Govt. Trade Policies

Introduction

Bangladesh, a founder member of WTO, has been pursuing policies and institutional reforms towards a free market economy in line with the prevailing world trend. The government has embarked upon an outward looking export-led industrialization strategy in early eighties and has been continuing the same to take advantage of liberalized world trade regime to achieve faster rate of growth of GDP and overall economic development. The major
elements of the existing trade policy, among others, are:
(a) Liberalized import and import procedures with no need of licensing.
(b) Rationalization of the tariff structure with a maximum rate of 37.5% import duty in 1999-2000.Average rate of protection dropped from 100% in 1985 to 22% in 1996.
(c) Reduction in quantitative restrictions (QRs.), the coverage of which has been reduced from 42% in 1985 to only 2% percent of imports in 1996.
(d) The exchange rate policy regime is more unified, flexible and market-based. Local currency Taka is freely convertible for current account transactions.
(e) IMF consistent counter trade/Special Trading Arrangements are allowed.
(f) Export promotion measures are specific and transparent.
To provide continuity and stability, the government has formulated Five Year Export and Import Policies from 1997 and envisaged a private sector-led growth policy in the Export Development Strategy of the Fifth Five-Year Plan (FFYP 1997-2002).

The Export Policy, Import Policy, Industrial Policy, Telecommunication Policy, Energy Policy, Foreign Exchange Policy, Manpower and Labour Policy, etc. are briefly narrated below :

Export Policy

The Export Policy 1997-2002 has been designed to operate in the imperative and opportunity of the market economy with a view to maintaining growth of export and narrowing down the gap between import payment and export earning.

1.1 Objectives of Export Policy :
i. Diversify the range of exports and improve their quality;
ii. Set up backward-linkage industries and services and promote use of local inputs in export products to maximize value addition particularly in textile sector;
iii. Extend fiscal and other incentives to attract entrepreneurs both local and foreign to invest in export-oriented industries;
iv. Consolidate existing market and explore and develop new ones.
v. Take advantage of the post Uruguay Round liberalized and globalize international market
vi. Develop an export infra-structure
vii. And develop trained human resources in export sector.

1.2 Strategy of Export Policy :
The main elements of the long term export strategy are as follows :
i. Remove all bottlenecks to achieve the objectives of export policy;
ii. Provide policy support to private sector operators on a continuous basis to ensure competitiveness
iii. Strengthen support services and infrastructure for exports and export-oriented industries;
iv. Priority will be given to build such infrastructure;
v. Develop managerial and entrepreneurial skills through HRD programmes;
vi. Design an appropriate export development program to broaden and diversify the country’s export base which is central to the export strategy;
vii. Duild long term capability to export by developing new products through adaptation and increased R&D activities;
viii. Maximize utilization of financial and other assistance extended by WTO to the LDCs;
ix. Ensure maintenance of ecological balance and pollution free environment in the production of exportable goods;
x. Extend technical and marketing assistance for development of new products and their marketing.

1.3 In order to achieve rapid export-led growth under private sector the Export Policy envisaged the following incentives :

1.3.1 Fiscal incentives
i. Duty-free import of capital machinery for export-oriented industries outside Export Processing Zones
ii. Bonded warehouse to facilitate duty-free import of raw materials for export production
iii. Duty-drawback, if the bonded warehouse facilities are not used
iv. Sale of 20 per cent of products by the 100 per cent export-oriented industries in the local market on payment of duties
v. Exemption of 50 per cent of income arising out of export business from income tax
vi. Tax holidays
vii. Duty-free import of samples
viii. Restructuring of the Export Credit Guarantee Scheme (ECGS)
ix. Taka has been made convertible into foreign exchange for import of goods and exporters are allowed to retain their foreign exchange earnings gradually at higher proportion
x. 20% of the rejected goods of the 100% export oriented industries including leather goods and readymade garments will be admissible for sale in the local market subject to payment of usual duties and taxes.

1.3.2 Financial incentives
i. Local currency export-credit at a concessional rate of interest which is currently between 8-10 per cent
ii. Foreign currency export-credit under Export Development Fund at a concessional rate of interest (LIBOR + 1 per cent)
iii. Back-to-back letters of credit for import of raw materials for export production on deferred payments basis
iv. Retention of export earning by the exporters in their own accounts ranging from 40 per cent in general cases to 7.5 per cent in lower value-added items
v. Facility for use of $25.00 million credit line for the markets of Commonwealth of Independent States (CIS)
vi. 25 per cent compensatory cash benefit to the local producers and suppliers of fabrics and other textile products for export in lieu of bonded warehouse and duty draw-back facilities
vii. Ten per cent Market Development Assistance for export of jute yarn and twine
viii. Banking facility for BMRE projects and
ix. Export Credit Guarantee facility.
x. Extension of time limit for adjustment of export credit from 180 days to 270 days in case of export of frozen food, tea and leather.

1.3.3 General incentives
i. Recognition of leather industries exporting at least 80 per cent of their products as 100 per cent export-oriented industries to enjoy the benefits of such industries and 80% export oriented other industries will get financial incentives including bank loan as available to 100% export oriented industries with scale premises up to 20% of their local production in the local market on payment on payment of usual duties and taxes
ii. Banning the export of crust leather to increase value addition
iii. Giving facility of entrepot trade for export;
iv. Enhancing the financial limit for dispatch of export samples abroad;
v. Product and market development support under Export Promotion Fund (EPF);
vi. Awarding national trophy for export performance;
vii. Extending quasi-diplomatic and social privileges under CIP (Commercially Important Person) schemes;
viii. Private Export Processing Zone (PEPZ) Act passed to allow establishment of Private EPZ by local and foreign investors;
ix. Reduced air freight for export of all crash programme items including fruits and vegetables and withdrawal of royalty from extending cargo service;
x. Deemed export facilities for use of local raw materials.
xi. Recognizing agricultural farms of a minimum size of 5 acres as small and medium size agricultural industry to encourage production of vegetables, fresh flowers orchid etc. for export.
xii. Increased import facilities for product development.

1.4 Thrust Export Sectors
The following sectors have been declared as thrust sectors in the current Export Policy :
1. Leather and Leather Goods
2. Readymade Garments
3. Computer Software
4. Agro-Processing Industry
1.5. Commodities under the Crash Programme

Toys luggage and fashion items, electronics, silk fabric, leather goods, Diamond cutting and polishing, jewellery, stationery goods, cut and artificial flower and orchids, gift items vegetables and engineering consultiancy and services.
Soft term credit will be provided for product development of these items in addition to marketing facilities etc.

Import Policy

2.1 .The main features of the Import Policy are given below:

2.1.1 Liberalisation of imports through removal and significant reduction of tariff and non-tariff barriers and gearing up customs administration for speedy clearance of goods. At present maximum tariff rate is 37.5%.
2.1.2 Rationalisation of the tariff structure to remove disincentives to domestic production arising from tariff anomalies; this involves lowering of duties, particularly on industrial inputs and capital machinery; and
2.1.3 Making foreign exchange convertible in current account transactions. A key object of tariff rationalization was to create a neutral trade regime by
eliminating anti-export bias resulting from high tariffs and Quantitative Restrictions (QRs). The government is committed to the reduction of tariffs as part of its liberalisation programme under WTO.
2.1.4 Like tariff rationalisation, significant progress has been made in removing QRs. Whereas almost 25 per cent of all items under 4-digit headings of imports were subject to QRs in 1990, now only 119 items covering only 2 per cent of imports are so disposed. Of these, only 27 items are restricted for trade reasons.

2.3. General provisions for Import:

2.3.1 Banned list: Unless other wise specified items included in this list can not be imported.
2.3.1 Restricted list: Any item included in this list shall be importable only on fulfillment of the conditions specified against the item.
2.3.2 Freely Importable Items: Unless otherwise specified, any item which does not appear either in Banned or in Restricted list are freely importable.
2.3.3 Freely Importable Items: Unless otherwise specified, any item, which does not appear either in Banned or in Restricted list are freely importable.

2.4 Import by Commercial importers:

2.4.1.Commercial imports are normally allowed under cash foreign exchange. Subject to the availability of fund, import of a few commercial items may be allowed under government allocation.
2.4.2.Industrial raw and packing materials and spares are freely importable under cash foreign exchange by commercial importers.
2.4.3.Foreign firms registered in Bangladesh under the Company Act,1994 are allowed to import permissible commercial items against their commercial IRC, without any prior permission from the Chief Controller but have to inform his office in writing regarding the detail information of the item before importation.
2.4.4.Registered Commercial Importers may import permissible items of industrial capital machinery and accessories under cash foreign exchange without any value limit for commercial purpose

2.5. Compulsory Membership of Recognised Chambers/ Trade Association:

2.5.1.It has been made obligatory for all importers, exporters and indentors to become member/provisional member/primary member of a recognised Chamber of Commerce and Industry or Trade Association as appropriate for the trade.
2.5.2.Permanent/regular IRC/ERC will be issued only on the basis of permanent/regular membership.
                                                                                                    
Industrial Policy

The Fifth Five Year Plan of Bangladesh envisages that Bangladesh will have within a decade a sizable industrial sector where manufacturing will account for at least 25 per cent of the gross domestic product (GDP) in place of present 11.3 percent and at least 20 per cent of the employed workforce in place of present 7.7 percent.

A vibrant and dynamic private sector will be the principal actor in Bangladesh’s industrial arena. The goals of export orientation and external competitiveness imply the pursuit of industrialization in accordance with the dynamic comparative advantage of the economy. Given Bangladesh’s resource endowment, the principle of dynamic comparative advantage means production of labour intensive manufactures with skill up-gradation and productivity growth as its cutting edge. Decentralized small and medium industries will constitute important elements in the industrial scene of Bangladesh. Industrial Policy, 1999 aims at addressing these concerns and build on earlier efforts and gains towards industrialization of Bangladesh economy.

3.1 Main Objectives:

3.1.1 To expand the production base of the economy by significantly raising the level of industrial investment
3.1.2 To promote the private sector to lead the growth of industrial production and investment
3.1.3 To define the role of the government as facilitator in creating an enabling environment for expanding private investment
3.1.4 To focus public undertaking in those industrial activities where public sector involvement is essential to facilitate the growth of the private sector.
3.1.5 To attract foreign direct investment in both export and import substitute industries

3.1.6 To ensure rapid growth of industrial employment by encouraging investment in labour intensive manufacturing industries including investment in efficient medium, small and cottage industries
3.1.7 To generate female employment in higher skill categories through special emphasis on skill development
3.1.8 To raise industrial productivity and to move progressively to higher value added products through skill and technology up-gradation
3.1.9 To enhance operational efficiency in all remaining public manufacturing enterprises through appropriate management restructuring and pursuit of market-oriented policies
3.1.10 To diversify and rapidly increase export of manufactures
3.1.11 To encourage the competitive strength of import substituting industries for catering to a growing domestic market
3.1.12 To ensure the process of industrialization which is environmentally sound for preventing environmental pollution and maintaining ecological balance
3.1.13 And to encourage balanced industrial development throughout the country by introducing suitable measures and incentives.

3.2 Main Targets Of The Industrial Policy

Liberalisation of industrial policy in Bangladesh started with the announcement of Industrial Policy, 1982. This was followed by successive and progressive liberalisation in 1991, 1992 and 1999 to make it compatible with globalisation and a competitive market economy. The targets of the policy are to:

3.2.1 Develop the industrial sector in order to increase its contribution to GDP, income, employment and poverty alleviation
3.2.2 Expand industries by the private sector and make role of Government ‘promotional’ rather than ‘regulatory’
3.2.3 Encourage domestic and foreign investment in overall industrial and infrastructure development
3.2.4 Promote private sector –led export- oriented growth
3.2.5 Develop export-oriented, export-linkage and efficient import-substitute industries
3.2.6 Expedite development of labour intensive industries through acquisition and improvement of appropriate technology
3.2.7 Encourage the development of agro-based and agro-supportive industries and
3.2.8 Motivate investment in the intermediate and basic industries.

Financial Incentives to Industries
3.3.1. There shall be a tax holiday for five and seven years for industries set up in the developed and less developed areas respectively which will remain effective until the year 1995
3.3.2. The National Board of Revenue in consultation with the Ministry of Industries will publish in the official gazette area wise classification for the application of concessional duties and tax holidays
3.3.3. There will be no discrimination in case of duties and taxes for the same type of industries set up in the public and private sectors
3.3.4. Local industrial products will be protected through tariff rationlization keeping in view the interests of the entrepreneurs and the consumers
3.3.5. To create internal market for jute products, industries producing jute substitute synthetic fibers especially polypropylene bag will be discouraged , high tariff rates will be imposed on related imports in these areas. In addition, effective steps will be taken for compulsory use of jute bags for packing of food grains, sugar, cement & fertilizer etc
3.3.6. Duties and taxes on import of goods which are produced locally will be higher than those applicable to import of raw materials to be used to produce such goods
3.3.7. In case where credits/loans obtained from foreign institutions or Government through private initiative for private industrial investments, the following conditions shall be applicable

a. The Government will relend the abovementioned credits/loans through commercial banks/DFIs. The concerned Banks/DFIs will disburses the credits/loans to the entrepreneurs with applicable service charge

b. The entrepreneurs shall undertake full responsibility for repayment of the loans/credits. For this,the concerned Banks/DFIs will provide guarantee
to the Government for repayment of the loans/credits. ConcernedBanks/DFIs will, however, be entitled to claim collateral from the
entrepreneurs.

3.3.8. An Exchange rate Fluctuation Absorption Scheme ( EFAS) will be created to reduce the impact on industrial sponsore for fluctuation of Bangladeshi currency with foreign currencies.
3.3.9. Special incentives will be provided to encourage non-resident Bangladeshi for investment in industries. In case of their investment in Bangladesh, they will enjoy facilities similar to those given to the foreign investors. Besides, they will be able to buy newly issued shares/debentures of Bangladeshi companies. Moreover, they will be able to maintain foreign currency deposit in the NFCD account for up to five years.
3.3.10. Provision will be made up to 80-100 percent accelerated depreciation allowance.
3.3.11 Special financial incentive for industries located in the least-developed areas and for small and cottage industries. As long as natural gas can not be supplied to the non-gas lined least developed areas and the price of natural gas remains lower than that of fuel oil, a subsidy will be provided on fuel oil use in industries in this areas.The concerned ministries will make provision for necessary funds for this purpose.

Small, Cottage, Medium and Large Industries.

1.’Small Industry’ means an industrial undertaking engaged either in manufacturing process or service activity which employs less than 50 workers and/or whose fixed capital is less than Tk.100 million.
2.’Cottage Industry’ means an industrial unit either engaged in manufacturing or servicing generally run by the family members either as full time or part time.
3.’Medium Industry’ means an industrial undertaking which employs 50 to 99 workers and/or whose fixed capital is from Tk.100 million to Tk.300 million.
4.’Large Industry’ means an industrial undertakings which employs 100 workers or more and/or whose fixed capital is more than Tk.300 million.

    

Foreign Investment

1.The Government is encouraging foreign investment with special importance.Such investments shall be established either independently or through joint venture on mutually beneficial terms and conditions. The Foreign Private Investment (promotion and protection) Act,1980 will continue to be the legal framework of foreign investments. The main provisions of the Act to protect foreign investment include:

a) Ensuring equal treatment in all respects for local and foreign investment:
b) Protection of foreign investment from nationalization:
c) Ensuring repatriation of proceeds from sale of shares and profits. In addition, adequate rules will be framed for protecting the intellectual property rights such as patents, designs and trademarks and copyrights.

2.In case of foreign investment, there will be no limitations pertaining to equity participation, i.e. up to 100 percent foreign investment will be allowed.

3.In case of joint ventures or industries set up independently by foreign investors, there will be no obligation to sell shares through public issue irrespective of the amount of paid up capital.

4.If the foreign investors reinvest their repatriable dividends, those will be treated as new investments.

5.Foreign investors or companies with foreign investment may obtain working capital loans equivalent to their equity amount. The amount and terms of loan will be determined in accordance with the Bank-Client relationship and the bank’s rules and procedures.

6.Rules will be framed to facilitate foreign investors or companies with foreign investments to buy shares through the stock exchange.

7.BSCIC has already developed industrial states with infra-structural facilities like roads, water, power & fuel etc. for small and cottage industries and steps are being taken for setting up more industrial states. In case of industries set up in the industrial estates, foreign investors will also get special concessionary financial benefits similar to local investors.

8.Other facilities to be provided to foreign investors are as under:

a. Tax exemption on royalties, technical knowledge and technical assistance fees and the facilities for their repatriation
b. Tax exemption on the interest on foreign loan
c. Tax exemption on capital gains from the transfer of shares by the investing company.
d. Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements
e. Exemption of income tax up to three years for the foreign technicians employed under the approved industries.
f. Remittance up to 50 percent of the salary of the foreigners employed in Bangladesh and the facilities of repatriation of their savings and retirement benefits at the time of their return
g. There will be no restriction in issuing work permits to foreign nationals in Bangladesh and
h. Facilities for repatriation of invested capital, profit and dividends.

Thrust Sector Industries

1) Agro-based industries 2) Artificial flowers 3) Computer Software and Information Technology 4) Electronics 5) Frozen food 6) Cut flower 7) Gift items 8) Infra-structure 9) Jute products 10) Jewellery and Dimond and Polishing 11) Leather 12) Oil and Gas 13) Seri-culture and silk industry 14) Stuffed toys 15) Textiles industries and 16) Tourism.

Reserved Industrial Sectors
1. Arms and Ammunition and other defense equipment and machinery
2. Production of Nuclear Energy
3. Security printing (currency notes)
4. Forest Plantation and Mechanized extraction within the bounds of Reserved forests.

Telecommunications Policy (TP)

4.1 Objectives of TP, 1998 :

The aim of the TP, 1998 is to develop a national sound telecommunication infrastructure to support the economy and welfare of the country by providing satisfactory telecommunication facilities . The strategic vision of the Government is to facilitate Universal Telephone service throughout the country at an affordable cost without compromising performance. To achieve this Government’s role as a service provider will diminish as the private sector’s role increases and its ability to formulate policy, regulate and facilitate will be strengthened through a new Telecommunications Act and the establishment of new institutions including a Telecommunication Regulatory Board which will become the guardian of the Act and fulfill its regulatory
functions.
The main objectives of the National Telecommunications Policy, 1998 are briefly given below :

4.1.1 The freedom for exchange of information is recognized as an important element of human rights
4.1.2 Telecommunications are to promote national integration and safeguard the social and cultural fabric of the nation
4.1.3 Universal access to and delivery of a full range of modern, sophisticated, efficient and cost effective telecommunication services
are to be provided
4.1.4 Digitization will replace all analogue switching equipment by the year 2002 and analogue transmission equipment by 2005
4.1.5 An environment of competition in the field of telecommunications for enhancing rapid development in volume, efficiency and accessibility, shall be ensured
4.1.6 Telecommunications Services are to be efficient and cost-effective and user- friendly. The users shall have multiple choices for access to networks & markets of different services, systems and carriers
4.1.7 The Government has opened the telecommunications market to the private sector which will become a much stronger force in telecommunications development in the coming years
4.1.8 Resources to the sector are to be maximized through participation of both public and private entrepreneurs in operating the services in areas where it is economically and socially justified. Local resources may be mobilized through ADP allocation, domestic private investment, issue of Telecommunication Bonds, allocating a part of the revenue earnings, Bank Loans etc. Foreign investment may be arranged through Suppliers Credit, Joint Ventures, BLT/ BOT/BOO/BTO agreement etc., in addition to the usual loans and grants from international organizations as well as through bilateral agreements with other countries in conformity with the industrial policy of the Government. Joint ventures with local companies will be
encouraged
4.1.9 Liberalized Tariff Policy : Tariff Policies are to be liberalized with regard to the area or the service
4.1.10 Research and development activities to facilitate the absorption of new technology and to upgrade the facilities and services in telecommunications and regional cooperation in this sector will be encouraged.

4.2 Implementation Strategy :

4.2.1 Government, with the participation of the public and private sectors, intends to meet its goals and objectives through a combination of policy
related technical and financial strategies. It will ensure that the present inadequate infrastructure is alleviated through the formulation of competition and performance standards. While supporting the private sector as the engine of growth it will continue to support Bangladesh Telegraph and Telephone Board (BTTB) in the short to medium term for an orderly transition from a monopolistic to a multi- operator environment
4.2.2 Human resource development in tandem with the need of the telecommunications sector standards and qualifications for different categories of personnel of all operators are to be set, based on their services
4.2.3 Defense and security interests of the country are to be protected
4.2.4 The role of the technologies of telecommunications and computers which are becoming increasingly interdependent on and complementary to
each other leading to the age of information technology is to be acknowledged and encouraged for the benefit of the nation
4.2.5 Promotion of local manufacture of viable telecommunications equipment will be encouraged to meet the local and regional demand and a vision to compete in international markets in near future is to be inculcated
4.2.6 Assignment, monitoring and management of radio frequency spectrum is to be conducted in an effective, fair, rational and equitable manner. Telecommunication network standards & their management should be compatible with international standards and
4.2.7 Protection of the users’ interests shall be ensured.

4.3 Targets :

A set of targets consisting of telephone density and accessibility of telecommunications facilities and services to the people is given below :

(a) Teledensity (Short Term) : The teledensity of the country is about 0.4 telephone for every 100 persons. The target of expansion of telephone penetration is fixed at 13 million line units including associated inland and overseas transmission links and facilities by the year 2000 in order to substantially eliminate the unserviced demand and increase the teledensity from 0.4 telephone to 1 telephone for every 100 persons.

(b) Accessibility upto Village Level : The aim will be to lay emphasis on the efforts to upgrade the semi-urban and rural telecommunication facilities and make the telecommunication services with the latest technology available in phases to all the Thanas, Unions, Growth Centers and ultimately to the Villages by the year 2005. The private sector operators who are licensed for the purpose will contribute all their efforts towards this end.

Energy Policy

Due to overriding importance of energy in socio-economic development, the Government of Bangladesh has given urgent attention to the overall
development of energy sector . It involved survey, exploration, exploitation and distribution of indigenous natural gas; survey and exploitation of hydropower; survey of coal and peat; establishment of petroleum refining facility and distribution systems; and establishment of power generation plants and networks for transmission and distribution of electricity. During last two decades about 20% (percent) of total public sector investment was allocated for the development of energy sector.

Per-capita consumption of commercial energy and generation of electricity in 1990 were 56 KGOE/ year and 73 kWh/ year respectively. Per capita consumption of commercial energy and electricity in Bangladesh is one of the lowest among the developing countries. In 1990, more than 73% of total final energy consumption was met by different type of biomass fuels (e.g. agricultural residues, wood fuels, animal dung etc.).

In 1990 only 2.2 % of total households (mostly in urban areas) had piped natural gas connections for cooking and 10 % of households had electricity connections and only 3.9% of total households used kerosene for cooking. The Government has decided to formulate National Energy Policy (NEP) to ensure proper exploration, production, distribution and rational use of energy sources to meet the growing energy demand of different zones, consuming sectors and consumers groups on a sustainable basis.

5.2 Objectives Of National Energy Policy (NEP) :

The objectives of NEP are :
(i) to provide energy for sustainable economic growth so that the economic development activities of different sectors are not constrained due to shortage of Energy
(ii) to meet the energy needs of different zones of the country and socio-economic groups
(iii) to ensure optimum development of all the indigenous energy sources
(iv) to ensure sustainable operation of the energy utilities
(v) to ensure rational use of total energy sources
(vi) to ensure environmentally sound sustainable energy development programmes causing minimum damage to environment and
(vii) to encourage public and private sector participation in the development and management of the energy sector.

5.3 The energy sector has been suffering from several problems, such as high level system loss, weak management and inadequate investment in the past resulting in serious power shortage. The present Government took a number of initiatives to increase investment in this sector and supply power.

5.4 Among the significant steps taken were adoption of the independent power policy (IPP), invitation to the private sector to invest in the energy sector including foreign direct investment, allowing establishment 10MW small power plant for generation of electricity for own use and sale, upward adjustment of tariff which had remained at the same level for years, and automatic tariff adjustment corresponding with fuel price increases. It has produced result in terms of interest of foreign direct investment in energy under BOO/ BOT arrangements as well as gas exploration and development. The following energy generation projects are being set up under BOO/BOT arrangements:

· 450 MW generation plant at Meghnaghat

· 360 MW generation plant at Haripur

· two barge-mounted power stations for 200 MW at Haripur

· two barge-mounted power stations for 200 MW at Khulna

· 200 MW generation plant at Baghabari

· 200-300 MW generation plant at Serajgonj

5.5 In the gas sub-sector, eight blocks have already been contracted out to four International Oil Companies (IOCs). Bids have been received for additional twelve blocks in the second round of bidding and letters of intent (LOI) have been issued to nine foreign companies awarding five more blocks for oil and gas exploration on July, 1998 as a prelude to sign production sharing contract (PSC).

Foreign Exchange Policy

6.1 Liberalization Of Exchange Control Regulations In its bid to liberalise Bangladesh’s foreign exchange policies, Bangladeshi ‘Taka’ was declared convertible for current external transactions, on March 24, 1994.

6.2 To facilitate investment it has also been decided that prior approval of the Bangladesh Bank is no longer required for :

6.2.1 Remittance of profits to their head offices by foreign firms and companies
6.2.2 Issuance of shares to non-residents against investments for setting up industries
6.2.3 Remittance of dividends on such shares to the non-resident investors
6.2.4 Portfolio investment by non- residents including foreign individuals / enterprises in shares and securities through stock exchanges
6.2.5 Remittance of dividend on portfolio investment by non-residents through stock exchange
6.2.6 Remittance of sale proceeds including capital gains of portfolio investments of non-residents through stock exchanges
6.2.7 Opening of letters of credit by banks against suppliers’ credit and other foreign borrowings contracted by industrial enterprises in the private sector in accordance with general guidelines prescribed by BOI ( subject to a maximum effective rate of interest of LIBOR + 4%, repayment period not less than 7 years ) or with specific approval of BOI
6.2.8 Remittance in repayment of principal and payment of interest of such loans
6.2.9 Remittance of technical fees and royalties against technical
assistance / royalty agreements in conformity with BOI guidelines
6.2.10 Remittance of savings of expatriate personnel at the time of their leaving Bangladesh out of the salaries and benefits stated in their employment contracts as approved by BOI
6.2.11 Extension of term loans by banks on normal banking considerations to foreign firm and
6.2.12 Extension of working capital loans to all foreign owned/ controlled industrial and trading firms/companies by banks on the basis of banker-customer relationship and normal banking practice.

Manpower and Labour Policy

Bangladesh offers a substantial manpower reserve – skilled, unskilled, educated and otherwise . There is a good supply of easily trainable low cost labour in the country. Many of them have a working knowledge of English language and possess the basic skills required by industries. Of late, there is an increasing supply of professionals, technologists and other middle and low level skilled workers . They receive technical training from universities, colleges, technical training centres, polytechnic institutions etc. The expenditure incurred by an employer to train his employees is exempted from income tax.

7.1 Employment conditions :
The minimum age for workers in Bangladesh is 18 years in factories and establishments. In the private sector, the dignity of labour is ensured in accordance with the principles enunciated in the ILO convention and recommendations.
7.2 Labour Laws : In Bangladesh 44 labour laws are now in operation. These relate to (a) wages and employment, (b) trade union & industrial disputes, (c) working environment and ( d ) labour administration and related matters. The main labour laws are :
(i) Workmen’s Compensation Act, 1923
(ii) Payment of Wages Act, 1936
(iii) Maternity Benefit Act, 1936
(iv) Employment of Labour (Standing Orders) Act, 1965
(v) Shops & Establishments Act, 1965
(vi) Factories Act, 1965
(vii) Industrial Relations Ordinance, 1969

7.3 Wages and fringe benefits :

In the public sector, wages and fringe benefits of the workers are determined by the government on the recommendation of the National Wages Commission established from time to time. Such Commissions were appointed in 1973, 1977, 1984, 1989 & 1992. Wages & fringe benefits declared by the government in 1997 have 20 grades of wages.
The public sector employees are, however, covered by the pay Commission declared by the government from time to time.
In the private sector, the wages & fringe benefits of the workers and employees are determined through collective bargaining process. Sometimes private industries follow the public sector wages & salary structure for their workers and employees respectively.

7.4 Working hours :

Workers in the public or private sector remain at their job for eight and a half hours daily (including half an hour for meal or rest), with Friday as weekly holiday making 48 working hours a week . Work in excess of these, is paid as overtime. The rate of overtime is 2 hours pay for 1 hour job.

7.5 REGISTRATION UNDER FACTORIES ACT

Any manufacturing company employing ten or more workers (with or without use of power) is required to be registered under the Factories Act, 1965
(Act IV of 1965) with the office of the Chief Inspector of Factories and Establishment. The Act is primarily to regulate working conditions and to ensure safety measure in the factory.

7.6 CLEARANCE FROM THE DEPARTMENT OF ENVIRONMENT

A certificate in respect of proper arrangement for anti-pollution and safety measures will be required from the Department of Environment before setting up an industry.

7.7 SUPPORT SERVICE INSTITUTIONS

The following institutions extend industrial support service to the industries under both public and private sector:-

Bangladesh Council for Scientific and Industrial Research (BCSIR)

Bangladesh Industrial Technical Assistance Centre (BITAC)

Bangladesh Institute of Management (BIM)

Bangladesh Standard and Testing Institution (BSTI)

Bangladesh Institute of Development Studies (BIDS)

Chamber of Commerce and Industries

(i) Undertakes research works and formulates various possibilities of commercial and industrial exploitation of the existing indigenous resources.
(ii) Undertakes quality control measures for various industrial products. Provides vocational and technical training for the apprentices of engineering industries.

Provides personnel training for management of staffs of various industries.
(i) Sets up national standard for industrial products.
(ii) Responsible for enforcing standardization (quality & specification) through issue of certificates.

(i) Undertakes research programmes of various fields of industries including training of executives of both private and public agencies responsible for industrial management, industrial financing and evaluation of schemes.

(ii) Publishes periodicals on various research studies.

Extend Support services to the private sector and assist public sectors in formulation of various public policies relating to Trade, Commerce and Industry.