WHY INVEST IN BANGLADESH ?

Bangladesh has a long established tanning industry which produces around 2-3% of the world’s leather from a ready supply of raw materials.
Abundant, low cost labor – ideal for labor intensive industry.
A sustainable Tannery Estate developed with CETP & having 205 industrial units. Increasing
production of eco-friendly leather, in which vegetable- and syntan-based materials are used instead
of chromium in the tanning process.
Government support in the form of tax holidays, duty free imports of raw materials and machinery for export-oriented leather market, export incentives.
Tariff and quota free access to major markets such as the EU, Canda, Australia and Japan.
A tariff concession facility to major importing countries under Generalized System of Preferences (GSP) coverage.
27% annual average export growth rate over the last 4 years.
Growing domestic market for footwear and leather articles (Nearly ten million urban populations
have annual incomes well in excess of $10,000 offering a sizable market for a wide range of goods and services).

Fiscal and Non Fiscal Incentives

Corporate tax holiday: 5 to 7 years for selected sectors and areas
Tax holiday for infrastructure investment: upto 10 years
Avoidance of double taxation under bilateral tax convention
Tariff concessions on import of capital machinery & Raw materials
Bonded warehousing facility Cash & Other Incentives
Funds for export promotion, export credit guarantee scheme, permission for domestic sales up to 20% by export-oriented companies outside EPZ.

Financial incentives:

Reduced import duty on machinery & spares
Export credit guarantee scheme
Domestic market sales up to 20% allowed to export-oriented companies outside EPZ (relevant duties apply)

In Bangladesh the leather industry is well established and ranked fourth in terms of earning foreign exchange. In consideration of being a value added sector the (Government of Bangladesh (GoB), Ministry of Industry (MoI) has declared it as a priority sector. A young, industrious workforce growing by roughly 2 million per year and one of the world’s lowest wage rates.

Bangladesh has a competitive edge as a sourcing country that is commercially competitive and beneficial for buyers and brands: Products at very convenient price.
Integrated production chain from raw materials to tanneries and footwear available. Containerized shipment is available from the industry site. Increased linkage industries – Packing, Lasts, Adhesives, Outsoles. Local supply of footwear components and leather accessories for producing hi-fashion products . Tariff and quota free access to the European Union (GSP), Canada, Australia and Japan . Shipment facilities-both by frequently available air and large sea port.

Additional incentives to export oriented and export linkage industries

Encouraging export oriented industries is one of the major objectives of the Industrial Policy in place, and as such the government ensures all support and co-operation to the exporter as per the export policy. Some of the facilities and incentives offered are as follows:

Concessionary duty as per SRO* is allowed on the import of capital machinery and spare parts for setting up export-oriented industries or BMRE of existing industries. For 100% export-oriented industries no import duty is payable.

Facilities such as special bonded warehouse against back-to-back letters of credit or notional import duty and non payment of Value Added Tax (VAT) facilities are available as per SRO of the government.

System for duty drawback is being simplified and concise. The exporter will be able to get back the duty draw-back directly from the concerned commercial bank.

Bank loans, of up to 90% if the value against irrevocable and confirmed letters of credit/sales agreement, are available.

For granting export performance benefits, the list of export products and the rate of export performance benefit (XPB) are reviewed from time to time.

With the intention of encouraging backward linkages, export-oriented industries including export-oriented ready made garment industries using indigenous raw materials instead of imported materials, are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export-oriented industries.

Export-oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad.

Entire export earnings from handicrafts and cottage industries are exempted from income tax. In case of other industries, proportional income tax rebates on export earnings is given between 30% and 100%. Industries which export 100% of their products are given tax exemption up to 100%.

Facilities for importing raw materials are given for manufacturing exportable commodities under banned/restricted list.

Import of specified quantities of duty-free samples for manufacturing exportable products is allowed. The quantity and value of samples is determined jointly by the concerned sponsoring agency and the NBR.

Local products supplied to local projects against foreign exchange under international tender are treated as indirect exports and the producer is entitled to avail of all export facilities.

Export oriented industries like toys, luggage and fashion articles, electronic goods, leather goods, diamond cutting and polishing, jewellery, stationery goods, silk cloth, gift items, cut and artificial flowers and orchid, vegetable processing and engineering consultancy services identified by the government as thrust sectors are provided special facilities in the form of cash incentives, venture capital and other facilities.

Export oriented industries are exempted from paying local taxes (such as municipal taxes).

Leather industries exporting at least 80% manufactured products will be treated as 100% export oriented industries.

Manufactures of indigenous fabrics (such as woven, knit, hosiery, grey, printed, dyed, garment check, hand loom, silk and specialized fabrics) supplying their products to 100% export oriented garment industries are entitled to avail a cash subsidy equivalent to 25% of the value of the fabrics provided the manufacturers of the fabrics do not enjoy duty draw back or duty free bonded warehouse facility.

Apart from the above mentioned facilities, other facilities as announced and provided in the export policy are also applicable for export-oriented and export-linkage industries.

Tax exemption on dividend income of non-resident shareholders during tax exemption period of an industry set up in an export processing zone and also after the expiry of tax exemption period if the dividend is re-invested in the same project.

Exemption of tax on income from industrial undertakings set up in an export processing zone for ten years from the date of commercial production.

Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.

Useful links

Leathergoods And Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB).
www.lfmeab.org

Export Promotion Bureau of Bangladesh
www.epb.gov.bd/index.php/home/publication

Bangladesh Investment Development Authority
www.boi.gov.bd/

Centre of Excellence for Leather Skill Bangladesh Limited (COEL)
www.coelbd.com