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Bangladesh's big draws for business
BANGLADESH'S attractive potential was highlighted at the highest level when Prime Minister Sheikh Hasina during her official visit to Singapore, last year, spoke at the opening session of the full-day Bangladesh-Singapore Business Forum 2018. Jointly organised by the Singapore Business Federation and International Enterprise Singapore, the forum was attended by 200 Singapore company representatives and members of her business delegation.
Speaking at the forum, the PM highlighted that as Bangladesh presses on with the next stage of development, it has opened up significantly for foreign investors. These benefits include access to newly expanding industries and a large, young and easily trainable workforce with competitive wages.
The country's investment regime includes the protection of foreign investment by law, generous tax holidays, concessionary duty on import of machinery, remittances of royalty,100 per cent foreign equity, unrestricted exit policy, full repatriation of dividend and capital on exit, cheaper costs of establishing business and duty-free and quota-free access to developed country markets.
Referring to Bangladesh's enviable success in becoming the second largest global exporter of ready-made garments, the PM said that other sectors such as pharmaceuticals, ICT and shipping are also making significant progress in the country.
She said that after meeting domestic demand, pharmaceutical products are now being exported to 120 countries including the United States and EU markets. In this regard, she said that Bangladesh is fast emerging as a major global hub for high quality, low-cost generic medicines. Other than pharmaceuticals, shipbuilding is another fast emerging industry in the country. Bangladesh is also producing high quality products in the leather, ceramics and footwear sectors. Singapore may consider importing more of these items, she added. Also, with its economy growing by a robust 7.86 per cent in the financial year 2017-18, up from 7.28 per cent expansion in the previous year, Bangladesh has emerged as one of the most promising emerging markets in the world, and foreign investors are beginning to recognise it as a market to keep an eye on.
Already the country is the world's second largest garment exporter and a rising pharmaceutical player. Exports are projected to climb to US$39 billion this year and the target is to hit US$50 billion by 2021 when Bangladesh will mark the 50th anniversary of its independence.
From 2003 to 2017, Bangladesh has achieved an annual export value growth of 19.6 per cent, which attests to its export competitiveness. In fact, the country has an overall competitive cost base.
Business set-up and operation costs including wage, office and housing rentals, and power are cheaper or more competitive than many other countries. The average monthly wage for garment workers in Bangladesh is US$63. In China, for example, garment workers earn on average about US$347 a month.
For foreign investors, the key attraction is that Bangladesh has a fast-growing economy with an expanding middle-class with rising disposable income - leading to greater demand for goods and services.
Importantly, there is strong political stability under the leadership of PM Sheikh Hasina who has been in power since 2009. She has recently been again voted in for another term of five years.
According to the Bangladesh Investment Development Authority (BIDA), Bangladesh has the most investor-friendly regulatory regime in South Asia. The country has a trainable, enthusiastic, hardworking and low cost (even by regional standards) labour force suitable for any industry. BIDA says that Bangladesh also offers some of the world's most competitive fiscal and non-fiscal incentives. These include remittance of royalties, technical know-how and technical assistance fees; repatriation facilities of dividend and capital at exit; and permanent resident permits on investing US$75,000 and citizenship on investing US$500,000.
At the same time, BIDA says that foreign investment in Bangladesh is secure vis-a-vis nationalisation and expropriation. The Foreign Private Investment (Promotion and Protection) Act 1980 ensures full protection for foreign investors.The geographic location of the country is ideal for global trade as Bangladesh is close to two of the largest markets in the world - India and China - with very convenient access to international sea and air routes.
There is sufficient supply of natural gas, water and electricity. Installed electricity generation capacity including captive power (as of June 30, 2018) stood at18,753 MW. To help sustain growth in the export-oriented economy and to meet the demands of a growing middle class, the government has plans to generate 34,000 MW of electricity by 2030.
BIDA says that it is important for foreign investors to note that there is no linguistic barrier as the majority of the educated population can read, write and speak English.
It also highlights that Bangladesh enjoys duty-free and quota-free access to almost all the developed countries with lower duty access to the markets of Thailand, India and Pakistan. Talks are also under way with China, Russia, Malaysia and neighbouring countries for duty-free access of Bangladeshi products to these markets. Also, Bangladesh's capital city, Dhaka, has easy access to its neighbouring countries. Dhaka is also the commercial and financial hub of Bangladesh and the largest economic centre of Eastern South Asia. Furthermore, Bangladesh is situated on the coast of the Bay of Bengal, which is ideal for trading with rising Asian and Middle Eastern markets.
A significant strength of Bangladesh as an investment destination is its young and skilled workforce. Already one of the main driving forces of Bangladesh's rapid economic growth is its workforce: In 2018, the median age of the country's population was just 26 years.
The country also shows potential in technical education. About 15,000 Bangladeshi fresh graduates get into top IT firms such as IBM, Microsoft and Google every year, according to the Bangladesh government.
The European Commission listed Bangladesh as an ideal destination for outsourcing. There are Tech Parks situated in the cities of Dhaka and Jessore to promote the progress of the ICT sector to create a Digital Bangladesh.
Another advantage for foreign investors is Bangladesh's growing population. As of June 2018, the population of Bangladesh was 166,340,956, according to the United Nations. This makes Bangladesh the fifth most populous country in Asia and the eighth in the whole world. In addition, the UN estimates Bangladesh's population to reach 265 million by 2050.
By 2025, the middle class of Bangladesh is also expected to grow to 34 million, triple the number of today's middle class of 12 million. Two million Bangladeshis join the middle class of the country every year.
With an eye on boosting economic growth in the country, Bangladesh has a strong openness to foreign investment. The country has shown a very welcoming attitude towards foreign investors, allowing foreign investment in most sectors and providing favourable conditions for doing business.
Some of the incentives Bangladesh is offering to foreign investors are: tax holidays and exemptions; simplified import of raw materials and machinery; and facilitation of utility connections.
The Bangladesh Economic Zone Authority (BEZA) is also planning to create 100 economic zones all over Bangladesh in the next 15 years. Meanwhile, foreign direct investment has been continuously growing, reaching US$2.4 billion in 2017.
A key attraction of Bangladesh as a destination for foreign investment is that it has trade agreements with many countries. It is also a member of the World Trade Organization. Among the signed memberships and agreements are the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area; Pakistan-Bangladesh Free Trade Agreement; Trade Preferential System of the Organization of the Islamic Conference; Asia-Pacific Trade Agreement; Preferential Tariff Arrangement - Group of Eight Developing Countries; and the South Asian Free Trade Area.
Furthermore, one of the main trading partners of Bangladesh has been the European Union. Signed in 2001, the EU-Bangladesh Cooperation Agreement provides better conditions for trading by offering duty-free exports.
Importantly, Bangladesh has an increasing number of Internet users. As confirmed by the latest reports by the Bangladesh Telecommunication Regulatory Commission (BTRC), and We Are Social and Hootsuite, there were over 80 million Bangladeshis using the Internet in 2018. That makes up 49 per cent of the total population of Bangladesh. Among countries with the highest Internet penetration percentage in South Asia, Bangladesh ranked third next to Maldives and Nepal.
In fact, Bangladesh's Internet penetration has surpassed the average of 36 per cent for South Asia and it is close to the world's average of 53 per cent. Thus, Bangladeshis are now gaining more access to the Internet, providing excellent opportunities for online businesses such as banking services and e-commerce to thrive in the country.