BANGLADESH

BUSINESS

Editorial Board Farook Chowdhury

Derrick Sanyahumbi
Khademul Islam

Editorial Staff Mostafa Zaki Haider

Mushfiq Wahed
Zahidul Naim Zakaria
Ahsan Sajid
Kazi Raisa Ashrafi
Tahmina Shafique
Mohteshamul Haque
Tasmiah T. Rahman
Farheen Rahman

Cover Photo Shafiq Alam/ Drik/ Majority World

Additional Photos Saikat Mojumder

Zaqiul Islam Deep
M. Yousuf Tushar/ Drik/ Majority World

Publisher

Euroconsult/BMB Mott MacDonald

6 Gulshan Avenue
Suite D4 (B. Aristocrat)
Dhaka-1212, Bangladesh
Phone: +880(2) 9880806
+880(2) 8810456
Fax : +880(2)9890977
E-mail: editor@bangladeshbusiness.biz

Design and Layout

SW Multimedia Ltd.
Plot 56/C, Road 132
5th and 6th floors, Gulshan South C/A
Gulshan-1, Dhaka-1212, Bangladesh.

Printers Binimoy Printers

37/2, Purana Paltan
Dhaka-1000, Bangladesh.

02 April 2009
 BANGLADESH
BUSINESS

Publisher's Note

T he theme of the second issue of Bangladesh Business in a sense was easy to

decide. In between the magazine's first issue and this one the nation underwent
a fundamental change. The caretaker government, while its tenure admittedly went
beyond the constitutional writ, did hold a general election widely held to be credible.
In a sweeping change that radically altered Bangladesh's political landscape the
Awami League assumed state power and authority in an overwhelming electoral
landslide. Now Bangladesh is again a democracy with a functioning parliament. But
to the degree this new political dispensation functions, what generally does it mean
for the country at large? This particular topic has admittedly been one that has been
discussed almost threadbare in various public media and forums, especially during
the much-heralded 'first 100 days'. But for us the question was far more specific:
what does it mean in terms of the private sector and the country's business
community? It was then that we decided to look at some issues which are critical to
the private sector in terms of its future role and function, and in relation to the
economic issues detailed in the manifesto of the governing political party. The latter
exercise was taken in recognition of the fact that the form and nature of political
conventions are changing in Bangladesh: detailed party manifestos are a necessity
nowadays, debates and talk shows have made them central to public discourses
about present conditions and future direction of the nation, and with notions of
accountability have now become firmly lodged in the public mind.
It was in this context that we decided that this second issue would focus on certain
key aspects of the economic section of the manifesto, to explore what has been
promised and what that promise actually entails in terms of economic challenges
and performances, and to what extent could the business community, whose
confidence was shaken during the caretaker government's regime, realistically expect
conditions to improve and prosper. In this effort we were considerably aided by the
feedback provided us by our readers to the first issue (some of which have been
published in the Letters section), who responded with a gratifying enthusiasm and
energy. We read their letters and emails carefully, and have incorporated many of
their suggestions in this second issue. We thank them all, and hope that this level of
response will not only continue, but grow with subsequent issues, especially from
our readers within Bangladesh.
Finally, we are aware that Bangladesh Business was to be a quarterly magazine, and that
this second issue has not met its projected deadline. The delay in publication was
because we tried very hard to live up to our commitment of producing a quality
publication, one that would articulate and represent the driving ideas and interests of
Bangladesh's private sector in a qualitatively different way. It was this striving that
was the cause for delay. As always, our readers will be the final arbiter of the extent
to which we have failed or lived up to their, and our, expectations. What we can only
really hope for is their continued support and indulgence for a publication that is
still in the process of defining itself.„

www.bangladeshbusiness.biz 03
 Letters
Success stories
Sir - I think the magazine is very
professional and informative.
However, a couple of suggestions:
1. Instead of three interviews in an
issue, one should suffice.
2. An article on investment and
growth prospects of certain industries
can be published in each issue.
3. Success stories of SMEs operating
in Bangladesh can be highlighted, e.g.
Micro, the local transformer
manufacturer, has ventured into
orchid production.
4. Bangladeshi companies
participating in international trade
fairs can be brought to light.
5. A 'letters to the editor' section can
be added.
Tonmoy Islam
Lexington, KY, USA
Being influential
Sir - I'm probably one of the few to
share the privilege of reading and
making observations on the first issue
of the magazine. It can potentially be
the only decent business magazine
published from Bangladesh. Print
quality and management is superlative.
I envision this magazine as a source
of knowledge, quoted in respectable
circles.
I liked most the article "Who Should
Advocate for the Private Sector".
Bangladesh's private sector has grown
against all odds but, they have failed
to highlight their contributions to the
nation's economic growth. This
magazine could be a great forum for
private sector advocacy and lobbiests.
For the magazine to be influential, its
circulation will have to be increased.
Bangladesh Business should primarily
focus on small and medium
enterprises. It should inform readers
on all aspects of different business
cycles from conception, like writing
business plans and feasibility studies,
to at-times company liquidation. It
04 April 2009
should be geared towards aspiring
entrepreneurs living at home and
abroad.
Many Bangladeshi expatriates want a
source of information where they can
learn about investment opportunities
in Bangladesh. A regular feature on
personal and company tax issues
would be helpful. Articles on tariff,
tax and legal issues written by
professionals in their respective fields
will be great for potential subscribers.
Issues on migration due to economic
reasons and environmentally
sustainable businesses should be
addressed. Articles on governance and
business ethics are important as well.
The website www.bangladeshbusiness.biz
is a great site and has the potential to
be a useful tool; it could include links
to useful and relevant existing sites. It
should be widely advertised locally
and in cities abroad where many
Bangladeshi migrants live. Issues
affecting foreign investment and
Export Processing Zones should also
be addressed with focus on
comparative advantages, backed by
figures and analyses.
Jamil Ahmed
Toronto, Ontario, Canada
Teaser line
Sir - As soon as I had glanced through
the first issue of Bangladesh Business
and read a couple of articles, my
friend Fahad (a professor of
Economics at University of
Washington) borrowed it from me
and I have not gotten it back yet.
My first impression of the magazine
is very favourable. I think that there is
definitely a need for something like
this. I enjoyed the article on Samson
Chowdhury with its beginning teaser
line about the security guard. I also
enjoyed the 'Briefings' section as it
gives a good overall picture of what is
going on.
Khawja Shamsuddin
BANGLADESH
BUSINESS
Analysis versus reporting
Sir - I am pleased with the effort put
in the magazine and wish it great
success. It definitely addresses a gap in
the market.
I feel that a decision needs to be made
whether Bangladesh Business is an
English magazine aimed at
Bangladeshis or if the target market is
international. Given the subject is
business rather than politics/news, I
think it should be the latter. The
reason I stress this decision on target
demographic is that some details
(analysis vs. reporting, style of writing,
etc.) will be impacted by the decision.
Secondly, the issue of analysis vs.
reporting is important. The articles
need more of a slant towards "the
implications for Bangladesh, and for
investors wherever they may be from"
angle, rather than factual reporting.
Overall, I was most impressed with
the production quality. I had
misgivings due to my past experiences
with such publications. But the
magazine with its quality of paper and
gloss was a pleasant surprise.
The magazine has potential and I
recommend reaching out to South
Asian university faculties and trading
desks (preferably the perspective of
non-Bangladeshi professionals) at
investment banks in London, New
York etc. for their feedback.
Information is readily available on the
internet - what's missing is insight and
strategic analysis; identifying what the
professionals seek would be great.
The best of luck with this great
initiative.
Udayan Chattopadhyay
University of Pennsylvania
High quality magazine
Sir - I received a copy of Bangladesh
Business and am impressed. I know
there are a few other English language
magazines that focus on business in
Dhaka. Nevertheless, there is a need 
 Letters
BANGLADESH
BUSINESS

 for additional high quality
publications, given the expected
growth of Bangladesh in global
business.
Good luck on the new enterprise.
M. Quddus
Dean, College of Business
Prairie View, Texas, USA
Wishing you luck
Sir - I like the look and feel of the
magazine and think it's a timely
publication. It can potentially serve
the business community in
Bangladesh and abroad in a
coordinated fashion if diversity in
content is offered. Some articles are
interesting, such as 'Private Sector
Development in Bangladesh' by
Forrest Cookson. Focusing on the
domestic business community is fine,
but in today's globalized world that is
only a part of the puzzle. I
recommend the addition of
perspectives on MNCs in Bangladesh,
foreign direct investment, SAARC,
EU, and trade with North America.
I wish you and the editorial team luck,
because the survival rate of magazines
like Bangladesh Business isn't very
high unless a solid business plan has
been put together with good financial
backing.
Sabir Majumder, Ph.D.
Fremont, CA, USA
in mind that business magazine various business schools and publish
readers are very busy. One article on a statistical survey pieces.
person in the issue, either on Samson I encourage you to continue bringing
Chowdhury or Shabbir Hassan would out this magazine with more insight.
have been enough. Visibility may be enhanced by
I would like to see articles on the covering 'controversial' issues (e.g.
private sector and state-owned Muhit's statement on market-based
enterprises where you could undertake valuation of the Taka)!
a sort of investigative journalism.
The last couple of pages on Syed Saad Andaleeb
'Fundamentals' were good; which you Penn State University
might want to expand with a little USA „
more information. I would also like to
see a Global/Asia Pacific/South Asian
subcontinent business info page. The
idea is people will get to know what's
happening around Asia and the
subcontinent. Everybody cannot
afford Business Week or Fortune
magazine.
The 'Review Notes' section is good.
You might want to review more local
and global business books. How about
pages on NRBs? What they are doing
abroad, what they want to do in
Bangladesh, and how we can pull
them back like China and India has
done, etc. I think NRBs are untapped
gold mines for Bangladesh and your
magazine could push the issue to the
forefront.
I would like to see some articles on
key sectors in every issue, such as
garments, outsourcing, leather etc.
I hope this helps. Thanks for taking
this venture.
Reza Kibria
Los Angeles, USA

More on NRBs Covering controversial issues

Sir - The overall get-up is nice and
this is a good start. I like the
'Briefings' section. I would suggest
adding a page with political news
briefings also. You could rename the
current page "Business Briefings".
While I liked some of the big stories
including the cover story, they were
also lengthy and dragged on a bit. If
you have more than two pages on a
topic you might lose the reader. Keep
Sir -I was delighted to see that our
book The Bangladesh Economy was
reviewed by Farah M. Ahmad in the
first issue of Bangladesh Business. I
like the stance of the magazine
regarding private sector issues. The
layout and print quality is great. I liked
the interview with Rauf Chowdhury.
This is a good way to get bring
important issues to the limelight. You
could also work with faculties at
Disclaimer: Letters to the editor,
Bangladesh Business should be sent to
6 Gulshan Avenue, Suite D4 (B.
Aristocrat), Dhaka 1212, Bangladesh.
Email correspondence should be sent
to editor@bangladeshbusiness.biz, with
'Letter to the Editor' in the subject line.
All letters should include the writer's
name and contact information. Letters
may be edited for length and clarity. „

www.bangladeshbusiness.biz 05
 Briefings
BANGLADESH
BUSINESS
UAE to invest further in
FDI Bangladesh
According to Dr. Hasan Mahmud, the state
minister for foreign affairs, the United
Arab Emirates (UAE) is eager to invest in
the hotel, tourism, oil and
telecommunications sectors of
Bangladesh. He requested that a hospital
and nursing institute be established in
Chittagong, on a piece of land offered as a
token of friendship to the former ruler of
UAE, H.H. Sheikh Zayed bin Sultan Al
Nahyan. The current UAE investment in
Bangladesh totals $2.5 billion.
With 7 lakh Bangladeshis sending in $1
billion worth of remittance per year, the
UAE is the largest destination for migrant
workers after Saudi Arabia. Upon Dr.
Mahmud's request that workers' wages be
paid on time, the UAE Labour Minister Mr.
Saqr Ghobash Saeed Ghobash said that a
bank system would be introduced by the
end of the year so that employers could
not arbitrarily deduct from workers' wages.
NRBs should be wooed to
NRB invest more and buy
premium bonds
Total remittance to Bangladesh reached
$8.9 billion in 2008 as 800,000
Bangladeshis entered the international job
market, but the amount is expected to
decrease in the months ahead with the
second ripple of the global recession.
Recommendations on surviving reduction
of foreign currency reserves include
investments from and sale of premium
bonds to non-resident Bangladeshis.
Dr. Mohammed Farashuddin, former
Governor of Bangladesh Bank, discussed
potential instruments to attract NRBs to
invest in Bangladesh, including
inducements to convert the remittance
into equity, leading to higher investment
and production. Most remittance earnings
are consumed, but if channeled
constructively, it could contribute to
increased output. The government offers
incentive packages for Foreign Direct
Investment while the central bank offers
US dollar premium bonds at an interest
06 April 2009
rate of 6.5% for NRBs. The forecasted
loss in foreign currency reserves could be
counterbalanced through these
instruments.
Chittagong port pours cold
Port
water on shipbuilding industry
Urged by Chittagong-based
conglomerates, the Chittagong Port
Authority (CPA) has drafted a policy to
establish shipbuilding yards upstream of
the Karnaphuli River. Once approved by
the Ministry of Shipping, companies can
set up shipbuilding yards and slipways Agriculture needs massive
Agriculture
there. Mr. RU Ahmed, the chairman of investments
CPA, said that the river's downstream,
Mr. Ad Spijkers, Country Chief of the
housing key installations like power plants
Food and Agriculture Organization
and fertilizer factories, will still be off-
(FAO), discussed Bangladesh's need for
limits. This has provoked accusations
high investments in agriculture and agro-
from leading shipbuilders that the growth
processing sectors for economic growth,
of a fledgling industry is being deliberately
and for insulation against the global
stunted by prohibiting the use of the
economic downturn. The FAO provides
downstream, considered the best possible
site for shipbuilding due to deep draught technical assistance in livestock, fisheries
and close proximity to the port. About 10 and forestry, assisting with programmes
to 12 companies willing to invest $500 on food policy, food safety and natural
resources management. He also suggested
million have applied for shipbuilding yards
downstream. a Netherlands model for Bangladesh to
Beginning in 2007, ocean-going link consumers and farmers closer
shipbuilding has proven successful in
Bangladesh, with its leading shipyard
owners, Ananda and Western Marine,
bagging export orders worth $600 million.
Bangladesh, with its low-wage welders,
history of boat-making and network of
rivers, can be a top Asian shipbuilding
contender alongside South Korea, Japan,
China and Vietnam.

together and to address the gaps in the
chain of distribution.
He added that input pricing should be
cost-effective, while output prices should
be fair. He approved of crop insurance
schemes and suggested the promotion of
strong farmers' organizations, resource
endowment in research and extension,
education, diversification of crops,
introduction of adaptable crops,
economical irrigation and efficient
management of water, use of fallow land,
and the most effective use of fertilizers to
maximize agriculture potentials. He urged
the government to increase public
investment and encourage regulated and
supported private sector investment in the
agricultural sector.
Cabinet approves
Regulation
national ICT policy
The cabinet has approved the National
Information and Communications
Technology Regulations 2009, initiated in
1997, aimed at establishing an accountable
and transparent government through
expansion of ICT coverage. This will
ensure development of human resources,
making Bangladesh a leader in ICT skills
in the next 30 years.
The cabinet meeting, chaired by Prime
Minister Sheikh Hasina, also approved the
Insurance Act 2009 and the Insurance
Authority Act 2009. The new insurance
law will allow the expansion of insurance
services to remote areas of the country,
www.bangladeshbusiness.biz
thus increasing public welfare. Under the
Insurance Authority Act, a regulatory
body will be formed with a chairperson
and four members with three-year tenures.
The authority will register insurance
businesses and renew annual registrations.
It will be funded by an insurance
regulatory fund, financed by the
government and other sources.
Government to launch
PSD public-private budgetary
window
The Finance Minister AMA Muhith said,
"The government will provide seed
money to foster public-private partnership
(PPP) for investments in infrastructure
and other sectors." The PPP model,
sponsored by the government, will allow
participation of both local and foreign
investors. In the budget for the next fiscal
year, a line item will include PPP in order
to direct investments into infrastructure,
human resources, education and housing
sectors.
1,600 workers lose jobs as
Crisis knitwear unit shuts down
Sunshine Knitwear Limited shut down its
factory in Tejgaon, resulting in the
dismissal of approximately 1,600 workers.
The reasons for the shutdown were falling
orders and low-priced offers from
international buyers. General Manager
SNR Towfiq stated that there have been
five instances of labour trouble in the last
three years, where workers physically
assaulted factory officials. He further
added that the factory, set up in 1996,
boasted a reputation for timely payment
of wages, and the disruptions perpetrated
by a handful of workers were unjustified.
Other units of the company remain in
operation, and there are no immediate
plans to reinstate the Tejgaon factory. The
global crisis is having adverse effects on
local firms, especially in the case of
export-oriented companies such as
Sunshine Knitwear Limited.
Briefings
BANGLADESH
BUSINESS
More land ports to be
Port privatized this year
The government plans to privatize three
land ports this year, under Build-Operate-
Transfer (BOT) arrangement, for a period
of 25 years to help boost cross-border
trade. The land ports that will be handed
over to private operators are Bhomra in
Satkhira, Akhaura in Brahmanbaria and
Burimari in Lalmonirhat. The Bangladesh
Land Port Authority (BLPA) is conducting
the groundwork to privatize the land
ports. Earlier, the government decided to
handover operations of 12 land ports to
private operators, in phases under the
BOT arrangement, to foster cross-border
trade with neighbouring countries
including India and Myanmar.
IFC to provide $15 million to
PSD PRAN Group for a three-year
project
The International Finance Corporation
(IFC) will provide $15 million to a three-
year expansion project of PRAN, a local
agro-processing company. The total
investment of the project is $51.2 million
and will end in 2011. This loan marks
IFC's first entry into the agro-processing
sector in Bangladesh. It will support
PRAN Group's strategic investment plan
in six food categories: beverages, culinary
products, confectionaries, dairy products,
snacks and premium rice. Major General
Amjad Khan Chowdhury (ret'd), CEO of
PRAN Group, said that with IFC as a
partner, PRAN will continue to seek the
highest operational standards and will
boost Bangladesh's entire agribusiness
sector.
For the financial year ending 30 June 2007,
PRAN reported total sales of $66.8
million and a net profit before minority
interest of $4.2 million. The corporate
investment programme will support the
continued growth of a leading food
company in Bangladesh to expand
capacity, improve operating efficiencies
and tap into new domestic and export
opportunities.
07
 Briefings
BANGLADESH
BUSINESS
Registrar of Joint Stock
Regulation Companies and Firms to
be digital in 3 months
Commerce Minister Lt-Colonel Faruk
Khan (ret'd) inaugurated the automation
of the Registrar of Joint Stock Companies
and Firms (RJSCF), and assessed the
progress of the reforms being made to
simplify the registration process. He said
measures to convert the files of RJSCF to
a computer-based digital format will be
taken within three months. He expects the
automation process, to be completed in a
year, to benefit the growth of businesses
in the country. Using an online process, a
new business entity will be able to register
with the RJSCF within seven days. There
is talk of introducing a desk to permit
registration of joint venture and foreign
companies in a day.
The government will increase human
resources and infrastructural facilities for
RJSCF and is considering amending the
Companies Act 1994 and Societies
Registration Act 1860, as the two outdated
acts often obstruct the growth of
businesses. Under the Ministry of
Commerce, the functions of RJSCF are to
incorporate limited companies, societies
and partnership firms under the
Companies Act 1994, Societies
Registration Act 1860 and Partnership Act
1932 respectively; their responsibility is to
manage and uphold the relevant statutory
provisions of these acts and maintain
records regarding entities that fall under
its jurisdiction. RJSCF is the sole authority
with the power to facilitate company
formation and keep records of all
ownership-related issues, as prescribed by
the company law.
Locals, NRBs join hands to
Energy
produce power in Sylhet
A private sector entrepreneur will invest
over Taka 4.5 billion to produce power in
the Sylhet region. Backed by investment
from NRBs and The Infrastructure
Development Company Limited
(IDCOL), the Sylhet-based Barkatullah
Electro Dynamics Ltd (BEDL) will add 51
08 April 2009
megawatts of electricity to the national grid
by May 2009. The company has plans to add
another 50 megawatts of electricity by early
next year. BEDL is believed to be the first
power producer to attract investment from
NRBs. It is also one of 11 rental power units
contracted out, by the Power Development
Board, to supply electricity to the national
grid. BEDL has engaged a Thai company to
oversee its operation and maintenance. With
an authorized capital of Taka 1 billion,
BEDL will build and operate the plant over
the next 15 years. Taka 300 crore logistics
Port yard set for launch
Gulam Rabbani Chowdhury, Managing
Director of BEDL, said, "We want to bring
KDS Logistics Ltd, one of the biggest
about a renaissance in private power
inland container depots, has launched a
generation." The new plant is expected to
Taka 300 crore logistics yard in Sitakunda,
emerge as a major competitor to Summit and
Chittagong. The off-dock facility is spread
United, the leading private sector players in
over 1,465,600 square-feet; designed to
the power business. IDCOL, a government-
handle both empty and laden containers,
owned infrastructure lender, is the lead
and is estimated to store 10,000 twenty-
financier for the project, with an investment
foot equivalent units (TEU) in off-dock
of Taka 500 million in the company. The
capacity on any given day. KDS Logistics
company's investment is welcomed in light
aspires to provide an assortment of
of the chronic power shortage that has
storage programmes and services to
plagued the nation for years.
customers and a one-stop solution for
storage, repair, transportation and chassis
Etasia to invest $2.50 handling. Located on a 40-acre site, it's
EPZ million in CEPZ
paved, fenced and lighted to Chittagong
Customs specifications; it is computerized
A local company, Etasia Interlinings
Limited, will set up an interlining (inbound/outbound) and provides
reports on daily site inventory, gate
manufacturing factory in the Comilla
Export Processing Zone (CEPZ) with an interchange and damage assessment. The
company is equipped with a real-time
investment of $2.50 million. The
company will create employment tracking system for truck unloading and
loading, container stuffing and un-stuffing
opportunities for 94 Bangladeshi
nationals. Prasanta Bhushan Barua, and web access which allows clients to
check their cargo's position.
member (Investment Promotion) of
Bangladesh Export Processing Zones
Authority (BEPZA), and Mohammed Businesses ask for Taka
Crisis 6000 crore bailout
Ismail Khan, Chairman of Etasia
Interlings Limited, signed the agreement
The Federation of Bangladesh Chambers
on behalf of their respective
of Commerce and Industry (FBCCI)
organizations at the BEPZA Complex.
sought a Taka 6000 crore rescue package
CEPZ, the sixth EPZ of Bangladesh, was
to survive the global economic downturn.
established in the old airport area of
They suggested that, if necessary, the
Comilla by BEPZA for promoting
rescue fund could be raised through
economic development of the region, and
issuing bonds. FBCCI leaders also asked
is currently spread over an area of 258
for better foreign relations with
acres. An extension of a further 478 acres
neighbouring countries, for Sunday to be
has been proposed.
the weekly holiday, controlling tender

manipulation, making Bangladesh Better
Business Forum (BBBF) and Regulatory
Reforms Commission (RRC) active,
forming a food security council, and
granting one or two years' grace period to
the industries that fail to repay loans due
to recession.
According to Prime Minister Sheikh
Hasina, the government will offer "special
packages", provide various facilities and
incentives to increase the flow of import
and export and save the country's business
sectors from the global financial crisis.
Promising to take every possible measure,
the prime minister asked business leaders
to invest in proposed economic zones,
suggesting that small power stations be set
up by the industrialists at their own
factories to assist in reducing the power
crisis there and in adjacent localities.
Trade with Japan touches
FDI $1billion mark
The latest Japan External Trade
Organization (JETRO) release on bilateral
trade statistics show trade between
Bangladesh and Japan at $1.24 billion in
2008. Exports from Japan to Bangladesh
grew by 33.9% to $800.93 million while
imports from Bangladesh grew by 14.6%
to $199.31 million over the course of the
year. Import of used cars was the primary
factor boosting Japanese exports to
Bangladesh. While leather is the top
product exported from Bangladesh,
Japanese importers also consider
Bangladesh as an import source for
apparels and leather products. Some
Japanese industrial groups may also
consider investing directly in Bangladesh.
With increased frequency of visits by
Japanese importers to Bangladesh in
recent months, there are higher chances of
them setting up sourcing offices here.
Besides apparels, the Japanese market has
export potential for jute products, IT
services, and food items made in
Bangladesh. With JETRO's assistance,
four Bangladeshi companies attended a
high-profile food show and received
praise for the quality of their products.
JETRO is also helping an organic tea
www.bangladeshbusiness.biz
producer in Bangladesh to explore export
opportunities to Japan.
A dozen garment exporters lose
Crisis millions as UK retailer busts
Approximately a dozen Bangladeshi RMG
exporting companies encountered a total
loss of about $20 million after
Woolworths, a top retailer in Britain, went
bankrupt due to the global economic
crisis.
The sudden liquidation of Woolworths
especially rattled Shanin Group in Dhaka,
which lost some $3 million, with most of
its shipments now set to be auctioned off
in an English port. Woolworths collapsed
on a massive £385 million debt, leaving its
suppliers' deliveries sitting in ports. Shanin
Group did not receive any payment
despite three months of frantic shuttling
by Bangladeshi negotiators between
London and Dhaka. Inter Stoss, another
garments manufacturer, has lost nearly a
million dollars after Woolworths went
bankrupt. Afterwards, Salehuddin Ahmed,
ex-governor of Bangladesh Bank, warned
exporters to check the financial health of
their buyers before making any shipments.
Investment in Karnaphuli
EPZ EPZ
A Hong Kong-Taiwan joint venture
company, Bangladesh Pou Hung
Industrial Ltd, will manufacture footwear,
leather goods and related components in
the Karnaphuli Export Processing Zone
(KEPZ). This wholly foreign-owned
company will invest $43.8 million in
setting up their unit, creating employment
Briefings
BANGLADESH
BUSINESS
opportunities for 3,582 individuals,
including 57 foreign nationals. Resource
Foam and Accessories, a Bangladeshi
company, will set up a foam, garments and
shoe accessories factory in the KEPZ.
This locally-owned company will invest
$3.01 million in setting up their unit and
will produce foam, woven labels, poly
bags, tags, cartons etc. The company will
create employment opportunities for 294
Bangladeshi nationals.
Agreements for both these endeavours
were signed between the Bangladesh
Export Processing Zones Authority
(BEPZA) and the respective companies at
the BEPZA Complex. The KEPZ was
opened in 2006, set on an area of 222.42
acres with 211 plots, with a view to
employ 52,000 Bangladeshis. The zone
area has been expanded, and is currently
268.32 acres, with 260 industrial plots. It's
located in North Patenga and Halishar,
within 6 kilometers from Chittagong port.
Bangladesh Bank to introduce
Regulation automated clearing house
from August 3, 2009
Attempting to facilitate business activities,
Bangladesh Bank plans to modernize the
payment and settlement system of cheque-
clearing by introducing Bangladesh
Automated Clearing House (BACH) from
August 3 of this year. Under the new
system, payments will be settled initially
using an automated cheque-clearing
system and electronic fund transfer among
1050 bank branches in Dhaka. There are
plans to further extend the services, in
phases, to 7000 bank branches in districts
by 2010. Bangladesh Bank has asked
CEOs of the commercial banks to
introduce the modern payment system,
and to procure the necessary software and
hardware for establishing links between
the bank concerned and the central bank
by the stated deadline. According to the
central bank, banks are required to make
arrangements and develop infrastructure
to meet the requirements of the new
system. The central bank will adopt
necessary regulations and issue operating
rules and procedures in this regard.
09
 BANGLADESH
BUSINESS

Cover Story

2009
Can The Center
Hold?

D uring the last election campaign in December
2008, Bangladesh's two major political parties and
their allies published their respective election
manifestos. Among other things, they outlined their
respective economic agenda indicating critical areas of
development and focus. The presentation of economic
development agenda by political parties during election
campaigning, a definitive first-time act, is in itself a
major achievement. Soon after, predictably enough, a
flurry of analyses, studies, reports, and commentaries
ensued from different stakeholders and sources. Critics
and assorted pundits rushed to question whether the
outlined economic agenda were merely 'wish' lists, a bit
of campaign razzle-dazzle, or whether they were
BANGLADESH
BUSINESS
credible documents of objectives, figures and outputs
that the parties seriously intended to live up to and
achieve.
The ball is now in the court of the current government,
whether it is going to implement and execute much of
what it so effectively presented to the people or not. The
Awami League's election manifesto detailed 23 areas in
which substantial changes would be brought about.
From these 23 areas, five priority issues were outlined.
However, they were given without a particular strategic
and policy framework. How will the economic vision
translate into action? Will there be some continuity
from the past two years? Will there be bold initiatives
that are truly new?
 BANGLADESH
BUSINESS

The global financial crisis makes matters more critical than Reaction to the crisis must not divert focus away from the
they otherwise would be. Export industries and remittance need to undertake long-awaited steps in several critical areas
flows are the two sectors most vulnerable to the current for economic development of the country. What is
global crisis. Clearly, therefore, there is a requirement to set significant is to take steps in order to avoid economic
out a plan of action that takes cognizance of the exogenous stagnation, bring about rising growth rates in the immediate
shocks by perhaps undertaking various counter-cyclical future, ensure food security, and develop a working
measures to promote domestic demand. The government, framework between the public and private sectors. Many
true to its word, formed a Task Force to manage the critical bottlenecks in the economy, if not removed, would
economy from the impact of the global financial crisis. seriously jeopardize future livelihood and economic
Researching, learning, performance. These
monitoring the global bottlenecks are well known,
situation, and advising are In light of the demands for stimulus outlined in the election
all within the scope of manifesto, and are
packages to bail out the export industries,
services of the Task Force somewhat unrelated to the
and it has been prudent actions are required in terms of issues of the current global
instrumental in unveiling a crisis. There certainly would
stimulus package valued at public spending and policy tradeoffs. be a budgetary constraint
Taka 34.24 billion. In light and, much as one needs to,
of the demands for
Why would the textile and apparel sector all issues cannot be tackled
stimulus packages to bail get a large subsidy package, the absence together.
out the export industries, A plan of action must
prudent actions are of which they have been vehemently prioritize critical issues
required in terms of public clustering the
spending and policy complaining about, when it is absolutely developmental agenda,
tradeoffs. essential to bring the energy sector to perhaps leaving other
Why would the textile and important areas to be dealt
apparel sector get a large order first? Also, why would the at a later stage, or laying
subsidy package, the foundations for achieving
absence of which they have government underwrite, with public results in the long run. For
been vehemently funds, private risks taken for profit? the government nothing
complaining about, when it would be more important
is absolutely essential to than to immediately fix the
bring the energy sector to order first? Also, why would the energy problem and to ensure that other infrastructural
government underwrite, with public funds, private risks facilities are gradually put in place. There needs to be an
taken for profit? This may be a deviation from the agenda for implementation of energy and infrastructural
manifesto's implicit code of fiscal and economic discipline, development plans with a strict timeframe. And that is where
risking it towards non-fulfillment, imbalance, and ultimately much of the effort could be spent in the coming months.
socio-political disappointment and failure. Perhaps the The urgency of the energy crisis cannot be neglected; each
current environment provides an opportunity for the textile day it reaches closer to a catastrophic state, as has been
and apparel industry to reorganize in order to establish clearly outlined in the article by Dr. Tamim in this issue of
modern corporate structures with appropriate governance Bangladesh Business. With the passing of 100 days we have
codes. This responsibility is long overdue as many of the five only seen short-term actions being taken to resolve the
thousand plus textile and apparel firms are operating at low energy crisis.
capacity, high percentage of product rejects, low During the last months of 2008, prices of essential
productivity, and irregular salary payments to workers, commodities, such as rice and lentil, exhibited downward
particularly female workers. Under these circumstances, a trends and currently rice is being sold at the market at equal
cautious approach to demands for carte blanche loan or lower prices than what it used to be before the global
rescheduling, cash incentives and subsidized feeding of shock. The corner seems to have been turned. The concern
workers is required. now is on low farm-gate prices impacting the cultivator's

12 April 2009
BANGLADESH
BUSINESS
income negatively enough to incur losses. Bangladesh
remains a food-deficit country with 2 to 2.4 million metric
ton of food grain imports each year. Some 2.5 percent of the
annual budget is spent on meeting the deficit. The challenges
to managing food balance and food security will remain a key
concern. Prioritizing agriculture, as Mr. Muhit has stated, is
needed. Though the stimulus package does indeed prioritize
agriculture, the government has not clearly set out what the
challenges are and to merely state increasing attention to
agriculture is not the most productive of approaches. There
is indeed an agricultural endowment fund allocated for
Krishi Gobeshana Foundation (Agricultural Research
Foundation), but to what purposes are unknown.
Over the decades the private sector has started to operate
significantly and in a major way in the farm and non-farm
sectors, and these actors cannot be overlooked. The
challenges are many with raising farm productivity. Arable
land is shrinking and demands are rising for non-farm
activities. Feeding a growing population and increasing
income in the rural sector will require increased production
and processing of high value-added crops, with increased
activities in the rural nonfarm sector. In order to meet with
these challenges the government has to engage the private
sector. So far, we have not seen any plan of action that puts
partnership with the private sector in the area of agriculture.
An issue not in dispute is the scarcity of land. Only three
14 April 2009
percent of agricultural cropped land is not utilized and
demand for land from other users are increasingly
threatening existing cropped area. Decisions have to be made
quickly. Should land for agricultural use remain as it is,
shrink, or expand? Should more and more land be put to use
for industrial and service sectors? Proper land management
is absent and land utilization is inefficient and wasteful.
Unless significantly higher priority is given to immediately
resolving both the physical and organizational aspects of
land management and use, getting higher levels of both
foreign and domestic investment in this sector in the future
will remain a fantasy. The government has not recognized
the critical need for land zoning, allocation, and planning.
Indisputably energy, infrastructure, agricultural reform, and
land management are key areas where, if foundations for
change and development are not laid, future economic
growth could very well be jeopardized. So far, and after 100
days, we have neither seen an agenda developed for land
management nor purposeful continuity of steps taken by the
Regulatory Reform Commission established under the
previous Caretaker Government.
The Federation of Bangladesh Chambers of Commerce and
Industry, as the predominant voice of the private sector, has
separately set out an extensive economic policy agenda laying
out to the government what they consider to be the most
critical areas of focus. The agenda covers numerous
 BANGLADESH
BUSINESS

recommendations in all conceivable areas of economic and public sectors could establish such a partnership. As
development from which 18 specific recommendations are such, it is somewhat disappointing that the government so
put forth as an 'economic roadmap to deliver 8% far has not even raised the need for
inclusive growth'. Several of the continuation of the Bangladesh Better
recommendations correspond to the Business Forum, where a platform
economic agenda set out by the Awami for dialogue between the public
League in its manifesto. The and private sectors existed
significantly common element in over the last year.
both these policy visions is the The commitments
lack of prioritization, an absence presented in the
of focus on the most critical economic agenda of the
bottlenecks to the long-term manifesto are expressed
economic growth and ensuring in vague and rhetorical
attention to achieving results in terms. This raises
those areas. questions. How would
So, what are the key, primary we hold the government
issues that must be addressed accountable for the
first? Which actions are to be taken deliverables promised to the
immediately, and which are to be people in the agenda? A
addressed in the medium-to-long-term? system for monitoring and
In the context of systemic limitations in evaluation is needed in order to
terms of funds, a skilled labor force, ensure promises are kept within a set
institutional capacity building, political will, and timeframe. But before one can monitor and
management abilities, long-listed agenda without evaluate, a well-defined, targeted plan of action is necessary.
prioritization amount to virtually meaningless set of This plan of action, put together within a framework of
demands. Given these dialogue between the public
limitations, attempting to do The commitments presented in the and private sectors, clearly
everything at once means a setting out the responsibilities
dilution of efforts and economic agenda of the manifesto of each stakeholder, could
resources that end up then provide performance
are expressed in vague and rhetorical
achieving practically nothing in indicators which could be
terms of our critical national terms. This raises questions. How objectively monitored. As a
needs. The private sector's result, both the public and
vibrancy, growth, adaptability, would we hold the government private sectors could be held
inherent capacity for initiative accountable for the results.
and timely decision-making
accountable for the deliverables It is only through such a
makes it imperative for the promised to the people in the agenda? rational indicator-based
government to actively engage framework that the plan of
with it in a partnership for A system for monitoring and action could be transformed
meeting the manifold into a reality. Even after the
challenges of economic evaluation is needed in order to ensure passing of 100 days, it is not
development. How will this promises are kept within a set late to begin work on
partnership be formed and to prioritizing a few critical areas,
what end? There are growing timeframe. perhaps those suggested
skill sets, management, and above, in order to set out steps
capital funds in the domain of the private sector and the to immediately address short-term challenges, and prepare
government would do well to exploit these resources. A plan for long-term commitments and implementation. Otherwise,
of action to take the declared economic agenda forward as time progresses, the achievements of the economic
within a strict time frame, in terms of short and medium agenda will merely wind up being predictably empty
ranges, defining the responsibilities and roles of the private promises, and garner strong critiques. „

www.bangladeshbusiness.biz 15
 BANGLADESH
BUSINESS
Textile and Apparel Industry:
The Emperor Needs New Clothes
T he recent flurry of analyses, studies and reports,
especially in the business pages of our national dailies,
on the impact of the global financial crisis on the economy
of Bangladesh has given rise to confusion and worry in the
public mind. It is due to the fact that often reports and
associated commentaries tend to conflict and be at odds
with each other. Frequently, within the same 24-hour news
cycle, one day exports are buoyant while the very next day
they are said to be severely affected by the global economic
downturn; reports appear that remittances are not affected,
to be negated the very next day by a different set of reports
that overseas jobs are shrinking and workers are returning
home empty-handed. One newspaper will quote from
studies demonstrating that poor countries will be the ones
affected most during the recession while another paper
equably argues that the 'marginal' economies are insulated
from the worst effects of the global turndown.
Obviously, we are trapped in some sort of speculation
overload here. To a certain extent, it is understandable.
Even in the best of times, hard data on critical issues is very
difficult to come by in Bangladesh, and even when one
16 April 2009
does, it can be suspect - leading predictably to a situation
that seduces writers, analysts and 'thinkers' into converting
perceptions and intuitions to 'hard' analyses and reports.
But at what cost? To take one example, whatever may be the
eventual impact and reality in the coming months and years
of our textile and apparel sector, here and now from March
of 2009 onwards, with that sector having not being
included in the government's STIMULUS PACKAGE,
their leaders have lobbied (to use a gentler term than
'browbeating') strongly for inclusion in the bailout program.
With just about every country nowadays resorting to
stimulus packages, why not us, they say. And when 76% of
the export revenue is coming from the textile and apparel
business, who should have been leading the list of sectors
to be in the package but them?
Over the last three decades, the textile and apparel sector
has admittedly been the only manufacturing export industry
that has emerged to provide the bulk of the export revenue,
employment, fashion a 'brand' name, and provide some
distant hope that other sectors of the economy could
follow a similar growth trail. In terms of the above factors
the sector has been the driving force of the economy.
However, there are other factors to be considered. There
are over 5,000 manufacturing units operating in this sector
employing over 2 to 3 million people. Nobody knows the
exact number. From the 5,000 established units only a
handful have a discernable corporate structure, and
established themselves as leaders in terms of production
processes, productivity, compliance issues and quality
control. But these comparative few do not define the norm;
they are light years ahead from the rest of the herd.
Within much of the sector, small and medium-sized firms
operate with low productivity, a high share of product
rejects (around 30 percent), substantial underutilization of
capacity, with infrequent, if at all, salary payments to
employees (moreover, being routinely in violation of
gender equality laws and codes by preferring male workers
over female workers in terms of salaries and benefits),
tolerate and even foster a factory culture where mastaans
and hoodlums determine work processes and organization,
all of which are antithetical to modern corporate practices.
There are innumerable thousands of these small units
operating in the industry, living off a labour force forced to
live in squalid conditions - a labour force that is otherwise
the driving force in a labour-intensive sector that claims to
be the driving force of the economy. The majority of the
employees engaged in the apparel and textile sector are
workers who have migrated from rural areas, providing the
sector with a constant flow of cheap labour. It is a sector
where such a supply of cheap labour is possible also due to
www.bangladeshbusiness.biz
the lack of legal, governmental and political oversights. The
labour is so cheap (a euphemism for 'ill-paid') that now with
the global financial crisis deepening, the government even
agreed to provide food subsidies for the garment workers -
workers employed in the industry that drives the national
economy and yet who cannot afford to buy food. How
tragic! When the market prices for rice is Taka 21/kg,
rationing is provided at Taka 18/kg to 300,000 workers with
valid ID cards.
There is no doubt that there is a crisis - in what shape and
with what eventual impact no one can clearly foresee since
we do not have comprehensive firm and industry data. But
one can, and perhaps one should, look at this crisis as an
opportunity for the apparel and textile industry to truly
become the engine of economic growth and facilitator of a
better social order. In order to do that, the industry must
reorganize and restructure itself along modern lines, with
firms operating at good margins, with consequent
negotiating power with buyers, make higher and regular
salary payments with regularized employment contracts,
increasing productivity, with superior machinery park as
well as the requisite qualified machine operators/line
inspectors/production workers. Unless the textile and
apparel industry reforms its internal structure, system, and
operations, stimulus packages and subsidies would only act
as an enabler, helping to sustain the prevailing environment,
with a huge portion of the cost being borne by the poorer
section of our society by continuing to provide a constant
supply of informal and cheap labour to the industry.„
17

Fallacies
Forrest Cookson
I n the midst of the global financial and economic crisis it
is popular to call for more regulation of the private
sector. Such deep suspicion of the private sector flourishes
in times of economic distress and bursts out in arguments
for increased and more intrusive regulation. We investigate
some of the fallacies currently existing in Bangladesh.
Are subsidies beneficial?
The first regulatory fallacy is the widespread use of
subsidies. Democratic nations love subsidies, particularly if
the party in power can direct the benefits to their political
supporters. In Bangladesh there are many subsidies, all of
which are stunting rather than helping achievement of
economic growth. There seems to be far more interest in
increasing subsidies than taking actions to accelerate
economic growth.
Someone pays for every subsidy. So who pays in
Bangladesh? Of course, it differs from one subsidy to
another. Electricity, for example, is subsidized. This is a
transfer to the rich from the poor, leading to an overuse of
electricity; spreading access to electricity without having
people pay for what they use becomes more and more
expensive and is one of the main reasons that there is so
little progress in the development of the power sector. But
there are other costs: two important ones are poor quality
electricity (variable voltage and frequency fluctuations that
are often very destructive to advanced equipment) and poor
service manifesting through frequent power outages. There
is also the hidden subsidy to those stealing electricity or
manipulating meters. The failure to insist on good quality
power meters makes it possible for meter readers to fix
meters to modify the record, for a fee paid to them by the
purchaser of the electricity used by consumers or plants.
The exposures during the tenure of the caretaker
government of the extent of this leading to the remarkable
acquisition of wealth by the persons concerned showed
how extensive this phenomenon has become. The hidden
subsidy - non payment and stealing - combined with the
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
Column
official subsidy wreck the electricity system. The continuing
subsidy - all in the name of doing good - is the single most
important factor in the total failure and breakdown of the
supply of electricity to the society. The society pays in less
electricity, poor quality electricity, lack of industrial
development and, for most Bangladeshi households- no
electricity at all.
The gas sector is a second example. The subsidy means that
the gas sector cannot recover its costs leading to low
investment, lack of funds for exploration and poor
maintenance. The subsidy encourages households to use
gas excessively and waste. There is a similar hidden subsidy
emerging from stealing gas and tinkering with meters by
bribing the meter readers. The cost of the subsidy to
Bangladesh is now clear. Unable to earn enough money to
invest in the system the nation is completely dependent on
foreign donors who, for better or worse, have their own
ideas; but the final result is massive underinvestment in the
system. We all cry out - "where is the gas"; the answer is, by
insisting on subsidies, the companies that manage the gas
are undermined financially and not able to do their job. You
get what you pay for.
With both electricity and gas, the regulatory authorities are
protecting the people - or so they think - by trying to limit
charges. The regulators have two tasks - to insure that the
accounts of the power and gas companies are correct and
recognizes all of the costs and to insure that the utility rates
are such that all the costs are covered. It is not their task to
decide what is fair. The regulators have far exceeded their
responsibilities.
A third example is urea: Who pays for the subsidy? First,
one should note that the low cost of urea encourages
farmers to overuse it. It also encourages the use of the
chemical in sectors outside agriculture where the
government does not intend to provide subsidy; but in the
operation of the system they inadvertently do so. This may
include subsidies to Indian users. Subsidy encourages such
overuse of urea that it discourages the use of technology
19
 BANGLADESH
BUSINESS
that achieves the same agronomic results at lower
applications of the chemical. Rather than seek urea saving
technologies, the government has consistently done the
opposite. Once again the subsidy results in the fertilizer
factories not earning enough to make investments and
maintain factories resulting in low efficiency in converting
gas to urea, wasting the gas. Finally the low price of urea
leads to under application of other soil nutrients resulting
in low crop yields. The subsidy of urea costs the society a
great deal in wasted gas and encouragement of wrong
agricultural technologies.
Regulation with the wrong objective
Another frequent fallacy is to regulate with the wrong
objective. One of the best examples is the
telecommunications sector. Since 1971 the objective of the
telecommunications regulation has been to maximize
government revenue. Before the establishment of private
mobile phone networks, the government owned most of
the telephone networks, with the connection fees priced
monopolistically to maximize profits. Only the rich need
telephones, it was argued, so it is appropriate to keep it
expensive. The importance of telecommunications for
businesses did not seem to occur to the authorities.
For some years, with the emergence of the cellular phone
networks, the telecommunications market has expanded
rapidly and services to the Bangladeshi people has grown
20 April 2009
enormously. In this expansion the use of VoIP services
grew. This service is tremendously beneficial to ordinary
people in Bangladesh who have relatives working abroad.
The regulatory authorities cut this off to establish a newer
regulated version that has met with only modest success.
Instead of making it easier to use VoIP they are doing the
opposite; instead of making it cheap, they are making it
expensive. This is a consequence of regulations for the
wrong objective. The welfare of the people seems to be the
furthest thing from the minds of the regulators. A better
way to proceed is to make it more competitive, not less.
Conclusions
The irony of these situations is that one set of regulatory
authorities are hurting the people while trying to help them;
the other set is trying to limit economic activity in the name
of good order and high revenues for the government. Both
their rules fail to encourage private sector investment and
innovation. The bias in both cases has mostly been to
restrict investment by government or large companies and
to discourage SME and Bangladeshi investors and
innovators.
Subsidies and over regulation are fallacies that discourage
investment, encourage waste, and harm the general public.„
Forrest Cookson is an ex-president of American Chamber of
Commerce, Bangladesh.
 BANGLADESH
BUSINESS

The Pulse of the Economy

H ow does one read the pulse of our economy? The
tradition is to use broad macroeconomic indicators
like GDP per capita, growth rate, volume of investment,
December 2008, the general mood of the country has
improved, although a majority of general people, opinion
leaders and businesses still feel that the country is heading
foreign currency reserves, trade etc. But this may not be in the wrong direction. In December, 61% of general
enough. One should also try to population and 57% of the
understand how the economic Economic concerns, particularly, opinion leaders believed that
agents themselves view the the country was heading in the
high prices, unemployment and
economy, as their perceptions wrong direction. Although
are just as important as hard corruption, drive this overall these percentages have
macroeconomic data. Indeed, negative mood in the country. 75% declined since September, by
in many instances, the former 17% and 24% respectively, the
could very well explain the of the general population, 71% of overall perception remains
trends of the latter. the opinion leaders, 83% of the grim. Similarly, 67% of
Recent surveys of a nationally businesses feel the country is
representative sample of businesses, and 58% of the public headed in the wrong direction,
general people, opinion leaders, officials believe high prices of which represents a decrease of
businesses, and public officials, 14% since September. These
conducted by the International essentials to be the top national decreases may be due to
Finance Corporation's concern. It is therefore increased optimism about the
Bangladesh Investment future, in light of the then-
Climate Fund during encouraging that high prices have impending national elections.
September-December, 2008, been one of the top priorities of Among public officials, in
sheds some light on the pulse contrast, perceptions are more
of the economy based on the
the new government. mixed: 41% believe that the
perceptions of these economic country is heading in the right
agents. These perceptions demonstrate the economic direction, and 38% believe the opposite.
challenges to be faced by the newly elected government. Economic concerns, particularly, high prices,
Survey results indicate that, between September and unemployment and corruption, drive this overall negative

www.bangladeshbusiness.biz 21
 BANGLADESH
BUSINESS

mood in the country. 75% of the general population, 71% purchasing power. This in turn translates into low demand.
of the opinion leaders, 83% of the businesses, and 58% of In fact, lack of demand was identified as one of the key
the public officials believe high prices of essentials to be the reasons for lack of investment. 71% of the businesses that
top national concern. It is therefore encouraging that high view the current economic situation as unfavorable believe
prices have been one of the top priorities of the new that high prices is the top reason for an unfavorable
government. It remains to be seen, however, whether these business environment.
initiatives have an impact on people's perceptions in the In addition, access to start-up capital, access to loan, own
future. fear of failure, and learning how to do business appears as
Unemployment and corruption are the second and third some of the biggest challenges to businesses, particularly
main concerns of the population, although they are way among women-owned or operated businesses. While 34%
behind - 27% of the general population, 29% of the of all businesses view capital scarcity as the biggest
opinion leaders, 27% of the businesses, and 24% of the constraint, the corresponding figure for women-owned
public officials view businesses is 62%.
unemployment as one of Similarly, 67% of women-
the top two national The new government faces an owned businesses rate
concerns. Similarly, 24% "own fear of failure" as
of the general population, environment where consumer and their biggest challenge,
35% of the public compared to the
business confidence is low but improving.
officials, 32% of the corresponding figure of
businesses, and 40% of To tackle the general pessimism regarding 46% for all businesses. All
the public officials view these reflect the relatively
corruption as one of the the country's future direction, it is disadvantaged position of
key concerns. women entrepreneurs in
The overall negative necessary for the new government to the society. Indeed, the
mood of the country biggest challenge to
transcends to the
tackle burning issues like high prices of running a business that
business environment as essentials, unemployment, facilitating was identified by women
well. 77% of businesses entrepreneurs was
believe that the overall women entrepreneurship and improving discrimination between
economic situation in males and females.
Bangladesh is unfavorable access to finance for businesses urgently. Women entrepreneurs,
towards their business, however, fare better than
whereas 68% believe that
They must also create an environment their male counterpart as
the situation of their that is conducive to investment and far as learning how to do
business is worse business is concerned.
compared to a year ago. business growth. While 41% of all
The negative perceptions businesses view it as one
of the economy among of the biggest constraints,
businesses are best reflected in the investment scenario this is true for only 27% of women entrepreneurs. This in
between 2007 and 2008. In the third quarter of 2007, 62% turn implies the huge potential for women as successful
of businesses made investments, whereas during the same entrepreneurs with proper support from family and society.
period in 2008, the exact same percentage chose not to Access to loans is a well-known constraint in Bangladesh,
invest in their businesses. and some recent initiatives have been taken targeting
How do we explain this complete reversal in investment development of the SME banking sector. However, it
trends? One might think that high prices should lead to appears that, for both SMEs and large firms, this constraint
higher profits for the businesses. However, it appears that is equally predominant. 61% of the SMEs and 63% of the
the multiplier effect of the high price phenomenon hurt the large firms find it difficult to get a loan.
businesses in general. And this is due to the simple law of Consultations with stakeholders suggest that most bank
demand. An increase in prices reduces the real income of loans and SME loans go to traders instead of
the consumers and thus negatively affects their overall manufacturers. While 63% of trade and 59% of service

22 April 2009

sector businesses find it is easy to get a loan, 64% of
manufacturing firms find it difficult. This may have
negative long-run consequences in terms of the country's
industrial development.
In this backdrop of current economic and business
environment, a strong voice for business reforms seems to
resonate among all stakeholders, despite the fact that a
significant fraction of them - 67% of the general people,
40% of the opinion leaders, 51% of the businesses, and
44% of public officials - have heard about or seen little or
no business reforms at all. Nonetheless, among those who
have seen or heard about business reforms, most of them -
89% of general people, 86% of opinion leaders, 75% of
businesses, and 74% of public officials - expressed the
necessity for business reforms in Bangladesh.
Irrespective of whether or not one has heard about
business reforms, 88% of the general people, 90% of the
opinion leaders, and 74% of the public officials believe that
business reforms are likely to have a significant impact on
their lives. Similarly, 72% of the businesses believe that
business reforms are likely to have a significant impact on
their businesses.
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
Why is there such an overwhelming demand for business
reforms? Consultations with stakeholders suggest that they
believe business reforms can result in better and more jobs,
as well as more competition and thus reduced prices. As we
have seen, a reduction in prices can benefit both producers
and consumers, due to the increase in purchasing power.
What do all these perceptions mean for the country? The
new government faces an environment where consumer
and business confidence is low but improving. To tackle the
general pessimism regarding the country's future direction,
it is necessary for the new government to tackle burning
issues like high prices of essentials, unemployment,
facilitating women entrepreneurship and improving access
to finance for businesses urgently. They must also create an
environment that is conducive to investment and business
growth. Such measures are critical to restoring business
confidence in light of the transition to a political
government and the financial crisis that has been wreaking
havoc across the globe. Future surveys will reveal whether
the new government has been responsive to the demands
of the people, and whether they have had a positive impact
on the perceptions of its citizens.„
23
 BANGLADESH BANGLADESH
BUSINESS BUSINESS

Whither Renewable Energy?

Dr. Saiful Haque

Photo: Creative Communication Limited

B angladesh is facing an enormous shortage of

conventional primary energy. Primary energy exists in
many forms such as chemical, oil, gas, coal, nuclear, solar,
poverty reduction and environmental protection should
necessarily enter into any calculation of an energy-based
development framework of Bangladesh.
thermal, hydro, and wind. Humans extract energy from Primary renewable energy like sunshine and bioenergy is
nature in the raw form known as abundantly available all over
'primary' energy, then process and Bangladesh, decentralized and
The PV system's ability
transform it to 'intermediate' and finally environment-friendly. Although they are
usable energy forms like electricity and to produce electricity also not free from conversion
heat. The conventional primary sources proximate to, or at the constraints, they can be used to generate
of energy like oil, gas, and coal have small and medium amounts of power in
conversion limitations and are used to point of consumption most locations within a very short
generate electricity from centralized means minimum system amount of time. A centralized power
plants. Furthermore, it is difficult and losses, thereby plant using conventional primary energy
uneconomical to use such primary needs three to five years to start
sources for rural electrification of promoting energy production. A nuclear power plant
Bangladesh. The environmental efficiency. takes eight to ten years to start trial
dimension of energy is a key issue of production. Bangladesh's climate is
energy planning. The option of quite suitable for production of power
alternative energy resources like renewable and nuclear and heat from Solar Photovoltaic (PV) cells, since its
energy which emit low greenhouse gases (GHGs) is primary source is sunshine. Bioenergy and biogas are also
important. A strategic action plan of sustainable energy for suitable for Bangladesh due to easy availability of raw

24 April 2009

materials and the relatively simple technology.
Usually, solar PV technology is used as a stand-alone system
for providing electricity to areas where the electricity grid
network is absent. In rural areas of Bangladesh, about three
hundred thousand households are already connected to PV
power systems. These systems can power two lights and a
black-and-white television and recharge mobile phone
batteries. The costs of installation vary from taka twenty-
five thousand to taka forty-five thousand depending on
options chosen. The initial installation cost is high, but the
tradeoff is the large saving afforded the economy's power
grid since each household with a PV solar home system
(SHS) is actually the owner of an individual PV power
plant. This 'power plant' supplies uninterrupted fuel-free
electricity for 25 years with negligible maintenance costs
(battery replacement costs come by every three years). At
the current growth rate of SHSs, it is expected that power
generated by photovoltaic cells will exceed 300 MW within
the next couple of years.
Diversification and use of PV installations in solar
irrigation, solar mini-grid for rural street lighting, village
marketplaces, and urban energy consumption could see a
radical growth. Globally, grids connected to solar PV,
popular due to negligible greenhouse gas emissions, are
surpassing the number of the stand-alone PV systems by
more than double. To study the suitability of such a grid
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
connection, a model 1.1kW solar PV system was installed at
the rooftop of the Renewable Energy Research Centre
(RERC) of Dhaka University on April 2008. The model ran
successfully. More such systems should be installed on
rooftops at different city locations to study the suitability of
this system. If pilot models are found to be suitable, a grid-
connected photovoltaic system could be installed on all
commercial buildings of Dhaka.
According to the model, only forty building rooftops would
be required to generate 1MW electricity using the solar PV
system. If there are two hundred thousand buildings in
Dhaka city, then all the rooftops connected to a PV grid
could generate about 3000 MW electricity! This power
could be fed to the national power grid every day during
Photo: Creative Communication Limited
daytime. To popularize this system, the government must
come up with an affordable pricing strategy for PV-
generated power from rooftops.
In the case of larger power plants the average cost of PV
installation would be less. A distributed PV system of
smaller capacity provides the opportunity to integrate
photovoltaic cells into the very architecture of buildings.
Thus, the technology is a dual-purpose one, both as a
building element and electricity source, something which in
the trade is known as Building Integrated Photovoltaic
(BIPV). Although BIPV is still expensive, its costs are
gradually decreasing. The BIPV system's merits are that it
25
 BANGLADESH
BUSINESS

Bangladesh Scorecard

26 April 2009
 BANGLADESH
BUSINESS

www.bangladeshbusiness.biz 27
 BANGLADESH
BUSINESS
relies solely on sunshine to generate power; no other fuel
source is required. Its operation is noise free, there are no
harmful emissions and it requires minimum maintenance.
The PV system's ability to produce electricity proximate to,
or at the point of consumption means minimum system
losses, thereby promoting energy efficiency. This particular
power system could be a major small-scale power source for
households and businesses in Bangladesh.
The prospect of bioenergy, especially biogas, is very bright
in Bangladesh. Biogas plants convert litter into gas for
thermal use such as cooking and heating. This gas is also
used in gas generators to produce electricity. Its by-product,
organic fertilizers, (or bio-slurry, to use techie lingo!) are
produced both in liquid and dried form. Biogas technology
is locally developed and available to users through the
government's BCSIR and IDCOL, Grameen Shakti, BRAC,
and German Technical Cooperation (GTZ, KFW, etc).
There are about thirty thousand biogas plants installed all
over Bangladesh, mostly in the rural areas. Almost ninety
percent of them are operational at present.
A small percentage of installations are inoperative because
of faulty designs by unqualified professionals or lack of
Rahimafrooz: Will the Sun Do?
R ahimafrooz Renewable Energy (RRE) Ltd. is a
subsidiary of Rahimafrooz group. Starting as a small
trading company in 1954, Rahimafrooz is now one of the
largest and most successful private sector business groups in
Bangladesh. Since 2006, RRE is providing solar power
solutions for residences, for irrigation in the agricultural
sector, clinics, schools and village marketplaces. The
increasing use of off-grid solar energy is rooted in the fact
28 April 2009
BANGLADESH
BUSINESS
diligence on the owner's part in terms of maintenance. The
rule of thumb for power generation using biogas
technology is that 1 kW requires approximately one
thousand poultry bird's feces (one Watt per chicken). In
Bangladesh, there are about a hundred and fifty thousand
poultry firms, with at least ten percent of them with more
than five thousand birds each. So right there, clucking away
unawares, we have the potential for 50 MW of off-grid
power generation! Taking all city wastes, kitchen waste, rice
husk, and poultry wastes into account, there is a potential
for generating 1000 MW electricity from bioenergy sources
in the country, keeping its use as cooking fuel intact. A
medium-sized biogas plant setup is cheap, costing around
Taka twenty thousand only and can be made with local
materials. Power generation using solar PV and biogas can
be explored as immediate or medium-term solutions.
For planning a long-term solution to Bangladesh's energy
crisis, the following renewable energy technology (RET)
options should be explored: biogas, solar, hybrid system,
wind, hydro, human paddle charging, electric hybrid three-
wheelers, solar vehicles, and co-generation. There is also a
need to learn and adopt Energy Conservation (EC) and
that grid electricity covers only 35% of Bangladesh, and
supplies only 70% of the total electricity demand. 85% of
the power plants in our country generate electricity by
burning natural gas, 6% by coal, 4% by hydro power and 4%
by oil. Such fossil-fuel-fed electricity generation is fraught
with environmental pollution. The search for viable,
alternative sources of energy for a resource-poor but energy-
hungry, developing country like Bangladesh is now a
necessity, and one of the leaders in this emerging field is
undoubtedly Rahimafrooz Renewable Energy Ltd.
RRE has been growing at nearly 50% annually since its
inception, with a yearly turnover of more than Taka 50 crore.
It provides solar power solutions such as solar home lighting
system, solar hot water system, solar refrigerators and solar
street lights. RRE's mainstream project is the solar home
lighting system, a product subsidized by The Infrastructure
Development Company Ltd. (IDCOL). The company has
already installed more than 60,000 solar units under the
program, which generates 300MWp electricity. It is estimated
that this project alone saves the earth from 13,064 tons of
carbon dioxide emissions per year.

Energy Efficiency (EE) mechanisms - the two are known as
'third fuel' or 'Negawatt'- to stop wastage. By conserving
power through energy-efficient devices, fifteen percent or
more electricity can be saved and therefore virtually
generated!
It is very important that those who are active in the field of
promoting renewable energy should themselves practice its
use on a smaller scale. Instead of lamenting power
shortages and sitting in the dark, we should take matters in
our own hands. Each one of us has a role to play. Education
and research institutes should engage themselves in energy-
related research based on local demand and materials so
that innovations, and innovative ways of thinking, can take
place within existing technology frameworks.
Large investment funds are required from financial
institutions for research, technology transfer, development
of skilled renewable-energy professionals, correct
dissemination of simple and inexpensive technology and
purchase of RET products for household and commercial
applications. The government should come forward with
incentive packages, adequate funding, enabling laws, and
distribution of funds for building Clean Development
Table: Specifications of Solar Home Systems (SHSs) available in the market*
*Source: Market Survey (April 2009)
Some key installations of RRE:
„ 2007: Solar system on a moving boat, BBC World
Service, 1.2 KWp
„ 2007: Telecom solution for Grameenphone at
Paharpur, Habiganj, 8.25KWp
„ 2006: Bangladesh Power Development Board
(BPDB) at Borkol, Rangamati, 10 KWp
„ 2005: Solar submersible water pump solution at
Barinda
„ 2005: Solar centralized solution at Chakaria, Cox's
Bazar, 5 KWp
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
Mechanisms (CDMs). Awareness building regarding carbon
trading and climate change issues have to be undertaken at
a national level to scale up the use of renewable energy.
Consumers should be geared towards utilizing renewable
energy wherever possible. Renewable-energy traders should
offer the best quality products at affordable prices and
provide dependable after-sales services. They should try to
develop RET locally to minimize dependence on dwindling
conventional sources of energy, and enhance energy
security.
The obvious, visible impact of energy security will be in the
growth of industry. We have reached the tipping point and
must switch from a fossil-fuel-based economy to a solar-
energy-based economy in order to both protect our
increasingly endangered planet and forge ahead
economically.„
Dr. Saiful Haque is Professor, RET, University of Dhaka, and
Member, National Committee of Renewable Energy.
„ Solar-powered hot water system for Aloha Hospital
at Naogaon, 1.95 KWp
RRE envisions the first ever grid-connected photovoltaic
solution which would feed into the national grid directly to
ensure smooth supply of electricity. This will reduce the
demand-supply gap of electricity in Bangladesh and reduce
pollution. RRE is working towards new and innovative solar
solutions such as a 'Solar Pump' for drinking water and
irrigation purposes, solar-powered billboards, solar security
lights and solar traffic signal lights. In 2006, Rahimafrooz
Batteries Ltd. won the "Ashden Award" for its promotion of
sustainable green energy and alleviation of Bangladesh's
energy crisis.„
29
 BANGLADESH
BUSINESS

"The truth is, we are

back to square one"

H ossain Khaled is a young businessman who is also

the ex-president of Dhaka Chamber of Commerce
and Industry (DCCI) and co-chair of the Infrastructure
Working Group of the Bangladesh Better Business Forum
(BBBF), the first public-private forum in Bangladesh. In an
interview with Bangladesh Business, he speaks about his
experiences as a member of BBBF, its potential, challenges
and the need for continuation.
How did you enjoy your time working at DCCI?
It was definitely a new challenge and experience, especially
being the youngest president and being able to run the
chamber of the upper most echelon in Bangladesh. I feel, in
my capacity as the president, I was able to set an example
for the next generation and reiterate the fact that we are the
backbone of the country. With the 50th anniversary event
of DCCI and especially the success of its International
Business Conference, I feel that I ended my term on a
memorable note.
What in your mind was the most significant
achievement for DCCI during the three-day long
event?
First of all, we were able to set the example that an
international conference of such scale can take place in
Bangladesh. We were successfully able to coordinate the
logistics, and at the same time bring together prominent
businessmen, economists and academics from more than 30
countries. We were lucky to receive immense support from
organizations such as yours (BMB Mott MacDonald) and
others, as well as the government. To answer your question,
I think we were able to set out a vision for Bangladesh, build
awareness, and set out a track for diplomacy. In a sense,

01
29 April 2009
January 2009
 BANGLADESH
BANGLADESH
BUSINESS

through this conference we presented a vision for business How was the Regulatory Reform Commission (RRC)
in Bangladesh and made recommendations. I think, five related to the implementation process?
months down the line, our predictions have been proven There was a great degree of confusion concerning this. In
true - unfortunately the government did not reach out to us reality, the RRC was separate from BBBF. However, there
then and have not done so yet. were several instances when we would forward approved
recommendations to relevant entities, and we would be told
You represented DCCI in BBBF as a member of the it is RRC's work and at other times, it would be the other
Infrastructure Working Group. What is your view of way round. It was a confusing issue altogether. However, a
BBBF? number of recommendations were indeed sent to RRC for
I am glad that a public-private forum was formed in implementation and follow-up.
Bangladesh. A number of organizations, chambers,
academics, and think tanks were able to come together on Were any of the recommendations implemented?
the same platform to share their views. Over the past Not that I know of.
decades, all these groups have had differing views at times, Were you happy with the composition of the BBBF?
and the forum actually Do you think the private
opened the floor for sector was weakly
constructive discussion BBBF was the dawn of a represented?
among us, leading to very I think the composition was
significant recommendations. new forum for us to work good. There are differences of
Personally and professionally, together. If it continues, it opinion concerning the
I feel that the forum was able composition. I agree that there
to address several issues
will become more precise in should have been more
within quite a short period of terms of its operation and representation of private
time and that it should not be effective in terms of impact. entities in this forum. But, for a
time-barred. It should start, I felt that it was all right.
definitely continue and be It should be noted that there
chaired by the head of the were individuals who were not
state or prime minister. representing any specific organization or body. I am not
questioning their intellect in any way, but at the same time I
Could you explain the workings of BBBF to us? feel that this forum should have been more organizationally
The forum was composed of five working groups focused representative. In some special cases individual
on broad thematic areas, namely Business Finance, representation made sense, such as in the case of Manzoor-
Infrastructure, Business Entry and Operations, E-Elahi who is a former adviser and a legendary
Macroeconomic Policy, and Skills Development. The businessman. Regardless of success, had I not been the
members of this forum were drawn from business President of DCCI representing the chamber, my presence
communities, the public sector, chambers, academics, and would be questionable. I would then be representing myself
others. In meetings, chaired by the caretaker government, and expressing my individual views and not a trade body's.
the problems would be discussed and recommendations
What would have been, according to you, an adequate
would be tabled by each group. The recommendations
composition?
were filed in the form of reports and placed to the chief
I would say more trade bodies and representation from
adviser. The CG office would review this and the status
organizations or groups rather than individuals.
would be distributed. If a decision was made there was no
point in going over it any further. The approved BBBF's chairperson mentioned that he would not let
recommendations would be sent to relevant ministries. The BBBF become a talking shop. Do you think his words
implementation process was to be carried out by these came true?
ministries or organizations in, say, three months. What The chief adviser would often open the floor for discussion
didn't happen was the follow-up. At a stage of severe and there would be diversions from the core topic. Time is
economic crisis, it would have been the right time to work money and we used to go there to present our
on those five issues. With the prime minister and finance recommendations in a systematic way, which didn't happen.
minister in place, now is the right time to set out Often, until or unless there were questions, the discussions
appropriate reforms. would go on.

www.bangladeshbusiness.biz 31
 BANGLADESH
BUSINESS

The procedure for this forum should have been that two to the total recommended and approved reforms dealt
three working groups would come and present their with infrastructure issues. Would you like to comment
recommendations in the meetings and discuss views, on this?
following which a report would be submitted for making I guess we were more aggressive! It was also because
decisions. That did not happen. Often the presentations infrastructure is such a wide topic. We had divided it into
would be too long or discussions would divert and go on. five sections, namely ICT, power and energy, roads and
We needed appropriate time allocation and a professional highways, ports and tourism. This allowed us to make very
approach to these meetings. One can summarize or specific recommendations.
highlight the important issues, instead of going over
Much of the reform issues handled by the
countless recommendations in
Infrastructure Working
a haphazard manner.
Group dealt with ICT. Why
Could you tell us some of Often the presentations wasn't the focus on the
the significant more pressing need of what
achievements of BBBF?
would be too long or we call 'physical
BBBF was a success story for discussions would divert and infrastructure' such as
all of us. All the go on. We needed power, roads, and port
recommendations put facilities?
forward, I felt, were quite appropriate time allocation The first sets of
pertinent. Many may say it was and a professional approach recommendations were of
just a talking shop, but the ICT, since we decided to give
truth is that BBBF was the
to BBBF meetings. ICT infrastructure the first
dawn of a new forum for us to and foremost priority. In case
work together. If its continuity of power, there is just one
is ensured, it will become more precise in terms of its major recommendation: we need power, we need new
operation and effective in terms of impact. I speak on energy sources, and it's about time we paid some attention
behalf of everyone when I say this. to it. There were a number of issues that were addressed in
For the past year, we were working on both micro and other components of infrastructure as well.
macro levels and we have done the groundwork. We can
Do you think establishment of economic
now work on a policy level. For example, we could set a
zones/industrial parks are critical for our future
goal of bringing down processing of company registration
economic development, attracting foreign
to no more than three days. We could also objectify
investments, and simply for zoning land for
simplification of the procedure and move unnecessary
industrial/manufacturing operations?
forms out of the equation. What is extremely important is
There is a proven track record in every country that it is
that we must have an appropriate feedback or follow-up
critical. In fact, we had recommendations that supported
procedure. Within the forum, we would not have follow-
zoning. But, what I do not agree with are the differences
ups in next meetings. This should be taken into account
made between companies in the zone, and those outside.
upon continuation of the forum.
We are already providing a number of facilities - tax
I feel that one of the major issues was the absence of
holidays, for example. Why can't a 100% export-oriented
ownership. We did not have a secretariat in place.
firm outside the zone get the same facilities? This particular
BBBF was the first time where the private and public issue was raised by DCCI and several recommendations
sector came together in such important dialogue. Do were also made for the ports.
you think it was adequately promoted and the general
Why do you think charging lower interest rate
public was aware of it?
compared to market rate can develop our SME sector?
In the initial period, there was much confusion concerning
Is finance the only issue for SME development?
the workings of BBBF and its exact goals. I feel, at least the
One of the major obstacles is the access to finance, and
major stakeholders, including the business community, were
also the cost of finance. SMEs must put forward collateral
aware of this initiative very well.
to take loans and this adds to the challenges SMEs face.
From the statistics we have, it seems that over 56% of The irony is that we charge corporate establishments a

32 April 2009
 BANGLADESH
BUSINESS

much lower interest rate than we charge SMEs. Finance, you need to go through a forum? It is simply because of
however, is not the only issue. But it is related in the sense that general consensus, which you will not find elsewhere.
that with better finance, you can actually ensure We all had one voice, and that is what was needed. This
productivity. kind of a forum exists in many countries across the globe
and it is a platform where you have the presence of both
Many say DCCI is a champion of SME development!
the sectors. I feel this forum has great future potential.
Could you explain this to us more?
From its very inception DCCI's focus has been to support If this continues, do you have something to say about
SME businesses. It was with this perspective that we had changes that may help future processes?
started. In the last 50 years, we certainly have been able to As of now, we do not know for sure if we even exist
gain extensive experience and understanding of the SME anymore! But, given that we do exist and given that we do
sector. With 75% of DCCI members being SMEs, we have continue, BBBF must have a secretariat. Another way to
become their voice. If we do not channel their views and approach this would be that individual working groups
recommendations, they will not get things done. Advocacy could maintain their own recommendations and then
for SMEs has to be done with follow-up, at least on the
support from everyone. All the decisions that have been made.
chambers should come together. Organizations and trade bodies
Unfortunately, in Bangladesh, we
I do not agree with the can be given responsibility and as
harbor jealousy rather than the differences made a result a sense of ownership will
willingness to work together. be created. For example, DCCI
between companies in could have a cell for The
Did you know that many of
Infrastructure Working Group
the Business Finance Working the zone, and those and they would provide all
Group recommendations that
are mentioned as approved outside. Why can't a secretarial services for this
working group. The forum needs
and implemented are actually 100% export-oriented to have ownership and power;
old and was presented by the
the members need to have that
SME Advisory Panel (now firm outside the zone get mentality and a sense of
defunct) in 2006 and 2007?
These are issues that are being the same facilities? commitment. The image of
BBBF may need to be rebuilt to
raised continuously. These are
portray that it is not just a talking
not recommendations placed just
shop or made up of people who
by the SME Advisory Panel, but
only recommend.
by many others as well. It's a sign that the government did
not react to these then and have not done so yet. On a last note to this Q&A, what is your wish and
dedication to the future of this country?
What do you think is happening with the change in
We have fallen behind on growth. We need to ensure that
regime, now that we have a democratically elected
after this economic crisis is over, we are able to accelerate
government? Will this dialogue between the private
growth. My wish is to be a responsible citizen and work
and public sector continue?
towards the development of my country.
Well, hopefully, under a democratic government
discussions will be better. We hope this will not be an We thank you immensely for being so patient and
autocratic government. giving us your valuable time. One last word: Who is
Hossain Khalid?
Do you think it is necessary for the dialogue to
Hossain Khalid is a very humble individual!
continue?
I like challenges. I was educated in the USA and came back
Like I said, it is a continuous process. We will improve with
afterwards to ensure that I make a difference here. I chose
time. You cannot fix this country in a single attempt. Many
to be a policy maker, and I feel I have been able to
may ask the reasons for the existence of this forum since it
contribute to some extent and I wish to continue doing so.„
is true that we have trade organizations and other bodies
through which you can make recommendations. Why do

www.bangladeshbusiness.biz 33
 BANGLADESH
BUSINESS

Amjad
Khan
Chowdhury
CEO of PRAN

01
33 April 2009
January 2009
 BANGLADESH
BANGLADESH
BUSINESS

T he Chief Executive of PRAN-RFL Group Major-

General (retired) Amjad Khan Chowdhury is a
cautious man. Or a precise one. Our session in his offices
Bangladesh to do so), a concern that is still ongoing, and
was also the founder-president of REHAB (the
developers' trade body). By this time, he says, he was
set in the teeming caterwaul of R K Mission Road started beginning to learn how to be a businessman in Bangladesh,
off with him asking us probing questions about our how the game was played. It was, he concedes, a steep
background, education and present work. He listened learning curve.
carefully to our answers and, judiciously pursing his lips, Notwithstanding the burgeoning if narrow-based
took down notations on our personal cards. Only then, manufacturing sector, agriculture is the dominant fact of
presumably reassured about our bona fides, did he unbend Bangladeshi national life, not just in economic terms but in
for a conversation enlivened by the occasional affable grin shaping Bengalis, from their songs of harvest to the green
and flashes of self-deprecating humour. of their flag. General Chowdhury turned his attention
Amjad Khan Chowdhury was born in Natore in 1940, but towards agriculture, saying that he read a famous book
left his Bengali boyhood for the PAF school in Sargodha, about trading in products where the country has a
and subsequently the Pakistan Military Academy at Kakul. comparative advantage. His decision was quick: the
He was commissioned into the Pakistan Army as an officer agriculture sector had the comparative advantage in
in 1958, and seemed to have Bangladesh and agriculture was
thrived in that particular where he wanted to be. An
organization - by 1968, at a additional fact was that not
comparatively young age, he
Only after being only was he from Natore
was a brigade major at
Rangpur. The PMA long
reassured about our himself, but his army posting
in North Bengal had made him
course is meant to leave its
indisputable imprint, and even
bona fides, did General see firsthand how army
developmental activities had
today there is something of Amjad unbend for a aided Bangladesh's traditionally
those army days in him, of most underdeveloped region,
Abbotabad and Risalpur and conversation enlivened with its seasonal monga and
Pindi, hints of it in the clipped lack of economic oppor-
moustache, his English, and by the occasional tunities. Agriculture in
bearing. In 1973, he was Bangladesh is a stagnant sector,
repatriated back to Bangladesh affable grin and flashes symbolized most perhaps with
and its army. During Ziaur the single dismal statistic that
Rahman's rule General of self-deprecating while it employs 60 percent of
Chowdhury seems to have the labour force it contributes
come into his own, playing an humour. only 20 percent to the nation's
important role in the army's GDP, a sector where
upgrading and reorganization, subsistence farming, func-
instrumental not only in establishing the Bangladesh tionally landless peasants, and structurally ineffective, if
Military Academy but also in modernizing and rebuilding well-intentioned, NGO interventions dominate the
the army cantonments at Jessore and Bogra. In 1981, while picture.
still merely 41 years old, he retired with the rank of major Enter PRAN, and the beginning of the food processing
general whose last post had been as the army's industry in Bangladesh. Pointing to a plaque in the
Quartermaster-General. conference room General Amjad solemnly intoned that
After retirement he went into business. Amjad Chowdhury PRAN stood for 'Program for Rural Advancement
is disarmingly frank about the move: He needed to make Nationally'. He read more books, consulted with experts
some serious money. But the road to it, and PRAN Group, (he is, however, dismissive of our agricultural university,
was no primrose path. His first venture, building tube wells saying that its tradition-bound teachers and researchers had
at his newly established Rangpur Foundry Ltd, lost money. not been of any use to him) and toured countries from
It has since been turned around substantially, producing Pakistan to the Philippines to learn how to do things, to see
agricultural machinery as well as having established itself the latest in food-processing technology and management
as one the largest producer of plastic pipes and fittings. practices and how to organize the business. Agribusiness,
Next he turned to building apartments (one of the first in to him, came to mean "adding value and shelf life" to

www.bangladeshbusiness.biz 35
 BANGLADESH
BUSINESS
agricultural produce. Crudely put, it means that selling a
raw, perishable agricultural good, say potatoes, is to be at
the bottom of the food-selling chain. The name of the
game is to join the big boys. Take those potatoes, peel them,
liquefy and extrude them into 'chips', put in additives and
preservatives for taste and long shelf life, package them
attractively, brand them with slick ad campaigns and ship
them out to supermarket shelves where they can be bought
and consumed even three months later. Later on, aim for
markets abroad, which means shipping beyond borders,
meeting stiff international quality control standards and
promoting with even slicker ad campaigns.
A business concept is easy enough, but putting it into
practice is, as they say, a whole different ballgame. It was a
message that General Chowdhury kept repeating to us. In
Bangladesh each stage of the supply chain is subject to
pressures: The problems in
ensuring quality crops, the
lack of proper infrastructure,
the absence of power for
cold storage, the lack of PRAN has commenced a
knowledge by farmers of
modern marketing methods $51 million expansion
or information and the lack
of access to credit by farmers
from financial institutions.
project which is expected
Add to it the inertia of
government officials, the "to produce agro-based
extra cost of corruption pay-
offs, the lack of skilled products worth Taka 2
management and labor, and
the list can seem endless. For
example, just getting billion annually."
accredited by international
certification bodies is a major
hurdle for food processing
firms of Bangladesh since
the Bangladesh Standards and Testing Institution (BSTI),
responsible for certifying products, is as yet not capable of
providing internationally recognized food and health
certificates. And yet PRAN, with an easily recognizable
brand name, under Amjad Chowdhury's leadership, has
overcome these hurdles to become one of the biggest
players in the food and processing sectors of Bangladesh.
The current turnover of PRAN Group is US $ 200 million;
its exports have climbed in Taka terms from 214 million in
2005 to 1200 million in 2008. It has established offices in
India and UAE and is the largest exporter of food and
plastic items to over 70 countries - including USA and
Europe. It is also transforming itself from being primarily a
producer and exporter of snack foods, fruit juices and
beverages into a true agribusiness concern. Examples of it
36 April 2009
are its intention of entering the dairy products and the
aromatic rice production business in a big way, in its
increased ability to anticipate changes in the consumption
habits of middle-class Bengalis (which is a crucial driver in
the expansion of the processed food industry), its linking
up with organized retail chains, and in its aiming for foreign
markets outside of the Bengali immigrant enclaves.
Furthermore, PRAN has commenced a $51 million project
(out of which IFC is giving 15 million - the first instance of
IFC financing a project in Bangladesh's agribusiness sector)
to expand capacities and improve operating efficiencies, a
project that, according to a company official, is expected
"to produce agro-based products worth Taka 2 billion
annually."
PRAN's transforming drive is also apparent in its efforts to
ensure a smooth, steady supply of raw material by initiating
contract farming. The latter
practice is expanding in
Bangladesh, as it already has
in India, with not only PRAN
but with other companies
and business houses such as
ACI, Bengal Foods, BRAC,
and which will radically alter
the current rural landscape of
small-scale, self-sufficient
household farming. Though
contract farming is not
without its critics, Amjad
Chowdhury amongst others
argue that by providing seeds,
guaranteeing crop sale and
stabilizing farmer-
agribusiness partnership it
can initiate true modern-
ization of our agricultural
sector. It may have its costs,
but modernization must come to Bangladeshi agriculture.
As the saying goes, only the future will tell. In the
meantime, both PRAN group and its CEO Amjad Khan
Chowdhury seem unstoppable. He had not only the vision
of a modernized, alternative agricultural sector in
Bangladesh allied with a high-value, high-earning and
employment-generating food processing industry, but the
courage to follow his convictions. The time may come in
the future for the torch to be handed over to younger
entrepreneurs in the agribusiness sector, but as our talk with
him winded down it was impossible to avoid the notion that
each and every one of those younger entrants into the
business is unlikely to forget who was the first man to show
them the way ahead. „

Food, And More, for All!
I n the second half of 2007, with the twin floods and
cyclone (Sidr) devastating much of Bangladesh's rural
areas and the coastline, people wondered whether a food
crisis would hit Bangladesh. Indeed, an estimated two
million tons of rice production was lost and the need for
imports became urgent. Importing the required rice volume
would not have been an issue, if unfortunately enough at
the same time global food and commodity prices had not
skyrocketed. That made not only import bills pinch the
coffers of the Ministry of Finance, but also stopped
traditional rice exporting countries' national sellers from
exporting rice in order to avoid any unforeseen shortages
with their own stock of food grains. India, for instance,
over a period of six months, more than doubled its rice
(coarse/non-basmati) export price and finally banned all
coarse rice exports. As food grain shortages hit markets the
world over, the market price of coarse rice in Dhaka
increased to Taka 38 per kg from the pre-crisis rate of Taka
20 per kg.
The genesis of the food crisis is symptomatic of a much
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
deeper problem with the agriculture sector. It brought
about a realization that the sector cannot be left to its own
devices and that intervention by the government is critical
in bringing about a brighter agricultural landscape. The
incumbent political party, while on the election campaign
trail, was quick to dwell on the high prices of food grains,
on the promise of availability of food for all, and on setting
the agenda for improving the prospects for growth in the
agricultural sector. Thanks to the winter rice (Boro)
production of some 17.8 million tons, rice supply in the
country is currently plentiful and prices have also decreased
to the pre-crisis level. But questions remain: What indeed is
the future of the agriculture sector? What about the 70
percent of Bangladesh's population who eke out a living in
farm and non-farm activities?
Over the last two decades, the rural landscapes have
dramatically changed. Bangladesh's population is
undergoing increasing urbanization; there are more non-
farm employment and production opportunities and
growing infrastructure linkages between rural and urban
37
 BANGLADESH
BUSINESS

01 April 2009
 BANGLADESH
BUSINESS

www.bangladeshbusiness.biz 45
 BANGLADESH
BUSINESS

centers. More importantly, private sector businesses, production. Bangladesh has been able to achieve close to
although still in a nascent stage, are reshaping the self-sufficiency in major cereal grains production. Total
agribusiness sector and farmer-market linkages. The domestic production of major cereals (rice plus wheat) was
performance of the rural non-farm sector is robust, with 29,775,000 metric ton in 2007-08. However, domestic
the growth rate over the last decade exceeding 8 percent production has always been supplemented by food imports
and accounting for over 56 percent of the total rural for maintaining a buffer stock for use at times of
income. But the growth of the non-farm sector critically emergency.
hinges on the expansion of high value-added agriculture Times are changing, though. With increasing population
and related agribusiness. and higher income levels as well as changing food
In recent years, developments within the fish, livestock, consumption, the lack of a comprehensive agricultural
poultry, fruits, spices, and vegetables products' sectors are reform could drive the country into a state of permanent
encouraging. With a growth rate of 73 percent over the food crisis, with its corollaries of food insecurity and
corresponding period, Bangladeshi exporters shipped increased vulnerability of large marginal sections of the
processed foods worth about $48 million during the 2007- population. Lack of resources, vulnerability of the
08 fiscal year. PRAN agricultural production
pioneered commercial ex- system to the natural
ports of this sector from hazards like floods,
Bangladesh and now The performance of the rural non- droughts, cyclones, etc.,
exports about half the decreasing/stagnating
country's processed food. farm sector is robust, with the growth productivity plus shrinking
According to industry land for crop production as
sources, at least 20 agro- rate over the last decade exceeding 8 demand for other uses rise
processing companies, are the major bottlenecks
including Square Con- percent and accounting for over 56 hindering the progress of
sumer Products and BD this sector. Rapid
Foods, have significant percent of the total rural income. But urbanization - the urban
export volumes and are population has more than
actively in pursuit of the growth of the non-farm sector doubled since indepen-
foreign markets. However, dence - resulting in more
it is not export, rather critically hinges on the expansion of housing, roads, and
changing consumption and industrial development is
demand patterns in the high value-added agriculture and shifting land use patterns
domestic market that is and reducing the net
causing shifts in the farm related agribusiness. cultivable land area by
and non-farm landscape. about one percentage point
Additional demand arising annually.
from consumer food With such limits on the net
consumption patterns over the next 10 to 12 years is valued cultivable area and the net sown area, any goal to attain
at US $8 billion in 2005 constant prices. Here one has to food security by improving domestic production would
add that these are only projections of consumer food largely have to rely on productivity growth. FAO data
demand. The real extent to which the share of the growing indicates that rice yields in Bangladesh are 45, 20 and 25
market can be captured by domestic producers will be percent lower than in China, Vietnam and Indonesia, while
determined by how the agribusiness industry organizes wheat yields are about 30 and 15 percent lower than in India
competitive facilities for production and marketing and and Pakistan, and are less than half of those in China.
generates momentum. Bangladesh enjoyed high yields in the past but those levels
The development focuses since Bangladesh's independence of productivity have stagnated. Without continuous
has always been increasing food grain production through improvements in yields, the danger of not being able to
the introduction of high-yielding varieties and associated feed the growing number of mouths is a real one. Over the
improved technologies with 'seed-fertilizer-irrigation' years, institutional inefficiencies and neglect by successive
interventions in crop production. The objective has been central governments have created much of the problem.
the achievement of self-sufficiency in food grain The Departments of Agriculture Extension, of Livestock

40 April 2009

Services, of Fisheries, and various agriculture research
institutes have not functioned as expected and have failed
to introduce new technologies, ensure their adoption,
increase farmer engagement in high-value commodities
with effective, dependable market linkages, and increase the
level of agricultural productivity.
With the changed agricultural landscape, public institutions
must now work together with the private sector groups
represented by both the business world and the non-
governmental organizations. The government could set out
a solid basis for agriculture and agribusiness growth by
making sure that the Krishi Gobeshana Foundation and the
Horticulture Export Development Foundation (HORTEX)
operate transparently, hand-in-glove with the private sector,
and by ensuring that research, extension facilities, and
supply chain management are rooted in the needs of
thousands of small farmers. "The private sector has limited
capacity to undertake agricultural research and the
government must support research and extension services
in a more comprehensive way by joining hands with the
private sector," says the Director of Operations of ACI
Foods Limited. The decline of a once very productive
agriculture research system must be arrested, and then
rejuvenated so that it can respond to current development
challenges.
There are issues of institutional changes, governance,
autonomy in decision-making, and funding and allocation
of resources within and outside the public rules and
regulations. Without reforming institutions and changing
www.bangladeshbusiness.biz
BANGLADESH
BUSINESS
fixed mindsets to focus on all the sectors and not just cereal
crops, the possibility of increasing research outputs and
reducing the gap between actual farmer yields and research
station experimental yields is indeed low. The small farmers
need to organize themselves into producer organizations
and form common interest groups to improve supply
chains, yields, and income levels. The participation of non-
governmental organizations as service providers to farmers
over the years have shown high benefits and supporting
their further involvement, coupled with the operations of
the larger corporate businesses, could bring about and
sustain an environment conducive to changes in small
farmer yields and supply chain management.
The immediate past caretaker government and the present
one have done well, with a little bit of luck on their side, in
ensuring that the worst effects of the recent past food crisis
were mitigated and that food prices were brought down to
normal levels. They expanded the food distribution system
through open market sales, set high procurement prices
(procurement price of rice was fixed at Taka 28 per kg
when average cost of production was Taka 21 per kg), and
initiated measures to improve timely delivery of crucial
inputs such as seeds, fertilizers, electricity, and diesel to the
farmers. It is hoped that working together with the private
sector groups to which could be added a timely dose of
luck, as General (retired) Amjad of PRAN pointed out in a
recent discussion, success in business can be an iffy thing;
government intervention in agriculture this time could
usher in a new era for its farm and non-farm sectors.„
45
 BANGLADESH
BUSINESS
‘Thailand Exhibition
in Dhaka’
Commemorating 36 years
of bilateral trade &
investment relations
O n October 5, 1972, only a year after its independence,
Bangladesh had established diplomatic ties with
Thailand. With a new 'Look-East' foreign policy initiated by
the then brand-new state of Bangladesh, the government-
to-government and people-to-people relationship with
Thailand has been strengthened for over three decades now.
The 'Thailand Exhibition in Dhaka' held from 11th to 14th
March 2009 commemorated this 36-year relationship
between Bangladesh and Thailand. Forty-two participating
companies exhibited a diverse range of products such as
food and beverages, health and beauty products, garments
and machinery, gift and decorative items, household and
electrical products, chemical products, stationery, gems and
jewelry, auto parts and accessories, and tour packages. The
fair attracted not only business people, but also crowds who
came by to check Thai consumer products, and enjoy
authentic Thai cuisine offered by @Corner.
Bangladesh-Thailand relations is sustained both at the
diplomatic and commercial levels. Trade levels between the
two countries have been increasing over the years; currently
it stands at approximately $600 million, with Bangladesh
incurring a large trade deficit. Bangladesh's main trading
partners are, of course, India and China with imports in
2008 from those countries being $3324.8 million and $3074
million, respectively, while comparatively imports from
Thailand stood at $490 million. The major imports from
Thailand in 2008 included cement, primary forms of
ethylene polymers, propylene and woven fabrics. The major
exports to Thailand in 2008 included chemicals, yarn and
fibers, and frozen seafood, valued at $6.4 million, $4.1
million, and $2.5 million, respectively. Bangladeshi
exporters have substantial opportunities to exploit the
competitive Thai markets and increase trade volumes. The
Thai government has given duty concessions to over 250
Bangladeshi products and Thai investors have exhibited
interest in exploring potential business markets in
42 April 2009
Bangladesh. On the occasion of the Thailand Exhibition in
Dhaka held over four days, Bangladeshi exporters
expressed their interest in the renewal of a proposal for a
bilateral free trade agreement with Dhaka. Thai investors
also expressed the interest to import 10 million pieces of
jute sacks from Bangladesh and set up a number of hotels
and resorts valued at around Taka 30 billion.
Bangladesh has a high potential to become an investment
destination for Thai investors because of the advantage it
holds in terms of labor costs. C.P. Bangladesh Co. Ltd.,
specializing in agricultural products and services and animal
feed, has large investments in Bangladesh, along with
@Corner, a restaurant business. A power cable
manufacturing plant in the country, also with 100 percent
Thai investment, is currently being set up. However, a poor
investment climate and weak infrastructure, coupled with
procedural complexities are the major drawbacks in
attracting Thai investment to Bangladesh. Despite these
shortcomings, Thai investors are keen to review investment
opportunities in Bangladesh's fisheries sector. Incidentally,
some investors at present have joint-venture investments in
the industrial sector and partial investments in a few shoe
factories and sugar factories in Chittagong. Skilled and
professional consultants from Thailand are employed in the
construction sector; Bashundhara City being a prime
example of such Thai participation.
The success of the Thailand exhibition in Dhaka lay in
having achieved its objective of furthering the trade and
investment relations between Bangladesh and Thailand.
Apart from celebrating and commemorating the existing
trade and investment relations, the exhibition also
promised of mutual and increased initiatives in exploring
new markets and commercial ties for lucrative trade and
investment relations between Bangladesh and Thailand in
the future.„
 BANGLADESH
BUSINESS

Advanced Chemical Industries Limited

Ready for the Recession

A t a time when it is becoming increasingly uncertain

for export industries to increase or sustain current
sales volumes, many voices are assertively speaking for
(ICI) began its operation in the then East Pakistan. After
independence the company was incorporated in
Bangladesh on the 24th of January 1973 as ICI
industrial growth based on the domestic market. It could Bangladesh Manufacturers Limited and also as a public
very well be that export industries will face a slowdown limited company. Although ACI - formed when ICI
from shrinking overseas markets, handed over its operation to local
decreasing prices, and large lay-offs. management - focused for a while
Does the future for business No enterprise has on pharmaceuticals, it also as a
enterprises lie in looking inward matter of course developed a
and focusing on the burgeoning
successfully entered and network with farmers for crop
domestic market? Is the domestic prospered in the rural protection that would soon evolve
market robust enough to support into a wide range of farm and non-
industrial growth? ACI believes so. markets more than ACI, farm related businesses. With a
With four business units and eleven with its firm vision, focus, rapidly growing pharmaceutical
subsidiaries, ACI has concentrated business, ACI has now expanded
in the domestic market and seen its and integration of several into agribusiness and what are
net sales grow to Taka 10.3 billion called Fast Moving Consumer
in 2008. "Bangladesh has a large business lines within a Goods (FMCG), meaning home
market; per capita income is rising single plan framework. care and personal care products.
each year, and the country is still Recently ACI entered into food
rural and agriculture-based," said a products, providing consumers
senior officer at ACI. Only a handful of enterprises have with a range of food products (flour, spices, salt) under its
successfully entered and prospered in the rural markets, catchy brand name 'PURE'. Given the existing gaps in
and none more than ACI, with its firm vision, focus, and demand and supply along the various stages in the national
attention to integrating several business lines within a food value chain, the case for investments in agriculture is
single plan framework. stronger than ever.
It was back in 1968 when Imperial Chemical Industries Over 2007 and 2008 net sales of the company have grown

44 April 2009

by 35 and 80 percent respectively, indicating that
diversification and expansion of business, based on an
investment outlay of Taka 1.7 billion, is paying off. ACI has
diversified into three major businesses: pharmaceuticals,
agribusiness, and consumer brands and commodity products.
The recent expansion in commodity products such as salt,
flour, and spices has already established the ACI brand as one
of the more trusted, quality names. High-value agricultural
produce such as vegetables, fish, livestock, fruits, spices have
an estimated market potential of US $8 billion in terms of
2005 prices. Although several other large enterprises do
operate in the agriculture and agribusiness market sector, and
are planning for expansion of operations, competition in the
sector is not yet robust. "Competition is good for the sector,
we would like to see more firms entering the market," says Dr.
Arif Dowla, Managing Director of ACI. "We have been
aggressive in the past few years and we believe the market
outlook is strong with great potential. Bangladesh is at a stage
where effective implementation of projects is the key for
success. Bangladesh is not in the forefront of innovation, that
is not our game, but implementing projects efficiently and in
a timely manner can provide us with the opportunity to
thrive."
The plot line on the pharmaceuticals market runs along
similar lines. The Drug Control Ordinance of 1982 provided
protection to the domestic market and the robust market has
seen several enterprises seemingly come from nowhere or
come from behind, such as Incepta, Opsonin, and Renata, to
become one among the top 10 leading firms. ACI, however,
with a tradition going back to ICI (now part of the Akzo
Noble Corporate) has a specific expertise and base to which it
has added to over the years. Employing 2,000 workers and
manufacturing 160 products in 357 different dosages (475
registered dosages), the pharmaceutical operation has
maintained a healthy growth of some 25 to 38 percent during
the last two years. While Square Pharmaceuticals leads the way,
the remaining top 10 firms are in a competitive position with
each other, sharing a Taka 47 billion domestic drug market.
While the pharmaceutical industry is poised to enter the
export market, entry has been hampered by the need to obtain
GMP/cGMP certification, or more importantly,
Investment in Recent Years (Million BDT) Market Share (%)
200 400
ACI Foods ACI Foods (Spices)
ACI Salt
Premiaflex Plastics
Air Freshener
Pharma Factory Savlon Antiseptic (Cream)
Savlon Antiseptic (Liquid)
ACI Pure Flour
ACI Mosquito Coil
ACI Salt ACI Aerosol
www.bangladeshbusiness.biz
BANGLADESH
BANGLADESH
BUSINESS
USFDA/UKMHRA/TGA licenses, along with a host of
other issues the industry is attempting to address. Among
those issues are critical ones such as production facilities for
Active Pharmaceutical Ingredient (API) and the establishment
of bioequivalence laboratories.
Although ACI pharmaceutical facilities comply with cGMP
standards, it is yet to obtain USFDA/UKMHRA/TGA
certification. In fact, quality is a core objective and strategy in
ACI. It has been one of the first corporate businesses in
Bangladesh to obtain ISO 9001 and ISO 14000 certifications
ACI Limited: Business Unit Products
Over 400 products covering all major
Pharmaceuticals
therapeutic areas
Home Care Product: ACI Aerosol, ACI
Consumer Brands Mosquito Coil
& Commodity Air Care Product: Angelic Fresh Air
Products Freshener
Hygiene Products: Savlon Liquid Antiseptic,
Savlon Antiseptic Cream, Savlon Family
Protection Soap, Savlon Femme Sanitary
Napkin, Vanish Toilet Cleaner
International alliances: Colgate Palmolive
(oral care), Nivea (personal care), Godrej (hair
care)
Crop Care & Public Health: Insecticides,
Agribusinesses herbicides & fungicides
Seeds: Hybrid rice, vegetables and maize seeds
CropEx: Commodity buying, storing, preserving
& selling
Livestock & Fishery: High-quality
nutritional, veterinary, poultry medicines and
vaccines; proposed - pisiculture, cattle rearing,
cattle fattening & integrated fisheries and
livestock project
Fertilizer: Micronutrient & foliar fertilizers,
zinc sulphate, magnesium sulphate, ammonium
sulphate, boron, sulphur 90% and sulphate of
potash
Motors: Agri-machineries, tractor, power tiller,
engine and harvester
for quality and environmental management. More funds are
being allocated to R&D, quality management and control.
This is a particularly encouraging and progressive step in
the context of a domestic market that has no regulatory
Sale Contribution (%) by Business Units, 2008
50% 100%
45
 BANGLADESH
BUSINESS

system for quality compliance, control of food-borne Corporate Strategy - ACI Limited
risks, and health hazards posed by adulterated products.
Sustained Strategy Aggressive Strategy
ACI's senior management is acutely aware that food safety
„ Crop protection Consumer chain stores
can only be guaranteed by the integration of control „ Pharmaceuticals
„

systems in the complete food chain ‘from stable to table’.
ACI could take this lead to a higher level by raising
consumer consciousness regarding food-borne illnesses
and related health hazards by designing consumer
educational programs and disseminating proper guidelines
on such issues.
ACI has recently established its chain of retail outlets by
opening several stores in and around Dhaka. Its subsidiary
concern, ACI Logistics, is poised to open 17 outlets in the
months to May under the brand name of 'Fresh 'N Near'.
It is part of an aggressive strategy to provide affordable,
quality food and household products to urban low and
middle-income consumers. While Meena Bazaar, Nandan,
and Agora are decidedly upscale, ACI wants to provide
better facilities and products to mass consumers - to give
them a credible alternative to the traditional unhygienic
and poorly organized kitchen markets of Dhaka. It will be
a big challenge for ACI, since Agora, one of the first
supermarkets in Dhaka, aimed at the high-end market,
reportedly is yet to operate profitably.
The shortage of supply of breeder-seed in the country is
acute. Some say this is due to the excessive reliance on
imported seed. The assertion is open to dispute but it is
true that the Seed Certification Agency has not functioned
properly for many years. The use of hybrid seed does have
its opponents, who caution that it causes the topsoil to
turn barren within a few years. But, with the scarcity of
„ Salt and Flour
„ Fast moving consumer
goods
„ Air care products
„ Animal Health Products
Moderate Strategy Planned Strategy
„ Seed „ Livestock
„ Joint venture „ Fisheries
„ CROPEX „ Sugar
„ Fertilizer „ Edible oil
breeder-seeds and the urgent, continual need for high crop
yields to feed a growing population, the use of hybrid
seeds will not abate in the near future. ACI has established
research and development centers in Bogra, Gazipur and
Mymensingh in order to carry out adaptability tests for
seed performance. Its management is fully aware of the
various issues relating to hybrid seed and is engaged in
taking appropriate measures and policies to ensure the
best possible outcome of the seed supply shortage.
ACI is highly leveraged, a condition arising from its recent
expansion and investments. In order to manage its debt
position the company has turned to innovative measures,
particularly in seeking instruments to attract investors.
"We had to look for different financing approaches like
direct listing, trading corporate bonds", said Muallem A.
Choudhury, Executive Director of the company. ACI
Formulation undertook direct listing of 5,267,150 shares

Photo: Creative Communication Limited

 BANGLADESH
BUSINESS

with a par value of Taka 10 each in Dhaka and Chittagong permanent and contractual employees, a large number of
stock exchanges (DSE and CSE), the first private company part-time workers as well as five to six hundred
to do so. "Market response was excellent. We got over agronomists, veterinarians, animal husbandry experts,
Taka 150 premium per share on average," he said. "But we team management is critical to the firm. ACI's
would not get more than Taka 30 premium if we had gone management board is fully aware of this dimension and
for IPO." Now each share sells for Taka 191 in the has put in place an empowerment policy that enables
secondary market. ACI Limited also pioneered the issue of employees to freely share their views with management,
the first tradable bond in DSE and CSE. The 20% creating a vital synergy between management decisions
Convertible Zero Coupon Bond will allow holders to and employee opinions. "Team work, motivation, rewards,
exchange 20% of par value of the and a constant education on
bond for the company's stock at behavioral and organizational
an exercise price. "The striking By transforming the domestic issues is what we seek to provide
price will be well below the market our employees," said a senior
market in terms of providing
price and significantly higher than company HR executive. The
face value. So exercising the option consumers with quality company management has set out
will result in significant capital six values: quality, transparency,
premium. The dilution of share products and better healthcare, fairness, customer focus,
will be only 6% over a five-year attempting to ensure farmers innovation and continuous
period." If everything goes improvement. "The entire
according to plan, ACI Limited livelihood and promoting the Southeast Asia region is moving
will be able to raise around Taka forward, Bangladesh will not
one billion through this bond
use of modern farm technology, remain behind and ACI believes it
issuance. Large and established ACI has set standards for can change the nation," declared
business houses need to initiate Dr Dowla.
and utilize modern corporate existing companies, as well as By transforming the domestic
practices not only for their own market in terms of providing
for new entrants.
benefit, but also in order to consumers with quality products,
provide examples of playing a critical role in terms of
professionalism, sound structure, and governance in the better healthcare, attempting to ensure farmers livelihood
society at large. It is praiseworthy that ACI has taken the and promoting the use of modern farm technology, ACI
lead in many such areas. has set standards for existing companies, as well as for new
Bangladesh has a severe shortage of high- to mid-level entrants. And by vividly demonstrating what home-grown
professionals and attracting them from existing sources is companies can do in terms of the domestic market, job
a key challenge. Led by a young, dynamic, and visionary creation and consumer confidence, it could also very well
managing director, ACI has built a competent team of serve as a guide to other companies on how to survive,
professionals to oversee and operate its wide range of and even achieve healthy growth, in these lean
diversified businesses and products. With over 4,948 recessionary years.„

www.bangladeshbusiness.biz 47
 BANGLADESH
BUSINESS
VENTURE CAPITAL INVESTMENTS
New Kid on the Block
B ack in 2001 the Bangladesh government, wishing to
jumpstart investments in agribusiness and IT sector,
established an Equity and Entrepreneurship Fund (EEF).
Over six years, some Taka 400 crore had been disbursed to
212 projects. These numbers are tentative since information
on EEF operations is hard to acquire. Even Bangladesh
Bank does not provide any information on EEF; this can
be verified by checking the Bank's website. Reportedly, the
'Fund' has been mismanaged and only a fraction of the
beneficiaries actually operate a fully functional business.
Among them is a crocodile farm that has garnered media
curiosity and attention for its success. An appraisal of the
EEF indicates that poor investment decisions coupled with
long delays in processing, incomplete understanding of
markets, a lack of competence on the part of promoters,
and the inability of financial institutions to soundly appraise
business plans hampered operations of the EEF, shrouding
it in a lack of transparency and making it ineffective. In
January 2009 it was reported that EEF would be transferred
to the Investment Corporation of Bangladesh with the
expectation that a better and more transparent operation of
the fund could be established. We only know that the
Information and Communication Technology operation of
48 April 2009
Photo: VIPB
EEF has been transferred to the ICB and not the
agribusiness operation. Under these circumstances one can
only welcome the entry of Venture Investment Partners
Bangladesh Limited (VIPB), a private equity fund.
VIPB promotes equity investments in Bangladesh,
hopefully setting a better and more competitive example to
EEF. It started as a public limited company, registered on
October 22, 2006. Mr. Zia U Ahmed, the chairman of
VIPB, said, "We realized the opportunity and started
approaching institutional investors both in and outside the
country." It was set up as a joint venture between USA-
based non-resident Bangladeshi (NRB) institutional
investors and investors in Bangladesh. "Our total paid-up
capital is Taka 12.5 crore with Taka 7.5 crore raised from
local sponsors and the rest from NRBs." VIPB invests
through direct equity and quasi-equity instruments. He
further elaborated, "Under direct equity investment, VIPB
usually buys up 5%-30% of the company and is entitled to
receive an equal percentage of profit." VIPB takes no
collateral in direct equity investment. On the other hand, a
quasi-equity loan is offering one part of the funding as a
structured debt, meaning that there is a certain fixed
monthly rent of the investment. The other part is an equity
 BANGLADESH
BUSINESS

investment. As an equity holder, VIPB owns preferred waste, causing air pollution. The Dhara Stitch project in
shares with limited risks and shares revenue earnings. Since Jessore has created employment opportunities for over a
March 2008, VIPB has already invested in around 200 small hundred women where VIPB has a quasi-equity investment
businesses. It primarily targets rural, non-farm businesses of Taka 15 lakh.
with an internal rate of return of around 30% and a EEF has a first preference to share disposal, but stories
potential to grow five times over five years. "Our abound on how difficult it has been to exit from initial
investment range is from Taka 2 lakh to Taka 1 crore with equity investments with EEF since so few of its
an average of Taka 8 lakh per investment. Most of the investments have materialized into viable operations. Equity
investments are medium-term, of 3 to 5 years." VIPB financing, particularly in Bangladesh, should require a
carefully scrutinizes each investment project and takes structure for monitoring operations; in fact, there should be
decisions after a thorough field investigation, a procedure quite a heavy involvement with the operational ends of
that should have been followed by EEF. businesses. Even a close scrutiny of the EEF's procedures
Until now, and before the advent of EEF, venture capital and modalities does not reveal any involvement of its
investment had been an unexplored avenue in Bangladesh. shareholder, i.e. the Bangladesh Bank. VIPB, on the other
In a country where mostly bank financing and personal hand, is more astute, with a mature awareness of the nature
sources of capital dominate investment decisions, equity of business operations in Bangladesh and therefore has
financing is yet to attract the made it mandatory to "hold minor
attention of entrepreneurs. The but significant stakes, so the
opportunities for business and the VIPB carefully entrepreneur has full control but
corollary need for finances, we still preserve the right to advise
however, are changing this practice scrutinizes each with more effective strategies for
and driving entrepreneurs to look investment project and long-run benefits, if required.
for alternative sources of finance. Company and TIN registrations are
During our visit to the VIPB office takes decisions after a a must. We teach all entrepreneurs
in Gulshan, Mr. Zia U Ahmed, said, thorough field how to maintain books of accounts
"Many small businesses show signs (especially cash book) and employ
of high growth potentials. investigation, a our trained local representatives to
Naturally they come embedded monitor them." The approach
with high levels of business risk."
procedure that should requires more work, but it is
He inferred that the unwillingness have been followed by undeniably a sincere and genuine
of traditional lenders to invest in attempt at assisting new
risky projects or an inability to
EEF. entrepreneurs and looking out for
retain adequate collateral translates their interests. There is much to be
into the fact that promising new commended in this approach,
business ideas never get the opportunity to launch and which our high-flying financial institutions would do well to
become successful. VIPB has invested in The Chargram emulate. And what is VIPB's exit strategy? Like any other
Fisheries Project with a stake of Taka 75 lakh. This business venture capital firm, VIPB expects to make a profit through
project is located near Daudkandi, where local NGOs the future sales of stakes in the firms it has invested in.
combined six villages into a kind of cooperative to utilize VIPB's exit strategy includes sales of its shares either to a
the flood plain area for the common good. The formation third-party organization, through possibly a public offering
of the cooperative, instead of individual fishing efforts, has of the company in the stock market or through an option
brought with it economies of scale such as lowering raw to sell back to the principal entrepreneur at a previously
material (larvae, fish-feed, etc.) costs. VIPB claims the agreed price. "So far we have only 3 to 4 firms with IPO
project has 100% returns. VIPB is sensitive to social and potential in our investment portfolio. We are thinking of
environmental concerns and damage mitigation is high on exercising our put option to sell back to entrepreneurs,"
its agenda, though it does list commerce and business as its said Mr. Ahmed. It seems that the state-run EEF has much
first priority. This is reflected from projects such as the to learn from the privately operated VIPB, in the context of
Rajshahi Briquette Project, a Taka 10 lakh facility set up to NRBs willing to invest their money and capital
transform rice husks (wastage of rice mills) into ‘briquettes knowledgeably combined with the willingness to challenge
and poultry feed’. Previously, the millers simply burnt the old ways of investment thinking and practices.„

www.bangladeshbusiness.biz 49
 BANGLADESH
BUSINESS

Fundamentals

50 April 2009
 BANGLADESH
BUSINESS

Economic Indicators

www.bangladeshbusiness.biz 51
 BANGLADESH
BUSINESS
Review Notes

52 April 2009