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Main Paper of the Economic Policy Paper on
Foreign Investment Protection Policies and Anti-Expropriation Measures

Introduction: Significance of Foreign Private Investment

In a developing country like Bangladesh, which has a narrow resource base, foreign private investment carries enormous significance. Over the years the realisation has gained ground that a vibrant and dynamic private sector is the key to economic progress. Even though the domestic private sector is still a fledgling and struggling to gain a foothold, the door inevitably has to be thrown open to foreign private investment to provide the stimulus that is badly needed for the economy.

Foreign direct investment is an imperative to overcome deficiencies in capital formation and a low technology base and to gain market access in the present context of liberalisation of the world economy. The need for a massive dose of foreign private investment is viewed as important especially in the context of the steadily deteriorating aid climate for Bangladesh which is still largely dependent on foreign aid to bolster its balance of payments and to meet its multidimensional need to develop adequate infrastructure and other sectors of the economy. These factors provide enough reason for Bangladesh to embark on a massive quest for foreign private investment. The current policy initiatives of the government are justifiably targeted at this goal.

Historical Background: Evolution of FDI Policies and Measures

The present perception of the government in respect of foreign private investment is the culmination of a series of experimentations and attitudinal changes from time to time. Consistent with the heavy emphasis on public sector investment in the post-independence era, the private sector was assigned a relatively minor role, and as a by-product of this policy stance foreign private investment was viewed as desirable only in collaboration with the public sector and with minority equity participation. The most restrictive facet of the policy was that no foreign investment was allowed to collaborate with domestic private capital. Such a view presumably was taken to prevent the multinational companies from gaining the upper hand in our domestic economy.

IIP 1973:

The first Industrial Policy, called the Industrial Investment Policy 1973, was tentatively announced in 1972. It contained certain incentives – full freedom of transfer of annual profit after payment of taxes, repatriation of capital spread over a number of years and a minimum dividend of 15%, subject to availability of profits. It was guaranteed that no nationalisation would take place within 10 years and a fair and equitable compensation would be provided in case of nationalisation.

Such a grudgingly extended welcome to foreign investors failed to materialise any investment; the foreign investors were obviously apprehensive of participating in an unequal relationship with the government which was practically a dominating force in the whole economy. Moreover, given the circumstances, nationalisation was always an ominous prospect. During 1973-74 and 1974-75 foreign private investment as a percentage of the total investment was 0.04% and 0.02% respectively.

RIIP 1974:

Against the background of such a dismal scenario, the Revised Investment and Industrial Policy ‘74, marked a major change in attitude towards foreign private investment. The revised policy permitted foreign private investment to collaborate with both GOB and local entrepreneurs.

In the private sector, foreign equity participation was limited to those industries where technical know-how was not locally available, the technology involved was very complicated and volume of investment was high. Such coverage also included industries based on local raw materials and those that were wholly export-oriented. Technical collaboration without equity participation was allowed in all types of industries. The period of moratorium on nationalisation was extended from 10 to 15 years, the tax holiday for less developed areas was extended from 5 to 7 years and repatriation facilities were further relaxed.

RIP 1975:

Needless to say, policy changes in respect of foreign investment that were hitherto witnessed were no better than small adjustments which failed to come to grips with the fundamentals that really mattered for investment from abroad. In this context one can confidently say that the change in government in 1975 paved the way for bringing about a major shift in policy towards foreign direct investment. A considerable liberalisation of attitude towards foreign investment became visible. While the ceiling of investment was raised to Tk. 100 million, this was thrown open for 10 other sectors previously reserved for the public sector enterprises where joint ventures were accorded preferential treatment. The provision of a moratorium on nationalisation was done away with due to the belief that mention of nationalisation would discourage the investors.

In 1978 several major changes took place to mark another shift in policy towards foreign private investment. This, of course, accompanied a series of measures directed towards betterment of the environment for privatisation as a whole. A noticeable change occurred in terms of abolition of the ceiling on private investment. These policy changes were initiated parallel to the government’s efforts to denationalise a number of abandoned industries through public tenders and return of some taken-over industries involving Bangladeshi ownership.

During the Second Five Year Plan period (1980-85) two significant mileposts were set up for attracting foreign investment. One was the enactment of the Foreign Private Investment (Promotion and Protection) Act, 1980, and the Bangladesh Export Processing Zones Authority Act, 1980, both of which provided a hitherto unavailable legal framework to the government’s commitment to foreign investment and contained details of the modus operandi to set up enterprises in Bangladesh for foreign as well as domestic investors. Another significant step that was taken to make foreign investment more attractive was to announce a new Industrial Policy in 1982 with a good deal of emphasis on foreign investment.

The preferred areas of foreign investment as indicated in NIP ‘82 included the following:

1. New enterprises, particularly those involving technology available to foreign investors.
2. Undertakings in which more intensive use of natural resources was called for.
3. Export-oriented industries.
4. Capital intensive technologies, the products of which were import-substitutes or export-oriented in nature.
5. Existing public- or private-sector enterprises where infusion of foreign capital or technology would result in increase in productivity and improvement in product quality.

While NIP ‘82 may be characterised as a turning point in the industrialisation process with emphasis on foreign investment, the late '80s as well as the whole of ‘90s may be termed a period of (i) financial sector reforms and (ii) trade policy reforms, the combined effect of which has been to increase efficiency of the banking sector so as to serve the private sector better and, through this, mainstream foreign investment into the domestic economy by bringing about international standard, such as, convertibility of current account as well as to liberalise the trade regime by reducing direct controls and tariffs. No doubt, these reforms have had a beneficial impact in terms of attracting foreign investment.

The Industrial Policy 1999 is by far the most comprehensive document embodying policy, strategies and modus operandi for furthering investment, including foreign direct investment, in Bangladesh. It is for the first time that the government has announced a vision for industrial development as a part of the industrial policy that addresses key concerns related to the industrialisation of the country. In 16 chapters it brings out the intentions, incentives and mechanisms that are targeted at accelerating the pace of industrialisation in the country. Foreign investment constitutes an area which the policy addresses with a good deal of comprehensiveness and includes a sizeable portfolio of incentives (See Box- 2).

Response of the Foreign Investors: Current Investment Situation

Given a well articulated policy, an extensive package of incentives and facilities comparable to those available in most other countries and, above all, a country with geographical compactness and no ethnic disharmony, one could reasonably expect that foreign private investment would be largely forthcoming, but our experience until now is sadly discouraging. The situation appears all the more discouraging when it is compared to the investment situation in countries like India and China. In 1982, which is considered a peak year of foreign direct investment in Bangladesh, the inflow of foreign direct investment into Bangladesh was to the extent of $ 4.7 million, compared to $ 65 million into Pakistan, $ 64 million into Sri Lanka, $ 185 million into Thailand and $2093 million into Singapore.

We have no dependable mechanism to monitor and record year-wise data of foreign direct investment; this is presumably why the annual budget speech of 1999 quotes World Bank figures to show the trend of foreign direct investment in Bangladesh since the present government came to power. According to this World Bank Report, while foreign direct investment stood at $ 83 million in 1994-95, it increased to $ 241 million in 1995-96, $ 296 in 1996-97, $ 387 million in 1997-98 and $ 807 million in 1998-99. According to World Bank projections, investment inflows will average $ 620 million annually during 1992 - 2000 and about $ 900 million annually till 2010 (Table–1). The principal sectors to receive the inflows will be energy, telecom, manufacturing and services.

Table-1: Foreign Direct Investment Inflows

Source: World Bank, FDI in Bangladesh, A Policy Note, 1999

A review of the above statistics points towards an investment level which apparently may be termed as satisfactory at least against the background of the past but, on closer scrutiny, it will be clear that foreign investment as materialised and projected is dominated by investment in the power, oil and gas sectors. And this kind of investment is linked with the public sector in so far as the investors will dispose of the product according to the terms and conditions agreed upon with the government. Thus, the investment that has taken place from 1996-97 to 1998-99 constitutes 65% to 78% of the total private investment. Another feature that is noticeable in the context of this kind of investment is that it is highly capital import-oriented and does not occasion a sizeable inflow of foreign currency, which is more desirable. One can, however, argue that investment in this context helps create infrastructural facilities that are needed to stimulate foreign investment in the country.

That the current foreign investment situation leaves much to be desired is borne out by the statistics presented by BOI. For example, data released for 1996-97 and 1997-98 show that out of the registered 278 units surveyed by them only 63 units (23%) were in production and 19 units (7%) were due to go into production very soon, reflecting the position as of 17 June, 1999 (Table - 2). According to a more up-to-date statement (Table - 3) released by BOI (position as of 15-11-‘99), out of 365 units surveyed by them, 81 units (22%) have gone into production. The comparison between the two tables shows that although in absolute terms the number of registered units as well as number of units which have gone into production have increased, the percentage increase of units that have gone into production is only to the extent of one per cent. Moreover, the comparison shows that over a period of 6 months (July ‘98 – Dec ‘98) only 10 units have gone into production.

All this reveals the fact that, compared to the number of units registered with the BOI, the number of units actually going into production is small. That is to say, investment that materialises falls far short of investment that is recorded in terms of intention. The gap will be found to be still wider when the number of units not registered is taken into account.

When the Bangladesh situation of foreign investment is compared to that of other countries, the regrettable fact that emerges is that our country enjoys a lamentably low level of foreign investment. Table-4 shows an inter-country comparison of foreign direct investment in South Asia from 1992 through 1997.

This signifies a situation where private foreign investment is slow in coming into sectors other than energy and, having accepted the fact that this is not desirable, a good ground exists for reviewing critical issues that relate to the foreign investment regime to give it a better prospect.

A. National Consensus

The Industrial Policy 1999 states "it is fortunate that Bangladesh enjoys political consensus across (sic) all political parties that a competitive and market-oriented economic policy is pursued in order to accelerate the economic growth process." The recent political trend, characterised by abstention from parliamentary sessions, incidents of street violence and frequent imposition of hartals, raise doubts that such a political consensus is being taken seriously by the politicians in order to ensure a congenial climate for foreign investment. A recent newspaper report, (The Independent: Feb 17, 2000) quotes the Vice President of BGMEA who was lamenting in the following words, "We are losing markets to third party sources. It is the main problem, which has its roots in political troubles."

B. Policy vs. Perception

Bangladesh is favoured with a plethora of policies that permeate almost every aspect of our socio-economic life, but it has to be realised that it is not so much the existence of a well-documented policy but how much this works out at the practical level in terms of implementation that generates confidence amongst the stakeholders. In the context of the Industrial Policy of our country, the more pertinent question is, do the foreign investors perceive it to be a credible document? (Credibility here is judged in terms of all the pre-conditions that contribute towards creation of a suitable environment for foreign investment). A strong perception should grow amongst the foreign investors that incentives and facilities that are promised to them within the framework of the Policy are easily accessible and realistically available with a minimum of hassle, bureaucratic or otherwise.

C. Good Governance: Corruption as an Eroding Factor

The issue of good governance cuts across all areas of socio-economic development and has also a direct bearing on the prospect of foreign investment in the country. The fact hat has emerged as critical is the ever-growing menace of corruption that is tightening the noose around the administrative apparatus.

A World Bank report on the problem of corruption in Bangladesh was discussed at the meeting of the Bangladesh Development Forum held on 13-14 April 2000 in Paris. It said that if corruption were curbed, the country’s economic growth could be boosted by as much as 2.9 per cent.

It noted that Transparency International in 1998 judged Bangladesh to be one of the world’s five most corrupt countries and said that a concerted national effort to curb corruption could lead to a substantial reduction in poverty in one of the world’s poorest nations where 60 million people live below the poverty line.

D. Investment: A Hostage to Mastans?

Given the present law and order situation one will not be far from truth if he says, as Mr. A. M. A. Muhith said in one of his recent articles, "Investment is a hostage to the Mastan culture. Investment is expensive and rent-seeking interests in a centralised system infested with political patronage make it impossible to earn a good return".

E. Domestic Investment vis- à - vis Foreign Investment

The issue of domestic investment vis-à-vis foreign investment has sometimes been misconceived, resulting in adoption of the wrong policy measures. Although foreign investment is necessary to fill up the domestic resource gap, there should be no two opinions about the fact that domestic investment should be promoted and a vibrant domestic economy should exist as a pre-condition for attraction of foreign investment. After all, if the local environment is not good enough for stimulating domestic investment, how can foreign investors regard it as congenial for investment of their capital and technology? But over-emphasis on foreign investment to the relative neglect of domestic investment sometimes causes imbalances in the economy and also frustration amongst the domestic investors. This may even create an attitude antagonistic to foreign investment. In a recent meeting of the Export Promotion Council, Mr. Salman F. Rahman, President of the Bangladesh Textile Mills Association (BTMA), decried inadequate access to capital for local entrepreneurs and said that the government was allowing everything to pass to foreign investors, compelling the local industrial houses to become traders and agents of foreign businesses.

F. Mechanism for Enforcement of Policy

The implementation of policies and measures is largely dependent on: i) how the legal instruments are framed and functioning; ii) how the functionaries are vested with decision-making authority and, above all, iii) how well the institutional mechanisms are co-ordinated.

G. Legal Instruments

It is strange that the investment policy has been changing from time to time whereas the relevant Acts, which are supposedly the means for enforcement of this policy, have remained static, as if immutable, over a period of years. Thus, while the Industrial Policy is being updated from time to time to respond to changing needs, the Acts, by staying put, have failed to address the requirements of enforcement. Mention may be made here of the Foreign Private Investment (Promotion and Protection) Act, 1980 (Annex III) and the Investment Board Act, 1989 (Annex IV) which are intended to provide legal coverage for enforcement of the Industrial Policy through mainly the Board of Investment (BOI). The functions of the BOI, laid down in the Investment Board Act, 1989, have totally lost their relevance and the definition of foreign investment enshrined in the Investment Act is outdated. Besides, a host of details needs to be re-adjusted to meet the present needs. Likewise, the Bangladesh Export Processing Zones Authority Act, 1980 needs to be looked into to put it in total accord with the Industrial Policy as well as the demands of the present situation.

One shortcoming in operationalising the measures embodied in the Act is that though two decades have elapsed since the Investment Act was passed, no rules have been framed under the Act although rules serve as instruments for enforcement of the Act.

H. Decision-making Authority

The BOI is the agency responsible under the Act for implementation of the government policy relating to investment, both domestic and foreign, and for providing all kinds of facilities in the matter of such investment. In effect, the power of decision-making is spread out amongst a number of ministries, departments and other agencies and, consequently, the incentives and facilities are implemented not as a result of the decision of the BOI but of several participating organisations. As a matter of fact, the BOI is vested with a lot of authority, thanks to the Act, but at the practical level it has to function with heavy reliance on other agencies. Thus the BOI has turned into a facilitator at best, not a provider of promised services and facilities. A shared authority under conditions where management does not act in unison at all levels does not bring the desired results.

The BOI's One Stop Service Centre was devised and installed to serve as a focused unit for providing all required facilities to the investors as per policy pronouncements. To this end the functionaries of all concerned government agencies, with adequate decision-making authority, are attached to the One Stop Service Centre. But as a recent evaluation shows, "The One Stop Service Centre has virtually turned into a ‘post- box’, only forwarding investors’ proposals with some endorsement called OSS recommendations to the respective agencies". According to the same evaluation, the investors’ perception about the OSS is as follows: i) it is not much different from a traditional government department and ii) it does not have the necessary authority to execute its decision. Investors rate the OSS ‘average’ in respect of obtaining services (Ferdousi, 99). In this background, there are many investors who prefer to approach the service providing departments directly and this most often brings quicker results. Even in instances where proposals are sent by OSS with recommendations, investors have to visit the concerned agencies to pursue their cases for early disposal. Against the background of the relatively poor performance of OSS, the question whether it is not just another layer of the bureaucracy is a reasonable one.

I. Institutional Mechanisms: Monitoring and Co-ordination Aspects

As has been indicated in the previous section, the policy in general and measures targeted at investment promotion are implemented by a number of ministries and agencies and naturally this calls for a set of monitoring and co-ordination mechanisms that can deliver the goods. Two features are noticeable in this context:

1. The co-ordination framework is not well founded -- the BOI is not constituted on a fully representative basis. For example, representation of EPZs is not included in the Board. The BOI is also not available for ensuring day-to-day coordination and, therefore, cannot be treated as a continuously available co-ordination platform. The One Stop Service Centre, as discussed earlier, does not function at a decision- making level.
2. The monitoring task, although an essential part of BOI activity, is not adequately addressed. The World Bank report referred to earlier states, "Unfortunately, the BOI is not a major source of FDI information. It compiles information on the basis of registrations but evidence suggests that nearly two thirds of registered/ proposed investments do not materialise. As such, the BOI registrations turn out to be a poor source of FDI information."

It is for this reason that (i) investment data, particularly data related to foreign investment, are not available on an up-to-date basis and (ii) the materialisation of investment as against registration with BOI is not recorded on a continuous basis and the BOI has to embark on periodic surveys to generate the required data. Moreover, it is hard to access data of foreign investment in a consolidated form, reflecting investments registered with BEPZA and BOI, in the absence of a well co-ordinated monitoring system.

J. Dissemination of Information

A prospective investor needs a huge amount of information ranging from the laws of the land to details about tax and custom regulations or even cultural aspects of the country. Apart from what is stated in "A Guide to Opportunities " published by the BOI, there is very little up-to-date information that an investor can lay his hands on. Consequently, an information hunt can take an investor several days or more unless he has a local associate. The most difficult part of the whole thing is that there is no single source from which the required information can be gleaned. This sad aspect emerged through the personal experience of the author of this paper, who naturally wanted to access information about foreign direct investments to accomplish his task. What is conspicuous by its absence is a compiled state-of-the-art manual on foreign investment, which, as one would expect, could be made available by the BOI. Half the time of a foreign investor can be saved if such information is easily available with our embassies abroad, but it is not unknown that many tend to travel to the country just to collect information at first hand. In the world of the super information highway, investment information from a website on Bangladesh is still not a reality. The International Chamber still does not have technological access to information on one single platform.

K. Issue of Expropriation and Nationalisation

The issue of expropriation and nationalisation is seized upon from time to time, thus generating considerable misgivings among the foreign investors and, although Bangladesh history shows that for the last 20 years no industry has been expropriated, the fear of nationalisation has not altogether disappeared.

One of the reasons may be the wording of clause 7 of the Investment Act, 1980, dealing with expropriation and nationalisation, which says, "Foreign Private investment shall not be expropriated or nationalised, or be subject to any measures having effect of expropriation or nationalisation, except for a public purpose against adequate compensation which shall be paid expeditiously and be freely transferable." The proviso in the clause, "except for a public purpose", is fraught with many possibilities and it is feared that this may turn out to be the Achilles’ heel for foreign investment in so far as it makes nationalisation a reality under any pretext. The interpretation of these words is flexible enough to expropriate a project funded by foreign investment.

There is a strong lobby which advocates that the nationalisation clause in the Investment Act should be altogether deleted to erase the unpleasant memories of nationalisation in the past and at the same time to refrain from any insinuation that nationalisation is not, after all, beyond the realm of possibility.

There is another group of sceptics who also have expressed the fear that, even if expropriation or nationalisation of foreign investment does not happen as a direct step, expropriation may take place in many indirect ways and, (mind you), these steps are no less inimical to foreign investment than one heavy-handed sweep of nationalisation. Some of these ways are:

1. Absence of a stable taxation policy: It is normally seen that taxation measures undergo fluctuations from time to time as part of the budgetary mechanism and this makes investment returns uncertain.
2. Abrupt and frequent changes in tariff policies: This phenomenon is also not uncommon in Bangladesh. High tide and low tide of duties in the budgets is as common in Bangladesh as the rise and fall of rivers and this keeps the foreign investors worriedly guessing as to what will come next.
3. Foreign exchange restrictions: Although not a reality at the moment, yet, as pointed out elsewhere in the report, there is a possibility in not too a distant future that a negative transfer may take place, resulting in a squeeze on foreign exchange. This may have an impact in terms of rationing foreign exchange, especially in the matter of repatriation of dividends. In this context, there is no guarantee that foreign exchange transfer will not be subjected to strict regulations if there is no big boost in foreign exchange earnings by Bangladesh.
4. Opening doors to trade unionism in restricted areas: A change in government policy towards labour unions in areas hitherto out-of-bounds for such unions will upset the calculations of foreign investors and no doubt the advantages that were reaped or are expected to be reaped in a situation where no union unrest exists will be wiped out to the detriment of the interests of the investors. This aspect has been more elaborately dealt with elsewhere in the report. The foregoing shows some of the key factors that may contribute towards a de facto expropriation of foreign investment and there is no doubt that the government should take the appropriate steps to ensure that the situations described above do not come to pass.

L. Nexus between Trade and Foreign Investment

In the context of the global economy, trade aspects assume special significance as essential ingredients for attracting foreign investment. The nexus between trade and foreign investment is sometimes not adequately recognised, so there is a need to harmonise the two aspects through the joint efforts of the ministries of commerce and industry.

An area on which particular attention should be focused in this context is protection of Intellectual Property Rights (IPR) which comes within the purview of our commitment to the Agreement on Trade Related Aspects of Intellectual Property Rights(TRIPS). The abuse of Intellectual Property Rights is rampant throughout the world, especially the least developed countries, and the foreign investors are wary about investing capital and technology involving copyrights and patents in countries where strict measures for protecting IPR are conspicuous by their absence. Bangladesh has a lot of potential to attract foreign investment in this field by fulfilling its commitment to the Agreement. Similar gains may be achieved by re-structuring the trade and tariff regimes in the best interests of foreign private investment.

As has been shown earlier in the paper, foreign private investment has tended to concentrate on the energy sector with import content in terms of equipment and machinery and much less in terms of cash inflows. There is a downside risk that gradually foreign investment of this nature will present the prospect of negative transfers, i.e. cash outflows will outstrip cash inflows, putting a severe strain on the country’s foreign exchange reserve. This points to the need for searching for avenues of earning cash foreign exchange and inevitably this calls for intensifying measures for promoting export-oriented industries. In this respect there are good grounds for considering the possibility of exporting gas or electricity through utilisation of gas. Here is an area where political consensus needs to be achieved. Considerable opposition to the idea of exporting gas is already visible and no settlement of the issue has yet been reached. Supreme consideration should be given to the fact that the foreign investment regime has to be sustained with attention to the need for maintaining a balance between capital inflows and outflows.

The Dhaka Chamber of Commerce and Industry (DCCI), with the financial support of the CIPE (Centre for International Private Enterprise) sponsored by the US Chamber of Commerce, has undertaken a programme for Economic Reform and Research Advocacy (ERRA) through a number of sectorial economic policy papers. The proposed EPP should be specific in terms of the subject/topic for the purpose of influencing the concerned government agencies and other related organisations to appropriately implement the suggested recommendations. The proposed paper, therefore, among others, should follow the TOR as under:

Terms of Reference:

• To briefly narrate the historical background of foreign investment in Bangladesh and policy support for its promotion.
• To make a situation analysis of the subject/topic and to suggest ways and means for improving the environment for foreign investment.
• To suggest policy and such other changes which may be effective and implementable in the short and long run.
• Any other suggestions that may supplement and/or complement the existing policy and other related measures.

Act No. XI of 1980

The above is an Act to facilitate the promotion and protection of foreign private investment in Bangladesh. It is hereby enacted as follows :-

1. Short Title:- This Act may be called the Foreign Private Investment (Promotion and Protection) Act, 1980.

2. Definitions:-

     (1) In this Act, unless there is anything repugnant in the subject or context:

1. "Foreign Capital" means capital invested in Bangladesh in any industrial undertaking by a citizen of any foreign country or by a company incorporated outside Bangladesh, in the form of foreign exchange, imported machinery and equipment, or in such other form as the government may approve for the purpose of such investment.
2. "Foreign Private Investment" means investment of foreign capital by a person who is not a citizen of Bangladesh or by a company incorporated outside Bangladesh but does not include investment by a foreign government or an agency of some foreign government.
3. "Industrial Undertaking" means an industrial establishment engaged in the production or processing of any goods, or in the development and extraction of mineral resources or products, or in the providing of such services as may be specified in this regard by the government.
4. The words and expressions used but not defined in this Act shall have the same meaning as in the Companies Act, 1913 (VII of 1913).

3. Foreign Private Investment

The government may, for the promotion of foreign private investment, sanction an establishment or any industrial undertaking with foreign capital:

(a) Which does not exist in Bangladesh and the establishment whereof, in the opinion of the government is desirable.
(b) Which is not being carried on in Bangladesh on a scale adequate to the economic and social needs of the country.
(c) Which is likely to contribute to:

1. The development of capital, technical and managerial resources of Bangladesh.
2. The discovery, mobilisation or better utilisation of the natural resources.
3. The strengthening of the balance of payments of Bangladesh.
4. Increasing employment opportunities in Bangladesh.
5. The economic development of the country in any other manner.

(d) Sanctioning of the establishment of an industrial undertaking with foreign capital under sub-section (1) may be subject to such conditions as the government may deem fit to impose.

4. Protection and Equitable Treatment

The government shall accord fair and equitable treatment to foreign private investment which shall enjoy full protection and security in Bangladesh.

5. Terms of Sanction, etc.

The terms of sanction, permission or license granted by the government to an industrial undertaking having foreign private investment shall not be unilaterally changed so as to adversely alter the conditions under which the establishment of such an undertaking was sanctioned; nor shall foreign private investment be accorded a less favourable treatment than what is accorded to similar private investment by the citizens of Bangladesh in the application of relevant rules and regulations.

6. Indemnification, etc.

In the event of losses of foreign investment owing to civil commotion, insurrection or riot, foreign private investment shall be accorded the same treatment with regard to indemnification, compensation, restitution or other settlement as is accorded to investment by the citizens of Bangladesh.

7. Expropriation and Nationalisation:-

(1) Foreign private investment shall not be expropriated or nationalised or be subject to any measures having the effect of expropriation or nationalisation except for a public purpose against adequate compensation which shall be paid expeditiously and be freely transferable.

(2) Adequate compensation for the purpose of sub-section (1) shall be an amount equivalent to the market value of the investment expropriated or nationalised immediately before the expropriation or nationalisation.

8. Repatriation of Investment

(1) In respect of foreign private investment, the transfer of capital and the returns from it, and in the event of the liquidation of an industrial undertaking having such investment, the proceeds from such liquidation is guaranteed.

(2) The guarantee under sub-section (1) shall be subject to the right which, in circumstances of exceptional financial and economic difficulties, the Government may exercise in accordance with the applicable laws and regulations in such circumstances.

9. Removal of Difficulty

If any difficulty arises in giving effect to any provision of this Act, the Government may take actions which are not inconsistent with the provisions of this Act, and which may appear to it to be necessary for the purpose of removing the difficulty.

Annex III
Investment Board of Act, 1989, Act No. XVII of 1989, An Act

For the establishment of a board to encourage investment in the private sector and to provide necessary facilities and assistance in the establishment industries;

Whereas, it is expedient to make provision for the establishment of a Board to encourage investment in industry in the private sector and to provide the necessary facilities and assistance for the establishment of industries;

It is hereby enacted as follows:-

1. Short Title and Commencement

(1) This Act may be called the Investment Board Act 1989.
(2) It shall be deemed to have come into force on the 8^th of Poush, 1395 corresponding to the 22^nd of December, 1998.

2. Definitions:- In this Act, unless there is anything repugnant in the subject or context:-

1. "Board" means the Board established under section 4;
2. "Chairman" means the Chairman of the Board;
3. "Executive Council" means the Executive Council constituted under section 8(1);
4. "Letter of Approval" in relation to the establishment of an industry means a letter of approval issued under section 11(4);
5. "Person" includes a group of individuals, a company or a commercial establishment;
6. "Private Sector" means an industrial sector not declared by the Government as an industrial sector reserved for the Government;
7. "Rules" means the rules made under this Act.

3. Act to Override Other Laws

The provisions of this Act and the rules made thereunder shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force.

4. Establishment of the Investment Board

As soon as may be after the commencement of this Act, the Government shall, by notification in the official Gazette, establish a Board to be called the Board of Investment.

5. Head Office

The head office of the Board shall be at Dhaka and the Board may establish its branch offices at such other place or places as it considers necessary.

6. Composition of the Board

(1) The Board shall consist of the following members, namely:-

1. Chairman;
2. Minister in charge of the Ministry or Division dealing with industries who shall also be its Vice-Chairman, ex officio;
3. Minister in charge of the Ministry or Division dealing with finance, ex officio;
4. Minister in charge of the Ministry or Division dealing with Power, fuel and mineral resources, ex officio;
5. Minister in charge of the Ministry or Division dealing with commerce, ex officio;
6. Minister in charge of the Ministry or Division dealing with textiles, ex officio;
7. Minister in charge of the Ministry or Division dealing with jute, ex officio;
8. Minister in charge of the Ministry or Division dealing with planning, ex officio;
9. Governor of the Bangladesh Bank, ex officio;
10. Secretary of the Ministry or Division dealing with industries, ex officio;
11. Secretary of the Ministry or Division dealing with finance, ex officio;
12. Secretary of the Ministry or Division dealing with internal resources, ex officio;
13. President of the Federation of the Bangladesh Chambers of Commerce and Industry, ex officio;
14. President of the Bangladesh Chamber of Industry, ex officio;
15. Chairman of the Executive Council, who shall also be its Secretary, ex officio.

(2) The Chairman of the Board shall be the Prime Minister or a person nominated by him from amongst the minister-members of the Board.
(3) The Board may co-opt four additional members but not more.
(4) No act or proceeding of the Board shall be invalid or called in question merely on the ground of the existence of any vacancy in, or any defect in the constitution of, the Board.

7. Functions:- The functions of' the Board shall be:

1. Providing of all kinds of facilities in the matter of investment of local and foreign capital for the purpose of rapid industrialisation in the private sector.
2. Implementation of the Government policy relating to the investment of capital in industries in the private sector.
3. Preparation of an investment schedule in relation to industries in the private sector and its implementation.
4. Preparation of an area-schedule for establishment of industries in the private sector and determination of special facilities for such areas.
5. Approval and registration of all industrial projects in the private sector, involving local and foreign capital.
6. Identification of investment sectors and facilities of promotion of investment in industries in the private sector and giving wide publicity thereof abroad.
7. Invention of specific devices for the purpose of promotion of investment in industries in the private sector and their implementation.
8. Creation of infrastructural facilities for industries in the private sector.
9. Determination of terms and conditions for employment of foreign officers, experts and other employees necessary for industries in the private sector.
10. Preparation of policies relating to transfer of technology and phase-wise local production in the private sector and their implementation.
11. Providing necessary assistance for rehabilitation of sickly industries in the private sector.
12. Financing, and providing assistance in the financing of, important new industries in the private sector.
13. Adoption of necessary measures for creation of capital for investment in industries in the private sector.
14. Collection, compilation, analysis and dissemination of all kinds of industrial data and establishment of a data-bank for that purpose.
15. Doing such other acts and things as may be necessary for the performance of the above functions.

8. Executive Council:-

1. There shall be an Executive Council of the Board, which shall consist of a Chairman and other members not exceeding six in number.
2. The Chairman and other members of the Executive Council shall be appointed by the Government, and the tenure of their office and terms and conditions of their service shall be determined by the Government.
3. The Chairman of the Executive Council shall be called the Executive Chairman and shall act as the Chief Executive of the Board.
4. The Executive Council shall advise and assist the Board in the efficient performance of its functions, be responsible for implementation of the decisions of the Board and shall exercise such powers and perform such functions as may be delegated to it by the Board.
5. When the office of the Executive Chairman becomes vacant or he is unable to discharge his duties due to absence, illness or any other reason, a member of the Executive Council nominated by the Government in this behalf shall act as the Executive Chairman until the new Executive Chairman appointed to the vacant office enters upon that office or, as the case may be, the Executive Chairman becomes able to resume the duties of his office.

9. Meetings:-

1. Subject to the other provisions of this section the Board shall determine the procedure for its own meetings and for the meetings of the Executive Council.
2. All meetings of the Board shall, with the approval of the Chairman, be convened by its Secretary and shall be held at least once in every three months at such times and places as may be determined by the Chairman.
3. All meetings of the Board shall be presided over by its Chairman or, in his absence, by its Vice-Chairman, and in the absence of both them, by such a member as may be nominated by the members present in the meeting from amongst themselves.
4. All meetings of the Executive Council shall be convened under the direction of the Executive Chairman and shall be held at such times and places as may be determined by him.
5. All meetings of the Executive Council shall be presided over by the Executive Chairman and, in his absence, by a member thereof as may be specified by the Executive Chairman.

1. All industries set up in the private sector, other than those falling within the jurisdiction of the Export Processing Zones Authority or the Bangladesh Small and Cottage Industries Corporation and textile industries set up by personal finance and the industrial projects approved by the Board, shall be registered in the prescribed manner.
2. An industry registered under this section shall be deemed to be an industry approved by the Board under this Act, and such industry may, on its request, be provided with all such facilities as may be provided to an industrial project approved by the Board.

(1) Every person intending to set up an industry in the private sector, other than an industry falling within the jurisdiction of the Export Processing Zones Authority or of the Bangladesh Small and Cottage Industries Corporation, shall apply to the Board in the form and manner prescribed by it for obtaining the Board’s approval on the proposed industrial project.

(2) Notwithstanding the provisions of sub-section (I) upon recommendation of the Board, the Government may, by notification in the official Gazette, exempt any industry or any industrial project from the operation of the provisions of this section.

(3) The Board may, for the convenience of considering an application received under sub-section (I), direct the applicant to furnish any information which it considers necessary for such a purpose, and may also consult any relevant authority on any matter relating to the proposed industrial project.

(4) If, after considering the application, the Board is satisfied that the project should be approved, it shall, subject to such conditions and limitations as it deems fit to impose, approve the same and shall issue a letter of approval to the applicant and shall specify in that letter the time-limit for the implementation of the project as also the time-limit for commencement of production thereat.

(5) At the time of approving an industrial project under sub-section (4) the Board shall give its decisions on all facilities that may be required for implementation of the project in due time and, in particular, on all or any of the following matters, subject to their relevancy, and shall send such decisions to the concerned persons or authorities, namely :-

1. The extent and the terms and conditions of foreign loan and of suppliers' credit.
2. Allotment of land in the industrial areas under the control of, or belonging to, the Government or a local authority other than the Export Processing Zones Authority and the Bangladesh Small and Cottage Industries Corporation.
3. Time limit for giving connections of electricity, gas and water supply.
4. Time limit for giving connections of all kinds of telecommunications.
5. Time limit for clearing by the customs authorities of imported machineries, spares of such machineries and raw materials.
6. Time limit for issuing clearance regarding environmental pollution.
7. Other facilities and services that may be required for the speedy setting up of an industry.

(6) A decision given by the Board under sub-section (5) shall be deemed to be a decision given by the Government or by such other person or authority as is authorised by, or entitled to give such decision under, the provisions of the relevant law on the relevant subject and such decision shall be implemented accordingly.

(7) No person shall, except with the prior permission of the Board, use any service or facility availed of by him pursuant to a decision under sub-section (5) for any purpose other than for the industrial project for which it was so availed.

(8) Where an industrial project is a company registered under the provisions of the Companies Act, 1913 (VII of 1913), the Board may, in respect of all matters relating to the issue of capital and sale of shares of that company, exercise all powers and perform all functions of the Government under the provisions of the Capital Issues (Continuance of Control) Act, 1947 (XXI of 1947).

(9) Where an industrial project faces any difficulty in the completion of the project within the time limit specified in the letter of approval or if, after such completion, it faces any difficulty in commencing, within such time-limit, production thereat, the entrepreneur of the project may apply to the Board for removing such difficulty, and upon such application, the Board shall endeavour to extend to the entrepreneur the necessary assistance.

(10) The Board may, from time to time, require the entrepreneur of an industrial project to furnish such information relating to the implementation of the project as the Board may consider necessary.

12. Determination of Import Entitlement:-

1. If an industry set up in the private sector, other than a textile industry or an industry falling within the jurisdiction of the Bangladesh Export Processing Zones Authority or of the Bangladesh Small and Cottage Industries Corporation, is in need of import entitlement for importing machineries, spares of machineries, raw materials and packing materials for its own use, it may, in the form and manner prescribed by the rules, apply to the Board for such entitlement.
2. The Board shall issue to the applicant a clearance so that such machineries, spares of machineries, raw materials and packing materials may be imported in accordance with import entitlement determined by the Board after considering the application.

13. Royalty and Fees:-

If an industry set up in the private sector, other than an industry falling within the jurisdiction of the Bangladesh Export Processing Zones Authority, is required to pay to a foreign national or a foreign organisation any royalty or any fees in respect of technical know-how or technical assistance, that industry shall, in the manner prescribed by the Board, apply to the Board for determination of such royalty or fees; and the royalty or fees determined by the Board shall be payable by the industry.

14. Duties of other Concerned Authorities Regarding an Approved Industrial Project:-

1. If, at the time of approving an industrial project, the Board sends to any person or authority any decision under section 11, that person or authority shall take the necessary steps so that the decision is implemented within the time limit specified by the Board.
2. If such a person or authority fails or is unable to take, within the time limit specified by the Board, proper steps pursuant to such a decision, the Board may, after considering the circumstances of the case, issue directions for taking the proper steps pursuant to the decision and upon such direction the concerned person or authority shall be bound to take the necessary steps accordingly.

15. Cancellation of Approval:– If an industrial project approved under section 11 contravenes any of the provisions of this Act or any rules made thereunder or violates any of the conditions relating to the approval, the Board may in the manner prescribed by rules cancel the approval of the project.

16. Inspection:- The Executive Council or a person of authority appointed by it may inspect the progress of the implementation of an industrial project approved under section 11 and shall, after such inspection, submit to the Board a report of the inspection.

17. Declaration of Industrial Area:- For carrying out the purposes of this Act the Government may, by notification in the official Gazette, declare one or more areas specified therein to be an industrial area or areas.

18. Acquisition of Land for Industrial Areas:- If any land situated in an area declared under section 11 to be an industrial area is required for any industrial project approved under section 11, such land shall be deemed to be required for the public purpose and it may be requisitioned or acquired for such purpose under the provisions of the Acquisition and Requisition of Immovable Property Ordinance, 1982 (11 of 1982).

19. Committee:- The Board may appoint one or more committees to assist it in the performance of its functions.

20. Appointment of Officers and Other Employees:- The Board may, for the proper performance of its functions, appoint such number of officers and other employees and consultants or advisers as it may deem fit.

21. Delegation of Powers:- The Board may, by order, delegate to the Executive Council or the Executive Chairman or a member of the Executive Council of a Committee appointed by the Board any of its powers or functions under this Act or the rules made thereunder.

22. Power to Make Rules:– The government may, by notification in the official Gazette, make rules for carrying out the purposes of this Act.

1. The Biniog Board Ordinance, 1988 (Ordinance No. 32, 1988) is hereby abrogated. In spite of such abrogation, the acts and measures taken under the abrogated Ordinance shall be deemed to have been done or adopted under this Act.