Bangladesh at a glance
- Population -162.9 million
- Area -143,998 sq km (55,598 sq miles)
- Major language- Bengali, English
- Major religion – 89.5% Islam , 10.5% Other( 9.6% Hinduism, 0.9% other)
- Life expectancy- 69 years (men), 70 years (women)
- Currency- taka ,UN, World Bank
- Literacy-70% ( 2016)
- Border – India, Myanmar
- Major Trading Partner- The European Union, the United States, Japan and the other nearby nations of China, Singapore, Malaysia and India.
- Recent area of development: Infrastructure, IT, Natural resource exploration, Education, Offshore Industry.
Brief about Bangladesh
Bangladesh, on the northern coast of the Bay of Bengal, is surrounded by India, with a small common border with Myanmar in the southeast. Considered a middle power in international affairs and a major developing country, Bangladesh is listed as one of the Next Eleven. It is a unitary state with an elected parliament called the Jatiyo Sangshad. Bangladesh has the third-largest economy and military in South Asia after India and Pakistan. It is a founding member of South Asian Association for Regional Cooperation( SAARC) and hosts the permanent secretariat of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). The country is the world’s largest contributor to United Nations peacekeeping operations. It is a member of the Developing 8 Countries, the Organization of Islamic Cooperation(OIC), the Commonwealth of Nations, the World Trade Organization, the Group of 77, the Non-Aligned Movement, Bangladesh–China–India–Myanmar Forum for Regional Cooperation (BCIM) and the Indian Ocean Rim Association. The country has significant natural resources, including natural gas and limestone. Agriculture mainly produces rice, jute and tea. Historically renowned for muslin and silk, modern Bangladesh is one of the world’s leading textile producers. Its major trading partners include the European Union, the United States, Japan and the other nearby nations of China, Singapore, Malaysia and India.
- Literacy rate here is around 70%. It has 17 active airports among 27 and good road and rail networks both domestic and international rout with the neighbor countries.
- The market-based economy of Bangladesh is the 44th largest in the world in nominal terms, and 32nd largest by purchasing power parity; it is classified among the Next Eleven emerging market According to the IMF, Bangladesh’s economy is the second fastest growing major economy of 2015-2016, with a rate of 7.1%. Dhaka and Chittagong are the principal financial centers of the country, being home to the Dhaka Stock Exchange and the Chittagong Stock Exchange. The financial sector of Bangladesh is the second largest in the subcontinent.
The country has pursued export-oriented industrialization, with its key export sectors include textiles, shipbuilding, fish and seafood, jute and leather goods. It has also developed self-sufficient industries in pharmaceuticals, steel and food processing. Bangladesh’s telecommunication industry has witnessed rapid growth over the years, receiving high investment from foreign companies. Bangladesh also has substantial reserves of natural gas and is Asia’s seventh largest gas producer. Offshore exploration activities are increasing in its maritime territory in the Bay of Bengal. It also has large deposits of limestone. The government promotes the Digital Bangladesh scheme as part of its efforts to develop the country’s growing information technology sector.
- Growth in Bangladesh in Fiscal Year 2016 (ended 30 June 2016) exceeded expectations, aided by revived exports and sustained domestic consumption.
Expected growth rate of Bangladesh economy for the financial year 2016-17 will be 7.6%.
Foreign investment in Bangladesh
Bangladesh has been steadily building its economic strength and is now emerging as an attractive frontier growth market in South Asia. This presents a sizeable opportunity for organizations seeking to expand their global footprint and further establish a presence in the South Asia region.
In this article, we explore some of the economic growth drivers for Bangladesh and potential opportunities for global companies to tap into.
Driven by robust domestic demand, the Bangladesh economy is rapidly expanding with an annual GDP growth rate of 6.5% in 2014. Private consumption continues to be supported by strong inbound remittances, while public investment has also received a boost.
Going forward, GDP is expected to grow at an average of 6.7% – 6.8% over the next 3 years, based on World Bank estimates. This shall be driven primarily by local demand as well as public spending due to increased public sector wages and large infrastructure investments in power, roads, communications and transportation.
Bangladesh’s international foreign reserves also continue to improve, rising to US$28 billion in March 2016, largely on the back of garment exports and remittances from Bangladeshi expatriates. Inward remittances are in excess of US$15 billion despite a slowdown in source countries, especially in the Middle East. Exports are holding up with a 9% growth in the last 9 months, indicating a positive future ahead.
Overall, there has been a major focus on developing industries like food, consumer durables, electronic products and information technology in the private sector, while in the public sector there are large government investments in infrastructure development like roads, highways, mega-bridges, technology parks and deep-sea ports.
The top 5 sectors that attracted the most investment include – textiles and apparel, gas & petroleum, banking, telecommunication and power, accounting for 71% of the total, in 2015.
Foreign companies are considering investments into Bangladesh from two perspectives – firstly, with Bangladesh as a manufacturing hub for exports, leveraging local capabilities, cost advantages and available incentives.
Export processing zones (EPZs) have been built by the government to provide ready infrastructure, along with fiscal and non-fiscal incentives to attract investments. As a result, 18% of the total FDI in 2015 was focused towards EPZs.
Secondly, global firms are increasingly focusing on serving the domestic market, especially in sectors with large potential such as food, banking and telecommunications, which is being driven by the emerging middle class.
The Bangladesh Institute of Development Studies (BIDS) reported that 20% of the country’s total population are in the middle income segment with the share expected to increase to 33% by 2030.
Tax Summary
Bangladesh economy is mainly affected by two types of taxes viz, Direct tax and Indirect tax. These include the following categories:
Direct Tax:
- Income Tax ( Individual & Corporate)
- Capital Gain tax
- Additional Tax
- Excess Profit Tax
- Transfer Pricing
- Gift tax
- Double Taxation Avoidance Agreement
Indirect Tax:
- Value Added Tax (VAT)
- Customs Duty
- Supplementary Duty
- Excise Duty
- Service tax
Income Tax (Individual & Corporate)
The principal taxes here in Bangladesh are personal income taxes, corporate income taxes Value-Added-Tax (VAT), Customs Duties, and Supplementary Duty.
The standard rate of VAT is 15% levied on transaction value of supplying goods and services. The top income tax rate for individuals is 30% For the 2016/17 tax year (July 1, 2016–June 30, 2017) the top corporate rate was 45%. However, publicly traded companies registered in Bangladesh are charged a lower rate of 25%.
Banks, financial institutions and insurance companies are charged the 40% rate. All other non- publicly traded companies are taxed at the 35% rate. Effective 1 July 2016.
Capital Gain tax
Capital gain tax for non-resident shareholder is 10% in Bangladesh (capital gains on sale of shares of listed companies). Tax rate from capital gain received from selling capital asset (other than securities of listed companies) is 15%.
Capital gain tax arising from sale of shares of listed entity in the hands of non-resident is exempt from tax provided that the non-resident has similar tax exemption in his/her home country however any income which is exempted in other countries, will be exempted in Bangladesh.
Double Taxation Avoidance Agreement
Bangladesh has concluded double taxation agreements with the following countries:
- (1) Belgium; (2) Canada; (3) China; (4) Denmark; (5) France; (6) Germany; (7) India; (8)Indonesia; (9) Italy; (10) Japan;
- (11) Korea; (12) Malaysia; (13) Mauritius; (14) Netherlands; (15) Norway; (16) Pakistan; (17) Philippines; (18) Poland;
- (19) Romania; (20) Saudi Arabia; (21) Singapore; (22) Sri Lanka; (23) Sweden; (24) Switzerland; (25) Thailand; (26) The Union Myanmar;
- (27) Turkey; (28) United Arab Emirates; (29) United Kingdom; (30) United States of America; (31) Vietnam.
VALUE ADDED TAX (VAT)
Value Added Tax (VAT) is levied on the importation of goods and the making of taxable supplies in the course of carrying out a taxable activity. The standard rate is 15%. Reduced rates are available depending on the nature of the taxable supply, which ranges from 0% to 15%. VAT operates in Bangladesh partly as a sales tax.
Bangladesh has got investment friendly sector where investors can explore them.
- Textile
- RMG and Backward Linkage
- Telecommunication and power
- Banking
- Electronics- Semi-Conducto , Cell Phone Assembly , Other Electronics
- Information Technology- Data Processing , Software Development
- Natural Gas-based Industries- Electricity, Fertilizer, Petro-chemicals
- Frozen Foods- Hatcheries, Sustainable aqua-culture technology, Feed meals plants, Processing unit for value-added products.
- Leather- Finished Leather, Leather Goods
- Ceramic- Tableware , Sanitary ware, Insulator
- Light Engineering- Machinery Parts, Consumer Items
- Agro-based Industry- Canned Juice / Fruit, Dairy and Poultry
Article brought to you by our members from Bangladesh Tahmina Akter ACA, CPA.