Bangladesh: The new business hub of Asia

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| The European | 19th April 2018
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Bangladesh is a booming economy, recently making the list of low-middle income countries as published by the World Bank. According to the IMF, the Bangladeshi economy is projected to grow from $180bn to $322bn by 2021. The total size of GDP in 2017 was $249.86bn and the gradually escalating growth rate was 7.28%. High-growth domestic markets, government support, lower valuations of takeover targets and ready access to capital have all provided unprecedented opportunities for investors across the world to explore new markets in the country.

Bangladesh is already one of the leading foreign direct investment (FDI) targets in the Asia Pacific region. In the last six years, net FDI inflows into Bangladesh have grown enormously, hitting $2.65bn in 2016–17. China alone (according to the Chinese Ambassador to Bangladesh) is planning to increase its FDI in Bangladesh by 50% in the coming years. In the 2016–17 financial year, the Bangladesh Investment Development Authority received registration of $23.25bn for investment from domestic, foreign and joint venture sources – 66% more than previous year. The national foreign reserve has increased more than five times in last 10 years from $6.14bn in 2007–08 to $32.21bn in March 2017 and $33bn in August 2017.

The Government of Bangladesh has undertaken various initiatives for developing the national infrastructure through public-private partnerships (PPPs) to sustain the growth in the economy. It has also recently enacted the One Stop Services Act 2018 for facilitating foreign investment. Simultaneously in 2017, for the first time, Bangladesh has allowed seven local corporations to make overseas investment and take their capital abroad.

Additionally, Bangladesh has the third-largest capital market in South Asia with two fully-fledged automated stock exchanges, hosted on computer-based trading system. Consequently, the country is seeing more and more foreign direct and local investments in different corporate sectors and in the capital market.

The increased need of investment is facilitated by various legislations, development of infrastructure through PPPs and supported by multiple commercial banks, financing corporations and non-bank financial institutions (NBFIs). According to a report by Bangladesh Bank, there are 57 scheduled banks, six non-scheduled banks, 33 financial institutions and nine foreign commercial banks operating in Bangladesh. Furthermore, “tax holidays” for new businesses have been given and 47 economic zones have been established to facilitate the business growth. Recently, business entities within these economic zones were declared exempted from the local government taxes and registration requirement with investment authority.

A thriving industrial base

Bangladesh has 166,000 sqkm of sea under its jurisdiction, which are abundant with resources, both mineral and supplying the fishing industry. It also has more than 200 rivers – with a total length of about 22,155 km occupying about 11% of the total area of the country. The major import and export industries of Bangladesh depends on the ports. Therefore, in addition to the two existing ports, the government has installed the Payra Port, a new deep sea port on the Bay of Bengal. The renowned port of Potenga is recorded in the Lloyd’s List as the 71st busiest port in the world. It was noted that despite worldwide decline in shipping volumes, the volume of containers carried through Potenga actually increased for a second year in a row, hitting over 2.35 million containers in 2016, a 16% increase in comparison to 2015. This increase is a direct indication of the development of the Bangladesh economy as the import and export industries largely depends on shipment. The statistics clearly suggest that businesses are expanding fast in Bangladesh.

The government has given highest priority to developing the energy sector in Bangladesh and is committed to making electricity available to all citizens by 2021. The government has initiated reform measures in the energy sector, including significant development programmes. As of April 2016, total installed generation capacity was 15,821 megawatt (MW) including 7,476 MW in the public sector and 6,145 MW in the private sector. According to the Power Sector Master Plan, installed capacity will rise to 30,000 MW by the year 2021. To reach this goal, the government is facilitating establishment of multiple LNG, coal, solar and wind power plants on BOT or BOO basis.

Within the health sector, Bangladesh’s pharmaceutical industry was valued at about $1.5bn in 2013, expected to grow at more
than three times the rate of GDP growth.

Based on IMF World Economic Outlook GDP projections and a 3.3% higher growth rate of pharmaceutical industry than the national GDP growth rate, the pharmaceutical industry is expected to grow at a rate of 23% for the next 10 years, with revenues reaching $4bn in 2016 and $9bn by 2020. In 2015, to expand the horizon of this sector, the government issued permission for establishing the first ever clinical research organisation in Bangladesh.

In the real estate sector, the number of registered members of Real Estate & Housing Association of Bangladesh (REHAB), an association for the real estate developers, has increased from 11 in 1991 to 1062 in 2018. Each year approximately 9,000 to 10,000 units of apartments, and approximately 5,000 to 6,000 units of plot are being delivered by real estate ventures. Going hand in hand with this is the tourism and hospitality sector, which is also growing. International brands are opening their hotels and resorts in Bangladesh.

Well-connected

The telecoms sector has seen mobile penetration exceed all expectations – steadily, the government’s vision of a digital Bangladesh
is becoming a reality. In recent years, the telecommunication sector has witnessed bold moves from operators and the regulators, including the merger of two of the leading providers and takeover of one operator by a foreign operator. The telecom sector is having transformative impact on the economy in terms of aggregate investment, FDI and productivity levels.

The Government of Bangladesh has revisited its taxation policy for the mobile telecoms industry, creating opportunities for it to reach out to poor population of rural Bangladesh. Such decisions will surely attract more investment from telecoms operators. The government is planning to accelerate the process of introducing new telecommunication technologies (e.g., 4G, LTE) in the telecom sector through transparent licensing system within shortest possible time. For further technological advancement, the first geostationary communications satellite of Bangladesh is scheduled for launching in March 2018.

Bangladesh has firmly established itself as a new destination for global investors. The country provides a range of opportunities for investors to explore, and monitoring how the country continues to develop is a very exciting prospect indeed.

Further Information

www.as-associates.net

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