Bangladesh has initiated groundwork to attract investments from large foreign firms which are planning to move out of China to reduce single-country dependence after Covid-19 pandemic.
Special economic zones with ready-to-use land, longer tax holiday and availability of all services under one roof are among the offers Bangladesh is going to make if foreign companies relocate their plants here from China.
Although the United States, the United Kingdom, Canada and other countries have shifted investments from China, the main goal of Bangladesh is to attract Japanese investment, officials said.
The list of Japanese companies that have investments in China has been collected by the Ministry of Foreign Affairs, and given to Bangladesh Economic Zones Authority (Beza) and Bangladesh Investment Development Authority.
Beza has hired Sumitomo Corporation of Japan as a consultant to persuade the Japanese companies in coming to Bangladesh. After creating the profiles of the companies, the Bangladesh Embassy in Japan will meet those companies and try to motivate them to invest in Bangladesh.
The Bangladesh missions in the United States, Canada, the United Kingdom and the European Union are also working to attract investments of those countries. Beza has also written to the Japan International Cooperation Agency, Japan External Trade Organization and the Japanese embassy.
Commerce ministry officials said almost 690 Japanese companies have investments in China, and 34 of those, including Sony, Toyota Boshoku, Sharp and Panasonic, have already shown interest in shifting their factories.
To expedite the process, a high-level task force headed by Commerce Minister Tipu Munshi has been formed to decide on incentives and facilities for foreign companies if they invest in Bangladesh.
The first meeting of the taskforce is expected on Thursday.
The commerce minister told The Business Standard the meeting will review the initiatives of Indonesia, Vietnam and India to attract investments from the foreign firms. "We will then recommend to the prime minister on what Bangladesh can do in this regard."
The minister said investors were leaving China, and many had shifted their investments to Indonesia and Vietnam.
He said investors would consider investing in Bangladesh only if they were offered better facilities than other countries.
Vietnam, India and Indonesia are among the countries which had taken initiatives months ago to get their share of the pie from the probable exodus of Japanese, Korean, European and American companies from China.
Japan has already allocated $2.2 billion to help its companies move out of China.
Officials said Indonesia is offering a 50 percent tax holiday for five years for investing $7 million, 100 percent for five years for investing any amount between $7 million and $70 million, and 100 percent for 20 years for any amount exceeding $70 million.
India has announced several facilities, including suspension of enforcement of the labour law for investing in Uttar Pradesh.
India, Vietnam and Indonesia rank between 60th and 80th among 190 countries on the ease of doing business index.
The taskforce, which includes a number of ministers, senior government officials and business leaders, thinks facilities such as tax holiday, land registration tax reduction, effective one-stop service, proper foreign exchange rate, and corporate tax and tariff cut should be offered.
Beza Executive Chairman Paban Chowdhury said, "There are tax holiday facilities for investments in the budget. But we have sent a proposal to the Prime Minister's Office to give a 10-year tax holiday for foreign direct investment (FDI). Considering the amount of investment, type of investment and employment, we have proposed giving a 100 percent tax holiday to some companies for 10 years and to some others for three years. Those who will get a 100 percent tax holiday for three years will have tax exemption of 80-90 percent from the following year. After 10 years, a 100 percent tax will be levied on them."
To be a relocation destination, Bangladesh needs to come up with some solid offers, the Beza chief earlier told The Business Standard, calling for changes in bureaucratic mindset to facilitate businesses instead of just regulate them.
Beza officials said the Covid-19 pandemic had to be brought under control first for getting FDI. Air travel restrictions have to be lifted and tourism has to be resumed.
There are 2,000 acres of land ready to be invested in right now, and another 2,000 acres are being readied where industries could be set up by 2022.
Two economic zones are being set up in Narayanganj to attract Japanese investment. The finance minister listed the two projects as low-priority ones to reduce the government's development expenditure after the pandemic. The Finance Division later made those high-priority projects in accordance with a directive from the Prime Minister's Office with the hope of attracting Japanese investment.
Business leader Shafiul Islam Mohiuddin, who is a member of the taskforce, told The Business Standard on Tuesday Bangladesh's business environment is not easy.
He said the country has the one-stop service act and rules, but investors are not getting the benefits.
"Large-scale legal reforms are needed besides incentives. We shall recommend these to the prime minister," Mohiuddin said.
He said we have to assess in detail what the other countries are doing to get FDI and what we should do.
"Without wasting time, we will determine what we need to do and will emphasise implementing that."
Mohiuddin also said, "India has relaxed many laws to attract FDI. Indonesia is offering lands for free, but our lands are very pricey. These obstacles have to be removed as well."
Finance Minister AHM Mustafa Kamal has set a target to double the growth of private investment in the next fiscal year's budget. Addressing a post-budget press briefing on Friday, he said, "Work to set up 17 economic zones is almost complete. We will offer foreign investors all kinds of facilities like those enjoyed by local businessmen. This will boost foreign investment in the country."
Presided over by the commerce minister, a high-level meeting was held on May 20 to discuss initiatives needed to attract investments that were exiting from China. The minister told the meeting attracting those investments would have helped the country tackle unemployment caused by the pandemic.
Private Industry and Investment Adviser to the prime minister Salman F Rahman said, "We have got a chance to attract FDI. Without wasting time, we need to utilise this."