One of the most important among all considerations to invest in a new era is the overall risks associated with the project. Moreover it can be increased if it is made in abroad. Consequently the analysis of country risks with various fundamentals is important.

1. REPORT ON
“ Risks in Bangladesh: Field for investment
consideration”

2. Presented To
Dr. A. A. Mahboob Uddin Chowdhury
Professor
Dept. of Finance
University of Dhaka

3. Presented By
Md. Raisul Hoque –ID: 23003
Abed Hossain Billah – ID: 23030
Pallab Hossain Tushar – ID: 23016
Md. Mahbubul Hasan – ID: 23028
Md. Mehedi Hasan – ID: 23051
Sajjad Mahmud Shahin – ID: 23027

4. Presented By
Md. Raisul Hoque
ID: 23003

5. Introduction
An MNC conducts Country risk analysis when
assessing whether to continue conducting
business in a particular country. The analysis can
also be used when determining whether to
implement new projects in foreign countries or
not. Country risk can be partitioned into the
country’s political risk and its financial risk.

6. What in Country Risk
 Country-risk analysis is the assessment of the level
of political and economic risk associated with doing
business in another country. Risk analysis is used
when extending credit to foreign buyers making
foreign direct investment decisions.

7. Overall Factors Consideration in Country
Risk
 The level of political stability
 Regulation of businesses
 Protection for private property
 Government wage and price controls
 Government budgets and deficits
 Inflation
 Unemployment
 Interest rates
 Exchange rates

8. Why Country Risk Important
Country Risk analysis is important for the following
reasons:
 Evaluating country risks is a crucial exercise when
choosing sites for international business, particularly
if investment is to be undertaken.
The study of country risks is also necessary in order
to develop alternative scenarios.
Business managers do not like surprises. Each aspect
of country-risk analysis is a potential source of
uncertainty, which can lead to unpleasant surprises
for anyone doing business abroad.

9. PRESENTED BY
Md. Mahbubul Hasan
ID# 23028

10.  Attitude of Consumers in the Host Country
◦ A mild form of political risk (to an exporter) is a
tendency of residents purchase only locally
produced goods. Even if the exporter decides to set
up a subsidiary in the foreign country, this
philosophy could prevent its success. All countries
tend to exert some pressure on consumers to
purchase from locally owned manufacturers. If
consumers are very loyal to local products, a joint
venture with a local company may be more feasible
than an exporting strategy.

11.  Attitude of Consumers in the Host Country
(Bangladesh Perspective)
◦ the consumers usually associate the price of the
brand with its quality, a brand priced too low is
generally perceived as a low quality product.
Consumers of Bangladesh have the tendency
towards those attributes to have the favoritism to
use the foreign products rather than to use
Bangladeshi products as patriotism.

12.  Attitude of Consumers in the Host Country (Bangladesh Perspective)
A research was conducted that contained the question about using
international brands products in two groups: male and female. The response
of them has presented graphically:

13.  Attitude of Consumers in the Host Country (Bangladesh Perspective)
Another question was in that study about the preference of foreign or
domestic brands having same prices. Still there the fondness about foreign
brand revealed strongly. The result is shown in followings:

14.  Attitude of Consumers in the Host Country
(Bangladesh Perspective)
Ranks Phones Manufacturing Country
1 Nokia Finland
2 Samsung South Korea
3 Apple USA
4 Sony Ericsson Japan
5 HTC Taiwan
6 Blackberry Canada
7 LG South Korea
46 Walton Bangladesh

15.  Actions of Host Government
◦ Tax and Tariffs
◦ Pollution control standards
◦ Withholding taxes and fund transfer restriction

16.  Actions of Host Government (Bangladesh Perspective)
Fiscal Incentives Non-Fiscal Incentives Infrastructure & Facilities
Tax holiday for 10 years 100% equity allowed Fully serviced plots
Concessionary tax for 5
years after completing
initial 10 years Unrestricted exit policy Ready factory building
Duty free import of
Full repatriation facilities of
machinery & raw
dividend and capital at the
materials
event of exit All types of utilities
Avoidance of double
taxation based on DTTs
Import of raw materials
allowed on Documentary
Acceptance basis
Warehouse and Secured
Bonded Area
Intra and Inter Zone export is
allowed Business Support Services
Subcontracting within EPZs
permitted Administrative services
Customs clearance at
Plant Site
Workers dormitory
enclave
Recreational amenities

17.  Actions of Host Government (Bangladesh
Perspective)
45%
20%
34%
25%
30%
25%
15%
5%
35% 35%
Corporate Tax Rates

18.  Actions of Host Government (Bangladesh
Perspective)
15%
Withholding Tax Rate
10% 10%
0%
10%
0%
Bangladesh China Pakistan India Sri-Lanka Vietnam

19.  Actions of Host Government (Bangladesh
Perspective)
40%
20.10% 28.80% 18.50% 13.80%
463%
Import Taxes Tariff Agricultural Tariff Non- Agricultural
Tariff
Customs Duty Luxury Items
Rates of Tariffs & Quotas (Maximum)

21.  Blockage of Fund Transfers
◦ Subsidiaries of MNCs often send funds back to the
headquarters for loan repayments, purchases of
supplies, administrative tires, remitted earnings, or
other purposes.

22.  Blockage of Fund Transfers (Bangladesh
Perspective)
◦ FDI related outward remittances, 1995-
2005(calendar year) (In Million USD)
Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Dividend/Profit
Repatriation
19 18 26 40 83 149 175 195 355 338 418
Inv. liquidation/ 0.3 - 0.6 0.1 2.9 0.5 0.5 2.6 2.2 10.5 3.3
Cap. Repatriation
Private Debt
20 34 84 53 168 227 188 243 229 372 208
amortization
Family Maintenance 0.99 0.74 1.41 1.56 1.92 2.43 1.84 2.82 4.19 4.72 2.58
Total Outward flow (a) 40.29 52.74 112.01 94.66 255.82 378.93 365.34 443.4 590.4 725.2 631.9
Gross FDI inflow
including
106.3 267.6 610.3 668.5 455.1 703.6 568.5 573.3 466.2 545.4 927.3
private outside loan (b)
Net Inflow/ Outflow 66.01 214.9 498.29 573.84 199.28 324.67 203.16 129.9 -124 -180 295.4

23.  Currency Inconvertibility
◦ Some governments do not allow the home currency
to be exchanged into other currencies. Thus, the
earnings generated by a subsidiary in these
countries cannot be remitted to the parent through
currency conversion. When the currency is
inconvertible, a MNC’s parent may need to
exchange it for goods to extract benefit from
projects in that country.

24.  Currency Inconvertibility (Bangladesh
Perspective)
◦ The Taka is fully convertible for current account
transactions.
◦ Bangladesh Bank, the central bank of Bangladesh,
does not fix the exchange rate against foreign
currencies, but it regulates conversion.
◦ The central bank's exchange control regulations
and the U.S.-Bangladesh Bilateral Investment Treaty
(in force since 1989) provide similar investment
transfer guarantees.

25.  Relationship with neighboring countries
 Internal Conflicts –
BD experienced internal and political turmoil 4-5
times after Independence War 1971 like 1975,
1981, 1990 and 2007
Bangladesh economy suffered a loss of $1.4
billion due mainly to election-related political
unrest
reduce the growth rate from the 6.2 percent to
5.4 percent

26. Total Loss suffered by BD Economy for
Political Unrest in 2014
86%
11%
3%
Service : Tk. 1.204
billion
Industry: Tk. 0.154
billion
Agriculture: Tk. 0.042
billion
Source: Bangladesh Bureau of Statistics (BBS)

27. Presented By
MD. MEHEDI HASAN
ID No. 23051

28. Lack of Restrictions
 “Copyright Laws”
 Local firms in Asia commonly copy
software produced by MNCs and sell it to
customers at lower prices.
 Bangladesh positions itself at 125th out of
129 countries (in terms of Intellectual
Property protection)
 The piracy rate in Bangladesh for sound
recordings & book publication is close to
100%

29.  The piracy rate in the CD sector is 100% for
regional (Indian) and international repertoire,
and 85% for local repertoire.
 Repertoire sold on cassettes is 80% Indian
(Hindi), 16% Bangladeshi and 4%
international
 The music piracy market value in Bangladesh
stands at US$ 180 million (11 times higher
than India).
Lack of Restrictions (Cont…)

30. Lack of Restrictions (Cont…)
Source: International Property Rights Index
2013 Report

31. Bureaucracy
 Government bureaucracy can complicate a
MNC’s business.
 Reasons –
Lack of accountability, responsiveness
transparency and flexibility
Excessive hierarchy
Politicization
 Issues of fairness, social equity, social
justice, and ethics are critical in public
administration

32. Bureaucracy (Cont…)
Table: Problems of Bangladesh Public Service Commission (PSC) in different periods
Source: Research by Kawsher Ahmed on “ Politics- Bureaucracy Relationship in Bangladesh.”

33. Corruption
 MNC may loss revenue because a government contract is
awarded to a local company by taking bribe.
 By some estimates of BBS, bribes & off-the-record
payments by firms may result in annual losses of 2%–3%
of national GDP.
 63.7% of the households of Bangladesh have been
victims of corruption (According to national household
survey 2012)
 Paid Tk 2, 19,556 million annually as unauthorized
payment, which is 13.4% of the national budget of 2012-
13 fiscal year and 2.4% of the GDP
 53.3% of total households who received services from
the service sectors paid bribe and unregulated money

34. Corruption (Cont..)
Source: Annual Household Survey 2013

35. Corruption (Cont..)
Table: Rate & amount of unauthorized payment of different service sectors in BD
Source: Annual Household Survey 2013

36. Corruption (Cont..)
Table: Corrupted countries according to CPI and their ratings including Bangladesh
Source: Corruption Perceptions Index (CPI) Report

37. Corruption (Cont..)
Source: Corruption Perceptions Index (CPI) Report by TI

38. PRESENTED BY
ABED HOSSAIN BILLAH
ID: 23030

39. FINANCIAL RISK FACTORS
 The possibility that shareholders will lose money when they invest in a company that has debt, if
the company's cash flow proves inadequate to meet its financial obligations.
Financial risk also refers to the possibility of a corporation or government defaulting on its
bonds, which would cause those bondholders to lose money.
Financial risk refers to the risks that businesses run when making investments, planning for the
future and conducting day-to-day operations. All businesses run some risk in making financial
decisions.
1. Some of these risks are external, depending on outside factors and decisions made by
other organizations and consumers.
2. Other risks are internal and deal with the possibility that the strategies and actions the
business leaders choose may have negative effects on operations.

40. ANALYSIS OF FINANCIAL RISK FACTORS OF BANGLADESH
Interest Rates of Bangladesh
In May 2014 Bangladesh Bank defined risk free rate is 5%. For call money for both the borrowing and lending rate
were 6.5%. For the scheduled banks the interest rates on Deposits was 8.01% whereas rates on advances was
13.23% where the Spread was 5.22%. The following table represents the relative interest rates of Bangladesh
with some developing countries and SouthAsian countries.
Country Last Previous Highest Lowest
Afghanistan 15.00 15.00 21.00 12.00
Bangladesh 7.25 7.25 8.75 4.50
Bhutan 6.00 6.00 6.00 6.00
China 6.00 6.00 10.98 5.31
India 8.00 8.00 14.50 4.25
Indonesia 7.50 7.50 12.75 5.75
Iran 14.15 14.15 19.00 10.00
Malaysia 3.25 3.00 3.50 2.00
Maldives 7.00 7.00 7.00 4.46
Myanmar 10.00 10.00 12.00 10.00
Nepal 8.00 8.00 8.00 5.50
Pakistan 10.00 10.00 20.00 7.50
Source: Wikipedia
Sri Lanka 6.50 6.50 10.50 6.50
Vietnam 6.50 6.50 15.00 4.80

41. COMPARATIVE TO THOSE COUNTRIES BANGLADESH’S INTEREST RATES
ARE NOT SO HIGHER NOT SO LOWER. INTEREST RATE PLAYS AN
IMPORTANT ROLE IN AN ECONOMY. THIS TENDS TO SLOW THE GROWTH
OF AN ECONOMY AND REDUCE THE DEMAND FOR THE PRODUCTS OF
MNCS. BANGLADESH’S INTEREST RATES ARE COMPARATIVELY LOWER IN
THE JANUARY 2014 THAN JANUARY 2013 .
Call Money
Borrowings Rates
Call Money Lendings
Rates
Scheduled Bank
Deposits Rates
Scheduled Bank
Advancess Rates
Spread
7.17% 7.17%
8.40%
13.39%
4.99%
10.29% 10.29%
8.60%
13.73%
5.13%
19.66% 19.66%
7.86%
13.49%
5.63%
Interest Rates in Different Times
Jan-14 Jan-13 Jan-12

42. EXCHANGE RATES SYSTEM IN BANGLADESH
Exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks, based on
demand-supply interaction. . Bangladesh Bank (BB) is not in the market on a day-to-day basis, and undertakes
USD purchase or sale transactions with dealer banks at prevailing inter-bank exchange rates only as needed to
maintain orderly market condition.
 Upon Bangladesh's independence, the value of the Bangladeshi taka was set between 7.5 and 8.0 to US$ 1
With the exception of fiscal year 1978, the taka's value relative to the US dollar declined every year from
1971 through the end of 1987
 Between 1980 and 1983, the taka sustained a decline of some 50 percent because of deterioration in
Bangladesh's balance of payments. Between 1985 and 1987, the taka was adjusted in frequent incremental
steps, stabilizing again around 12 percent lower in real terms against the United States dollar., , but at the
same time narrowing the difference between the official rate and the preferential secondary rate from 15
percent to 7.5 percent. Accompanying this structural adjustment was an expansion in the amount of trade
conducted at the secondary rate, to 53 percent of total exports and 28 percent of total imports.

43. GENERALLY BANGLADESH MANAGES EXCHANGE RATES SYSTEM IN THE FREE FLOAT
SYSTEM. BANGLADESH ALWAYS TRIED TO WEAKEN THE VALUE TAKA AGAINST US
DOLLAR TO COMPENSATE THE EXPORTERS. THIS REDUCED THE APPEALING OF FOREIGN
INVESTORS.
BANGLADESH EXCHANGE RATES FLUCTUATION AGAINST DOLLAR OVER TIMES
REPRESENTED BELOW WITH GRAPH.
Source: Bangladesh Bank Statistical Department.

44. ALTHOUGH BANGLADESH HAS BEEN FOLLOWING THE WEAKEN OF TAKA AGAINST
DOLLARS SINCE 1971 IN LAST TWO YEARS TAKA VALUE INCREASED AGAINST
DOLLAR. THIS WILL CREATE POSITIVE IMPACT IN FOREIGN INVESTMENT IN
BANGLADESH IF THE POLICY CONTINUES. THE LAST FOUR YEARS FLUCTUATION
OF TAKA AGAINST DOLLAR IS STATED BELOW WITH A GRAPH.
69.22
71.15
84.45
79.21
77.75
1-Jan-10
1-Mar-10
1-May-10
1-Jul-10
1-Sep-10
1-Nov-10
1-Jan-11
1-Mar-11
1-May-11
1-Jul-11
1-Sep-11
1-Nov-11
1-Jan-12
1-Mar-12
1-May-12
1-Jul-12
1-Sep-12
1-Nov-12
1-Jan-13
1-Mar-13
1-May-13
1-Jul-13
1-Sep-13
1-Nov-13
1-Jan-14
Rates of Taka against dollar in last five years

45. INFLATION RATES OF BANGLADESH
Inflation rate was 7.48% in May 2014 slightly increased from the previous month. In April 2014, it t was 7.46%.
Overall inflation in 2014 decreases from the previous year. In May 2013 the inflation was 7.98%. Higher inflation
tends to increase the possibility of foreign investment while others are constant.
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Inflation Rates in Five years
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14

46. HOWEVER BANGLADESH HAS A QUITE HIGH INFLATION RATES THAN MOST OTHERS SOUTH
ASIAN COUNTRIES.
THE INFLATION RATES IN SAARC COUNTRIES ARE SHOWN IN THE FOLLOWING GRAPH.
4.50%
7.50%
8.30% 8.30%
8.80%
11.40%
12.80%
10.20%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Inflation Rates in SAARC countries

47. Presented By
Sajjad Mahmud Shahin
ID: 23027

48.  Checklist approach.
 Delphi Technique.
Quantitative analysis.
 Inspection visits.
Combination of techniques

49. Rating Assigned to Factor
(within a range of 1-5)
Weight Assigned to Factor
According to Importance
Weighted Value of Factor
Political Risk Factors
Attitudes of the Consumers in the
Host Country
4.5 10% 0.45
Actions of Host Government 4 15% 0.6
Lack of Restriction 1 5% 0.05
Blockage of Fund Transfers 5 15% 0.75
Currency Inconvertibility 4 10% 0.4
War and Political Turmoil 0.5 15% 0.075
Bureaucracy 1 15% 0.15
Corruption 0.25 15% 0.0375
Political Risk Ratings 100% 2.5125
Financial Risk Factors
Interest Rates 3.5 35% 1.225
Exchange Rates 2.75 30% 0.825
Inflation Rates 4 35% 1.4
Financial Risk Ratings 100% 3.45

50.  Ratings of Bangladesh Evaluating all factors
Category Ratings as
Determined
Above
Weight Assigned
to Each Risk
Category
Weighted Ratings
Political Risk 2.513 75% 1.8844
Financial Risk 3.45 25% 0.8625
Overall Country
Risk Rating
100% 2.7469

51.  After all qualitative and quantitative judgment and
analysis of the information in the practical part
Bangladesh has acquired the score for country risk
2.7469 which can be said that moderate. That means
Bangladesh has the moderate risk in foreign
investment era for MNCs and foreign investors.

52. Thanks