Introduction
Opening an overseas branch is a complex process for companies, especially those looking to open up in a new territory. South Asian country, Bangladesh, is no exception. Opening a business there requires careful planning and risk assessment. Also, as this is a developing country and is currently undergoing economic developments, it is important to have a comprehensive understanding of Bangladesh’s business environment and investment regulations to successfully set up a branch there. In this article, we will explore how companies can open a Bangladesh branch, while also considering the potential challenges they may face.
Political and Regulatory Background
Bangladesh is the eighth-most populous nation in the world with a population of 164 million people. Since its independence in 1971, the country has undergone rapid economic growth and development. It has pushed New Delhi and Beijing as a major player in South Asia, culminating in significant development and trade links with the rest of the world.
The Bangladesh Government adopted an open-door policy in the early 1990s and allows 100% foreign investment in virtually all sectors. This includes the setting up of overseas branches in Bangladesh. However, it is the Bangladesh Investment Development Authority (BIDA) that facilitates this process by granting permission to the companies looking to open a branch in the country. Companies are required to go through a series of bureaucratic procedures to get a BIDA sanction, which also includes prior approval from the Bangladesh Securities and Exchange Commission and the Bangladesh Bank, depending on the sector.
Benefits of Opening a Branch in Bangladesh
Opening a branch in Bangladesh offers many benefits to companies. These include access to the world’s second-largest expatriate labour force, access to an expanding economy, low cost of labour, and access to the world’s fourth-largest population.
By establishing a presence in Bangladesh, companies will be able to tap into the growing consumer market, as well as take advantage of the country’s strategically located ports and well-developed infrastructure. Moreover, Bangladesh’s tax and duty structure is very competitive and encourages companies to invest.
Potential Challenges
Despite the many benefits of opening a branch in Bangladesh, companies would need to consider the potential risks and challenges. This includes the complex bureaucratic procedures when applying for permission to set up the branch, the risk of having to comply with unfamiliar laws and regulations, and the risk of not being completely aware of the local culture and customs.
Companies should also consider the availability of skilled labour and the cost of employing people from this developing country. Additionally, due to the large number of unskilled workers in Bangladesh, a company may need to provide further training for employees, which can increase the costs. There are also small-scale entrepreneurs in the country, primarily in the garment and non-manufacturing sectors, who may provide competition to overseas branches.
Strategic Planning and Preparation
Given the potential risks of opening a branch in Bangladesh, it is essential to have a clear strategy which is well-thought out in advance. Companies would need to become familiar with the country’s laws, regulations and infrastructure deficiencies. Additionally, they would need to identify potential suppliers and customers in the local market, and consider their local competitors. Companies also should consider the impact of Bangladesh’s export regulations and trade tariffs, and the potential opporunities arising from local and regional economic developments.
Hire Local Professionals and Build a Strong Network
It is also important to consider local needs when opening a branch in Bangladesh. Companies should build a strong network with local professionals and develop relationships with the regulatory bodies. Additionally, having a local partner can be beneficial, as they can provide advice and local knowledge about the market and the people.
Companies should also ensure that their partner is able to meet the necessary requirements in order to run the business successfully, such as adequate credit facilities, investment permits and licenses. Moreover, companies should ensure that the partner has sufficient market knowledge and connections in order to effectively promote and market the business in the local market.
Conclusion
In conclusion, companies should be aware of the potential benefits and challenges of opening a business in Bangladesh. Companies need to carefully plan their strategy, become familiar with the regulations, and ensure that the partner they are working with meets the necessary requirements. With careful preparation, companies can open a branch in Bangladesh and gain access to the country’s growing consumer market.
Risks of Political Instability
Opening a branch in Bangladesh carries a certain level of risk due to the country’s political instability. Political unrest in Bangladesh has been an issue since the 1970s and has been known to disrupt businesses, resulting in potential losses and delays in completion of projects. Companies should pay attention to the political situation in the country and ensure that they are adequately protected against any potential risks associated with it.
Trade Restrictions and Embargoes
Companies should also be aware of the potential risks of trade restrictions and embargoes that can be imposed on Bangladesh. Due to its political nature, the country is subject to trade restrictions by many countries, which can have a negative impact on businesses. Companies should review trade and investment regulations before committing to establishing a branch in the country, and should ensure that their activities are compliant with any applicable restrictions.
The Cost of Setting Up a Branch
The cost of setting up a branch in Bangladesh depends on the size and scope of the business. Companies should take into account the cost of obtaining BIDA approval, labour costs, and registration fees for various permits and licenses. Moreover, depending on the industry, companies may need to set up warehouses, offices and factories in order to conduct their business operations. Additionally, companies may need to make additional investments in technology, equipment and infrastructure, which can be a costly endeavour.
Working with Non-Governmental Organizations
Non-governmental organizations (NGOs) can provide invaluable assistance to companies looking to open a branch in Bangladesh. These organizations are often able to provide information on the current regulations and the applicable laws in the country. Moreover, they can provide assistance in navigation of the complex bureaucratic procedures, as well as advice on potential grant funding opportunities.
Therefore, it is important for companies to establish relationships early on with these organizations in order to access the necessary information and expertise to ensure the successful establishment of an overseas branch in Bangladesh.
