
    • Recurrent annual fees for royalties and other expenses such as fees for technical know-how, technical assistance, operational services, marketing of products etc. should not exceed an aggregate limit of 6% of the previous year's sales of the firms are declared in the tax return.

    Once the technical transfer agreements falling within the above limits are signed, these are required to be furnished to BOI for registration.

    Proposals which are covered under the prescribed limits will require prior approval of BOI for which application have to be submitted along with necessary documents and copy of the relevant draft agreement.
     

    Living in Bangladesh:

    Exciting Place and Harmonious Living
    Bangladesh is an exciting place to live and visit. Historical and archeological sites dot the countryside, some dating as far back as the third century, B.C. It is endowed with enchanting scenic beauty, mighty rivers, sunny beaches, historical relics and colorful tribal life Today Bangladesh is home to some of the major religions of the World. Islam, Hinduism, Buddhism and Christianity are all found here. Owing to a long tradition of tolerance, there is no communal animosity or ethnic controversy in Bangladesh. The constitution of the country also guarantees full freedom of religion and there is no discrimination based on race, religion, caste, sex or place of birth. Above all, the Bangladeshi people are by nature very polite, courteous, friendly and hospitable.

    Affordable Living Costs
    For the expatriate, Bangladesh is affordable and comfortable to live in. Expatriates' accommodation is available in centrally located apartments and houses. In several suburban areas, much quiet, more secluded houses are also available for rent. For those visiting Bangladesh, Dhaka offers two international five-star hotels - the Pan Pacific Sonargaon Hotel and Dhaka Sheraton (Link). Both the hotels provide deluxe accommodation, restaurants, health-club and entertainment facilities. In addition there are a number of medium standard hotels and guest houses in Dhaka and Chittagong to accommodate the expatriates.

    International Schooling
    An American International School for grades 1 to 12 is located near the high-class residential area of Gulshan in Dhaka. The professional teaching staffs follows the American school curriculum. The school library maintains a substantial collection. Tuition charges are reasonable. A Japanese school, is located in the residential area of Baridhara in Dhaka. The school is managed by the Japanese Association in Bangladesh.

    Entertainment and Recreations
    For recreation, expatriates have access to 3 private clubs in Dhaka to play tennis, squash, golf and billiards, and to swim or dine. Local entertainment includes plays, art exhibits, films and instrumental and vocal music groups. Special occasions are often marked by folk or dance festivals. Similar sports and recreational facilities are also available in Chittagong and Khulna.

    Tours and Travels
    Chittagong and Khuna - these two places have some special attractions for visitors. Chittagong, the second largest city, is the gateway to the Bay of Bengal with a picturesque hinterland of large hills and forests, broad sandy beaches and fine temperate climate always attract holiday-makers. It combines the humming of busy sea-port with the pleasure of a charming hill-town with undulating topography. Chittagong is the country's principal sea-port and is the main site of heavy, medium and light industries. Chittagong is also close to other unique tourist spots like Cox's Bazar, Kaptai and Rangamati.

    Khulna, the country's third largest city, serves as the gateway to the port of Mongla and the Sundarbans, the home of the Royal Bengal Tiger. A journey by paddle steamer from Dhaka to Khulna along the southern river system running through the green countryside is guaranteed to be an unforgettable experience for foreigners. Saint Khan Jahan Ali's sixty-domed ancient mosque (1459 A.D.) and his mausoleum at Bagerhat about 32 kms. Away from Khulna are the popular tourist attractions.

    Healthcare
    Basic health care needs can be met at any of the country's hospitals or clinics, or by a foreign-trained registered physicians, engaged in various state owned and private hospitals and clinics. Most of them are highly qualified, well experienced and educated in U.S.A., U.K. Japan, and other European countries. There are also some good hospitals and clinics with modern diagnostic equipment and facilities.

    Workdays and Business Hours
    Bangladesh observes a Friday weekend. Business hours are 9:00 - 16:00. Banks observe the same hours while industry has a 48-hour week.

    Flight Schedules
    Traveling to Bangladesh from any country is simple and easy. For latest flight schedules from major international hubs like London, Dubai, Bangkok, Singapore, Singapore, please contact. For details please click here...

    For more information on living in Bangladesh, its culture, travel information, places to visit and security, please visit www.lonelyplanet.com/dest/ind/ban.html