Definition of Foreign Direct Investment (FDI):

A foreign direct investment (FDI) is an investment made by a firm or individual in one country
into business interests located in another country. Generally, FDI takes place when an investor
establishes foreign business operations or acquires foreign business assets in a foreign company.
However, FDIs are distinguished from portfolio investments in which an investor merely
purchases equities of foreign-based companies.

Foreign Direct Investment Procedures in Bangladesh:

Bangladesh offers generous opportunities for investment under its relaxed Industrial Policy and
export-oriented, private sector-led growth strategy. Except for the previously stated reserved
sectors, foreign investors are free to make investments in Bangladesh in industrial enterprises.

In regards to Procedure of foreign investment in Bangladesh, Foreign companies wishing to do

business or establish a presence in Bangladesh have a number of options.

 Foreign Direct Investment in Bangladesh:

FDI (foreign direct investment in Bangladesh) in industrial or construction projects must be

registered with the Bangladesh Investment Development Authority (BIDA).

BIDA, formerly known as the Investment Board, was formed by the Bangladesh Investment
Development Authority Act 2016 to deal with issues related to FDI and to promote investment in
Bangladesh.

The foreign direct investment (FDI) inflow at the end of June 2018 amounted to USD 2.58
billion (foreign direct investment in Bangladesh stats, Bangladesh bank).
The Bangladesh Investment Development Authority (BIDA) announced an impressive 13.34%
rise in FDI in the third quarter of 2018, receiving proposals worth USD 3.23 billion over the
same period, suggesting strong interest on the part of foreign investors.

The key objective of BIDA is to encourage domestic and foreign investment as well as improve
Bangladesh’s international competitiveness. BIDA also provides the necessary facilities and
assistance for the establishment of industries.
In regards to the Procedure of foreign investment in Bangladesh, determining the route of
investment usually depends on the specific sector and the policy of the FDI adopted by the
Government in regards to foreign direct investment in Bangladesh. 

 Wholly owned subsidiaries in Bangladesh:

Foreign companies are allowed to create wholly-owned subsidiaries in Bangladesh. Such

companies may be known as private limited or public limited companies. Foreign equity
ownership can be up to 100% in most sectors, including construction, information technology
and production.
Foreign entities can acquire an existing Bangladeshi company or incorporate a new company that
complies with the requirements of the Registrar of Joint Stock Companies and Firms (RJSC).
Subsidiaries are entitled to remit dividends reported on income after tax.

 Joint Ventures in Bangladesh:

As with wholly-owned subsidiaries, international companies can have joint venture companies
with Bangladeshi partners. The equity ownership of a foreign corporation would depend on the
sector in which it is invested.
 Setting up a Branch or Liaison offices in Bangladesh for foreign investors:

International companies can also create a presence in Bangladesh through a representative office,
liaison office or branch office for the purpose of foreign investment in Bangladesh.
Typically foreign companies that do not have local earnings in Bangladesh may choose to set up
representative offices, liaison offices or branches.
The operations of these organizations are limited to those set out in their BIDA approvals and are
subject to strict compliance with the foreign exchange regulations.
Generally, no outward remittance of any kind from Bangladesh is allowed unless expressly
approved by the Foreign Exchange Regulations or the Bangladesh Bank.
such offices are expected to pay inward remittances of at least USD 50,000 within two months
from the date of establishment as a cost of establishment.
One of the requisite approvals for the establishment is that security clearance must be obtained
from the Ministry of Home Affairs of the Government of Bangladesh. (Foreign direct investment
in Bangladesh).

 Option of Participating in an existing Bangladeshi company by purchasing

shares:

In regards to foreign investment in Bangladesh, Foreign investors are free to invest in local
companies in Bangladesh unless expressly prohibited (as stated above).
Shares can also be given to foreign investors against capital machinery brought by them to
Bangladesh (subject to confirmation by the Customs and Excise Office of the import documents,
Procedure of foreign direct investment in Bangladesh).
Foreign Direct Investment Procedures in China:

 Rights to Industry Standard Formulation:

Standards are important to many industries in China, from telecommunications to manufacturing.

Foreign companies have often felt left out of the decision-making process, believing that the
government and local firms were behaving unfairly. With the new regulations, the Central
Government has guaranteed that going forwards, firms in an industry will have equal right to set
new standards and that those standards will apply equally to foreign and domestic companies.

 Equal Domestic and International Company Treatment Pre-establishment:

Before a company has even been set up, there are many legal requirements that must be
overcome. However, starting in January 2020, the setup process for foreign and domestic
companies will be more similar. One major change is that the additional step of pre-approval for
foreign companies before setup will no longer be required. This does not mean that the setup
process is now extremely simple. Most foreign companies choose to use an in-country service
provider like FDI China to make sure all the steps of the company set up are accomplished.
Partnering with a local provider can ensure that the company structure is compliant and safely
established within the company’s future scope of activity. Learn more about how you can utilize
our services!

 Expropriation (Government Taking Over Company Assets):

Several parts of these new regulations further clarify legal content found elsewhere in the
People’s Republic of China’s laws. Expropriation is one such case, also implied in the
Constitution. Now, in Article 20 of the new regulations, a further explanation is made. “The
State is not to expropriate any investment made by foreign investors.” Foreign companies can
rest increasingly assured. However, as stated in the Constitution, out of the interests of the
public, expropriation is still possible. It must go throw standard statutory procedures, and fair
compensation from the government must be made to the company.
 Lack of Variable Interest Entity (VIE) Restriction:

In the Chinese market, there are several industries that foreign companies are banned from
participating directly. However, foreign companies often still invest in those interests, in what is
known as VIE. They provide funding to domestic companies in return for control and profits. In
the previous evolution of regulations passed in 2015, the government cracked down on this
loophole, classifying foreign investment to include those domestic companies that are controlled
by a foreign entity.

Interestingly, in March of 2019, the government seemed to open this loophole again, removing
that additional classification for what is considered a foreign investment. It seems that the VIE
structure will continue to be workable, at least in the near future. In some industries, VIE is not
considered a grey area, with detailed rules being in place. This is an example of the complexity
of the Chinese environment. Foreign companies should still proceed cautiously with VIE, as new
regulations may be passed in the next few years.

 Foreign Exchange Assurance:

International companies must frequently move money across borders. For foreign companies in
China, this is an understandable concern. According to the Foreign Investment Law, foreign
investors’ profits, capital contributions, capital gains, asset disposal proceeds, liquidation
proceeds, technology transfer royalties, and legal compensation in China can be freely moved
outward or inward, if the appropriate legal procedures of the PRC.

 Wider access to Government Procurement:

A large source of income for many companies is government procurement, meaning government
agencies purchasing a firm’s goods or services for use. Up until the new regulations, foreign
companies were not treated equally in this area. Now, the government is required to consider
both domestic and foreign companies on a level playing field.
 Local Government Commitment:

China, being a vast country home to so many people on the planet, has an extensive government
structure, consisting of local, intermediate, and national level officials. The Chinese system also
has been known to have different rules at different levels, providing room for corruption. This is
a factor that is discouraging to foreign investment. Under the new rules, it is clearly stipulated
that unless under special conditions approved by the central government, local governments may
not infringe on rights, impose additional requirements, set market entry or exit conditions, or
interfere foreign companies’ operations.

If, because of special circumstances caused by public or national interest, local governments
must deal with foreign companies in a special way, those companies are entitled to compensation
for their loss or damage suffered. This is welcome news for foreign-owned companies and
provides a level of clarity and trust not had before.

 Generic National Security Review:

In 2015, the FDI laws draft had a whole chapter devoted to the procedures and requirements for a
national security review of foreign companies’ operations. Those provisions seemed to be
designed after the United States’ Committee on Foreign Investment in the United States (CFIUS)
structure. Unusual to the overall bearing of the 2019 Foreign Investment Law update, that
chapter was removed, keeping only a generic clause that China’s national security department
will review foreign investments which may influence China’s national security and that decisions
made by the review will be final. Many observers anticipate that the Chinese authorities are in
the process of revising the regulations for the national security review and that there will be
separate regulations passed soon.

Corporate Governance and Decision-Making Flexibility:

In the past, the corporate governance and decision making of foreign companies, including profit
dispensation, has been tightly regulated. Going forward, the restrictions have been greatly eased,
essentially to the level of Chinese-based companies. Out of all the changes the new laws make,
this newfound freedom may be the greatest change for foreign companies.