HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements...Bangladesh

# 					2017 Investment Climate Statements: Bangladesh			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Bangladesh, the world’s eighth most populous country, offers promising opportunities for investment, especially in the oil and gas, power, pharmaceutical, information technology, telecommunications, and infrastructure sectors as well as in labor-intensive industries such as ready-made garments, household textiles, and leather processing. With over six percent annual growth sustained over the past two and a half decades, a large, young and hard-working workforce, strategic location, and vibrant private sector, Bangladesh is likely to attract increasing investment in coming years.

The Government of Bangladesh actively seeks foreign investment, particularly in the apparel industry, energy, power, and infrastructure projects. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors. According to the central bank of Bangladesh, the country received $2.0 billion in foreign direct investment (FDI) FY 2015-16, up from $1.8 billion in the previous year.

Bangladesh has made gradual progress in reducing some constraints on investment, including the progress with ensuring reliable electricity, but inadequate infrastructure, limited financing capabilities, bureaucratic delays, and corruption continue to hinder foreign investment. New government efforts to improve the business environment show promise but implementation has yet to be seen. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

On July 1, 2016, terrorists killed more than 20 people in a restaurant frequented by foreigners in Dhaka’s diplomatic enclave, including one U.S. citizen. Da’esh (also referred to as IS, ISIL, or ISIS) and Al Qaeda in the Indian Subcontinent (AQIS) have publicly claimed credit for multiple attacks since September 2015. In October 2016, Da’esh threatened to target “expats, tourists, diplomats, garment buyers, missionaries, and sports teams” in the most “secured zones” in Bangladesh.

International brands and the international community continue to press the Government of Bangladesh to meaningfully address worker rights and safety problems in Bangladesh. Labor unrest in December 2016 increased pressure on Bangladesh to show progress towards meeting the U.S. Government’s 16-point Generalized System of Preferences (GSP) Action Plan.

The government has limited resources for intellectual property rights (IPR) protection and Counterfeit goods are readily available in Bangladesh. Government policies in the information and telecommunications (ICT) sector are still under development. Current policies grant the government broad powers to intervene in the sector.

Capital markets in Bangladesh are still developing and the financial sector is still highly dependent on banks.

*Table 1: Major Economic Statistics Summary*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

Bangladesh actively seeks foreign investment, particularly in apparel, power, oil and gas, and infrastructure projects. It offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Four sectors, however, are reserved for government investment:

- Arms and ammunition and other defense equipment and machinery;
- Forest plantation and mechanized extraction within the bounds of reserved forests;
- Production of nuclear energy;
- Security printing.

The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with promoting supervising and promoting private investment. The BIDA Act of 2016 approved the merger of the now disbanded Board of Investment and the Privatization Committee. BIDA performs the following functions:

- Provides pre-investment counseling services
- Registers and approves of private industrial projects
- Issues approval of branch/liaison/representative offices
- Issues work permits for foreign nationals
- Issues approval of royalty remittances, technical know-how and technical assistance fees
- Facilitates import of capital machinery and raw materials
- Issues approvals for foreign loans and supplier credits

The Bangladesh Export Processing Zone Authority (BEPZA) acts as the investment supervisory authority in export processing zones (EPZs). BEPZA is the one stop service provider and regulatory authority for companies operating inside EPZs. In addition, Bangladesh plans to establish over 100 Economic Zones (EZs) over the next several years. The EZs are designed to attract additional foreign investment to locations throughout the country. The Bangladesh Economic Zones Authority (BEZA) is responsible for supervising and promoting investments in the economic zones (EZs).

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign and domestic private entities can establish and own, operate, and dispose of interests in most types of business enterprises. Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled. Draft regulations in the area of telecommunication infrastructure currently include provisions precluding 100 percent foreign ownership.

Four sectors are reserved for government investment and exclude both foreign and domestic private sector activity:

- Arms and ammunition and other defense equipment and machinery;
- Forest plantation and mechanized extraction within the bounds of reserved forests;
- Production of nuclear energy;
- Security printing.

In addition, there are 17 controlled sectors that require prior clearance/ permission from the respective line ministries/authorities. These are:

- Fishing in the deep sea
- Bank/financial institution in the private sector
- Insurance company in the private sector
- Generation, supply and distribution of power in the private sector
- Exploration, extraction and supply of natural gas/oil
- Exploration, extraction and supply of coal
- Exploration, extraction and supply of other mineral resources
- Large-scale infrastructure project (e.g. flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station)
- Crude oil refinery (recycling/refining of lube oil used as fuel)
- Medium and large industry using natural gas/condescend and other minerals as raw material
- Telecommunication service (mobile/cellular and land phone)
- Satellite channel
- Cargo/passenger aviation
- Sea-bound ship transport
- Sea-port/deep seaport
- VOIP/IP telephone
- Industries using heavy minerals accumulated from sea beach

While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping and insurance companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive. In practical terms, foreign investors frequently find it necessary to have a local partner even though this requirement may not be statutorily defined.

*Business Registration*

The Bangladesh Investment Development Authority (BIDA), formerly the Board of Investment, is responsible for screening, reviewing and approving FDI in Bangladesh. BIDA is directly supervised by the Prime Minister’s office and the Chairman of BIDA has Minister-equivalent rank. There have been instances where receiving approval was delayed. Once the foreign investor’s application is submitted to BIDA, the authorities review the proposal to ensure the investment does not create conflicts with local business. Investors note it is frequently necessary to separately register with other entities such as the National Board of Revenue. According to the World Bank, business registration in Bangladesh takes 19.5 days on average with nine distinct steps: http://www.doingbusiness.org/data/exploreeconomies/bangladesh/ 

The steps for investment are also available at: http://bida.gov.bd/ .

Requirements vary by sector, but all foreign investors are also required to obtain clearance certificates from relevant ministries and institutions with regulatory oversight. BIDA establishes time-lines for the submission of all the required documents. For example, if a proposed foreign investment is in the healthcare equipment field, investors need to obtain a No Objection Certificate (NOC) from the Directorate General for Health Services under the Ministry of Health. The NOC states that the specific investment will not hinder local manufacturers and is in alignment with the guidelines of the ministry. Negative outcomes can be appealed, except for applications pertaining to the four restricted sectors previously mentioned.

A foreign investor also must register its company with the Registrar of Joint Stock Companies and Firms (RJSC&F) and open a local bank account under the registered company’s name. For BIDA screening, an investor must submit the RJSC&F Company Registration certificate, legal bank account details, a NOC from the relevant ministry, department, or institution, and a project profile (if the investment is more than $1.25 million) along with BIDA’s formatted application form.

**Other Investment Policy Reviews**

In 2013 Bangladesh completed an investment policy review (IPR) with the United Nations Conference on Trade and Development (UNCTAD): http://unctad.org/en/Pages/DIAE/Investment%20Policy%20Reviews/Investment-Policy-Reviews.aspx .

Bangladesh has not conducted an IPR through the Organization for Economic Cooperation and Development.

A Trade Policy Review was last done by the World Trade Organization in October 2012 and can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp370_e.htm .

With EU assistance, Bangladesh conducted a trade policy review, the “Comprehensive Trade Policy of Bangladesh” which was published in the ministry of commerce in September 2014 and is still in draft mode pending further review and approval:

https://mincom.gov.bd/ 

**Business Facilitation**

The Government has had limited success reducing the time required to establish a company. BIDA and BEZA are both attempting to establish one-stop business registration shops and these agencies have proposed draft legislation for this purpose.

Companies can register their business at Office of the Registrar of Joint Stock Companies and Firms: www.roc.gov.bd . However, the online business registration process is not clear and cannot be used by a foreign company to attain the business registration as certain steps are required to be performed in-person.

In addition, BIDA has branch/liaison office registration information on its website at: www.boi.gov.bd/ . The online business registration process is clear and complete but cannot be used by foreign companies to attain the business registration as certain steps are required to be performed in-person.

Other agencies with which a company must typically register are as follows:

- City Corporation – Trade License
- National Board of Revenue – Tax & VAT Registration
- Chief Inspector of Shops and Establishments – Employment of workers notification

The company registration process now takes around 15 workdays to complete. The process to open a branch or liaison office is approximately one month. The process for trade license, tax registration, and VAT registration requires seven days, two days, and three weeks, respectively.

**Outward Investment**

Outward foreign direct investment is generally restricted through the Foreign Exchange Regulation Act of 1947. As a result, the Bangladesh Bank plays a key role in limiting outbound investment. In September 2015, the government amended the 1947 Act by adding a “conditional provision” that permits outbound investment for export-related enterprises. Private sector contacts note that the few international investments approved by the Bangladesh Bank have been limited to large exporting companies with international experience.

							2. Bilateral Investment Agreements and Taxation Treaties					

Bangladesh has signed bilateral investment treaties with 28 countries, including Austria, the Belgium-Luxembourg Economic Union, China, Denmark, France, Germany, India, Indonesia, Iran, Italy, Japan, Democratic People’s Republic of Korea, Republic of Korea, Malaysia, Netherlands, Pakistan, Philippines, Poland, Romania, Singapore, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom, United States, Uzbekistan and Vietnam.

The U.S.-Bangladesh Bilateral Investment Treaty, signed on March 12, 1986, entered into force on July 23, 1989. The Foreign Investment Act includes a guarantee of national treatment.

The United States and Bangladesh signed a bilateral treaty for the avoidance of double taxation on September 26, 2004. The United States ratified it on March 31, 2006. The parties exchanged instruments of ratification on August 7, 2006. The treaty became effective for most taxpayers beginning in the 2007 tax year.

Bangladesh has successfully negotiated several regional trade and economic agreements, including the South Asian Free Trade Area (SAFTA), the Asia-Pacific Trade Agreement (APTA), and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC). Bangladesh has not signed any bilateral free trade agreements (FTA) but has started initial FTA discussions with Sri Lanka in March 2017.

Bangladesh has taken steps to strengthen bilateral economic relations with India by reducing trade barriers and improving connectivity. Bangladesh gained duty-free access to India via regional, not bilateral trade agreements. The first is the South Asian Association for Regional Cooperation (SAARC) Preferential Trading Arrangement (SAPTA) that was signed in April 1993 and operationalized in December 1995, which gives limited preferential market access to exports of member countries. The second is the South Asian Free Trade Area (SAFTA) agreement that was signed in January 2004 in Islamabad and entered into force from January 2006. Tariff reduction under SAFTA started from July 2006. Since November 2011, under SAFTA Bangladesh can export goods duty-free to India, with the exception of alcohol and tobacco. India also provides duty-free and preferential tariff treatment to Bangladesh under the Duty Free Tariff Preference (DFTP) Scheme for Least Developed Countries (LDCs) effective from August 13, 2008. As a founding member of the World Trade Organization (WTO) and as a Less Developed Country (LDC), Bangladesh has been an active advocate for LDC interests in WTO negotiations.

							3. Legal Regime					

**Transparency of the Regulatory System**

Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. The chambers of commerce have called for a greater voice for the private sector in government decisions and for privatization, but at the same time many support protectionism and subsidies for their own industries. The result is that policy and regulations in Bangladesh are often not clear, consistent, or publicized. Registration and regulatory processes are alleged to be frequently used as rent-seeking opportunities. The major rule-making and regulatory authority exist in the national level – under each Ministry with many final decisions being made at the top-most levels, including the Prime Minister’s office (PMO). The PMO is actively engaged in policies, as well as foreign investment in government-controlled projects.

The Bangladesh Investment Development Authority (BIDA) – a merger of the Board of Investment (BOI) and the Privatization Commission (PC) – was formed in accordance with the Bangladesh Investment Development Authority Bill 2016 passed by parliament on July 25, 2016. The bill established BIDA as the apex private investment promotion and facilitation agency in Bangladesh. The move came amid complaints about redundancies in the BOI’s and the PC’s overlapping mandates and concerns that the PC had not made sufficient progress. BIDA hopes to become a “one-stop shop” for investors and a “true” investment promotion authority rather than simply follow the referral service-orientation of BOI. Currently, BIDA is not yet a one-stop shop and companies must still seek approvals from relevant line ministries

Bangladesh has achieved incremental progress in using information technology to improve the transparency and efficiency of some government services and to develop independent agencies to regulate the energy and telecommunication sectors. Some investors cited government laws, regulations, and implementation as impediments to investment. The government has historically limited opportunities for the private sector to comment on proposed regulations. In 2009, Bangladesh adopted the Right to Information Act that provides for multilevel stakeholders consultation through workshops or media outreach. Although the consultation process exists, it is still weak and subject to further improvement.

Ministries do not generally publish and release draft proposals to the public. However, several agencies, including the Bangladesh Bank, BIDA, the Commerce of Ministry and the Bangladesh Telecommunications Regulatory Commission have occasionally posted draft legislation and regulations online and solicited feedback from the business community. In some instances, parliamentary committees have also reached out to relevant stakeholders for input on draft legislation. The media continues to be the main information source for the public on many draft proposals. There is also no legal obligation to publish proposed regulations, consider alternatives to proposed regulation, or solicit comments from the general public.

Regulatory agencies generally do not solicit comments on proposed regulations from the general public; however, when a consultation occurs, comments may be received through public media consultation, feedback on websites (e.g., in the past, the Bangladesh Bank received comments on monetary policy), Focused Group Discussions (FGDs), or workshops with relevant stakeholders. There is no government body tasked with soliciting and receiving comments, but the Bangladesh Government Press of the Ministry of Information is entrusted with the authority of disseminating government information to the public. The law does not require regulatory agencies to report on the results of consultations, and in practice, regulators do not generally report the results. Widespread use of social media in Bangladesh has created an additional platform for public input into developing regulations, and government officials appear to be sensitive to this form of messaging.

The Bangladesh Government Press, http://www.dpp.gov.bd/bgpress/ , the government printing office, publishes the weekly “Bangladesh Gazette” every Thursday. The gazette provides official notice of government actions, including the issuance of government rules and regulations and the transfer and promotion of government employees. Laws can also be accessed at http://bdlaws.minlaw.gov.bd/ 

Bangladesh passed the Financial Reporting Act of 2015 that created the Financial Reporting Council (FRC) and aims to establish transparency and accountability in the accounting and auditing of financial institutions. However, the FRC is not fully operational and accounting practices and quality varies widely in Bangladesh. Internationally known and recognized firms have begun establishing local offices in Bangladesh and the presence of these firms is positively influencing the accounting norms in the country. Some firms are capable of providing financial reports audited to international standards while others maintain unreliable (or multiple) sets of accounting reports. Regulatory agencies also do not conduct impact assessment of proposed regulations; hence, regulations are often not reviewed on the basis of data-driven assessments. National budget documents are not prepared according to internationally accepted standards.

**International Regulatory Considerations**

Bangladesh has successfully negotiated several regional trade and economic agreements, including the South Asian Free Trade Area (SAFTA), the South Asia Association for Regional Cooperation, the Asia-Pacific Trade Agreement (APTA), and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC). BIMSTEC in particular aims to integrate regional regulatory systems between Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan. However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated.

Local law is based on English Common Law system, but most fall short of international standards. The country’s regulatory system remains weak, where many of the laws and regulations are not enforced and standards are not maintained.

Bangladesh has been a member of the World Trade Organization (WTO) since January, 1995. WTO requires all signatories to the Agreement on Technical Barriers to Trade (TBT) to establish a National Inquiry Point and Notification Authority to gather and efficiently distribute trade-related regulatory, standards and conformity assessment information to the WTO Member community. Bangladesh Standards and Testing Institute (BSTI) is the National Enquiry Point. There is an internal committee on WTO affairs in BSTI and it participates in the notification activities to WTO through the Ministry of Commerce and the Ministry of Industries.

The contact address of the Bangladesh WTO-TBT National Enquiry Point is:

Maan Bhaban116/A, Tejgaon Industrial Area, Dhaka-1208Tel: +88-02 8870278 ( off) , Fax : +88-02-9131581Mob: +8801552402985, +8801915479519E-mail ; rezaulkarim60@gmail.comLink to BSTI: http://bsti.gov.bd/ 

**Legal System and Judicial Independence**

Bangladesh is a common law based jurisdiction. Many of the basic laws of Bangladesh such as penal code, civil and criminal procedural codes, contract law and company law are influenced by English common laws. However family laws such as laws relating to marriage, dissolution of marriage and inheritance are based on religious scripts, and therefore differ between religious communities. The Bangladeshi legal system is based on a written constitution and the laws often take statutory forms that are enacted by the legislature and interpreted by the higher courts. Ordinarily, executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations and is also enforceable by the court. Yet, being a common law system, the statutes are short, and set out basic rights and responsibilities, but are elaborated by the courts in their application and interpretation of those. The Judiciary of Bangladesh acts through the (1) The Superior Judiciary having Appellate, Revision & Original Jurisdiction, and (2) Sub-Ordinate Judiciary having Original Jurisdiction.

Since 1971, Bangladesh’s legal system has been updated in areas of company, banking, bankruptcy and money loan court laws, and other commercial laws. An important impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, which means delays in proceedings carry no penalties. Bangladesh does not have a separate court or division of a court dedicated solely to hearing commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts. Bangladesh scored 7.5 in the World Bank’s 2016 Quality of Judicial Processes Index out of an 18 score.

Some notable commercial laws include:

- The Contract Act, 1872 (Act No. IX of 1930)
- The Sale of Goods Act, 1930 (Act No. III of 1930)
- The Partnership Act, 1932 (Act No. IX of 1932)
- The Negotiable Instruments Act, 1881 (Act No. XXVI of 1881)
- The Bankruptcy Act, 1997 (Act No. X of 1997)
- The Arbitration Act, 2001 (Act No. I of 2001)

The judicial system of Bangladesh has never been completely independent from the interference of the executive branch of the government. In a significant milestone, the government in 2007 separated the country’s judiciary from the executive, but the executive retains strong influence over the judiciary through control of judicial appointments. Other pillars of the justice system, including the police, courts, and legal profession are also closely aligned with the executive branch. In lower courts, corruption is widely perceived as a serious problem. Regulations or enforcement actions are appealable under the Appellate Division of the Supreme Court.

**Laws and Regulations on Foreign Direct Investment**

Major laws affecting foreign investment include: the Foreign Private Investment (Promotion and Protection) Act of 1980, the Bangladesh Export Processing Zones Authority Act of 1980, the Companies Act of 1994, the Telecommunications Act of 2001, the Industrial Policy Act of 2005, the Industrial Policy Act of 2010, and the Bangladesh Economic Zones Act 2010. The Industrial Policy Act of 2016 was approved by the Cabinet Committee on Industrial Purchase on February 24, 2016 and replaces the Industrial Policy of 2010.

The Industrial Policy Act of 2016, which replaced the 2010 Act, offers incentives for “green”, high-tech, or “transformative” industries. Foreign investors who invest $1 million or transfer $2 million to a recognized financial institution can apply for Bangladeshi citizenship. The Government of Bangladesh will provide financial and policy support for high-priority industries (those that create large-scale employment and earn substantial export revenue) and creative (architecture, arts and antiques, fashion design, film and video, interactive laser software, software, and computer and media programming) industries. Specific importance will be given to agriculture and food processing, ready-made garments (RMG), information and communication technology (ICT) and software, pharmaceuticals, leather and leather products, and jute and jute goods.

In the past year, BIDA has submitted proposed legislation for a One-Stop Service Act (OSS) to attract further foreign direct investment to Bangladesh. In addition, Petrobangla, the state-owned oil and gas company, has modified its production sharing agreement contract for offshore gas exploration to include an option to export gas.

BIDA has a “one-stop” website that provides relevant laws, rules, procedure, and reporting requirements for investors at: http://www.bida.gov.bd/ . Aside from information on relevant business laws and licenses, the website includes information on Bangladesh’s investment climate, opportunities for business, potential sectors, and how to do business in Bangladesh. The website also has an eService Portal for Investors, which provides services like visa recommendations for foreign investors, approval/ extension of work permit for expatriates, approval of foreign borrowing, and approval/ renewal of branch/ liaison and representative office. However, the effectiveness of these online services is questionable.

**Competition and Anti-Trust Laws**

The Government of Bangladesh formed an independent agency in 2011 called the “Bangladesh Competition Commission (BCC)” under the Ministry of Commerce. The Parliament of Bangladesh then passed the Competition Act in June 2012, and in September 2013, Joint Additional Secretary Md. Sujayet Ullah was appointed to operationalize the BCC. However, the BCC has experienced operational delays. Currently, the WTO Cell of the Ministry of Commerce, which has stated the BCC will start functioning soon, handles all competition-related issues but the exact date has not been confirmed.

In January 2016, the two parent companies of Malaysia-based Robi and India-based Airtel signed a formal deal to merge their operations in Bangladesh, completing the country’s first telecommunications merger. The deal, valued at $12.5 million, is to date, Bangladesh’s largest corporate merger. The merger raised anti-competition concerns but it was completed in November 2016 after the Bangladesh Telecommunication Regulatory Commission (BTRC) and Prime Minister Sheikh Hasina gave final approvals.

**Expropriation and Compensation**

Since the Foreign Investment Act of 1980 banned nationalization or expropriation without adequate compensation, the Government of Bangladesh has not nationalized or expropriated property from foreign investors. In the years immediately following independence in 1971, widespread nationalization resulted in government ownership of more than 90 percent of fixed assets in the modern manufacturing sector, including the textile, jute and sugar industries and all banking and insurance interests, except those in foreign (but non-Pakistani) hands. The government has since taken steps to privatize many of these industries during the last 20 years and the private sector has developed into a main driver of the country’s sustained economic growth of approximately six percent per year during the past two decades.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Bangladesh is a signatory to the International Convention for the Settlement of Disputes (ICSID) and it acceded in May 1992 to the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Alternative dispute resolutions are possible under the Bangladesh Arbitration Act of 2001. The current legislation allows for enforcement of arbitral awards.

*Investor-State Dispute Settlement*

Bangladeshi law allows contracts to refer dispute settlement to third country forums for resolution. Bangladesh is also a party to the South Asia Association for Regional Cooperation (SAARC) Agreement for the Establishment of an Arbitration Council, signed November 2005, which aims to establish a permanent center for alternative dispute resolution in one of the SAARC member countries.

In practice, enforcement of arbitration results is applied unevenly and the government has challenged ICSID rulings, especially those that involve rulings against the government. The timeframe for dispute resolution is unpredictable and has no set limit. It can be done as quickly as a few months, but often takes years depending on the type of dispute. Anecdotal information indicates average resolution times can be as high as 16 years. Local courts may be biased against foreign investors in resolving disputes.

Bangladesh is a signatory of the New York Convention and recognizes the enforcement of international arbitration awards. Domestic arbitration is under the authority of the district judge court bench and foreign arbitration is under the authority of the relevant high court bench.

The ability of the Bangladeshi judicial system to enforce its own awards is weak. Senior members of the government have been effective in using their offices to resolve investment disputes on several occasions, but the government’s ability to resolve investment disputes at a lower level is mixed. The government does not publish the numbers of investment disputes involving U.S. or foreign investors. Anecdotal evidence indicates investment disputes occur with limited frequency and the involved parties often resolve the disputes privately rather than seek government intervention.

The greatest number of complaints arising from U.S. investors in recent years involves disputes with the National Board of Revenue (NBR) over prior year tax returns. The investors have alleged that NBR is disproportionately targeting them to meet tax collection targets and not due to legitimate problems with previously filed tax returns.

*International Commercial Arbitration and Foreign Courts*

Bangladeshi law allows contracts to refer dispute settlement to third country forums for resolution. The Bangladesh Arbitration Act of 2001 and amendments in 2004 reformed alternative dispute resolution in Bangladesh. The Act consolidated the law relating to both domestic and international commercial arbitration. It thus creates a single and unified legal regime for arbitration in Bangladesh. Although the new Act is principally based on the UNCITRAL Model Law, it is a patchwork quilt as some unique provisions are derived from the Indian Arbitration and Conciliation Act 1996 and some from the English Arbitration Act 1996.

The practice of alternative dispute resolution (ADR) in Bangladesh has many challenges, including lack of funds, lack of lawyer cooperation, and lack of good faith. Slow adoption of ADR mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes in Bangladesh.

As in many countries, Bangladesh has adopted a “conflicts of law” approach to determining whether a judgment from a foreign legal jurisdiction is enforceable in Bangladesh. This single criterion allows the courts of Bangladesh broad discretion in choosing whether to enforce foreign judgments with significant effects on matrimonial, adoption, corporate, and property disputes. Most enterprises in Bangladesh, and especially state-owned enterprises (SOEs) because the ruling government party nominates the company leaders, maintain strong ties with the government. Thus, domestic courts strongly tend to favor SOEs and thereafter, local companies, in investment disputes.

Investors are also increasingly turning to the Bangladesh International Arbitration Center (BIAC) for dispute resolution. BIAC is an independent arbitration center established by prominent local business leaders in April 2011 to improve commercial dispute resolution in Bangladesh to stimulate economic growth. The council committee is headed by the President of International Chamber of Commerce – Bangladesh (ICC,B) and includes the presidents of other prominent chambers such as like Dhaka Chamber of Commerce and Industry (DCCI) and Metropolitan Chamber of Commerce and Industry (MCCI). The center operates under the Bangladesh Arbitration Act of 2001. According to BIAC, fast track cases are resolved in approximately six months while typical cases are resolved in one year. Major Bangladeshi trade and business associations such as the American Chamber of Commerce in Bangladesh (AmCham) can sometimes help to resolve transaction disputes.

**Bankruptcy Regulations**

Many laws affecting investment in Bangladesh are old and outdated. Bankruptcy laws, which apply mainly to individual insolvency, are sometimes not used in business cases because of webs of falsified assets and uncollectible cross-indebtedness supporting insolvent banks and companies. A Bankruptcy Act was enacted in 1997, but has been ineffective in addressing these issues. An amendment to the Bank Companies Act of 1991 was enacted in 2013. Some bankruptcy cases fall under the Money Loan Court Act, which has more stringent and timely procedures.

							4. Industrial Policies					

**Investment Incentives**

In certain areas, current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 01, 2011 and June 30, 2019. Industries set up in Export Processing Zones (EPZs) are also eligible for tax holidays.

Thrust sectors subject to exemption include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, energy efficient appliances, insecticides, pesticides, petro-chemicals, fruit and vegetable processing textile machinery, tissue grafting and tire manufacturing industries.

Physical infrastructures eligible for exemptions include: deep sea ports, elevated expressways, road overpasses, toll road and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.

*Tax Holidays*