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Doing Business in Bangladesh

Doing Business in Bangladesh involves navigating various financial aspects and regulatory requirements, which have seen reforms aimed at attracting foreign investment. Trade and exports have been integral to the country’s economic upliftment, contributing significantly to its GDP. However, companies seeking to establish operations in Bangladesh must be cognizant of the challenges posed by infrastructure constraints and bureaucratic complexities. Despite these hurdles, the potential for growth in a market characterized by reduced poverty rates and rapidly improved economic indicators remains significant.

Key Takeaways

  • Bangladesh presents significant investment opportunities with a growing economy and strategic location.
  • Understanding the country’s legal and business environment is vital for successful market entry.
  • Despite challenges, the potential for prosperous business operations in Bangladesh is substantial.

Bangladesh Business Guides

Economic Overview

Bangladesh stands out in South Asia for its notable economic resilience and growth. The country has seen steady GDP increases, underpinned by strong export performance in the textile industry and substantial foreign investment inflows.

Economic Growth

Bangladesh’s economy has demonstrated robust growth rates over the last two decades, positioning the country as one of the fastest-growing South Asian regions. A solid demographic dividend, expansion of export-oriented industries, and resilient remittance inflows have consistently driven its upward trajectory.

GDP and Main Industries

Bangladesh’s GDP has grown impressively, with the textile and garment sectors serving as significant contributors. These industries form the backbone of the country’s exports and generate sizable employment opportunities. In addition to textiles, electronics, shipbuilding, and agribusiness sectors are gaining prominence. Bangladesh also strategically focuses on industries such as electricity and natural gas production to bolster economic development further.

Foreign Investment Landscape

The United Nations Conference on Trade and Development observed that foreign direct investment in Bangladesh has increased, indicative of the country’s growing appeal to multinational corporations. The government’s investment-friendly policies have encouraged foreign participation, particularly in sectors like the textile industry, which is pivotal for the country’s economic advancement. Despite global recessions and a challenging economic climate, Bangladesh’s ability to attract and maintain foreign investment continues to support its economic growth.

Legal and Business Framework

The legal and business framework in Bangladesh encompasses a diverse range of laws and regulations that are crucial for conducting business. It includes specific rules on intellectual property, contract enforcement, and the establishment of various business vehicles within the legal system. Understanding this framework is essential for operating successfully in this jurisdiction.

Business Laws and Regulations

Bangladesh has a structured business environment that mandates compliance with various laws and regulations. Business vehicles in Bangladesh can take several forms, such as private limited companies, public limited companies, branch offices, and representative offices. They need to adhere to the Companies Act and other relevant legislation. Permits and licenses are required for certain operations, and navigating the legal bureaucracy is a part of the business setup process. The Competition Lawensures fair trade practices, while Data Protection regulations are being strengthened to secure personal data.

Intellectual Property Rights

Intellectual property rights in Bangladesh are protected under the Patents and Designs Act and the Copyright Act. These laws ensure that creators can secure patents for their inventions, copyrights for their literary and artistic work, and trademarks for their distinctive signs or logos. The protection of these rights encourages innovation and provides legal recourse against infringement, bolstering business confidence.

Contracts and Enforcing Contracts

Contracts in Bangladesh are governed by the Contract Act, which stipulates the requirements for a valid agreement. Businesses must ensure contracts are clear and enforceable, with terms that are legally binding and executable. The legal system permits enforcement of contracts through the courts, although it can be time-consuming. Additionally, understanding regulations regarding employment relationships, including redundancies and mass layoffs, is necessary as they form part of contract law and affect operational decisions.

By navigating through the complexities of the legal and business framework in Bangladesh, companies can safeguard their interests and foster a conducive environment for growth and development.

Setting Up a Business

Setting up a business in Bangladesh involves several key steps including company registration, property registration, and obtaining necessary permits. Each process is governed by specific regulations that must be adhered to.

Starting a Business

When one decides to start a business in Bangladesh, the first step is to decide on the type of legal entity they wish to establish. Options for foreign investors include setting up as a wholly foreign-owned enterprise, a joint venture, or working through liaison offices. At minimum, two directors are needed to form a company, and the company name must be cleared before incorporation.

Steps for Incorporation:

  1. Company Name Clearance: Obtain approval for the company name.
  2. Directors: Appoint a minimum of two directors.
  3. Documentation: Prepare and submit articles of association and other legal documents.
  4. Registration: Register the company with the Registrar of Joint Stock Companies and Firms (RJSC).

Registering Property

To register property in Bangladesh, one must ensure proper due diligence is performed. The process includes checking the property title for any encumbrances, completing the required documents, and paying the applicable property registration fees. It is critical for businesses to have clear ownership rights to avoid future legal complications.

Key Aspects of Property Registration:

  • Title Search: Verify the property’s legal status.
  • Documentation: Execute the sales deed and have it notarized.
  • Registration Fees: Pay stamp duty and registration fees to the government.

Dealing with Construction Permits

Acquiring construction permits is obligatory for businesses looking to develop new structures or alter existing ones. The process includes obtaining approvals from various government authorities, ensuring compliance with local building codes, and passing inspections.

Essential Steps for Construction Permits:

  • Site Plan Approval: Submit detailed plans to the city development authority.
  • Inspections: Undergo mandatory inspections during and after construction.
  • Utility Connections: Secure connections to essential utilities such as water, electricity, and sewerage.

Financial Aspects

When doing business in Bangladesh, understanding the financial landscape is crucial for both obtaining credit and managing investments effectively. Taxation policies and tariffs also play a significant role in shaping the trade environment.

Getting Credit and Credit Information

Access to credit is a fundamental need for businesses to grow and expand. In Bangladesh, the presence of a Credit Information Bureau helps streamline the sharing of credit information. It maintains records on borrowers’ creditworthiness, which banks and financial institutions use to assess risk and extend credit. The availability of such information typically facilitates a more efficient allocation of credit to potential investors and businesses within the country.

Protecting Minority Investors

Protecting minority investors is an essential aspect of encouraging investment. Bangladesh’s legal framework includes regulations that help safeguard the interests of minority shareholders. These include disclosure requirements for major transactions, as well as governance obligations that ensure minority stakeholders are considered in significant changes to corporate structure or operations. This focus on protecting minority investors serves to maintain a level of confidence among both local and foreign shareholders, bolstering investment activities.

Taxation and Tariffs

Business operations in Bangladesh are subject to various forms of taxes and tariffs, impacting transactions and the profitability of companies. Tariff rates can vary depending on the product and trade agreements, influencing exports and import costs. The country has a tiered corporate income tax system, with rates depending on the type of business entity. In addition, a VAT (Value Added Tax) is applied to goods and services, and different types of indirect taxes may be levied. Businesses must ensure compliance with the tax regulations to avoid any legal issues and underpin smooth operations within the market.

Trade and Exports

When doing business in Bangladesh, understanding the framework of trade and exports is crucial. This includes mastering the processes for trading across borders, adhering to customs and documentationrequirements, and leveraging export incentives and restrictions.

Trading Across Borders

Bangladesh, recognized for its substantial export in the sector of textiles, often ranks competitively in trading across borders due to its continuous efforts to simplify trade processes. In 2021, Bangladesh’s top export destination was the United States, with knit T-shirts being the leading export item. The nation utilizes its strategic geographical location, bordering India and Myanmar, to facilitate trade. Additionally, digital platforms and the internet have eased the flow of information, making it simpler for businesses to navigate trade logistics.

Customs and Documentation

Stringent customs regulations can greatly impact the export process. Exporters must comply with all required documentation to clear their goods. This includes, but is not limited to:

  • Commercial Invoice
  • Bill of Lading/Airway Bill
  • Packing List
  • Certificate of Origin
  • Letter of Credit or other payment terms aligned with the buyer

Fulfilling these requirements helps prevent delays and ensures compliance with both domestic and international trade laws.

Export Incentives and Restrictions

The Bangladeshi government offers numerous incentives to exporters to promote foreign trade, such as tax exemptions and financial support programs. Conversely, there are restrictions on exporting certain items. These measures are taken to protect local industries and national security, as well as in response to international trade agreements and protocols.

Understanding the landscape of incentives and restrictions is key for any business endeavoring to export from Bangladesh, ensuring smooth and profitable operations.

Business Operations

Conducting business in Bangladesh involves navigating a system where workforce capabilities, regulatory requirements, and property rights are key factors.

Employment and Workforce

In Bangladesh, the textile industry is a significant source of employment and economic activity. Employers must comply with local labor laws which outline standards for working conditions, wages, and benefits. Labor-intensive sectors offer various incentives to foreign businesses, aiming to harness the skilled but competitively priced workforce.

Safety and Regulations

Safety is a major concern, especially in factories and industrial areas. Businesses must adhere to safety regulations to prevent workplace accidents, which have been a historical challenge in sectors like textiles. Compliance with regulations is enforced by the government to ensure worker safety and fair labor practices are maintained.

Property Rights and Regulations

In Bangladesh, securing property rights is crucial for business operations. The legal system provides mechanisms to enforce rights and resolve disputes. However, businesses often face challenges due to bureaucratic procedures. Companies should be aware of potential liabilities that may arise from not following the established property and investment regulations.

Business Challenges

When engaging in commercial activities in Bangladesh, businesses often face a series of regulatory and operational obstacles. Highlighted here are specific aspects relating to insolvency procedures, corruption, bureaucratic complexities, and the development of digital infrastructure which require attention and strategies to navigate effectively.

Resolving Insolvency

In Bangladesh, the process of resolving insolvency can be intricate. As reported by the World Bank Group, Bangladesh is positioned lower in the global ranking for ease of handling insolvency. Procedures may be protracted and complex, making it difficult for businesses to efficiently restructure or dissolve entities facing financial difficulties.

Dealing with Corruption and Bureaucracy

The private sector’s development is often hindered by challenges related to corruption and bureaucracy. Despite reforms, transparency and efficient governance remain critical issues. Dealing with administrative tasks can be a daunting process, with unpredictable delays and additional informal costs due to corruption.

Digital and Technological Infrastructure

Bangladesh faces substantial hurdles in its progress towards a robust digital and technological infrastructure. The availability and reliability of internet services can impede private sector activities and limit the use of digital certificates. The advancement of digital infrastructure is crucial for streamlining processes, improving access to public services, and resolving commercial disputes more effectively.

Milly is an international lawyer and tech entrepreneur who has advised companies on expanding globally for over 5 years. She is an advocate of remote hiring and regularly consults on future of work matters. Milly founded RemotePad to help employers learn more about building and growing international teams.