Bangladesh report 2011 12

International Business Environment: A Case Study of Bangladesh
Submitted by: Uzair Ahmad Reg#: 110842 Submitted to: Dr. Shahid Mansoor Hashmi
E-mail: uzairahmad1986@gmail.com 1 | P a g e
Air University Islamabad, E9 PAF Complex, Islamabad
 Executive Summary
Bangladesh faces the challenge of achieving accelerated economic growth and alleviating the
massive poverty that afflicts nearly two-fifths of its 160 million populations. Strategies for
meeting this challenge have included a shift away from state-bureaucratic controls and industrial
autarky towards economic liberalization and integration with the global economy. These policy
reforms were initiated in the mid-1980s against the backdrop of serious macroeconomic
imbalances, caused in part by the declining level of foreign aid and in part by a preceding
episode of severe deterioration in the country’s terms of trade. The policy reforms in the 1980s
included the withdrawal of food and agricultural subsidies, privatization of state-owned
enterprises, financial liberalization, and withdrawal of quantitative import restrictions. The
beginning of the 1990s saw the launching of a more comprehensive reform program, which
coincided with a transition to parliamentary democracy from a semi-autocratic rule. These later
reforms were particularly aimed at moving towards an open economy – such as making the
currency convertible on the current account, reducing import duties generally to much lower
levels, and removing virtually all controls on the movements of foreign private capital. Besides,
fiscal reforms were undertaken including the introduction of the value-added tax.
During the 1990s, notable progress was made in economic performance. Along with
maintaining economic stabilization with a significantly reduced and declining dependence on
foreign aid, the economy appeared to begin a transition from stabilization to growth. In the
1980s, per capita GDP had grown slowly at the rate of about 1.6 per cent per annum; the growth
rate accelerated to 2.4 per cent in the first half of the 1990s, and further to 3.6 per cent in the
second half of the decade. The acceleration in the growth of per capita income owed itself both
to a slowdown in population growth and a sustained increase in the rate of GDP growth (which
averaged 5.21 percent annually during the second half of the 1990s). During this time, the
progress in the human development indicators has been even much more impressive. Bangladesh
is in fact among the top performing countries in the 1990s in terms of the extent of improvement
in the Human Development Index as estimated by the UNDP.1
However, there are signs that
continued progress in this respect may prove increasingly difficult, particularly in the absence of
strong international support and further consolidation of the economy's growth performance.
The relatively strong growth of the Bangladesh economy in the 1990s was underpinned
by even much stronger export growth. That performance has now been put to test by the global
economic recession and the threat of post-MFA competition in the export of readymade garment
- the country's flagship in the global market. Given the increased reliance on trade, the country's
overall economic performance has come to depend to a large extent on how well it can cope with
the risks and opportunities in the global market. Undoubtedly, the country will have to deal with
1
The absolute increase in the value of HDI for Bangladesh between 1990 and 2001 is surpassed only by
that for China (and Cape Verde) among all the countries for which such estimates are available; cf. UNDP
(2003), see the table on "Human development Index trends", pp. 241-44.

a whole range of internal policy issues, from public finance and the financial system to
governance and investment climate. But, much will also depend on the changes in the global
economic scenario and the way domestic policies respond to such changes. This paper is aimed
at particularly highlighting International business in the wider context of Bangladesh's economic
growth and future challenges.
 Limitations of the report
All data given in the report has been collected from different internet sources. Although
the data has been collected carefully but most of the times it was hard to find updated data and
much harder part were to choose among different sources, therefore errors may be there.
 Highlights of Bangladesh’s Performance
Economic Growth Bangladesh’s growth rate averaged 6.3 percent between 2004 and 2008
and was resilient despite the global downturn. But Bangladesh must
continue to improve labor and capital efficiency and increase investment
rates.
Poverty Growth has been broad-based. Poverty is projected to fall to 31 percent
in 2010, a significant decrease from 57 percent in 1991–1992.
Increasing regional disparities in poverty rates, however, need to be
addressed.
Economic Structure Output structure has remained fairly stable, with a slight decrease of
agriculture’s share in GDP and a corresponding gain by industry.
Agriculture’s share (18.6 percent) of GDP is less significant than in the
median of LI-Asia countries but it employs half the workforce.
Inefficiency in labor allocation points to the need to stimulate job
creation in industry.
Demography and
Environment
A high population density and the pressure this creates on resources
make controlling population critical. The population growth rate
declined from 1.6 to 1.4 percent over the last five-year period, leading to
lower youth dependency rates. Also global warming poses a major
threat, making environmental conservation a high priority.
Gender Bangladesh does not suffer from a wide gender gap in health or
education. Although low, women’s participation in the workforce is
increasing steadily.
Fiscal and Monetary
Policy
The macroeconomic environment is stable, with low fiscal deficits and a
drop in the inflation rate in 2009 from double digits in 2008.
Business
Environment
Doing Business 2010 cited Bangladesh as South Asia’s top reformer. In
most aspects of the institutional environment for doing business,
Bangladesh performs well compared to the regional median, and some

indicators show progress and reform.
Financial Sector The financial sector is underdeveloped compared to the financial sectors
of comparator countries, and domestic credit to the private sector has
been hampered by high real interest rates. The Central Bank of
Bangladesh has instituted directed credit and capped interest rates to
spur investment.
External Sector The readymade garment sector accounts for 80 percent of the country’s
exports, and higher-value products and diversification are needed.
Bangladesh has attracted a small fraction of the FDI attracted by
comparator countries. Foreign exchange inflows from remittances rose
in 2008 and 2009, despite the global downturn, and resulted in a record
current account surplus of 2.8 percent of GDP in 2009.
Economic
Infrastructure
Despite improvement in air transport and telephone density, the quality
of infrastructure in Bangladesh is poor. Inadequate and unreliable
electricity supply is often cited as a deterrent to investment. Bangladesh
also lags behind comparators in roads and ICT usage.
Science and
Technology
Science and technology capability in Bangladesh is below the low-
income country global median and well below the capabilities of India
and Vietnam.
Health Although life expectancy continues to increase, and child immunization
rates have held steady at 89 percent, government spending on health is
still low—1 percent of GDP. This lack of funding is evident in how few
births are attended by skilled professionals and the high rate of maternal
mortality.
Education Educational attainment at all levels is low, and adult literacy, at 53.5
percent, is cause for concern.
Employment and
Workforce
The unemployment rate is deceptively low at 4.2 percent, which does
not capture the extent of underemployment or the many Bangladeshis
working abroad. The labor force continues to grow rapidly, and female
participation has improved, partially because of the increasing
importance of the readymade garment and shrimp export industries.
Agriculture Agriculture employs half the labor force and supplies rice, the main food
staple. Cereal yields have increased with higher fertilizer usage. Farmers
in the southwest are cultivating shrimp and prawns for export.

 Country Profile
 Country Profile at Glance
• OfficialName: People'sRepublicof Bangladesh
• Location: SouthAsia
• Independence: 1971
• Capital: Dhaka
• No.Divisions: 7 (64 Districts)
• Share Borderwith: India,Burmaand Bay of Bengal
• Area: 147,570 km²
• Population: 160 Million
• Populationgrowthrate: 1.6%
• Density: 18th in world(1,200/km²)
• Currency: Taka(BDT
• BusinessLanguage: English
• Time Zone: +6
• Political Environment: ParliamentaryDemocracy
• CurrentConstitution: 4th November,1972
The Formation of an Independent Bangladesh
Tension between East and West Pakistan existed from the outset because of their vast
geographic, economic, and cultural differences. East Pakistan's Awami League, a political
party founded by the Bengali nationalist Sheik Mujibur Rahman in 1949, sought
independence from West Pakistan. Although 56% of the population resided in East Pakistan,
the West held the lion's share of political and economic power. In 1970, East Pakistanis
secured a majority of the seats in the national assembly. President Yahya Khan postponed
the opening of the national assembly in an attempt to circumvent East Pakistan's demand for
greater autonomy. As a consequence, East Pakistan seceded and the independent state of
Bangladesh, or Bengali nation, was proclaimed on March 26, 1971. Civil war broke out, and
with the help of Indian troops in the last few weeks of the war, East Pakistan defeated West
Pakistan on Dec. 16, 1971.
Economic growth continues in Bangladesh, although at a slower pace, during the world
economic slowdown. Bangladesh has achieved steady economic growth at 5% or more per
year over the past decade. Its growth exceeded 6 percent in FY 2008, reached 5.9% in FY
2009, and is expected to slow slightly to 5.5% in FY 2010; however, more supportive

external conditions are expected to lead to an increase in growth to around 6% in FY 2011-
12.
GDP (2008 est.): $84.2 billion (official); $226.4 billion (PPP).
Annual GDP growth rate (FY 2008): 6.2%; (FY 2008 World Bank est.): below 6%.
Per capita GDP (2008 est.): $554 (official); $1,500 (PPP).
Inflation (December 2008): 6.03% (point-to-point basis) and 8.9% (monthly average basis).
Exchange rate: U.S. $1=69.03 BDT (Dec. 2009); U.S. $1=68.55 BDT (2008); U.S.
$1=69.89 BDT (2007).
Annual budget (2008 est.): $12.54 billion.
Fiscal year: July 1 to June 30.
Natural resources: Natural gas, fertile soil, water.
Agriculture (19.1% of GDP): Products--rice, jute, tea, sugar, wheat.
Industry (manufacturing; 28.6% of GDP): Types--garments and knitwear, jute goods, frozen
fish and seafood, textiles, fertilizer, sugar, tea, leather, ship-breaking for scrap,
pharmaceuticals, ceramic tableware, newsprint.
Trade: Total imports (FY 2008)--$21.6 billion: capital goods, food grains, petroleum,
textiles, chemicals, vegetable oils. Growth rate over previous fiscal year: 25.95%. Total
exports (FY 2008)--$14.11 billion: garments and knitwear, frozen fish, jute and jute goods,
leather and leather products, tea, urea fertilizer, ceramic tableware. Growth rate over
previous fiscal year: 16.04%. Exports to U.S. (Jan.-Dec. 2008)--$3.74 billion. Imports from
U.S. (Jan.-Dec. 2008)--$468.1 million.
(Source: U.S. Department of State)
Geography
Bangladesh is a low-lying, riparian country located in South Asia with a largely marshy
jungle coastline of 710 kilometers (440 mi.) on the northern littoral of the Bay of Bengal.
Formed by a deltaic plain at the confluence of the Ganges (Padma), Brahmaputra
(Jamuna), and Meghna Rivers and their tributaries, Bangladesh's alluvial soil is highly
fertile but vulnerable to flood and drought. Hills rise above the plain only in the
Chittagong Hill Tracts in the far southeast and the Sylhet division in the northeast.
Straddling the Tropic of Cancer, Bangladesh has a subtropical monsoonal climate
characterized by heavy seasonal rainfall, moderately warm temperatures, and high
humidity. Natural calamities, such as floods, tropical cyclones, tornadoes, and tidal bores
affect the country almost every year. Bangladesh also is affected by major cyclones on
average 16 times a decade.
Urbanization is proceeding rapidly, and it is estimated that only 30% of the population
entering the labor force in the future will be absorbed into agriculture, although many
will likely find other kinds of work in rural areas. The areas around Dhaka and Comilla
are the most densely settled. The Sundarbans, an area of coastal tropical jungle in the
southwest and last wild home of the Bengal tiger, and the Chittagong Hill Tracts on the
southeastern border with Burma and India, are the least densely populated.

Location: Southern Asia, bordering the Bay of Bengal, between Burma and
India
Geographic coordinates: 24 00 N, 90 00 E
Map references: Asia, South Asia
Area: total: 144,000 sq km land: 133,910 sq km water: 10,090 sq km
Land boundaries: total: 4,246 km border countries: Burma 193 km, India 4,053 km
Coastline: 580 km
Climate: tropical; mild winter (October to March); hot, humid summer
(March to June); humid, warm rainy monsoon (June to October)
Terrain: Mostly flat alluvial plain; hilly in southeast
Elevation extremes: lowest point: Indian Ocean 0 m highest point: Keokradong
1,230 m
Natural resources: natural gas, arable land, timber, coal
Land use: arable land: 62.11% , permanent crops: 3.07%
other: 34.82%
Natural hazards: droughts, cyclones; much of the country routinely inundated during
the summer monsoon season
Environment - current
issues:
many people are landless and forced to live on and cultivate flood-
prone land; water-borne diseases prevalent in surface water; water
pollution, especially of fishing areas, results from the use of
commercial pesticides; ground water contaminated by naturally
occurring arsenic; intermittent water shortages because of falling
water tables in the northern and central parts of the country; soil
degradation and erosion; deforestation; severe overpopulation
note: most of the country is situated on deltas of large rivers flowing from the Himalayas:
the Ganges unites with the Jamuna (main channel of the Brahmaputra) and later joins the
Meghna to eventually empty into the Bay of Bengal
Political system:
Parliamentary democracy: - The president's duties are normally ceremonial, but with the
13th amendment to the constitution, the president's role becomes significant at times
when Parliament is dissolved and a caretaker government is installed - at presidential

direction - to supervise the elections. The parliament is unicameral (with one legislation
chamber).
The prime minister is appointed by the president. The prime minister must be a Member
of Parliament (MP) who the president feels commands the confidence of the majority of
other MPs. The cabinet is composed of ministers selected by the prime minister and
appointed by the president. At least 90% of the ministers must be MPs. The other 10%
may be non-MP experts or "technocrats" who are not otherwise disqualified from being
elected MPs. According to the constitution, the president can dissolve Parliament upon
the written request of the prime minister.
POLITICAL CONDITIONS
Despite serious problems related to a dysfunctional political system, weak governance,
and pervasive corruption, Bangladesh remains one of the few democracies in the Muslim
world. Bangladeshis regard democracy as an important legacy of their bloody war for
independence, and they vote in large numbers. However, democratic institutions and
practices remain weak.
Bangladesh is generally a force for moderation in international forums, and it is also a
long-time leader in international peacekeeping operations. It has been the second-largest
contributor to UN peacekeeping operations, with 10,481 troops and police active in
November 2009. Its activities in international organizations, with other governments, and
with its regional partners to promote human rights, democracy, and free markets are
coordinated and high-profile. Bangladesh became a member of the United Nations
Human Rights Council in May 2006, and began a second term in 2009. However, an
explicit goal of its foreign policy has been to strengthen relations with Islamic states,
leading to actions such as voting against a December 2009 UN resolution to improve
human rights conditions in Iran.
Bangladesh lies at the strategic crossroads of South and Southeast Asia. Potential terrorist
movements and activities in or through Bangladesh pose a potentially serious threat to
India, Nepal, Bhutan, and Burma, as well as Bangladesh itself. Consequentially, the
Bangladesh Government has banned a number of Islamic extremist groups in recent
years. In February 2002, the government banned Shahdat al Hiqma, in February 2005 it
banned Jagrata Muslim Janata, Bangladesh (JMJB) and Jama'atul Mujahideen
Bangladesh (JMB), and in October 2005 it banned Harkatul Jehad Al Islami (HUJI).
Following the August 17, 2005 serial bombings in the country, the government launched
a crackdown on extremists. In 2006, seven senior JMB leaders were sentenced to death
for their role in the 2005 murder of two judges. Six of the seven were executed in March
2007; another leader was tried and sentenced to death in absentia in the same case. In
March 2008, the U.S. Government listed Harkatul Jihadi Islami (HUJI)-Bangladesh as a

foreign terrorist organization. In October 2009, the Government of Bangladesh added
Hizb-ut-Tahrir to the list of banned terrorist organizations. Given its size and location, a
major crisis in Bangladesh could have important consequences for regional stability,
particularly if significant refugee movements ensue.
Source: U.S. Department of State
Legal system:
- Based on English Common Law.
- All the Chief judges and other judges are appointed by the President.
- Legislation: In February 2004, Parliament passed the Anti-corruption Act, paving the
way for the establishment of an Independent body to fight corruption.
Main agencies involved in AC prevention, investigation, enforcement, education
- Anti-corruption Commission (replaces previous Bureau for Anti-corruption)
 Public Service Commission
 Comptroller and Auditor general
 Tax Ombudsman
 Elections Commission
Anti-corruption strategy:
Bangladesh had an abundance of public sector reform plans and strategies none of which
really materialized. ADB is assisting the new Anti-Corruption Commission with the
recruitment rules and regulations, and a new project focusing on a National Integrity
Strategy (NIS) has been developed to assist Anti-corruption commission Bangladesh.
 International Trade Barriers
Historically, like many other developing countries Bangladesh relied on tariffs and
quantitative restrictions to protect domestic activities and raise revenue. Roughly 40% of
its total tax revenue still comes from import taxes. Average protective tariffs are currently
at 20.1%, with average agricultural tariff at 28.8% and non-agricultural tariff at 18.5%. A
noteworthy feature of the present tariff structure is the significant application of para-
tariff called supplementary duties, which account for about 31% of the average
protection. The average customs duty, which registers a decrease over time, is currently
13.8% with four non-zero duty slabs of 3%, 7%, 12% and 25%. Food stuff, fertilizer,
seed, plastic trays used in poultry and dairy, medicines and raw cottons are not subject to
any custom duty. Some consumer goods, mainly the non-food luxury items, have high
protective rates even up to 463%- well beyond the top custom duty rate.
While high-income countries still have the world’s lowest tariff barriers, many
developing countries are converging rapidly. Bangladesh still maintains a very restrictive
trade policy. Bangladesh has ranked 113th and 107th in terms of Trade Policy and

Institutional Environment respectively out of 125 countries studied. Bangladesh ranked
slightly better for External environment where its position was 59th out of 125 countries.
 Imports and exports of Bangladesh
Like many other third-world countries, Bangladesh relies quite heavily on exports to provide for
the needs of its densely populated nation. The same products sold locally will generally fetch a
much lower price than they would on the international market. This means that it is far more
profitable for the country to engage in exportation than it is to engage in local trade. While this
may mean that a large percentage of the country’s GDP is sent off abroad as Bangladesh exports
instead of being enjoyed by the country’s own people, it also allows for a steady influx of foreign
currency.
Currently Bangladesh’s main export items are garments, jute and jute-related goods, leather,
frozen fish and seafood. Just three years ago the country made over $2,000 billion from export
trade. The majority of the country’s trade is conducted with the USA but a small portion of
exports also sees its way to Germany, the UK, France and Italy. However these figures should
not mislead you into thinking that the country is well-off. As one of the poorest and most densely
populated countries in the world, the majority of these profits will generally make their way into
the pockets of a few wealthy while the rest will be thinly spread out amongst those involved in
the production of these goods. To add to this, the country’s economy depends on an erratic
monsoon cycle as well as drought and flooding which makes regular harvesting difficult.
Besides these Bangladesh exports, the country is also engaged in the production of rice, tea,
sugar wheat, ship scrap metal, textiles, fertilizer, pharmaceuticals, ceramic tableware and
newsprint. Though yields can at times be quite high, the country still faces widespread poverty
and it is struggling to free itself from this. Some progress has been made, but there are still many
people living below the breadline in Bangladesh.
Bangladesh Exports to U.S.
With a population of 151 million, Bangladesh exported US$3.3 billion worth of merchandise to
the United States in 2006, up 21.4% from 2005 and up 53.2% in 4 years.
1. Cotton apparel and household goods …US$2.2 billion (67.5% of Bangladesh to U.S. exports,
down 29.2% from 2005)
2. Other textile apparel and household goods … $641.8 million (19.6%, up 5.6%)
3. Fish and shellfish … $192.6 million (5.9%, up 38.4%)

4. Sporting and camping apparel, footwear and gear … $139.1 million (4.3%, up 8.3%)
5. Wool apparel and household goods … $17.3 million (0.5%, down 27.4%)
6. Cloth, fabric and threads (wool and silk) … $11.3 million (0.3%, down 1.6%)
7. Abrasives, belting, boxes, glass … $11.1 million (0.3%, up 26.5%)
8. Toys, sporting goods including guns and bicycles … $8.6 million (0.3%, up 27.2%)
9. Fertilizers, pesticides and insecticides … $7.3 million (0.2%, down 78.9%)
10. Goods returned then re-exported to America … $5.6 million (0.2%, up 623%).
Fastest-Growing Bangladesh Exports to U.S.
Below are American imports from Bangladesh in 2006 with the highest percentage sales
increases from 2005.
1. Non-textile floor and wall tiles … US$58,000 (up 2,880% from 2005)
2. Jewelry including watches and rings … $53,000 (up 1,225%)
3. Goods returned then re-exported to America … $5.6 million (up 623%)
4. Paper products … $114,000 (up 339%)
5. Fruits and preparations including frozen juices … $43,000 (up 291%).
Bangladesh Imports from U.S.
Bangladesh’s imports from the U.S. rose 4% to $333 million in 2006, up 23.6% since 2002. Of
American exports to Bangladesh in 2006, the following product categories had the highest
values.
1. Raw cotton … US$39.7 million (11.9% of Bangladesh from U.S. imports, down 6% from 2005)
2. Generators and accessories … $37.8 million (11.4%, up 49.3%)
3. Textile sewing machines … $23.4 million (7%, up 46.5%)
4. Steelmaking materials … $19.2 million (5.8%, up 162.7%)
5. Pulp and wood pulp … $14.6 million (4.4%, up 51.3%)
6. Drilling and oilfield equipment … $14.3 million (4.3%, up 287.1%)
7. Wheat … $11.4 million (3.4%, up 182.5%)
8. Other industrial machines … $9.8 million (3%, up 39.3%)
9. Industrial engines … $9 million (2.7%, up 49.7%)
10. Telecommunications equipment … $8.8 million (2.6%, down 66.3%).
Fastest-Growing Bangladesh Imports from U.S.
Below are American exports to Bangladesh in 2006 with the highest percentage sales increases
from 2005.
1. Other agricultural manufactured products … US$134,000 (up 857% from 2005)
2. Corn … $359,000 (up 716%)
3. Unmanufactured agricultural farming … $1.8 million (up 589%)
4. Marine engine parts … $80,000 (up 567%)
5. Tanks, artillery, missiles, rockets, guns and ammunition … $58,000 (up 480%).

In terms of the merchandise flow between the two countries, Bangladesh’s trade surplus with
America was $2.9 billion in 2006, up 57.5% from 2002. The Bangladesh’s trade surplus with the
U.S. increased 23.8% in 2006 – an improvement from the 17.9% surplus increase in 2005 from
the year earlier.
 Foreign Investment Policy
By quickening the tempo of policy reforms Bangladesh could expect to achieve a double
digit manufacturing growth. Adequate reforms would create the climate for raising the
level of investment from the present 23 percent to 28 percent within the next three to five
years. With the adoption of market-friendly policies under a reformed policy
environment, Bangladesh should also be able to attract sufficient foreign direct
investment to finance the desired investment growth.
Foreign Investment Opportunities
Bangladesh is now trying to establish itself as the next rising star in South Asia for
foreign investment. The government has implemented a number of policy reforms
designed to create a more open and competitive climate for private investment, both
foreign and local.
The country has a genuinely democratic system of government and enjoys political
stability seen as a sine qua non for ensuring a favorable climate for investment and
sustained development.
Bangladesh has been quick to undertake major restructuring for establishing a market
economy, with the major thrust coming from the private sector. The country enjoys
modest but steady economic growth. Its current development strategy is based on the
premise that the creation and distribution of wealth occurs through the acceleration of
growth driven by competitive market forces, with the government facilitating growth and
making a clean break from the practices of a controlled economy where private
investment is constrained. The government has been gradually withdrawing its
involvement in this industrial and infrastructure sectors and promoting private sector
participation.
The government has moved speedily to translate its policy pronouncements into specific
reforms. It has been consistently pursuing an open-door investment policy and playing a
catalytic rather than a regulatory role.
Regulatory controls and constrains have been reduced to a minimum. The government
has steadily liberalized its trade regime. Significant progress has been achieved in
reducing non-tariff restrictions on trade, rationalizing tariff rates and improving export
incentives. The introduction of VAT has helped rationalization of the import tariff and
domestic tax structures. The tariff structure and the import policy are kept under constant
review to identify areas where further improvements are called for.

Motivated by the simple realization that state-owned enterprises are a drain on its scarce
resources and that these are generally inefficient, very costly and slow in responding to
changing markets and consumer desires, the country has embarked on a privatization
program, offering substantial opportunities for international investors.
Foreign investment is particularly welcome in the export-oriented industries such as
textiles, leather goods, electronic products and components, chemicals and
petrochemicals, agro-based industries, green jute pulp, paper, rayon products, frozen
foods (dominated by shrimp farming), tourism, agriculture, light industries, software and
data processing.
Foreign investment is also desired in high technology products that will help import
substitution or industries that will be labor as well as technology intensive.
Some of the foreign private investment opportunities are:
- Direct (100%) foreign investment or joint venture investment in the Export
Processing Zones (EPZs) or outside EPZs.
- Portfolio investment by purchasing shares in publicly listed companies through
the stock exchange.
- Investment in infrastructure projects such as power generation (private power
generation policy announced); oil, gas and mineral exploration,
telecommunication, ports, roads and highways.
- Outright purchase or purchase of shares of state-owned enterprises, which are
under process of privatization.
- Investment in private EPZ.
The country's drive for foreign investment is being spearheaded by the Board of
Investment, which was created to facilitate the setting up of manufacturing and other
industries in the private sector, both local and foreign. It is a promotional organization
dedicated towards providing investment assistance to all investors.
The Board is headed by the country's Prime Minister and it includes Ministers and
Secretaries from the concerned ministries as well as representatives from the private
sector.
The Board has launched an investment promotion drive at home and abroad to attract
investors. The BOI has been assisting in the implementation of new projects as well as
providing services.
In order to stimulate rapid economic growth of the country, particularly through
industrialization, the government has adopted an 'Open Door Policy' to attract foreign
investment to Bangladesh. The Bangladesh Export Processing Zones Authority (BEPZA)
is the official organ of the government to promote, attract and facilitate foreign
investment in the Export Processing Zones.

Bangladesh is on the verge of a significant breakthrough in terms both of international
investor confidence and significant inflow of new investment funds.
 The main export destinations are USA, Germany, UK, France and Belgium
 The main import partners are China, India, Kuwait, Singapore, and Hong Kong
o Major Exports are garments, jute and jute-related goods, leather, frozen fish and
seafood.
o Major Imports are machinery and equipment, chemicals, iron and steel, foodstuffs and
petroleum products to cement.
 MNC’s and its contribution
There is very large list of MNCs operating in Bangladesh, where I have selected some
very common to all.
 Unilever Bangladesh Ltd
 Tetra Pak Asian Emerging Markets
 Standard Chartered Bank
 Novartis Bangladesh Ltd
 Saudi Bangladesh Industrial and
Agricultural Investment Company
Ltd (SABINCO)
 British American Tobacco
Bangladesh Ltd
 Hewlett-Packard Bangladesh
 Glaxo SmithKline Ltd
 American Express Bank
 Banglalink (Orascom Telecom
Holdings)
 British Power Industries (BPI)

 Country Competitiveness
To launch WEF’s Global Competitiveness Report 2011-12 in Bangladesh. The report was
globally launched on 7 September, 2011. Global Competitiveness Index (GCI) is an index of
weighted average of 12 different pillars
Basic requirements sub-index: (4 pillars) factor-driven stage
Efficiency enhancers sub-index: (6 pillars) efficiency-driven stage
Innovation and sophistication factors sub-index: (2 pillars) innovation-driven stage
 GCI is estimated on the basis of moving averages of two years
Each sub-index has different weights considering country’s stages of development
 Bangladesh is considered at factor-driven stage
Joint Research Centre of the European Commission (JRC) has examined the GCI for 2010, and
termed the index to be robust to changes in weights
S
Stages of
development
Factor Driven
Stage 1
Transitions
form Stage 1-2
Efficiency
driven stage 2
Transition from
Stage 2-3
Innovation
driven stage 3
GDP per-
Capita (US$)
< 2,000 2,000-2,999 3,000-8,999 9,000-17,000 >17,000
Basic
requirement
60% 40-%-60% 40% 20-40% 20%
Efficiency
enhancements
35% 35-50% 50% 50% 50%
Innovation and
sophistication
5% 5-10% 10% 10-30% 30%
 Global Competitive Index 2011-2012 Major Findings
A total of 142 countries have been assessed in 2011 (139 in 2010) newly including Belize, Haiti
and Yemen where Libya could not be covered due to resent unrest.
Top 10 countries in GCI 2011-12 have been dominated by European countries, major shuffling
has taken place in their rankings.

o Switzerland retained its 1st
position by maintain its strength in innovation, technological
readiness and labor market efficiency.
o Singapore moved up to 2nd position, continued to be leader among the Asian countries
Best institutions in the world, highly efficient in goods and labor market efficiency;
strong infrastructural base; strong focus on education.
o USA continued falling in the rank. Down to 5th position from top in 3 years.
A number of escalating weaknesses have lowered US rankings: low trust in politicians,
government’s poor ability to maintain relation with the private sector; less transparent
policy making and burdensome regulations.
 A comparative analysis of selected Asian Countries
o Among the BRIC countries, China continues to lead and
improved its position to 26, Followed by Brazil (53),
India (56), and Russia (66). All slipped in 201.
o In South Asia, Sri Lanka, Pakistan and Nepal advanced
well. Sri Lanka jumped up by 27 positions within two
years and ranked 52nd
(last year 62nd
)
o Bangladesh and India failed to retain their year’s
position. Bangladesh dropped one position securing
108th
rank in 2010 (107th in 2009) Slid by one position
in two consecutive
o Among other Asian countries; Cambodia superseded
Bangladesh by 9 positions from 2 positions behind
o Vietnam, Indonesia and Thailand decelerated
 Bangladesh in GCI Ranking and Changes in GCI Score.

 Bangladesh in GCI Ranking and Changes in GCI Scores
Bangladesh dropped by one position, ranked 108th in GCI 2011-12
 Among the same set of countries as of 2010-11 (139): rank remained the same
 Bangladesh’s GCI score has increased by 2.5%; scores of all indices and
subindicese except financial market sophistication and innovation increased
Bangladesh’s rank and scores improved in basic requirement sub-index
 Both ranks and scores of public institutions and macroeconomic stability improved
 Ranks fell for infrastructure by 1 position and health and primary education by 2
positions although their scores increased
Rank and score dropped in efficiency enhancer index
 Goods and labour market efficiency, and technological readiness experienced rise
 Financial market sophistication and market size experienced decline in ranking
Dropped by 4 positions in innovation and sophistication index (from 109 to 113)
 Improved: business sophistication
 Fall: Innovation

 Identification of Problematic Factors of Bangladesh.
Top three problematic factors have been rearranged with further concentration in the level of
perception (58.4% in 2011 vis-a-vis 51.8% in 2010)
Inadequate supply of infrastructure remained top (22.6% vis-a-vis 23.8% in 2010)
Corruption came up as second-most important factor with significant rise at the
perception level (18.5% vis-a-vis 12.6% in 2010)
Inefficient government bureaucracy though considered to be strong in terms of level of
perception but came down to third (17.4% vis-a-vis 15.4% in 2010)
Problematic Factors in Trading
• Export of Bangladeshi products is perceived to be affected by the following factors:
 lack of proper identification of markets/buyers, use of inappropriate technologies,
poor access to imported inputs at competitive prices
• Import by local entrepreneurs is affected by a number of factors:
 Burdensome import procedures, tariffs/NTBs, delays in domestic transportation
 Concluding Remarks on GCI
Bangladesh slipped one rank and became 108th
out of 142 countries in the GCI of 2011.
Although positive changes were discerned in different indicators, these changes were
insignificant to create enough forces to run the wheel of the economy at required pace.
Without having sufficient ‘push’ in the wheel of ‘basic requirements’ growth in rank of
GCI is likely to remain at snail pace.
Bangladesh should set a strategic target to lift its ranking upwards in a gradual manner.

It should set target to reach its ranking at least at 90.
To reach 99th
ranking in GCI, Bangladesh needed to improve its GCI score from 3.73 to
3.84.
Basic Requirements score: from 3.81 to 4.08, Efficiency Enhancer score: already
reached; Innovation and sophistication score: from 3.04 to 3.55
 Suggestions for improving GCI ranking.
First and most important focus should be on infrastructure development, creating efficient
public institutions, reducing corruption and human resource development in order to
enhance productivity.
Strong political stance is required against corruption, wasteful or delayed
public spending and strengthening of local government system
Trade facilitation measures should be strengthened
Government’s initiatives in the last two years were perceived to be inadequate to
build Digital Bangladesh by 2021
Focus should be put in place on time bound implementation of action plan of ICT policy
2009; investment in ICT infrastructure development; access of internet services at
village/school level should also be improved.
Controlling corruption will be a major challenge for the government in the coming years.
Ensuring discipline in the financial sector is a major issue for growth and development.
Difficulty in obtaining credit, poor monitoring and supervision both in banking and
capital markets, weak regulation, poor financial auditing and reporting), and rise of
money laundering- are major concerns.
Domestic competition and company level operations are being circumvented by the same
traditional practices with little dynamism in technology, process and marketing.
Investment in heavy industries, ensuring availability of high and sophisticated process
equipment/machineries, cluster development (SMEs), R&D for product and process
development and market penetration should be the focus of industrial development.
 Doing Business in Bangladesh
Summary of doing business in Bangladesh
I take about 19 days to start a new business, with following 7 procedures (Bangladesh’s
ranking 86). Dealing with construction permits (Bangladesh’s ranking 82) procedure required
11 and no of day for construction are 201. Getting electricity (Bangladesh’s ranking 182) 7
procedure with 372 days. Registering property (Bangladesh’s ranking 173) procedure 8 and
245 days will be required. Getting Credit (Bangladesh’s ranking 78) where strength of legal
rights index is 7. Protecting investors (Bangladesh’s ranking 24). Paying taxes (Bangladesh’s
ranking 100) no of payments per year is 21. Trading across boarder (Bangladesh’s ranking
115) Enforcing contracts (Bangladesh’s ranking 180) and resolving insolvency
(Bangladesh’s ranking 107) time will be 4 years at a recovery rate of 25.8 cents on the dollar.

How Bangladesh ranks on Doing Business topics
How Bangladesh and comparator economies rank on the ease of doing business

Market Overview
 Bangladesh is a semitropical riverine nation with fertile soil and a high vulnerability
to floods and cyclones.
 Most Bangladeshis live in rural areas and make their living from agriculture, although
there has been heavy migration to the cities, primarily to Dhaka, the capital.
 With over 140 million people crowded into an area the size of Iowa, Bangladesh has
the highest population density of any country, except city-states such as Singapore.
 Bangladesh has experienced fairly robust economic growth during the last decade,
which saw the restoration of a democratically elected government and a steady, albeit
slow, liberalization of the economy.
 For the past 15 years, Bangladesh has seen trend growth in annual real GDP of
around five percent. Real GDP growth for FY2005 (ended June 30) is provisionally
reported as 5.38%. These growth rates, however, fall short of the estimated 7-9%
annual real GDP growth needed to significantly reduce the poverty that afflicts one in
three Bangladeshis.
 Inflation rates have continued to rise, averaging 6.48% FY2005 (Source: Bangladesh
Bureau of Statistics).
 U.S. exports to Bangladesh in ten months (January-October 2005) were 276.4
million, while imports from Bangladesh during this period were $2.25 billion.
(Source: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch,
Washington, D.C. 20233)
 An estimated eight million Bangladeshis have annual incomes well in excess of
$10,000. Heavily concentrated in Dhaka and Chittagong, they represent a sizable
market for a wide range of goods and services.
Market Challenges
 Despite a relatively good performance in the last decade, the economy is beset with
many structural weaknesses, which the government has yet to address.
 Chief among these weaknesses are the undercapitalized financial sector, an
unproductive and chronically money losing public sector, poor infrastructure, lack of
export diversification, and pervasive corruption at all levels of society.
 In October 2005, for the fifth time, Transparency International reported that
Bangladesh is perceived to be the most corrupt country in the world.
 The failure of the political system to address these long-standing economic problems
has adversely affected the business environment and investment climate.
 The initial impact of the end of the Multi-Fiber Arrangement on Bangladesh's textile
and garment sector has been limited. In the medium term, many firms are well
positioned to compete and are undertaking new investment, while marginal
manufacturers face consolidation or closure. Exports have grown, especially in the
knitwear subsector.

Market Opportunities
 The leading commercial sectors for U.S. exports and investment are:
Electrical Power Systems
Textile Machinery/Equipment
Oil, Gas and Mineral Exploration/Production Services
Computers/Peripherals and Computer Software
Architectural, Construction and Engineering Services
 More generally, Bangladesh needs significant infrastructure development. Many
infrastructure projects are financed by the multi-lateral development banks. Interested
companies should monitor the web sites of these organizations for tender opportunities.
 The leading agricultural sectors for U.S. exports are:
Cotton
Wheat
Vegetable Oil
Apples
Market Entry Strategy
 Personal relationships are important to selling products in Bangladesh. Many companies
license dealers or distributors, or hire local agents to represent their products on an
exclusive or non-exclusive basis.
 As companies become more established in the market, they may choose to open a
branch or subsidiary.
 Many other companies service Bangladesh from their offices in the region, either in India
or in Southeast Asia.
 Some consumer goods companies have established manufacturing facilities in
Bangladesh.
 Some companies have begun granting franchise licenses in Bangladesh, including for
casual theme restaurants, clothing, health spas and specialty goods.
 Successful companies adapt their products to the demands of the local marketplace.
This may include smaller packaging to reduce retail pricing and marketing strategies that
position the product as an inexpensive indulgence or unique gift.
Major Finding of Bangladesh International Business
 Bangladesh is least developed countries; therefore it has access to many developed
nations and global markets.
 Low labor cost in Bangladesh.
 Relatively high literacy rate.
 Skilled labor.
 Inadequate climate is a risk.
 4-5 hours electricity short fall may suffer business activates but still providing
competitive position to it’s industries.
 Textile and readymade garments are it’s strength. However frozen fish and other sea food
are also high trading and GDP contributor.
 Political stability may be a risk for investors.

Recommendation
Although recommendations are given at the end of GCI to gain its lead in the global
market, however in short Bangladesh needs to
 Improve literacy rate.
 Protect intellectual property rights.


Bangladesh report 2011 12

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