Bangladesh The Dazzling Delta:

Your Growth Strategy in Asia

Nestled between India and Myanmar in South Asia, Bangladesh a country filled with hopes and dreams of 160 mn
people (8th largest) and spanning 147,540 sq. kilometers surfaces as one of the most prominent, lucrative
investment frontiers in the world. Despite its fair share of myriad challenges, the country has shown remarkable
resilience to register a steady economic growth of > 6% in the last decade, an accomplishment to take pride in. This
significant growth has resulted in a massive change in the composition of the countrys workforce today, as is
evidenced by the rise of consumerism.

Frontier Market Series: A LightCastle Analytics Publication

Acronyms
BDT
MW
Kg
MT
M MT
USD
GBP
bn
mn

Bangladeshi Taka
Mega Watt
Kilogram
Metric Ton
Mn Metric Ton
United States Dollar
Pound Sterling
Bn
Mn

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Table of Contents
Emerging Bangladesh A Part of Your Global Growth Strategy .................................................................................3
Apparel Export Industry Clocking Ahead ...................................................................................................................7
Power Infrastructure A Gold Mine ............................................................................................................................9
Footwear The Next Export Tiger ..............................................................................................................................11
Pharmaceutical Industry The Thrust Sector ............................................................................................................13
Information Technology The Gateway to Middle Income Status ...........................................................................15
Footprints Big Names that have made big ..............................................................................................................17
Investing in Bangladesh Government Policy Support .............................................................................................18

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Emerging Bangladesh A Part of Your Global Growth Strategy

Economy has been experiencing steady growth over the last decade and prospects are looking
better for the coming one, with a booming RMG sector, flourishing remittance flow, record high
foreign currency reserve and international investors interest in FDIs. Geographic proximity to
emerging Asian powerhouses - India and China - will further add impetus to the countrys drive
towards middle income status.
Strong performance relative to emerging
economies
Bangladesh economy has performed well over the
last decade with GDP growing by 6-7%, while many
of its competitors have faltered and lost their ways
(growth has been over the median of Ba rated
countries and BRIC). The growth is considered
impressive taking into account frequent instances of
natural calamities and political unrests that have at
times hindered economic activities.
Inflation has remained stable over 2013 at 7%
(Source: Bangladesh Bank) despite frequent supply
chain disruption due to political unrest. Reining of
inflation is attributed to declining growth of nonfood inflation such as rent, which has contributed to
lower inflationary pressure. In addition, the
Bangladesh Bank has adopted a tighter monetary
policy, leading to further lowering of inflation.

economic outlook, progress on policy reform and

limited vulnerability to fiscal and external funding
stress. Local currency country risk ceiling is affirmed
at Baa3, long term foreign currency bond, B2 and
bank deposit ceiling at B1.

Bangladesh economy vitals are on growth

trajectory
Exports have been growing based on the blossoming
RMG sector, which has clocked USD 23 bn over
2013. Remittance revenues have grown to the tune
of USD 12 bn, albeit at a slower pace. However,
import growth has declined at a relatively higher
rate, contributing to a positive current account
balance.
Bangladesh is experiencing record high forex
reserve position, currently standing at USD 19 bn.
The current reserve can comfortably cover 7 months
of countrys import and the Forex reserve is
expected to grow with steadily improving RMG
export and growth in remittance earning. Manpower
export is also set to improve as the Malaysian labor
market reopens and as government undertakes
measures to train and send more semi-skilled and
skilled workers abroad.

Influx in infrastructure development

Moody affirms Bangladeshs rating at Ba3

with stable outlook
Bangladesh has performed well compared to other
comparable countries. Sovereign ratings by both
Moodys and S&Ps are testament to the economys
resilience. The ratings are driven by healthy

Government has been investing heavily in

infrastructure development, especially in the field of
power generation. Public sector authorities have
tackled the demand-supply gap by directly involving
the private sector. Entrepreneurs have established
quick rental power generation plants, which have
been regularly supplying to the national grid,
contributing to lower electricity shortage.
Additionally, the government has reached an
agreement with India to import electricity, starting
with 500 MW per day. The existing installed capacity
is 10,213 MW.
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Government has been working to improve

efficiency of the Chittagong Port which has the
potential of doubling their capacity. There also are
long term plans of establishing a deep sea port in
Sonadia and both Chinese and Indian investors have
expressed interest in developing the sea port.
Establishment of a proper seaport can significantly
reduce export lead time and earn steady flow of
revenue for the government.

Economy offering long-term growth

opportunities

Expanding consumer market providing

growth opportunities

Moreover, Bangladesh is one of the few locations

that possess the capacity, access and cost-base to
capture the manufacturing shift out of China.

Spending power of Bangladesh is steadily enhancing

and by 2021, Bangladesh is projected to become a
middle income nation of 175mn people.

Bangladesh is developing as a key export hub in the

heart of Asia. With Indian and Chinese consumer
spending projected to grow by USD 2.6 trillion+ and
USD 4.2 trillion+ in the coming decade this
powerhouses will become key markets for
Bangladesh.

RMG continues its success story with USD 23 bn in

exports, mostly catering to the nations in EU. With
proliferation of product diversification and new
markets in Asia, this volume may well exceed USD
40 bn by 2020.
Bangladesh has competitive wage rates compared to
other emerging markets.

With an emerging economy consumer spending,

disposable income and personal savings are also
experiencing a positive momentum. Bangladesh is a
mammoth sized consumer market consisting of
nearly 160 mn consumers.
This huge consumer base is being driven by catalytic
factors like age and gender distribution (60% of the
population is aged between 15-64), increasing
urban population (growing at a rate of over
30%/year), expanding labor force (increasing
purchasing power of the mass), increasing literacy
rate (primary education enrollment is 95%+), rising
middle class, growing white collar culture, and
globalization.

Additionally, Bangladesh has one of the lowest

public debt to GDP ratio compared to other frontier
markets including the likes of India and Vietnam.

Strategic Location at the Heart of Asia

Beneficial location at the crux of Chindia.
Proximity to India and China leads to strong trade
relations. Additionally, Bangladesh leverages on the
exceptional growth environment in the region and
commutable distance to key Asian cities traction
from the 975 mn new Asian middle class market.
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A host of emerging sectors

Additionally, FDI is currently 1.2% of GDP, which is

low compared to frontier market average.

Bangladesh has started foraying into diverse higher

value sectors. Light Engineering, Pharmaceuticals,
Leather, and IT services are exhibiting high potential.
Non RMG exports stand at USD 5 bn now and are
expected to exceed USD 11 bn by 2025.

Potential Gap of USD 2 bn +

Capital market provides long positions and

risk diversification for investors
Bangladesh capital markets have very low and even
negative correlation with developed, emerging and
other frontier equity markets. Therefore, an
exposure to Bangladesh significantly improves risk
adjusted returns.

Next investment hub in Asia

Bangladesh provides an opportunity space for
foreign investors to bring forward technology and
market access while reciprocally the country
provides a favorable cost base, trade terms and
capacity for set-up of production facilities.

The market has returned 203% since Jan 2007

(16.33% p.a.). For long term investors looking to
participate in the Bangladesh growth story now
the time is just about ripe to start investing.

At present, Bangladesh is involved in the production

of motorbikes, consumer electronics (TVs,
refrigerators, mobile devices) and even ships.

FDI yet to reach its full potential

Bangladesh has been experiencing increasing FDI
over the last decade. FY 2013 inward FDI was USD
1.7 bn (highest in the manufacturing sector USD
713 mn).
Largest Stocks as of May 30, 2014

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Get Ready to Enter Bangladesh

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Apparel Export Industry

Clocking Ahead
Bangladeshs RMG sector outlook projects a
bright future as close competitors like China are
moving up the value chain, leaving value
apparel manufacturing to cost effective players
like Bangladesh. Mckinsey, a leading consulting
firm, in their recent report on Bangladeshs
RMG sector, has testified to RMG sectors
growth potential. According to the report, RMG
export is set to grow to USD 36 bn by 2020.

The growth story of the RMG sector

The export oriented readymade garments (RMG)
sector in Bangladesh started its modest journey as a
small non-traditional sector of export in the late
1970s. In this short span of three decades, RMG has
transformed itself as the countrys highest revenue
generating sector, contributing 82% (USD 23 bn
FY13) of countrys total export.

Emerging markets for Bangladesh apparel

EU is Bangladeshs highest RMG export destination
constituting 58% of total export followed by US
market with export of 23%. Bangladesh has recently
diversified into emerging export markets including
Australia, Brazil, China, Japan, and South Africa
accounting for 14% of total export.

Bangladesh is currently the largest RMG exporter

behind China and India having a growth potential in
the coming years. With GSP facility in EU and duty
free access to Canada and Japan, Bangladesh is
benefitting from competitive cost advantages that
have translated into higher export revenue.

Sustaining competitive costs

The RMG sector has flourished over the years
catalyzing on inexpensive labor. The country still
sustains the competitive advantage despite
conceding 77% minimum wage hike in early 2014.

Bangladeshs RMG export has spiked in the post

MFA regime from USD 6.9 bn in 2005 to USD 11.8 bn
in 2008. The global financial crisis also had minimal
impact on Bangladeshs export, initially stagnating at
USD 11.8 bn in 2009 before increasing to USD 19.2
bn in 2011.

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Way forward for further growth with

renewed compliance
The RMG sector has undergone upheaval in 2013
mainly due to a series of industrial accidents which
brought international attention towards factory
compliance issues. Amid pressure from international
retailers, Bangladeshi factories have undergone
structural changes for adhering to strict compliance
norms. Meanwhile, political unrest in the latter half
of 2013 had a crippling effect on the sector.
In spite of the double whammy, RMG export has
managed to register growth (c.10%), both in the
last quarter of 2013 and first half of 2014. This
indicates to the resilience of the sector and buyers
continued reliance of Bangladesh as an export
destination.
In the backdrop of the recent signing on the TICFA
agreement with the U.S., talks are underway to
revive GSP facilities. The new GSP deal may also
include tariff and quota free access of Bangladesh
apparel that went missing in the previous GSP
agreement.

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Power Infrastructure A Gold

Mine
Bangladeshs annual economic growth of 7%
calls for the scalability of its power
infrastructure to keep up with the demands of
industry and increased urbanization.
Heavy investment in energy infrastructure has
made improvements but by 2030 Bangladeshs
demand may well reach 34,000 MW. Meeting
this increase may result in a multi-bn dollar
opportunity for business.

Insights on fuel sources

The fuel mix of the power plants are heavily
dependent on natural gas, set to meet the power
demands of the country until 2019.
The power developments master plan lays out a
roadmap to reduce dependence on the natural gas
and move fuel priority towards usage of coal, having
plans to generate 50% of total electricity by 2030.

Status quo
The current demand in the country is around 6,264
MW with maximum demand having hit 8,250 MW in
April 2013. The electricity demand is set to grow at
11% in the 2015-2020 period (PSMP 2010) and the
installed capacity was 10,213 MW as of November
2013. However, there is shortfall due to mismatch
between fuel mixes and plant types.

The private units are operating in the market,

comprising of 42% of the total installed capacity.

Quick power rental from private sector

Moreover, 62% of the population is currently

covered by the electricity grid with the rest of the
population set to come online in the near future.
This represents a still untapped market of 61 mn
people who will be connected to the national grid in
the coming years as Bangladesh continues its growth
trajectory out of the LDC category.

Various quick rental power plants were set up by the

private sector units, aiming to reduce the generation
deficit during the 2010/11 period. 22 plants were
rolled out by the private sector. These plants have
high production costs owing to exorbitant furnace oil
prices and are poised for replacement now with
alternative energy sources.

The power industry is unique in the fact that

overhauling it can impact all components across the
vertical production chain. This presents ample
opportunity for investment in areas ranging from
electricity generation to distribution channels in the
fuel sourcing function.

Game plan for the future

In keeping pace with the level of economic growth in
Bangladesh, the power authorities have devised a
master plan through the PSMP 2010 to upgrade the
linkages in the sector to reach the optimum fuel mix.
Some major developments in the sector have also
occurred to ensure that demand is met adequately
in near future.

Regional connectivity
Bangladesh has started to move towards regional
power grid connectivity, the first manifestation of
which has been the beginning of electricity import
from India. This move was started on a pilot basis in
October 2013 with import of 175 MW of electricity.
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It has the potential to reach 1000 MW given the

infrastructure in place. This gives Bangladesh a
cushion with respect to energy security in the near
term.

Alternative sources of power

Coal: As a fuel source, coal consists of around 3% of
the total composition. This is set to reach 50% within
the year 2030 according to the master plan by the
Power Development Board. Salient reasons for a
foray into coal production are because of two
reasons. First, because there are huge reserves of
coal in the Northern regions of the country,
estimated to be around 3 bn tonnes; and second,
there is potential to import coal from neighboring
countries to fulfill demand if necessary.
Hydroelectricity: Drawing from the prior-mentioned
point on regional connectivity, there is a huge
potential for Bangladesh to tap in to Nepals and
Bhutans huge hydroelectric generation capacity.

LNG import facilities and off-shore gas

reserves
Liquefied Natural Gas (LNG) can augment the
countrys energy needs by allowing for import of
liquefied natural gas and subsequent gasification on
landing and distribution. The groundwork has been
laid to construct Bangladeshs first floating LNG
terminal at Moheshkhali that is going to have a
capacity to handle 5 mn MT/year of LNG.
The proposed infrastructure for this purpose will
also act as a platform for offshore power exploration
as well as subsequent extraction and transfer. Its
fair to say that Bangladesh has substantial reserves
of untapped gas in its offshore wells.

Investment potential
Projected demand to hit ~ 34k MW by 2030. Total
investment in the sector over the next 15 years is
estimated at USD 70.5 bn.

Commercial &
Household demand for
power set to reach
33,708 MW by 2030
Major investment
opportunities via BOO,
BOOT arrangements
under the PPP
mechanism

Renewable Energy (Solar): Bangladesh has

successfully managed to implement one of the
biggest Solar Home System (SHS) projects. Almost 3
mn SHSs have been installed to date with a targeted
installation base of 6 mn by 2015. Currently
renewable energy makes up 2% of the total
electricity generation.
Wind Energy: Having a 710 km coast line,
Bangladesh is yet to take full advantage of wind
turbines. Upside from this sector can be extensive.

Overhaul of road,
waterway and
infrastructure to
facilitate fuel
transport

Overhaul of
Pipeline
Infrastructure to
carry imported
LNG and Drilled
Natural Gas from
sea to distribution
hubs

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Footwear The Next Export

Tiger

Eyeing the global leather market

Although Bangladesh export basket is heavily

skewed in favor of RMG export, several new
sectors have cropped up over the last decade.
Footwear is one such sector which has
tremendous potential to significantly boost the
countrys export while diversifying the
economys export basket.

Global footwear industry is at an upward

trajectory
Given rising global demand for footwear, which is
expected to reach USD 211 bn by the end of 2018
(Source: Transparency Market Research), Bangladesh
holds the potential to leverage benefits through
high-quality production.

The sector has been growing over the last 5 years

with exports increasing by 46% in 2011 followed by
another healthy 25% growth in 2013. Recently, total
export has exceeded USD 1 bn mark chiefly due to
the rising global demand and renewed interest
among local entrepreneurs for manufacturing
footwear. Some international investors have already
carved a niche by setting up factories in local Export
Processing Zones (EPZs).
As illustrated above, Bangladesh has the potential
to accommodate relocating footwear units from
China due to Bangladeshs inherent input cost
advantages. However, Bangladeshi labor need to
undergo significant learning curve to improve on
efficiency and productivity.

Local footwear market is growing

Bangladeshs footwear export has doubled during
2010-13 and continues to rise further as illustrated
below. Bangladesh is involved in the export of
components at various stages of footwear value
chain ranging from raw materials to work-inprogress such as soles and finished goods e.g., shoes.

As illustrated above, Bangladesh has the potential to

accommodate relocating footwear units from China,
due to Bangladeshs inherent input cost advantages.
However, Bangladeshi labor need to undergo the
learning curve to improve their efficiency and
productivity.

Source: Export Promotion Bureau (EPB)

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Bangladesh has a distinct advantage in footwear

production as it is involved in all stages of the value
chain from raw leather to final product. The annual
export of these components is expected to reach a
value of USD 5 bn within the next decade.

Leather sourcing will be a competitive

advantage
Bangladesh produces superior quality leather from
local livestock, which is subsequently processed by
tanneries concentrated around the capital. These
inputs are then transformed into final products
including footwear, whose exports stood at USD 419
mn as of 2013. (Source: EPB)
The annual production of leather hovers around 250
mn square feet each year with supply peaking during
the religious festivals of Eid. In 2013, the supply of
rawhide stood around 7 mn units, leaving the
tanneries to struggle to keep up with the supply.

Bangladesh has robust backward linkage

In Bangladesh, incoming raw hides are sorted and
processed in tanneries that are concentrated in the
outskirts of the capital in Hazaribagh. These entities
have come under censure for being environmentally
unfriendly prompting the government to build a 200
acre Leather Industrial Park in Savar at a cost of
USD 60 mn. The park will include state-of-the-art
Effluent Treatment Plants (ETPs) to treat the waste
generated while processing leather in the tanneries.

The Asian market to drive demand

In sync with international proliferation, the domestic
market, and the region as a whole, also has potential
for growth. This is due to rising per capita income in
Bangladesh, recently passing the USD 1,000 mark. In
addition, the economic conditions of the countries
in this region is changing rapidly with increasing
economic growth translating into higher per capita
income, in effect indicating higher purchasing
power. This is going to pull the demand for products
such as footwear upward as they move from being a
mere necessity to a luxury and status oriented
product.

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Pharmaceutical Industry The

Thrust Sector
The pharmaceutical sector in Bangladesh is one
of the thrust sectors and plays a vital role for
the countrys economy. The sector utilizes
highly skilled manpower along with advanced
machinery for manufacturing high quality
generic medicines and vaccines for local and
international markets at competitive prices.
Currently, the market consists of around 150
pharmaceutical companies, out of which top 20
companies control 85% of the market share.
The local manufacturers cater to 97 % of the
country's consumption with a market size of
USD 1.2 bn and are continuously expanding
their reach in the global horizon.

Market demand and supply insights

Bangladesh has one of the lowest per capita drug
consumption in the world. However, the onset of the
sector growth was accelerated by the promulgation
of the Drugs (Control) Ordinance, 1982 Act.
Furthermore, the local demand for generic drugs
sharply increased within the past few years due to
the development of health care infrastructure,
increase of health awareness both in rural and urban
areas, escalation in standard of living in general, and
increase in life expectancy.
Incepta Pharmaceuticals Ltd, Renata Ltd, Drug
International Ltd, Eskayef Bangladesh Ltd, Sanofi,
Beximco Pharmaceuticals Ltd, and Opsonin Pharma
are the top market players. Square Pharmaceuticals
stands out as the market leader with a whopping
19.3 % market share. Trailing it closely are Incepta,
Beximco, and Opsonin.

Global vs. local market synopsis

IMS projects the global pharmaceutical market to
reach 1.135 trillion from 9.53 bn at a compound
annual growth rate (CAGR) of 36% during 20132017. Led by China, the BRIC countries (Brazil,
Russia, India, and China) account for almost 70% of
all pharmaceutical market sales. Parallel to the
global picture, the emerging countries show a
positive growth trend, where Bangladesh is one of
the Tier 3 pharmerging countries that is forecasted
to contribute to this industry growth by 69%
between 20132017.
The local market demand in Bangladesh differs
significantly from the international market; about
85% of the drugs sold are generics and 15% are
patented drugs. The market comprises 83 active
pharmaceutical companies, of which the top 20
controls 85% market share. The local market size
currently rests at USD 1.2 bn.

All these companies are well known for exporting

high-end branded drugs such as anti-cancer drugs
and cardiac medicines. Some high-tech insulin
manufacturing plants have started operations in
recent times to meet the country's growing demand.
Beximco has recently entered the EU market and
became enlisted in London Stock Exchange as well.

Export status quo

As a member of WTO and being enlisted as one of
the LDCs, Bangladesh currently enjoys the benefits
of intellectual property rights that allow producing
generic drugs and exports until 2016 without
compulsory licenses or paying the patent holders,

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thus providing an advantage to the local

manufacturers and exporters.

At the moment, companies import 80% of thier raw

materials (APIs) from India and China, which
significantly escalates the cost of production.
However, currently 15 Bangladeshi companies (such
as Beximco, Square, and Opsonin) are
manufacturing active pharmaceutical ingredients
(API).
The government is taking significant steps to
implement API Industries Park at Munshiganj, a
distance of 40 km from the capital. About 40
industries will be established at the plant, which will
include a central Effluent Treatment Plant
incinerator. Building this backwards-integration is a
giant leap for this sector as it will eventually give the
local pharmaceutical manufacturers price
competitiveness in the global arena.

Source: EPB

The local manufacturers are determined to meet the

domestic demand fully by 2014 and penetrate
leading foreign markets. At present, pharma
companies export to 85 countries in Europe, Asia,
Africa, and Latin America with export standing at
USD 60 mn in 2013. Due to the rise in demand in
Southeast Asia, Asia Pacific and Africa, the pharma
exports recorded a rise of 23.9% in FY 2012-13.
Leading companies have already obtained
accreditation from USFDA, UKMHRA, TGA and GCC
and are endeavoring to penetrate into U.S.A and
other EU based markets.

Moreover, to meet the staggering local and

international demand, the government has
extensively imposed lower or nil import duty and
VAT for certain raw materials/ items and certain
capital machineries, and also allowed tax holidays
of four to six years to investors in this sector.

Rapid growth poised to stay

The Bangladesh pharmaceutical market is growing at
a fast pace and radiates a promising future.
According to Business Monitor International's latest
report, Bangladesh has moved one step upward to
occupy the 14th position among the 17 regional
markets.
This sector offers an enormous investment
opportunity and has the potential to export
alongside to the RMG sector catering to the
burgeoning worldwide consumption.

Growth incentives and benefits

Healthy growth trajectory is boosting the
pharmaceutical manufacturers towards R&D for
newer generics with global standards in place. The
DGDRA Bangladesh is playing the key role in
inspecting the WHO GMP and SOP of the
pharmaceutical manufacturers and enrolling the
certifications for subsequent two years validity from
the date of inspection.

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Information Technology The

Gateway to Middle Income
Status
Bangladesh IT sector has historically remained
outside limelight due to neighbor Indias
spectacular IT success. Lack of infrastructure
and inadequate training facilities compounded
the slow progress of this sector.
However, over the last decade, there has been
a proliferation of IT ventures earning foreign
currency reserves for the nation.
The government also undertook several
development measures for improving overall
infrastructure, culminating in more reliable and
cheaper internet connectivity while ensuring
training facilities for budding IT professionals.

Market in growing with more product

depth
Currently there are over 800 IT and ITES companies
registered in Bangladesh with an estimated total
industry turnover of around USD 250 mn. Nearly
76% of these companies are involved with
customized application development and
maintenance. The specialization of the local IT and
ITES companies is shown in the following figure.

Whereas most local market players initially offered

their services and products predominantly on the
domestic market, much to the delight of the nation,
Bangladeshi software solutions and ITES are
nowadays exported to other parts in the world, too,
like Europe and Northern America.

Thriving domestic ITES market

Recently, many large-scale automation projects have
been implemented in sectors such as banking,
telecom, pharmaceuticals, RMG and Textile sectors,
increasing the domestic demand for software and
ITES solutions. Manufacturing sectors including
garments, textiles, and pharmaceuticals, have
created sustainable demand for IT solutions like
ERP, HR, and Payroll management systems, and
production and financial management software. As a
result, the domestic IT service industry has grown by
20 to 30% per annum over the last few years
(Source: BASIS).

Prospect of outsourcing is positive

The ITC estimates that around 200 Bangladeshi ICT
companies are serving international markets offering
outsourcing services and project delivery models. In
regards to export destinations, North America
(Canada and the U.S.) dominates, but European
countries like the U.K., Denmark, the Netherlands
and Germany have nonetheless emerged over the
last few years as major export destinations (Source:
BASIS). According to the ITC Exporter Directory,
there are over 10,000 ICT freelancers active in
Bangladesh as of 2014, billing an export revenue of
nearly USD 200 mn.

Source: BASIS
Source: BASIS

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Big names are taking notice

Booming startup community

Bangladeshs prospects have been identified by

several global ICT companies. For example, the
Korean technology giant, Samsung, has opened a
high-end research and development (R&D) center
in Bangladesh employing over 250 engineers. VizRT,
a Norwegian company that creates content
production tools for the digital media industry, is
building captive centers following acquisitions of ICT
production companies in Bangladesh. Other global
IT companies like AMD, LG, and IBM are currently
in the process of setting up either their back-office
R&D or support centers in Bangladesh.

Bangladesh is witnessing the rise of a vibrant startup

ecosystem. Many initiatives from public as well as
private sectors are being regularly held with the likes
of Digital World 2014, A2I Innovation Fund, GIST
Bootcamp, StartupBash, Startup Cup, DCCI
Innovation, and Entrepreneur expo to promote the
startup concept and support the budding
entrepreneurs.

Government is strongly backing the sector

Governments Digital Bangladesh initiative has
assisted in increasing export revenues in the IT
sector from USD 35 mn to USD 200 mn over the last
five years. In conjunction, it is also helping to set up
infrastructure for enhanced connectivity, ICT based
citizen service delivery, and ICT based education
system, and multiple internet connectivity.

Local ventures like BDJobs.com and NewsCred have

raised international funds with many local tech
companies like chaldal.com raising seed finance
from local and international investor networks.
A host of freelancers is now forming small teams and
making way towards setting up their own IT firm.
With the right mentoring and access to market
linkage, these local entrepreneurs can become the
next generation of leading global tech startup
founders.

Initiatives like Digital World and BASIS Softexpo are

playing a positive role in building awareness and
promoting IT sector to both the domestic and the
international market. Internet connectivity has been
enhanced vastly over the country.

The sector outlook is optimistic

With cooperation and support from both
government & the private sector, the sector is
expected to reach export earning of USD 1 bn
within the next 5 years courtesy of the European
and the U.S. markets.

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Footprints Big Names that

have made big
Many multinational companies are maintaining
market presence as a precursor to more heavy
involvement. However, some major
international companies in different sectors
have chosen to take the plunge and enjoy
superior returns. Some of them are:

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Investing in Bangladesh
Government Policy Support
Since economic liberalization of the Bangladesh
economy in early 90s, successive governments
have pursued a pro-investment policy with a
view to increasing foreign direct investment
(FDI). Special economic zones have been setup
across the country and major foreign investors
provided with subsidized lands, tax holidays,
profit repatriation, and priority in utility
connections.

Bangladesh Emerging investment hub

Recently, attractiveness of Bangladesh as an
investment destination has increased manifold,
especially due to the countrys preferential trade
status in major international markets, inexpensive
labor, and proximity to China and India. Increasing
labor costs in China has further precipitated a shift of
investment to neighboring regions. Under the
context, Bangladesh government is keen to attract
investment not only to positively tilt the balance of
payment position, but to further rejuvenate the
economy through employment generation and GDP
growth.

Investment friendly policy framework

A host of policies has been adopted to incentivize
foreign investment.
Tax holidays: Foreign investors will receive tax
holidays ranging from 5 to 7 years based on
geographic locations. For industrial enterprises
located in Dhaka and Chittagong, tax holiday is for 5
years while it is 7 years for locations in Khulna,
Sylhet, Barisal, and Rajshahi divisions.
Accelerated depreciation facility: Industrial units
financed by foreign investors will enjoy accelerated
depreciation allowance post tax holiday period. Such
allowance is available at 100% cost of the machinery
or plant if the industrial undertaking is set up in the
areas falling within Dhaka, Chittagong, and Khulna. If
the industrial undertaking is set up elsewhere in the
country, accelerated depreciation is allowed at the
rate of 80% in the first year and 20% in the second
year.

Concessionary duty on imported capital machinery:

No import duty will be charged for imported
machinery for industrial units that are 100% export
oriented in nature. For the rest, 5% import duty will
be charged for initial installation or BMRE/BMR of
the existing industries.
Full repatriation of capital: Full repatriation of
capital invested from foreign sources will be
allowed. Similarly, profits and dividend accruing to
foreign investment may be transferred in full. If
foreign investors reinvest their dividends and or
retained earnings, those will be treated as new
investment.
Legal protection: The policy framework for foreign
investment in Bangladesh is based on 'The Foreign
Private Investment (Promotion & Protection) Act
1980, which ensures legal protection to foreign
investment in Bangladesh against nationalization
and expropriation. It also guarantees nondiscriminatory treatment between foreign and local
investment, and repatriation of proceeds from sales
of shares and profit. Despite change in government,
there has been a continuity of policies with regards
to attracting foreign investments.
Bilateral agreement and treaty: Government of
Bangladesh has a series of bilateral investment
agreement with a number of countries in Asia
(China, India, Japan, Singapore, South Korea, Sri
Lanka, Thailand, Iran, Malaysia, Pakistan,
Philippines), Europe (Belgium, Denmark, France,
Germany, Poland, Romania, Sweden, The
Netherlands, United Kingdom, Italy, Romania,
Switzerland, Turkey) and North America (Canada,
U.S.A).
In addition, Bangladesh is a signatory to MIGA
(Multilateral Investment Guarantee Agency), OPIC
(Overseas Private Investment Corporation) of U.S.A,
ICSID (International Centre for Settlement of
Investment Disputes) and a member of the
WIPO (World Intellectual Property Organization)
permanent committee on development co-operation
related to industrial property.
Preferential trade agreements: Bangladesh has a
number of preferential trade agreements with
countries having significant market size e.g., GSP
with EU, quota and tariff free access to Canada,
Japan.

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Investment Advisory Services

Alongside, Bangladesh has recently signed Trade and

Investment Co-operation Framework Agreement
(TICFA) with the U.S. where bilateral trade issues will
be discussed. Currently, talks are underway to revive
the GSP suspension imposed by the U.S. government
last year.

In order to trade dematerialized shares listed

with the Stock Exchanges, investors must have a
Beneficiary Owners (BO) Account with CDBL.

NRB & Foreign Investors may choose to appoint

a custodian to ensure trade execution and safe
custody of shares.

Gateway to Bangladesh
International investors undertake investments
seamlessly through Board of Investment (BOI) and
Central Banks support.

Entering the capital markets

Foreign investors can also invest directly in
Bangladeshs vibrant capital market, which can
hedge investors portfolio risks in the event of global
economic downturn.
The following steps need to be taken by a foreign
investor for investing in the capital market:

A Foreign Currency Account (FCA) is needed for

inward and outward remittance.

A Non-resident Investors Taka Account (NITA) is

required for converting foreign currency into
Taka.

All Capital Market investors are required to

conduct trading through a Stock Broking
Account maintained with any Stock
Broker/Member of the respective Stock
Exchange.
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Investment Advisory Services

About us:
At LightCastle Partners, we help you simplify
decisions by providing advisory and analytics
services.
Advisory: We empower you to make prudent
investment decisions by providing authentic due
diligence, consumer research, company valuation,
business design, and impact investment consulting
services.

Analysts
Asif Khan, CFA
Bijon Islam, Co-founder LightCastle
Kashif Choudhury, Business Associate LightCastle
Raitul Rabith, AVP LightCastle
Saifur Rahman, Co-founder LightCastle
Tanzina Moktadir, VP LightCastle
Zahedul Amin, Co-founder LightCastle

Analytics: We develop crisp, digital dashboards and

run predictive analysis to articulate major insights
from a wide assortment of data, enabling you to
adopt strategic shifts to drive profitability.
From working with over 40 national and
international firms, we have gained in-depth
knowledge and honed expertise to advance our goal
to simplify the complex process of decision making.
On the private sector side, we consulted for some of
the biggest global brands - Mitsubishi (Japan),
Generac (U.S.A), Telenor (Norway), Starbucks (U.S.A)
- international investment funds such as Asian
Capital Advisors and a number of local
conglomerates. Under impact investment, we
worked in multiple projects with top tier firms like
CARE Bangladesh, Swisscontact Katalyst, Traidcraft
(UK), Habitat for Humanity (Philippines) and Hivos
(Indonesia).

For any queries, please contact:

LightCastle Partners
FR Tower 19 Floor
32 Kamal Ataturk Avenue
Banani Dhaka 1213, Bangladesh
Email: info@lightcastlebd.com
Read our blog at http://www.lightcastlebd.com/blog
Visit us at http://www.lightcastlebd.com

The founding partners have background in

Investment and Corporate Banking, Audit and
Advisory from firms like Citi, HSBC, Standard
Chartered and KPMG.

All information contained herein is obtained by LightCastle from

sources believed to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors,
however, all information contained herein is As IS without
warranty of any kind.
LightCastle adopts all necessary measures to ensure that the
information it uses is of sufficient quality and is from sources
considered to be reliable including, when appropriate,
independent third-party sources. However, LightCastle is not an
auditor and cannot in every instance independently verify or
validate information received in preparing publications.

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Investment Advisory Services