LETTER OF TRANSMITTAL

21st March, 2019

To,

Ms. Tanbina Tabassum

Assistant Professor
Department of Finance
Faculty of Business Administration,
Premier University, Chattogram.

Subject: Submission of Term Paper.

Dear Madam,

I am glad to submit this term paper on the study of the “Foreign Direct
Investment in Bangladesh”. The term paper deals with several important aspects
on Foreign Direct Investment in Bangladesh. In this term paper I have tried to
analyze the foreign ownership in Bangladesh.

Thank you for your sincere co-operation throughout the duration of the study.

I would once again like to express my sense of gratitude towards you for giving
me this opportunity, and sincerely hope that my term paper would give you
immense satisfaction. I will always be available to respond to any queries that
you may have in this regard.

Sincerely,

Rafy Al Nawaz Sharif

ID: 1403010107443
Sec: A, Batch: 30th
Department: Finance

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 LETTER OF ACCEPTANCE

The Term Paper titled “Foreign Direct Investment in Bangladesh” has been
submitted to the Department of Finance, in partial fulfillment of the
requirements for the degree of Bachelor of Business Administration, Faculty of
Business Studies on 21st March, by Rafy Al Nawaz Sharif, Id # 1403010107443.
The report has been accepted and may be presented for evaluation.

(Any opinions, suggestions made in this term paper are entirely that of the
author of the term paper. The University does not condone nor reject any of
these opinions or suggestions).

_________________________________

“Assistant Professor Ms. Tanbina Tabassum”

Term Paper Supervisor

Department of Finance

Faculty of Business Administration,

Premier University, Chattogram.

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 ACKNOWLEDGMENT

It is great privilege to express gratitude to the Almighty Allah to give me the

great opportunity to complete this term paper and to conduct this study under
the supervision of Assistant Professor Ms. Tanbina Tabassum, Department of
Finance, Premier University. I offer my sincerest gratitude to my supervisor
who has supported me throughout my term paper with her patience and
knowledge whilst allowing me the room to work in my own way. I attribute the
level of my Bachelor‟s degree to her encouragement and effort and without her
this term paper, too, would not have been completed or written. One simply
could not wish for a better or friendlier supervisor.

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 EXECUTIVE SUMMARY

In Bangladesh, FDI acts as key elements for economic growth in last two
decades. Most of the industrial infrastructure, human skill development, large
capacity of production of Bangladesh are based on Foreign Direct Investment
(FDI). Foreign Direct Investment (FDI) also improves the technological
knowledge and managerial abilities and helping to integrate domestic economy
to global economy .Bangladesh has many comparative advances to attract the
Foreign Direct Investment (FDI) such as the availability to get skilled
manpower and relatively stable macroeconomic environment.

At the same time Bangladesh has many disadvantages in Foreign Direct

Investment (FDI).but if the Bangladesh Government takes stapes, it would be a
relatively better place for Foreign Direct Investment (FDI). Foreign Direct
Investment (FDI) is an important way to achieve industrial development and
growth .This study analyzes the Foreign Direct Investment (FDI) in Bangladesh,
prospects and challenges and its impacts on the economy.

As a developing country, Bangladesh needs more Foreign Direct Investment

(FDI) for its industrial, social and economic development. To accelerate the
development in this sectors the Government of Bangladesh trying to create
more favorable environment for Foreign Direct Investment (FDI).for this the
government has taken some stapes such as making favorable industrial policies,
economic policies ,attracting foreign investors, reducing bureaucratic
complexity and so on.

Foreign Direct Investment (FDI) is a major economic tool that helps industrial
development as well as the GDP growth, infrastructure and socio cultural
development of the host country. It creates new opportunities for employments,
high per capital income and more productivity that enhances the growth rate of
the host country.

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 TABLE OF CONTENT

Chapter Contents Page No

Chapter 1: Introductory Background 02

Aspects

Objectives and Scope of the study 02

Methodology 02

Limitation 03

Chapter 2: Theoretical Foreign Direct Investment 05

Aspects

Types of FDI 05

Necessity of a FDI for a country 08

Foreign Investment Opportunity 09

Significance of foreign investments in 09

Bangladesh

Factors affecting FDI 09

FDI in Bangladesh 11

History of FDI in Bangladesh 12

Inflow of FDI in Bangladesh 12

Facilities provided for GDI in 19

Bangladesh

Administration of FDI in Bangladesh 25

Function of BIDA for FDI 25

Road map to investment in 28

Bangladesh

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 Problems faced by FDI investors in 29
Bangladesh

Challenges to Attract FDI in 30

Bangladesh

Prospects of FDI in Bangladesh 33

Chapter 3: Practical Grameenphone: At a glance 36

Aspects

Vision and Mission 36

Objectives 37

Activities and Functions 37

Findings 40

SWOT Analysis 41

Chapter 4: Recommendation 46
Conclusionary Aspects

Conclusion 47

Chapter 5: Ending Bibliography 49

Matters

References 50

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Chapter 01
Introductory Aspects

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1.1 Background

FDI is an investment made by a company or individual of one country in business interests

located in another country. Generally, foreign investment is a sine qua non for changing the
fate of a country, while FDI directly contributes to economic wellbeing of a country. Foreign
investment carries enormous significance in a developing country like Bangladesh. Over the
years, FDI received by Bangladesh has been worth around 1 per cent of its GDP. This has
been one of the major factors responsible for a near stationary growth rate of around 6 per
cent during the last few years.
With the progression of time Bangladesh change its administrative structure as to the FDI to
open up the new road and to remove the compliances identified with the FDI. In any case, the
exertion of this basic advancement has back warded by sudden and startling political impact
and changes. Before going for inside and out investigation the stream of FDI in Bangladesh
we have the benefit to view the local and overall stream of FDI in the ongoing time frame.

1.2 Objectives and scope of the study

Objectives

The main objective of the study is to show the overall scenario of FDI in Bangladesh.
However the study covers the following supportive objects:

 To know about FDI.

 To show the condition of FDI in Bangladesh.
 To figure out some problem, and give some recommendations.
 To gain knowledge practically through analysis of the year to year about FDI.

Scope of the study

To complete the report, we have studied different articles, newspapers, BB website to know
about FDI, FDI in Bangladesh and its trend over the years.

1.3 Methodology
In order to make the report more meaningful and presentable, only secondary sources of data
and information has been used, as we can‟t find out any primary sources.

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Secondary data Source:
Secondary data are collecting from various papers supplements like

☞ Bangladesh Investment Development Authority (BIDA),

☞ Bangladesh Bank & Bangladesh Burro of Statistics.

☞ Bangladesh Export Processing Zone, etc.

☞ The Financial Express,

☞ The Daily Star, etc. newspapers,

☞ Internet.

☞ Books are studied.

1.4 Limitations

In spite of the fact that we endeavored to discover and set the causes that decide the state of
the stream of FDI, we trust we are not at the best pinnacle. We have relied extensively on
published data and other secondary sources to precede the report. But some of those sources
were not approachable and we lacked from data of that sources. In analyzing the report we
have presented some factors that determine the shape of the flow of FDI. But these are not
surely the only factors and many important factors may be omitted from the analysis. And
another thing is that the underlying factors are mostly in qualitative factors in nature and
therefore cannot be measured in numerical way. The consequences are that we failed to
provide absolute guideline about restructuring policy and some other decisions. The finding
of the report is based on some assumed scenario and changes on those scenarios may reshape
the future flow of FDI. That is the analysis is situation and time based. The biggest problem
we faced in the reporting period is the paradoxical data set. We have three sets of data in
regard to the FDI, but all that provides us contradictory result. Board of Investment does not
confirm what the Bangladesh bank published and vice versa. Then again the account of FDI
information is just about another idea in our nation. Accordingly we present the FDI
information which we trust more exact in best of our insight for the related periods.

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Chapter 02
Theoretical Aspects

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2.1 Foreign Direct Investment

Foreign direct investment is an investment in a business by an investor from another country

for which the foreign investor has control over the company purchased. It is also defined as
cross border investment made by a resident in one economy in an enterprise in another
company. FDI is direct investment into production in a country by a company located in
another country, either by buying a company in the target country or by expanding operations
of an existing business in that country. Corporations that widely engage in FDI are called
multinational companies, multinational enterprises, or transnational corporations FDI
generally infers fare of genuine capital from home to the host country, however
notwithstanding when monetary venture results from FDI, capital may not be exchanged
from the home country to the host one. Or maybe, worldwide partnership may procure/use
genuine capital from neighborhood (or a third-country) sources remote capital" implies
capital put resources into Bangladesh in any mechanical endeavor by a resident of any
outside nation or by an organization consolidated outside Bangladesh. As remote trade,
imported hardware and gear, or in such other frame as the administration may support with
the end goal of such venture; Bangladesh welcomes FDI for modern development,
specifically inviting foundation of assembling firms and administration segment undertakings
that would move their items inside the nation and furthermore send out outside it.

2.2 Types of FDI

FDI can be divided among four major categories.

 By Direction
 By Motive
 By Target
 By Entry Modes

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 BY
BY
DIRECTION
MOTIVE

BY
BY
ENTRY
TARGET
MODES

These major categories are can be described thorugh some sub categories, these are described
below:

 BY TARGET

 Horizontal FDI
Where the company carries out the same activities abroad as at home (for example
Toyota assembling cars in both Japan and UK)

 Vertical FDI
A vertical investment is one in which different but related business activities from
the investor's main business are established or acquired in a foreign country, such as
when a manufacturing company acquires an interest in a foreign company that
supplies parts or raw materials required for the manufacturing company to make its
products.

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 BY MOTIVE

 Resource seeking
Looking for resources at a lower real cost.
 Market seeking
Secure market share and sales growth in target foreign market.
 Efficiency seeking
Seeks to establish efficient structure through useful factors, cultures, policies or
markets.
 Strategic asset seeking
Seeks to acquire assets in foreign farms that promote corporate long term objectives.

 BY DIRECTION

 Inward FDI
An inward investment involves a foreign entity either investing in or purchasing the
goods of a local company.
 Outward FDI
An outward investment is a business strategy where a domestic firm expands its
operations to a foreign country either via acquisition or expansion of an existing
foreign facility.

 BY ENTRY MODES

 Greenfield Investment

Greenfield investment is the investment in a manufacturing,office,etc. and it is the

idea of building a facility on a green fieldsuch as farmland or a forest.
 Mergersand Acquisions

A merger is a combination of two companies to form a new company, while an

acquisition is the purchase of one company by another company in which a new
company is formed.

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2.2 Necessity of FDI for a Country
The world has seen a marvelous rush of worldwide corporate movement especially amid the
second 50% of the most recent decade. This has been encouraged by advances made in the
data innovation. This pattern, fortified with the bearing toward fringe less-

Economies, is drawing increasingly TNCs (Trans National Company) into the worldwide
task. FDI is not any more just a key choice of companies; it additionally assumes a key job in
the national monetary advancement systems. Different nations are endeavoring to pull in
outside financial specialists through an assortment of measures, i.e. advancement of
speculation condition, financial changes and a bundle of impetus offers. FDI can change a
nation's monetary situation inside most limited conceivable time. It isn't simply access to
subsidize, yet additionally give exchange of specialized know how and the executive‟s
aptitude. It is likewise a settling factor in any economy, on the grounds that once TNCs have
made a benefit based direct venture, they can't just haul out medium-term like on account of
portfolio investment . Normally the benefits accruable from FDI are inclusive of-

 Transfer of technology to individual firms and technological spill-over to the wider

economy.
 Increased productive efficiency due to competition from multinational subsidiaries.
 Improvement in the quality of the factors of production including management in
other firms, not just the host firm.
 Benefits to the balance of payments through inflow of investment funds.
 Increase in exports.
 Increase in savings and investment.
 Faster growth and employment.
 Improve foreign exchange position of the country.
 Employment generation and increase in production.
 Help in capital formation by bringing fresh capital.

Thus, foreign direct investment is viewed as a major stimulus to economic growth in

developing countries. Its ability to deal with two major obstacles, namely, shortages of
financial resources and technology and skills, has made it the center of attention for policy-
makers in low-income countries in particular.

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2.3 Foreign Investment Opportunity

Private investment from overseas sources is welcome in all areas of the economy with the
exemption of five industrial sectors (arms, production of nuclear energy, forest plantation and
mechanized extraction within the bounds of reserved forests security printing and minting, air
transportation and railways) reserved for public sector. Such investments can be made either
indecently or through joint venture on mutually beneficial terms and conditions .In other
words, 100% foreign direct investment as well as joint venture both with local private
sponsor and with public sector is allowed. Foreign Investment however is specially desired in
the following categories.

1. Export-oriented industries,

2. Industries in the export processing zones,

3. High technology products that will be either import-substitute or export-oriented,

4. Undertaking in which more diversified use of indigenous natural resources is

possible.
5. Basic industries based mainly only on local raw materials,

2.4 Significance of foreign investment in Bangladesh

Foreign investment carries enormous significance in a developing country like Bangladesh.

Realizing the importance of foreign investment Bangladesh formulated its first industrial
investment policy in1973,revised it again in1974,1975 and in 1978.Foreign private
investment (promotion and protection)act,1980 and the Bangladesh Export processing zones
authority act 1980 were enacted. To make the foreign investment more attractive new
industrial policy was announced in 1982.However, the industry policy 1999 is by far the most
comparative document. Bangladesh has ever made for investment including foreign
investment.

2.5 Factors Affecting Foreign Direct Investment

Because Foreign Direct Investment can significantly affect a country‟s economy, the most
influential factors are:
 Inflation
 National income
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 Government restriction
 Exchange rates

Impact of Inflation
If a country‟s inflation rate increases relative to the countries with which it invests, its
capital account would be expected to decrease, other things being equal. Consumer
and corporations in that country will most likely purchase more goods or invest more
in overseas (due to high local inflation), while the country‟s exports to other countries
& flow of investment from foreign will decline.

Impact of the National Income

If a country‟s income level (national income) increases by a higher percentage than
those of other countries, its capital account is expected to decrease, other things being
equal. As the real income level (adjusted for inflation) raises does consumption of
goods. A percentage of that increase in consumption will most likely reflect an
increased demand for foreign investment.

Impact of Government Restrictions

A country‟s Government can prevent or discourage investment from other countries.
By imposing such restrictions, the Government disrupts investment flows. Among the
most commonly used investment restriction are bureaucratic tangles, projection of
intellectual property right and f\fiscal policy changes. In addition to these, a
Government can reduce its country‟s investment by enforcing laws, or a maximum
limit that can be invested.

Impact of Exchange Rates

Each country‟s currency is valued in terms of other currencies through the use of
exchanges rates, so that currencies can be exchanged to facilitate international
transaction. The values of most currencies can fluctuate over time because of market
and government forces. If a country‟s currency begins to rise in value against other
currencies, its capital account balance should decrease, other things being equal. As
the currency strengthens, Investment by that country will become more expensive
than the receiving countries.

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2.6 Foreign Direct Investment (FDI) in Bangladesh

Bangladesh is one of the N11 Countries. It is considered as a land of opportunities because it

is growing 6%-7% annual growth rate during last one and half decade without any major
governmental incubation. Bangladesh has a very strong resilience power to progress with so
many barriers and disasters. The foreign direct investment (FDI) is considered as one of the
major sources of employment generation, technology transfer, and managerial capacity
building, and increasing market efficiency in any country. FDI is very important for
companies. This is because global competition among the multinationals is rising
tremendously. Factors of production e.g. land, labor, capital are becoming costlier in the
developed world. As a result producing economy product by maintaining satisfactory quality
is a major threat to the TNCs & MNCs. Without a standard product in competitive price a
company may not remain competitive around the world. For this reason global investors are
searching for a more competitive location where factors of production are available at a
competitive rate and market access of the products could be ensured. Relocation of the labor
intensive industries towards the developing countries is the result of this tension of global
investors. On the other hand; export earnings, remittance and the foreign direct investment
(FDI) are three major sources of revenue of a least developed country. Therefore
governments are offering special packages to the foreign investors for attracting FDI.
Developing countries are somehow in an advantageous position to attract FDI. Adequate
manpower supply, large local market and special packages from the government side remain
them in the field. Bangladesh is such a developing country with absolute advantage to attract
FDI. Bangladesh received highest Foreign Direct Investment (FDI) from the United Kingdom (UK)
in the past year.
Statistics released by Bangladesh Bank (BB) last month showed that net inflow of FDI from
the UK stood at $ 312.98 million in 2017, which was $330.32 million in 2016.
As a result, the FDI from the UK decreased by 5.25 per cent during the period under review.
Gross inflow of FDI from the same country, however, stood at $329.17 million in 2017,
which was $342.28 million in the previous year.
Maximum amount of the UK FDI went to the banking sector in the past year, which the BB
data also showed is $137.14 million followed by $42 million in textile and weaving
sector.Provisional data of the Bangladesh Bank (BB) on the annual balance of payments (BoP)
showed that the gross inflow of FDI declined by 7.90 per cent to US$ 2.79 billion in FY 2017-18 from
$3.03 billion in FY 2016-17.

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According to the BoP data, the net inflow of FDI also slipped to $1.58 billion in the past
fiscal year from $1.65 billion in FY '17. Thus the rate of decline in the net FDI stood at 4.23
per cent.
It is to be noted that the net FDI data, as presented in the BoP table, do not denote the actual
net inflow, but it is a primary estimation. The country last experienced a decline in FDI in FY
'14, when the net inflow of FDI declined by 14.45 per cent to $1.48 billion from $1.73 billion
in FY '13.The decline in FDI in the past fiscal year also went against the ambitious projection
made in the Seventh Five Year Plan (7FYP) of the country. For FY '18, the 7FYP projected
an FDI inflow worth $ 5.87 billion. But the gross inflow of FDI stood at $ 2.79 billion. Thus
the difference between the projection and the actual inflow hovered over $ 3.0 billion. In FY
'17, the actual inflow of FDI also stood well behind the projection of $ 4.31 billion.

2.7 History of FDI in BD

During the liberation war in 1971 a nationalist weave emerged which gives Bangladeshis a
spirit of freedom and dignity of independence but it also results on more reserved position in
case of economic policy. Policy makers at that period used to see foreign companies access
with a negative eyes. Foreign investments were discouraged as a result foreign direct
investment (FDI) inflow in Bangladesh till 1980 is very insignificant. The growth of
Bangladesh‟s FDI inflow was around US$ 308 – 356 million for long fifteen years (1980 –
1995) which started with an amount of US $ 0.090 million in 1972. Afterwards this concept
has been changed into a reverse position and government start encouraging foreign direct
investment from 1990sIn order to accelerate economic growth, Bangladesh opened her
economy in the late1980s to reap the benefits of FDI. In 1989 the government set up Board of
Investment (BOI).The primary objective of which is aimed at attracting and facilitating
investment from abroad. The government also lifted restrictions on capital and profit
repatriation gradually and opened up almost all industrial sectors for foreigners to invest
either independently or jointly with the local partners.

2.8 Inflow of Foreign Direct Investment (FDI) in Bangladesh

2.8.1 FDI inflow by Component

Net FDI Inflows by components in Bangladesh can be divided into 3 parts-

Equity capital: When an investor purchases shares of a company in another country.

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 Reinvested earnings: When an investor makes profit and doesn‟t give dividend or
send them back to his home country, rather he reinvests it in the host country.
Intra-company loans: When the parent company provides loan to its subsidiaries
abroad.

FY Year Equity Reinvested Intra-company Total(US$)

2006-2007 Capital
464.5 earnings
281 Loans
47.24 Million)
792.74
2007-2008 545.69 197.71 25.29 768.69
2007
2008-2009 535.42 336.61 88.56 960.59
2009-2010 515.14 331.1 66.78 913.02
2010-2011 249.95 445.19 83.9 779.04
2011-2012 454.1 542.35 198.43 1194.88
2012-2013 761.03 645.64 323.96 1730.63
2013-2014 233.84 795.78 450.72 1480.34
2014-2015 528.03 1141.34 164.5 1833.87
2015-2016 505.55 1154.45 343.53 2003.53
2016-2017 1006.74 1253 195.07 2454.81
2017-2018 614.76 1253.44 712.24 2580.44

Source: Bangladesh Bank, Statistics Department, Survey Report 2017 & 2018

From the table above we can see that, total FDI inflows have increased in a steady way over
the years except there was a major downfall in 2011 and 2014. In both 2011 and 2014, total
FDI have decreased even though reinvested earnings and intra-company loans have increased
from previous year. So we can clearly understand that in both those years equity capital was
the main reason behind that downfall. When we look at the table we can find that in 2011
equity capital reduced by $133.98 million and in 2014, it reduced by $250.29 million, in
2017-2018 it is also decreased its impact fall in the index. We all know that in 2011 the
Bangladesh stock market (DSE, CSE) have faced a major crash due to asset bubbles. The
stock price was way overvalued. Price of most of the shares inflated about 400% to 700%
comparing to the face value. Again, the downfall in 2013-14 fiscal years can be understood
by the fact that the current government came to power once again in that year. And since that
was an election year, there were a lot of negative things happening in the country and as well
as in the stock market too, therefore investment in the share market was lower than previous

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years. Inward FDI into Bangladesh tripled since FY2010-11. Starting from $792 million in
FY2006-07, it has reached $2580.44 million in the FY2016-17. The salient feature of this
growth is the presence of large portion of reinvested earnings in the FDI inflow. This is
suggestive of confidence of the existing investors in the country‟s performance. This
confidence is expected to result in the growth of first time overseas investors.

The graph shows us that reinvested earnings has never had a downward trend, it was always
increasing. Intra-company loans were increasing up until 2014, but after that it had both
increasing and decreasing trend. Equity capital had the most variations over the years. It was
the main reason FDI had fallen in 2011 and 2014.

2.8.2 Net FDI Inflows by Areas

Net FDI Inflows by areas in Bangladesh can be divided into 2 parts-

EPZ: Export processing zones are areas typically built in a developing country
that provides several incentives and barrier free environment in order to attract
foreign direct investment that mainly focuses on export oriented production. At
present Bangladesh has 8 EPZs naming Chittagong, Dhaka, Karnaphuli, Adamjee,
Comilla, Ishwardi, Mongla, and Uttara EPZ.

Non-EPZ: Areas other than Export Processing Zones.

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 Year EPZ Non-EPZ Total (USD Million)
2006-2007 110.78 681.96 792.74
2007-2008 88.14 680.55 768.69
2008-2009 129.34 831.25 960.59
2009-2010 151.11 761.91 913.02
2010-2011 181.45 597.59 779.04
2011-2012 185.26 1009.62 1194.88
2012-2013 369.75 1360.88 1730.63
2013-2014 406.34 1074 1480.34
2014-2015 363.54 1470.33 1833.87
2015-2016 427.64 1575.89 2003.53
2016-2017 383.46 2071.35 2454.81
2017-2018 450.41 2130.03 2580.44

Source: Bangladesh Bank, Statistics Department, Survey Report 2017 & 2018

From the table we can see that FDI inflows by the Export Processing Zones (EPZ) area have
gradually increased over the years. Bangladesh established export processing zones (EPZs)
with infrastructure facilities and logistical support for both local and foreign investors.
Bangladesh has now been actively promoting the economic zones (EZ) regime, responding to
the need for serviced industrial land and infrastructural facilities to the investors. Therefore,
the ups and downs in the FDI can be explained by the ups and downs in non-EPZ area. In
2014, even though total FDI inflows have reduced to $1480.34 million from $1730.63
million, FDI from EPZ area have increased in that year.

From graph it can be seen that total FDI is increasing both in EPZ and Non-EPZ sector.

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2.8.3 Net FDI Inflows by Sectors

Sectors 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016
07 08 09 10 11 12 13 14 15 16 -17
Agriculture & 43.2
4.57 3.65 19.14 10.95 11.53 49.5 29.72 28.99 29.22 36.57
Fishing 6
Mining & -- -- -- -- -- -- 0.13 -- --- 0.27 -
Quarrying 0.01
Power, Gas & 467.
229.93 157.92 46.89 73.66 127.19 244.94 93.67 50.43 279.98 430.16
Petroleum 93
Power 24.95 25.1 23.4 36.79 52.59 64.2 71.32 47.72 80.44 207.84 334.
26
Gas & Petroleum 204.9 132.8 23.49 36.87 74.6 180.77 22.35 2.71 199.54 222.32 133.
67
Manufacturing 147.46 128.92 183.96 233.74 330.25 414.98 712.88 757.47 539.28 825.85 869.
43
Food Products 7.2 11.27 20.6 22.1 17.16 35.51 61.88 58.46 96.59 108.24 96.4
3
Textiles & Wearing 105.4 93.42 130.35 157.94 225.1 241.39 412.43 445.82 351.62 396.05 360.
35
Pharmaceuticals & 35.9
5.5 4.67 8.24 8.05 8.98 14.09 30.39 47.92 25.71 37.02
Chemicals 7
Metal & Machinery 0.02 0.03 0.02 1.84 4.9 11.73 14.42 14.81 11.43 2.8 0.05

Vehicle & Transport 0.6 0.24 0.1 0.77 0.35 1.52 17.81 4.71 10.12 2.93 2.81

Fertilizer 8.87 7.14 6.06 3.97 4.63 17.2 18.67 9.74 38.7 13.18 8.7

Cement 5.55 4.47 7.9 12.51 3.77 59.62 32.4 38.26 26.75 38.68 35.1
6
Leather & Leather 23.3
0.88 0.91 1.65 8.75 12.92 8.29 28.01 36.23 36.79 16.35
Products 8
Mfg (Others) 13.4 6.77 9.04 17.81 52.37 25.63 96.87 101.52 139.83 210.6 306.
58
Construction -- 0.68 0.19 0.36 1.01 6.85 4.08 6.14 4.21 24.3
2
Trade & Commerce 103.84 171.26 122.53 128.8 234.82 272.75 295.05 276.86 436.88 320.93 309.
73
Trading 0.71 0.04 0.03 0.04 3.8 5.26 12.28 42.88 83.36 42.53 109.
17
Banking 91.83 156.8 110.2 111.56 208.78 253.44 268.53 225.53 389.58 254.2 155.
58
Insurance 6.37 7.3 4.63 11.27 15.81 4.27 7.09 -16.01 28.39 42.5
8
NBFI 4.93 7.12 7.67 5.93 6.43 9.78 7.15 8.45 11.09 -4.19 2.4
Transport, Storage 601.
305.1 299.9 579.62 445.99 54.5 179.04 527.09 272.54 183.2 273.61
& Communication 28
Telecommunication 304.7 299.9 579.62 445.82 52.41 178.9 525.29 267.09 197.22 267.12 593.
89

Source: Bangladesh Bank, Statistics Department, Survey Report 2017

A sectorial analysis for FY2016-17 FDI indicates domination of manufacturing, led by

textiles and wearing, as the major FDI sector. Historically, telecommunication, energy and
power had been the major source of FDI. However, the rise of manufacturing is good news
for Bangladesh as the country is promoting an export and job-led growth strategy.
Manufacturing sectors creates maximum number of jobs and enables higher value addition to
increase productivity and linkages in the vertical segments. Besides, the other sectors play
catalytic role in creating both direct and indirect job opportunities. While the net FDI flows
into Bangladesh have been increasing in absolute terms over the past decade, the stock of FDI

16 | P a g e
has also been growing considerably. While the net FDI inflow during the last few years was
largely contributed by telecom, energy and power, the end June 2017 FDI stock indicates that
the FDI stock of manufacturing ($5,140 million) overtaken the power & energy ($4,495
million) and telecommunication ($1,254 million).

2.8.4 Net FDI Inflows by Countries

Here, the countries are chosen based on their contribution to our total FDI inflows and their
power to influence it. The following countries have the largest contribution to our economy
and FDI. The following amounts are in US$ million.

Year 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-

07 08 09 10 11 12 13 14 15 16 17
Canada 3.22 0.11 0.41 0.27 2.49 6.44 44.3 6.37 -1.47 3.5
-0.01

China 0.92 3.47 2.54 5.17 18.57 14.35 26.01 41.82 49.84 52.37
68.58

Egypt 123.47 132.32 309.7 2 37.3 146.86 138.14 54.17 0.21 0.19
-0.04
France - 0.37 4.84 2.25 2.46 9.61 12.89 11.61 8.93 10.97
14.64
German 6.18 6.23 5.6 5.75 2.64 4.45 17.05 28.63 18.94 17.42
24.84
y
Hong- 62.49 41.65 47.55 72.95 93.58 68.07 86.34 102.39 93.4 126.9 111.7
Kong
India 2.51 8.67 5.67 38.95 20.71 27.88 42.09 56.89 82.79 88 95.41
Japan 28.79 26.69 58.53 22.03 35.05 31.36 99.04 64.9 77.74 34.61 44.47
Malaysi 45.73 1.51 79.15 40.17 2 7.72 337.97 55.88 40.43 112.8 46.15
a 18.21 22.09 39.93 48.75 71.41 119.7 84.96 130.35 97.77 5
78.67
Netherla 90.04
nds
Norway 77.35 6.74 62.37 55.89 - 24.31 8.56 57.59 107.2 113.2 187.4
2.25 14.22 22.96 13.14 24.59 63.19 27.37 39.3 7
120.7 5
19.22 1
Pakistan 13.39
0.49 2.29 3.25 7.42 7.97 26.36 7.07 21.17 5
36.86 26.67
Saudi
Arabia -4.87
Singapor 11.78 37.32 14.75 311.9 22.77 15.59 103.59 177.99 135.1 132.3 701.4
e 30.06 36.58 40.97 46.75 73.84 104.98 124.94 139.81 7
131.3 4
138.4
South
Korea 9 9 178.5
U.A.E. 62.02 134.3 70.29 33.29 22 7.34 50.48 11.78 6.78 12.16 17.68
U.K. 123.7 149.8 105.6 66.5 144.64 128.19 159.49 145.89 273.5 330.3 313.8
161.5 54.48 36.24 34.79 94.18 95.07 71.07 33.98 5
224.6 2
449.7 7
U.S.A. 208.7
4 1

Source: Bangladesh Bank, Statistics Department, Survey Report 2017

17 | P a g e
Source: Foreign Investment & External Debt (FIED) Cell, Statistics Department, Bangladesh Bank

From the table we can see that, Bangladesh received highest Foreign Direct Investment
(FDI) from the United Kingdom (UK) in the past year. Statistics released by Bangladesh
Bank (BB) last month showed that net inflow of FDI from the UK stood at $ 313.87million
in 2017, which was $330.32 million in 2016.As a result, the FDI from the UK decreased by
5.25 per cent during the period under review. Gross inflow of FDI from the same country,
however, stood at $329.17 million in 2017, which was $342.28 million in the previous year.
Maximum amount of the UK FDI went to the banking sector in the past year, which the BB
data also showed is $137.14 million followed by $42 million in textile and weaving sector.
But we can also see that it has begun to rise after that. Singapore had an unusual investment
during that year. Last year, Singapore made an investment of over $700 million in
Bangladesh which was 28.57% of the total FDI inflows. South Korea‟s contribution has
gradually increased over the years. In the second quarter of 2018 gross inflows of FDI was
highest from China.

18 | P a g e
2.9 Facilities provide for FDI investor in BD:

Bangladesh is one of the promising economies with a large domestic market, availability of
labor with competitive price, low utility charges, two Seaports and a potential Deep Seaport
facility, long-term tax holiday, 100% repatriation facility, and easy access to largest regional
market like India and China. 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.

2.9.1 Facilities and Incentives for a foreign investor

In order to encourage the inflows of FDI the government of Bangladesh offers one of the
most liberal investment policies and attractive packages of fiscal, financial and other
incentives to foreign entrepreneurs in South Asia. Major incentives to stimulate private sector
direct investment are listed below:

Tax exemptions

Generally five to seven years' tax exemptions are available for many business
investments. However, for electric power generation tax exemptions are provided for
up to 15 years

Duty
No import duty is applicable for export oriented industry. For other industries it is 5%
ad valorem.

Income tax
Double taxation can be avoided in most cases as the country (Bangladesh) benefits
from many bilateral investment agreements. Exemptions of income tax up to three

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years for the expatriate employees in industries are specified in the relevant schedules
of the income tax ordinance.

Remittances

Facilities for full repatriation of invested capital, profits and dividends are the norm in
most situations

Exit
An investor can wind up an investment either through a decision of an annual or
extraordinary general meeting. Once a foreign investor completes the formalities to
exit the country, he or she can repatriate the net proceeds after securing proper
authorization from the central bank (Bangladesh Bank).

Ownership

Foreign investors can set up ventures, either wholly owned or in joint collaboration,
with local partners.

Investing in the stock market

Foreign investors are allowed to participate in initial primary offerings (IPOs) without
any regulatory restrictions. Also, incomes from dividends are tax-exempt for investors

100% export oriented industries

No import duty is charged in case of capital machinery and spares listed in NBR's*
relevant notification. However, import duty at 7.5% is secured in the form of a bank
guarantee or an indemnity bond to be returned after installation of the machinery.

Other Facilities

 Industries are eligible for tax holidays for the following periods according to the
location of the establishment.

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 The period of tax holiday is calculated from the month of commencement of
commercial production or operation of the industrial undertaking. The eligibility
of a tax holiday is to be determined by the National Board of Revenue (NBR).
 The tax holiday facility is applicable to industries set up in Bangladesh before
June 30, 2012.
 Accelerated depreciation in lieu of a tax holiday is allowed at the rate of 80% of
actual cost of machinery or plant for the year in which the unit starts commercial
production and 20% for the following years. The rate of depreciation is 100% for
years specified by the NBR.
 Concessionary duty as per SRO* is allowed on the import of capital machinery
and spare parts for setting up export-oriented industries or BMRE of existing
industries. For 100% export-oriented industries no import duty is payable.
 Facilities such as special bonded warehouse against back-to-back letters of credit
or notional import duty and non-payment of Value Added Tax (VAT) facilities are
available as per SRO of the government.
 System for duty drawback is being simplified and concise. The exporter will be
able to get back the duty draw-back directly from the concerned commercial bank.
 Bank loans, of up to 90% if the value against irrevocable and confirmed letters of
credit/sales agreement are available.
 For granting export performance benefits, the list of export products and the rate
of export performance benefit (XPB) are reviewed from time to time.
 With the intention of encouraging backward linkages, export-oriented industries
including export-oriented ready-made garment industries using indigenous raw
materials instead of imported materials, are given additional facilities and benefits
at prescribed rates. Similar incentives are extended to the suppliers of raw
materials to export-oriented industries.
 Export-oriented industries are allocated foreign exchange for publicity campaigns
and for opening offices abroad.
 Entire export earnings from handicrafts and cottage industries are exempted from
income tax. In case of other industries, proportional income tax rebates on export
earnings is given between 30% and 100%. Industries which export 100% of their
products are given tax exemption up to 100%.
 Exemption of tax on income from industrial undertakings set up in an export
processing zone for ten years from the date of commercial production.
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 Tax exemption on capital gains from the transfer of shares of public limited
companies listed with a stock exchange.
 For foreign direct investment, there is no limitation pertaining to foreign equity
participation, i.e. 100 percent foreign equity is allowed
 Non-resident institutional or individual investors can make portfolio investments
in stock exchanges in Bangladesh.
 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 with respect to tax holiday, payment of royalty, technical know-how
fees etc.
 The process of issuing work permits to foreign experts on the recommendation of
investing 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.
 Citizenship by investing a minimum of US $ 500,000 or by transferring US$
1,000,000 to any recognized financial institution. Permanent resident ship by
investing a minimum of US$ 75,000.
 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.
 Depreciation allowances
 Accelerated depreciation for new industries is available at the rate of 50%, 30%
and 20% for the first, second and third years respectively, on the cost of plant and
machinery.
 Industries exporting over 80% goods or any other services qualify for duty free
import of machinery and spares and bonded warehousing.
 90% loans against letters of credit and funds for export promotion.
 Export credit guarantee scheme.

22 | P a g e
  Domestic market sales of up to 20% is allowed to export oriented business located
outside an Export Processing Zones (EPZs) on payment of relevant duties.
 Cash incentives and export subsidies are granted on the Free On Board (FOB)
value of selected exports ranging from 5% to 20% on selected product.

Tax holidays

o In Dhaka & Chittagong Divisions: 100% in first two years: 50% for the next
two years and 25% in the year five.

o For the rest of Bangladesh: 100% for first three years, 50% for next three
years, and 25% for year seven.

2.9.2 Factors that attract FDI in BD

 2nd largest RMG producers and leading to become 1st within 2019

 57% of the population is under the age of 25

 Privileged market access to EU, Japan, China India with duty free quota free access of
around 3 billion people in the region and 160 million in the country.

 Becoming major player in pharmaceutical sector with 20% growth and exporting to
100 countries and exemption of patent requirements till 2032

 An API (Active pharmaceutical industry) industry is underway

 66 among 100 private and public economic zones are underway comprising 77000
acres of fully serviced land

 Unbroken 6% economic growth for a decade

 Most competitive cost base for production in South Asia

 Almost all sectors are open for investment

 No capping on amount or percentage of investment

 Repatriation of profit or equity is most hassle free

23 | P a g e
 World class One stop service is going to be in place

 Investment related services are mostly online

 Fast integrating in the global value chain

 There is a tremendous opportunity for the growth of private equity and other new
forms of capital funding for private enterprise.

 Bangladesh has no records of defaults in its bilateral and multilateral donors and debt-
service liabilities.

 For the last 42 years of independence, Bangladesh has never experienced negative
growth.

 Investment Protection Agreement and Avoidance of Double Taxation Agreement are

in force with most of the countries.

 Lower production costs in terms of semi-skilled and skilled work force.

 .English is widely understood and spoken.

 Remittance of royalty, technical know-how and technical assistance fees.

 Repatriation facilities of dividend and capital at exit.

 Macroeconomic stability;
 Open and diversified economy
 Cheap and efficient labor
 Good transportation and communication networks.
 Strategic location as a gateway to the countries of the Asia-Pacific region; a
legislative framework favorable to business .
 Rate of inflation is a crucial factor in influencing the inflow of foreign investment. A
high rate of inflation signifies economic instability. A low and stable inflation rate
acts as a sign of internal economic stability. This is because it reduces uncertainty and
boosts the confidence of people and businesses for making investment decisions. On
the other hand high inflation rate signifies the inability of the central bank to set
appropriate monetary policies. A high inflation rate also impacts capital preservation

24 | P a g e
 of foreign investment. It affects profitability as higher prices can lead to increased
costs and lower profits. So, stable inflation rate is desirable to attract foreign capital.

2.10 Administration of FDI in BD

Bangladesh Investment Development Authority (BIDA), a merger of Board of Investment

and Privatization Commission promote private sector investment – both local and foreign - in
the country. Established under Bangladesh Investment Development Authority (BIDA) Act
2016, the Bangladesh Investment Development Authority (BIDA) is the principal private
investment promotion and facilitation agency of Bangladesh. The act is created on September
01, 2016.Order to decide whether and how to invest in Bangladesh BIDA provides a
welcoming service to visiting foreign investors. The services include reception at airport,
assistance with hotel bookings, transport arrangements and drawing up an itinerary in
accordance with the needs of the foreign investors visiting Bangladesh.

2.11 Function of BIDA for FDI

 Pre-investment information and counseling service

 Investor welcome service (including a faster immigration service)
 Registration and approval of foreign, joint-venture and local projects
 Registration and approval of branch, liaison and representative offices
 Approving remittances of royalty, technical know-how and technical assistance
fees
 Approving foreign loan suppliers' credit, PAYE scheme etc.
 Assistance in obtaining industrial plots
 Providing necessary facilities and assistance in the establishment of businesses
 Obtaining approval for work permits for foreign nationals
 Facilitating the import of capital machinery and raw materials
 Facilitating utility connections (electricity, gas, water and sewerage, telecoms
etc.)
 Assistance with import clearance and warehousing licenses
 Online Registration System (ORS)
 BIDA Online Service Tracking (BOST)

25 | P a g e
 Industrial Policy ensures equal treatment for local and foreign investment. To
avail of the facilities and services provided by the BIDA for setting up of industries the
procedures mentioned below are to be followed by the entrepreneurs.

 To avail of facilities and the institutional support services provided by the govt.
entrepreneurs/investors are advised to apply for registration to BIDA in a simple
prescribed form.
 On receipt of application in the prescribed form along with copies of (1) TIN
certificate, (2) Trade License, (3) Membership Certificate of relevant trade
association/chamber, (4) Certificate from the nominated bank regarding opening of
account, (5) Incorporation Certificate, in case of limited companies and (6) Letter of
registration with BIDA, necessary field inspection is done to determine annual
production capacity and half yearly/yearly import entitlement of raw & packing
materials.
 The entrepreneur is then advised to deposit IRC fees (on the basis of annual import
entitlement) by Treasury Challan to the Bangladesh Bank/Treasury. On receipt of the
copy of treasury Challan, recommendation is referred to the office of the Chief
Controller of Imports & Exports (CCI&E) for issuance of ad-hoc IRC.
 The entrepreneur will then approach nominated bank for opening Letters of Credit for
import. After starting commercial production the entrepreneur may apply to BIDA for
regularization of the ad-hoc import entitlement. On receipt of application for
regularization of the entitlement, utilization of ad-hoc import entitlement is verified
through field inspection and if found satisfactory BIDA recommends to CCI&E for
regularization. Import entitlement may, however, be fixed on verification of the actual
requirement.
 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 form of BIDA.
 Entrepreneurs requiring industrial plot for setting up of an industry in any industrial
areas/estates apart from BEPZA and BSCIC, may approach BIDA 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 BIDA
provides assistance to get the industrial plot.

26 | P a g e
 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.
 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.

27 | P a g e
2.12 Road Map to Investment in Bangladesh

28 | P a g e
2.13 Problem faced by FDI investors in Bangladesh
Though Bangladesh has most attractive FDI policies in SAARC region and though there is an
evidence of boom of FDI flow in energy sector, the overall scenario of FDI inflow to
Bangladesh is not at all satisfactory. The following factors can be identified as major
obstacles to FDI in Bangladesh.

 Lack of Skilled People

In our country there is lack of professionals. Sector specific trained man power is not
adequate. People are not experience enough. So they not get satisfactory output by
investing here.
 Unreliable Energy Supply
We have limited capacity to supply adequate electricity and gas to industries which is
very important for any manufacturing firm. They always need continuous supply of
such kind of energy. But in our country we cannot assure with this kind of facilities
always. About 47.90% of people are covering under electrification in Bangladesh.
Currently about 7200-7500 MW of electricity is generating in a day. It is not
sufficient to provide electricity supply into newer industries as demanded.
 Corruption
While investing in our country investors get victim to various kind of Corruption.
None of the procedures are totally corruption free in our country. So this creates very
negative impression about investing here.
 Low Labor Productivity
The labor force in Bangladesh is not very efficient. Their production capacity is not
very high. One more important thing is that in our country people are not efficient to
use modern technology which is very important to operate a business
 Unhealthy Trade Union Practices
Trade union is a compulsory part of any organization but they should follow some
rules and regulation. But in our country trade union practices are very unhealthy. The
policies they use are not efficient rather harmful for the investors.
 Less Improved Seaport Facilities
Our seaport facilities are not adequate & there are records of a lot of malpractices at
the port. We have two Sea ports in Bangladesh. But only Chittagong port is active.
But in the question of FDI seaport is one of the most important issues. If the seaport
facilities are not good investors face a lot of problems especially when it is a

29 | P a g e
 manufacturing firm. We are in need of a Deep Sea Port to enhance our international
trade capabilities.
 Unfriendly Legal System
The laws implemented in our country are not friendly. Legal systems are very
complicated and hazardous. So investors face various kinds of problems.
 Non-cooperation From Relevant Government Agencies
The relevant government agencies like, the Board of Investment, Police, National
Board of Revenue, Environment Authority etc. are nor cooperative at all. There is
Lack of administrative coordination among different government bodies. That makes
a lot of harassment to the FDI investors.
 Absence of Technological Infrastructure
Now a day where technology is more advanced businesses are growing fast. But in
our country technological infrastructure is very weak so investors face a lot of trouble
to operate their business here.
 Delay to get services
Because of the administrative complexity and unwillingness of the concerned
authority they do not get support in time from support organizations.

2.14 Challenges to Attract FDI in Bangladesh:

There are some challenges for Bangladesh to attract FDI for those we are still lagging behind:

 Bureaucratic Complexity
Bureaucratic multifaceted nature to get enrolled or authorization is high in our nation.
In Bangladesh, FDI must be enrolled either with the Bangladesh Export Processing
Zone Authority (BEPZA) for putting resources into an EPZ, or with the Board of
Investment (BOI) on account of contributing inside the nation however outside of
EPZ. This enlistment procedure is to empower the financial specialists to benefit
themselves of the vital government arrangement bolster and get affirmation to assuage
the troubles frequently experienced in managing the different open undertakings. Be
that as it may, sadly this system is extremely unpredictable. Once more, cost of
working together is expanding by the informal expense of organization. That is the
reason remote financial specialists are not intrigued to contribute here.

30 | P a g e
 Poorly developed socio-economic and physical infrastructure
Our socio economic and physical Infrastructure is not well developed. Only one
Dhaka-Chittagong Highway is not sufficient to support total import-export trade of
Bangladesh. As a result traffic jam is destroying our valuable time during
international trade through this highway. For this reason foreign investors do not get
attracted to come here.
 Poor Implementation of Policies
In our country we have specific policies but very unfortunately implementation of
those policies is not appropriate. Sometimes there is no implementation; sometimes
the implementation is not proper.
 Frequent change in govt. policies
Our government policies are not stable. They get changed very frequently. Foreign
investors cannot rely on the policies.
 Deteriorating law and order situation and non-transparency
Our law and order situation are not efficient and transparent. Lengthy and
cumbersome judicial process is discouraging foreign investors to enter into
Bangladesh.
 Lack of project specific proposals
There is lack of project specific proposals in hand to attract international investment.
 Political Instability
Our country is politically very much instable and that is very visible to the whole
world. We see Political unrest and blockades frequently. Investors always search for
such countries which are politically stable so we are getting behind to attract foreign
investors.
 Lack of promoting agency
We do not have promoting agencies to attract foreign investors. We have regulators to
provide permissions and operate inspections in industrial establishments but we do
not have a government agency to promote investment in larger scale. The SME
Foundation is working to promote Small and Medium Enterprises but they do not
have mandate to promote foreign investment or large scale local investment.
 Poor imposition of IP law
In Bangladesh imposition of IP (Intellectual Property) law is very weak. We have
limited understanding and institutional capacity to impose IP relevant laws in

31 | P a g e
 Bangladesh. It discourages a high-tech company to enter into Bangladesh. We cannot
give protection to the Intellectual Properties.
 Corruption
Corruption is the biggest problem in our country. Bangladesh is in the 17th position of
corrupted countries. Foreigner investors are not interested to invest in such kind of
corrupted country.

32 | P a g e
2.15 Prospects of FDI in Bangladesh

Bangladesh has been promoting FDI for decades with the most liberal investment policy and incentive
regime in South Asia. The Foreign Private Investment (Promotion and Protection) Act, 1980, ensures
equal treatment for local and foreign Investors. This act also provides legal protection to foreign
investment in Bangladesh against nationalization and expropriation. It also gives the guarantee of
repatriation of capital and dividend.

Bangladesh has achieved a consistent GDP growth of over 5% in the last decade and never
experienced a negative growth. Even Bangladesh sustained growth of over 5% during the recent
global economic crisis. In 2009 Bangladesh achieved a 5.9% GDP growth. Various necessary steps
like generation of huge number of SMEs, success in microcredit and NGO activities, rapid spread of
telecommunications services, record level of foreign remittances, acceleration of export earnings are
taking the economy at a higher level of growth. Its investment friendly climate offers generous and
attractive packages of incentives for foreign investors like 100% ownership, tax and duty exemptions
and others. Actually, Bangladesh has gained a higher ranking than many developing countries in
terms of incentive package. A lot of additional fiscal incentives are offered to export oriented
industries. The government has created Export processing zones (EPZs) to attract private investment.
The government targets foreign investors to invest in EPZ.

The vision is that the unique opportunities in energy and power, infrastructures, manufacturing and
knowledge-based sectors will attract substantial investment. Bangladesh has become a least cost
producer in the world with various positive factors like industrious low-cost workforce, strategic
location, regional connectivity and worldwide access, strong local market and growth, low cost of
energy, proven export competitiveness, competitive incentives, export and economic zones, positive
investment climate.

Bangladesh is ranked 119th position globally and 4th in the SAARC region in the Ease of Doing
Business Ranking by World Bank and IFC report entitled "Doing Business in 2010".

FDI has been allowed in all sector of the economy except five industries - defense equipment, nuclear
energy, forest plantation, security printing and railways.

The investors enjoy the following incentives for investing in Bangladesh –

a) 5 to 7 years corporate tax holiday for selected sectors.

b) Private power companies enjoy corporate income tax exemption for a period of 15 years.

c) Tax exemption on royalties, technical knowhow and technical assistance fees and facilities for
their repatriation.

d) Tax exemption on foreign loans regarding interest.

e) Tax exemptions on capital gains from transfer of shares by the investing company.

f) Remittances of up to 50% of salaries of the foreigners employed in Bangladesh and facilities

for repatriation of their savings and retirement benefits at the time of their return.

33 | P a g e
 g) No restrictions on issuance of work permits to project related foreign nationals and
employees.

h) Facilities for repatriation of invested capital, profits and dividends.

i) Provision of transfer of shares held by foreign shareholders to local investors.

j) Reinvestment of remittable dividends would be treated as new investment.

k) An investor can wind up on investment either through a decision of the AGM. Once a foreign
investor completes the related formalities to exit the country, he or she can repatriate the sales
proceeds after securing proper authorization from the Central bank.

Bangladesh makes no difference between foreign private investors and domestic investors regarding
investment incentives or export and import policies. In Bangladesh foreign investors enjoy the access
to domestic capital markets for working capital in the form of loans sanctioned from the commercial
banks and development financial institutions. The foreign investors have been given the opportunity
to have access to the services of the country's stock exchanges. Some export-oriented industries of the
thrust sector are provided with the benefit of cash incentives, venture capital, and other investment
friendly facilities.

The Board of Investment (BoI) of Bangladesh provides registration and other services. They also
provide the procedures for FDI those have been simplified to attract FDI.

Bangladesh Bank has prepared a sovereign and highly effective credit rating report. This should help
to attract FDI as well as boost short-term borrowings for the country's private and public sectors.
Country‟s image will be enhanced by this sound and sovereign credit rating report. It will certainly
help local financial organizations to tap low-cost borrowings from foreign sources. The dependence
on the London inter-bank offer rate will be definitely reduced. It also helps to obtain low-cost funds
from foreign sources.

34 | P a g e
Chapter 03
Practical Aspects

35 | P a g e
3.1 Grameenphone

Grameenphone [GP] is the leading telecommunications company in Bangladesh. As of

January 2019, it gained more than 56 million subscribers in Bangladesh. As a result,
Grameenphone became the largest mobile phone operator in Bangladesh. It is a joint venture
company (Telenor and Grameen Telecom Corporation). GP received the license for mobile
phone operation in Bangladesh from the Ministry of Posts and Telecommunications on
November 28, 1996. It started operations on March 26, 1997. The Telenor owns a 55.8%
ownership of Grameenphone and Grameen Telecom holds 34.2% ownership of the company.
Test 10% is publicly held.

Grameenphone was the first company to introduce GSM & 3G technology in Bangladesh,
and built the first cellular network to cover 99% of the country.

3.1.1 Company Vision and Mission

Vision

“We exist to help our customers get the full benefit of communications services in their daily
lives. We‟re here to help”

Mission
Grameenphone Ltd. aims at providing reliable, widespread, convenient mobile and cost
effective telephone services to the people in Bangladesh irrespective of where they live. Such
services will also help Bangladesh keep pace with other countries including those in South
Africa region and reduce the existing disparity in telecom services between urban and rural
areas. Coming to Grameenphone‟s mission statement, it is: “To be the leading
telecommunication service provider in the country with satisfied customers, shareholders and
enthusiastic employees.” If we analyze this mission statement we realize that Grameenphone
wants to be the market leader in the mobile telecommunication business of Bangladesh. This
implies that they also consider BTCL as their competitor and they want to keep a win-win
situation for their customer, shareholders and employees.

36 | P a g e
3.1.2 Company Objectives

 Coming up with better service solution to the subscriber for ensuring their
satisfaction.

 Coming up with the strongest possible network for the entire country.

 Capture bigger market.

 Getting the leading share in telecommunication industry.

 To gain higher return on the investment capital.

 Ensure Sustainability in growth.

 Meet the customer satisfaction and make the best ROI.

3.1.3 Company Activities and Functions

1) GP Online Shop - Buy genuine devices with manufacturer warranty and get it delivered
right at your doorstep

2) GP Music - Country‟s largest digital music collection. Stream or download latest

international and local releases

3) MyGP App - Your one stop app to manage all your account activity. App-solute control on
the go.

4) WoW Box - The number one lifestyle app for Android phone. Exclusive deals and
contents every day.

5) Tonic - Avail medical consultations and services for patient.

6) Mobile Financial Services (Gpay) - Add value to your life with a wide variety of services,
and makes your life easier.

7) Bioscope- Bioscope is a video streaming platform that offers Live TV channels and
unlimited Video on Demand. Bioscope is available on both app and web

8) Flexiplan – you can make your own flexi plan through internet by using flexiplan service

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Corporate social responsibility of Grameenphone Ltd (CSR)

Grameenphone is always committed to empowering the society with meaningful solutions.

This company always works for the betterment of society. At Grameenphone Corporate
Social Responsibility (CSR) is a complementary combination of responsible business
practices and corporate behaviors and externally focused initiatives to create shared value for
the society and the company. Along with realizing its ambition „Internet for All‟,
Grameenphone is enabling people to improve their lives through a number of CSR
(Corporate Social Responsibility) initiatives which includes the following:

1. Online School-Quality education for left out children: With a view of improving
access and quality of education for the underprivileged, Grameenphone in partnership
with 18 Jaago Foundation and Agni Systems Ltd. launched an online school in 2011.
Its aim is to provide quality education to rural and remote students who are deprived
of education.

2. Support during Natural Disaster: Grameenphone is playing a dynamic role during the
difficult moment like flood, storm surge, cold wave, building collapse and etc. They
provided food, medicine, mobile talk time and etc. during the crisis moment of our
country.

3. Climate change green endeavor for green business operation: Grameenphone is highly
focused on the continuous deployment of enhanced sustainable solutions for energy
efficient and environment friendly networks. The Company has an environmental
roadmap which aims to promote a low-carbon society, and the first priority is to take
responsibility for the CO2 emission generated by its own operations

4. Online Child Safety-an eye opening study on Bangladeshi children: Along with its
endeavor to spread the light of education across the country, Grameenphone is also
working for online safety which is a big concern to many parents now. For the first
time in Bangladesh, Grameenphone has started various initiatives to enlighten the
parents and teachers who find it a real challenge to monitor and limit their children‟s
online behavior while cybercrimes are increasing rapidly

5. Safe Internet Workshop-Country wide awareness: As a part of its continuous

endeavor to spread awareness among the parents and the children regarding safe use

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 of Internet, Grameenphone has started a countrywide Safe Internet Workshop
initiative in association with BRAC.

Grameenphone has also done many CSR activities in early years like:

 Sponsor of Bangladesh National Cricket team

 Sponsor of Bangladesh Special Olympics team

 Establishment of Blood Bank at Bogra for underprivileged patients

 Employment opportunities for acid survivors

 Blood donation camps for underprivileged Thalassemia patients

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3.2 Findings

There is actually no organization in this world which is free from problems. Grameenphone is
not also free from problems: in Grameenphone we have found the following problems. Some
are general problems & some are specifically related with Compensation & Reward policy of
HRM:

1. Their working environment is not good. There is not enough free space to walk
smoothly. There are not even enough chairs to seat. The arrangement they made is not
also good. More or less the environment of Grameenphone (HRD) is not very good.

2. They don‟t have any flexible benefits plan for their employees.

3. There is no slot for Part Time job in Grameenphone

4. Grameenphone does not have the profit sharing policy.

5. There is no regular meeting in Grameenphone with senior management.

6. The numbers of direct & indirect rewards are very few.

7. They don‟t help their employees in tax cutting.

8. The number of female employee is very low & no female official is there in the top
management. It‟s a sort of discrimination

9. The practice of job evaluation is still not there.

10. There is no system like Pay-Leave in Grameenphone

These are the problems that we found in Grameenphone while we went there to take
interviews from the employees working there in Grameenphone.

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3.3 SWOT Analysis

SWOT Analysis of Grameenphone

STRENGTHS

Market Leader: It is the market leader in the telecommunication industry in Bangladesh.

Collaboration with Apple and Samsung: It sells smart phones of different recognized
brands including apple (iPhones) and Samsung (Galaxy). These phones are offered with
different packages. Users can buy these smart phones paying the price at installment. This
strategy gives Grameenphone extra advantages to reach and sell their connections to the
upper society of the country.

Introduction of latest Technologies: It has always been the first mover to introduce latest
technologies among all the private telecommunication companies of Bangladesh.

Network Availability: Grameenphone has the largest network coverage. It has a large
number of BTS station all over Bangladesh. That is why the company can provide better
connectivity with excellent clear networking system in most of the areas of Bangladesh.
Among all, GP introduced 3G networking service second after the Teletalk (the government
owned Telecom Company).

Brand Value: Grameenphone is well known all over the country because of its strong
network which developed the strongest brand image in the country. This brand recognition
symbolizes the strongest business activities.

Revenue: Because of effective strategic planning, quality service, and networking coverage
Grameenphone has been able to earn a strong revenue growth which gave them financial
soundness.

Skilled Human Resources: Most of the stuff of Grameenphone are highly skilled and
efficient in many ways in their job responsibilities. The reason behind this responsible
manner is the Human Resource Department of Grameenphone which follows ethical strategy
to recruit and manage employees.

Effective Support Organization: GP has taken this idea from the employees of Bangladesh
Railway and Grameen Bank who are experienced and capable of providing precious and
effective guidelines for the operations.
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Easiest Access to the Widest Rural Network: Grameenphone has been dedicated to set up a
strong network through the widest rural area across the country to provide the utmost service
to the people of the country.

High Ethical Standards: To ensure quality of services, Grameenphone has been very strict
to follow its ethical standards.

WEAKNESS

Cultural Gap: In management body of Grameenphone, employees from different countries

and cultures exist. The Chief Executive Officer and Chief Technical Officer are Indian and
many employees come from different countries around the world. Because this reason, there
may sometimes be lack of understanding due to cultural gap. Also, they might not realize
understand the future goals of the company.

Different Mind: Sometimes, idea variety creates problem. In Grameenphone, it is highly

encouraged to innovate and apply new strategy for providing better service. Sometimes, it
could create problem because employees are used to with previous strategy.

Complicated Pricing Structure: Grameenphone has lots of service packages. The pricing of
these packages and their billing policies are different. These are difficult to promote and hard
for the users to understand.

Technical Problems with Offered Packages: Almost all of the new offers from
Grameenphone are having some technical problems and users are experiencing those
problems. Either they are not working at all or part of the services of those offers is disabled.
The Grameenphone is not aware of those problems. They are delaying to give a solution to
these problems. As a result, it is increasing customer dissatisfactions.

OPPORTUNITY

Economic Growth of Bangladesh: The economic growth of the country will increase the
expansion of telecommunication industry from 2016 to 2018; there is a huge chance in the
telecommunication sector.

Increased Intentional Activities in Bangladesh: As Bangladesh has been experience FDI

and many foreigners are working here, the international activities have increased in the

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country. They need to be connected not only within the country, but also outside of the
country. So, the market is also expanding globally.

Declining Prices for Handsets: In the past, people of low income had low access to the
mobile phone services due to the high price of handsets. When the Chinese mobile industry
enters the market, the flood of cheap handsets with latest technology started. Now anybody
can buy and maintain handsets as the telecom service price is also at the decrease.

New International Gateway: As BTTB „s new gateway of international connection made it

easy for the telecom companies to provide services of ISD call and international roaming.

Flexibility of Mobile Phone: Mobile phones became more dynamic today. These modern
handsets are being used as an alternative to many devices such as music, video, camera,
laptop etc. Communication through mobile phone became popular. The land phone
connection is pretty costly also. Smartphones are also easier to carry because of the
portability; people are getting more dependent on mobile phones than land phones. So, there
is a strong probability achieving more sales of connections.

Political Instability: Though political stability brings negative impact to most of the
businesses, but in the case of telecommunication industry it is an opposite case for short
period of time.

THREATS

Maturity Stage of Industry Life Cycle: The telecommunication industry is in the maturity
phase. The basic characteristics of this phase are that the profit stops to grow as because the
existing companies already grabbed all the market shares, and there is nothing left. So, the net
income stops growing further.

Intense Competition: In the mature level of industry life cycle, the competition is intense. In
our country, the competition in the telecommunication industry is intense as well.

More Rigid Government Regulations: Government is becoming more strict of companies

are taking away currency from the country. So, foreign companies are being threatened
because they may have barrier to back their investment and profit to their country. The
government also made the rules stricter for the foreign employee to work here.

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Upgraded Technology Used by Competitors: New mobile phone operators are establishing
their channel with latest technology. The competitors are gaining more strength. Whereas
Grameenphone is using the station that is five almost dilapidated. So, it is a disadvantage for
Grameenphone.

Devaluation of Taka: As the investment comes from the overseas and profit goes to the
home country, there is a risk of currency depreciation which may reduce the profit.

Price War: Finally, the price war is the biggest threat for the company for its profit. As the
competition is intense, the competitors are offering new packages frequently which are
decreasing the prices of the services as well. There is a direct negative effect to the profit
margin of Grameenphone. Recently, it has been the primary concern for any mobile operator
in the market. To remain competitive, they must reduce the price of their offered products.

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Chapter 04
Conclusionary Aspects

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4.1 Recommendation

We have to overcome the aforesaid impediments towards the inflow of FDI in Bangladesh. If
it is possible, definitely Bangladesh would be able to attract a lion‟s share of FDI among
South Asian regions and thereby achieve its target of higher economic growth and poverty
alleviation. To overcome it there are few recommendations:

Decreasing number of permissions/registrations/licenses with a predetermined time

frame. The administrative system of the country should be reformed through
appropriate and effective measures. The bureaucracy needs to be reorganized. The
control of bureaucracy should be minimized. Government should look into the law
and order situation to ensure business friendly environment
Ensuring hassle free and in time delivery of industrial utilities like Electricity, Gas
and water etc. Increase in power generation and other utilities supplies to the
manufacturing entity.
Establishing an Investment Promotion Agency other than the Board of Investment
(Regulator) or restructuring Board of Investment with new management.
The government may consider setting up new EPZs to encourage export oriented
investors. Necessary steps should be taken to improve the image of the country
abroad.
Special investment attraction drive with specific project proposals to attract local and
foreign investment.
Developing infrastructure as per requirement of tomorrow‟s business. Bangladesh has
to reinforce its infrastructure facilities, and improve the quality of services.
Developing sector specific demand driven skilled manpower with specific technical
knowledge. Emphasize on the job training to facilitate technology transfer and
employment generation.
A consistent incentive package should be implemented which may include fiscal
measures (such as rationalization of tariffs, elimination of non-tariff barriers),
financial measures (such as reducing interest rates, access to financing), and
institutional measures (such as enhancement of competitiveness through capacity
building).
Good governance should be ensured. Corporate governance will play a key role in
enhancing the investment climate of Bangladesh. So we should implement corporate

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 governance strongly in financial sector. The rate of corporate taxes is 40% for non-
listed companies. It is one of the highest in Asia. This rate should be favorable for
investors.
Political stability is very important to attract the foreign investors.

4.2 Conclusion

In conclusion, it could be said that though return on investment is quick in Bangladesh, the
higher rate of corporate tax is discouraging new investors to come here. The corporate tax
rate is one of the highest in Asia. The average corporate tax rate is 40 per cent in Bangladesh
while it ranges between 17 and 25 per cent in countries like Thailand, Indonesia, Vietnam
and India, the business leader mentioned. The access to land is very challenging in
Bangladesh. "Land prices go up and there is a lot of land-related litigations that make the
investment very costly," he continued. Again, some of the big foreign investors in the country
are in tax-related disputes with the government, such as GP.FDI inflow into Bangladesh is
low compared to many countries at the similar level of development.

Bangladesh's low labor costs are generally believed to be attractive to foreign investors, but
yet they hesitate to make fresh investments in the country because of the country's
underdeveloped infrastructure. The provisional net FDI data reported in the BoP vary far
from the data derived from the enterprise survey. Our country is very much underdeveloped.
In the context of an underdeveloped country the role of FDI is very vital and essential. We do
not have sufficient internal resources to meet up the growing demand of increasing
population at different aspect. As a result we have to rely greatly on FDI to accelerate our
economic growth and to meet up the demand.

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Chapter 05
Ending Matters

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4.1 Bibliography

a. “Scenario and Incentives of Foreign Direct Investment (FDI) in Bangladesh”,

By Md. Abdullah Al Mamun & Md. Hasebur Rahman

b. Balasubramanyam, V.N., Salisu, M., and Sapsford, D., 1996, „Foreign direct
investments and growth in EP and IS countries‟, The Economic Journal Vol.
106, pp. 92-105

c. Mottaleb, K.A., 2007, Determinants of Foreign Direct Investment and Its

Impact on Economic Growth in Developing Countries, MPRA Paper 9457,
University Library of Munich

d. Muhammad Azam, 2010, „An Empirical Analysis of the Impacts of Exports

and Foreign Direct Investment on Economic Growth in South Asia.
Interdisciplinary‟ Journal of Contemporary Research in Business, Vol. 2,
Issue. 7, pp 249-58.

e. Quader, Syed Manzur, 2009, “Foreign Direct Investment in Bangladesh: An

Empirical Analysis on its Determinants and Impacts”, Retrieved from
http://mpra.ub.unimuenchen.de/26134/MPRA Paper No.26134.

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4.2 References

a. Foreign Investment & External Debt (FIED) Cell, Statistics Department,

Bangladesh Bank

b. BIDA Website

c. DCCI website

d. https://thefinancialexpress.com.bd/economy/bangladesh-attracts-nearly-3b-fdi-
in-2017-18-fiscal-year-1536149782

e. https://thefinancialexpress.com.bd/views/reflecting-on-the-state-of-fdi-
1527266131

f. http://today.thefinancialexpress.com.bd/first-page/fdi-inflow-curve-heads-
downward-again-1535305410

g. https://thefinancialexpress.com.bd/economy/bangladesh-got-highest-fdi-from-
uk-in-2017-1525160781

h. https://www.grameenphone.com/

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