Foreign Direct Investment in Bangladesh's Technology Sector: Trends and Opportunities

Foreign direct investment (FDI) in Bangladesh's technology sector has grown steadily but remains modest relative to the country's potential. While Bangladesh attracted approximately $3.5 billion in total FDI in recent fiscal years, the technology sector's share has been growing as international companies recognize the cost-quality advantages of Bangladeshi engineering talent. This article examines the current FDI landscape, incentive structures, and opportunities for technology investors.

Current FDI Landscape in Technology

Unlike India, where technology FDI runs into tens of billions of dollars annually, Bangladesh's technology FDI is measured in hundreds of millions. However, significant investments have been made:

• Samsung R&D Bangladesh: Samsung established an R&D center in Dhaka, employing several hundred engineers working on mobile technology and software development for Samsung's global product lines.
• Cefalo (Norwegian investment): Founded with Norwegian capital, Cefalo operates as a nearshore development center for Scandinavian companies, employing 350+ engineers in Dhaka.
• Selise (Swiss investment): The Swiss digital platforms company established its primary engineering center in Dhaka with several hundred developers.
• BJIT Group (Japanese investment): BJIT operates with Japanese investment and management, bridging Bangladeshi talent with Japanese enterprise clients.
• Venture capital: International VCs including Sequoia Capital (via Surge), Y Combinator, Valar Ventures, and 500 Global have invested in Bangladeshi technology startups.

Investment Incentive Framework

Bangladesh offers one of the most generous incentive packages for technology companies in South Asia:

Tax Incentives

• IT export income tax exemption: 100% exemption on corporate income tax for IT/ITES export revenue, extended through 2027
• Hi-tech park tax holiday: Up to 10 years of complete tax exemption for companies operating within BHTPA parks
• Capital gains tax exemption: Exemption on capital gains from the sale of shares in IT companies in certain circumstances
• Reduced withholding tax: Lower withholding tax rates on royalties and technical service fees paid to foreign entities in the IT sector

Operational Incentives

• 100% foreign ownership: No requirement for local partners or joint ventures — foreign investors can own 100% of IT company equity
• Full profit repatriation: Foreign investors can repatriate 100% of profits and dividends without restriction
• Duty-free imports: Computer hardware, servers, networking equipment, and software licenses can be imported duty-free by registered IT companies
• Simplified work permits: Streamlined work permit process for foreign employees of IT companies

Regulatory Environment

Company Formation

Registering a company in Bangladesh takes approximately 2-4 weeks through the Registrar of Joint Stock Companies and Firms (RJSC). For IT companies, the process has been simplified with online registration available. A foreign company can establish a subsidiary, branch office, or liaison office. The Bangladesh Investment Development Authority (BIDA) provides one-stop service for foreign investors.

Intellectual Property Protection

Bangladesh is a signatory to major international IP treaties including TRIPS (Trade-Related Aspects of Intellectual Property Rights), the Paris Convention, and the WIPO Copyright Treaty. The Copyright Act of 2000 covers software explicitly. The Patent and Design Act provides patent protection for technological inventions. While enforcement mechanisms are still maturing compared to developed countries, contractual protections and international arbitration clauses provide practical IP security for foreign investors.

Data Protection

The Digital Security Act of 2018 addresses certain aspects of data protection and cybercrime. Bangladesh is developing comprehensive data protection legislation aligned with international standards. In practice, IT companies operating in Bangladesh routinely comply with client-mandated data protection requirements including GDPR-aligned processes for European clients.

Investment Opportunities

Development Center Setup

The most straightforward investment model is establishing an offshore development center (ODC) in Dhaka. Companies can recruit from the 30,000+ annual CS graduates and build dedicated teams at 50-70% cost savings compared to Indian tier-1 cities. The ODC model has been proven by companies like Cefalo, Selise, and Samsung R&D Bangladesh.

Acquisition of Local Companies

Several mid-sized Bangladeshi software companies (50-200 employees) with established client bases and technical capabilities represent acquisition targets for international firms looking to enter the Bangladesh market or access its talent pool.

SaaS and Product Investment

Investing in Bangladeshi SaaS companies offers exposure to a rapidly growing domestic market where digital adoption is accelerating. Companies like Nexis Limited, which have developed product portfolios including Ultimate HRM, Digital Menu, and Digital School, demonstrate the viability of building enterprise software products entirely with Bangladeshi engineering teams at competitive development costs.

Risk Factors

Foreign investors should consider:

• Currency risk: The Bangladeshi Taka (BDT) has depreciated against the USD in recent years, which benefits exporters but creates uncertainty for import-dependent operations
• Political risk: Bangladesh has experienced periods of political instability, though the IT sector has been relatively insulated from direct operational impact
• Infrastructure: While improving, power and internet reliability outside Dhaka and designated IT parks can be inconsistent
• Bureaucracy: Despite improvements, government processes can be slower than in more developed economies

Getting Started

Foreign companies interested in exploring technology investment in Bangladesh should begin with a fact-finding visit including meetings with BIDA, BASIS (the software industry association), and established IT companies. Understanding the ecosystem first-hand is more valuable than desk research alone. Nexis Limited regularly engages with international partners exploring the Bangladeshi technology landscape — reach out to start a conversation about potential collaboration or to learn more about operating in Bangladesh's growing tech ecosystem.