Foreign Direct Investment (FDI) & The One-stop service Act 2018 (OSS) in Bangladesh

The open economy of current world made the place of collaboration with all, none the less capitalism also takes it’s bite as a beneficiary whereas the redundant opportunity gets a chance to share their capability to output the best product possible. Investors collaborate with countries around the world according to their demand and necessity, countries response to their demand and in this process, both investors and state get their fair share. To make things much easier governments offer special facilities for direct investment by foreign investors. Thus the concept of Foreign Direct Investment grows.

What is Foreign Direct Investment or FDI?

In a native sense, Foreign Direct Investment is direct investment of a foreign legal entity (might be natural or legal person) to a state of which he is not a citizen or person and these investments generally placed under special facilities of government to ensure long time goal and return of an investor, moreover, these investments are comparatively large in scale like 10% or more investment in a company or project.

In more formal texture FDI can be described as follows, “[Foreign] direct investment reflects the aim of obtaining a lasting interest by a resident entity of one economy (direct investor) in an enterprise that is resident in another economy (the direct investment enterprise)”

Here for understanding “direct investor”, we have to look into The Fifth Edition of the IMF’s Balance of Payment Manual which defines the owner of 10% or more of a company’s capital as a direct investor. Furthermore, the also commented “A direct investor may be an individual, an incorporated or unincorporated private or public enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which have a direct investment enterprise, operating in a country other than the country of residence of the direct investor” [Find more about it here]

Benefit of FDI

In the open market FDI plays a very critical role both for the investors and the country on which it is invested. Developing countries like Bangladesh, Vietnam and others have a force of youth with very low wages and they are seeking work in every direction; generally, those countries also have a low cost of living compared to the first world countries. Similarly, FDI helps those countries to create more job, help their infrastructure to grow. Also, new technology and hands-on experience of workers help those countries to grow further. The diversification because of the investment of various countries makes those countries stronger in future. On the other hand, developed countries have their money and technology but not enough labour force to keep all industry running. Moreover, investors from developed countries try to establish a dominant possession over the global industry by FDI and they also try to play a role in making trade friendly laws and regulations.  Normally, governments are welcoming to the foreign investors but the long bureaucratic process makes things tortuous. Moreover, Laws of the country may not be well suited for the investors. Many other elements like political instability, taxing policy, foreign policy plays a vital role in foreign investment. As investors take a great risk by investing good amount of money despite having cheap labour they often stay reluctant to invest in such a risky socio-economic system.

In such a situation, many governments take special procedure to overcome those obstacles. Government around the world provide special zones and areas to keep their investment safe under special law, they often provide special speedy service for foreign investors. Sometimes investors are ensured by the government so that the investors invest according to their convenience and became more confident to get the return of their heavy investment.

Foreign Direct Investment in Bangladesh

Foreign Direct Investment in Bangladesh

Bangladesh as a place of Foreign Direct investment

As it is shown earlier a developing country has a lot to offer to the foreign investors and Bangladesh is one of them. If we want to analyze the question “why Bangladesh is a good place for investors?” we can have two approaches.

  1. The general status of Bangladesh as a country and 2. The special steps were taken by the Bangladesh government to ensure foreign investment in Bangladesh. Let’s discuss both one by one.

 

The general status of Bangladesh as an investment place

  1. Demographics, Education & Employment: Bangladesh is the 8th largest country of the world according to the population. The country has a various number educational system to focus on different areas; around the country, there are thousands of vocational training institute to create a force of skilled labour every year. Hundreds of universities and Institutes are outputting a significant number of graduates to work in all sector but due to the overpopulation it is not easy to secure a job in the country therefore around 13.8%[1] are jobless and more are looking for better opportunity, this highly competitive market has lot to offer to the investors. Investors can easily get a skilled force with a very reasonable salary which starts from 0.40 USD / Hour! As the minimum wage is only 100 USD / Month.
  2. Infrastructure: In last few years the infrastructures of roads and highways have changed drastically and many mega projects like undergoing to transform the country and place it to a new level. Moreover, Bangladesh has two Sea Port and three international Airport for easy and convenient import and export of goods.
  3. Cost of living: Like any other factor cost of living including rent, bills, daily spending like groceries and necessary shopping is an important factor to consider before a sustainable plan. 300-400 USD/ month is good enough for a single person to lead a decent lifestyle in the capital of Bangladesh.
  4. Upraising middle class: Bangladesh having the re-marketable economic growth in the last few years it has created a new middle class and these people are not only the producer but also a class or consumers and their lifestyle is changing with time, therefore, this new market also a place where investors can invest their money to have a good return.
  5. Political Stability: Bangladesh has reached a new era when it is compared to the previous history of the political turmoil. The present government has established a trusted relationship with both the people and with other political parties. The country has maintained its peaceful relationship with neighbour countries to confirm internal and external interruption in the country.
  6. Foreign policy: Bangladesh believes in peace and cooperation with all, Bangladesh does not maintain any superpower quorum, so there is almost no chance to have sudden trade war or sanctions against Bangladesh, which I think a key factor nowadays.

B. The special steps taken by the Bangladesh government to ensure foreign investment in Bangladesh.

Bangladesh has achieved the highest-ever GDP growth in 2017-2018 fiscal year which is 7.86% and that growth surpassed the estimated growth of 7.65%, this major success was possible due to the effort of the government and the consistent planning of years. To continue this trend the government has taken more special major steps few of them are mentioned below.

  1. One stop service under “The One-stop service Act 2018”:

Previously to invest in Bangladesh investors required to present their documents as much as 42 offices which were a necessary obstacle for foreign investment which was another key factor for low ranking of Bangladesh in the World Bank’s Ease Doing Business ranking despite having so many potentials in this country. Since the government of Bangladesh has committed to change the economic status of Bangladesh, the government quickly responded to the situation and try to solve the problems of foreign investment.

Now let’s have a look what is articulated in The One-stop service Act 2018 (OSSA) of Bangladesh.

The law has passed to provide all services related to investment in the country under one umbrella. Under the Law, a committee headed by a minister, styled One Stop Service Ensuring Committee, will be formed with a view to ensuring the implementation. According to the Act, around 15 government agencies will provide all relevant services to investors from one point, to save time and reduce complications.

The organizations include: Home Ministry, Power Division, National Board of Revenue (NBR), Bangladesh Bank, Office of the Registrar of Joint Stock Companies and Firms, gas providers, Department of Public Works, Department of Environment, Export Promotion Bureau, water and sewerage authorities, BTRC, Office of the Chief Controller of Imports and Exports, Bangladesh Export Processing Zones Authority and Bida and other product-related associations as well as local government offices.

OSS services are as follows;

  1. Import Permit
  2. Export Permit
  3. Local sale and purchase permit
  4. Project Clearance
  5. NoC for Bank Loan
  6. VISA recommendation
  7. Work Permit
  8. Sale Permit
  9. Manufacturing Permit
  10. Building plan approval
  11. Utility Connection
  12. Name Clearance
  13. Certificate of Incorporation/ Registration
  14. TIN Certificate
  15. VAT Registration
  16. Environment Clearance
  17. License for Service Providers
  18. Fire Safety Clearance
  19. Factory registration with DIFE
  20. Boiler Registration
  21. Captive Power Plant (Permission from DOE)
  22. Customs Clearance
  23. Sub Contract Permit
  24. NOC for Off Shore Banking License
  25. Permission for installation of WTP, ETP
  26. Permission for installation of Generator
  27. Remittance Clearance
  28. Request for Utility Connection
  29. Renewal of Boiler Registration

Benefits of a one-stop service under the act

  • Reduction of time to register a business and obtain a license and permit
  • Reduction of business registration and licensing/permitting costs
  • Increased transparency in the business registration and licensing/permitting process (reduction of corruption)
  • Increased service quality

For example;  An investor under this Service will have a:-

  • Gas connection in 7 days
  • Electricity in 14 days
  • Police clearance report for a visa of foreign investors and workers in 45 days
  • Investment registration in 7 days and clearance in 20 days
  • Land registration and issuance of registration documents in 5 days
  • Work permits in 9 days
  • Approval for repatriation of royalty in 7 days

Most importantly, section 9 of the Act has its own Accountability close so there is no chance of delay or option for bribery. Another special power of this act is that it can make new rules and take necessary steps for the purpose of the act under section 11 and 12 of the act which removes the general problem of law being outdated with time.

Six organizations – BIDA, Bangladesh Bank, NBR, Rajuk, the Bangladesh Electrification Board, and the Office of the Chief Controller of Imports and Exports – are providing the services and it is designed to be an automated and digitalized format, for investors to access through a single window.

  1. Special Economic Zones & Export Processing Zones:

To establish a business-friendly environment and provide all other facilities that are needed for better productivity in the country Bangladesh has been offering Special Economic Zones (SEZs) around the country. The journey started with Chittagong EPZ in 1983 to reduce the dependency on agriculture and that effort to let more establishment of EPZ. Currently, there are eight zones (EPZs) that are now actively boosting the country’s economy these EPZs are run by BEPZA:

  1. Adamjee Export Processing Zone, Siddhirganj, Narayanganj
  2. Chittagong Export Processing Zone, South Halishahar, Chittagong
  3. Comilla Export Processing Zone, Cumilla
  4. Dhaka Export Processing Zone, Savar, Dhaka
  5. Ishwardi Export Processing Zone, Ishwardi, Pabna
  6. Karnaphuli Export Processing Zone, North Patenga, Chittagong
  7. Mongla Export Processing Zone, Mongla, Bagerhat
  8. Uttara Export Processing Zone, Nilphamari

The success of these Zones and the interest of various parties motivated the government to make larger and diversified plan, currently there are over 100 SEZs under various category; Like –

  • Government Economic Zone
  • Non- Government (Private) Economic Zone
  • Science and Technology-Based Economic Zone etc.

Many of these Zones are already under [limited] production and other zones are scheduled to be in full production gradually within 2030, these economic zones are established by Bangladesh Economic Zones Act, 2010.

Now, these zones have special benefits for the investors. Generally, Special Economic Zones offer special facilities. These special economic zones act like enclaves of a country provides the investors with a world-class environment for innovation and production.  Many special facilities are offered in these zones like special export and import permission, tax wave, special laws, rules and regulations. Many national laws can be silent in these zones like in Bangladesh Labor law of the country does not apply in these special zones as well as special industrial utilities are provided to ensure the most productivity such as special electricity and gas supply or telecommunication connection etc. Generally, the government ensures betters security and special policing to keep the production going. The Government also make sure the highways and ports are easily accessible from those zones.  These facilities help the industries to get both the world-class service and cheap labour, altogether this is a win-win situation for the investors.

It must be also mentioned that investors can buy or lease lands form government for their business and have other facilities as well.

How can you invest in Bangladesh:

There are many ways that person or company can invest in Bangladesh.

  1. Joint Venture: A Joint Venture(JV) is a cooperative enterprise entered into by two or more business entities for the purpose of a specific project or other business activity. Generally, joint venture is formed to fulfil a certain and specific business purpose. A foreign investor could easily invest in Bangladesh by a Joint Venture by that way both of the party will get their benefit, for example, a foreign company if form a joint venture with a Bangladesh company they can provide technology and grab the global market, on the other hand, the Bangladeshi party can provide the best support from Bangladesh as they know the knowhow and the working practice in Bangladesh.
  2. Firm: If the investor wants to invest in a test basis having a limited liability then a Business firm may be the most helpful, an investor can agree with like-minded (who may be Bangladeshi or foreigner) people to start business that is best suited for them, firm is also a good idea to understand the situation around here before large investment.
  3. Company: So far forming a Company or establish a branch of multinational/foreign is the best way to go whether with or without local investment. Generally, a company invest more than a JV or a firm and having that power they can bargain with government and authorities to ensure the best deal for their business. It could be a public company or a private one.

Bangladesh is now ready to receive the Foreign Direct Investment and the investors could easily get their services without hassle by The One Step Service Act, 2018. On the other hand, the lovely people of Bangladesh are always welcoming to provide their service and put their best effort to get them into a better position.

Speaking of services you can mail us at [email protected] if you need any legal support or help or an additional helping hand to establish your business in Bangladesh.

[1] [ https://www.thedailystar.net/frontpage/26-lakh-youths-jobless-1411804 ]

Rayhanul Islam

Legal activist & Practitioner - Editor - Researcher - Learner; A person who uses Logic & Law as his tool where psychology & Philosophy plays a role, he is on a quest to bring positive change to the legal sector of Bangladesh. He works as a lawyer and promotes legal knowledge and human right concept to the root level. He can be reached at: [email protected]

You may also like...

Leave a Reply