B-NESI Investments and Economic Zones (May 12, 2016)

Research Background Note on
CAPITALIZING ON COMPETITIVE
ADVANTAGES: CROSS-BORDER
INVESTMENTS AND ECONOMIC ZONES
Page 1

The Institute for Policy, Advocacy and Governance
Currency Equivalents
Base Currency Converts**
USD $1.00 (United States Dollar) Tk. 78.45 (Bangladesh Taka)
USD $1.00 (United States Dollar) Rs. 66.27 (Indian Rupee)
Rs. ₹1.00 (Indian Rupee) Tk. 1.18 (Bangladesh Taka)
**April, 2016
Government Fiscal Year
Country Year Policy**
Bangladesh July 1 – June 30
India April 1 – March 31
**IRS Database
Glossary
Article 1: Land Boundary Agreement 1974 – A “Protocol for exchange of Instrument of Ratification regarding
the India-Bangladesh Land Boundary Agreement” which was agreed in 1974. A follow-up was another passing
of Protocol 2011 of the Land Boundary Agreement. The article 1 of LBA 1974 consists of 15 different clauses
regarding Land Boundary demarcation (border, railway line, river, khals, hill tracts and enclaves) between
Bangladesh and India.
Article 2: An excerpt from “Framework Agreement on Cooperation for Development in 2011” between
Government of the Republic of India and Government of the People’s Republic of India. The article states as:
“To enhance cooperation in sharing of the waters of common rivers, both Parties will explore the possibilities
of common basin management of common rivers for mutual benefit. The Parties will cooperate in flood
forecasting and control. They will cooperate and provide necessary assistance to each other to enhance
navigability and accessibility of river routes and ports.”
Dutch Disease: In a certain economy when there are rise in foreign direct investment (FDI), foreign currency,
resource price or rise from natural resource exploration; national income rises. This consequently makes other
products less price competitive especially for export market. This is known as Dutch Disease.
Foreign Currency (FCA): FC is a transactional account that can be denominated/converted to other currency

other than the home currency. This currency can be maintained both onshore and offshore.
Industrial Park: A portion of a city that is commissioned explicitly for industrial use but not for residential or
commercial use). Industrial parks may contain oil refineries, warehouses, ports, chemical plants, distribution
centers, plastics manufacturers, airports, food and beverage processors, and steel manufacturers. Some industrial
parks offer tax incentives, fiscal and tariff incentives. The objective is to promote local business for the export
market.
Line of Credit (LoC): LOC is a settlement between a financial authority or institution and a pact of customers
that establishes a maximum loan ceiling. The financial institution, mainly a bank, permits the maximum amount
to be borrowed. The borrower can draw down or withdraw on the line of credit at any period within the set
agreement.
Public Good: Public good is a set of selected items which consumption is allocated to the society as a whole
and not for individual consumption. Public goods are results of public taxation and no one is accountable to pay
for it. Public goods that include product and service are economic statistics and general information, open space,
iii
Capitalizing on competitive Advantages: Cross-Border Investments and Economic Zones
park and amphitheater, water, road, radio station, antenna TV, law enforcement, parking space, national defense
etc.
Special Economic Zone (SEZ): In modern economic zones, SEZs are special economic zones where business
and trades laws differ from the rest of the country. SEZs are located by a country's national borders to promote
trade, investment, job creation and effective administration. With an overall aim to encourage businesses to set
up in the zone, special financial policies from monitoring and regulatory authority are introduced. These policies
typically address taxation, trading and investing, customs, quotas and labor regulations. Additionally, companies
may be offered tax holidays.
List of Acronyms
ADB Asian Development Bank INR Indian Rupi (Rs.)

ADO Asian Development Outlook IRS Internal Revenue Service
AIIB Asian Infrastructure Investment Bank IPAG The Institute for Policy, Advocacy and
Governance
ASEAN Association of Southeast Asian Nations IPT International Passenger Terminal
BAPA Bangladesh Agro-Processors’ Association LAD Least Available Depth
BBS Bangladesh Bureau of Statistics LBA Land and Boundary Agreement
BCIM Bangladesh–China–India–Myanmar Forum LCS Land Custom Station / Land Ports
for Regional Cooperation
BDT Bangladeshi Taka LoC Line of Credit
BIMSTEC The Bay of Bengal Initiative for Multi- LUMPL Lafarge Umiam Mining Private Ltd.
Sectoral Technical and Economic
Cooperation
BIS Bureau of Indian Standards MAS Monetary Authority of Singapore
BIT Bilateral Investment Treaties MDGs Millennium Development Goals
B-NESI Bangladesh and North-Eastern States of MDNER Ministry of Development of North Eastern
India Region
BICF Bangladesh Investment Climate Fund MFN Most Favored Nation
BOI Board of Investment MIIPP Meghalaya Industrial and Investment
Promotion Policy
BOPs Border Outposts MoU Memorandum of Understanding
BRIC Brazil, Russia, India and China MT Metric Tonne
BSTI Bangladesh Standards and Testing Institute N-11 Next Eleven
CBMP Coordinated Border Management Plan NER North Eastern Regions of India
CMCL Cement Manufacturing Company Limited NEC North Eastern Council
CIS Capital Investment Subsidy NEIIPP North Eastern Industrial and Investment
Promotion Policy
DTA Domestic Tariff Area NESI North Eastern States of India
ECNEC Executive Committee of the National NFCD Non-resident Foreign Currency Deposit
Economic Council
EPZ Export Processing Zone NTBs Non-tariff Barriers
FDI Foreign Direct Investment NGO Non-Government Organization
FC/FCA Foreign Currency Account PIWTT Protocol on Inland Water Transit and Trade
FICCI Federation of Indian Chambers of PPP Purchasing Power Parity
Commerce and Industries
GDP Gross Domestic Product SDG Sustainable Development Goal
GoB Government of Bangladesh SEZ Special Economic Zone
GoI Government of India SIIB Symbiosis Institute of International Business
iv
ICBC Industrial and Commercial Bank of China SOPs Standard Operating Procedures
ICC Indian Chamber of Commerce UNCTAD United Nations Conference on Trade and
Development
ICPs Integrated Check Posts TFP Tripura Food Park
IECC India Endowment for Climate Change of TIDC Tripura Industrial Development Corporation
SAARC
IFC International Finance Corporation USD United States Dollar
IIA International Investment Agreement WB World Bank
IIDC IIDC Infrastructure and industrial WTO World Trade Organization
Development Corporation
Content
Currency Equivalents..........................................................................................................................................ii
Government Fiscal Year.....................................................................................................................................ii
Glossary...............................................................................................................................................................iii
List of Acronyms.................................................................................................................................................iv
Content................................................................................................................................................................. v
List of Tables......................................................................................................................................................vii
List of Figures....................................................................................................................................................vii
Chapter 1. Introduction.......................................................................................................................................1
1.1 Background and Context..............................................................................................................................1
1.2 Objective and Methodology.........................................................................................................................3
1.3 Chapter Mapping.........................................................................................................................................4
Chapter 2. Economic Success Indicators of Bangladesh: the Road to Excellence..........................................4
2.1 GDP Projection............................................................................................................................................2
2.2 Course towards Middle Income Grading.....................................................................................................3
2.3 Poverty and Extreme Poverty Reduction.....................................................................................................4
2.4 Export Growth.............................................................................................................................................5
Chapter 3. International Best Practices on Bilateral Investment.....................................................................7
3.1 Case 1: Singapore-China Bilateral Trade.....................................................................................................7
Chapter 4. Current Bilateral Investments between Bangladesh and India.....................................................9
4.1 Land Boundary Agreement..........................................................................................................................9
4.2 JCC Meetings...............................................................................................................................................9
4.3 Security and Strategic Affairs....................................................................................................................10
4.4 Rerouted Waterways..................................................................................................................................10
v
4.5 Rebooted Power Sector..............................................................................................................................11
4.6 Smooth Trade and Investment Facilitation.................................................................................................11
4.7 Joint Regularity Authority..........................................................................................................................13
4.8 Promotion of Transportation......................................................................................................................13
Chapter 5. Cross-Country Competitive Edges and Incentives.......................................................................14
5.1 Facilities and Tax Incentives for Foreign Investors in Bangladesh............................................................15
5.3 Facilities and Tax Incentives for Foreign Investors in NESI......................................................................17
Chapter 6. Grabbing the Investment Potential Markets: More Avenues......................................................18
6.1 Chemical Industry......................................................................................................................................18
6.2 Automotive Industry..................................................................................................................................18
6.3 Special Economic Zone (SEZ) for Cement Industry..................................................................................20
6.3.1 Rationale behind setting up SEZ for Cement Industry........................................................................20
6.3.2 Proposed SEZ Model..........................................................................................................................22
6.3.3 Benefit.................................................................................................................................................23
6.4 Investment at Tripura Food Park (TFP).....................................................................................................24
6.4.1 Rationale behind investing at TFP......................................................................................................25
6.4.2 Proposed Model..................................................................................................................................25
6.4.3 Benefit.................................................................................................................................................28
Chapter 7. Existing Barriers to Investment.....................................................................................................29
7.1 Inequitable Trade Gap................................................................................................................................29
7.2 Lack of Backend Knowledge of Proper Investment...................................................................................29
7.3 The Forefending Halo Effect of FDI..........................................................................................................30
Chapter 8. Policy Implications and Recommendation....................................................................................31
Conclusion..........................................................................................................................................................33
Appendices.........................................................................................................................................................34
Addendum 1: Bilateral Agreements between Bangladesh and India................................................................34
Addendum 2: References.................................................................................................................................36
vi
List of Tables
Table 1: Selected Economic Trend for Bangladesh, ADO 2015...............................................................................................2

Table 2: Chinese Provincial FDI (2013-14)...............................................................................................................................8
Table 3: Bangladesh’s Trade Statistics with India...................................................................................................................12
Table 4: India Bangladesh Trade Scenario...............................................................................................................................14
Table 5: Fiscal and Non-fiscal Incentives for EPZ..................................................................................................................17
Table 6: Thrust Sectors in Four Contiguous States of NESI....................................................................................................20
Table 7: Cement Consumption in Bangladesh.........................................................................................................................20
Table 8: Responsibilities of Key Stakeholders.........................................................................................................................23
Table 9: Tripura’s Strengths Favorable to Establish Food Park..............................................................................................24
Table 10: Responsibilities of Key Stakeholders.......................................................................................................................26
Table 11: List of Products to be produced at Food Park..........................................................................................................27
Table 12: Incentives offered by State Government and Central Government.........................................................................28
Table 13: Comparison of the Key Indicators of Ease of Doing Business Index......................................................................30
Table 14: Identified Obstacles for investment in Bangladesh and India..................................................................................31
List of Figures
Figure 1: Geographical Map of NESI........................................................................................................................................2

Figure 2: Another Economic Projection from the World Bank shows the Upward Trend of Bangladesh GDP.......................2
Figure 3: The cumulative data analysis and future projection even shows a higher trend than the world GDP.......................3
Figure 4: Bangladesh has the most Manageable Budget Deficit within the SAARC countries................................................4
vii
Figure 5: Some Diametric Poverty Progression (2009-2014)....................................................................................................5
Figure 6: Export Growth in Sub-Regional Countries (2011-2014)............................................................................................6
Figure 7: Bangladesh’s trade with India (in million USD)......................................................................................................12
Figure 8: FDI Outflow, Top 5 Home Countries in Asia, (US$ billion in 2014 and growing).................................................18
Figure 9: South Asian Countries into Greenfield Automotive Industry, 2013-14...................................................................19
Figure 10: Cement Demand and Capacity (2010-2014)..........................................................................................................21
Figure 11: Demand vs. Capacity growth (2005-2014).............................................................................................................21
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Chapter 1. Introduction
1.1 Background and Context
Contra to largely concerted trade liberalization and institutional independence of WTO, investment
liberalization in the overall global sector has made little progression. Investment aggression taken and bilateral
treaties signed between Bangladesh and India are also of no exception and also these Bilateral Investment
Treaties (BIT) took chiefly in piecemeal forms.
Again, the two countries have striking business composition. Bangladesh has drawn global attention in recent
times with significant breakthroughs in areas like MDG accomplishments as well as strong performance in
several areas including poverty reduction and consistent economic growth over the years. Following the
performance of attaining developing country from underdeveloped countries and successful integration into the
targeted SDG goals, Goldman Sachs grouped Bangladesh among N-11 economies considering the high potential
of becoming a power surge among the largest economies in the 21 st century1. One of the four2 areas that
Goldman Sachs took into consideration in selecting the N-11 was the openness to trade and the investment
policies of the individual countries. Thus, inclusion of Bangladesh in the N-11 was an endorsement for the
country’s investment prospects. In addition, the country possesses a strong advantage in terms of its
geographical location. The country is situated next door to a big economy 3 like India with a population of 1.32
billion. Another economic giant, China, is also not very far off – with a distance of about 100 km between the
two borders. Apart from the strategic location, Bangladesh offers a vibrant young workforce, competitive cost
base, tariff-free access to the developed world, competitive fiscal and non-fiscal incentives, etc. These are
presumably some of the lucrative reasons that Bangladesh has been attracting foreign investors’ attention, and
the Foreign Direct Investment (FDI) inflow in Bangladesh. Despite of a major decline in global inflow,
Bangladesh drew 17.72% more FDI in 2015 than that of the previous year 4.
1
Founded in 1869 in New York, the Goldman Sachs is an American multinational investment banking firm that occasionally makes
prediction about emerging markets. It gave projection on future economic power and grouped BRIC (Brazil, Russia, India and China) in
2001. Later on in 2005, the firm identified eleven countries including Bangladesh as having a high potential of becoming one of the
largest economies.
2
The Goldman Sachs used four variables i.e., macroeconomic stability, political maturity, openness of trade and investment policies and
the quality of education while selecting the N-11 countries.
4
http://www.tradingeconomics.com/bangladesh/foreign-direct-investment
India, on the other hand, has been earning a significant amount of FDI for the last few years. The FDI outflow
from India is also noticeable. While the FDI inflow-outflow picture for India as a whole is by and large bright, it
is not encouraging if the North-Eastern States of India (NESI) region is separately taken into consideration. The
dismal picture drew attention of the Indian scholars and think tanks. Frustration was expressed in one study in
the following terms: “despite having natural advantage of trade with neighboring countries and the potentiality
to develop various industries as being endowed with vast natural resources, the NER fails to attract any
sizeable amount of FDI due to infrastructural and other bottlenecks” (Goswamia, C. & Saikia. K.K, 2012).
Although the North Eastern States of India (NESI) is a landlocked territory, it is not far away from some major
markets. Moreover, NESI is stationed in such a strategic location that it can become the stepping stone for India
to strengthen trade and investment ties with ASEAN5 countries.
Figure 1: Geographical Map of NESI
5
The Association of Southeast Asian Nations (ASEAN) is an economic organization of ten countries with membership from Indonesia,
Malaysia, the Philippines, Singapore, Thailand, Brunei, Myanmar, Cambodia, Laos and Vietnam. The combined nominal GDP was over
USD 2 trillion in 2011.
2
Bangladesh as a country with a population of 154 million (Census, 2013) including a significant portion of
middle class consumers could be the best choice as a lucrative market for NESI’s products. The availability of
raw materials as reflected in doing business indices 6, and the existing trend of increasing investment (significant
amount of outbound flows of FDI from India along with an increasing trend of FDI outflows from Bangladesh)
create an encouraging environment for strong bilateral investment focusing on the B-NESI region in the near
future.
1.2 Objective and Methodology
This study probes the bilateral investment cooperation between Bangladesh and NESI in the area of bilateral
public goods. There are a number of bilateral treaties and investment potential areas available to be treated,
especially after the historic meeting in June, 2015 (where MoU on 22 agreements was signed covering security,
investment, transport, waterways, railway, strategic affairs, education, municipal development, land boundary,
power sector and numerous sectors). This paper sets aside agenda other than investment related agreements and
identifies and presents potential investment pockets that can breed mutually feasible economic development.
To be more specific, the study has the following objectives:
 To develop a comprehensive background study on current trade status, potential business ground and
road blocks of bilateral investment and economic development. And to provide necessary breeding
ground for joint cooperation between Bangladesh and NESI. The specific objective is to bring together
the major stakeholders including politicians, policymakers, civil society members, consumers, and think
tanks from both regions
 To present specific steps based on international practices for enhanced cooperation on bilateral
investment and relevant policy development
 To suggest recommendations and solutions for improved trade policies, bilateral business scopes and
formal and informal trade gaps and avenues for mutual benefit. If needed, also to promote and engage
dialogues between Bangladesh and NESI on the same ground.
6
According to the World Bank’s ‘Ease of Doing Business Index’, India and Bangladesh ranked 130 and 174 in 2016.
3
1.3 Chapter Mapping
The essence of this background paper is to prepare and present the overall untapped market for Bangladesh and
NESI. For this purpose, it has been divided into several chapters that include divisional analysis and
presentation of relevant data supporting the aforementioned cause. As a whole, this research paper introduces
the potentially identified pockets for bilateral investment in regards to both countries’ economic development.
The research paper also states relevant case studies and corresponding policy adherence. The results/inferences
derived are the results of diagnostic analysis using literature review and secondary (and tertiary, if needed) data.
The paper explores of progression areas which can result to better disbursing gains from trade and investment.
The paper starts with Chapter 1, where the author tries to present a background on the research. It also illustrates
the broad and specific objectives for the whole plan. Accordingly, the contents in the other chapter have been
displayed. Chapter 2 contains evidence gathered from secondary data analysis and literature review, which
portrays the current economic growth. In this section, some common rational indicators and standards have been
used to demonstrate the results. In Chapter 3, a common model of international practice has been presented. The
objective is to provide data and evidence that if policy and measures are taken well, any bilateral treaty model
can breed the desired success. Chapter 4, provides taken investment policies taken (till date) between
Bangladesh and India. Chapter 5 shows various incentives and trade facilities enjoyed by both regions. The
objective is to gather promotional scopes for the upcoming treaties and agreements. Chapter 6 articulates some
potential avenues for further investment opportunity. In Chapter 7, common curbing elements for bilateral
investments, BIT and FDI have been identified and presented for policy recommendation. Finally, the paper
ends with Chapter 8 by offering a summary of policy recommendations.
Chapter 2. Economic Success Indicators of Bangladesh: the Road to Excellence
Against many tides, Bangladesh has attained economic developments in the past years. From the negative notion
of ‘Bottomless Basket’ to a positive global outlook of ‘Country with vast opportunities’ has not been able to
attain in a day. The post 71 Bangladesh has seen many obstacles and growing hostilities from many countries
and has overcome those notions. Thus Bangladesh has achieved the true definition of Asian success story.
4
The success indicators can encompass all of the socio economic development factors that ensure investment
(FDI) and trading opportunity in Bangladesh. The other success factors are: Gender Parity, Environmental
Sustainability, Reducing Income Inequality, Improving Governance, Strengthened PPP (Public Private
Partnership).
Some of the success indicators of Bangladesh have been discussed in the next portions.
2.1 GDP Projection
According to Asian Development Outlook (ADO) by Asian Development Bank (ADB), Bangladesh is one of
the commodity-exporting countries that successfully blocked the headwinds of narrowing surpluses by
offsetting the external balances of commodity importers. The overall ADO projection over the country can be
summarized in the below formulated table7:
Selected 2015 2016

economic ADO 2015 2015 Achievement ADO 2015 2015 Achievement
indicators (%):
GDP growth 6.1 6.5 6.4 6.7
Inflation 6.5 6.4 6.2 6.2
Current GDP -0.5 -0.8 0.5 -0.5
balance (GDP
share)
Table 1: Selected Economic Trend for Bangladesh, ADO 2015
7
Asian Development Outlook 2015; Asian Development Outlook 2015 Update
http://www.adb.org/sites/default/files/publication/154508/ado-2015.pdf
5
Figure 2: Another Economic Projection from the World Bank shows the Upward Trend of Bangladesh GDP 8
Figure 3: The cumulative data analysis and future projection even shows a higher trend than the world GDP
2.2 Course towards Middle Income Grading
In 2013-14 fiscal, per capita income was $1,190. The successive rise in per capita income resulted $1,314 in
2014-15 and $1,466 in 2015-16.9 This was a cumulative result of raising purchasing power to $3,190, ranking a
36th position listed on the same basis and PPP (Purchasing Power Parity) index from 25.97 in 2006-10 to 27.05
8
The World Bank, www.tradingeconomics.com
9
Executive Committee of the National Economic Council (ECNEC) and Bangladesh Bureau of Statistics (BBS) (As of April, 2016)
6
in 2011-1610. This resulted a rise in the GDP economy size (totaling Tk. 15.13 trillion and 5.99 billion in 2014-
15 to Tk. 13.43 trillion and 6.74 billion in 2015-16) to 56th place for Bangladesh 11
The same study shows that, comparing to other South Asian countries, Bangladesh has comparative edge over
sustainable budget deficit. From the below exhibit it can be shown that among these countries, Bangladesh
along with India and Sri Lanka has the most manageable budget deficit:
Figure 4: Bangladesh has the most Manageable Budget Deficit within the SAARC countries
2.3 Poverty and Extreme Poverty Reduction
“Against [all] the odds, Bangladesh lifted 16 million people out of poverty in the last 10 years and also reduced
inequality; that is a rare and remarkable achievement.”
Johannes Zutt, World Bank Country Director for Bangladesh12.
By “Crossing the Rhine” of limited resources, in-house corruption and commodity syndication, Bangladesh has
fought back to poverty and extreme poverty from 1971 and has gained some remarkable achievements.
10
PPP conversion factor, The World Bank, http://data.worldbank.org/indicator/PA.NUS.PPP
11
World Development Indicators database, World Bank, 17 February 2016
12
http://www.worldbank.org/en/news/press-release/2013/06/20/bangladesh-reduced-number-of-poor-by-16-million-in-a-decade
7
Additionally, the GoB has promised to combat against existing poverty by collaboration with NGOs in the
rendition of health, education and micro-credit services.
Figure 5: Some Diametric Poverty Progression (2009-2014)13
2.4 Export Growth
As the political violence and instability in the FY 2014-15 made the country hamstrung, it has recently
recovered in export and investment promotions (especially with recovery in US and the Eurozone). The main
earning from export is the Ready Made Garments (RMG) sector. Bangladesh sets target of $33.5 billion export
earnings for 2015-16, which is 7.38 percent more than the 2014-15 fiscal.
The following figures show the current and forecasted trend of export earning of Bangladesh vs. the export
growth in the sub-regional countries, which shows the most consistent growth in favor of Bangladesh’s export
scenario.
13
Poverty Reduction in Bangladesh: Recent progress, Courtesy of Center for Research and Information
http://cri.org.bd/2014/07/02/poverty-reduction-in-bangladesh-recent-drifts/
8
14
Figure 6: Export Growth in Sub-Regional Countries (2011-2014)
Figure 7: South Asian countries outperformed many “export tigers” in 2013 (export growth in US$)
14
World Bank
9
Figure 8: Export earning target of Bangladesh15
This list of success can go on. However, the lessons of this growth experience especially the post 1972 war-torn
Bangladesh show some unfavorably external factors such as oil price shock, high global commodity prices
including extenuating factors such as sequential floods and natural disasters in the 1970s that ultimately led to
some unfortunate conditions. But, no economy is such success story without any obstacle. Other than these
economic downfalls, Bangladesh has achieved remarkable success even comparing to South East Asian
economy.
Chapter 3. International Best Practices on Bilateral Investment
Bilateral investments have always been one of the conflict management engines in international relations. Other
than being a model of ‘how to focus’, bilateral investments also exhibit the possible best practices that
ultimately help in positive economic transition. The presented case study here is discussed above IIA/UNCTAD
landscape and region/investor-wise disputes. However, if there were any, the bilateral investment would have
resolved such arisen issue.
3.1 Case 1: Singapore-China Bilateral Trade16
15
Export Promotion Bureau
16
IE Singapore Statlink, http://www.iesingapore.gov.sg/Publications/Singapore-Trade-Statistics
10
Singapore’s investment and trading tide burgeoned after forming the formal ties 25 years back in the 90s. More
substantial growth, free trade agreements and joint projects are underway.
As his first visit in Singapore in November 6, 2015, Chinese President Xi Jinping jointly with Singaporean
President Ma Ying-jeou signed some MoUs on economic cooperation, education, urban development and
governance.
The China-Singapore free trade agreement came into existence in January, 2009. Understanding China as an
important player in the regional economy, Singapore adopted China as the largest non-oil import destination in
2010.
Statistically, China exceeded the neighboring Malaysia to become Singapore’s largest trading partner in 2013.
Business volume between the two countries reached $121.5 billion in 2015, offering a gigantic 23-fold increase
from $5.2 billion in 1990.
Figure 9: Singapore-China Bilateral Trading in US$ billion (1990-2014)
Again, Singapore’s investments in the key western cities (Chengdu, Chongqing and Xi’an) shows the following
investment volume:
Province Xi’an (2013) Chengdu (2014) Chongquing (2014)

Cumulative FDI (US$ 1.2 4.4 5.0
billion)
Table 2: Chinese Provincial FDI (2013-14)
Both countries have increased bilateral cooperation in the financial sector. In March, 2013, Monetary Authority
of Singapore (MAS) increased the size of its bilateral currency swap facility with China to 300 billion yuan
(S$66.2 billion). The objective was to promote financial stability and trade. Aside financial trading in 2015,
11
Singapore was designated as the first offshore yuan hub outside China with the Industrial and Commercial Bank
of China (ICBC). The financial analysts derive that, this move was to bypass financial capital into the East from
the West, which again is being more strengthened by the introduction of Asian Infrastructure Investment Bank
(AIIB).
Consequently, local companies in Singapore have been attracted to invest in Chinese coastal provinces such as
Jiangsu, Zhejiang, Shandong and Guangdong. Unilaterally, Singapore has set up seven bilateral business centers
in these provinces. In these provinces more than 70 per cent of foreign investments are concentrated.
As a result for the second consecutive year, Singapore has been selected as the largest foreign investment in
2015, totaling US$5.8 billion that comes from more than 700 projects in China. 17
Chapter 4. Current Bilateral Investments between Bangladesh and India
Regardless of local issues and border disputes, Bangladesh and India repeatedly have made formal and informal
trades beyond borders. The engaging trades encouraged and resulted in bilateral investments 18 between
Bangladesh and India. Some of the bilateral investments are mentioned below:
4.1 Land Boundary Agreement
Indian Prime Minister, Mr. Narendra Modi paid a visit to Bangladesh from 6-7 June 2015. He expressed his
satisfaction over the 100th constitutional amendment to give fulfillment of the 1974 Land Boundary Agreement
and its 2011 Protocol.
This resulted the land swap of the conflicting enclaves between the two countries on July 31 st, 2015.
4.2 JCC Meetings
The first meeting of the India-Bangladesh Joint Consultative Commission (JCC), was held in New Delhi on
May 7th, 2012. A Framework Agreement on Cooperation for Development was signed during this visit of the
17
http://www.straitstimes.com/business/bilateral-trade-and-investment-going-strong
18
http://www.financialexpress.com/article/economy/india-bangladesh-ink-22-agreements-all-you-wanted-to-know/81278/
12
then Indian Prime Minister Mr. Manmohan Singh’s visit to Bangladesh. The delegation was led by Foreign
Ministers from both countries.
The second JCC meeting took place in Dhaka from February 16-17, 2013. This meeting was a multifaceted
venture, encompassing a wide range of areas including trade and investment, connectivity, security, water,
power, border management, shipping, development cooperation, renewable energy, art and culture, human
resource development and people to people exchanges.
The third JCC meeting held in New Delhi on 20 September 2014, where maritime boundary issue was greatly
emphasized. Consequently, on his visit in Bangladesh, India Prime Minister Mr. Modi signed a MoU on blue
economy and maritime cooperation in the Bay of Bengal and the Indian Ocean; along with use of Chittagong
and Mongla ports and a project under IECC (India Endowment for Climate Change of SAARC).
As a result, settlement of the maritime boundary passed on in favor of Bangladesh with 19,467 sq. km of the
25,602 sq. km sea area of the Bay of Bengal. This development further enhanced mutual understanding and
paved way for cooperation in sustainable exploitation of the maritime resources of the Bay of Bengal and its
resources.
4.3 Security and Strategic Affairs
Among 22 signed agreements on June 2015, Prevention of Smuggling of Fake Currency Notes, Cooperation
between Coast Guards and Prevention of Human Trafficking, gun running and drugs were some of the important
taken agendas.
In the same meeting, need for Coordinated Border Management Plan (CBMP) for managing border, reducing
cross border criminal activities, irregular movement, violence and tragic loss of lives were also discussed. In this
meeting, both states welcomed the finalization of Standard Operating Procedures (SOPs). This treaty would let
the Indian border roads for construction and maintenance of Border Outposts (BOPs) of Border Guards
Bangladesh and deploy emergency (Indian) medical facilities in distress areas by Bangladeshi personnel, who
are serving in the vicinity.
In this concern, border killing was restricted to zero and government officials were also directed to take actions
against such crimes, further if any. Since then, such savagery activities have been leveled to zero.
4.4 Rerouted Waterways
According to Article 2 of the Framework Agreement on Cooperation for Development of 2011, it was decided
to address the water resources management issue of common rivers including water sharing and common basin
management. Ultimately, which has encouraged and enabled many cement traders and food processing
13
companies (i.e. Pran) to rethink border trading and come up with new investment policies. These opportune
policies and taken agendas have been discussed in the later parts of the paper.
In this meeting, it was also assured to Bangladesh that India would not take any unilateral decision on any
Himalayan strategy (including Tipaimukh Hydro-Electric Power Project) of their River Interlinking Project
which may affect Bangladesh adversely.
Another great initiative was the signing of the Coastal Shipping Agreement which will open up new cooperative
avenues in the areas joint collaboration. In this regard, the Protocol on Inland Water Transit and Trade (PIWTT)
was also renewed to adapt new trade facilitation measures. It included dredging of the Bangladesh-India inland
water protocol routes and further assessment of Least Available Depth (LAD) with international funding. While
this was primarily initiated by Prime Minister Sheikh Hasina, her Indian counterpart Mr. Modi agreed to provide
necessary assistance for enhancing navigability of the routes according to the Framework Agreement.
4.5 Rebooted Power Sector
To help Bangladesh achieve its 2021 Goal (to achieve installed capacity of 24,000 MW power by the year 2021)
Mr. Modi in the recent visit in Bangladesh, requested Bangladeshi Prime Minister Sheikh Hasina for smoothing
the entry of Indian companies in the power generation and distribution sector of Bangladesh. In this regard, a
bilateral exchange was already operational through the Bheramara-Baharampur grid connection of 1,000 MW
electricity and supply of 100 MW of power from India including from Palatana Power Plantto (eastern side of
Bangladesh). To enhance in-house power capacity, the prime ministers also expressed their firm conviction to
set up more power plants in the western portions of Bangladesh.
In the same line, it was decided to evacuate power from the North-eastern region of India (Rangia/Rowta) to
Muzaffarnagar of India through Bangladesh by constructing 7000 MW multi-terminal grid line with substantial
power option at Barapukuria in Bangladesh.
In this meeting, the working pace of Bangladesh-India Friendship Power Company’s 1320 MW coal-fired
power plant at Rampal, Bangladesh was appreciated by both governments. However, currently this project is at
halt as many environmentalists and common people are protesting against an alleged attempt causing from the
aggression on the adjacent safari.
Although Bangladesh being a relatively small country, has not been able expand its export base, it gain its
success through stretching and integrating new product diversifications. Consequently, it did not face any price
appreciation in case of other commodities, as a result, it is one of the few South Asian countries that did not
suffer from Dutch Disease. Thus, statistically, it has been able to outperform many of the Asian economy giants
in 2013.
14
Bangladesh is one of the eight economies reduced the export and import time by implementing computerized
systems that allow web-based documents submission. 19
4.6 Smooth Trade and Investment Facilitation
In the Dhaka 2015 meeting, the two Prime Ministers signed the renewal of the bilateral Trade Agreement
provisioning new trade facilitation. This signing will widen further bilateral trades, investment and economic
cooperation in a sustainable way to mutually benefit the both regions. Referring to Article 1 of the Framework
Agreement on Cooperation for Development, the two Prime Ministers officially directed concerned officials to
eliminate all bars to ensure smooth bilateral trade.
Follow up success of functional Border Haats was also discussed and more opening of border haats at mutually
agreed locations was stressed.
Year Export** Import** Trade Ratio

2008-09 18391.95 (274.26) 186093.00 (2863.19) 1:10
2009-10 21680 (304.62) 221573 (3202.1) 1:11
2010-11 36475 (512.5) 324832 (4560) 1:9
2011-12 38792 (490.42) 376428.5 (4758.89) 1:10
2012-13 45071.68 (563.96) 381598 (4776.9) 1:8.47
2013-14 35448.42 (456.633) 469080 (6035.5) 1: 13.22
**Value in million Tk. (Value in million US$)
Table 3: Bangladesh’s Trade Statistics with India
Figure 7: Bangladesh’s trade with India (in million USD)
19
Doing Business Report, 2015, The World Bank
15
The decision of introducing Special Economic Zones (SEZ) for India into Bangladesh market was emphasized.
Mongla and Bheramara were identified as possible locations. The relevant application of the SEZ initiatives
have been discussed in the next parts of the report.
Another decision of Line of Credit (LoC) grant worth US$ 2 billion for Bangladesh was awarded from India.
This grant encompassed various development projects particularly in the area of public transport, roads,
railways, inland waterways, ports, education, health etc.
In the same meeting, a bilateral MoU was signed that stated that India would provide assistance on Small
Development Projects, a special intra-municipal policy aimed for city improvement projects (already
undertaken) in Rajshahi, Sylhet, Khulna & Narsingdi.
Another potential investment area is renewable energy, as Mr. Modi forwarded directives to the potential
investors (from India) of solar power-based system installation including light bulbs, mobile charging facilities,
fans and cook stoves to the off-grid villages in Bangladesh.
4.7 Joint Regularity Authority
In the meeting, harmonization of standards, agreements and certificates for enhancing bilateral trade was
ensured by enrolling the Bilateral Cooperation Agreement between the Bangladesh Standards and Testing
Institute (BSTI) and the Bureau of Indian Standards (BIS). The two governments also agreed to inform new
legislation, rules and regulations in safety and testing to each other. The objective is to facilitate easy
compliance and upgradation of facilities.
4.8 Promotion of Transportation
Along with the introduction of Dhaka-Shillong-Guwahati and Kolkata-Dhaka-Agartala Bus services, another
route was also planned to cover Khulna-Kolkata and Jessore-Kolkata as proposed by Bangladesh, which is
planned to be operationalized after completion of consultations by both sides. Furthermore, to promote the
development process of coal sector, a bridge over the river Feni at Ramgarh-Subroom was also proposed and the
officials were directed to expedite.

After the success of first joint venture, a proposal of introducing second Maitree Express between Khulna and
Kolkata was also discussed. The joint government directed the concerned officials of both sides to take
measures to ensure more passenger-friendly customs and immigration facilities for the passengers of Maitree
Express. Mr. Modi also announced that India will construct a modern International Passenger Terminal (IPT) in
India to facilitate easy customs and immigration requirements for Kolkata-Dhaka Maitri Express commuters.
16
In the railway sector, this bilateral agreement brought tide in the construction of Akhaura-Agartala railway link
and revival of the old railway links.
Aside setting promises in numerous potential business areas, both governments also vowed to work closely in
advancing the existing trades and relevant regional/sub-regional cooperation processes including SAARC,
BIMSTEC and BCIM-EC.

FY Bangladesh Export Bangladesh Import Trade Imbalance Trade in Favor of
to India from India
2010-11 512.51 4569.20 4056.69 India
2011-12 498.42 4743.30 4244.88 India
2012-13 563.96 4776.80 4212.84 India
2013-14 456.63 6034.8 5578.17 India
2014-15 (July-March) 396.43 4456.5 4060.07 India
Table 4: India Bangladesh Trade Scenario
Chapter 5. Cross-Country Competitive Edges and Incentives
The all-embracing observers have termed Bangladesh as a winning combination of favorable market and
competitive cost based structure, which indicates that it is one of the few countries where risk factors for FDI is
minimum. Especially for India and North Eastern regions of India (considering the joint borders and potential
hotspot for untapped investment in heavy industries) Bangladesh is considered the golden gate of most
permissive FDI administrations in South Asia that allows 100% foreign equity ownership with unlimited exit
policy including royalty remittance and equity & dividend repatriation. Quota free access of Bangladeshi
products to most developed countries is one of the most compelling reasons that investors would desire to come
to Bangladesh for investment. Moreover, Bangladesh offers a highly adaptive and industrious workforce,
excellent commercial and infrastructural support. Although historically Bangladeshi workforce is perceived as
semi-skilled, the current conjugation with government and state level polytechnic and vocational schools are
providing enough skill based trainings and thus the age-long notion against technical education is changing.
17
On the other hand, NESI has a good number of advantages of being the next powerhouse of Indian investment
economy. Especially, the region is bestowed with a favorable topography and agro-climactic conditions which
offers vast potential for agriculture, horticulture and forestry (ICC, 2013). In this study, ICC identified that the
region’s comparative advantages in producing vegetables, fruits and other horticulture products could be tapped
by setting up small-scale processing units as the region produces a large amount of spices such as chilies,
gingers, mustard seeds, fruits and vegetables. As per the ‘North Eastern Industrial and Investment Promotion
Policy (NEIIPP), 2007’ the whole of NESI has been declared a SEZ (Special Economic Zone) and many tax
exemptions, subsidies and waivers are offered (ICC, 2013). From numerous studies, it was revealed that the
region has potential in the area of hydro power and quarry industry.
NESI’s agro potentiality could be complemented with Bangladesh’s knowledge in the same area. As said, while
NESI has advantages including plenty of raw materials and educated workforce, Bangladesh has shown its edge
in agriculture as the country can afford to feed such a high number of its inhabitants with limited cultivable land.
Historically Bangladesh exports frozen food, raw jute, jute goods, woven garments, knitwear, agro-products,
leather and chemical products in India and imports goods including textiles and textile articles, automobile,
chemical or allied industries products, machinery and mechanical gadgets etc.
The GoB enacted the Foreign Private Investment (Promotion and Protection) Act in 1980. The objective is to
provide fair and equitable treatment to foreign private investment. Against expropriation and nationalization,
this act provides administrative framework and ensures legal protection of foreign investment in Bangladesh. It
also guarantees capital repatriation and returns. In the similar way, competent protection is available for
intellectual property rights, such as patents, benchmarks, designs and trademarks. In Bangladesh, industries
established in the Government EPZ (Export Processing Zone) enjoy tax holidays. The facilities and tax
incentives for foreign investors in Bangladesh and NESI region have been furnished in later portions of the
paper.
5.1 Facilities and Tax Incentives for Foreign Investors in Bangladesh
Some of the world’s most competitive yet feasible and practical fiscal and non-fiscal incentives are offered by
the Bangladeshi government. In general, the foreign investors are entitled to the following incentives 20:
20
Document Courtesy: Board of Investment, Government of Bangladesh
18
 Permanent resident permits on investing a minimum of USD 75,000 and citizenship on investing a
minimum of USD 500,000
 In Dhaka & Chittagong Divisions, tax holidays are 100% in first two years, 50% in the year three and
four year, and 25% in the year five; while in Rajshahi, Khulna, Sylhet and Barisal Divisions and three
Chittagong Hilly Districts: 100% for first three years, 50% for next three years, 25% for year seven
 Accelerated depreciation for new industries is available at the rate of 50%, 30% and 20% for the first,
second and third years respectively, on the cost of plant and machinery
 Businesses that export 80% or more of goods or services get qualified for duty free import of machinery
& spares and bonded warehousing
 90% loans against letters of credit and funds for export promotion
 Guarantee scheme for export credit
 Domestic market sales of up to 20% for export oriented business located outside an EPZ on payment of
relevant duties
 Tax exemption on capital gains from the transfer of shares by the investing company
 Option for avoidance of double taxation in bilateral agreements
 No restriction in issuing work permits to foreign nationals
 Repatriation facilities for invested capital, profits and dividends
 No limitation on long term and working capital loan to foreign investors from local commercial banks
 No limitation on foreign equity participation in FDI
 Foreign technicians employed in foreign companies gets tax exemption for up to 3 (three) years for
personal tax.
While above are the general incentives for foreign investors in Bangladesh, FDIs in Bangladesh also enjoy many
fiscal and non-fiscal incentives that are furnished in the following table:
Fiscal Incentives for EPZ Non-fiscal Incentives for EPZ
 Tax holiday for 10 years and concessionary tax for  100% foreign equity allowed
5 years after completing initial 10 years
 Full repatriation facilities of dividend and
 Duty free import of machinery and raw materials capital at the event of exit
 Duty free import and export of raw materials and  Enjoy MFN (most favored nation) status
finished goods
 Intra and Inter-zone export is allowed
 Complete exemption from dividend tax for 3 years
19
subject to certain conditions  Back-to-back L/C for the import of raw
materials in certain industries
 Exemption of income tax on salaries of foreign
technicians for 3 years subject to certain  No ceiling on foreign and local investment
conditions
 Import of goods from the Domestic Tariff Area
 GSP facility available (DTA)
 Duty free import of materials for constructing  Non-resident Foreign Currency Deposit (NFCD)
factory buildings Account permitted
 Accelerated depreciation on machinery or plant  Option to sell 10 per cent of output to the DTA
allowed under certain conditions
 Remittance of royalty, technical and consultancy fees  Full repatriation of capital & dividend
allowed
 Option to relocate from one zone to another
 Duty & quota free access to EU, Canada, Norway,
Australia etc.  Foreign Currency loan from abroad under direct
automatic route
 Relief from double taxation.
 Equal rights with Bangladeshi nationals for
foreign employees
 Operation of FC account by 'B' and 'C' type

Industries allowed.
Table 5: Fiscal and Non-fiscal Incentives for EPZ2122
Source: Board of Investment (BOI)
5.3 Facilities and Tax Incentives for Foreign Investors in NESI
As per the ‘North Eastern Industrial and Investment Promotion Policy (NEIIPP)–2007’, the NESI region has
been declared as special economic zone (SEZ). The Indian government has implemented various business
themes to attract foreign investors. These are as follows:
21
Fiscal-and-Non-Fiscal-Incentives, Fiscal and non-fiscal Incentives, http://www.boi.gov.bd/site/page/aed23fd5-6e31-4d22-8920-
b088f43f84b7/Fiscal-and-Non-Fiscal-Incentives
22
Bangladesh Export Processing Zone Authority,
http://www.epzbangladesh.org.bd/investor_details/incentives-facilities
20
 Up to 90% Subsidy on transport cost of raw materials and 50% on movement of finished goods that are
brought from outside NESI regions as well as the finished goods sent from the region to the rest of
India. The transport cost between Siliguri (the entry point to the north east) and the factory site is
considered for subsidy calculations.
 Income tax exemption up to five years for new industrial installation in the region.
 Growth centers and IIDCs will be converted into total tax free zones for the next ten years. (Although
this scheme has not been implemented yet). Similar benefits will also be forwarded to new industrial
zones or their successive expansion in other growth units of industrial parks, and export promotion
zones set up by the states. Similar benefits will also be provided to units located beyond specified
borders. (Provided that they belong to the specified industries of the Indian government circulation).
 Up to 15% subsidy on Capital Investment Subsidy (CIS) of investment in plant and machinery, with a
maximum ceiling of 30 lakh INR (International Normalized Ratio).
 Up to 3% interest subsidy on working capital loans applicable for 10 years. Eligibility conditions will be
same as in case of tax benefit.
Chapter 6. Grabbing the Investment Potential Markets: More Avenues
Bangladesh and India both already have some running joint ventures/green field projects operated into the
mutual lands. Along with these opportunities, some more areas can be explored for further possibilities. For
instance, among ten largest green field projects operated in Bangladesh in 2014, two were from India. Other
than Asian Paints, Pacific International Lines opened up a $70 million project of transportation, freight and
distribution services. Moreover, given that Bangladesh is already doing quid-pro-quo business with other Indian
states, it is only a matter of time when Bangladesh extends the same (and probably ranges of products) business
lines with the NESI regions.
6.1 Chemical Industry
India entered into Bangladesh with an estimated expenditure of 81 million US$ worth of Chemicals, paints,
coatings, additives and adhesives industry in 2014. The investor was Asian Paints. This project is one of the
largest announced Greenfield projects in Bangladesh in 2014 23.
6.2 Automotive Industry
23
http://www.bssnews.net/newsDetails.php?cat=2&id=501273&date=2015-06-24
21
Due to its heavy inclination towards automobile industry, India has been presented with numerous Greenfield
investment offered by global automakers and first-tier spare parts suppliers in South Asia during 2013–2014,
including 12 projects that exceeds a potential of more than $100 million.
Figure 8: FDI Outflow, Top 5 Home Countries in Asia, (US$ billion in 2014 and growing)24
During 2013–2014, the South-Asian countries each was awarded one Greenfield investment project by foreign
companies. These projects are relatively large investments with a significant number of jobs created. In 2013,
for example, Mahindra & Mahindra from India invested more than $200 million in a plant and jointly with
Rangs Group and Aftab Automobiles, they started producing three wheelers, light trucks and utility vehicles in
Bangladesh.
The below chart extracted from World Investment Report, 2015 by UNCTAD, shows that even in business
volume, Bangladesh is the most hospitable country to commit joint ventures with India when it comes
automobile industry.
Figure 9: South Asian Countries into Greenfield Automotive Industry, 2013-14
Discussions in the above sections confirm that there exist a lot of investment potentials in the NESI region. Each
state of the North Eastern States of India (NESI) has a number of thrust sectors and huge scope for investment.
24
World Investment Report, 2015, UNCTAD and Financial Times Ltd, fDi Markets (www.fDimarkets.com)
22
Considering the scope, this paper accumulates thrust sectors of the four states that are contiguous to Bangladesh.
The following Box presents those in the following manner:
Assam 1. Agro - Horticulture & Food Processing Sector

2. Medical Plants
3. Tourism
4. Pharmaceuticals
5. Electronic and IT base industries
6. Mineral Resources
Tripura 1. Rubber
2. Food Processing
3. Tea
4. Bamboo
5. Mineral Resources
6. Tourism
Meghalaya 1. Agro Based Industries
2. Horticulture & Biotechnology Based Unit
3. Electronics and Information technology
4. Tea, Rubber & Spices
5. Mineral Based Industries
Mizoram 1. Bamboo and timber based industries
2. Food Processing & Agro- horticulture sector
3. Electronics and Information technology
4. Tourism sector
5. Handloom and handicrafts
6. Plantation Fiber and Hill Brooms
Table 6: Thrust Sectors in Four Contiguous States of NESI
Source: Investment Promotion Policies of individual states
Considering the above thrust sectors of NESI and the strength of Bangladesh and given the limitation of this
research, two potential areas have been discussed comprehensively in following sections: one about the Special
Economic Zone (SEZ) for Cement Industry and another on the investment prospect at Tripura Food Park.
6.3 Special Economic Zone (SEZ) for Cement Industry
Special Economic Zone (SEZ) has become ubiquitous idea of centralizing the thrust/exclusive sectors of a
specific region. The Government of Bangladesh has been actively considering setting up a Special Economic
Zone (SEZ) in the Sylhet division25. The Board of Investment (BOI), in collaboration with Bangladesh
Investment Climate Fund (BICF) of IFC, has already conducted necessary feasibility study. The study exhibited
25
http://www.bizbangladesh.com/business-news-2612.php
23
that there exists huge potentiality (especially of tea and cement export) to establish SEZ in Sylhet. From
intensive research, it was found that if a Cement SEZ was established, this region could become a hub for
cement trading. Given the proximate NESI region with abundance of raw materials for cement production, it is
expected that both Bangladeshi and Indian investors will invest in the SEZ from win-win perspective.
6.3.1 Rationale behind setting up SEZ for Cement Industry
The construction sector is one of the fastest growing sectors in Bangladesh. The average growth rate in this
sector is around 8% (as of data 2012). As cement is one the most important construction materials, the growth in
the sector warrants a faster growth of demand for cement. The experience of the last few years suggests that the
demand for cement grew at a rate of 10 percent per year. The country’s increasing urbanization has generated
considerable needs for cement. The following table shows the growth of cement consumption in Bangladesh:
Year Consumption Growth rate %

(mn MT)
2005 7.60 18.50%
2006 8.40 10.53%
2007 8.20 -2.38%
2008 8.54 4.10%
2009 10.57 23.82%
2010 13.93 31.80%
Table 7: Cement Consumption in Bangladesh
Source: Research Report: Cement Sector of Bangladesh (2012)
Since, the cement industry in Bangladesh is in rising trend, the leading cement manufactures are going for
further expansion. Cement trading is increasing due to growing demand for cement in both the local and foreign
markets. Industry expected demand growth is 20% to 25% for the next three years.
24
Figure 10: Cement Demand and Capacity (2010-2014)
Source: IDLC Research Report 2013
The current trend shows that industry specialists estimated the annual demand for cement in the country lies
between 18-20 million tons, while the combined production capacity of the active cement producers is more
than 36 million ton, almost double of local demand.26
Figure 11: Demand vs. Capacity growth (2005-2014)
26
Monthly Business Report 2013, IDLC, Published in March, 2015.
25
Source: IDLC Research Report 2013: Cement Sector
Both Bangladesh and NESI have a number of large cement manufacturers who have strong reputation. For
example, the major export market of Crown Cement 27 is the northeastern belts of India (Meghalaya, Tripura, and
eastern and western regions of Assam). The company has won National Export Trophy in 2008-09 and 2009-10
(Kabir, 2013). The same country came up as first to export in January, 2003. On the other hand, C ement
Manufacturing Company Limited (CMCL), the largest cement manufacturer in north east India became the first
Indian cement manufacturer to opt for clinker export to Bangladesh. Star Cement, a subsidiary of CMCL,
exported its first barge of clinker to Bangladesh in August 2013. The company also aimed to export over 50,000
tonnes of clinker to Bangladesh every month (The Times of India, 2013). Although, this promise didn’t see any
execution, later in 2015, this company tied up with several cement manufacturers of Bangladesh to export
required clinker in Bangladesh through riverine routes. 28
There exists an example of cross border investment in the area of cement between Bangladesh and India. For
instance, Lafarge Surma Cement Ltd.29 was registered in 1997 as a private limited company in Bangladesh,
which owns a subsidiary company called Lafarge Umiam Mining Private Ltd. (LUMPL) registered in India. It
operates at Nongtrai in Meghalaya. In 1998, it decided to embark on the construction of a cement plant in
Bangladesh that required continuous supply of limestone from a quarry belonging to the group located in the
state of Meghalaya. Considering the large market in Bangladesh, the company pursued the two governments of
India and Bangladesh to sign a bilateral investment agreement for setting up a cement industry. Thus, in
November 2000, the two governments signed a historic agreement through exchange of letters in order to
support the unique cross-border commercial venture. As of today it is the only cross-border industrial venture
between the two countries. The agreement resulted in providing uninterrupted supply of limestone to the
Chhatak Cement Plant in Bangladesh by a 17 km-long belt conveyor from Meghalaya. The Company is meeting
about 8% of the total need for cement and 10% of total clinker requirements of Bangladesh. By exporting
clinkers to other cement producers, this company is earning around USD 50-60 million per annum worth of
foreign currency savings for the country.
6.3.2 Proposed SEZ Model
27
http://www.crowncement.com/export.php
28
http://www.meghalayatimes.info/index.php/region/21166-star-cement-begins-clinker-export-by-river-route
29
Lafarge Group, with 176 years of experience, holds world’s top-ranking position in Cement, Aggregates, Concrete and Gypsum. It
operates in 64 countries with around 68,000 employees. Lafarge is named as one of the 100 Most Sustainable Companies in the World.
26
The key stakeholder of the proposed SEZ would be the Bangladesh Economic Zones Authority; Commerce and
Industry department of Meghalaya Government and the Investors of B-NESI region. The responsibilities of
these three groups of stakeholders would be in the following manner:
Bangladesh Economic 1. Land Acquisition
Zone Authority 2. Infrastructure Building
3. Utility Service Providing
4. Coordination
5. Facilitation of export process
Commerce & Industry 1. Coordination with the Department of Mining &
Department of Geology of Meghalaya to ensure uninterrupted
Meghalaya limestone supply
2. Reassurance of NESI' entrepreneur to invest at
SEZ
B-NESI Investors 1. Plant setting up
2. Ensuring limestone supply by working together
Table 8: Responsibilities of Key Stakeholders
Source: Author, 2016
Investors from both Bangladesh and NESI should come forward to invest in the SEZ. In Bangladesh, out of 123
listed companies, the 13 largest cement manufacturers hold 78% of the market share. These large base has the
capability to install large plants at the SEZ. Besides, many local manufacturers can invest at SEZ as well. From
NESI side, Cement Manufacturing Company Limited (CMCL), which is one of the noted cement manufacturers
in North East India can invest in the SEZ as well. Besides, M/S Narayan Kar & Associates Pvt. Ltd of Tripura,
M/S Barak Valley Cements Ltd of Assam, Dhunik Cement, Amrit Cement Industries, Cement Manufacturing
Company, Cosmos Cement, Green Valley Industries, Goldstone Cement, Hills Cement, JUD Cements and
Meghalaya Cement Limited of Meghalaya can also invest.
6.3.3 Benefit
Due to geographic nature, Bangladesh does not have in-house limestone supply and cannot produce clinkers.
Except Lafarge, all other cement manufacturers of Bangladesh import clinkers 30. About 10-15 million tonnes of
clinker is imported annually from Thailand, Indonesia, Malaysia, China and Philippines that incurs a high rate of
shipping cost and exercise duties. On the other hand, limestone is abundantly available just on the other side of
the border within a few kilometers inside India. Meghalaya, the nearest border state of India, is considered to
have a rich base of limestone. This can be a backward linkage of establishing cement industry in Sylhet. Thus,
30
Cement Sector in Bangladesh, IDLC Report
27
getting uninterrupted limestone supply at a competitive cost will considerably boost up the cement industry in
Bangladesh. Nonetheless, it will generate significant employment for Sylhet and the surrounding area. Thus
establishment of the economic zone and providing surety of an uninterrupted power and limestone supply, will
reduce the per-unit cost of production. Subsequently, it will boost up cement export capacity. All companies
having plants in the SEZ will be able to enjoy both internal and external economies of scale. Installation of
cement factory in the SEZ would increase the export volume to the NESI region and meet the demand.
6.4 Investment at Tripura Food Park (TFP)
Tripura is located in a significant strategic position as it is surrounded by Bangladesh on three sides sharing 856
km long international border. Tripura’s geographic location and socio-economic linkages with Bangladesh
offers the state as a potential center of the entire northeastern region of India. The agro-climatic conditions of
Tripura is favorable for growing various fruits and horticultural crops, creating vast potentiality for setting up
food processing industry in the state. Again, Tripura has an optimal agro-climatic condition for production of
range of horticultural crops. Besides, it has stable state law, investor friendly environment, a transparent policy
scheme and responsive legislation. Understanding its potential, the state government has announced a number of
initiatives including infrastructural development i.e., creation of Tripura Food Park, introduction of investment-
friendly schemes, investment in land customs stations, laboratory for testing food products, cold storage chains
and capacity building program. Strengths that are favorable to attract foreign investment at Tripura Food Park
are depicted in the following table:
Supply side Advantage 1. Diverse Agro-climate conditions

2. Abounds agriculture, horticulture and livestock production
3. Skilled human resources and increased focus on skill development
4. Vast reserve of natural gas providing at a concessional price
Incentive to Industry 1. Tax incentives and exemptions
2. Capital Investment subsidies and other incentives
3. Availability of finance at cost-effective terms
4. Comprehensive Insurance Scheme
Physical Infrastructure 5. Establishing Food Park with the facilities of laboratory, cold storage &
warehouse
6. Easy access to physical infrastructure such as power, water, roads etc.
7. Strategic location, being between Bangladesh on one side
8. South East Asia on the other
Regulatory Framework 1. Simple procedures for entry and exit points of firms
2. Industrial regulation, labor regulation, other government regulations
28
3. Security, law and order situation
Table 9: Tripura’s Strengths Favorable to Establish Food Park
Source: Author’s analysis from different sources, 2016
From the above table it is clear that Tripura, among other NESI states, possesses a strong investment climate. As
Bangladesh has already shown its strength in exporting processed food, the Bangladeshi entrepreneurs can
invest at the Tripura Food Park.
6.4.1 Rationale behind investing at TFP
From above discussion, it can be derived that Tripura can be the golden gate for trade promotion between
Bangladesh and NESI. The region’s comparative advantages in producing fruits, vegetables and other
horticultural products can be tapped by setting up large-scale processing units for both local and foreign
markets. Bangladesh, with a population of about 157 million, has a huge domestic market for processed food.
There are nearly 700 processed food manufacturing enterprises in Bangladesh 31. The demand for processed food
in Bangladesh is growing rapidly with increasing purchasing power of the middle class. With 44.98 million
people, NESI has a significant demand for processed food as well. Moreover, the neighboring state, West
Bengal, with a population of 91 million can be the potential market of processed food. Apart from this, the
strategic geographical position of the NESI, wherein it shares 98% of its boundaries (about 5,000 km) with
neighboring countries (Nepal, Bhutan, China, Myanmar and Bangladesh) shows its immense potential to be the
hub of processed food trade (Karmakar, 2008).
6.4.2 Proposed Model
Tripura government has established a separate Food Park considering the growing demand of food processing
industry in this region. The Tripura Industrial Development Corporation Limited (TIDC) is mainly responsible
to operationalize the Food Park. To attract investment, TIDC can communicate with potential Bangladeshi
investors through Bangladesh Agro-Processors’ Association (BAPA) and annual food expositions such as
FoodPro. Bangladesh has a good number of food processing industries. BAPA has nearly 370 members 32 who
are engaged in manufacturing and processing of these foods. Another statistics exhibits that in a processed food
31
Ministry of Foreign Affairs of Denmark and Bangladesh Agro-Processors Association (BAPA)
32
http://bapabd.org/
29
fair in 2014, around 36% investors were from neighboring countries and among them, 31% of the exhibitors
made more than 10% of their business in just 3 days 33. Amongst them, Pran-RFL Group, Square Consumer
Product Limited, Akij Food and Beverage Limited and BRAC Dairy & Food Project are some of the largest
companies that hold the major market share in Bangladesh and they are capable to set up plants in the Food Park
of Tripura. These companies can install factory at Food Park aiming at capturing the growing market of
Bangladesh and NESI using abundant raw material from Tripura. The key stakeholders for the proposed food
park would be the Tripura Industrial Development Corporation Limited (TIDC); Bangladesh Agro-Processors’
Association (BAPA); and the Bangladeshi investors. The assumed responsibilities of the key stakeholders are
discussed in the following table:
Tripura Industrial Development • Acquiring land

Corporation Limited (TIDCL) • Building Infrastructure i.e. Cold Storage, Ware House & Quality
Control laboratory
• Ensuring Utility Services
• Establishing one stop service center
• Ensuring uninterrupted supply of raw material
Bangladesh Agro-Processors’ • Working jointly with TIDC
Association (BAPA) • Motivating its member to invest at Food Park
• Disseminating information to potential investors
Potential Bangladeshi investors • Setting up plant
• Connecting with local suppliers
• Establishing a sound value chain to ensure the production of
quality output
• Selling products at both Bangladesh & NESI' market
Table 10: Responsibilities of Key Stakeholders

Source: Author, 2016
The existing Food Park is the industrial infrastructure owned and managed by the TIDCL having 30 Acres
industrial area with sophisticated technologies. TIDC provides various facilities subsuming 1500 MT cold
storage, warehouse, quality control laboratory, sorting, grading & packaging unit, bottle manufacturing unit and
test house. The project has incurred Rs. 707.00 lacs as investment costs (GOI- Rs.400 lacs, State-Rs.307.00
lacs). (TIDCL, September 2015). Tripura can offer the aforementioned Bangladeshi food manufacturers to
invest in the park while the latter can take the opportunity of the favorable investment environment with
33
FoodPro, 2014
30
abundant primary goods. In fact, one Bangladeshi company naming Pran 34 has already got foothold in Tripura.
Pran is investing Tk. 10 crore in Bodhjungnagar near Agartala to process mainly the pineapple. Aside this
project, for initial market entry into jelly and soft drinks production, Pran has been promised by the Indian
government to allocate a 10-acre industrial park 35. The main market for this products is the northeast India
including the Seven Sisters. The GoI has also assured of electricity, infrastructure and banking facilities to Pran.
It also plans to open office in every state of India to grow further business. (Pankaj Saran, 2015) 36. Moreover, for
the industrial park, TIDC has allotted two acres to Pran for the agro-food product unit.
All logistics for setting up the unit in the Food Park area, which would earn foreign currency and create scope
for employment, would be provided by TIDC. The plant will supply products to the markets of Assam,
Nagaland, Tripura, Meghalaya, Manipur, Mizoram and Arunachal Pradesh. The product that could be produced
by the proposed Bangladeshi companies are shown in the following table:
Crop Processed Products

Wheat Noodles, Flours (fortified), Biscuits & bakery, Breakfast cereals
Maize Flour, corn flakes, corn meal, corn oil, starch and its derivatives (i.e. glucose, starch)
Pineapple Juice, tidbit slice, Jam, Concentrates, IQF, Fiber Marmalade,
Cocktail syrup, preserved fresh, wax emulsion
Jackfruits Dehydrated Chips, Pulp in Syrup

Litchi Juice, Jam, Syrup, Concentrates, IQF, Fruit cocktail in Syrup
Banana Puree, Chips, Pulp, Concentrates, Banana Powder
Orange Juice, Jam, Concentrate, Marmalade, Fruits cocktail in syrup, preserved fresh
Table 11: List of Products to be produced at Food Park
Bangladeshi companies with their long experience and rich business background can easily become the leading
business brand in the NESI region by capturing its growing market. In NESI, the fruit processing industry is still
at a budding stage. Bangladesh having geographical and ethnic proximity with this region can tap this
opportunity through accessing abundant raw materials from Tripura. The incentive packages that are favorable
34
Pran Group, set up in 1980, manufactures more than 200 food products under 10 different categories i.e. Juices, Drinks, Mineral Water,
Bakery, Carbonated beverages, Snacks, Culinary, Confectionery, Biscuits & Dairy. Pran exports its agro-processed foods and drinks to
95 countries, including the US, Britain, Sweden, Cyprus, Australia, Malaysia, Italy, Germany, South Korea, and some Middle East and
African countries (Pran, 2013). PRAN has already earned a reputation as a brand name in this region as its products are available in
northeastern India.
35
Cool Bangladesh in Team Engine, http://www.tm-engine.com/cool-bangladesh.php
36
http://www.thedailystar.net/business/export/export-more-india-reduce-trade-gap-saran-121321
31
to investment in Tripura Food Park, offered by both the state governments (under Tripura Industrial Investment
Promotion Incentive Scheme 2012) are furnished in the following table:
Incentives Offered by the State Incentives Offered by the Central Government

Government
1. Capital Investment Subsidy at 30% and 1. Exemption of Excise Duty on finished

additional subsidy at 2.5% for enterprises of products.
ST, SC, & women individuals on Fixed
Capital Investment, for land and civil works 2. Central Transport Subsidy.
subject to a ceiling of Rs. 50 lakh per unit.
3. Income tax exemption for five years for the
2. Procurement Preference at 15% on purchases new industrial units set up in the region
on tendering process by the state Government (Indian Chamber of Commerce, 2013).
Department / Agencies subject to at least 30%
value addition within the state. 4. Capital Investment Subsidy.
3. Full Reimbursement of Standard Certification

5. Interest Subsidy on working capital loans.
Fees /Charges / other expenses on account of
obtaining a standard Certification.
6. Comprehensive Insurance Scheme for
insurance coverage. Subsidies to service
4. Partial reimbursement at 20% of floor space
sector, bio-technology and power generating
rentals actually paid by IT enterprise, subject
industries (Government of Tripura, 2013).
to a maximum of Rs. 12 Lakhs Per Annum.
5. Provides State Transport Subsidy for covering

the portion for which Central Transport
Subsidy is not available.
6. 85% Exemption from the payment of Earnest

Money and Security Deposits on tenders
floated by State Govt. Department / Agencies
(Government of Tripura, 2013).
32
Table 12: Incentives offered by State Government and Central Government
Source: North Eastern Industrial and Investment Promotion Policy
6.4.3 Benefit
Tripura grows a range of varieties of fruits and vegetables. Aside a significant value addition through the
proposed food park, the state can earn huge returns from both domestic and international markets. From
infrastructural point of view, in the long run, the Food Park will expand industries based on fruits and vegetable
products. It will encourage growth of the food processing industry by establishing a strong infrastructure backed
supply chain. The Food Park will provide waste management policy and ensure monetary worth, especially for
perishables like fruits and vegetables. It will rejuvenate the agricultural sector by offering employment
opportunities. On the other hand, Bangladeshi companies will increase business operations and return by
investing in the Food Park.
Chapter 7. Existing Barriers to Investment
7.1 Inequitable Trade Gap
It is widely acknowledged that both Bangladesh and India offer natural market for each other. In the case of the
B-NESI region, it is true to a greater extent. However, extra effort to ensure and tighten mutually beneficial
economic chains is yet to be unfolded. To ensure economic growth of both Bangladesh and NESI, the necessity
of investment is irrefutable. In this regard, articulated planning and advanced policymaking, that are conducive
of investment, can create new vistas of economic cooperation. But the existing imbalance in trade volume
between Bangladesh and India often add as a sore point. The enormous trade gap 37 can only be reduced by
increasing Indian investment in Bangladesh and then re-exporting products to India including the NESI region.
However, there exist some difficulties and dissuading features that are handicapping the investment prospects.
The first and foremost barrier would be the lack of proper steps from part of both the governments. No
government has taken any appropriate initiative to accelerate investment flow in the region. So the shortage of
proper planning and policy making could be identified as the main constraint against accelerating investment
pace.
37
The trade gap between Bangladesh and India was a drop of 10.94 percent to $2.36 billion in FY16 from $2.65 billion in the FY15.
33
7.2 Lack of Backend Knowledge of Proper Investment
A number of activities and considerations are prerequisite to the investment decision. Moreover, international
investment requires investor knowledge about the level of obstacles, bureaucracy and law & regulations that
exist in the potential investment destination. These are critical considerations directly related to the protection of
capital and investment. According to the WB’s Doing Business Index 2016, Bangladesh is currently ranked 38 at
174 while India is positioned at 130. The following table shows the underlying problem of doing business and
hereby the dilemma of mutual investment:
Indicators Bangladesh India
Total Ranking DB 2016 DB 2015 Change in DB 2016 DB 2015 Change in
Rank (174) Rank (173) Rank Rank (130) Rank (142) Rank
Starting a Business 117 111 -6 155 164 +9
Dealing with Construction 118 118 No 183 184 +1
Permits change
Getting Electricity 189 189 No 70 99 +29
change
Registering Property 185 184 -1 138 138 No
change
Getting Credits 133 128 -5 42 36 -6
Protecting Investors 88 87 -1 8 8 No
change
Paying Taxes 86 85 -1 157 156 -1
Trading Across Borders 172 172 No 133 133 No
change change
Enforcing Contracts 188 188 No 178 178 No
change change
Resolving Insolvency 155 155 No 136 136 No
change change
Table 13: Comparison of the Key Indicators of Ease of Doing Business Index
Source: Doing Business Data (2015 & 2016), the World Bank
7.3 The Forefending Halo Effect of FDI
Again there are some commonly perceived obstacles for foreign investment in Bangladesh and India. For
instance, even after several administrative and communal integration, foreign investments in both countries have
38
Ease of doing business ranks economies from 1 to 189, with first place being the best. A low numerical rank means that the regulatory
environment is conducive for business operation.
34
repeatedly faced bureaucratic hassles, slow decision making processes, conservative public sentiment, delayed
engagement and administrative negligence. Both countries, especially Bangladesh lack proper legal and
administrative framework, political stability and social and religious harmony.
Some of major obstacles faced by both Indian and Bangladeshi investors in mutual countries are 39:
Investment obstacles in India 1. Power shortage in certain areas

2. Overall legal and order problem
3. Bureaucratic hassles
4. Limited market size specially in the South West India
5. Limited access due to intra-communal disputes (religious
violence, crusades, racial obstacles), i.e. in Assam
6. Complex land acquisition system
7. Conservative sentiment in some particular regions
Investment obstacles in 1. Country of frequent and devastating natural calamities
Bangladesh 2. Negative notion of impoverished and underdeveloped country
3. Lack of interest of adjust into new liberal investment system
4. Slow policy making and corruption in the state level
5. Poor application of commercial law and labor rights
6. Political instability
7. Power shortage
8. Poor infrastructure
Table 14: Identified Obstacles for investment in Bangladesh and India
Chapter 8. Policy Implications and Recommendation
To be an emerging economy from an impoverished one, Bangladesh needs more foreign investment in the
upcoming years. The NESI, on the other hand, cannot afford to sit idle as well. To get rid of the negativity of a
landlocked allegory and to enhance the tempo of industrialization, it also requires to hardware investment on
and above the current level. To kick start the process, both Bangladesh and NESI should show keenness. Taking
notes of the positives, it remains to be said that B-NESI can give a big boost to the investment volume to each
39
Rahman & Bhattacharya, 2003, Economic and Political relation between Bangladesh and neighboring countries
35
other. Bangladesh should be considered as one of the lucrative destinations for investment. The regulatory
burden on investment procedures has been reducing over the times. Numerous incentives from Bangladesh
government signaled its keenness to boost investment. Bangladesh also allows 100% foreign direct investment
across sectors except in nuclear energy, currency printing, forestry and defense. Similarly, the Indian
government has also put focus on the NESI region and is trying to pull and revamp investment in the region.
Both parties should try to address the problems prevailing on the ground in a realistic manner as some existing
barriers like short validity period of business visa are still working as impediment to this end.
Considering contextual facts, Bangladesh could be the ideal destination for Indian entrepreneurs. However, it
also makes sense to strive for increasing Bangladeshi investment in the NESI region as well. Re-export of the
goods, produced in the factory from both end is a tremendous possibility, to say least. Till today, the vast mutual
investment potentiality has remained untapped and unaccounted to a large extent. Now, what is necessary is to
see a tangible outcome, i.e., a good beginning and subsequent steps to drive the impetus forward. To provide
confidence to the potential investors, several initiatives would be worth noting. Both Bangladesh and NESI must
share their resources and advantages to unleash the potentials to expand the investment volume. The relevant
nodal agencies of both governments should come forward to exploit the inherent potential of industrialization to
give a major push to this end. Till today, what mostly lacks is the shortage of entrepreneurs and entrepreneurial
attempts. Both parties should encourage entrepreneurship without wasting time and should arrange proper
business and investment conducive ambience.
Reviewing the export baskets from Bangladesh to India, it seems worthy to invest in some important sectors
including agro processing, automobiles, textiles, chemicals, plastics, light engineering, pharmaceuticals and IT.
Keeping the knowledge of fertile farmland of the NESI region and its literate work force, Bangladesh can invest
into agriculture, hydro power and quarry industry. Knowledgeable quarter opine that both Bangladesh and NESI
should go for joint ventures to provide a heightened climax to the existing initiatives. In such case, modalities
should be worked out to engage the private sectors to hasten the process. Sophisticated factory-made goods have
a great demand in the NESI region. Bangladesh can capitalize on this demand from NESI side and can make a
foray into their market.
36
Conclusion
Investment is imperative to propel the development wheel of any country. Consequently, globally the
investment cooperation is on a rising trend. The scope of enhanced investment opportunity between Bangladesh
and NESI is enormous. Both Bangladesh and NESI offer natural market for each other’s exporting goods.
Geographical proximity and contiguousness40can reduce transaction cost and can ensure quicker delivery. While
Bangladesh requires attracting investment from abroad in order to keep its growth upbeat, the NESI, also
requires to amass effort to create jobs for its vast literate and underemployed population. It is expected that by
ensuring intensified ties in terms of trade and investment, the regions’ economies would be one of the fastest
growing in the next decade that will hereafter offer outstanding long-term growth opportunities. On the same
notes, both parties should try to unlock huge scope for collaborative cooperation. Bangladesh offers a
competitive business friendly environment. Cheap labor cost, strategic location and global market access are
some of the advantages that Bangladesh offers to the potential investors from India. Hence, there is ample scope
for Indian entrepreneur to invest in Bangladesh. On the similar note, NESI should attract Bangladeshi
investment to ensure maximum value addition to the abundant resources of the region. Both Bangladesh and
NESI need to remain presentable as an investment destination to materialize their individual economic growth
aspiration.
Many informal channel affirms that, the states of northeastern India are closer to Bangladesh than they are to
their mother India. If realized, it is high time both the regions took the ‘adopt and adapt’ policy to reconcile any
prior bad blood and proceed towards a greater economy. Provided that the aforementioned variables are
maximized and external vulnerabilities are minimized properly, this business will give an added fillip to the
sustainable economic development in these regions.
40
Four of the NESI’s seven states naming Tripura, Meghalaya, Mizoram and Assam share a total of 1880 km border with Bangladesh.
37
Appendices
Addendum 1: Bilateral Agreements between Bangladesh and India
The following bilateral documents were signed, exchanged, adopted and handed over during the visit of Mr.
Narendra Modi in Bangladesh in June 2015:
i. Exchange of Instruments of Ratification of 1974 Land Boundary Agreement and its 2011 Protocol
ii. Exchange of letters on Modalities for implementation of 1974Land Boundary Agreement and its 2011
Protocol
iii. Bilateral Trade Agreement (renewal)
iv. Agreement on Coastal Shipping between Bangladesh and India
v. Protocol on Inland Water Transit and Trade (renewal)
vi. Bilateral Cooperation Agreement between Bangladesh Standards &Testing Institution (BSTI) and
Bureau of Indian Standards (BIS) on Cooperation in the field of Standardization.
vii. Agreement on Dhaka-Shillong-Guwahati Bus Service and its Protocol
viii. Agreement on Kolkata-Dhaka-Agartala Bus Service and its Protocol
ix. Memorandum of Understanding between Coast Guards
x. Memorandum of Understanding on Prevention of Human Trafficking
xi. Memorandum of Understanding on Prevention of Smuggling and Circulation of Fake Currency Notes
xii. Memorandum of Understanding between Bangladesh and India for Extending a New Line of Credit
(LoC) of US$ 2 billion by Government of India to Government of Bangladesh
xiii. Memorandum of Understanding on Blue Economy and Maritime Cooperation in the Bay of Bengal and
the Indian Ocean
xiv. Memorandum of Understanding on Use of Chittagong and Mongla Ports
xv. Memorandum of Understanding for a Project under IECC (India Endowment for Climate Change) of
SAARC
xvi. Memorandum of Understanding on Indian Economic Zone
xvii. Cultural Exchange Programme for the years 2015-17
xviii. Statement of Intent on Bangladesh-India Education Cooperation (adoption)
xix. Agreement between Bangladesh Submarine Cable Company Limited (BSCCL) and Bharat Sanchar
Nigam Limited (BSNL) for leasing of international bandwidth for internet at Akhaura
38
xx. Memorandum of Understanding between University of Dhaka, Bangladesh and Council of Scientific
and Industrial Research, India for Joint Research on Oceanography of the Bay of Bengal
xxi. Memorandum of Understanding between University of Rajshahi, Bangladesh and University of Jamia
Milia Islamia, India
xxii. Handing over of Consent Letter by Insurance Development and Regulatory Authority (IDRA),
Bangladesh to Life Insurance Corporation (LIC), India to start operations in Bangladesh

In a courtesy event held at Sheikh Hasina’s office, the two Prime Ministers inaugurated/flagged off the
followings:
i. Flagging off Dhaka-Shillong-Guwahati Bus Service
ii. Flagging off Kolkata-Dhaka-Agartala Bus Service
iii. Unveiling of Foundation Stone for Construction of Khulna-Mongla Railway line
iv. Unveiling of Foundation Stone for Rehabilitation of Kalaura-Shahbajpur section of Bangladesh
Railways.
v. Inauguration of Tarapur-Kamlasagar Border Haat
vi. Unveiling of Foundation Stone for Bangladesh – India Friendship Building at National Police
Academy, Sardah
vii. Inauguration of Upgraded Laboratories at BSTI
viii. Unveiling of Foundation Stone of Rabindra Bhaban Kuthibari, Shilaidaha
ix. Unveiling of Foundation Stone for Construction of Bangladesh–India Friendship Bridge-1 over Feni
River

Indian Prime Minister Mr. Modi handed over the following to Bangladeshi Prime Minister Sheikh Hasina:
i. Audio recording of Bangabandhu’s Speech at Brigade Maidan, Kolkata (06 February 1972)
ii. DVD of Parliamentary Debate on Land Boundary Agreement
iii. Mementos of INS Vikrant
iv. Replica of a dredger supplied to Mongla Port
v. Photo and replica of one of the 24 Automatic Weather Stations installed in Bangladesh under the
STORM programme

On the other hand, Prime Minister Sheikh Hasina handed over the following souvenirs to Prime Minister Mr.
Modi:
i. A photograph of the "Signing Instrument of Surrender 1971”
39
ii. A map indicating the location of SEZs for India
iii. A photograph of the model of the Maitree Super Thermal Power Project (2x660 MW) at Rampal.
40
Addendum 2: References
Acharya L., Marwaha, A. (2012). Status Paper on India-Bangladesh Economic Relations, Federation of Indian
Chambers of Commerce and Industries (FICCI). Retrieved as on 09 October 2013 from
http://www.ficci.com/spdocument/20184/StatusPaperonIndiaBangladesh.pdf
DhakaTribune (July 8, 2013), Many Indian Firms look for Investment in Bangladesh. Retrieved on 05 October
2013 from http://www.dhakatribune.com/commerce/2013/jul/08/many-indian-firms-look-investment-
bangladesh
Foodpro Bangladesh. (2013). Bangladesh Food Processing Sector an overview. Retrieved on November 26,
2013 from http://www.foodpro.com.bd/way-to-foodpro-bangladesh.
Goswami. C., Saikia. K. K (2012). FDI and its relation with exports in India, status and prospect in north east
region, Symbiosis Institute of International Business (SIIB), ELSEVIER
Government of Assam. Investment Policy of Assam 2008. Retrieved on 04 October 2013

fromhttp://assamgovt.nic.in/pdf/Industrial%20Policy%20of%20Assam%202008.pdf
Government of Manipur Secretariat (2013), The Industrial and Investment Policy of Manipur 2013. Commerce
& Industries Department. Retrieved on 15 October 2013 from http://dcimanipur.gov.in/MSME/Industrial
%20Policy%202013%20with%20Notification.pdf
Government of Meghalaya (2013). Meghalaya Industrial and Investment Promotion Policy (MIIPP)-2012.
Commerce and Industries Department. Retrieved on 11 October from
http://megindustry.gov.in/MIIPP_2012.pdf
Government of Tripura, Department of Industry & Commerce. (2013). Incentive for Investors. Retrieved on
November 20, 2013 from http://industries.tripura.gov.in/incentives
Government of Tripura (2013). Tripura Industrial Investment Incentives Promotion Scheme, 2012. Department
of Industries & Commerce. Available at http://www.tidc.in/P_scheme_2012.pdf
41
Hindustantimes (04 March 2012) Bangladesh Expects $7-9 bn Investment by Indian Power Cos. Retrieved on
01 November 2013 from
http://www.hindustantimes.com/world-news/bangladesh-expects-7-9-bn-investment-by-indian-power-
cos/article1-820552.aspx
Indian Chamber of Commerce (2013). India’s North-East Diversifying Growth Opportunity. Retrieved on 12
September, 2013 from
http://www.pwc.in/en_IN/in/assets/pdfs/publications/2013/north-east_summit-2013.pdf
Kabir, M. A. (2013, November 25). Cement makers coming of age. The Daily Star. Retrieved 25 November
2013 from http://www.thedailystar.net/beta2/news/cement-makers-coming-of-age/
Kanungo, A.K, (2012). FDI Inflows into South Asia: A Case Study of India’s Investments in Bangladesh.
Retrieved on 10 November 2013 from http://dx.doi.org/10.2139/ssrn.2140737
Karmakar. K. G. (2008). Agriculture and Rural Development in North-Eastern India: The Role of NABARD.
ASCI Journal of Management 37(2): 89–108
Lafarge Surma Cement Ltd. (2013). About us. Retrieved on 22 November, 2013 from http://www.lafarge-
bd.com/about.php
Ministry of Foreign Affairs of Denmark. (2013). Food Processing in Bangladesh, Opportunities within fishery,
vegetables and fruits. Retrieved on 01 December, 2013 from
http://bangladesh.um.dk/en/~/media/Bangladesh/Documents/Content%20English/Development%20issues/DBP
%20Downloads/Food%20Processing%20in%20Bangladesh.ashx
PRAN (2013). Export History. Retrieved on 26 November, 2013 from

http://www.Pranfoods.net/export_history.php
Research Report: Cement Sector of Bangladesh. (2013). IDLC Finance Limited. Retrieved on 18 November,
2013 from http://www.idlc.com/sector_coverage/1332569363Research%20Report%20on%20Cement%20Sector
%20of%20BD-Initiation,%20April%2005,2011.pdf
42
Reza, M. F. (2013). Analysis of Financial Performance of HOLCIM cement Bangladesh Ltd. Independent
University, Bangladesh. Retrieved on 19 November, 2013 from
http://www.sb.iub.edu.bd/internship/Spring2013/0830050.pdf.
The Daily Star (September 8, 2013) Growth momentum hinges on foreign investments. Retrieved on 15
November 2013 from
http://www.thedailystar.net/beta2/news/growth-momentum-hinges-on-foreign-investments/
The Hindu (December 4, 2012) India to Promote Investments in Bangladesh. Retrieved on 16 November 2013
from http://www.thehindu.com/business/Economy/india-to-promote-investments-in-
bangladesh/article4164392.ece
The Times of India. (2013, August 13). Star Cement starts export to Bangladesh through riverine route.
Retrieved on 18 November 2013 from http://articles.timesofindia.indiatimes.com/2013-08-
13/guwahati/41372137_1_clinker-bangladesh-river-route
Tripura Industrial Development Corporation. (2013). Food Park, retrieved on 02 December, 2013 from
http://www.tidc.in/G_food.html.
USDA Foreign Agriculture Service. (2013). Food Processing Industries in Bangladesh. Retrieved on 01
December, 2013 from http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20Processing
%20Industries%20in%20Bangladesh_New%20Delhi_Bangladesh_7-3-2013.pdf
World Investment Report 2013, Global Value Chains: Investment and Trade for Development, United Nations
Conference on Trade and Development (UNCTAD).
43

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Research Background Note on

Base Currency Converts**

USD $1.00 (United States Dollar) Tk. 78.45 (Bangladesh Taka)

USD $1.00 (United States Dollar) Rs. 66.27 (Indian Rupee)

Rs. ₹1.00 (Indian Rupee) Tk. 1.18 (Bangladesh Taka)

Government Fiscal Year

Country Year Policy**

Bangladesh July 1 – June 30

India April 1 – March 31

Foreign Currency (FCA): FC is a transactional account that can be denominated/converted to other currency

ADB Asian Development Bank INR Indian Rupi (Rs.)

Table 1: Selected Economic Trend for Bangladesh, ADO 2015...............................................................................................2

Figure 1: Geographical Map of NESI........................................................................................................................................2

1.1 Background and Context

Figure 1: Geographical Map of NESI

1.2 Objective and Methodology

To be more specific, the study has the following objectives:

Chapter 2. Economic Success Indicators of Bangladesh: the Road to Excellence

2.1 GDP Projection

Selected 2015 2016

Table 1: Selected Economic Trend for Bangladesh, ADO 2015

2.2 Course towards Middle Income Grading

2.3 Poverty and Extreme Poverty Reduction

Johannes Zutt, World Bank Country Director for Bangladesh12.

Figure 5: Some Diametric Poverty Progression (2009-2014)13

2.4 Export Growth

Figure 6: Export Growth in Sub-Regional Countries (2011-2014)

Chapter 3. International Best Practices on Bilateral Investment

3.1 Case 1: Singapore-China Bilateral Trade16

Figure 9: Singapore-China Bilateral Trading in US$ billion (1990-2014)

Province Xi’an (2013) Chengdu (2014) Chongquing (2014)

Table 2: Chinese Provincial FDI (2013-14)

Chapter 4. Current Bilateral Investments between Bangladesh and India

4.1 Land Boundary Agreement

4.2 JCC Meetings

4.3 Security and Strategic Affairs

4.4 Rerouted Waterways

4.5 Rebooted Power Sector

4.6 Smooth Trade and Investment Facilitation

Year Export** Import** Trade Ratio

Figure 7: Bangladesh’s trade with India (in million USD)

4.7 Joint Regularity Authority

4.8 Promotion of Transportation

Table 4: India Bangladesh Trade Scenario

Chapter 5. Cross-Country Competitive Edges and Incentives

5.1 Facilities and Tax Incentives for Foreign Investors in Bangladesh

Fiscal Incentives for EPZ Non-fiscal Incentives for EPZ

 Operation of FC account by 'B' and 'C' type

Table 5: Fiscal and Non-fiscal Incentives for EPZ2122

Source: Board of Investment (BOI)

5.3 Facilities and Tax Incentives for Foreign Investors in NESI

Chapter 6. Grabbing the Investment Potential Markets: More Avenues

6.1 Chemical Industry

6.2 Automotive Industry

Figure 9: South Asian Countries into Greenfield Automotive Industry, 2013-14

Assam 1. Agro - Horticulture & Food Processing Sector

Table 6: Thrust Sectors in Four Contiguous States of NESI

Source: Investment Promotion Policies of individual states

6.3 Special Economic Zone (SEZ) for Cement Industry

6.3.1 Rationale behind setting up SEZ for Cement Industry

Year Consumption Growth rate %

Table 7: Cement Consumption in Bangladesh

Source: Research Report: Cement Sector of Bangladesh (2012)

Source: IDLC Research Report 2013

Year Export Import Trade Ratio