Bangladesh Export Opportunities
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Bangladesh, traditionally known for jute and tea exports, has recently attracted world- wide attention for readymade garments and leather exports. Bangladesh foresees an expansion of her agricultural sector, as well as increased diversity in non traditional industries and business. Below is a short account of a few potential investment sectors. In addition an indicative list of private sector investment opportunities is presented at Appendix-A.
- The fastest growing industry in Bangladesh with RMG accounting for more than 75% of total exports.
- Bangladesh is best placed in the region for textiles and garments because of cheap labor and trade status with the EU.
- Government incentives for the spinning and weaving industries include a 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally.
- There is a huge fabric demand supply gap in the RMG industry which is being me by imports. Thus the potential for backward linkage industry is enormous.
RMG and Backward Linkage:
The phenomenal growth in RMG was experienced in the last decade. With about 2,600 factories and a workforce of 1.4 million, RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990's.
a. Finished Leather
b. Leather Goods
- The labor-intensive leather industry is well suited to Bangladesh having cheap and abundant labor.
- Bangladesh has a domestic supply of good quality raw material, as hides and skins are a by-product of large livestock industry.
- Adequate government support in the form of tax holidays, duty free imports of raw materials and machinery for export-oriented leather market
- The industry lacks domestic technology and expertise and local support industries such as chemicals are still under-developed.
- Present Government is in the process of setting up of separate Leather Zone relocating the existing industry sites to an well-organized place.
- New FDI inflow is highly encouraged and foreign investors are welcome to have the opportunity.
There is already a substantial domestic leather industry, mostly export-oriented. The leather includes some ready-made garments, although that aspect is continued mainly to a small export-trade in "Italian-make" garments for the US market. Footwear is more important in terms of value addition. This is the fast growing sector for leather products. Presently Bangladesh produces between 2 and 3 percent of the world's leather market. Most of the livestock base for this production is domestic which is estimated as comprising 1.8 percent of the world's cattle stock and 3.7 percent of the goat stock. The hides and skins (average annual output is 150 million sq.ft.) have a good international reputation. Foreign direct investment in this sector along with the production of tanning chemicals appears to be highly rewarding.
Having the basic raw materials for leather goods as well as for the production of leather shoe, a large pool of low cost but trainable labour force together with tariff concession facility to major importing countries under GSP coverage, Bangladesh can be a potential off shore location for leather and leather products manufacturing with low cost but high quality.
Government is promoting semi-intensive shrimp farming.
Fish and prawn exports grew at an average 20% in the past decade.
Shrimp processing and export industry is largely dominated by the smaller unorganized sector.
15% cash incentive is given to shrimp export amount.
The frozen foods export is the second largest export sector of the country. The average annual growth rate is about 28%. This export-oriented industry includes the following sub-sectors which need proper attention for augmentation of production and export earnings.
- Sustainable aqua-culture technology
- Feed meals plants
- Processing unit for value-added products.
Investment in frozen food sector with new technology and equipment has a vast potential for growth.
a) Data Processing
b) Software Development
- Investment is mostly confined to information processing.
- Bangladesh has a cheaper and rapidly growing IT workforce.
- Government is keen in establishing IT related infrastructure for the development of the industry.
Availability of substantial number of qualified and experienced young people in various branches of engineering, science and technologies have opened up the scope of profitable investment in these sectors. Comparatively short training period and low investment have made such ventures highly profitable.
A number of Bangladeshi IT firms are interested in finding international investors or collaborators in various sub-sectors.
- Canned Juice / Fruit
- Dairy and Poultry
Bangladesh has a huge supply of raw materials for the agro-based industry.
Fruits and vegetable production has increased significantly in recent years.
Government and NGOs have been conducting regular training programs in developing a skilled manpower for this industry.
There is a substantial demand supply gap in the agro-based industry.
Bangladesh has the basic attributes for successful agro-based industries, namely, rich alluvial soil, a year-round frost-free environment, an adequate water supply and an abundance of cheap labour. Increased cultivation of vegetables, spices and tropical fruits now grown in Bangladesh could supply raw materials to local agro-processing industries for both domestic and export markets.
Progressive agricultural practices, improved marketing technique and modern processing facilities would enable the agro-processing industry to improve its quality and expand production levels significantly.
Investment interests in agro-based industries are highly encouraged.
- Bangladesh has a skilled manpower in ceramic industry.
- Historically, tableware industry is labor-intensive.
- The clean gas reserve required for firing is a great competitive advantage for Bangladesh.
Global ceramic tableware industry is currently going through a phase of acquisition and consolidation as smaller industries in the developed countries are becoming uncompetitive and bankrupt. As a result, the big names like Noritake, Wedgewood, Lenox, Villeroy & Boch and Royal Doulton are all individually becoming billion-dollar operations.
Historically, tableware industry is labor-intensive and even after spending billions of dollars on automation, developed countries could not reduce the number of workforce according to their expectations. As a result, the cost of production will always remain extremely high in developed countries and the premium brands are only surviving because they are charging huge price to the consumers for their brand equity.
Bangladesh, being a gas-rich and low-labor-cost economy, offers to be a strategic partners in production and supply of ceramic products. Investment interests in this sector are strongly welcomed.
- Machinery Parts
- Consumer Items
- A growing and increasingly affluent middle class indicates demand for consumer durables.
- There is a significant sector of cottage industries engaged in simple electronic goods.
- Export-oriented production in light industries has gained momentum in the past few years.
Light industries in Bangladesh produce a multitude of labour intensive goods including toys, consumer items, small tools and paper products for the domestic market. Further development for these industries offers various investment opportunities. Export-oriented production in light industries has gained momentum in the past few years. Entrepreneurs from Hong Kong, Japan and Korea have taken advantage of Bangladesh's cheap and easily trainable labour and its infrastructure facilities to manufacture products for the export market.
Natural Gas-based Industries
- Bangladesh has a substantial gas reserve of about 20 trillion cubic feet (tcf)
- There is a huge demand for fertilizer in Bangladesh as the agriculture is the principal sector of the economy.
The private sector power generation policy announced in 1996 under which private power companies are exempt from income tax for 15 years. Several barge-mounted power plants are in operation. But an extensive demand gap for electricity is crucial.
Opportunities exist in developing new plants (barge-mounted and other, large, small and mini), constructing transmission and distribution system, rehabilitating or upgrading existing plants and supplying a variety of support services. Investment opportunities are available on a build-operate-transfer (BOT) basis.
b) Cell Phone Assembly
c) Other Electronics
Manufacturing of semi-conductors could be established as a potential cottage industry.
Bangladesh is going to be the largest cell-phone market in South Asia.
Bangladesh's experience in basic electronics spans over two decades. In recent years, European and Asian electronic firms have established technical collaboration with their Bangladeshi counterparts to produce some electronic goods at competitive prices. This has tremendous potentiality for expansion.
The Government of Bangladesh has adopted National Telecommunication Policy, 1998. Investment is encouraged through BLT-BOT/BOO/BTO and other joint venture schemes which by greatly increasing the capacity, quality and type of services, will create improved efficiencies in other sectors such as transportation energy and the textile industry.
To meet the telecommunication requirements of the country the government has been developing and expanding the systems and services of BTTB. Private sector operations in the rural telecommunication, paging, cellular telephones and riverine radio trunking have already been allowed. At present 7 private operators are providing their services to about 100,000 customers. Government has allowed expanding 300,000 digital telephone in Dhaka by private sector participation through open tendering.
In accordance with overall national policy, liberalization of the telecommunications sector will continue. However, the government retains the sale authority to determine the number of competitions that are economically viable for certain services. The strategy is to provide equal and rational opportunities to all competitors.
Bangladesh is one of the leading producers of jute in the world. At present the annual production is 890,000 MT. In 1996-97 Bangladesh exported raw jute worth US$ 116.32 million and jute goods worth US$ 317.86 million in the form of sacking hessian carpet & carpet backing cloth, jute yarn/twine etc. This is one of the very prospective areas for investment with higher technology.
Besides Oil and gas a contract has been signed to extract coal from Barapukuria coal mine in Dinajpur district with a Chineses consortium designed to extract 1.0 million MT coal a year. Another contract has been signed with a North Korean company for the extraction of 1.6 million MT hard rock per year at Madhyapara in the same district.
Bangladesh is still at a low level of electrification with only 16% of it population having access to electricity and per capita generation is only 96 KW per annum. Hence, there is a great need and urgency to expand the electrification programs. The government of Bangladesh has attached priority for the development of the power sector.
The present installed generation capacity is 2908 MW. But the available generation capacity is about 2200 MW due to old age of few power plants. The route length of transmission line is 3500 Km, the total length of distribution network is 1,28,000 KM and the number of consumers is 35,00,000 at present.
The present demand of electricity is about 22,00 MW. It is estimated that the peak demand in FY 2000 will be about 3150 MW and this will increase to about 4600 MW in FY 2005. A total of 2700 MW generation capacity is planned to be added to the system during the Fifth Five Year Plan period FY 1998-FY 2002.
Bangladesh has amended its Industrial Policy and the power sector is open to private investment. The government has approved the Private Sector Power Generation. Policy of Bangladesh to attract private investment in power generation. Under the policy, the private power companies shall be exempted from corporate income tax for a period of 15 years and the companies will be allowed to import plant and equipment without payment of custom duties and VAT.
Because of the favorable conditions for private investment a large number of Independent power producers (IPPs) have shown interests for setting up power plants in Bangladesh. A Rural Power Plant is being implemented by RPC at Mymensingh. A Rural Power Company (RPC) has been created A 60 MW Gas Turbine Power Plant is being implemented by RPC at Mymensingh. Contracts with four IPPs selected through competitive bidding have already been negotiated and are expected to be signed shortly. Bids received for setting up a 360 MW combined cycle power plant at Haripur and 450 MW combined cycle power plant at Meghna Ghat in the private sector are being evaluated. There is need for more private investment in power generation to meet the increasing demand in future.
The government of Bangadesh has undertaken some reform measures with a view to achieving operational and management efficiency and commercial characteristics in the power sector. Power Grid Company of Bangladesh (PGCB) has been created. Initially PGCB will own the transmision lines associated with Meghna Ghat Power Project. Ultimately it will take over the entire transmission system of the country. Dhaka Electric Supply Comapny (DESCO) has been created to manage the distribution area of Mirpur. DESCO will eventually take over the entire distribution responsibilities of Dhaka metropolitan city area.
In air transport, the government has given provisional domestic air transport operating licenses to six private companies for STOL Services. Seven airports have been refurnished to cater to their needs. International air & cargo transport in the private sector is now allowed for operation in Bangladesh.
With growing international interest in traveling through Asia tourism is taking roots in Bangladesh. Bangladesh offers a variety of historically significant and culturally unique sites for tourists. Sylhet's tea gardens, Cox's Bazar sea-beach, the Royal Bengal Tiger, Deer and the Sundarbans, the largest mangrove forest in the world with unique bio-diversity offer tourist attractions. Ancient mosques, Buddhist monasteries, Hindu temples, monuments and other landmarks dot the countryside. Additional hotel and resort facilities could be created for attracting tourists from home and abroad. Dhaka and Chittagong also have an unmet demand for additional hotel rooms, restaurants, entertainment and recreational facilities.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI)
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