Did You Know That Foreign Investment Has No Restriction In Bangladesh?

Many of the investors want to know, how to make foreign direct investment in Bangladesh. This is because Bangladesh is one of the worlds fastest growing economy. 

Did You Know That Foreign Investment Has No Restriction In Bangladesh?

Non-residents or foreign personals are free to invest in different industrial enterprises other than some reserved sectors. Industrial Policy from Bangladesh Government has restricted those sectors. There are some major business activities in where FDI is encouraged in this country. (Please read about those business sectors in our post).

You can form a joint venture with local investors, or can establish a fully (foreign) owned. Prior permission from the central bank (Bangladesh Bank) is not required if investors use their own funds. Investors can get institutional support provided by Government when they are registered with Bangladesh Investment Development Authority (BIDA).

Bangladesh has some Export Processing Zones to facilitate export oriented industrial units. To invest in Export Processing Zone area you will need to register with Bangladesh Export Processing Zones Authority (BEPZA) Government of Bangladesh has established some Economic Zones also for industrial entrepreneurs. Registration with Bangladesh Economic Zones Authority (BEZA) required for operating in Economic Zones.

Temporary NRTA/FDI account opening:

For investment in industrial units of Bangladesh, non-resident investors need to open a temporary NRTA (Non-resident taka) account. No prior approval of central bank is required to open this account in the name of the proposed company/enterprise. This account may be credited with inward remittances from abroad only. It is also termed as “Blocked account” as no withdrawal is allowed.

To open such account investors usually need to submit following documents.

1.      Name clearance from RJSC & Firms, you can collect it from RJSC online portal

2.      List of proposed owners

3.      Authenticated photocopy passport of the investors

4.      Proposed MOA & AOA

5.      Resolution/Contract between investors with expression of interest to open account with the specific bank by the investors

6.      Resolution or Declaration related relating to the authorized person of the proposed company responsible to operate the account

In what form non-residents/foreigners can invest:

Non-residents or Foreign personals can invest in industrial units of Bangladesh in two ways. This is either by directly sending funds from abroad, or by purchasing capital machinery paying outside Bangladesh.

The central bank of Bangladesh has accorded their general permission to invest freely with following conditions:

1.       The industrial unit is to be registered with the Registrar of the Joint Stock Companies and Firms(RJSCF)/ BSEC (The Bangladesh Securities and Exchange Commission).

2.       Shares to foreign personals may be issued -

• against free convertible FC inward remittance from abroad
• against import of capital machinery from abroad. Payment of such import must be paid from abroad also. Those import capital machinery must be cleared from Bangladesh customs.
• against debit to non-resident Taka accounts with ADs in their overseas branches and correspondents name against inward remittance in convertible currencies. Ads may issue payment certificate from such account for purchase of shares  in Bangladeshi companies.

Inward Remittance:

For encashment of the Inward remittance sent by the foreign investors, banks usually request for some typical documents. Those documents are required by them for onward reporting to the regulatory bodies by them. We furnish below is the list of such documents for your ready reference.

1.       Application for encashment of inward remittance and encashment certificate

2.       Form – C completed and duly signed by the authorized/nominated person

3.       Attested photocopy of

• Name clearance from RJSC & Firms
• Proposed MOA & AOA
• Resolution/Contract between investors
• Authenticated photocopy passport of the investors
• Expression of interest to open account with the specific bank by the investors
• Resolution or Declaration related to the authorized/nominated person of the proposed company responsible to operate the account

Format used for encashment certificate in Appendix 5/39 for payment from non-resident Taka account and Appendix 5/40 for inward remittance in FC.

Encashment certificate issued after reporting to the central bank online. It is given as per guidelines for foreign exchange transaction issued by the central bank. It includes the remittance information and the online reporting ID as well. For A (wholly owned foreign company) & B (partially owned foreign company) type industrial units in EPZs and EZs encashment in local currency (BDT) is not mandatory. In these cases, inward remittance may be kept in FC accounts in FC forms.

RJSC Registration & Documentation by FDI customer:

Investors will have to apply for registration and issue of share to the RJSC & Firms submitting this Encashment certificate, proposed MOA & AOA, List of Directors with filled in forms and fees of registration. (For details please read - We will discuss in other article).

Investors will have to collect and submit following documents for onward reporting to FEID (Foreign Exchange Investment Department) of Bangladesh Bank (the central bank).

• Attested copy of Encashment Certificates with Reporting Transaction ID number.
• Attested copy of Certificate of Incorporation
• Attested copy of Memorandum (MOA) & Articles of Association (AOA)
• Attested copy of Form XII
• Attested copy of Trade License
• Attested copy of TIN Certificate
• Attested copy of VAT/BIN Certificate
• Attested copy of registration/approval from BIDA, BEZA, EZA, ETZ

Intimation of Share issued to non-residents to the FEID:

Issue of shares to non-residents must be reported mentioning transaction ID to Foreign Exchange Investment Department, Bangladesh Bank, Head Office through the concerned AD within 14 (fourteen) days of share issue.

According to guidelines for foreign exchange transaction from the central bank, following documents must accompany-

• attested copy of RJSCF/BSEC permission to issue shares favoring non-residents.
• attested copy of the registration certificate for the industrial ventures from BIDA/BEPZA/BEZA.
• copy of encashment certificate issued by AD in case other than investment in the form of capital machinery.
• for issue of shares against foreign investment in the form of capital machinery:

- attested copy of bill of entry as a proof of customs clearance of the capital machinery,

        - attested copy of the related import permit,

        - attested copy of invoice,

        - attested copy of bill of lading of air way bill, etc.

Closing Temporary Account/Opening new business account:

After registration/commencement of business, bank may open a new account receiving all required documents in usual procedure. The existing temporary/blocked account of the industrial unit against Foreign Direct Investment will be closed. The balance amount of the previously opened account will be transferred to the new account. Investors can use this account as a regular transaction account.

However, If the planned investment or incorporation does not have effect, the balance of the account may be allowed to repatriate without prior approval from Bangladesh Bank after meeting the required expenses. Authorized Dealers shall report opening and closure of these accounts to Foreign Exchange Investment Department and Foreign Exchange Operations Department, Head office or concerned office of central bank immediately. Along with this report attested copy of form 'C' or TM form (as applicable) with particulars of transactions.

Quarterly report submission:

Every industrial venture with foreign investment must submit Quarterly Report as per prescribed from of Bangladesh Bank along with their unaudited quarterly financial statement.

Transfer of Bangladeshi Shares/Securities:

You can also take the opportunity to invest in Bangladesh in another procedure. Sometimes it is much easier for a single non-resident or foreign person. Any non-resident can invest by buying shares of existing company in Bangladesh. Approval from central bank (Bangladesh Bank) will not be required for transfer of shares and securities owned by resident of the country from one shareholder to another of any nationality/residency. Intimation to Bangladesh Bank is not required when transfer is effected between residents.

However, Foreign Exchange Investment Department of the central bank should be intimated by concerned AD within 14 (fourteen) days of transfer of shares of private/public limited companies not listed in the stock exchanges. Such transfer may be from resident to non-resident, non-resident to resident and non-resident to non-resident.

Following documents must be submitted with the intimation letter:

• authenticated copy of encashment certificate by the concerned AD
• attested copy of the permission for the transfer given by the RJSCF/BSEC
• attested copy of up to date Schedule-X

Conclusion:

Bangladesh has a very fast growing economy. Almost every sector of the economy encourage foreign investment. It has its own big market. International supply chain is also very well connected this economy. People are very enthusiastic. Environment is also nice to stay and work. Maximum trouble you will face is in its traffic system. However, Government of Bangladesh has been undertaking a huge number of infrastructure development works to turn its traffic system comfortable. Projects like- metro-rail projects, express ways, high-speed lanes, widening highways, high-speed magnetic trains project (proposed) are some of the upcoming solution to this problem. This country is now in the most lucrative demographic dividend in the globe.

I hope you can have a safe and good return of your investment in Bangladesh.

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