Bangladesh Investment Guide 2026: Foreign Investment Climate, Incentives and Entry Practicalities

In South Asia, Bangladesh is rapidly evolving from "the world's next factory" into a growth pole that global capital is watching closely — named The Economist's Country of the Year 2024 and projected to become the world's 12th-largest economy around 2050. With GDP growth of around 7% per year, a workforce averaging just 26 years old, a middle-and-affluent consumer base of 34 million, and an institutional framework highly open to foreign capital, Bangladesh offers Chinese enterprises a compelling new destination for production capacity, market diversification and supply-chain reconfiguration. Drawing on the KPMG Bangladesh Investment Guide and local materials provided by Gazi Law Firm (our Bangladesh partner firm), this article maps the investment climate, policy incentives and practical entry pathway, and flags key risks from a cross-border legal perspective.

1. Country Overview: A Fast-Growing South Asian Market

Bangladesh sits in South Asia on the Bay of Bengal, bordered by India to the north, east and west and Myanmar to the southeast — a hub linking South and Southeast Asia. The climate is tropical: a mild winter from October to March, a hot, humid summer from March to June, and a humid, warm monsoon from June to October. The capital, Dhaka, is the political and economic centre; other major cities include Chattogram (home to the country's largest seaport) and Sylhet.

Bangladesh is a parliamentary democracy; Bengali is the official language. As of 2023 the population stands at approximately 175.7 million, with a dependency ratio of about 53.7% — a high share of working-age people and a substantial demographic dividend. The financial system is anchored by the central bank, Bangladesh Bank, with the Bangladeshi taka (BDT) as local currency, two stock exchanges (Dhaka Stock Exchange and Chittagong Stock Exchange), 62 scheduled banks, 5 non-scheduled banks and 35 non-banking financial institutions.

2. Why Invest in Bangladesh: Eight Reasons and Key Data

Bangladesh's appeal to foreign investors rests on the combination of strategic location, cost advantage, policy support and market potential. Eight core reasons stand out:

• Strategic location: at the crossroads of South and Southeast Asia, commanding the Bay of Bengal with strong sea, road and air connectivity;
• Fast-growing services and digital economy: daily mobile financial services (MFS) transactions exceed USD 400 million, with internet penetration growing at around 3% CAGR;
• Highly competitive labour costs: a minimum wage of about USD 100 per month, far below the regional average of about USD 381;
• Generous fiscal incentives: tax holidays of up to 10 years, export-income relief, and duty concessions on imported capital machinery and raw materials;
• Bilateral and regional agreements: double-taxation treaties with 34 countries and access to multilateral trade arrangements;
• Openness to foreign investment: 100% foreign ownership allowed, no minimum or maximum limits, and full repatriation of profits;
• Young and skilled workforce: average age of about 26, one of the youngest in the world;
• Sustained rapid growth: GDP growth of about 7% projected for the next five years.

The headline figures:

On the cost side, Bangladesh's factor prices are materially lower than its peers:

Returns on equity in several sectors reach 3–4× the global industry average:

Bangladesh is also consolidating its position in global value chains: it hosts 61 of the top 100 highest-rated LEED-certified factories, is the fastest-growing apparel exporter to the EU (surpassing China), and is the world's third-largest rice producer, second-largest jute and freshwater-fish producer, and third-largest vegetable producer.

3. Foreign Investment Legal & Policy Framework

Bangladesh's foreign-investment policy and regulatory framework is composed of multiple statutes, rules and sectoral policies covering incorporation, sector entry, foreign exchange and taxation. The principal instruments include:

• Business establishment: Companies Act 1994; Securities and Exchange Commission Act 1993;
• Investment protection: Foreign Private Investment (Promotion & Protection) Act 1980;
• Zones: Bangladesh Export Processing Zones Authority Act 1980 (EPZ); Bangladesh Private Export Processing Zones Authority Act 1996; Bangladesh Economic Zones Act 2010;
• Investment facilitation: Bangladesh Investment Development Authority Act 2016;
• Taxation: Income Tax Act 2023 and related rules and SROs; annual Finance Act/Bill;
• International trade: Bangladesh Export Policy and Import Policy (as amended from time to time);
• Sectoral regulation: Bangladesh Energy Regulatory Commission Act 2003; Bangladesh Telecommunication Regulatory Commission Act 2001; National Drug Policy 2005; PPP Policy and Guidelines 2010;
• Foreign exchange: Bangladesh foreign exchange guidelines (issued from time to time).

Four key regulators

Depending on the nature and location of the project, investors must deal with the relevant authority:

4. Investment Incentives: Fiscal and Non-Fiscal

(1) Non-fiscal incentives

• 100% foreign ownership or joint venture: full foreign ownership allowed with no mandatory local shareholding;
• No minimum or maximum limit: no ceiling on foreign or local investment;
• Full repatriation of capital, profit and dividends: capital, profits and dividends may be freely transferred abroad;
• Bonded warehouse licence: available to export-oriented enterprises;
• Streamlined visa and work permits: virtual/online approval of visas and work permits.

(2) Fiscal incentives

Bangladesh combines tax holidays, relief and drawbacks to materially lower the tax cost of export-oriented investment:

• Tax holidays of up to 10 years, varying by project location;
• Export-income relief: reduction or exemption on export income;
• Relief on interest on foreign loans and royalty/technical fee remittances;
• Reduced import duty on capital machinery and raw materials;
• Duty drawback facilities for exporters;
• Cash incentives for export-oriented industries;
• Avoidance of double taxation through treaties with 34 countries;
• 100% tax-free sectors: PPP, IT and foreign-loan interest are fully tax-exempt;
• No export duties, except for selective tobacco products.

5. Sector Opportunities and Priority Areas

Bangladesh maintains clear lists of priority and special-development sectors; China's strengths in equipment manufacturing, new energy, healthcare and electronics map closely onto them.

(1) Priority sectors (16 directions)

Manpower export, environmentally friendly ship recycling, tourism, home textiles, wind power, herbal medicine, hospitals and clinics, LED/CFL manufacturing, tea, seed, cosmetics and toiletries, cement, logistics, hi-tech, medical equipment and devices, agricultural machinery manufacturing, and rice bran oil.

(2) Special development sectors

Electric and electronic industries, ceramics, fisheries, printing and packaging, jewellery, paper and paper products, rubber, silk, handicrafts, cashew nuts (raw and processed), live and processed crabs, toys, agar, halal meat and halal products, recycled products, activities suited to the fourth industrial revolution — plus textiles and solar energy.

By accumulated FDI stock, textiles & wearing, banking, power, telecom and gas & petroleum are the five largest sectors (December 2024, USD million):

Industry clusters are also geographically distinctive: Dhaka leads in RMG & textiles, IT and outsourcing/freelancing; Chattogram focuses on shipbuilding, seafood processing and steel; Rajshahi is known for agro-based industries and silk; Sylhet for tea and natural gas; and Khulna for shrimp farming & processing and jute. Investors can align site selection with supply-chain and factor conditions accordingly.

6. Entry Practicalities: Company and Office Setup

(1) Setting up a registered office (liaison / representative office)

1. Apply to BIDA;
2. Notify Bangladesh Bank after obtaining registration;
3. Register with the Income Tax Authority;
4. Register with the RJSC (Registrar of Joint Stock Companies);
5. Obtain a trade licence.

If the Bangladesh office is to generate and receive revenue locally, BIDA approval is required together with VAT registration where applicable; import/export activities additionally require import/export registration certificates.

(2) Incorporating a company

1. Apply to the RJSC for name clearance;
2. Open a temporary bank account to deposit share capital;
3. Prepare the Memorandum and Articles of Association and apply for incorporation with the RJSC;
4. Register with the Income Tax Authority;
5. Obtain a trade licence;
6. Obtain VAT registration.

7. Zone Options: EPZ / Economic Zones / High-Tech Parks

Bangladesh offers differentiated zone vehicles for different industries:

• Export Processing Zones (EPZs): 11 nationwide, exclusively for export-oriented enterprises, with plug-and-play industrial plots, special incentives and tax holidays;
• Economic Zones (EZs): 10 nationwide, open to all industries, with long- or short-term land lease/rent, dedicated utility services, and special incentives and tax holidays;
• High-Tech Parks (HTPs): 4 dedicated to high-tech and IT projects;
• Public-Private Partnerships (PPP): facilitated PPP projects and unsolicited proposals with dedicated single-point management and negotiable terms.

On ports and logistics, Bangladesh is expanding Matarbari, Bay Terminal and several other ports, with projected total handling capacity of about 7.23 million TEU — roughly a 6× increase over current levels — underpinning export-oriented manufacturing and trade.

8. Risk Notes and Cross-Border Legal Advice

Notwithstanding the substantial opportunities, Chinese enterprises should carefully assess the following legal and compliance risks before landing:

From a cross-border legal standpoint, Chinese investors are advised to: (i) embed foreign-investment protection, profit-repatriation and dispute-resolution provisions in the investment agreement; (ii) make full use of bilateral and investment-protection arrangements between China, Bangladesh and third countries; and (iii) retain counsel familiar with both jurisdictions to conduct due diligence on the target company, land title, licences and tax incentives, and to complete compliance registration at the landing stage.

Jiangsu Tianni Law Firm has established a strategic cooperation with Gazi Law Firm (Bangladesh) to provide joint legal services covering company registration, taxation, cross-border investment, international trade and commercial disputes between China and Bangladesh. If you plan to invest in Bangladesh or are engaged in a China–Bangladesh cross-border transaction, please contact Luo Wei's team.

Note: Data and policy information herein are drawn primarily from the KPMG Bangladesh Investment Guide (September 2025) and local materials provided by Gazi Law Firm, and are for general reference only. They do not constitute formal legal advice; please consult qualified counsel in light of the specific project and the laws and regulations in force in Bangladesh.