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Destination Bangladesh[English] Destination Bangladesh August 2019 Destination Bangladesh | PwC 1 Table of contents Foreword .............................................................................................................. 3 Chapter 1: Doing business in Bangladesh: Expanding gateways ....................... 4 Chapter 2: Entering the Bangladesh market, funding opportunities and incentives to draw foreign investments .............................................................. 12 Chapter 3: Regulations for operating in Bangladesh ......................................... 21 Chapter 4: Steps to set up business operations ................................................ 27 Chapter 5: The way forward ............................................................................... 32 2 PwC | Destination Bangladesh Foreword Bangladesh as an investment destination Bangladesh’s economy has witnessed steady growth in the past Bangladesh is already being recognised as a thriving investment decade, with the country’s annual gross domestic product (GDP) hub, and this is reflected in the country’s foreign direct investment growth rate at 7.86% in 2018. It is poised to increase by 7% on (FDI) inflows. Bangladesh’s FDI stood at USD 2.58 billion at the an average till 2033, according to a forecast by the Centre for end of June 2018. According to the Bangladesh Investment Economics and Business Research (CEBR). Development Authority (BIDA), there was 13.34% growth in FDI in the third quarter of 2018, with proposals worth USD 3.23 billion With a rising per capita income and a growing middle-class in the basket. The government’s mega projects were viewed as population, there has also been a notable increase in domestic the primary reason for drawing substantial FDI investments in consumer demand. This is a positive sign, as increased domestic the transport, storage and communications sectors. Besides consumption reflects a certain insulation of the country’s domestic consumption, exports from the country are also thriving. economy from global headwinds. The Bangladesh government Bangladesh exported goods worth USD 6.88 billion to the US in has been proactive in the country’s progress, as is evident from 2018-2019. This ranks the US as the primary export destination increased government investment in various initiatives. for Bangladesh, followed by Germany and the UK. Some of these are in the realm of infrastructure, such as the This comprehensive report is a study of Bangladesh as an Padma Bridge and the Karnaphuli Tunnel. Bangladesh is also investment destination. The positives of investing in Bangladesh working with China on the regional Asian Highway and the ‘One today are many. Preferential trade benefits and friendly investment Belt-One Road’ project. The Government is also in the process policies are offered to countries investing in Bangladesh. The first of strengthening ties with India, Bhutan and Nepal, and this chapter outlines the demographics, and financial and economic is expected to facilitate more investment and global tie-ups. indicators that support this fact. The second chapter looks at Government support can also be seen in the power facilities, the processes, funding opportunities and incentives available to with 7,000 MW of electricity being added to the national grid. companies wishing to enter the Bangladesh market. The third Additionally, Bangladesh’s Power System Master Plan (PSMP) chapter delves into the regulations and policies that need to be targets uninterrupted power supply, and this is expected to adhered to for investment in Bangladesh. The subsequent chapter increase the country’s power generation capacity to 34,000 MW offers a step-by-step account of the processes involved in setting by 2030. up business operations in the country, while the concluding The country’s burgeoning growth and relatively stable political chapter looks into the future of Bangladesh as an investment scenario have attributed to steady and positive sovereign ratings, option. as Moody’s and S&P’s reports indicate. The reports underline We hope the report serves as a ready reckoner for prospective that ‘Bangladesh is a mobile economy on the verge of moving up investors planning to invest in this riverine country. the economic ladder’. Its stable growth rate of population at 1.2% since 2013 and young workforce – 60% of the populace is in the 15-64 age group – also contribute to the growth trajectory of the economy. Mamun Rashid Managing Partner, PwC Bangladesh Destination Bangladesh | PwC 3 Chapter 1: Doing business in Bangladesh: Expanding gateways Bangladesh is considered to be among the next 11 emerging Projections suggest that Bangladesh is going to be the one of markets. In the past decade, Bangladesh’s economy has grown the fastest-growing economies by 2050, and the 28th and 23rd at an annual rate of ~ 6-7%. The country has reflected both largest economy by 2030 and 2050, respectively, from its 43rd social and economic growth. The level of poverty has dropped, position1 currently. accompanied by increased life expectancy, literacy and With aspirations to become a middle-income country by per-capita food intake. 2021, Bangladesh is making substantial efforts to maintain Sustained economic growth in recent years has generated higher macroeconomic stability, strengthen revenue mobilisation, tackle demand for electricity, transport and telecommunication services. energy and infrastructure deficits, support an expanding financial While the growth rate of the population has declined, the labour sector and external trade reforms, and improve existing labour force is growing rapidly and is indicative of Bangladesh moving skills. The country is also working on economic governance, towards a lower dependency ratio; thereby, lessening the expense urban management and adapting to climate change. burden on the productive population. From strength to strength Bangladesh achieved an impressive annual gross domestic real public investments increased by 10.5% and merchandise product (GDP) growth rate of 7.86% in 2018, the highest in South imports by 25.2 %. Asia.2 It has been striving to maintain an increasing GDP growth All these factors have been contributing to the growth of the rate for the last five years. Strong consumption and public country, and in turn is resulting in a sharp increase in domestic investment, recovery of ready-made garments (RMG) export and consumer demand. This is also an indication of prosperity as high remittance growth were identified as the main propellers of Bangladesh citizens begin to show an obvious preference for economic growth. Moreover, remittance flows increased by 17% better quality goods and in greater volumes. to reach USD 14.9 billion, equivalent to ~ 5.4% of the GDP, while Fig. 1.1: GDP growth rates of Bangladesh and regional As of 2017, Bangladesh secured the position of being the 42nd economies3 and 58th largest economy globally in terms of purchasing power parity and in nominal terms respectively.4 Already established 9.0% as a lower-middle income country, according to World Bank 8.0% benchmarks in 2015, Bangladesh is ready to graduate to the 7.0% middle- income threshold by 2024. The GDP of Bangladesh is 6.0% poised to increase by 7% on an average between 2018 and 2033, 5.0% according to a forecast prepared by Centre for Economics and 4.0% Business Research (CEBR). 3.0% 2.0% In terms of its significant domestic growth, rising consumption 1.0% and increased government investment are only two examples of 0.0% the main contributors. Substantial infrastructural developments 2014 2015 2016 2017 2018 such as the Padma Bridge and the Karnaphuli Tunnel are Afghanistan Bhutan Maldives Pakistan predicted to further boost economic growth. Additionally, the Bangladesh India Nepal Sri Lanka market for consumer durables and other value-added products is also on the rise, bolstered by the rising per capita income and growth of the middle-class population. Moreover, Bangladesh is pursing stronger multilateral ties with India, Bhutan and Nepal while collaborating with China on the regional Asian Highway and “One Belt-One Road” initiative. Bangladesh’s initiative to establish international ties will facilitate more investment and global collaboration. 1 https://www.pwc.com/gx/en/issues/economy/the-world-in-2050.html 2 The World Bank. (2018). Bangladesh Development Update. 3 The World Bank. (2018). Bangladesh Development Update & Asian Development Bank (ADB) Basic Statistics (2018), available at https://data.adb.org/dashboard/ bangladesh-numbers 4 IMF. 2017. Report for Selected Country Groups and Subjects (PPP valuation of country GDP) 4 PwC | Destination Bangladesh Steady sovereign rating and strong FX reserve Consistent growth and a stable political landscape have contributed to steady and positive sovereign ratings for Bangladesh. Both Moody’s and S&P have labelled the country as a mobile economy on the verge of moving up the economic ladder. Table 1.1: Country Sovereign Rating by S&P and Moody5 S&P Sovereign Ratings Moody’s Sovereign Rating Year Rating Outlook Year Rating Outlook 2018 BB-/ B Stable 2018 Ba3 Positive 2016 BB-/ B Stable 2014 Ba3 Positive 2010 BB-/ B Stable 2010 Ba3 Positive Improved standard of living With more than a 5% persistent increase in growth rate since 2015, Bangladesh’s per capita GDP as of 2018 stands at USD 1, 6536. This positive trajectory may be attributed to stable population growth and an increasing GDP growth rate. Final consumption expenditure, which accounts for private consumption and general government
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