Chambers Asia-Pacific 2020: Practice Area Overview
Corporate & Finance: A.S & Associates
Bangladesh is among the five fastest-growing economies of the world, with a 7.3% GDP growth projection in FY2019. According to a recent World Bank report, “Sound macroeconomic policies – such as keeping the budget deficit below 5 percent of GDP – and resilient domestic demand have led to growth in manufacturing and construction industries.” Bangladesh is already one of the leading FDI targets in the Asia-Pacific region. In the last couple of years, net FDI inflows into Bangladesh have been growing enormously, hitting over $3.21 billion in 2018. Most of these foreign investments have gone to the production of electricity, food, and textiles. According to the IMF, the Bangladeshi economy is projected to grow from $180 billion to $322 billion by 2021.
High-growth domestic markets, government support, lower valuations of takeover targets and ready access to capital have provided unprecedented opportunities for investors all across the world to explore new market in Bangladesh. As of now, Bangladesh has the third largest capital market of South Asia with two full-fledged automated stock exchanges, hosted on computer-based trading systems. Consequently, the country is seeing more and more of direct foreign 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 public-private partnership and supported by multiple commercial banks, financing corporations and NBFIs. (As per Bangladesh Bank’s report, there are 62 scheduled banks, 5 non-scheduled banks and 31 financial institutions and 9 foreign commercial banks that are operating in Bangladesh.)
Bangladesh has 1,66,000 sq km area of sea, abundance of living and non-living resources and more than 200 rivers all around the country, with a total length of about 22,155 km, which occupy about 11% of the total area of the country. Major export and import from Bangladesh (about 85%) depends on the ports. To facilitate the process, the Government has installed a new Deep-Sea Port on the Bay of Bengal, in addition to the two previous ports.The Government has given highest priority to the power sector development in Bangladesh and is committed to make electricity available to all citizens by 2021. For that, the Government has also initiated implementing reform measures in the power sector, including significant development programs. The utility electricity sector in Bangladesh has one national grid with an installed capacity of 21,419 MW as of September 2019. According to the Power Sector Master Plan, the Government has a plan to increase installed capacity to 30,000 MW by the year 2021. To reach this goal, the Government is facilitating establishment of multiple LNG, coal, solar and wind based power plants on a BOT or BOO basis.
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 1007 in 2019. 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 these real estate ventures. Hand in hand, the tourism and hospitality sector is growing as well, witnessed by many international brands opening their hotels and resorts in Bangladesh.
The telecom sector has seen mobile penetration growth that has exceeded all expectations and is gradually bringing the Government’s vision of DIGITAL BANGLADESH into reality. In recent years, the telecommunication sector of Bangladesh has seen some bold moves from the operators and the regulators, including merger of two of the leading providers and takeover of one operator by a foreign operator. The telecom sector is having a transformative impact on the economy in terms of aggregate investment, foreign direct investment and productivity levels. The Government of Bangladesh has revisited its taxation policy for the mobile telecommunication industry for creating opportunity for them to reach out to the poor population of rural Bangladesh. This decision will surely attract more investment by the telecommunications operators. The government has already introduced advanced telecommunication technologies like 4G data services. The telecom regulator has started its initial preparations for awarding licences to carriers for 5G mobile data service in 2020.
Within the health sector, Bangladesh’s pharmaceutical industry was valued at about $2.2 billion in 2018, expected to grow at more than 3 times the rate of GDP growth. Bangladesh's pharmaceuticals sector is expected to grow at 15 percent year-on-year to reach $5.11 billion by 2023, propelled by high investments by local companies and international investors. In 2015, to expand the horizon of this sector, the Government issued permission for establishing the first ever Clinical Research Organization in Bangladesh.
A number of national incentives and facilities are provided by the Government of Bangladesh for investors seeking opportunities to invest in Bangladesh including a tax holiday for new businesses, up to 100% tax exemptions for EPZ developers and investors, 11 Economic Zones for business, 2 G2G Economic Zones with India and China, creating Special Economic Zones (SEZs) and 7 Private Economic Zones.
To cater for this increased investment and to improve the regulatory regime along with overall improvement of the nation’s investment climate, the Government of Bangladesh has recently enacted new enabling legislations like the One Stop Service (OSS) Act 2018, and implemented VAT & Supplementary Duty Act 2012 and is currently in the process of amending the Companies Act 1994, Arbitration Act 2001, Secured Transaction Law and Commercial Dispute Resolution Court Act etc.
It is evident that Bangladesh truly has become the new profitable destination for investors. This scenario can easily be identified by the recently increased establishment of international and multinational brands flying into Bangladesh. In the next few years, corporate/project financing, investment deals and significant numbers of associated joint ventures, mergers and acquisitions are going to be the busiest sectors in Bangladesh and in time will result in a huge demand for specialised corporate lawyers to advocate the best possible solutions for making these deals.
Last but not least, the country is also opening up to allowing outbound investments by its businessmen, granting a few permissions to some corporate entities to establish out of Bangladesh, and through its extensive global reach and network, the Firm is playing major roles in the process, paving its way to become an international law firm in the coming days.