Establishing a Company
If you are looking towards business or investment in Bangladesh, here are some steps you may wish to consider as you get started:
- Contact Netherlands Enterprise Agency, Dutch Chambers of Commerce, Fenedex and/or NCH.
- Register with the Netherlands Embassy – if you are planning a visit to consider investment, let the economic team at the Embassy know by sending an email to firstname.lastname@example.org
- Visit the Board of Investment website for foreign investors’ registration details, including setting up a business (step by step), arranging for a work permit and fiscal and non-fiscal incentives.
- Contact local Dutch business support organizations, such as the Dutch Bangla Chamber of Commerce & Industry in Bangladesh.
- Subscribe to the Netherlands Embassy monthly economic newsflash containing recent economic news and information on business opportunities in Bangladesh.
- Consult the ‘Investing in Bangladesh. A Guide for New Investors’ brochure for information on the commercial, economic and political environment as well as practical information on trade regulations, business travel, and starting a business in Bangladesh. The brochure includes an easy-reference overview of each step that must be taken in the registration process.
It is advisable to undertake as much market research and planning as possible before establishing a market presence in Bangladesh. As in any new market, succeeding in Bangladesh requires due diligence and research on customers, demand, market channels, advertising, etc. Up-to-date local knowledge is crucial: before making major commitments European enterprises are advised to engage with the relevant business networks, consultants, marketing agencies and legal and accountancy advisors for advice and additional support.
Choosing the best entry strategy into Bangladesh requires careful consideration of the business' needs. Whether an enterprise chooses to set up a subsidiary, a branch/liaison office or a joint venture, there are several options available, each with different implications and advantages.
Understanding the legal and regulatory framework will be vital for the long term success of business in Bangladesh. The country’s laws and regulations, though based on the English legal system, require careful navigation. Although Bangladesh has a well-established judicial system, litigation can be a time-consuming business. It is therefore crucial that clear termination clauses are set out in contractual documents, it is often also advisable to make provision for alternative methods of resolving disputes, such as arbitration, which do not involve the courts. Bangladesh has not ratified the Arbitration (Protocol and Convention) Act 1937, so it may be advisable for agreements to include a specific clause to allow an independent arbitrator - outside Bangladesh - to settle any disputes between the parties.
Corruption is often cited as a barrier to the effective development of the private sector, and poses business risks which require pro-active management in the form of regular due diligence exercises and up-to-date risk strategies. Procurement practices often lack transparency and are usually coupled with a significant bureaucratic burden.
All of these risks and difficulties require careful management, and companies would do well to consider the following when doing business locally:
- Keep the number of intermediaries to a minimum. Having fewer parties involved makes operations more efficient and helps to reduce risk.
- Screen local representatives, agents and key staff carefully, and ensure that their remuneration is at market rates.
- Incorporate anti-bribery and anti-corruption provisions into contracts with partners, and press for audit-rights.
- Monitor any third party activities.
- Be wary of how business disputes may escalate: there is a tendency amongst Bangladeshi enterprises to bring criminal charges (for example, allegations of fraud) against former business partners.
Getting your Goods to Market
Almost all goods exported from the Netherlands arrive in Bangladesh via sea or air. The main ports are Chittagong and Mongla with both having adequate warehousing facilities. Chittagong has a holding capacity of over 50,000 tons with plans to increase this further. The National Board of Revenue provides bonded warehouse facilities to 100% export oriented industries and to industries whose inputs are mainly imported.
Speedy clearance of goods is often hampered by bureaucratic customs procedures and these delays will need to be factored in to your delivery schedule.
Exporters to Bangladesh should be diligent and precise in preparing export documentation. It is worth noting that any deviations can lead to delays and additional costs. Invoices should clearly state the goods being supplied (including specification, packing and country of origin) and correspond to the Letter of Credit.
Dutch companies can approach the Bangladesh market in several ways. Companies are always advised to seek professional legal/taxation advice before entering into a Joint Venture or similar type of agreement.
In the case of direct exports it is advisable to have a local representative either on a commission basis or as an Agent. An Agent of a foreign company is also allowed to participate in international tenders on behalf of their foreign principle.
Set up an office
A Dutch company can establish an office for selling their products and equipment direct to the end-user or consumer. Offices can also be set up on a registered Joint Venture basis with a Bangladeshi trading company. To set-up an office, Dutch firms should first register with the Board of Investment and the Registrar of Joint Stock Companies.
Please find here more practical information on starting a business (PDF).
Appoint a distributor
It is also possible to market your goods through distributors in Bangladesh. If you choose to employ this route, be aware of the risks in providing exclusive distribution right to your distributor.
As a first step towards establishing a local presence, foreign businesses often enter into contractual agreements with a Bangladeshi company to act as a local distributor, supplier or agent. This strategy can help in getting to know a partner and establish trust before possibly progressing onto more involved forms of partnership. Most agency agreements have a clause, permitting both parties to give due notice if it is intended to terminate the agreement. The appointment of the right partner/agent is often fundamental to success. Usually, Dhaka-based agents should be in a position to cover the entire territory of Bangladesh.
When appointing an agent Dutch companies should consider the following:
- The agent has the authority to act or carry on a business and therefore should do every lawful thing necessary to execute such an act or business. The 1972 Contract Act prescribes the rights and liabilities of an agent and also of the principal. If an agent acts beyond the terms of the agency agreement, the principal will not be liable for these acts.
- Most agency agreements have a clause that permits either party to give due notice if it is intended that the agreement is to be terminated. It is prudent to include a contract clause which agrees to allow an independent arbitrator outside of Bangladesh to settle any disputes between parties. However, the Bangladesh International Arbitration Centre (BIAC) was launched in 2011 becoming the country's first arbitration center for the settlement of commercial disputes.
- BIAC is an initiative of the International Chamber of Commerce in partnership with the Dhaka Chamber of Commerce and Industry and the Metropolitan Chamber of Commerce and Industry. The contact details of BIAC are:
Chief Executive Officer
Bangladesh International Arbitration Centre
Chandrashila Suvastu Tower (6th Floor)
69/1 Panthapath, Dhaka
Tel: +880-2-9671491, 8629227 | Fax: +880-2-8624351 | Email: email@example.com
The Board of Investment (BOI) is the first point of contact for a potential investor. They have a wealth of information on the investment opportunities in Bangladesh and the incentive packages on offer. Their Investor's Guide provides information on 'Business Setup at a Glance'.
- BOI contains information on the procedures required to establish a company in Bangladesh and the time that registering and establishing a company will most likely take. The step by step procedure can be consulted for exact details.
- Information is provided on the types of companies that can be formed, the general costs of doing business in Bangladesh, how to obtain the necessary work permits, remitting funds to Bangladesh amongst others. The BOI further provides the Roadmap to Investment service for new investors to facilitate the process from first enquiry through registration to implementation.
- Registration with BOI can be managed electronically, through the BOI Online Registration process.
- If the investor is to locate in an Export Processing Zone (EPZ) then BOI will introduce the company to the Bangladesh Export Processing Zones Authority, who will facilitate the early start up processes.
Local Capital Sources
Bangladesh has a large number of banks, including both state-owned (4) and private commercial banks (30) and foreign banks (9). There are also specialized banks (4), which are state-owned institutions for development finance. In addition, there are leasing and finance companies, as well as other co-operative, public and specialized institutions. Foreign investors have access to local capital sources. Trade finance, term loans and working capital are easily available, especially to major foreign investors. Interest rates vary from 9 to in some cases more than 20 per cent.
Investors can buy or lease land or buildings either from the government or from private parties. Purchasing land from private hands may be risky unless the ownership is properly checked. The safest method is to purchase land from the Government or to set up in Government-designated industrial zones. Transfer of ownership requires the purchase of Government stamps for legal authorization. Once land is purchased, there is no restriction on its transfer or sale. Ownership, Property and Management Control. There is no general restriction on equity participation, acquisition of property or management control by a foreign firm.
Many foreign offices are located in the Gulshan district. This has to do mainly with infrastructure as this district is very nearly the only place in Dhaka where expats can live comfortably with a view to safety, but also for example power and water supplies, schools, supermarkets, etc. that are not always readily available elsewhere in the city. It is strongly advised to seek housing here in connection with unrest, demonstrations and 'hartals' because this area is fairly remote. Having an office located in down-town Dhaka can create tremendous journeys. Especially during peak hours it can take up to 2 hours (one way). Businesses therefore choose mostly for office locations in close proximity to the housing areas. That said, many IT-related offices for example are centered around the BASE sector organization in the Motijheel area.
Cultural differences and Business Etiquette
Part of doing business is related to business etiquette and cultural differences. What are the local manners? The success of doing business in Bangladesh partly depends on how foreign entrepreneurs are capable of adapting to the Bangladeshi business culture. Although there are no official regulations for this, it can help to pay attention to the following aspects.
- An adequate personal contact is very important for maintaining business contacts. To realize and maintain this personal contact, meetings outside the office, lunches/dinners, are highly appreciated.
- Hierarchy is important in Bangladeshi society and differences in age and status are observed through language conventions. Individuals with higher status are not addressed by personal name; instead a title or kinship term is used.
- Be on time, even if you have to wait for a while.
- It is commonly used to shake hands. Men do not shake hands with women, unless the woman takes the initiative. Otherwise it’s acceptable to nod.
- Always use the right hand when shaking hands and accepting business cards, as the left hand is considered as unclean. Bring a lot of business cards, as these are commonly exchanged.
- Do use titles wherever possible, such as “Professor” or “Doctor”. If your Bangladeshi counterpart does not have a title, use ‘Mr.’, ’Mrs.’, or ‘Miss’.
- If you are not certain who is in charge, the best advice is to turn to the eldest person within the company.
- Usually, business meetings start off with small talk. Sometimes, in these first meetings, the actual business is not even discussed. It is important to establish a personal relationship before embarking on business related talks.
- Agendas are not set and negotiations can take a long time.
- Bangladeshi do not like to say ‘no’, instead they use expressions such as ‘maybe’ or ‘that might be difficult’ or ‘we shall try’.
- It is not common to bring personal gifts, however, presents given to business acquaintances is appreciated.
- In same-sex conversation, touching is common and individuals may stand or sit very close. The closer individuals are in terms of status, the closer their spatial interaction is.
- Face and self-esteem is an essential part of Bangladeshi culture, therefore any individual criticism in business situations must be done carefully and with sensitivity.
- When invited to a meal, do not start eating until the oldest person at the table begins.
- Don’t refuse any food or drink offered to you during business meetings as this may cause offence.