Bangladesh & Spain

Spain’s mixed capitalist economy is the fourteenth-largest economy by nominal GDP (USD 1.4 trillion) in the world, and sixteenth largest by purchasing power parity.

It is the fifth-largest economy in the European Union, and the fourth largest in the Eurozone, based on nominal GDP statistics.

In 2015, Spain was the nineteenth-largest exporter in the world and the fifteenth-largest importer. Germany, France, Italy, UK and China are main trading partners.

Spain is one of the fastest growing economies in developed world. In 2015, while the United States GDP grew 2.5% and European Union economy advanced just 1.5%, Spain registered a 3.2% growth. This GDP growth does has not resulted in Balance of Payments current account deficits as in previous growth cycles.

Spain’s growth prospects are stable. The Spanish economy is evidencing a more favourable pattern of behaviour compared with the rest of the largest developed countries. In fact, GDP growth is expected to outperform the larger developed countries and the Euro area average over the next years, according to the IMF.

This growth is supported by the progressive increase in internal demand, primarily led by private investment and domestic consumption. In fact, the private components of domestic spending have played a key role in the growth of the Spanish economy in recent quarters, and have made a decisive contribution to improving investors & expectations. Specifically, the expansive behavior of household spending on consumption in the most recent period has continued to be sustained on the upward trend in financial factors and employment. In fact, GDP and employment are growing at the same pace. Spain has generated 42.8% of all the employment created in the Euro Area since 2014.

The positive effects of structural reforms account for a large part of this trend. Spain undertook an ambitious programme of structural reforms which is having a significant impact on the Spanish economy, driving an increasing improvement in competitiveness at company level and on the whole of the country’s economy. These reforms have increased competition, brought greater flexibility to the labour market, restructured the financial system, and improved the conditions under which new companies can access the market.

The Spanish economy registered quarterly growth of 0.8% in the fourth quarter of 2015. The growth is projected to remain robust in 2016 and 2017, backed by positive labour market developments, improved access to credit for firms and households, high confidence and low oil prices. Spain’s economy has expanded by 3.2% in 2015 and is forecasted to grow 2.7% and 2.4% in 2016 and 2017, respectively.

According to hard and soft data on economic activity, private consumption growth remained robust in the last quarter of 2015 and it is expected to remain the main driver of growth in 2016 and 2017, supported by low inflation and steadily improving labour market conditions. Exports will remain resilient, with exports of goods progressively gathering steam, fueled by continued improvements in competitiveness and recovering growth in Spain’s main export markets.

In 2015, inflation averaged -0.6%, driven by the fall in oil prices. It is expected to turn slightly positive again in the short term, but to remain low over 2016 and 2017, due to low external price pressures and remaining slack in the economy.

Job creation remained very robust in the second half of 2015, while the labour force registered an expansion. There are 958,800 more employees than in end-2013. The unemployment rate fell to 20.9% in the fourth quarter of 2015, with a further expected decrease in the next quarters.

Spain is one of the most open countries to foreign investment in the world. According to the FDI Regulatory Restrictiveness Index ranking, issued by the OECD, Spain is the ninth country with the fewest regulatory restrictions on foreign investment. In Spain, foreign investors are accorded exactly the same treatment as Spanish investors, with no discrimination regarding the type or size of the investment.

As the OECD explains in the Index, there is a direct link between the absence of restrictions on foreign investment and the volume of inward foreign investment. In fact, Spain places eighth in the world ranking of countries with the greatest stock of inward foreign investment (Source: UNCTAD).

Foreign investment in Spain involves over $US 720 billion. There are now over 12.000 foreign multinational companies based in Spain from all sectors, especially those with higher value added such as ICT, Automotive, Biotechnology, Chemicals, Logistics, e-Commerce, Healthcare, Aerospace, Nearshore or Business Services, Consumer goods or Tourism.

In recent years, Spain has been EU largest recipient of foreign investment along with the UK. In fact, productive foreign direct investment amounted to 21.7 billion euros in 2015, 11% up on 2014 (19.6 billion), according to the Investment Register of the Ministry for Economy and Competitiveness.

One of the main drivers of this attractiveness is the potential end expected growth of the Spanish Economy, as described above.

The Spanish market size is another key factor to attract international investors. The Spanish domestic market is one of the biggest in Europe with more than 46 million of consumers with a high GDP per capita and an additional injection of demand coming from the 65 million tourists who visit the country every year. Indeed, Spain is the world’s 14 th largest economy in terms of GDP and 5 th largest in the European Union. In terms of purchasing power, the Spanish market is larger than many of the more consolidated and dynamic emerging economies.

With this as a basis, Spain has a highly developed business sector. There are a number of Spanish companies established all over the world and with international acclaim, with the experience and capacity necessary to become partners in all type of international projects throughout the world.

For these reasons, Spain stands as an attractive platform for international business operations in third countries. As a member of the EU it offers entrepreneurs the opportunity of an easy access to the worlds’ biggest free market area. This means potential investors can benefit from European aid programs, a single currency, no intra-Community tariffs and free movement of goods and services, capital and people.

Furthermore, the Spanish geographical location allows an easy access to markets in the whole of the Mediterranean area, northern Africa and Middle East. Its business, economic, historic, linguistic and cultural ties with Latin America also allow a suitable access to these countries. Spain has signed Double Taxation treaties with 93 countries that represent more than 95% of the world´s GDP, in addition to more than 70

Agreements for the Promotion and Reciprocal Protection of Investments.

Companies setting up in Spain also have the added guarantee of favourable access to all international markets and all the corners of the national territory, thanks to the modern logistics and infrastructure network which has been put in place. Spain is the

European leader in terms of the length of its highways and the number of kilometers in

use of its high-speed rail lines. Additionally, it houses 3 of Europe’s 10 largest container ports (Valencia, Algeciras, and Barcelona) and two of Europe’s 10 busiest passenger airports (Madrid and Barcelona).

As a result of the increasing attractiveness of the Spanish economy as a platform for international business, Spanish exports are growing substantially. Spanish exports of goods grew by 4.3% compared to those recorded in the previous year, reaching the highest-ever figure on record. In the last few years, Spanish exports of goods and services have risen steadily in terms of GDP. According to Eurostat, the weight of exports in GDP has increased from 21.9% in 2009 to 33.5% by 2015 greater than in Italy, France or the United Kingdom.

In addition, Spain provides international Investors falling taxation costs. Corporate Income Tax is at 25%. Moreover, it is noteworthy that the average effective corporate tax rate is much lower at nominal rates due to the interesting tax incentives companies can apply. Among these tax benefits we can highlight those which may be applied by companies that carry out R & D.

The OECD considers these benefits as the most beneficial among developed countries, as is the patent box regime, which exempts from corporate tax 60% of the net income earned by the assignment of patents and other intangibles.

Among the tax benefits in the Corporate Tax regulations is a tax incentive for newly created companies. New Companies will be taxed at the rate of 15% in the first tax period in which the tax base is positive and in the next.

Spain also offers a wide range of grants and incentives for investment available at European, national, regional, and local levels available to foreign companies established in Spain on equal terms with firms owned by Spanish capital. This means companies established in Spain can access the program of regional incentives, which involve financial grants for productive investment to encourage entrepreneurship which, by directing their location toward predetermined areas and depending on the area chosen, can range from 10% to 55%.

Spain also offers international companies a comprehensive social security system and high living standards and a well-educated and highly skilled workforce. Spain has three business schools in the top 20 in the world, according to the main international rankings of the sector.

Also noteworthy is the fact that Spain has a beneficial tax regime for impatriates in which any foreign worker who resides in Spain for employment reasons can choose to be taxed under Individuals Income Tax or Non-Resident Income Tax (which has the competitive flat tax rate of 24%). Another fiscal incentive for the internationalization of companies established in Spainis the participation exemption regime, by which dividends and capital gains are exempt from tax if received by a Spanish entity (on equal terms if the company is owned by foreign or Spanish capital) that holds at least 5% of the share capital or equity of a foreign entity for a continuous period of at least one year.

Bangladesh is the 44th largest economy of the world by nominal GDP (USD 226.3 billion), while it ranks 34th in terms of purchasing power parity (PPP), according to IMF’s 2016 estimates. This market based economy is currently one of fastest growing one among the major economies of the world. The real GDP growth for the 2015-16 fiscal year has been estimated at 7.05%. During the past decade, the real GDP growth of the country averaged 6.24%, during which time growth dipped below 6% only twice. This stable growth trend is a genuine testament to the resilience of the Bangladesh economy.
Goldman Sachs included Bangladesh in “the Next 11 economies” as having a high potential of becoming, along with the BRICS countries, among the world’s largest economies in the 21stcentury. J.P. Morgan also added Bangladesh in its list of Frontier 5 Markets as a market worth further investigation. PwC projected Bangladesh to be the 23rd largest economy in 2050 in terms of PPP.
Bangladesh has the 8th largest population (163.42 million) in the world, growing at the rate of ~1.2% per annum. Considering the scarcity of habitable land and natural resource, this huge population could have adverse effects on its growth. But the country is preparing itself to reap the benefits of demographic dividend. Currently, around 68.1% of the population belong to the labor force, which is growing by 2.3% per annum. The rate of unemployment of Bangladesh’s labor force is around 4.3%, which lower than that of Sri Lanka (4.6%), Nigeria (7.5%), Pakistan (5.2%), USA (6.2%), and China (4.7%). What separates Bangladesh from other countries is the age of its population. The population of Bangladesh is relatively young, with median age of 24.70. This young population is expected to remain in the workforce for next three decades and drive GDP growth through both increased productivity and high consumption.

Bangladesh economy is still an agricultural one with a majority of the population employed in some kind of agro-based activity. However, as we have already achieved self-sufficiency in food production, industry and service sectors are gaining more and more focus. The country has pursued export-oriented industrialization. Bangladesh is the second largest RMG exporter of the world, RMG brings more than 80% of the country’s total export earnings. Other major export items are jute and jute goods, leather and footwear items, and frozen shrimp and fish. Bangladesh is a net importer. The main imports of the country are capital machineries, & equipment, industrial raw materials, chemicals, iron, raw cotton, crude oil and petroleum products. Despite having a negative trade balance, the country enjoys a positive balance of payment, thanks to strong remittance inflow. More than 9 million Bangladeshi expatriates are working across the world, sending a healthy stream of remittance to the country. Bangladesh is among the top 10 remittance earners of the world. This remittance income and the positive balance of payment has led to a strong foreign exchange base, which is helping us to maintain stable currency exchange rates. Our Gross National Income has been growing quite steadily, which recently graduated Bangladesh to lower-middle income status.

Bangladesh has also developed self-sufficient industries in pharmaceuticals, steel and food processing. Bangladesh’s telecommunication industry has witnessed rapid growth over the years, receiving high investment from foreign companies. Bangladesh also has substantial reserves of natural gas and is Asia’s seventh largest gas producer. The country also has sizable amount of coal. There is abundant supply of water all over the country. The financial sector of the country is quite developed.

Bangladesh has just broken the 7% economic growth barrier in FY16, which marks the beginning of a new growth phase. The next growth cycle must be supported by infrastructure development, especially in transportation, communication, and power supply. The government has already taken measures to construct some large construction projects like Padma bridge, Four-lane highway, Payra deep sea port, Metro rail, LNG terminal, several coal based power plants, and the first nuclear power plant of the country. These projects are expected to be completed in next 6 years and cost roughly USD 64 bn. Many other projects are in the pipeline, with more to come. A very positive thing about Bangladesh economy is the national debt level, which is very low. The total domestic credit (public and private) to GDP stood at 46.3% as of Jun’16. Our sovereign rating – given by the world’s leading agencies like Moody’s, Fitch, and S&P – has also been “Stable” for the last few years. As such, there is scope to borrow large sums from both local and foreign sources in order to finance the development projects. Foreign direct investment (FDI) inflow in the country is pretty low. Net FDI inflow was only 1.7% of GDP in 2015. Once the development projects are done, we can expect higher level of direct investments in our country by foreign companies.

The government of Bangladesh is promoting “Digital Bangladesh”, which implies the broad use of computers, and embodies the modern philosophy of effective and useful use of technology in terms of implementing the promises in education, health, job placement, and poverty reduction. Its efforts to develop the country’s growing information technology sector, with the ultimate goal of achieving overall improvement of the daily lifestyle of general people.

Sources:
-Population data is from World Bank.
-Economic data is from Bangladesh Bank
-Inflation data is from Bangladesh Bureau of Statistics
-Export data is from Export promotion Bureau
-import data is from Bangladesh Bank
-Trade balance data is from Bangladesh Bank

Bangladesh is one of the world’s most densely populated country. With growing economy (has been growing at 6.5% for last one decade), coupled with a rising middle class, gives Bangladesh a perfect set of attributes to be considered as a FDI destination.

In recent years, the FDI figures also indicate the confidence of foreign investors in the prospect of Bangladesh. The country witnessed a “historically high level” of growth in foreign direct investment in 2015, crossing the figure USD2bn mark. According to World Investment Report 2016 by UNCTAD, FDI inflows in Bangladesh jumped by 44% to USD2.23, owing to the rising FDI in labor- intensive manufacturing. The high growth has been attributed to political stability, higher return of investment, less risk of investment and reinvestment of earnings.

It is also reported that, in South Asia, Bangladesh is the second largest recipient of FDI investments. The investment return has been a key stimulus for the interest of the investors, which hovers around 14% to 15%. Moreover, reinvested earnings in the country continued to rise, exceeding the value of the equity component and Bangladesh became the largest FDI host in this subgroup of exporters, as flows into Cambodia fell slightly.

Because of the surging domestic demand and international competitiveness, the largest sectors of interest for the investors have been Textile and Garments, Power, Gas and Petroleum, Infrastructure, Telecom and Banking. However, government has been also encouraging other sectors too through providing various incentives and tagging the sectors as booster sectors. Such sectors are Leather, IT, Pharmaceuticals, Healthcare, Plastics, etc.

Additionally, Bangladesh Government has adopted an ‘Open Door Policy’ to attract foreign investment to Bangladesh EPZs (Export Processing Zones). The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate free from cumbersome procedures. The EPZs provide facilities ranging from Plots/factory buildings in custom bonded area to fiscal & non-fiscal incentives. Currently, there are eight EPZs across the country. Moreover, a total of 24,017 acres of land, mostly owned by the government, have been allotted to new 24 economic zones, which will come with various incentives for the potential investors.

Bangladesh offers also offers an attractive place for foreigners to abode. According to a study conducted by JETRO (Japan External Trade Organization), Bangladesh offers amenities at attractive cost, for instance schooling for children, housing rent and commination expense. In addition, the industrial estate and office rents are competitive compared to other major industrial cities in Asia.

Among many offerings for foreign investments in Bangladesh, it offers tax holidays. In the Dhaka & Chittagong Divisions: 100% in first two years: 50% in the year three and four: and 25% in the year five. In the Rajshahi, Khulna, Sylhet, Barisal Divisions and three Chittagong Hilly Districts: 100% for first three years, 50% for next three years, 25% for year seven. Additionally, there are Cash and added incentives to exporting industries. For instance, Businesses exporting 80% or more of goods or services qualify for duty free import of machinery and spares, bonded warehousing. Also, 90% loans against letters of credit and funds for export promotion. ​

Sources:

-Population data is from World Bank.

-Economic data is from Bangladesh Bank

-Inflation data is from Bangladesh Bureau of Statistics

-Export data is from Export promotion Bureau

-import data is from Bangladesh Bank

-Trade balance data is from Bangladesh Bank