In this epoch of globalisation, foreign private investment is an imperative feature in the map of economic and infrastructural development for developing countries. The Government of Bangladesh vigorously seeks foreign private investment through widening an assortment of investment incentives under its industrial policy and export-oriented intensification strategy, with few recognised distinctions between foreign and domestic private investors.
The Foreign Private Investment (Promotion and Protection) Act 1980 (1980 Act) stipulates matters relating to the setup of permanent establishments by foreign investors in Bangladesh, details on various investment incentives, monitoring and control of foreign exchanges, etc. The Act classifies diverse investment incentives to foreign investors of Bangladesh including tax holidays, concessionary duty on imported capital machinery, tax exemption on intellectual property rights, and tax exemption on export-oriented companies.
Since the beginning of the 1990s, Bangladesh has adopted a number of policies to increase the inflow of foreign investment. Ratification of the 1965 Conventions on the Settlement of Investment Dispute between States and Nationals of other States (ICSID Convention) by Bangladesh fulfils its commitment to the protection of foreign private investment in Bangladesh. Bangladesh is also a member of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), and the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985 (amended 2006).
Bangladesh's commitment to fair and equitable treatment towards foreign investment has been upheld by the judiciary in the case of Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration and Production Company Limited ("Bapex") and Bangladesh Oil Gas and Mineral Corporation ("Petrobangla") (ICSID Case No. ARB/10/18). In this case, our judiciary complied with the decisions delivered by ICSID that involved substantial monetary awards against Bangladesh. Compliance with the decisions given by ICSID in the Niko case demonstrates Bangladesh's positive attitude towards its commitment for the protection of the interest of foreign investors with the terms and conditions of BITs and the ICSID convention.
However, in the year 2014, a Study on Legal System and Procedures for Promoting Enabling Business Environment in Bangladesh was conducted by the Japan International Cooperation Agency (JICA) along with Mitsubishi UFJ Research and Consulting Co. Ltd. and KRI International Corp. In the final report of this study, a number of issues faced by the foreign investors were put forward for grabbing the attention of our government to work on. In this study, the foreign investors in Bangladesh claimed that tax incentives, provided under 1980 Act towards the foreign investors, are not consistent with Industrial Policy, prepared by the Ministry of Industries of Bangladesh.
It was brought to the attention of the government that there is no single guideline which illuminates concrete restrictions for all the Controlled Industries identified under the policy in a comprehensive manner. Moreover, there is no detailed law/regulation and guidelines regarding restrictions on entry of foreign capitals in the industries which are not included under the Controlled Industries category.
Most Foreign investors are not aware or updated on the changes made to existing laws, Notifications/ SROs/Orders/Policies and other relevant regulations due to insufficient dissemination measures by the government. As a result, foreign investors sometimes find the newly-enacted laws or amendment of laws and regulations as a bolt from the blue when any specific issue comes in front.
In order to commence a business in Bangladesh, potential investors stressed that they find it extremely burdensome to obtain various licenses, permits and approvals from different authorities. Furthermore, measures are vexatious and multifaceted for filing and obtaining licenses, permits and approvals after completion of foreign company registration.
Further, investors pointed out that the criteria for acquiring prior approval for foreign currency borrowings are imprecise to them. Foreign investors emphasized on the need of a prescribed guideline detailing the procedure for obtaining waiver from the Board of Investment for making outward remittance. Moreover, investors said that it is difficult to reimburse salaries of expatriates to their home country from Bangladesh.
Foreign investors often face problems in obtaining employment visa, work permits and security clearance as the process is lengthy and cumbersome and difficult to push through the system. It has been observed by the investors that intelligibility on the enforcement is deficient. It has also been pointed out that there is a lack of coordination within the authorities which results in a delayed process.
These issues have adverse impact on our foreign investors which would ultimately affect our economy unpleasantly. Subsistence of these issues is not acceptable as this questions our stance towards welcoming foreign investment.
Therefore, the findings suggest that our Government needs to do a lot to uphold its commitment towards foreign investors. It's been long since these issues were identified and put before the Government but we see very little and sometimes no progress in most of the cases. Though our judiciary is very watchful regarding the fair and equitable treatment towards our foreign investors as reflected in Niko case, the application of existing laws, existing systems and practices sometimes may show otherwise.
Al Amin Rahman, Bar-at-Law, is an advocate, Supreme Court of Bangladesh.