Role of Business Economic Development
Chapter – 1 Introduction Page 1.1 Background03 1.2 Financial economic sector04 1.
3 Microfinance04 1. 4 Economy of Bangladesh05 1. 5 Objectives of the term paper06 Chapter- 2 Conceptual issues 2. 1 The Garment Industry of Bangladesh 06 2. 2 Agriculture07 2. 3 Textile Sector08 2. 4 Manufacturing and Industry09 2. 5 Banking and Finance10 2. 6 Statistical Position of Economy in Bangladesh 10 Chapter-3 Database 3. 1 Economic Transformation11 3. 2 Economic performance12 Chapter 4 Finding of The Study Page 4. 1 Garments & Textiles 12 4. 2 Spinning 16 4. 3 Frozen Foods 18 . 4 Leather 19 4. 5 Electronics 20 4. 6 Agriculture 21 4. 7 Information Technology 24 4. 8 Pharmaceuticals 25 Chapter-5 Conclusion 5. 1 Summary of Major Findings 27 5. 2 Economic Performance 28 5. 3 Policy Recommendation 28 Chapter – 1 Introduction There is no denying the fact that the economical business sector plays a significant role in the economic development of a country. The importance of an efficient economic sector lies in the fact that, it ensures domestic resources mobilization, generation of savings, and investments in productive sectors.
In fact, it is the system by which a country’s most profitable and efficient projects are systematically and continuously directed to the most productive sources of future growth. The financial system not only transfers funds from savers to investors: it must be able to select projects which will yield the highest returns, accumulate sufficient quantities of capital to fund the range of investment projects across economic activities, account for price risks across assets, monitor performance, and enforce contracts.
The larger the business sector in the context of the overall economy, the greater the share of lending by depository rather than central banks, and the greater the share of credit to private sector rather than public sector, the greater is the rate of economic growth. The country’s economy is based on agriculture. Rice, jute, tea, sugarcane, tobacco, and wheat are the major crops. Bangladesh is the world’s largest producer of jute. Fishing is also an important economic activity, and beef, dairy products, and poultry are also produced. . 1-Background Bangladesh, since its independence in 1971, had to experience several military rules besides democratically elected government associated with major political assassinations. Regardless of all the aroused disputes, the country constantly pushed to achieve economic, social and developmental success through introduction and implementation of different policies during the ruling period of different elected governments as well as at the time when the country was declared to be under the emergency rule.
Bangladesh, named in the list of the developing nations, is blessed with several natural advantages over developed countries. Examples of such are huge reserves of oil, natural gas, coal, timber and the only natural port of the world that connects SAARC and ASEAN business hub together. The utilization of such natural assets are closed to zero. Foreign donors are granting financial aids for reformation and infrastructure development of the country. Loans are being taken on heavy interest, by GOB, from World Bank and Asian Development Bank for developmental purposes. 1. -Financial economic sector The financial sector consists of the central bank, Bangladesh Bank, 4 state owned commercial banks, 5 government-owned specialized (development) banks, 30 domestic private commercial banks, 9 foreign-owned commercial banks, and 29 NBFIs. In terms of both industry assets and deposits, private commercial banks command the greatest market share. Additionally, 298 micro credit organizations are licensed by the Micro credit Regulatory Authority (MRA). Insurance companies, stock exchanges, and cooperative banks comprise a smaller part of the financial system.
As of August 2008 the net domestic assets of the country’s banking system were valued at BDT 1. 9 trillion ($28 billion). 1. 3- Microfinance The average annual growth rate in the microfinance sector in Bangladesh over the five years 2003–2008 was 23 percent. It is expected to reach 25 percent annually over the next three years (2009–2012) as a result of growing demand for larger loan sizes. Despite its significant outreach—estimated at 60 percent of all Bangladeshi households—microfinance assets remain less than 2 percent of GDP, having increased only marginally relative to GDP since 2001.
The total loan portfolio of the microfinance sector is estimated to exceed BDT 135 billion and total borrowers, to exceed 30 million. Although it is difficult to estimate the unique number of microfinance borrowers, taking into account their cross-indebtedness to different microfinance providers, they likely number 18 million. It is estimated that just over 60 percent of them have income below the poverty line. The Micro credit Regulatory Authority Act of 2006 limits two important potential MFI funding sources: equity investments and deposits.
Foreign currency financing is also effectively prohibited. MFIs in general have access funding for most MFIs. These sources seem adequate to cover current funding needs. 1. 4- Economy of Bangladesh Bangladesh is an agriculture driven economy. Total of 54% of the population of the nation is directly and indirectly involved in farming and lives in rural areas (World Bank, 2011). Due to soil fertility and ample supply of water, having the blessing of thousands of rivers and its branches zigzagging nationwide.
Bangladesh can harvest three crops every year. Apart from the fact that cyclones and floods damage crops every year, the production of crops meets substantial local consumption demand but are not grown sufficiently enough for export purposes. Where both men and women are engaged in generating foreign revenue and contributing to the GDP. The third sector which contributes greatly to the economy of the nation is the export of manpower which brings remittances by Bangladeshi workers working abroad, such as in Middle-East Singapore, Malaysia, etc.
Due to cultural and religious norms, women previously stayed within the compound of their houses and were liable to take care of the house-hold activities, whereas men were regarded as the only earner and head of the family. CIA World Fact-Book, published in 2010, economy structure of Bangladesh is as follows:- GDP(PPP) $259. 30 Billion GDP Growth 6. 00% GDP(Per Capita) $1,700 Public Debt / National Budget 39. 30% / $11. 43 Billion Inflation Rate 8. 10% Exports $16. 24 Billion Imports $21. 34 Billion External Debts $24. 6 Billion Table-1 Economics Of Bangladesh (Source: CIA World Factbook,2010) Released beat-up report of World Bank, in 2007, estimated Bangladesh of becoming a Middle income country. It has been suggested, to reach the goal, Bangladesh should emphasize to deepen its industrial base, integrate more into global markets and prioritize urban economic development. The country has large reserves of natural gas, petroleum deposits and low-grade coal. All these minerals are rare and demanding in the global market, specially for industrial and Energy-generation purposes.
Cheap labor-force advantages make the local manufactured Products highly competitive in global markets through FDI, introduced and encouraged Firstly by the government formed in 1991. The major source of foreign earnings is being Transacted from garments and textiles export and remittances sent home by Bangladeshi workers living abroad. 1. 5-Objectives of the term paper The broad objective of the study is to examine the reforms that took place in Bangladesh and to explore the financial implications of the reforms.
Followings are the specific objectives of the study: · To review the economic sector reform programs; · To compare the financial performance of the economic system in Bangladesh before and after implementation of the economic sector reforms; · To identify different problem areas of the economic sector of Bangladesh, which still needed careful restructuring for better performance; and · To suggest some policy measures for strengthening the restructuring mechanism. Chapter- 2 Conceptual issues 2. 1 The garment industry of Bangladesh
The garment industry has played a pioneering role in the development of industrial sector of Bangladesh. Though it took a rather late start i. e. , in 1976 but it soon established its reputation in the world market within a short span of time. Resultantly garment is now one of the main export items of the country. Besides, enriching the country’s economy it has played a very important role in alleviating unemployment. At present there are more than two thousand one hundred garment factories in the country employing more than 12 lack labors. 85 percent of the labor force is women. . 2 Agriculture Most Bangladeshis earn their living from agriculture. Although rice and jute are the primary crops, maize and vegetables are assuming greater importance. Tea is grown in the northeast. Because of Bangladesh’s fertile soil and normally ample water supply, rice can be grown and harvested three times a year in many areas. Population pressure continues to place a severe burden on productive capacity, creating a food deficit, especially of wheat. Foreign assistance and commercial imports fill the gap, but seasonal hunger remains a problem.
Underemployment remains a serious problem, and a growing concern for Bangladesh’s agricultural sector will be its ability to absorb additional manpower. Finding alternative sources of employment will continue to be a daunting problem Most Bangladeshis earn their living from agriculture. Although rice and jute are the primary crops, maize and vegetables are assuming greater importance. Tea is grown in the northeast. Because of Bangladesh’s fertile soil and normally ample water supply, rice can be grown and harvested three times a year in many areas.
Due to a number of factors, These include better flood control and irrigation, a generally more efficient use of fertilizers, and the establishment of better distribution and rural credit networks. Population pressure continues to place a severe burden on productive capacity, creating a food deficit, especially of wheat. Foreign assistance and commercial imports fill the gap, but seasonal hunger remains a problem. Underemployment remains a serious problem, and a growing concern for Bangladesh’s agricultural sector will be its ability to absorb additional manpower. [pic] Map showing the growing areas of major agricultural products.
Main article: Agriculture of Bangladesh 2. 3 Textile sector Bangladesh’s textile industry, which includes knitwear and ready-made garments along with specialized textile products, is the nation’s number onexport earner, accounting for 80% of Bangladesh’s exports of $15. 56 billion in 2009. Bangladesh is 2nd in world textile exports, and China which exported $120. 1 billion worth of textiles in 2009. The industry employs nearly 3. 5 million workers. Current exports have doubled since 2004. Wages in Bangladesh’s textile industry were the lowest in the world as of 2010. [pic]
The country was considered the most formidable rival to China where wages were rapidly rising and currency was appreciating. As of 2011 wages remained low for the 3 million people employed in the industry, but labor unrest was increasing despite vigorous government action to enforce labor peace. Owners of textile firms and their political allies were a powerful political influence in Bangladesh. 2. 4 Manufacturing and industry Many new jobs – mostly for women – have been created by the country’s dynamic private ready-made garment industry. Eastern Bengal was known for its fine muslin and silk fabric before the British period.
The dyes, yarn, and cloth were the envy of much of the pre-modern world. Bengali muslin, silk, and brocade were worn by the aristocracy of Asia and Europe. The introduction of machine-made textiles from England in the late eighteenth century spelled doom for the costly and time-consuming hand loom process. Cotton growing died out in East Bengal, and the textile industry became dependent on imported yarn. Those who had earned their living in the textile industry were forced to rely more completely on farming. Only the smallest vestiges of a once-thriving cottage industry survived. 2. 5 Banking & Finance The banking system dominates the financial sector accounting for about 97% of the market in terms of assets. * Government has undertaken major reform initiatives to improve the regulatory and legal environments for banks. * Several specialist development financial institutions have been providing long-term debt, equity financing and leasing. [pic] 2. 6- Statistical Position of Economy in Bangladesh |The Economy in 2009-2010 | |Currency | Taka (Tk. | |GDP at current price | Tk. 6,149,432 million | |Annual per Capita GDP | Tk. 42,638 | |GDP growth rate at constant price | 5. 88 percent | |Industrial growth rate at constant price | 8. 05 percent | |Inflation rate | 5. 4 percent | |Investment rate | 25. 6 percent of GDP | |National savings rate | 30 percent of GDP | |Exports (US$) | US$ 12,816. 11 million | |Foreign Reserve | US$ 6,562. 0 million (up to May 2008-2009 financial year) | | | |Import and Export | |Principal Industries |Jute, tea, textiles, garments, paper, newsprint, fertilizer, leather and | | |leather gods, sugar, cement, fish processing, pharmaceuticals, chemical | | |industries, etc. |Traditional Export Items |Raw jute, jute manufactures (hessian sacking, carpet backing, carpets), jute | | |products, tea, leather, leather products etc. | |Non-traditional Export Items |Garments, frozen shrimps, other fish products, newsprint, paper, naphtha, | | |furnace oil, urea, ceramic products, light engineering items etc. |Principal Imports |Wheat, oil, seeds, crude petroleum, raw cotton, edible oil, petroleum products,| | |fertilizer, cement, staple fibers, Raw Cotton, iron & steel, capital goods, | | |pharmaceuticals raw materials etc. | Chapter-3 Database 3. 1- Economic Transformation The Bangladeshi economy has shown great resilience in the face of the recent global economic crisis and recession and has continued to grow at a healthy rate. Since 1996, the economy has grown 5% – 6% per year.
Political instability, poor infrastructure, corruption, insufficient power supplies, and slow implementation of economic reforms have not slowed down growth. Economists agree that the country has the potential to achieve a higher growth rate if these roadblocks are adequately addressed. More than half of GDP is generated through the service sector, but nearly two-thirds of Bangladeshis are employed in the agriculture sector. The share of agriculture in the labor force is 45%, in industry 30% and in services 25%. The share of the service sector in GDP is 52. 6% while industry’s share is 28. % and agriculture’s 18. 7%. In 2009, garment exports, totaling $12. 3 billion and remittances from overseas Bangladeshis totaling $9. 7 billion accounted for almost 25% of GDP. The country was not completely immune from the global economic downturn; the principal adverse effect of the recession was a reduction in export revenue in 2009. It came on the back of a very high growth of 23% in 2008. However, overall exports declined by only 2. 0%. Despite recent high growth rates, socioeconomic development is still not favorable for the majority of the population. 3. -Economic performance Bangladeshis have access to a water point. However, due to the discovery of arsenic in the ground water, only 76% of these can now be considered safe. In 2006, the Joint Monitoring Program by WHO and UNICEF reported that 51% of urban areas had improved sanitation facilities and only 7% of urban areas had sewerage connection. In addition, only 32% of the rural population was using improved sanitation in 2006. Female economic activity accounts for 52. 7% of the economy, but females earn less than half the income of their male counterparts.
The number of poor women is higher than their male counterparts and the extremely poor is largely women, while there is a higher proportion of a female-headed household than male-headed ones among the ultra-poor. However, the country has made significant progress in achieving gender parity in primary and secondary education. Rural areas still lack basic health care facilities and educational institutions. The number of health care facilities in rural areas has not grown as quickly as the number of education institutions, thanks to the NGOs working in the education sector.
Child underweight rates have hovered at about 46% since 2000. The total number of undernourished people in Bangladesh is approximately 41 million. Overall, according to the 2010 data, the HDI for Bangladesh was 0. 469 with a rank of 129 out of 168 countries. The 2005 data shows that the Gini index is 31. 0. |Economic indicators | 2007 | 2008 | 2009 |2010 | | | GDP | $ mm | 68415. 4 | 79554. 4 | 89359. 8 |100357. 0 | | | GDP growth | % | 6. | 6. 2 | 5. 7 |6. 1 | | | Inflation (CPI) | % | 9. 1 | 8. 9 | 5. 4 |8. 1 | | | Unemployment | % | – | – | – |- | | | Foreign direct | % of GDP | 1. 0 | 1. 3 | 0. 8 |1. 0 | | |investment | | | | | | | | Export growth | % | 13. | 7. 0 | 0. 0 |0. 9 | | | Import growth | % | 16. 0 | -2. 1 | -2. 6 |0. 7 | | | Current account | $ mm | 856. 9 | 926. 2 | 3556. 1 |2502. 4 | | |bance | | | | | | | Chapter 4 Finding of The Study 4. 1 GARMENT AND TEXTILES :
The garments and textiles industry sector is the biggest export earner sector of Bangladesh with value of over US$12. 347 billion of exports in 2008-2009. Our factories design and produce for the world’s leading brands and retailers, like: Reebok, GAP, Wal-Mart, Hudson Bay, Puma, etc. This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge that supports profitable expansion into new strategic markets. |Year |No. of garment |Employment (in |Export of RMG |Total export of |% of RMG to total | | |factories million workers) |(in million US$)|Bangladesh (in million|export | | | | | |US$) | | |2005-06 |4,220 |2. 2 |7,900. 80 |10,526. 16 |75. 08 | |2006-07 |4,490 |2. 4 |9,211. 23 |12,177. 86 |75. 64 | |2007-08 |4,743 |2. 8 |10,699. 80 |14,110. 80 |75. 83 | |2008-09 |4,825 |3. 1 |12,347. 7 |15,565. 19 |79. 33 | Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Industry Background and Status The phenomenal growth in RMG was experienced in the last decade. In 1984-85, no of Garment factories was 800 RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present with about 4,000 factories and a workforce of two million, 80% of which are women, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country.
Exhibit 6. 1 shows the growth of RMG exports from Bangladesh since 1981-82. Main apparel items exported from Bangladesh (in million US$) |Year |Shirt |Trouser |Jacket |T-shirt |Sweater | |2005-06 |1,056. 69 |2,165. 25 |389. 52 |1,781. 51 |1,044. 01 | |2006-07 |943. 44 |2,201. 32 |1,005. 06 |2,208. 90 |1,248. 09 | |2007-08 |915. 6 |2,512. 74 |1,181. 52 |2,765. 56 |1,474. 09 | |2008-09 |1000. 16 |3,007. 29 |1,299. 74 |3,065. 86 |1,858. 2 | Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Industry Outlook Multi-Fiber Agreement (MFA) and Generalized System of Preferences (GSP) of the EU are the main factors behind acquainting Bangladesh RMG products to global market ensuring assured market access. Bangladesh is now a significant RMG supplier to North America and Europe. Due to phasing out of MFA, many are doubtful about Bangladesh’s ability to maintain the fast growth of the recent years in this sector but Bangladesh has taken a better position in the U. S. A market through competition.
However, on a more positive note, Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently, Canada has also provided tariff-free access of all the items from Bangladesh. Marketing network has been spread over the economies of the continents. End users could well recognize and differentiate the products confidently. Bangladesh RMG industry largely depends on the imported yarns and fabrics. Bangladesh produces only 10% of export-quality cloth used by the garments industry.
The need for establishment of backward-linkage industry has become an immediate concern to the government and the exporters. There are enormous opportunities in setting up composite textiles industry combining textile, yarn and garments. Investment Opportunities and government support RMG and textile sectors have enormous investment opportunities. The government of Bangladesh has created a highly favorable policy framework for investment in these sectors offering investors the following choices: 1) Establishment of new textile / RMG mill in the private sector. 2) Joint ventures with the existing textile / RMG mill. ) Acquisition of public sector textile mills that are being privatized. 4) Indirect investment through financial services and / or leasing. To meet up the local demands, backward linkage is a significant trading opportunity and is supported by a government backed incentive: 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally. * SPINNING : Value Addition to the Fibrous Substances Spinning is the first step in textile value chain that adds value to the fibrous substances by converting them into yarn or thread through the processes of drawing, twisting and winding (Exhibit 1).
Characteristics of the yarn vary based on the materials used, fiber length and alignment, quantity of fiber used and degree of twist. The earliest spinning probably involved simply twisting the fibers in the hand. Later, the use of a stick to help twist the fiber was introduced. Drop spinning involves the use of a stick with a whorl or weight to stabilize the spinning of the stick (called a spindle). The spindle is spun, and hangs supported by the yarn as more fiber is introduced. This introduced fiber picks up the twist and becomes yarn. However, the development of spinning wheel allowed a continuous and faster yarn production.
Spinning wheels are either foot or hand powered. Modern powered spinning, originally done by water or steam power but now done by electricity, is vastly faster than hand spinning. Materials that can be used to create yarn fall into three broad classes: plant, animal, and synthetic. 1) Plant materials: cotton, flax (to produce linen), hemp, raffia, yucca, coconut husk, 2) Animal materials: wool, goat (angora or Cashmere goat), rabbit (angora), llama, alpaca, dog, camel, silk, 3) Synthetic materials: polyester, nylon, rayon, acetate, Mylar… 4) Apart from the above, mineral materials like asbestos are also used, but not very often. Spinning Industry in Bangladesh Development of spinning industry in Bangladesh is closely associated with the development of Textile and Clothing (T&C) sector as a whole. Power-driven modern textiles in Bengal were traced back to early twentieth century. Before 1947, modern textiles were only the composite textile mills having spinning and weaving facilities. Later, activities like specialized textile weaving, knitting and hosiery and dyeing-printing-finishing were added.
During 1947, there were about 11 composite textile mills in Bangladesh (then East Pakistan) with 1. 1 million spindles and 2. 7 thousand looms. Spindles grew to 3. 2 million in 1956 but declined to 0. 8 million in 1972 as worn-out obsolete spindles went out of operation. In 1972, large-scale manufacturing units including textile mills were nationalized. After 1982, state-owned spinning mills were gradually denationalized. By 1999, spindles installed were 2. 8 million (2. 4 million in the private sector and 0. 4 million in the public sector) with an annual production capacity of 200 million kg.
BOI sector Survey found that in 2004, about 3. 44 million spindles are producing 382 million kg of yarn for the textile industry (Exhibit 2). [pic] Challenges of and Supports to the Spinners The success of a robust textile sector largely depends upon an improved and reliable spinning sub-sector. If spinning sub-sector produces substandard / inferior yarn, its adverse effect persists right across the entire value chain. Availability of raw materials, transportation, port facilities and tariff rationalization are the key challenges to the spinners.
The Government has been supporting the spinners providing lower tariff for machinery spares and raw materials, cash incentives, reduced tax rate, and low-cost funding etc. Investment Outlook Textile & Clothing is the largest manufacturing sector of Bangladesh providing over 4 million jobs, accounting for 5% of GDP, 40% of manufacturing value addition and 75% of total foreign exchange earnings. The growing demands for yarn in the local market, comparatively low cost of doing business, lucrative incentive package, favorable investment policy regime etc are the main reasons for investment in this sustainable sector.
Spinning could be chosen. 4. 3 FROZEN FOODS The frozen foods export is the second largest export sector of the country. After some initial difficulties in terms of quality achievement, exporters have earned credibility and trustworthiness in the global market. Assurance of reliable and continued product quality is a major challenge in this sector. Technology orientation, marketing perceptions, and quality improvement aspects invite foreign investment in this sector. The current challenges of international trading are largely dictated by price, quality, time and service.
Industry Situation Exporters have earned credibility and trustworthiness in the global market and are committed to maintaining a competitive advantage in product quality. Continuing investment in technology, marketing and quality remain at the forefront of the industries’ strategy to meet the challenges of international trade in price, quality, time and service. Industry Outlook Frozen food sub-sector has credible opportunities in Middle East, EU and North American countries and Far Eastern countries. In 2004-05, total fish production was 2. 216 million metric tons of which 8. 2 metric . tons were shrimp. At present, there are 868 fish hatcheries and farm of which 218,000 hectors of shrimp farm. This export-oriented industry includes the following sub-sectors, which need proper attention for augmentation of production, attain international standard quality and export earnings. 1) Hatcheries, Sustainable aqua-culture technology. 2) Feed-meals plants, Processing unit for value-added products. 3) Investment in frozen food sector with new technology and equipment has a vast potential for growth. * LEATHER Industry Situation
Bangladesh leather industry is dominated substantially by the domestic investment which is 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. percent of the goat stock. The hides andskins (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 labor 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.
In 2004-05 total export of leather goods was 220. 93 million US$ on the other hand it is 257. 27 million US$ during 2005-06 FY. Industry Outlook Provision of newly announced infrastructural facilities through establishment of an integrated Leather Park and simultaneously, growth in the global demand, opportunities for investing in and setting up export-oriented leather industry in Bangladesh is definitely attractive. Foreign investors are welcome to capitalize on this opportunity. 4. 5 ELECTRONICS Industry Background The electronics industry in Bangladesh mostly produces consumer items.
Home appliances like television, radio, VCD and CD players, refrigerator, air conditioners, oven, electronic fan, blenders etc. are being assembled to a large extent. To ensure the performance reliability, the key challenges in this sector are technical assistance and proper technology orientation of the industry. Developing the significant capacity and skill in assembly and manufacture of a wide range of electronic components and parts is curacies. As yet, Bangladesh does not have any telecommunication equipment industry in the private sector.
However, an urgent need for diversification and modernization is felt among the existing entrepreneurs, government and professionals. Government is keen to provide and ensure enabling assistance to the development of this sector. Industry Outlook and Opportunities Skilled, easily trainable and low-cost human resources are the main cost advantage of setting up electronic industry in Bangladesh. Growing domestic demand and international market access are some key attractive issues to the investors. In the economies like Malaysia, Singapore, Korea and Thailand, electronics contribute a major portion in the GDP.
They are encouraging electronic industry to shift from low-end assembly operations with high import content of inputs to upstream higher- value-added activities. In this context, relocation, outward investment and joint venture with Bangladeshi companies could be gainful strategies. To capitalize on the comparative advantages, substantial foreign investment from those countries is highly encouraged. * AGRICULTURE Sector Highlights Bangladesh has a tropical climate, a lot of fresh water, indeed a land interspersed with numerous rivers, fertile soil and possibility to cultivate crops round the year.
So it is unique to supply raw materials for the agro-based industry. The abundance of natural resources available in Bangladesh supports a range of highly profitable investment opportunities in agribusiness. Over 90 varieties of vegetable are grown in Bangladesh, yet in this fertile land there is underutilization of the country’s agricultural capacity. This presents many opportunities for investors seeking to export agricultural products, or to meet the rapidly growing local demand. Thriving in this sector are canned juices, fruits, vegetables, dairy and poultry.
The country offers: 1) Huge supply of raw materials exists for the agribusiness industry. 2) A tropical climate for all year growing, a lot of fresh water, indeed a land interspersed with numerous rivers, available land with fertile soil. 3) Government and NGOs have been conducting regular training programs to develop skilled manpower for agro-based industry. 4) Wide range of biodiversity exists for different crops. 5) Agricultural commodities have a comparatively higher value added than non-agricultural commodities.
Investment opportunities There is a wide variety of investment opportunities including: * Cold storage facilities serving the supply chain, especially fresh produce for export. * Fresh produce production for local and export markets. * Production of fertilizers and cultivation of seeds. * Eco-friendly jute production, supported by jute technology development institutes. * Shrimp farming, Halal foods, Milk and dairy products. * High value-added foods for export, including herbs, spices, nuts and pulses.
Industry Incentives The government encourages development of the agricultural sector through measures to increase crop sector productivity and production of non-crop agriculture. To achieve this, the government provides increased credit, and facilitates greater access to inputs and modern technology. Sector Background Being an agrarian economy, agriculture has dominated in the economy for years. It has fulfilled the preconditions of access to input and raw materials in setting up successful agro-based industries.
Alluvial soil, a year-round frost-free environment, adequate water supply and abundance of cheap labor are available in Bangladesh. 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. In 2005-06, Export of agricultural products accounted for about 1% of total export amounting US$ 76. 24 million. Industry Outlook To avail the competitive and comparative advantages, Bangladesh invites progressive agricultural-practices, improved marketing technique and modern processing facilities.
The government emphasizes development of the agricultural sector through appropriate measures to increase crop sector productivity and production of non-crop agriculture by providing increased credit, and facilitating greater access to inputs and modern technology. Investment interests in setting up agro-based industries in Bangladesh are highly encouraged. To promote agro-based industries and attract investment in this sector, Board of Investment organized Agri-Invest 2003 Bangladesh in December 2003.
This first ever exposition created huge interest among the foreign and local investors. 4. 7 INFORMATION TECHNOLOGY Sector Highlights 1) To investigate the IT industry robustly, deregulation of the telephone has been decided and executed by mid-2003. 2) The extensive growth of mobile telephony resulted in significant opportunities. 3) The industry is at its introductory stage and has opportunity of capitalizing the potential. 4) Bangladesh has a well-educated, skilled, dedicated and growing IT workforce. 5) There is a fast growing domestic market and export demand. ) Strong research assistance from the universities and research institutions are available. Industry Background Compared to the neighboring India, Pakistan and other South and South East Asian nations, Bangladesh is lagging behind in IT Sector. But it is true that the sector has vast potentiality to develop. 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.
Existing investment in IT sector is mainly small-scale and domestic in nature. Collaboration in the IT sector is mainly based on licensing agreements and representation. A growing number of computer training schools and institutes are being opened. Management of most of the IT firms is professionally strengthened with the Bangladeshis who have studied and worked in both North America and Europe, and returned home. The annual market size for IT including computer hardware, peripherals and software was estimated to be worth approximately US$ 20 million.
The market is fast growing at an annual rate of about 25%. The country has over 400,000 PCs Submarine Cable Bangladesh has joined the consortium of SEA-ME-WE-4 submarine cable, which starts its commercial activities from 21st may, 2006. This will especially help prosperous data entry and software sectors. The landing station of this cable is situated at Jhelong in Cox’s bazaar. There are 14 countries of this consortium the countries are Singapore, Thailand, UAE, Bangladesh, India, Pakistan, Sri Lanka, KSA, Egypt, Tunisia, Italy, Algeria and France.
It has connected 16 telecommunication organizations of 14 countries. With the direct help from submarine cable Bangladesh can earn more foreign currency by increasing international voice circuit (e. g. submarine cable will give support to establish 100,000 voice circuits. Voice and data communication will be faster. Consortium has created capacity pool, which we can sell also can manage IRV. Broad band service, data transmission, call centre, software export will be cheaper. Unemployed youths can easily engage themselves in those services by taking short term training.
Bangladesh has right to land 15 landing station without charge. It will help smoother operation of E-commerce, E-governance, E-education, Telemedicine etc. So, there are huge chances of development of ICT sector and finally government will be financially benefited. 4. 8 PHERMACEUTICALS 1) Pharmaceutical products have huge demand both in local and overseas market. 2) There are huge demand-supply gap in pharmaceutical products. 3) Bangladesh offers a good number of qualified, skilled pharmacists, bio-chemists, micro-biologists, and chemists for pharmaceutical industries. ) Government offers support for importing raw materials for production. 5) Present Government has taken initiatives to modernize, expand and attract foreign investment in pharmaceutical industries, and for this adopted national medicine policy (revised) 2005, which will help to adapt with the changing world under WTO/TRIPS. [pic] Outlook Considering the overall demand, pharmaceuticals is one of the emerging sectors in Bangladesh. Government offers different incentives for importing raw materials pharmaceutical industries. This particular sector has huge potential of growth in the future.
For sustainable return, pharmaceutical sector could be a rational choice. Chapter-5 Conclusion 5. 1 Summary of Major Findings The economic sector has tremendous impact on socio-economic structure of the country. It also brings economic prosperity for the any country. We believe that there must be a saturation point for any industry. But for our economic sector, still we are away from it. The economy is likely to grow at a similar pace as experienced over the last ten years — of around 6. 2 percent — in fiscal 2009-10, despite the continued global economic slowdown, Bangladesh Bank said . Most indicators in the first quarter of fiscal 2009-10 point to a more moderate level of economic expansion,” the BB said in its latest quarterly review. The BB projection means that the growth is likely to fall short of the government’s original target of 7. 2 percent GDP growth for the current fiscal year. “Bangladesh Bank will produce forecasts for economic growth on a regular basis, in line with the common practice in other central banks across the world “The significant remittance growth is likely to have positive consequences for both domestic consumption and investment .
The third development centres around the healthy growth in private sector credit, which during the first quarter this year grew by 19. 9 percent against a target of 18. 4 percent. This suggests that the credit envelope will “not be a constraint towards achieving the overall economic growth targets”. Gross domestic agricultural production is expected to be 2. 2 percent higher than that of the previous year, of 65. 6 million tones, on the back of government incentives and higher agricultural credit disbursement. The industrial sector is projected to grow between 7. percent and 7. 75 percent in fiscal 2009-10, down from the 9. 47 percent seen last fiscal year, but in line with the average industry sector growth rate over the last ten years Economic growth was also steady in the outgoing year despite some clouds over export earning. The GDP (gross domestic product) growth was 6. 32 percent in FY 2009-10, which was marginally lower than the 6. 71 percent of the previous FY 2008-09, but higher than many other neighboring countries. The GDP for the current FY 2010-11 has been targeted at 7. 2 percent. 5. 2 Economic Performance A steady average annual GDP growth of 5% over the last decade. * Inflation has been kept in single-digit. * Exports have been gradually shifted from traditional goods to more value added items. * Emphasis has been put on manufacturing of backward linkage of Readymade Garments, Pharmaceuticals Industries and IT sector. * The private sector is playing an increasingly active role in the economic life of the country, while the public sector concentrates more on the physical, social infrastructure and policy making. 5. 3 Policy Recommendation
The restructuring measures taken so far are definitely not sufficient considering the gravity of the situation. Based on the above discussion the following steps may need to be taken as reform or restructuring measures to speed up the progress · The problem of excess liquid asset of the banks should be handled with due attention. In order to utilize the excess liquidity · A number of measures were taken to strengthen the legal framework. However, in order to attain the benefit of improved legal framework, enforcement of legislations should be ensured.
Legal procedures should be uncomplicated and disposal of case should be speedier. · Government interference, political involvement, pressure from the trade unions has to be reduced for the smooth function. · For developing the asset utilization ratio, portfolio of asset structure should be rearranged by removing the non-earning assets or transforming the non-earning assets into earning one. · Technological up-gradation of the banking system is needed equipped with state-of-the-art infrastructure and logistics. Lastly, the problem of Bangladesh financial system is widespread and not related to banking system only. Therefore the scope of the reform measures should also be applied to the non-bank financial institutions. Reference list * Released beat-up report of World Bank, in 2007, estimated Bangladesh. * Bangladesh Garment Manufacturers and Exporters Association (BGMEA) * Bangladesh Export statistics 2009-10, Dhaka, Bangladesh. * A report of Garments published in the magazine, April 2008. * Economic Review – 2010 * Review of Bangladesh Development – 2009 * A report of economics published in the magazine, April 2011