Construction and Infrastructure Business in Bangladesh in 2023
While planning to build a house, we recall terms such as real estate, developer, and construction, among others, but we are unsure of their precise rules and regulatory requirements. In this post we will talk about Construction and Infrastructure Business in Bangladesh and the Empowering way of doing construction in Bangladesh by following relevant laws and regulations.
What is meant by the term Construction?
The art and science of adding structures to land areas, sometimes known as construction.
What is the difference between construction and real estate?
Real estate businesses used to purchase and own properties in order to generate profits. On the contrary, the buildings are constructed by construction companies. In addition, a construction company provides financing for a building company to complete a housing project on behalf of a real estate company or company.
In terms of infrastructure, construction, and high-rise building, Dhaka, the capital of Bangladesh with a population of 20 million, is one of the fastest-growing cities in the world. Following are the top ten names of the best building construction businesses in Dhaka, Bangladesh.
Bangladesh is well on its path to becoming a middle-income country by 2021, which will require yearly investments of $24 billion in the country’s infrastructure sector. As the nation modernizes and improves its capacity to manage systems for major infrastructure projects such as energy, telecommunications, transportation, water, and sanitation, the government intends to enlist the assistance of the private sector.
As a result of the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB) identifying Bangladesh as a country with significant opportunities for infrastructure investment, numerous infrastructure projects have been initiated throughout the country and will have a significant impact on the country’s economy in the coming years.
The increase in development activities and megaprojects has been supported by a rise in government spending and a solid economic expansion. There are now more than ten megaprojects in development, including the Dhaka Mass Rapid Transit (MRT) and the Padma bridge. ADB has agreed to offer a loan of 33.36 million US dollars for the MRT, while the remaining 11.32 million US dollars would be funded by the Bangladeshi government.
Both infrastructure and civil engineering sector development projects have been completed in 2019, resulting in a turning point for the country’s largest construction firms. In addition, international rivalry has generated a robust construction market.
As Bangladesh takes significant steps towards urbanization and ensures a rise in public spending, large infrastructure projects and the housing industry have both experienced an increase in private funding. According to the Development Update released by the World Bank in October of the fiscal year, the construction industry expanded by 9.6% in 2019.
Foreign investors urge for Construction Management similar to that of the United Kingdom or the United States, whereas local construction firms utilizing labor-intensive, less expensive technologies think they can contribute more to the GDP growth of Bangladesh.
Joint ventures can be used to enhance the number of large construction firms engaged in international construction projects. In addition, construction firms now employ laborers, architects, and engineers with international and local experience, which is a tremendous boon for the sector.
The Creation and Infrastructure industry include the construction of infrastructure by individuals or businesses, as well as infrastructures within the Public Sector.
The Public Sector Infrastructure consists of the construction of roads and highways, flyovers, bridges, power plants, LNG terminals, railways, dams, seaport, and river port, among others; and such projects are either fully funded and regulated by the Government/Government agencies under the public procurement Act 2006, the Public Procurement Rules 2008, or via the Public Private Partnership agreement under the Public Private Partnership (PPP) Act 2015 whereby the Government has permitted private companies to participate in the construction of the Public Sector Infrastructure
REGISTRATION AND LICENSING PROCEDURE for Construction and Infrastructure Business in Bangladesh
Since 1990, the construction industry has contributed significantly to the rise of Bangladesh’s gross domestic product, which has attracted both domestic and foreign investors. Interested investors who intend to launch a firm in this industry must first form a legal corporation. How do we proceed? They may choose to form a limited liability company, a branch office, a single proprietorship, or a partnership, each of which is detailed in more detail below.
Construction Company incorporation in Bangladesh:
The procedure of incorporating a company begins with the obtaining of a Name Clearance certificate from the Company House, Registrar of Joint Stock and Companies (RJSC) as well as the preparation of the Articles and Memorandum of Association of the Company as well as Form XII (Director’s particulars) and Form IX (Director’s Consent), both of which must be by the shareholders.
The executed MOA and AOA, along with the aforementioned paperwork and costs, must be delivered to the RJSC. The RJSC will provide a certificate of incorporation, together with RJSC-certified memorandum and articles of association, confirming that the business has been lawfully incorporated, providing all documents are correct and authentic. If a foreign stakeholder is involved, the process is slightly different.
As BIDA has certain standards for the establishment of a branch office in Bangladesh, a Branch office is incorporated under the Bangladesh Investment Development Authority (BIDA) by submitting an online application along with the necessary paperwork. A Branch office in Bangladesh does not establish a separate legal business organization in Bangladesh, despite being fundamentally distinct from the Parent Company. Typically, foreign investors with a short-term project in Bangladesh open a branch office to conduct business.
Partnership business in Bangladesh:
By executing a partnership deed and registering the partnership with the Registrar of Joint Stock Companies and Firms, a partnership firm can be formed (RJSC).
This sort of business company is founded by a single person and has no partners. To conduct business through such a company, one must get a trade license, a personal TIN, and a VAT certificate, and only a Bangladeshi citizen may establish one.
The TIN certificate and the Value Added Tax (VAT) Certificate must be obtained from the online portal of the National Board of Revenue (NBR) in order to start a business, while the trade license must be obtained from the municipal corporation/local government office.
Before and after establishing a corporation, branch office, sole proprietorship, or partnership in Bangladesh, legal counsel is essential. When incorporating Construction and Infrastructure Business in Bangladesh, branch office, sole proprietorship, or partnership, it is imperative that all original signed documents and related forms be presented to the appropriate government authority; otherwise, the incorporation application will fail without a doubt. In 2019, a new rule regarding company incorporation stipulates that the name clearance is valid for only one month and must be renewed each month until the firm is properly incorporated. A requirement for annual renewal is also considered mandatory for Trade License.
Compliance requirements for Infrastructure Construction by Individuals/Companies and Public Sector Infrastructure are fundamentally distinct.
Infrastructure: A construction contract must be executed with the landowner and the construction owner outlining the terms and conditions of the agreement under the Contract Act 1872, including the time limit within which the construction will be completed, the handover date of the property, a termination clause, etc. Additionally, the construction company must adhere to the Bangladesh National Building Code (BNBC) 2006. Construction companies and landowners must be prepared to face legal repercussions for any breach of contract.
Partnership between the government and the private sector:
On the other hand, government-funded infrastructure projects must adhere to the Public Procurement Act of 2006 and the Public Procurement Rules of 2008. The public private partnership (PPP)Act 2015, which mandates the execution of a PPP contract between the contracting agency and the private investor, must be strictly adhered to in the building, construction, and upgrading of large infrastructure projects involving a partnership between the government and the private sector.
The agreed-upon terms and conditions must be rigorously adhered to, and any violations must be settled amicably by them, by a neutral expert mediator, or by arbitration. According to the Public- Private Partnership Act of 2015, in the case of Public- Private Partnership projects for the construction or reconstruction of infrastructure, the private investor is required to incorporate a limited liability company.
In the era of globalization, Bangladesh has failed to provide construction site laborers with a safe working environment. In recent years, unfortunate events have resulted in hefty fines, which have in turn compelled employers to comply with the health, safety, and welfare provisions of Bangladesh’s labor laws.
Aside from that, every employee at the construction company, regardless of nationality, must execute a letter of appointment with the company. Many foreign workers are employed in Bangladesh to design and execute building projects, and they must be employed in accordance with Bangladesh’s labor and immigration rules. According to immigration laws, each foreign worker must possess a legitimate employment visa and a valid work permit.
TAHMIDUR RAHMAN REMURA TLS ASSOCIATES AND ITS SERVICES:
Since its founding, TAHMIDUR RAHMAN REMURA TLS Associates, an international legal company, has faithfully served both national and international customers alongside for Construction and Infrastructure Business in Bangladesh. The devoted team of attorneys and barristers has amassed exceptional experience and knowledge to handle difficulties arising from this area of the construction industry.
TAHMIDUR RAHMAN REMURA TLS may also aid with the incorporation of a company like Construction and Infrastructure Business in Bangladesh, beginning with the preparation of the AOA and MOA, as well as all other essential forms, and ending with the name clearance and submission of all documents to RJSC.
TAHMIDUR RAHMAN REMURA TLS assists businesses with the renewal process for Trade Licenses and Name Clearance.
TAHMIDUR RAHMAN REMURA TLS’s immigration law team can assist the Company in obtaining the E-visa (employment visa) recommendation letter and work permit on behalf of the foreign employee, as well as the extension of the work permit and the E visa for the foreign employee. The service shall include drafting the necessary application and documents, collecting the relevant documents from the foreign employee and the company, submitting the application and documents to the appropriate government authorities, and liaising with them to obtain the required work permit and visa extension.
TAHMIDUR RAHMAN REMURA TLS has assisted businesses with the development and review of PPP contracts between the government and private investor. They have also aided landowners and construction companies in reviewing or drafting agreements that adhere to the BNBC 2006 for building and home construction projects.
Due to their years of experience in company and employment law, TAHMIDUR RAHMAN REMURA TLS’s legal team is adept in drafting and reviewing employment agreements for companies, and they are also able to defend both employers and employees in the Labour Courts in the event of an industrial dispute.
Force Majure in Construction Company in Bangladesh:
Any PPP contracts or contracts executed between the parties with a Force Majeure clause shall either be halted, allowing an extension for completion with no penalties placed on the party tasked with delivering the deliverables, or shall be cancelled due to frustration. As a result, the anticipated timeframe for such projects has been pushed back, and the completion period will be pushed back much more, increasing costs, lowering GDP growth for the following quarter, and, most importantly, slowing the momentum promised during the past several years.
The current general tax rate in Bangladesh is 32.5 percent, as stipulated by its legal code. The required withholding rate for services provided under this category is 7.5% at source. Locally formed limited liability companies are required to submit a number of reports to the National Board of Revenue (NBR), such as a Tax Identification Number (TIN) application, a monthly tax deduction statement, a half-yearly withholding tax statement, a yearly statement related to the tax return submission of its employees, and a yearly statement related to the salary paid by the company to its employees. Advance quarterly tax deposits, Submission of annual tax returns and attendance at appeal/hearing sessions as required on behalf of the business. Monthly VAT filings, etc.
TAHMIDUR RAHMAN REMURA TLS is able to provide guidance and assistance to ensure that all regulatory compliances are met, allowing the business to operate smoothly and without incident.
Traditionally, under the infrastructure of the public sector, works must be acquired from contractors or suppliers through a competitive bidding process. For earlier infrastructure projects, the procurement and planning techniques for building projects in the Public Sector Infrastructure were scrutinized, prompting the establishment of an electronic procurement system for this industry, which still leaves opportunity for proper procurement routes.
The price increase of raw materials is a result of the rising demand for these commodities and the oversaturation of the market by suppliers, which is still dominated by huge corporations that are expanding into new sectors among the raw material suppliers.
Despite this, it is anticipated that the construction industry would experience major growth as new infrastructure developments in power production, highways, bridges, buildings, and telecommunications are implemented. The completion dates for several of these projects extend well beyond 2020; the construction industry is likely to maintain its momentum.
Investment in Bangladesh and Construction and Infrastructure Business in Bangladesh
In this age of globalization, Bangladesh has contributed to the rise in GDP by investing in significant infrastructure projects such as gas, energy, telecommunications, transportation, power plant water and sanitation facilities, hence Construction and Infrastructure Business in Bangladesh is also bound to make an impact. This has not only impacted the country’s economic progress, but it has also created employment possibilities in the sector and contributed to Bangladesh’s goal of eradicating poverty.
In addition, foreign competition has generated a thriving market in the sector. the building and infrastructures industry includes both private and public infrastructure projects. Public Sector Infrastructure consists of the building of roads and highways, flyovers, bridges, power plants, LNG terminals, railways, dams, seaports, river ports, etc.
Initially, the public sector was the primary contributor to large infrastructure projects; however, when their investment alone was unable to generate adequate investment for infrastructure facilities, the government joined forces with the private sector to reduce the deficit in the construction of infrastructures by establishing private sector participation in infrastructure development through Private Public Partnership agreements.
If a construction company desires to begin operations in Bangladesh, it must form a company/branch office/partnership by submitting all the required documents and fees to the RJSC or BIDA office and obtaining all the necessary operating permits from the appropriate government agency. However, sole proprietors are not required to register with any government agency, and obtaining a company license, VAT certificate, and tax identification number is sufficient for starting a firm.
The international law firm TAHMIDUR RAHMAN REMURA TLS Associates is regarded as one of the greatest law companies in Bangladesh. In the construction industry, they have supported a number of clients in establishing a company and getting all necessary permits from the relevant authority.
TAHMIDUR RAHMAN REMURA TLS has vast expertise reviewing and/or developing agreements, including PPP contracts for government bodies/agencies and commercial contracts for construction enterprises and Construction alongside Infrastructure Business in Bangladesh. Additionally, they have a staff dedicated to job issues in Bangladesh.
Are you planning to register a Construction and Infrastructure Business in Bangladesh?
The legal team of Tahmidur Rahman, The Law Firm in BangladeshRemura: TLS, The Law Firm in Bangladesh are highly experienced in providing all kinds of services related to forming and registering a Private Limited Company in Bangladesh . For queries or legal assistance, please reach us at:
E-mail: [email protected]
Phone: +8801847220062 or +8801779127165
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