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17 April 2008
Growth, Investment, Opportunity
Asian Tiger Capital Partners
The Bangladesh paradox has been one of surprising economic resilience in the face of natural disasters, poor governance and political volatility. In effect, an entrepreneurial private sector base has compensated for a less supportive macro political environment. However, a key challenge is whether Bangladesh can move away from an economy that is an impressive underdog, to one that can truly join the ranks of the fastest growing economies in the region. Is it realistic for Bangladesh to follow in the footsteps of Vietnam and become the next Asian Tiger? It is important that Bangladesh can attract long term investment flows that will help build the infrastructure and productive capacity of the economy. The aim of this paper is to provide global investors with an outline on the challenges and prospects for the Bangladesh economy. But a large portion of this report is dedicated to our review of industry profiles and sector reviews, reflecting our belief in the need to focus on specific investment ideas. We hope this report, the first of a series of more detailed sector analyses we intend to publish, will reduce some of the informational asymmetries that have constrained FDI flows. We remain optimistic that the next phase of Bangladesh’s economic development will provide many profitable opportunities for global investors.
Ifty Islam Managing Partner +880 171 584 0112 firstname.lastname@example.org Syeed Khan Partner +880 172 726 1267 email@example.com Abdullah Ibneyy Shahid Research Associate firstname.lastname@example.org
Asian Tiger Capital Partners
UTC Building, Level 16 8 Panthapath, Dhaka-1215 Bangladesh www.at-capital.com
AT Capital Research
CONTENTS 1. Overview………………………………………………………………………………………………………………………………………………………………………. Overview Introduction A case for optimism The importance of developing an economic vision Improving manufacturing productivity Lessons from Vietnam The key enabling goals Conclusion 2. Our Top Investment Investment Ideas………………………………………………………….………………………………………………………………………… deas 3. FDI in Bangladesh: Background………………………………………………………………………………………………………………………… Background Trends in FDI flows Sector distribution of FDI flows FDI outlook 4. Capital market…………………………………………………………………………………………………………………………………………………………… market International diversification An emerging capital market A favorable environment for foreign investors 5. Banking…………………………………………………………………………………………………………………………………………………………………………. Banking Banking sector performance The regulatory environment Opportunities in a developing economy 6. Energy…………………………………………………………………………………………………………………………………………………………………………… Energy Energy review Meeting the country’s energy needs 7. Infrastructure (non(non-Energy) Energy)………………………………………………………………………………………………………………………………….. Road, rail and ports Lessons from around the world Strengthening the nations backbone 8. Agriculture Agriculture…………………………………………………………………………………………………………………………………………………………………... iculture A long tradition in agriculture Meeting the needs of the population Improving yields and product innovation 9. Textiles…………………………………………………………………………………………………………………………………………………………………………… Textiles A success story Increasing global market share Exploring the value chain 10. Outsourcing………………………………………………………………………………………………………………………………………………………………. Outsourcing Redefining the supply chain An enabling environment A credible partner 11. Manpower…………………………………………………………………………………………………………………………………………………………………… Manpower Increased global labour mobility Substantial opportunities for global competitiveness Enabling an international workforce 5
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12. Pharmaceuticals……………………………………………………………………………………………………………………………………………………… Pharmaceuticals Competitive advantages ahead of 2016 A sustainable long term strategy 13. Healthcare……………………………………………………………………………………………………………………………………………………………….…. Healthcare The current state of the market Prospects in medical tourism Developing private health care 14. Biotechnology……………………………………………………………………………………………………………………………………………………………. Biotechnology The importance of biotechnology for Bangladesh Lessons from India Opportunities for investment 15. Light Engineering…………………………………………………………………………………………………………………………………………………… Engineering Industry review Potential growth areas Building on a strong base 16. Heavy Engineering: Ship Building..........……………………………………………………………………………………..………………. Building A booming market Is growth sustainable? 17. Tourism……………………………………………………………………………………………………………………………………………………………………….. Tourism Marketing and promotion strategies An overview of the hotels sector Developing an effective tourism strategy 18. Education……………………………………………………………………………………………………………………………………………………………………. Education The enabling environment of education in Bangladesh Areas for focus 79
Appendices Appendix 1-Overview Figure 1-10: Various indicators on doing business in Bangladesh Figures 11-22: Investment related costs in Dhaka vis-à-vis various other cities around the world Appendix 2-Energy Figure 1: Power generation mix in Bangladesh in Fiscal Year (FY) 2006 Figure 2: Trend in annual power generation capacity in Bangladesh Figure 3: Coal reserves in Bangladesh Appendix 3-Infrastructure (non(non-energy) Figure 1: Composition of different types of roads in Bangladesh (2007) Figure 2: Revenue earnings and expense of Bangladesh Railway Figure 3: Toll target and collection by Jamuna Multipurpose Bridge Authority Case 1: Reform of Bangladesh Railway Appendix 4-Agriculture Figure 1: Food grain production in Bangladesh Figure 2: Export of agricultural commodities from Bangladesh Figure 3: Production and import of chemical fertilizers by Bangladesh Figure 4: Employment broad economic sectors 116
2004 Figure 2: Per capita expenditure on health in various countries Figure 3: Distribution of patients by method of treatment in Bangladesh (%). World market by geographic region Figure 2: Top 20 manufacturers in Bangladesh by sales Figure 3: Top 10 Therapeutic segments in Bangladesh by sales Figure 4: Top 14 molecules in Bangladesh by sales Figure 5: Major API manufacturers in Bangladesh and their products Appendix 8-Healthcare Figure 1: Total expenditure on health as a %age of GDP by countries.AT Capital Research Appendix 5-Textiles Figure 1: Ready Made Garment (RMG) exports from Bangladesh Figure 2: Main apparel items exported from Bangladesh Figure 3: Structure of Bangladesh’s Primary Textile Sector (PTS) Figure 4: Comparative growth between spindle capacity and growth in RMG Appendix 6-Manpower Figure 1: Estimated size of remittances market in Bangladesh Figure 2: Different categories of Bangladeshi migrant workers Figure 3: Overseas employment of Bangladeshi workers at various skill levels Figure 4: The demographic implosion in developing world (mn) Figure 5: Sources of Remittances to Bangladesh (in USD mn) Appendix 7-Pharmaceuticals Figure 1. 2005 Appendix 9-Biotechnology Figure 1: Indian Biotech segments Case 1: Major Multinational Biotechnology players in India Appendix 1010-Heavy Engineering (Shipbuilding) Figure 1: Growth of world shipbuilding capacities Appendix 1111-Education Figure 1: Bangladesh educational institutes Figure 2: Number of public and private technical-vocational institutes 2005 Figure 3: Number of public and private professional college 2005 124 126 128 130 132 132 133 4 .
Asian Tiger Capital Partners Ifty Islam Managing Partner +(8801) 715840112 ifty. We hope this report. However. The aim of this paper is to provide global investors with an outline on the challenges and prospects for the Bangladesh economy as well as investment opportunities. We believe it is realistic for Bangladesh to achieve a similar tenfold increase over a seven year period. corporate governance. poor governance and political volatility. not only to attract FDI. A dynamic private sector and a substantial increase in FDI flow is likely to fail to deliver the kinds of economic growth gains Bangladesh need’s to become a Middle Income Country (MIC) unless the government and the regulatory authorities can provide a supportive enabling environment in terms of infrastructure. but also to improve manufacturing productivity. a key challenge is whether Bangladesh can move away from an economy that is an impressive underdog. The growth of private equity firms (those that invest in non-listed securities) can positively impact Bangladesh’s ability. will reduce some of the informational asymmetries that have constrained FDI flows. capital markets. law and order. education. Vietnam saw its FDI increase from USD 2bn in 2000 to an estimated USD 1 20bn in 2007.islam@at-capital.AT Capital Research Overview Overview The Bangladesh paradox has been one of surprising economic resilience in the face of natural disasters. a large domestic market of 150mn people. increasing FDI from a projected USD 700mn in 2008 to USD 7bn by 2015. to one that can truly join the ranks of the fastest growing economies in the region. Bangladesh has three key attractions for global investors and multinationals: a large base of low-cost labour. fiscal policies among other factors. . The fact that Bangladesh is lagging in the economic development chain is a potential advantage for policymakers in terms of the ability to learn from the experience of other countries. We remain optimistic that the next phase of Bangladesh’s economic development and will provide many profitable opportunities for global investors.com 5 . it is important that Bangladesh can attract similar long term investment flows that will help build the infrastructure and productive capacity of the economy. and nearly 3bn people in the Asian region that it has market access to. the first of a series of more detailed sector analyses we intend to publish.
The Bangladesh paradox Optimism for becoming middle income country is justified.AT Capital Research Introduction The Bangladesh paradox has been one of surprising economic resilience in the face of natural disasters. The role of government should be to create an enabling environment for both FDI and domestically generated investment capital to prosper. most notably China. It is important that Bangladesh can attract similar long term investment flows that will help build the infrastructure and productive capacity of the economy. ultimately it is an aggregate of a series of specific investments across a variety of industries. In effect. but reflects our belief that the range and breadth of investment opportunities. This is not accidental. We hope this report. Even if growth has lagged a number of other economies in Asia. This will clearly require regulatory reforms. poor governance and political volatility. development of the capital markets. However. and greater infrastructure expenditure. We remain optimistic that the next phase of Bangladesh’s economic development will provide many profitable opportunities for global investors. The aim of this paper is to provide global investors with an outline on the challenges and prospects for the Bangladesh economy. saw its FDI increase from USD 2bn in 2000 to an estimated 1 USD 20bn in 2007. as Bangladesh integrates more effectively with the global economy . But Bangladesh also needs to market the opportunities it offers to global capital markets and multinationals more effectively. an entrepreneurial private sector base has compensated for a less supportive macro political environment. the first of a series of more detailed sector analyses we intend to publish. especially on power generation. is justified. But a large proportion of this report is dedicated to our review of industry profiles and sector reviews. the 50 anniversary of its Independence. Vietnam. But it is not inevitable. India and Vietnam. increasing FDI from a projected USD 700mn in 2008 to USD 7bn by 2015. While FDI seems to be a generic and nebulous concept to many. to one that can truly join the ranks of the fastest growing economies in the region. a key challenge is whether Bangladesh can move away from an economy that is an impressive underdog.is not fully appreciated by many international investors. Building an enabling environment to spur FDI and domestic private investment 6 . the volatility of Bangladesh’s growth has been lower. We believe it is realistic for Bangladesh to achieve a similar tenfold increase over a seven year period. Is it realistic to assume that Bangladesh can follow in the footsteps of Vietnam and become the next Asian Tiger? We believe optimism that Bangladesh can move into the ranks of Middle Income th countries (defined as a per capita income of USD 875) by 2021. But this will require Bangladesh moving from a 5-6% growth trajectory to around 7. will reduce some of the informational asymmetries that have constrained FDI flows. This is not impossible given the experience of other countries in the region. Much will depend on the ability of Bangladesh to achieve achieve the acceleration in FDI (Foreign Direct Investment) flows seen in the rest of Asia and parts of Latin America.5%. for example.
GS. in th the e immediate aftermath of the political uncertainty following Tiananmen Square. global investors should not overlook the scope for transformational shifts. when the country was almost bankrupt and going to the IMF for emergency funding.5tr of reserves. what one mig “Brand Bangladesh”. is a young population of 150mn people with very favourable demographics resulting in one of the fastest rates of growth of labour supply in the world. very few economic forecasters would have predicted that less than 20 years later China would be the manufacturing power house of the world. As students of economic history. who have done much of the pioneering work on BRICs (Brazil. corruption A more positive impression we believe is appropriate.In 1825. US investment bank Goldman Sachs. world. China and India constituted 50% of global GDP and by 2050 these two nations will again constitute 50% of global GDP. One only needs to look at recent history for evidence that globalization has accelerated the potential pace of economic change. Source: CIA Factbook2 Economic history suggests never underestimate the scope for transformational change When considering what might be possible in Bangladesh. India was the second7 . a country in the heart of Asia and juxtaposed strategically between India and China.AT Capital Research The need for a more positive “Brand Bangladesh” A Case for Optimism . we are struck by the scope for profound changes in a country’s competitive economic position over the longer-term. overpopulation and corruption. is likely to be one of natural natural disasters. Russian. that just 15 years later it would become a global 3 powerhouse in services with near USD 300bn in reserves.a longlong-term perspective on economic potential might ht define as The image of Bangladesh for the rest of the world. 2007) when commenting on 3 India that: “On the eve of the Industrial Revolution (around 1770). Even the most optimistic Indian patriot would have been hard pushed to forecast in 1992. with more than USD 1. Similarly with China. India and China) noted in a recent report (“Brics and Beyond”. a very entrepreneurial culture as evidenced both by the resilience of the textile sector to the end of MFA quotas. grinding poverty.
3 Pakistan. Egypt. Bangladesh’s geographic position gives it every opportunity to participate in the “Asian Century”. Korea. India followed inward-looking and state-interventionist policies that shackled the economy through regulations. and India has begun to play catch-up. Goldman Sachs bullish on Bangladesh as part of their “Next 11” EM markets to follow the BRICs Goldman Sachs in 2005. Reforms beginning in 1991 gradually removed obstacles to economic freedom.” They go on to forecast that India will overtake the US as the second largest 3 economy in the world to China by 2050. contributing more than 20% of total world output. Progress has been made over the last few years to reduce poverty. The result was a very diverse grouping that includes Bangladesh. After independence in 1947. that share had fallen to 3% the lowest in its recorded history. driven to some extent by a lack of openness. active civil society and a relatively free media have increased public accountability. steadily re-integrating into the global economy. Their goal was to “identify those countries that could potentially have a BRIC-like impact in rivaling the G7”. Philippines. We believe it is this potential that will increase the focus. pejoratively termed the Hindu rate of Growth.AT Capital Research In 1770 India was the second biggest economy in the world. the post-industrial economic decline of India (and China) is a historical aberration. JP 4 Morgan Research. The result was decades of low growth. Mexico.1% (CAGR). and severely restricted trade and economic freedom. increasing literacy levels and moderating population growth to a more sustainable level. Indonesia. An assertive judiciary. today Transformational change is not inevitable but it is certainly possible. By the 1970s. Their main common ground and the reason for their selection was that they were the next set of largepopulation countries beyond the BRICs. 04 April 2007) they commented that: JP Morgan have added Bangladesh to their “Frontier five” on the basis of its favourable demographics and large population “It is the demographics of Bangladesh that justifies its inclusion in the JPMorgan Frontier Five. The purpose of all this historical analysis is to rere-iterate that Bangladesh by 2021 could be radically different to the country you see today. interest and opportunities for global investors. In their 2007 report (“Ho Chi Minh trail to Mexico”. Five-year economic growth is strong at 6. By 2050 it will overtake the US to reclaim 2nd place largest economy in the world.” 8 . after two centuries of relative economic stagnation. Nigeria. The country ranks fourth in growth in economically active population. Turkey and Vietnam. From a long-term perspective. JP Morgan also introduced the concept of the “Frontier five” and included Bangladesh in that list. Iran. introduced the concept of the Next Eleven (N(N-11) and included Bangladesh Bangladesh in that list.
we associate it with Samsung. adopted its “Doi Moi” (roughly translates as “change or something new”) or “Renovation” policy back in 1986 that culminated in peak FDI flow 10 years later in 1996. The redefinition of Korea corporate brands such as Samsung. Former PM Mahathir adopted his “Vision 2020” strategy in 1994 of moving Malaysia from a 7 developing to an advanced nation. Witness Chinese Paramount Leader Deng Xiaoping’s “Open Door” policy of the early 1980s in moving the Communist economic system towards a more market and export based strategy.000. But translating this rising interest by the foreign investor community into substantial capital inflows will require a focused strategy to create both a broad range of concrete investment opportunities/proposals along with a supportive regulatory environment. When we think of Korea now. it was the “Chaebol” or family conglomerates that had the “Vision” to help the country accelerate to first world status. the current favourite of the global investors buying into the Asian economic miracle. away from being perceived as a cheaper alternative to Japan. LG and Hyundai. Korea had a per capita GDP of USD 10. a near trebling in just a decade. which has just celebrated moving to a per capita GDP of USD 20. Bangladesh: The Importance of Developing an Economic Vision There is little doubt that the success of the previous Asian Tigers has been predicated on Economic Vision. But Korea managed to re-invent itself despite the collapse in GDP and the crisis of national self-confidence.AT Capital Research Bangladesh population growth rate one of the fastest in Asia Source: globalis. The private sector was the catalyst for the dramatic economic recovery. Vietnam. this has been at Government level. Indeed in 1995.000 that collapsed to USD 7800 in the aftermath of the 1997 Asian crisis.unu. to being associated with the most cutting edge technology in electronics from 70" plasmas to talking refrigerators should be an inspiration to any corporate 9 Economic vision at both a government and private level key to the success of current and previous Asian Tigers Korean Chaebol have shown the potential impact corporate strategic vision can play in a country’s economic development .gvu. But not all transformational economic vision comes at a government level.edu5 The growing number of global investment banks focusing on the opportunities in Bangladesh clearly suggests increasing potential to step up both FDI and foreign portfolio flows. While the government played an important enabling role. Vision In many cases. Take South Korea. The Asian crisis hit Vietnam hard but the ability to grow FDI flow from USD 2bn in 2000 to USD 20bn in 2007 6 underlines the important foundations the “Doi Moi” policy made.
AT Capital Research questioning the ability of their vision to impact a country.b. In 1950. The 2006 CPD paper “Bangladesh Vision 2021” prepared under the Nagorik committee is an excellent and thought provoking summary of many of the key issues. will require better economic governance and business environment without which FDI will continue at low levels. a commercially 10 . • A shift from agriculture to industry and services • Deepening integration with global markets • The emergence of diverse dynamic urban centers The WB Report goes on to note that “the management of these transitions. but one still needing a supportive regulatory environment. one need only look to India. the World Bank suggested that Bangladesh could reach Middle Income Country (MIC) status (defined as USD per capita of USD 875) by 2016 if it grows 7. South Korea’s GDP per capita was the same as Bangladesh!). closer to the Korean experience. now of the world’s leading IT and outsourcing companies was originally an edible oil company.5% per year. India was probably a hybrid between the two models of public sector versus private sector economic vision. there have been two excellent and comprehensive reports that we would recommend that global investors take a look at. greater integration with global markets and the emergence of dynamic urban sectors. The July 2007 World Bank Report “Bangladesh: Strategy for Sustained Growth” also provides plenty of food for 9 thought. when the country was almost running out of reserves and forced to seek emergency IMF financing. The report highlighted three key mutually re-inforcing long9 term transitions as being integral to achieving this outturn including: India’s hybrid economic vision with government combining with NRIs helped provide the foundation for the rapid economic growth of today A sustainable economic strategy for Bangladesh Key themes include shift away from agriculture. forced a re-thinking on a socialist economic strategy. The economic crisis of 1992. The Valley y to Bangalore. In the latter report. But the Indian success story was clearly not all down to government reforms. Indeed when Bangladeshi corporates express skepticism about their ability to work with policymakers to deliver necessary regulatory reforms. have also private sector led by NRIs returning from Silicon Valle played a pivotal role. in turn. It took the vision of the then finance minister (now prime minister) Manmohan Singh to create the right environment for change that included cutting the excessive tariff barriers and regulatory constraints on foreign ownerships and repatriation of profits that was limiting FDI flows. Bangladesh’s Economic Strategy In formulating the likely economic strategy and hence investment opportunities. for evidence of what can be done when the public and private sectors develop a partnership/adopt a mindset of cooperation. (n. The Bangladesh growth model is likely to be built on the dynamism of its entrepreneurs/corporates. The “Hindu” rate of growth of 3% and all the problems of the “License Raj” with a labyrinthine and suffocating bureaucratic apparatus were increasingly viewed as misguided. Family companies like Tata and Reliance have re-invented themselves. continued macroeconomic stability. Wipro. whose bureaucracy in the early 1990s was no less unwieldy than Bangladesh’s regulatory framework today.
education. and a greater emphasis on the quality of education and labour skills”. deeper and more efficient financial sector. The Importance of Improving Manufacturing Productivity The World Bank also did a survey of 700 firms in five key industries where they 9 found six key factors that was likely to improve productivity: i. iii. They emphasized the need to also support Small and Medium Sized Enterprises 8 (SMEs) in terms of access to credit and technology innovations. developing the jute industry to benefit from the growing demand for eco-friendly products. Addressing energy supply constraints where they noted that a 1% increase in the number of power outages in a year reduces the productivity of the average firm by 10%. New strategic sectors for the economy include offshore light manufacturing. iv. the Committee identified a number of new sectors assembled electronic goods. vi.AT Capital Research viable energy sector that supports the country’s vast energy needs. more open trade. WB survey highlighted key factors to improve productivity … …. ii. data processing. The WB also noted that new measures were needed to encourage the application of a greater innovation and the adoption of more advanced technologies. agro-food processing. increased FDI. By lowering trade barriers since they found that firms that export the majority of their output were 10% more efficient than those that are more domestically focused. manpower. Strengthening law and order: the ongoing presence of “protection payments” was a negative. In terms of Goal Three. manpower and agro-businesses The “Bangladesh Vision 2021” paper from the Nagorik Committee identified eight inter-related goals. to help Bangladesh achieve MIC status th by the time of its 50 anniversary from Independence in 2021. Building human capital: Higher Education levels and better management training were important contributors to firm productivity.these included better infrastructure. v. law and order Source: CIA Factbook2 11 . data processing. They also outlined the support for the expansion of existing leading sectors of the economy including textiles. Increase FDI since they found firms with any level of foreign ownership were found to be 10% more productive on average than firms that are wholly domestically owned. innovation. Experience gained in export markets was selfreinforcing over time. eco products.
Vietnam and Cambodia across issues such as product and market diversification. “(Fitch) believes that legal framework.AT Capital Research International Private Equity firms can bring in substantial efficiency for Bangladeshi firms It is worth worth noting that the arrival of international Private Equity firms (those that invest in nonnon-listed securities) can positively impact Bangladesh on all of the above with the exception of law and order. 11 Government-Private Sector forum and Investment Climate. Vietnam. IT. Vietnam benefited from its “Doi Moi” policy with a pro-active strategy to attractive FDI 12 . pricing. lean manufacturing.7%. Fitch also notes that since the introduction of the First Law on Foreign Investment in 1987. are crucial for foreign 12 direct investment into Vietnam”. Sri Lanka. The major “value-added” from private equity is likely to be from strategic capital. according to the World Bank’s “Doing Business Report 2008”. 2000 and 2003. 1996. Also. Vietnam’s st overall position improved to 91 (out of 178 countries) which was better than th th Bangladesh (107 ) though the latter was still better than India (120 ). As a recent Fitch Ratings Report (February 2008) has noted. and procurement and supply chain management.” The FDI policy was further regulatory changes and amendments in 12 1990. the UNDP 2005 paper “Report on Identification of Employment Oriented Export Sectors” offers insights including comparables with Thailand. In a report on Private Equity. trade promotion. Vietnam “has identified itself as a county determined to attract FDI. and th 13 Cambodia (145 ). the clear success story in Asia’s Asia’s Vietnam. (see Appendix 1 for details on Bangladesh’s “Ease of Doing Business” results).” (McKinsey 2005) Lessons from Other Other Countries – Vietnam The fact that Bangladesh is lagging in the economic development chain is a positive in terms of the ability to learn from the experience of other countries both in this region and in the emerging markets (EM) more broadly. clear government policies. Vietnam’s political stability as a one party state under the Communist Party has given some reassurance to 2 investors. 1992. local market size and cost structures in considering FDI destinations. which has seen FDI expand tenfold from USD 2bn in 2000 to USD 20bn 20bn in 2007 with in excess of USD 5bn recorded for Q1 2008. Pakistan.4% 6 second only to China at 9. What can Bangladesh learn and what are the lessons for potential global investors in Bangladesh from the Vietnam experience? experience? A paper by Hsieh Weng-Jen (2005) “The Determinants of Foreign Direct Investment in South East Asian Transition Countries” suggests that foreign investors value political stability. tax incentives and industrial facilities. For lessons Bangladesh can learn from the rest of Asia. leading 10 strategy consulting firm McKinsey noted that: “Several buyout firms now recognize that they can create value (in conjunction with management teams) by participating more in managing the companies in their investment portfolio and by developing cross-industry functional skills—including marketing. Vietnam’s growth in the 2000-2006 period has been 7. Since the “Doi Moi” policy was launched.5% and above India’s 6. trade agreements. Vietnam increased FDI from USD 2bn in 2000 tenfold to USD 20bn in 2007 However. the government has been striving to implement policy measures to promote investment.
But perhaps the greatest lesson Bangladesh can learn is that in the same way Vietnam has clearly benefited from the “China+one” policy of many global multinationals in terms of reducing their dependence on China. rather than lower wage workers sending money back to the country. Pakistan at 50% and Bangladesh at 43%. July 26. the workforce’s English language proficiency compares favourably with many of its 6 neighbors. An elevated railway envisaged to be able to compete with Singapore or Bangkok is planned for Hanoi. This 6 will reduce reliance on hydropower from around 40% currently. A strong educational system is also a major attraction for Vietnam Vietnam as an FDI destination. But in other areas such as outsourcing. The government also continues to provide preferential incentives to projects investing in the industrial. As the DB report notes. Leveraging Diaspora is an area Bangladesh has done with remittances but it can clearly do more.AT Capital Research Vietnam’s continues to innovate FDI policy including lowering corporate tax rates. in both power and communications 13 . more industrial zones To further enhance the country’s attractiveness as an FDI destination. The government plans seven new power plants by 2010. So in terms of Vietnam lessons for Bangladesh. On infrastructure. Vietnam is constructing six international airports with one Bangkok. Vietnam’s focus on education Vietnam’s has focused on improving infrastructure. due to Vietnam’s openness to foreign influence and reliance on trade. Vietnam’s government has also proposed cutting the standard corporate tax rate from 28% to 25% to create a more favourable business environment for FDI. DB Research. Bangladesh should aim to position itself as “India+one”. Remittances from the Vietnamese Diaspora amounted to 9. it has been far less effective. especially China. one natural gas plant and one nuclear plant all with the help of foreign investors. Investment in education is another key focus. An additional 22 industrial zones were 6 set up in 2007 alone and the total now stands at 150. Its literacy rate of 90% is similar to China’s and significantly higher than India at 60%. second only to Philippines. However. leveraging NRB intellectual and commercial capital. processing and economic zones.5% of GDP in 2006.100 1. Figure 4: Diaspora in 2006 Diaspora (mn) 3 24 39 4 Total population Diaspora as a % (mn) of total population 84 1.6% of the population. the relative size of this Diaspora is larger at 3.300 142 4% 2% 3% 3% Countries Vietnam India China Bangladesh Source: Several sources compiled by Wikipedia14 Vietnam’s Diaspora have played a key role in its economic success Leveraging Diaspora A recent Deutsche Bank Report (“Understanding Vietnam”. 2007) suggested that an estimated 3mn Vietnamese live abroad mostly in North American and Europe. This compares to 20-25mn and 55-60mn of the Indian and Chinese Diaspora respectively. especially in terms of attracting higher skilled diasporas back. It has already done so to some extent in textiles. a dynamic and proactive FDI strategy is clearly important.
A recent ADB report suggested that to grow at 7% GDP growth would necessitate Bangladesh adding 2000 MW of capacity each year. Enabling Environment Goal 1 – Better Infrastructure Bangladesh needs to increase investments in its infrastructure both in power and communications. Regulatory Regulatory and Corporate Governance The 2006 Nagorik committee recommended a transparent campaign financing system and more accountable MPs to reduce the risks of corruption in government procurement programs as a soft means of party financing. law and order. it offers a number of valuable insights that are still relevant. Another constraint has been the lack of investment in equipment in ports such as the addition of more automated gantry cranes. This involves significant expansion of its power generation capacity. corporate governance. Without this. education. One major factor that has meant that Bangladesh has one of the most inefficient ports in the region is the powerful labour unions which have historically enforced wage and facility-fee increases and allowed corruption to persist. They also 8 recommended the establishment of an effective Anti-corruption commission. 5 enabling environment goals Encouraging private sector infrastructure investment Creating transparency and accountability Enabling Environment Goal 2 – More effective Political. Additional investment in port facilities both in terms of greater private sector participation to cut transit and processing times as well as potentially a deep water port is also important.AT Capital Research Remittances is important for Vietnam Source: DB Research (2007)6 The Importance of a Supportive Supportive “Enabling Environment” Creating an enabling environment is the key. An excellent report on improving the enabling environment is the Bangladesh Enterprise Institute’s (BEI) 15 “Reducing the Costs of Doing Business in Bangladesh” (2003). it is self-evident that economic vision and a dynamic corporate sector will remain capacity constrained. Both the 2007 WB Report and the 2006 Nagorik Paper emphasized the need for decentralization of government to improve the efficiency and remove bottlenecks 14 . A dynamic private sector and a substantial increase in FDI flow is likely to fail to deliver the kinds of economic growth gains Bangladesh needs to become MIC unless the government and the regulatory authorities can provide a supportive enabling environment in terms of infrastructure. Although the paper is several years old. capital markets. . fiscal policies and so on.
Even with interests around the world falling sharply.AT Capital Research in government and the administrative bottlenecks that are an ongoing constraint 8. Bangladesh Bank has been pressuring commercial banks to narrow their spreads which is a positive step.” Enabling Environment Goal 3 – A more developed financial system/capital markets One of the biggest constraints for Bangladeshi business is the high cost of corporate capital. both in capital markets and banking. Also greater protection of minority shareholder rights is required to ensure more owner/managers focus on delivering efficiencies to maximize returns for all shareholders and not just themselves as the majority shareholder. As the WB (2007) have noted “The low revenue effort that stems from weak administration creates a chain of disincentives to good governance.9 on economic development and a more dynamic private sector. A more developed financial system. Source: The Heritage Foundation16 More effective tax collection is also a key enabling goal. many companies still have to pay 16%+ funding costs which make a number of investment proposals unviable. Bangladesh also needs to develop a corporate bond market which in turn requires greater development and liquidity of the government bond market. The regulatory authorities need to ensure better corporate governance which should include more transparent. from low salaries for civil servants to 9 inadequate operations and maintenance. will be an important foundation for more rapid growth 15 . credible and reliable accounts from Bangladeshi companies. The book building process for the proposed sale of Grameenphone later in 2008 should alleviate some of the concerns from owners of businesses about depressed valuations if they come to market. This is partly a reflection of very wide margins/spreads adopted by banks between deposit and lending rates. This is partly because of what they perceive as unattractive valuations with IPOs being brought on a net asset rather than a market price based valuation. It is also a reflection of a number of companies unwilling to access the stock market as a form of cheaper financing.
most notably in its emergence as a major global textile and RMG exporter. especially vocational training and English language. capital markets and law and order. (see Appendix 1 for details on the JETRO 17 Annual 16 Constraints create a window of investment opportunities . it needs to develop a broader base of skilled workers and managers that can support the expansion into new higher value activities such as IT outsourcing as well as offshoring. It’s achievements over the past 37 years has been impressive.” They recommend additional public sector investment in expanding the judiciary as well as increasing the pay for the police force as well as 15 other law enforcement officials. 9 especially foreigners. One might add that a move away from confrontational politics between the major political parties that resulted in regular strikes that stopped business will also be important if Bangladesh is to achieve its longer-term goals.” Enabling Environment Goal 5 – Education Improved education. It was notably described by US Secretary of State Henry Kissinger as “an international basket case”. We outlined a number of enabling goals the government needs to deliver on from substantial investment in infrastructure. but one whose economy and infrastructure was shattered. The very favourable demographics in Bangladesh with its young and growing population contrast with Europe. Russia. This should be based on an expansion of secondary and tertiary education though the more rapid benefits may well come from the establishment of a number of vocational training colleges in IT. Conclusions: Investment Opportunities Bangladesh emerged from the 1971 war of independence a free nation. A more focused education strategy is critical if Bangladesh is to leverage its favourable demographics in terms of a young and rapidly growing labour force. despite political instability and natural disasters is a testament to a dynamic and entrepreneurial private sector. electricians. An aggressive strategy to reduce internet costs by a further 75% will be necessary to act as a catalyst for the more rapid development of the IT sector if Bangladesh is to position itself as a major beneficiary of India diversification – the th so-called “India+1” strategy. key If Bangladesh wants to become the next Asian Tiger. More broadly. English Language and other specific areas such as nurses. plumbers etc that might underpin a significant expansion in Manpower exports. As the 2007 WB Report highlighted “The fractiousness of Bangladeshi politics contributes to political uncertainty and heightens perceptions of economic risks among investors. the low volatility and consistency of growth in the past decade. BEI notes that “Among the elements that add to the cost of doing business in Bangladesh (is) the inordinate delay in the disposal of cases. by the lower courts in particular. We see the prospects for Bangladesh to accelerate its growth rate to 7%+ on a consistent basis over the next 10 years which should take it towards a goal of becoming an MIC. and the indifference or incapacity of the police in enforcing law and order.AT Capital Research Improving Law and Order as well as political stability will be critical to increase foreign investor confidence Enabling Environment Goal 4 – Law and Order/Political Stability On Law and Order. to corporate and regulatory governance reforms. China and Japan which will suffer from a rapidly ageing population.
Biotechnology. Paper presented at the Malaysian Business Council.AT Capital Research Report on the costs of doing business in Bangladesh versus other Asian Countries). In the next section of this report we list what we believe are the most compelling investment opportunities for global investors. Prepared under the initiative of NAGORIK Committee 2006. (1991).dbresearch. 4. Agriculture. reducing regulatory and tax disincentives for foreign investors. and encouraging the private sector and capital markets to develop specific investment ideas foreign companies and funds can actually invest in. Textiles. Available at http://www2. 6. Heavy Engineering .html on April 7. Manpower Exports.gvu.goldmansachs.com/ideas/brics/BRICs-andBeyond. Tourism and Education. (2005) "The Determinants of Foreign Direct Investment in South East Asian Transition Countries". B. (2007). (2007).unu. Dhaka: 17 2. Energy.my/New%20Folder/publication/the%20way%20forwar d. (2007).com/PROD/DBR_INTERNET_ENPROD/PROD0000000000213377. a large domestic market of 150mn people. “Ho Chi Minh Trail to Mexico-Launching the JPMorgan Frontier Five and EM8”. Available at www. “BRICs and Beyond”. Centre for Policy Dialogue (CPD). JP Morgan Research. Official website of Globalis available at globalis. 5. Pharmaceuticals. M. Assuming FDI of USD 700mn in 2008. 8. Paper presented at National Chung Kung University. . we provide more detailed analysis on the key sectors in Bangladesh including Capital Markets. Bangladesh has three key attractions for global investors and multinationals: a large base of low-cost labour. 2008.edu. Banks. Central Intelligence Agency-the World Factbook available at https://www. This will require among other things a more pro-active FDI strategy such as marketing “Brand Bangladesh more effectively overseas. 7. Available at http://www.html. 3.jpm. and nearly 3bn people in the Asian region that it has market access to. In the remainder of document. Non-Energy Infrastructure.htm. DB Research. We believe it is credible for Bangladesh to emulate Vietnam’s FDI performance of a tenfold increase over seven years. “Bangladesh Vision 2021”. Healthcare.epu. Outsourcing.gov/library/publications/the-world-factbook/index. Goldman Sachs Global Economics Group. Hsieh Weng-Jen. “Understanding Vietnam: a look beyond facts and figures”. References 1. Light Engineering. this suggests Bangladesh should aim for FDI of USD 7bn by 2015. (2007). “The Way Forward (Vision 2020)”.cia.pdf Mohammad.
McKinsey Quarterly. World Bank. Wikipedia search: “Diaspora”. IRIS. University of Maryland. Available at www. N. W. & Schneider. "Private Equity's New Challenge".pdf 14. A. 16. “Doing Business 2008”. “Bangladesh: Strategy for Sustained Growth”. (2008).AT Capital Research Centre for Policy Dialogue 9. 12. 18.gov/bd/files/jobs_subsectors.doi. (February 2008) 13. (2007). 11. (2004). August 2004.pdf.org. Official website of The Heritage Foundation at www. Prepared for UNDP Bangladesh. “Reducing the Costs of Doing Business in Bangladesh”. The World Bank Office. “Report on Identification of Employment Oriented Export Sectors”. Dhaka. Available at www.usaid. 10. C. (2005).gov/oia/procurement/reports/2008%20World%20Bank%20EoDB %20Rankings. Fitch Ratings Report on Vietnam. Bangladesh Development Series Paper No. (2003). 18 . Harper.. 15.heritage. Bangladesh Enterprise Institute.
Targeting NRBs should be a priority. Asian Tiger Capital Partners Syeed Khan Partner +(8801) 727261267 syeed. (SPP) With significant energy needs in Bangladesh.Our Top Investment Ideas AT Capital Research Our Top Investment Ideas Investment in Independent Power Producers (IPP) and Small Power Plants (SPP). Only Dhaka benefits from high end hotels. Investment in pharmaceutical plants with certification for developed markets. Chittagong and Sylhet. Contract/toll manufacturing for bulk drugs with foreign joint venture partners provides a means for leveraging a low cost base in accessing a global market. For the domestic market. both low end and high end. power generation is a key driver in economic development. Investment in luxury hotels in Cox’s Bazar. Investment in weaving mills mills and dyeingdyeing-finishing mills. Investment in private commercial banks To comply with Basel II many banks will struggle to meet capital requirements. and we anticipate consolidation in the industry. Investment in modern technology.com 19 . With medical tourism a growing sector. it also reduces wastage and improves margins. new machinery and modern production processes is a significant opportunity to profit from greater backward linkage/vertical integration Investment in world class medical facilities for medical tourism. This will give rise to many opportunities in a sector that has yet to fully penetrate the wider economy. Bangladesh can develop its comparative advantage given increasing labor costs in the traditional outsourcing/offshoring destinations such as India and China. promoting tourism provides significant investment opportunities. Bangladesh could capitalize on this global shift. This also provides opportunities for LDC based pharmaceutical companies to develop international revenue streams after the TRIPs patent protection lapses in 2016. mills There is a large demand-supply gap in fabrics and a shortage of weaving mills. Coupled with a coordinated national branding and marketing effort. benefiting from geographic proximity to tourist destinations of South and South East Asia. Key to the capitalizing on global outsourcing and manpower exports. markets. Investment in Vocational Training Colleges. Investment in country wide cold storage facilities. Power Purchase Agreements (PPA) with the government mitigates many external risks. is targeted training. This will allow the development of a higher value-added agriculture export market.khan@at-capital.
it rose to 1. Some very large FDI proposals are currently pending with the government.9bn). that can successfully attract the attention of foreign investors from both developed and developing countries. increasing the level of FDI is likely to have a significant positive impact on export growth. In FY05. United Arab Emirates based Abu Dhabi Group (USD 2bn).5% in FY04. Over the 1998-2007 period. FDI varied between a low of 1. The shares of the three sectors are 46%. Bangladesh has a number of positive attractions like low wage rate and steady macroeconomic growth. FDI as a share of GDP in Bangladesh varied between 1. This suggests a target level for Bangladesh of USD 7bn annual FDI by 2015. UKbased Global Oil and Energy Ltd (USD 2. we believe it is realistic for Bangladesh to replicate the Vietnam experience of a tenfold increase in FDI over the 2000-2007 period.2% in FY04 and a high of 3. Bangladesh has a bright future in terms of attracting a greater amount of FDI provided improvements are initiated in areas like bureaucratic processes.noman@at-capital. As a ratio of gross investment. the aggregate FDI inflow to Bangladesh was USD 5. Malaysian Azimat Corporation (USD 900mn).4% in FY98 and 0. These include investment proposals made by Indian conglomerate Tata (USD 3bn). Asian Tiger Capital Partners Md. For a developing country like Bangladesh. the balance of payments and facilitate knowledge transfer into the country. Saif Noman Khan saif. 27% and 27% respectively.com 20 . and services. and Contech Ltd (USD 900mn). With a more focused FDI strategy.2% in FY98. more effective marketing of “Brand Bangladesh” as well as the development of infrastructure.AT Capital Research FDI Foreign Direct Investment (FDI) Over the last decade. There are three broad sectors of FDI inflows: infrastructure. manufacturing.3% due mostly to the large inflow of FDI to the telecommunications sector.51bn.
However.3% due mostly to the large inflow of FDI to the telecommunications sector (Figure 1). FDI however played a minor role in the economy of Bangladesh until 1980.5% in FY04.AT Capital Research Why FDI for Bangladesh Foreign direct investment (FDI) is a key driver of a developing country’s economic development. it also transfers a considerable amount of technical and managerial knowledge and skills. the share rose to 1. liberalization of the investment regime. FDI not only brings investment capital. FDI also has a positive impact on a country’s foreign exchange reserves reserves.2% in FY98. 1980’ in an attempt to attract FDI. the FDI/GDP ratio varied between 1. FDI varied between a low of 1. radically reduced levels of control. In FY05. and sustained socio-political 1 stability. which are reserved for the public sector: defense equipment and machinery. Bangladesh such as trade and exchange liberalization. FDI and export opportunities FDI impact on import substituting industries Share of FDI in domestic GDP 21 . but also the wider economy and domestic enterprises. Except five industries. perceived improvement in investment climate. not only to the investee 1. As a ratio of gross investment. at least theoretically. One of the reasons that FDI might be positive for a country’s reserve position over the longer term is FDI-financed companies are largely export-oriented and one reason for exporting a greater proportion of their output than their local counterparts is that such FDI financed firms usually tend to have a comparative advantage in their knowledge of international markets. both domestic and foreign. effective implementation of these measures. and their ability to adjust and respond to the changing pattern and dynamics of international markets.4% in FY98 and 0. efficiency of distribution channels.2 businesses. Consequently it can be argued that the inflow of FDI might play an important role in Bangladesh in the long run in reducing the country’s existing trade 1 deficit. a crucial year of policy change. and above all the interest of foreign investors in the energy and telecommunication sectors. and security printing and minting. opening up of infrastructure and services to the private sector. The Government of Bangladesh (GOB) enacted the ‘Foreign Investment Promotion and Protection Act. FDI in Bangladesh: Background Several underlying factors have contributed to increasing the FDI inflow in Bangladesh.3 FY04 and a high of 3. which is key to attracting higher FDI inflows. Comparative analysis shows Bangladesh's investment incentives and regulations for FDI appear competitive with those offered by similar EM countries in the rest of Asia.2 in every sector of the economy. needs significant institutional reforms.2. forestry in the reserved forest area. FDI in Bangladesh still constitutes a low share of GDP Over the last decade. FDI is allowed 1. better provision of essential infrastructure. nuclear energy.2% in 1. current account convertibility. emphasis on private sector led development.
986 266 1. the aggregate FDI inflows to Bangladesh were USD 5. over the 10-year period (1998-2007). disinvestments and debt amortization. the outward 1 remittances constituted 65% of the total inflow.51bn (Figure 2). there was an sharp jump in FDI inflows to USD 804mn. Of this.99bn (54%).510 403 2.51bn 5. new capital investment was USD 2.89bn (16%) (Figure 3). Figure 2: FDI inflows and associated outward remittances (USD mn) Fiscal Year Total FDI inflows Equity Reinvested earning Intra-company loans Outward remittances Dividend/profit Investment liquidation *Estimated 1998 603 349 181 73 40 0 1999 594 396 121 77 83 3 2000 383 153 81 149 149 1 2001 564 372 81 111 175 1 2002 394 230 85 79 195 3 2003 379 164 165 50 355 2 2004 284 111 161 12 338 11 2005 804 361 294 149 418 3 2006 745 447 199 99 396 4 2007* Total 460 5.63bn (nearly 30%). However.718 5 31 Source: Bangladesh Bank Source: Bangladesh Bank After a relatively high inflow in FY98. and intra-company loans constituted USD 0. In FY05. when FDI and debt inflows are seen in the context of associated remittances on account of dividend/profit repatriation. there was a declining trend in FDI inflow up to FY04 with the exception of FY01.634 91 890 569 2.AT Capital Research Trend of FDI flow in Bangladesh Source: Bangladesh Bank From 1998 to 2007. 22 . reinvested earnings amounted to USD 1.
24bn (22. Figure 4: Sector split of FDI f rom 1998 to 2007 27% 46% 27% Service Manufacturing Infrastructure Source: Bangladesh Bank Over the 19981998-2007 periods. The third group is the services sector where FDI inflows amounted to USD 1.91bn 1. gas and oil.287 1. Figure 5: Sector Wise Distribution of FDI Inflows (USD mn) Sector Infrastructure Gas and Oil Power Telecommunications Manufacturing Textiles Fertilizer Cement Chemicals & Pharmaceuticals Services Trade & Commerce Other Services Total *FY= Fiscal Year.241 581 965 1.510 Source: Bangladesh Bank Figure 6 illustrates the total FDI inflow in Bangladesh over the last last 11 years from 1997 to 2007 from different countries across the world.374 903 142 253 76 1. 27% and 27% respectively services (Figure 4). On the other hand.AT Capital Research Sector distribution of FDI inflows There are three broad sectors of FDI inflows: infrastructure. and trade and commerce sectors showed better performance during the last two years while the textiles sector experienced declining inflow of FDI in the second half of the decade (Figure 5). In infrastructure sector. The shares of the three sectors are 46%.35bn during the period out of which trade and commerce was the highest recipient with USD 0.349 909 440 5. textiles. Within manufacturing.5%). there was rapid growth in FDI inflow to the telecommunication sector in FY05 which continued till FY07. gas and oil was the main recipient of FDI amounting to USD 1.3 (16. world Figure 6 shows that near about 90% of annual FDI has been received from only 11 countries. On the other hand. **Estimated FY98* 238 231 0 7 145 117 2 3 23 220 173 47 603 FY99 249 124 101 24 150 129 0 2 19 195 116 79 594 FY00 106 50 56 0 163 144 0 5 14 114 44 70 383 FY01 319 139 175 5 134 113 4 13 4 111 35 76 564 FY02 197 75 101 21 123 67 25 28 3 74 48 26 394 FY03 120 23 35 62 160 77 5 77 1 99 49 50 379 FY04 131 61 26 44 64 32 23 6 3 89 55 34 284 FY05 461 169 30 262 219 75 51 87 6 124 102 22 804 FY06 FY07** 478 488 182 187 28 268 107 74 16 16 1 160 142 18 745 29 272 109 75 16 16 2 163 145 18 760 Total 2. and services. 23 .5%). manufacturing. gas and oil. the most significant recipient was the textiles sector amounting to USD 0.37bn. and trade and commerce dominated the first half in terms of FDI inflow whereas telecommunication sector was the highest recipient during the second half of the ten year period.4%) out of a total of USD 1.9bn (16.
0 59.6 2.1 11. considering their share 1.3 0. FY data for 2006 & 2007 2001 4.0 18.5 40.6 350.9 13.0 0. oil. Large FDI pipeline Around half a dozen multi multiti-bnbn-dollar proposals of foreign direct investment (FDI) in infrastructure.6 32. Increased FDI is likely to bring a significant net benefit to Bangladesh.4 31. therefore.5 22.7 30. Macro factors favoring FDI in Bangladesh: FDI: Way forward for Bangladesh 24 . Setting up of industrial parks: parks The development of new industrial parks can help in creating a favorable environment of foreign investment.0 Total 575.4 2005 18.0 11. and they can enjoy investment incentives that are competitive with those offered by other countries in the region and the developing world.9 40.8 92.6 2007 10. UKbased Global Oil and Energy Ltd (USD 2.5 309.4 UAE 0.6 16.1 5.8 45.3 48.9 187.1 578.4 11.9 11.6 305.0 61.2 1. and removing inefficient 1 bureaucratic procedures. The recent flow of FDI from Egypt reflects their investment in the telecom sector of Bangladesh.8 115.8 91.6 232.2 24.5 14.5 16. United Arab Emirates-based Abu Dhabi Group (USD 2bn).7 77.6 13.3 50. The country needs to accelerate the adoption of investmentfriendly policies.AT Capital Research Figure 6: Country-wise FDI inflow into Bangladesh.8 Japan 51.9bn).7 0.7 3. Malaysian Azimat Corporation (USD 4 900mn).1 0.7 161. power.9 South Korea 34.5 97.0 0.7 Source: Bangladesh Bank This leaves scope for exploring new FDI inflow destinations for Bangladesh.9 3.0 67.0 Hong Kong-China 21.9 35.0 0.5 744.5 1.8 19.0 0. for Bangladesh to ensure an investment climate that can attract more FDI flows to the country.7 83.5 29.5 24.1 100.6 25.5 2002 3.2 0.1 240. and Contech Ltd (USD 900mn).3 576.1 1.4 33.0 0.3 15. To be successful.1 22.8 2.0 UK 255. These investment proposals include Indian conglomerate Tata (USD 3bn).3 Others 135.8 30.9 6. Bangladesh The most important positive outcomes include integrating the domestic economy with the global economy and in the area of technology and skill transfer.3 0.4 53.9 29.5 12.0 328.4 21.5 172.8 460. 1998-2007* (USD mn) FDI inflow by source country Country 1997 1998 1999 2000 Denmark 0.1 123.5 152.9 66.2 2004 18. It is important.0 845.9 101.0 23.3 18. The availability of infrastructure with a secure and enabling investment climate can act as a powerful catalyst in attracting foreign investors for investment in profitable ventures. progress in several policy areas are 1 important including: Improvement of port services: The port services must be improved both in term of service time and cost.0 0.2 of FDI in other developing economies they might be a good source to tap further.0 Singapore 2.2 Norway 0.0 5.4 26.5 63. Simplified custom clearance procedures along with improvement in physical facilities and reforms in the labor management system need to be initiated.4 43. Bangladesh needs to undertake effective promotion measures to convince potential foreign investors that they can earn significant returns.1 0.5 Egypt 0.1 111. Though in recent times we can see increased flow of FDI from the Middle East there remains scope for further FDI from that region.8 141.1 62.9 52.6 69. gas and manufacturing sectors have been pending with the government recently.9 354.6 0.9 29.7 35.4 28.6 157.1 46.5 Malaysia 6. simplifying regulatory practices.2 173.4 12.0 2. they would be operating in a favourable regulatory environment.0 0.7 17.6 70.5 77.1 20.0 17.0 123.8 0.0 1.5 54.3 2006 20.6 *Calendar year data for 1997-2005.1 53.9 30.8 0.4 26.5 13.3 2003 14.0 USA 67. Though both UK and USA both has been large contributors to the FDI inflow.9 55.0 39.0 10.7 53.8 792.
bd/2007/06/14/mega-fdi-plans-hang-inlimbo/ Accessed on March 15. 4. I. M. “Impact of Foreign Direct Investment on Bangladesh's Balance of Payments: Some Policy Implication”. “Foreign Direct Investment: Impact on Sectoral growth in Bangladesh”. Robin. 25 ..bangladeshnews. it is important not only to improve relations with countries that have already invested in Bangladesh. Bangladesh Bank Working Paper Series: WP 0712. References 1. Economic and commercial diplomacy: diplomacy Strengthening economic and commercial diplomacy is a key factor in attracting FDI in the present world characterized by rapid globalization and increasing competition. A. Moreover. Hossain. but also to identify potential investors in other countries and undertake appropriate measures to attract them to invest in the country. 2008. 3.com. Trade Liberalization and Economic Growth: Empirical Evidence from South Asia and Implications for Bangladesh”. A. 2. In this respect. http://www. D. Bangladesh has a bright future in terms of attracting a greater amount of FDI provided improvements are initiated in areas like bureaucratic processes.AT Capital Research Setting up of new EPZs: A phased government program of setting up new EPZs to extend facilities to export oriented investors would attract FDI. more effective marketing of “Brand Bangladesh” as well as the development of infrastructure. “Foreign Direct Investment. M. (2006). The private sector may also be further encouraged to set up new EPZs like the Korea EPZ. Mortaza. & Narayan. C. Bangladesh Bank Policy Note PN0704. (2007). Bangladesh Bank Policy Note PN0805. (2007). improved bilateral relations with potential investor countries can act as a catalyst to increasing FDI inflows to Bangladesh. G. This suggests a target level for Bangladesh of USD 6-7bn annual FDI by 2015. we believe it is realistic for Bangladesh to replicate the Vietnam experience of a tenfold increase in FDI from 2001 to 2007. With a more focused FDI strategy.
AT Capital Research Capital Markets Markets
Asian Tiger Capital Partners
The Bangladesh stock market has provided significant returns to investors over the last five years. Five years CAGR of DGEN- the benchmark index of Dhaka stock Exchange is 30%, while last year the index rose 86.6%, making it one of the best performing markets in the world. Despite the remarkable performance over the last five years, the market cap to GDP ratio is only 19%, the lowest among the South Asian emerging markets. Because of the size of the market, it has attracted little investor attention until recently. Foreign portfolio investment increased by 839% in 2007 to USD 129mn, although this still accounts for less than 2% of total market cap. Government plans to privatize State Owned Enterprises (SOEs), combined with a large pipeline of IPOs, especially from the telecom sector, should underpin the future growth of the stock market. We expect the market cap of the DSE will double within the next few years. The Bangladesh capital market is dominated by local investors, and is highly uncorrelated with other markets. It was unaffected by India’s May 2006 meltdown, and has so far shown resilience against the sub-prime meltdown. Despite the remarkable performance over the last few years and tremendous potential for future growth, the market is still trading at low multiples, relatively cheap versus other countries in Asia. We believe that further investment inflows by foreign funds along with the development of a larger domestic institutional investor base will cause market direction and valuations to become driven to a greater extent by the underlying fundamentals. The move away from “news” driven trading should reduce volatility. We also see a structural longer-term increase in demand for equities from foreign investors as Bangladesh moves into frontier fund or even broader EM indices. However, some degree of caution is justified in the run up to the elections at the end of the year which suggests there may be more attractive levels to build up more substantial exposure in early 2009. The near 40% decline in Vietnamese stocks in 2008, which is perhaps one of the closest regional comparisons in terms of the relative dominance of retail over institutional investors also gives grounds for a more defensive stance on Bangladeshi equities in the near term.
AT Capital Research
The Bangladesh stock marketarket- an overview
Dhaka Stock Exchange comprises of 235 members
The stock market in Bangladesh consists of two exchanges, the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The stock exchanges function within the regulatory gamut of Securities Exchange Ordinance and related by-laws and regulations. Among the investment banking and brokerage entities the principal institutions are the Investment Corporation of Bangladesh (ICB), the leading merchant banks, and commercial banks who are active with their own portfolios. The 235 members of the Dhaka Stock Exchange, the more important of the country’s two exchanges, fall 3 into this category. . The main institutional investors in the stock market of Bangladesh are insurance companies, commercial banks, Bangladesh Shilpa Rin Shangstha (BSRS), Bangladesh Shilpa Bank (BSB), Investment Corporation of Bangladesh (ICB), 5 provident fund, trusts, and pension funds of different organizations.
Banking sector comprises of 48.3% of total market cap.
The Bangladesh Stock Market has been growing rapidly and currently constitutes about 19% 19% of the country's gross domestic product (GDP) in 2007 against only 6% in 2006. On March 31, 2008, the total market capitalization of DSE was USD 3 11.8bn, compared to below USD 5bn in 2006. Among listed companies, banks dominate. dominate In March 2008 banks comprised 48.3% total market cap followed by fuel and power (12%), and pharmaceuticals (9.9%). In terms of turnover, financial sector (banks, NBFIs, Insurance) comprises of 58.9% 3 total turnover, while 39.1% of total turnover comprises only from banks.
Figure 1: Split of DSE market capitalization as of March 31, 2008 Bank Fuel & power Pharma Cement Others
24% 48% 6% 10% 12%
Source: AT Capital Research
DSE Performance The DSE General Index rose 86.6% for the 12-month period ending 31 December 2007 vs. +37.7% for the MSCI Asia ex-Japan Index. The DSE General Index fouryear CAGR (2004 -07) was +46.1% vs. +34.5% for the MSCI Asia ex-Japan Index for the same period. The DSE General Index correlation to the MSCI Asia ex-Japan 1 Index for the last 12-month period was positive, and strong at 0.9427.
AT Capital Research
Figure 2: DSE versus MSCI, 20042004-2007 Figure 3: DSE versus MSCI, last 12 months
4 year CAGR of DGEN was 46.1%
In the 2nd quarter of 2007, DGEN rose 41.26% - the best performance globally.
April-July 2007 Fi gure 4: Stock market returns in selected c ountries, April 45 40 35 33.0 30.6 30 25 21.1 20 15 28.8 27.3 26.6 23.3 21.7 41.3
The January 11, 2007 move to the army-backed caretaker government had an adverse impact on the demand for bank loans with the anti-corruption drive increasing risk aversion among business men. For the 1H07, banks (all listed banks, excluding the govt and non- listed) lending growth was only 7%, whereas deposit growth was 10%. At that time banks had excess cash and they invested some of this money in the stock market. They were very active at that time by offering margin loan to retail investors as well. So the market had excess liquidity and there was a shortage of supply of good stocks, a combination that pushed Bangladeshi equities sharply higher. This in turn triggered further retail buying. Inward foreign remittance was also a factor behind the surge in the stock market in 2007. While institutional investors were active at that time and the market was rising upward, retail investors were confident enough to invest in the market. A portion of money that was sent to the retail investors by their relatives, who were working abroad, was invested in the market, thus triggering a further surge in the market.
FPI increased by 839% in 2007
Foreign Portfolio Investment (FPI) increased significantly by 839% in 2007. 2007 The benchmark DSE General Index saw a record 396% rise in turnover and a 139% increase in value in 2007. In the same year, foreign investors bought shares worth BDT 14.4 bn and sold shares worth BDT 5.5 bn. Foreign investors want growth28
750 2. 2007 3.850 2. In addition. The Bangladesh stock market can be compared to 2 Pakistan’s in the mid 90s by market cap/GDP.150 3.700 Sid r Source: Dhaka Stock Exchange Fi gure 6 : Market performance during the 8th National Parliament Election on October 01.000 DGEN 2. Stocks have shown resilience to both electoral electoral risk and natural disasters. 01. power. For example. The injection of substantial public sector listings to the stock market has greatly transformed the sector distribution. 15 .800 2. energy. Historically. pharmaceutical 7 and cement sectors received most of the portfolio investment.900 2. There were 108 public sector enterprises (out of a total of 128) initially marked for privatization through public offering. According to DSE sources. Their equity growth was primarily driven by privatization and the liberalization of foreign investment. the market showed resilience on various political/electoral scenarios. Fi gure 5: Market performance during the natural disasterdisaster-Sidr on November 15. the banking.100 3. 2001 720 1-Nov 3-Nov 5-Nov 7-Nov 9-Nov 11-Nov 13-Nov 15-Nov 17-Nov 19-Nov 21-Nov 23-Nov 25-Nov 27-Nov 29-Nov 700 680 DGEN 660 640 8th National Election 620 600 Source: Dhaka Stock Exchange 1-Sep 5-Sep 9-Sep 4-Nov 8-Nov 13-Sep 17-Sep 21-Sep 25-Sep 29-Sep 12-Nov 16-Nov 20-Nov 24-Nov 3-Oct 7-Oct 11-Oct 15-Oct 19-Oct 23-Oct 27-Oct 31-Oct Bangladesh capital market is following the trend of Pakistan capital market development. stocks were unaffected on the parliament election in 2001 (see below). gas and pharmaceuticals. outright auctions. Market Development Lessons can be learnt on the development of Bangladesh’s capital markets from the experience of Pakistan.050 3. power. The relatively stable political environment is another factor behind the rise in portfolio investment in the country's stock market by merchant banks. the number of enterprises to be privatized increased to 118.Sidr in 2007. even in the face of recent devastating flood and hurricane. and strategic sales to investors in 1994.950 2. The market changed from being textile-dominated (22 % of market capitalization in June 1992) to one that revolves around three to ten large29 . By 1996. the market maintained its upward momentum.AT Capital Research oriented markets and always look for new quality issues in sectors like telecoms.
8 2006 310 7 4. In the 1 quarter of 2008. the pace of privatization is increasing. the capital market of Bangladesh is now poised to achieve a higher degree of stability. Over the past five years. and regulation. In most cases. public issue rules. the SEC is about to introduce a new system of IPO called “Book BookBook-Building”. the government floated Meghna and Jamuna .8 2007 368 14 10.6 19. None of these top 10 stocks comes from the textile sector. Figure 8: Key DSE statistics over 2003-07 DSE statistics No of securities No of public issue Market capitalization Average daily turnover (USD mn) Source: DSE Website3 In 2007. maturity.short term outlook: Last year 14 new companies have been listed on the DSE through IPOs IPOs. In Bangladesh. bn Government privatization of State Owned Enterprises (SOEs) combined with a large pipeline of IPOs especially from telecom sector makes us optimistic about future growth of the capital market.2 2004 256 3 3. Source: DSE Website3 To overcome the problem of traditional IPO system. We believe.84 84bn 11. the price will be determined by the market and the issuing company is expected to get a fair price for their stock offering.7 1.5mn) were the largest. Figure 7: Development initiatives at DSE Year 1998 2004 2004 2004 2005 2006 Development initiative Automated Trading System started DGEN Benchmark index introduced Started Central Depository Services DSE-20 Index introduced Started Govt bond market Direct Listing Rules initiated Government has started floating SOEs to the capital market. This traditional system of IPO pricing significantly undervalues the company and is one reason why companies are reluctant to go public. Under this new book building method. and bond issuance rules to govern the market and introduce transparency.3 2005 286 17 3. increasing In 2006. SEC is about to introduce a new system called “Book-building” As part of this development initiative.two other profitable State Owned Enterprises (SOEs) from the fuel and power sector. The Bangladesh Bangladesh Capital Market . Among them. 14 companies have been listed in DSE 2003 267 14 1. settlements systems. along with the Securities and Exchange Commission. The Bangladesh Stock market is small with 368 securities and market cap of USD 11. Premier Bank (BDT 844mn) and International Leasing and Financial Services (BDT112. 84bn.8 3.AT Capital Research capital stocks. the government floated DESCO and Power-grid with 25% shares of each already issued on the public market and a further 15% of each will be off-loaded within short period of st time.0 30 . have developed new trading rules. the Asian Development Bank (ADB).5 3. the offer price is determined by the NAV per share.7 4. Building It has been argued that the traditional IPO system has a major drawback.
For Bangladesh. foreign investors from Europe and the US in 2007 injected BDT 8. participation of institutions is very low. Among the more noteworthy foreign investment regulations/protections are: • 100% foreign ownership of companies with no exit restriction • 100% repatriation of investment and profit • No tax on capital gain • Tax rebate to encourage companies to be listed in DSE and CSE • Reinvestment of repatriable dividend is treated as new investment. world The current level of development of the Bangladesh market is similar to that seen in Pakistan and SriLanka in the mid 90s and the early 2000s respectively. We believe that the growth of the Bangladesh institutional market will occur more rapidly. and have benefited from impressive capital gains. concessions. increasing FPI. Bangladesh has been ranked 17th in investor protection ranking by the World Bank. This in turn should bolster their confidence. Government investment regulations are firmly pro-business and pro-FDI. The national airline (“Biman”) is expected to float 49% of its share to the public in December 2008. or agreements with the private sector or foreign investors. Favorable Investment climate for foreign investors: Strong investor protection combined with favourable public policy climate has significantly increased the number of foreign entrants over the last year. one of the lowest in the world. The Bangladesh Capital Market: long long term prospect The market market capitalization capitalization (of DSE) to GDP ratio is only 19%. 31 . Investment opportunities in the Bangladesh Capital Market: The Bangladesh stock market provides significant opportunities both for local and foreign investors. At least 8 large profitable SOEs mainly from the power and energy sectors expected to be listed. Remaining large Telco’s are expected to come to the market in the next few years. The market is dominated by local retail investors. new companies especially MNC and giant Telco’s listing will help the capital market to grow. Foreign-owned Telecom giants such as Grameenphone are expected to be IPOed in 2008. having never annulled treaties. This can be compared with the development of the US market in 1950 when institutional investors were only 4% of the market versus 80+ currently.9bn into the market. According to Dhaka Stock Exchange (DSE) statistics. Pakistan has a market cap to GDP ratio of 58% whereas it was around 15.6% in 2 1998. investors Except mutual funds.AT Capital Research Expected Expected future entrants to the market The process of divestment of the 3 remaining state-owned banks has already begun.
87 -0.30 0.5% clearly exceeds the India.16 -0.69 0.59 1.00 0. Grameenphone.94 -0.59 0.00 STI 0.09 -0.29 0.00 1.00 NIKKIE 0.91 -0. With less than 20% volatility.75 0. the DSE’s return in 2007 of 81. Bangladesh’s risk-return trade-off is very attractive. One aspect of contagion is that when large institutional investors such as hedge funds lose money in one market.23 0. So for example. • International Diversification Opportunities: The Bangladesh stock market is dominated by local retail investors.27 1. Pakistan. they are forced to sell other markets they hold to enhance their liquidity and potentially meet margin calls.39 0. regionally Source: Deutsche Bank report1 • Expected listing listing of telecom companies: One aspect of growing the number of publicly listed stocks is fiscal incentives.57 0. the government has decided to impose a 45% corporate tax rate on Telco’s if they do not list on the stock exchange instead of 35% corporate tax.31 0.09 0. Hong Kong markets.25 0.01 0.00 S&P CNX NIFTY -0.84 0.95 1. the country’s largest mobile phone operator is expected to be listed in this year with the other major Telcos set to follow.46 1.40 1.15 One reason behind the lower correlation of Bangladeshi stocks versus other EM equities is that no big hedge funds or international institutional investors are present in the market. if big hedge funds incur losses in US equities.37 0.89 0.05 CSE HANG SENG 0. Figure 10: Correlation between indices in January 2008 Karachi 100 Karachi 100 (Pakistan) SENSEX (India) S&P CNX NIFTY (India) CSE (Srilanka) HANG SENG (Hong Kong) NIKKIE (Japan) STI (Singapore) FTSE 100 (UK) DGEN (Bangladesh) Source: Dhaka Stock Exchange3 SENSEX 0. Figure 9: 12M risk and return. and is thus less correlated with the rest of the world than other EM equity markets.91 0. they might try to recover the loss by selling in other markets 32 .41 1.00 FTSE DGEN 100 0.15 -0.62 -0.27 1.23 0.68 0.80 0.00 -0.00 1.66 0.00 0. For example.AT Capital Research • High return with low risk: Among emerging markets.
Grameenphone. 5. Deutsche Bank AG/Hong Kong. the market remains uncorrelated with the rest of the world.dsebd.org/ExploreEconomies/?economyid=17.AT Capital Research like Europe or even EM. They may look for private placement opportunities. Bloomberg at www.com/guest_pdf_files/07/News. 33 .eplbangladesh. • PrePre-IPO placement: As new companies are coming to the market. 2. 6. “Reforming Pakistan’s Capital Market”. 8.secbd. Bangladesh at www.adb. Chou. Here in Bangladesh.pdf.bloomberg. Available at www. Primary sources: brokers.doingbusiness. 7. the largest telecoms company is expected to be listed in this year. Official website of Securities and Exchange Commission. (2008). It is has been reported that the value of Grameenphone is approximately USD 3.org.org/Documents/Books/Rising_to_the_Challenge/Pakistan/3-pakcap. Financial Express. For example. Retrieved from the website of Equity Partners Limited at http://www. Deutsche Bank. Accessed on 25 March 2008.pdf. analysts. there is an opportunity for pre-IPO placements. (2008). References: 1. as no such hedge fund or big institutional investors are present. “Bangladesh Primer: Introduction to the Market”. Official website of Dhaka Stock Exchange at www. and the author’s personal experience with Dhaka Stock Exchange. This is an attractive reason for foreign investors to buy Bangladeshi equities in terms of diversifying their portfolio. 4. “Foreign portfolio investment encouraging in 2007”.org. C. 3. Accessed on 27 July 2007. http://www.75bn.com.
nationalized commercial banks (NCBs) collectively have negative capital of BDT 31bn. Due to recurring losses.com 34 . Privatization of the NCBs will create large investment opportunities. With their superior customer service and product capabilities. the vast majority of the people do not have access to banking services. By comparison. There are 48 banks in Bangladesh. the commercial banking sector is expected to maintain its rapid growth rate. Recently. To meet capital requirements under Basel II. Classified loans as a % of total portfolio has decreased from 41% in 1999 to 14% in 2007. Banks in Bangladesh mostly offer traditional commercial banking products like deposits. NCBs can be attractive investment targets for investors. The banking system asset base is USD 30 bn. this ratio is more than 57% in Pakistan. The government is likely to gradually undertake privatization of NCBs.islam@at-capital. FCBs and PCBs are expected to benefit from market growth. Fuelled by high trade and remittance growth. consolidation is anticipated to meet Basel II requirements. Shahidul Islam. the fast growing PCBs are expected to resort to tier II capital. trade finance. Additionally. roughly 42% of the country’s GDP. There have been some improvements in credit risk management of the banks in Bangladesh. Large new investments in the form of preferred stocks and subordinated debt are expected. credit cards and debit cards. there has been a surge among FCBs and PCBs in offering technology driven products like ATMs. with many small players in the market.AT Capital Research Banking Banking Asian Tiger Capital Partners Though the financial sector is dominated by banks. private commercial banks (PCBs) have the largest and fastest growing market share. Despite their late entry. money transfer services and loan products. Government owned banks are losing their market share while foreign commercial banks’ (FCBs) share is almost static. CFA shahid. With their country-wide branch networks with access to large and varied customer bases.
USD 1.737 3. pulling out. There are many smaller private commercial banks (PCB) that fall short of Basel II capital requirements.203 Total 2. NCBs can be attractive investment targets for investors. Privatization of other NCBs The government has said it will privatize the other NCBs. NCBs and SBs used to lend in the ‘priority’ sectors without a systemized and rigorous assessment of creditworthiness of the obligors. a restructured and rationalized Rupali Bank under modern management and technology could provide a significant investment opportunity. Basel II could be a driver for consolidation in the sector with benefits beyond simply shoring up balance sheets. The 48 banks include 4 NCBs. There still remains significant scope for further growth. compared to 57% in Pakistan . cross selling of products and cost synergies. leveraging client bases and branch networks. However. Presently there are 48 banks operating in Bangladesh. banks play a strong role in financial intermediation. Sustained economic growth of 5%-6% and high growth of trade and remittance in the last 12 years has helped grow the banking sector. except two (Bangladesh Commerce Bank Limited and First Security Bank Limited). Bangladesh The number has remained unchanged in the last 8 years. opportunity The USD 450mn privatization of Rupali Bank.238 1.AT Capital Research The financial sector is dominated by banks. Non Performing Loans (NPL) have been a nagging problem for NCBs and SBs.295 49 155 Rural branches 2. are listed and are expected to undertake rights issues. 5 government owned specialized banks (SBs). 30 PCBs and 9 4 FCBs. sector. Rupali Bank remains an acquisition opportunity. many of them may have to issue preferred stock and subordinated debts. With unparalleled country wide branch networks. These banks have 6. they need additional capital to expand their businesses. investment opportunities in the form of equity or long-term subordinated debts abound Figure 1: The distribution of branches of different bank segments Urban branches NCBs PCBs FCBs SBs 1. Despite keen interest from local investors. reduction of nonperforming loans and improved service provision.5 bn equity injections are required as banks need to raise equity or tier II capital to abide by Basel II norms. The asset base 6 is approximately 42% of GDP. to meet the capital requirement under Basel II Tier 2 requirements. The state owned NCBs and SBs have been losing their market share every year since the private banks started operations in the early 80s. whereas stock market capitalization is 4 USD 12bn. They provide significant opportunities for operational improvements. to raise expansion capital.839 Source: Bangladesh Bank wesite4 Private commercial banks are increasing their market share 35 . was almost finalized recently. All the PCBs. In the past there have been concerns about overall lending practices in the NCBs. Consolidation in the banking sector. new bank licenses have not been issued by current and previous regimes. banks As the capital market is relatively underdeveloped. Total banking system assets are approximately USD 30bn. Capitalization of PCBs Though most of the private commercial banks seem to be well capitalized to support their existing asset base. The high growth of PCBs and privatization of NCBs will create significant investment opportunities in the sector. Additionally. a national commercial bank (NCB).146 490 0 1.576 branches. through rationalization. With the fourth largest branch network covering almost the entire country. a Saudi prince. the deal aborted with the buyer.
5% in 2006.8% of total assets employed. Four NCBs (Sonali.0 36 . They account for more than 2/3 bank branches but their share of assets and deposits are now less than 35%. which increased to 2. acting as the counterparty in corporate and interbank foreign exchange transactions and serving as correspondent banks for local banks are major business for FCBs. Agrani. The banking industry in the country is far less concentrated than it has been in the past. Some of them have been very successful and are enjoying sustained growth of around 25% annually. There has also been high growth in non-funded activities. The banking sector has made great progress in reducing classified loans. They account for roughly half of Bangladesh’s stock market capitalization. This is due to expansion in trade and remittances. some banks are targeting SMEs segments and increasing their focus on retail banking.11% and 1. PCBs have been a real success story in Bangladesh. Janata and Rupali) used to account for more than past 70% of banking assets and deposits 20 years ago. Their operations are concentrated in major urban areas like Dhaka and Chittagong. ICICI and Mashreq bank are not operating as scheduled commercial banks in Bangladesh but are maintaining liaison offices in the country to support their correspondent banking businesses (eg LC confirmation. Banks are also taking exposure to the microfinance sector through wholesale financing to micro finance institutions (MFIs). While the market share of FCBs remains almost unchanged. Non-interest income in 2005 was 1.9 6. Citi. that of NCBs and SBs has fallen sharply in the recent years. classified loans were 41% of total loans in 1999. with no single PCB enjoying 4 more than 10% of the market share. Figure 2: The NPLs of different categories of banks NPL % NCBs PCBs FCBs SBs Total Source: Bangladesh Bank2 FCBs have not penetrated the Bangladesh market as widely as they have in other countries in the region Financial Indicators Bank deposits and credits have been growing 1515-16% annually in recent years. FCBs largely target large corporates and local operations of multinational companies. Overall. the main sources of non-funded income for the banks. This figure was 26.9% and 31.1 1. As corporate banking has become increasingly competitive. 26. Foreign commercial banks are less active in Bangladesh than in other countries in the region. Private banks as a group achieved 40% growth in operating profit in 2007 The PCBs are the newest entrants into the market but they are increasing their market share rapidly. The PCBs 2 and FCBs had classified loans of 6. They have adopted new technology. HSBC and Standard Chartered are the major foreign banks operating in Bangladesh.0 14. . retail banking business is increasing. Some regional and global players like Wachovia.AT Capital Research rapidly at the expense of the government owned banks. The sector is not concentrated. 4 Sonali is the largest NCB and largest bank in the country.5% of assets respectively.5 31. years. with Standard Chartered being the most dominant. which has come down to 14% in 2007. particularly in high-end retail banking.8% respectively for NCBs and SBs. maintaining nostro accounts and executing fund transfer instructions). Non-interest income accounts for a larger share of total income 2 among foreign banks than local banks. gained efficiency and continue to grow fast. Despite a tough business 7 environment in 2007. Though corporate banking has been the major growth area for most of the FCBs and PCBs. Almost all the new bank branches in the country in recent years were opened by private commercial banks. PCBs have shown 40% growth in operating profit in the year.
9 84. Internet banking and tele-banking services are also growing fast. Interest rate and FX spreads are still higher than those in neighboring countries Spreads are shrinking slowly while volumes are growing fast. We believe corporate governance and management effectiveness make the bulk of the difference. However. Credit Information Bureaus help lenders identify clients who have defaulted on their obligations to other financial institutions and Money Loan Court plays an important role in the fast settlement of default cases.AT Capital Research The reduction in NPLs in recent years is partly due to writing off some NPLs but also due to the implementation of more effective credit control processes and systems.0 Capitalization Most of the banks belonging to the FCB and PCB categories meet the capital adequacy requirements. the weighted average interest rate spread was 6. Competition. Customers’ use of online banking (the ability of the customers to execute transactions in any of the bank’s branches. The capital of the banks is in the form of equity. the total capital of banks stood at BDT 100bn in June 2007 representing 6. As per Bangladesh Bank (BB).6bn. NCBs are suffering from negative capital due to their sustained operating losses. While FCBs and PCBs are introducing technology driven products in Bangladesh. Capital position of NCBs stood at BDT (-) 30. ATM services are gaining popularity very fast. transaction through POS and SWIFT grew by 111% and 61% respectively. Source: Bangladesh Bank2 In certain segments competition is forcing the banks to cut lending rate and reduce fees for the services. Spreads in foreign exchange transactions are also narrowing. Tier II capital in the form of preferred stock or subordinated 2 debts are almost non-existent. trend. state owned banks are lagging in adoption of new technology and 2 associated efficiencies .1 Capital -30. and general provisions. Adoption of Modern Technology The rapid adoption of modern and innovative technologytechnology-driven products and services by the commercial banks is an encouraging trend. During the same period.16% in Bangladesh. the monthly volume of credit card transactions grew by 124%. Figure 3: Outstanding loans and capital position of banks as of June 30. Some banks are making extra ordinary profits while others are failing. PCBs BDT 84.1 1. In September 2007. debit cards increased by 112% and transaction through ATMs increased by 114%. However.25% spread in 2 India .4 854. the weighted average interest rate margin has shrunk slightly over the years.6 14. between June and December 2007. like LC fees and guarantee fees. the fees and foreign exchange spreads in Bangladesh are still higher than those in other countries in the region. However.5 125. statutory reserves. SBs BDT 14. the money loan court. and FCBs BDT 31.5bn. paid up capital. 2007 (BDT bn) Loans NCBs PCBs FCBs SBs Total 499.9bn. According to the Financial Sector Review by BB. the NCBs and SBs suffer from capital shortfalls and some have negative capital. and improved risk management have facilitated greater efficiency. are shrinking fast.5 31.2% of bank loans. not in the branch where the account was opened) is also expanding rapidly. Typical banking fees.1 118.8 100. 91bp higher than the 5. The development of a credit information bureau.8bn. Most of the PCBs and all the FCBs have adequate capital. 37 . the current interest rate spread is still high in comparison to other countries.597. Efficiency and Spread Shrinkage According to BB studies.
BB has defined the role of chairman. Bank directors are no longer allowed to get involved in operational decisions of the banks. Several other reforms have also been introduced by BB to ensure good governance in all institutions 4 operating in the financial sector. The number of members in the board of directors has been restricted to thirteen. Basel II standards will be implemented from early 2009. BB has issued a number of prudential guidelines regarding capital adequacy. In addition to its own ratings based on capital adequacy. the banks will be required to maintain capital to riskweighted assets ratio of 10% as a minimum with core capital not less than 5%. These include strengthening a bank’s capital base and making them better prepared for adopting Basel II standards. BB has made it mandatory for the banks to be rated by independent rating agencies. BB has also made publication and public disclosure of bank financial statements mandatory. the board and CEO 38 . Financial disclosure standards have improved. Implementation of these regulations will help strengthen the financial system and will help bring greater discipline in the activities of the banks and financial 2 institutions. As per BB directives. BB has been successful at improving corporate governance in banks.AT Capital Research Regulatory Environment BB as a regulator has been fairly successful. The paid up capital and the statutory reserve of all bank companies has been raised to a minimum floor of BDT 2bn. bank capital is mainly in the form of equity. Lending to directors directly as well as the companies they own has been stopped. corporate governance and legal issues recently. Professionalism in management is more evident in banking than any other sector in the country. BB has also directed the banks to establish audit committees formed by the board of directors. has improved significantly in recent years. management efficiency and liquidity. The overall health of the banking sector. Currently banks need to maintain 9% capital on risk weighted assets. However regulatory vigilance needs to be increased to avoid the recurrence of events like the failure of Oriental Bank. especially capital adequacy and asset quality. BB has taken some corporate governance initiatives recently. asset quality. In the near future. BB has also promoted and implemented Anti-Money Laundering rules. the chairman of the board of directors or chairman of any committee formed by the board or any director does not have jurisdiction for taking decisions in executive matters. BB has also made the CEO responsible for implementing the policies taken by the board and looking after all administration. The role of the CEO and role of chairman of the board have also been defined. Corporate Governance There has been significant improvement of corporate governance in banks in recent years. As tier II capital is almost non-existent.
As a result. banks are expected to increase their diversification towards capital market related activities. Overall risk management of the banks in Bangladesh improved significantly in the last few years. large FCBs perform risk grading. The repo facility with the central bank was introduced in 2002. As the economy modernizes. Due to the absence of an interbank money market and a secondary market of government treasury bills. In addition. c) Asset & Liability Management. d) Foreign Exchange Risk Management. In the past. Risk grading and risk-based pricing is almost an alien concept among local banks. Banking services are also expected to spread into rural rural areas. we believe there are tremendous growth and investment opportunities in financial services. It is mandatory for all commercial banks to use a due diligence template 2 called Lending Risk Analysis (LRA).AT Capital Research Better asset liability management and deeper interbank term money market can help avoid occasional liquidity crunch. Subsequently the interbank repo market has also evolved. The guidelines were minimum instructions for the banks and the banks were asked to build up their own risk management manuals on the basis of 4 those guidelines. b) Internal Control & Compliance. the 4 trading volume of government treasury bills/bonds is still low. Liquidity and Interbank Market Banks in Bangladesh need to maintain 5% of their customer liabilities as cash reserves with their BDT clearing account (non interest bearing) with BB. Most of the banks did not have market risk management practices. BB has adopted several initiatives to improve the risk management practices of the commercial banks. In addition. In 2003. BB circulated "Guidelines on Managing Core Risks" to the banks for complying with five core risk management in banks. The interbank term lending market is thin. classified loans as % of the total loan portfolio have fallen from 41% in 1999 to 14% in 2007. Outlook The sector is expected to maintain high growth and the branch networks are expected to spread towards rural areas fast As access access to financial services is still low in the country. As a part of their global practice. Risk management Banks lacked professional credit risk management capabilities in the past. FCBs and PCBs were not convinced on the 39 . the banking sector may grow even faster. BB has introduced FX exposure related guidelines to the banks. Therefore. market liquidity and overnight interbank rates fluctuate abruptly. due to fewer business opportunities. Overnight interbank borrowing rates sometimes shoot up to 20%. but the correlation between risk grades and loan prices are poor. country. As a result. As mentioned earlier. some used to take large speculative FX positions 7/8 years ago which triggered big losses and depleted their capital. Those were a) Credit Risk Management. and e) Money Laundering Risk Management. banks need to depend on the call money market and repo window for liquidity management. However. Traditionally the overnight interbank call money market was the source of liquidity for banks in Bangladesh. commercial banks need to invest 13% of their liabilities in government treasury bills.
Priorities NCB NCB and SB Reforms While the recent corporatization of NCBs is a positive development. RTGS will eliminate time consuming manual clearing operations of the banks and will bring efficiency in money transfer and interbank settlement. Currently 6 commercial banks are operating as full-fledged Islamic bank. especially among smaller. there should be consolidation within the banking sector. The growth growth rate of Islamic banking is expected to remain higher that of conventional banking. Islamic banking is growing faster than conventional banking. Consolidation is expected to happen in the medium medium term. International and regional The competition in the market is expected to intensify players are expected to increase or expand their operations when the sector is opened up. Only NCBs. risk management practices in banks have improved greatly in recent years. Recently a consortium of banks has decided to set up 9 a net work of 500 ATMs. new generation PCBs.AT Capital Research attractions of opening branches in rural areas. BB has published guidelines for bank mergers and acquisitions. banks need to manage their risk emanating from capital market exposure through own-account trading or margin lending. The government’s decision to merge BSB and BSRS is a positive development while steps towards eventual privatization should be taken. However. 40 . as per government regulations and requirements. used to have a large rural network. we believe some smaller players will be forced to consolidate if Basel II capital regulations are applied stringently. However. timely privatization is necessary to facilitate the commercial orientation of NCBs and SBs. It has been argued that uneconomic factors. intensify. Ten other conventional banks including two foreign banks offer Islamic banking products. Therefore. Attracted by the high growth of foreign wage earners remittances and rural savings. BB should implement clear guidelines in this regard. Continued efforts to privatize Rupali Bank should be a priority for the government. banks with technological and managerial superiority are expected to continue to enjoy a high level of profitability in the medium term. Players with automated. Anticipating consolidation in the industry. Implementation of RTGS needs to be expedited. things are changing rapidly. Therefore. However. may be an obstacle to consolidation in the near-term. However. major players in the sector are expected to have presence all over the country in the future. country-wide operations are expected to enjoy a competitive advantage with foreign remittances and internal money transfer a high growth business. 60% of which will be deployed in rural areas. Risk Management: As mentioned earlier. thanks to some initiatives by BB. Market Infrastructure: BB has undertaken a project to implement an automated clearing system called Real Time Gross Settlement (RTGS). PCBs are expanding their branch network into rural areas. like a sponsors’ prestige associated with being a bank director.
Official website of Bangladesh at www. “Huge expansion of ATMs planned nationwide: Cash Link Bangladesh. Published in The Daily Star on March 28. (2008). like introducing repo transactions. Bangladesh Development Series Paper No. 2008. This is important for establishing a treasury yield curve which will be the basis for pricing other fixed income securities. the country lacks a vibrant secondary market for government securities. “Bangladesh private banks profit up 40 pct in 2007”. 4. Bangladesh Bank. Bangladesh Bank (2006-2007). (2007). (2007). 2. 41 . Though in recent years BB has taken some initiatives. 5. DB Research.reuters. Rahman. 12 November 2006. “Rupali Bank dropped from privatisation list”. “Understanding Vietnam”. Euronet Worldwide tie up”.com/issues/2008/03/11/news0841. Akhtar. 2008. Available http://nation. 2008. 7.ittefaq. A vibrant secondary market for government securities can help bank treasuries better manage their liquidity and avoid occasional spikes of overnight interbank rate. 6. Available at http://in. S. World Bank Office. Reuters (2008). S. Dhaka (2008). 18. 9. Deutsche Bank. “Bangladesh Strategy for Sustained Growth”.bangladesh-bank.htm.AT Capital Research Development of a Fixed Income Securities Market: Fixed income securities market in Bangladesh lags behind those of its neighbors and other developing countries. The New Nation Article on March 11. “Address by the Governor of the State Bank of Pakistan” at the Pakistan Banking Association. (2006). Dhaka. Series I. Bangladesh Bank Annual Report 20062007. (2008). “Financial Sector Overview”.org. London. issuing longer tenor bonds and appointing primary dealers for acting as intermediaries for dealing in government securities. References: 1. Volume III. 3. 8.com/article/companyNews/idINDHA10801020080116 The New Nation. Accessed on April 6.
The government plans to increase power output using renewable resources by 10%.397 MW of power is generated by the private sector which is around 25% of total installed capacity of the country.4bn of new investment will be required by 2015 for new generation and transmission. it has been estimated that Bangladesh will need to add at least 2. Bangladesh has a total of eight production sharing contracts (PSCs) with ten International Oil Companies (IOCs).hasan@at-capital.Energy AT Capital Research Energy Asian Tiger Capital Partners An effective energy policy is one of the most important supporting factors if Bangladesh is to achieve more rapid economic growth. Currently 1. Government / first world subsidization is key to commercial viability.000 MW of electricity to the national grid every year. Gas is the key source of energy in Bangladesh. To achieve GDP growth of 7%. The Government opened the power sector for private investment in 1996.4bn.4 TCF gas will start depleting from 2012. It will require an additional 24 trillion cubic feet (TCF) gas output for attaining the projected 7% growth rate by 2025. Increasing this generation capacity only will cost around USD 1. and after 2015. We believe. The coal production and reserves of the Barapukuria Coal Mine and the Phulbari Coal Project mines could supply coal for power generation capacity in excess of 2. The energy shortfall in Bangladesh is progressively getting worse and needs urgent government action for both a short-term and long-term solution. renewable energy remains relatively expensive compared to conventional power generation.com 42 . regulatory and specialist infrastructure agencies and the private sector are a key determinant of success. It has been estimated that alternative energy sources such as Wind energy. The government estimates that USD 6. It is forecast that demand for electricity will grow at an annual rate of about 8% for the next 10 years. Concerted and co-ordinated efforts by the government. Mohammad Emran Hasan emran.750 MW. Some estimate that the country's proven reserve of 8.000 MW of new power plant capacity could be developed using domestic coal. Significant investment is required in energy production and exploration.200 MW of power. significant opportunities exist in investing in coal fired power plants. which will require investments of USD 8bn. Bio Gas and Solar energy could generate 2. However. the country will require new sources to meet the growing demand. Experts forecast that 4. However only coal fired power plants generating 250 MW are currently in operation.
such as 2 gas driven power plants. per capita 1 electricity consumption and hence the energy crisis.091 MW. Under the bidding model.800 1. This underlines the need for power sector reform.600 1. Bangladesh has a total of eight production sharing contracts (PSCs) with ten IOCs with companies like Shell. we believe there are many opportunities to invest in projects of varying sizes from traditional areas. FDI of USD 1. Reserves are depleting Natural gas is currently the only significant source of commercial energy in Bangladesh. Currently 17 out of 23 fields are producing gas. the only widely used indigenous non-renewable energy source. although proven reserves are estimated to start depleting from 2012.275 MW which is 71% higher than the 1998 capacity of 3.200 1. and while total theoretical generation capacity was 4385 MW. Fi gure 1: Per capita consumption of electricity in 2005 2. Cairn. will get progressively worse. Only Nepal has lower consumption (see figure below). the country's naval 43 Bangladesh Thailand Nepal India Pakistan Sri Lanka . This resulted in service disruptions and blackouts on 364 days in 2007.717 MW.822mn was invested from 1998 to 2007 in the energy sector 8 of Bangladesh which accounts for 33% of total FDI in the period. If Bangladesh grows more rapidly. Natural gas. gas consumption has been increasing at an average rate of 4 8% per annum.AT Capital Research FDI increased by 72% from 1998 to 2007 in the energy sector Overview Bangladesh has an installed capacity of 5. 2008. Bangladesh is now offering its third offshore gas bidding round which will end on May 7. to more innovative sectors such as alternative energy.000 800 600 400 200 0 Source: International Energy Agency Natural gas used for 86% of power generation.000 1. Per capita electricity consumption lowest among developing nations Consumption of electricity is low compared to other developing nations with per capita consumption of 147 KWh compared to India which has per capita usage of 480 KWh. With the supply-demand deficit for electricity continuing to rise.4 TCF. and Tullow who have sizeable operations. It is widely reported that about 500 MW power cannot be generated daily due to a shortage of gas supply despite there being enough generating capacity.500 MW. Bangladesh had recoverable (proven + probable) gas reserves of around 14 trillion cubic feet (TCF) 3. The recoverable proven remaining reserve is around 8.4 as at August 2007. Since the last decade. The private sector is generating around 25% of the country’s generation while in 1998 all power generation came from the public 7 sector. Chevron. 7 accounts for around 86% of the power generation of Bangladesh. peak demand stood at 4.400 KWh/year 1. average maximum peak generation was only 3. In 2007.
provision of electricity in remote locations and reduced reliance on fossil fuels which are either imported or depleting. Energy and Mineral Resources. The dislocation and environmental debate on coal extraction also underlines the need for the government to develop a political consensus with fair and equitable compensation for any local residents dislocated by new mines. low sulphur coal deposits.000 solar home systems that 44 Significant probable coal reserves remain untapped Liquid fuel contributes to less than 10% of the power generation Significant opportunities in renewable energy . The government plans to increase power output using renewable resources by 10%.this halted extraction in the Phulbari coal mine. responsible for oil and gas exploration. a statutory body. Of the blocks. Renewable energy provides a significant potential source of energy with benefits of reduced negative environmental impacts.2mn tonnes of crude oil along with 2. Petrobangla. Experts suggest that solar energy has the potential to provide up to 300 MW of power. Coal is a significant second source of energy. Power Cell in a study paper has estimated that around 2. with a capacity for 1.5mn tonnes of crude oil. transmission. There are more than 100. The Saudi Hitech International Group is planning to set up a 5. and development and marketing of coal and hard rock. have been discovered in 2 Bangladesh. Petrobangla is responsible for the exploration and development of mineral resources. Bangladesh imports about 1. with probable reserves of 3. Only the Eastern Refinery in Chittagong. Currently 4 MW of power is being produced by home solar systems. operating under the administration of the Ministry of Power. Five good quality. Gas is government regulated Gas distribution distribution remains regulated by Petrobangla.3bn metric tons. Around 8% of total power generation in Bangladesh uses liquid fuel. bio gas and solar energy are particularly suited to the Bangladesh climate. Solar power introduced in 2002. This refinery is expected to be three times bigger than the Eastern refinery with investment of USD 3bn and forecast annual turnover of USD 8 7bn. But in 2006. To make renewable energy economically viable first world funds and government subsidy plays a vital 3 role.000 MW power plant to be fired by its coal. 2 eight are located in shallow waters and twenty blocks are in deep-sea areas. Currently there are eleven companies operating under Petrobangla. Further extraction of coal resources remains delayed due to the lack of agreement over mining methods among 2 experts. meets the required standards. overall control and coordination of mineral resources and implementation of production sharing plans with International Oil Companies (IOC). distribution.5bn in October 2005 to develop the Phulbari mine in northern Dinajpur district through the open pit system and set up a 1. A 250 MW coal-fired power plant was commissioned in December 2005 with coal supplied from Barapukuria. Wind energy. London-based Asia Energy had submitted an investment proposal of USD 2.200 MW of power could be generated using alternative energy sources. production. the local community in Phulbari organized a large demonstration against the proposed open pit mine due to concerns over social and environmental impact .AT Capital Research area has been divided into 28 blocks for hydrocarbon exploration.1mn tonnes oil refinery in Chittagong through a management partnership deal with Cosmopolitan Oil Refinery Management Ltd.6mn tonnes of refined petroleum products per annum.
allowing repatriation of equity freely. the sole major refinery. cogeneration A project in the rural area of Gazipur is generating power of 225 KW and serving 500 families using sugar cane and rice 5 husk as raw materials.10 mainly in off grid areas to encourage renewable energy expansion. By contrast. Investment Opportunities Significant investment opportunities in off shore gas exploration. Currently only 230 MW of conventional hydro power is utilized in the Karnafuli Hydro Station.1 mn tonne oil refinery in Chittagong through a management partnership deal with Cosmopolitan Oil Refinery Management Ltd. Myanmar. which is the only conventional hydro-electric power plant in the country. Fiscal incentives to encourage private investment. Shangu. Wind energy utilization in Bangladesh is in the early stages stages of development. Asian Development Bank and Bangladesh government are subsidizing solar energy 3. if the country's proven reserve of 8. World Bank. is meeting only 40% of the country’s requirement. Thailand. Mongla We believe investors should focus on this sector as the Government-owned Eastern refinery. investment Significant features include the exemption from corporate income tax for a period of 15 years. However no tangible steps have been taken so far to explore Bangladesh’s deepwater energy resources. tax exemption on interest on foreign loans and the avoidance of 12 double taxation in case of foreign investors. development Wind turbines with generation capacity of 1 MW are operating in Feni and recently another plant with a number of turbines has started its pilot operation in Kutubdia 10 Island with the same capacity. tributaries of main rivers (Karnafuli. It has been estimated that 26 TCF of additional gas will be required by 2025 to support an estimated 7% gross domestic product (GDP) growth. The Saudi Hitech International Group is planning to set up a 5. Experts are optimistic that Bangladesh has prospects of discovering major petroleum resources in the deep waters of the Bay of Bengal. Matamuhuri) as well as small waterfalls suggests there is significant potential for 7 developing mini/micro hydropower power generation. However the abundance of canals. It has been estimated that 600 MW of powe power ower could be generated from bio mass and around 300 MW from cogeneration. Investors can set up a refinery plants plants in Chittagong or Mongla. India.AT Capital Research have been installed by providers including Grameen Shakti. The scope for conventional hydropower generation is very limited in Bangladesh because of its flat terrain except in some hilly regions in the northeast and southeast parts of the country. resources in Bangladesh’s territorial waters remain largely unexplored. According to Petrobangla statistics. Rahimafrooz and the Infrastructure Development Company Limited (IDCOL). With rising oil prices the oil refinery 45 . Hydropower potential only for mini/micro units.4 TCF gas starts depleting from 2012. while the remainder is imported. after 2015 the country will require new reserves to meet growing demand. International oil companies (IOCs) have been involved in exploration and 2 development of gas. all achieved significant successes after years of persistent efforts.
Power Cell estimated that if all the roofs of Dhaka city install solar panels this could generate around 300 MW of power which could serve the demand 46 . IPPs with capacity of 10 to 50 MW are considered as SPPs.. regulatory risk and collection risk. 2015. Installing environment friendly Solar Home Systems provide a compelling investment case. SPPs are operated on a Build. With the Power Purchase Agreement (PPA) provided by the government. many external risks are also mitigated. Westmont and Bon Consortium. it is more feasible and profitable given current supply constraints. The draft policy aims at raising coal-fired power production to 20%.5bn. 2 from current 3% of the total power generation by 2015. The total investment required in setting up a nuclear plant is anywhere between USD 1. It remains challenging to ensure a reliable source of sufficient gas supplies for large power plants until new gas fields are discovered. Own and Operate (BOO) basis. All the IPPs are run with natural gas. At present major IPPs in the market include AES. investors Currently IPPs have installed capacity of 1397 MW 6 which is roughly 25% of the total installed capacity of the Country. Also.000 MW to meet the country's mounting electricity 14 demand. such as currency devaluation. Ltd. The proportion of IPPs power generation is growing significantly. A review committee will be constituted to finalize the draft coal policy. As SPPs require less gas. While political consensus over further coal mining remains an an unresolved issue. The supply chain for a nuclear power plant is shorter than gas. Summit Power Co. Aside from domestic supply. we believe opportunities remain for using coal as a significant means of power production. Bangladesh is planning to install a nuclear power plant by 2015. issue. Nuclear power plants require multi-billion dollar investments for construction and maintenance though the fuel required for such plants is very cheap compared to costly fossil fuel or gas required by conventional power plants. coal or liquid fuel based power plants. a South Korean company. good quality coal can be imported from China and Australia. according to sources from the Bangladesh Atomic Energy Commission (BAEC). They require less time to complete the tender process and require investment of around 5 USD 7mn for a 10 MW plant with estimated IRRs between 30 to 40% . Daewoo Engineering. which was recently reviewed by an expert panel. Small power plants plants (SPP) provide a significant opportunity with lower capital investment.0bn and USD 1.AT Capital Research industry continues to look attractive. The coal policy would neither be company specific nor mining method specific. Currently 12 7 to 15 companies have invested in SPPs. 13 Independent Power Producers (IPP) can be a very profitable investment for both local and foreign investors. Gas prices offered to IPPs are also very cheap at 11 around USD 1 / MSCF. To quicken the process for utilization of coal resources the government is planning to adopt a national coal policy. Russia has offered to provide technical support in the proposed nuclear power plant in Rooppur. has reportedly offered to build and operate 8 a large-scale nuclear power generation plant in Bangladesh. As such there are significant investment opportunities in coal extraction and coal fired power plants. with generation capacity between 700 MW to 1. gas price escalation. The government is formulating an attractive financial incentive package for mine developers.
2008. 6.com/ Power Cell.pdf Primary sources: interviews with IDCOL Officials. Biogas is a growing source of power generation. around 200 km hilly coastline and about 50 islands in the Bay of Bengal. particularly through IPPs and SPPs. broader participation of both local and foreign investors in the power sector is critical. Biogas can be produced from pulp of sugar cane. & Nexant. Energy & Mineral Resources at http://www. 11 References 1. urban waste and poultry waste. 2008. 4. coming from the Indian Ocean and hitting the coastal areas of Bangladesh from March to October.asp. are a potential source for wind energy. 47 2. with 80% population of the rural area having no access to electricity. Website of Energy & Power at http://www. 7. Available at http://energybangla. Local Government Engineering Department (LGED) and Bangladesh Rural Advancement Committee (BRAC).pdf. Bangladesh has 724 km long coastal belt. The Government has set the goal of providing electricity to all citizens by 2020. . An adequate and reliable supply of electricity is an important pre-requisite for increasing FDI and achieving Bangladesh’s aim of becoming a Middle-Income Country. Accessed on March 29. rice husk.org/Textbase/stats/index. The added advantage of biogas is the slurry can be used as good quality organic fertilizer. “Bangladesh Power Data Book”. (2006).. International Energy Agency database of statistics on various countries available at http://www. Accessed all the 29 issues from January 1.iea. 2007 to March 15. Website of Power Cell.com/upload/Power. 1.com/upload/Bangladesh%20Power%20Data%20Book. salt / ice production. Website of Energy Bangla at http://www. ensuring that all the energy sources are maximized both locally and domestically.ep-bd. Conclusion The Government has taken many initiatives to encourage private and foreign investors to invest in the energy sector in Bangladesh. a division of Ministry of Power. 5.AT Capital Research for all fan and lights used residentially.com/. (2006). It has been estimated that if wind turbines were installed along the coast line.bd/ Power Cell. 3. Solar energy also provides a significant opportunity for rural development.energybangla.powercell. IDCOL. Biogas plants are operated by Grameen Shakti. Wind energy could also be used in shrimp farming.000 MW of power could be generated. Asian Development Bank. We believe energy remains one of the most attractive sectors for global investors to consider. “Power System Master Plan Update”. Available at energybangla.gov. The strong south/south-westerly monsoon wind. To achieve this ambitious target. 3 vegetable irrigation and domestic/household use. This 9 sub sector is still in its infancy with many opportunities for growth.
Website of Local Government Engineering Department (LGED) at http://lged. Primary sources: interviews with officials of Rural Electrification Board. 10. Website of Renewable Energy Information Network at http://www. (2007). I. Robin. 12. Available at http://www. Article published in The Financial Express on December 25.org/database. 9. Bangladesh Bank Policy Note PN0704.html 14. “Nuclear power plant to be installed by 2015”. A.lgedrein.powercell.gov. Available at www. 2007).thefinancialexpressbd.bd/erlwebsite/home/corporateprofile.AT Capital Research 8.erl. (2006). “Private Sector Power Generation Policy of Bangladesh”.pdf 13.org/sre.bd/images/additional_images/PSEPGPB. Ministry of Energy and Mineral Resources. “Foreign Direct Investment: Impact on Sectoral growth in Bangladesh”. A. Rahman.com.com/search_index. M.php?pageid=21. Website of Eastern Refinery Limited at http://www.php?page=detail_news&news_id=20570 48 . (2004). 11.
Integration with the Asian Highway is a prerequisite for investment in sea ports to be viable. large scale national intercity bus operator is a commercially attractive proposition for the private sector.e. Bangladesh. It will also facilitate the growth of other rapid growing large and medium scale industries. one government proposal is the installation of an underground/subway metro rail. The key to its revitalization as the country’s second port is investment in its operations and in its complementary infrastructure. Dhaka city is densely populated with severe traffic congestion. For example. Chittagong. if connected with the Asian Highway. Mongla port has substantial expansion potential. investment in setting up an adjacent private port and a deep sea port in the Bay of Bengal. Bangladesh with its high density of roads. could make it a competitive and credible regional commercial hub. capital and existing facilities to build its infrastructure on. a higher quality. These are all further investment opportunities for private sector players. and fuel companies. There are interesting lessons to be learnt from around the world in large infrastructure projects such as rail and toll roads where Public Private Initiatives have been extremely successful in achieving both operational and financial success. support and maintenance facilities. with a relatively underinvested bus sector with a large client base. It has very limited resources and assets. has the potential to act as the transit route for trans-national freight transport. In Chittagong port. mainly Dhaka.com 49 .AT Capital Research Infrastructure (Non-Energy) Infrastructure (Non(Non-Energy) Bangladesh is a small country with a large population. The high density of city dwellers makes such an investment a potentially attractive commercial opportunity. There is a need for dredging the Pushur river and building the Padma bridge which will connect the port to commercial hubs. Asian Tiger Capital Partners A M Ashfaque Bari Nahid nahid.bari@at-capital. Due to the low availability of land for road expansion. such as transportation. and other major land ports of the country. restricted land area. makes road transportation another possible investment opportunity. Investment in infrastructure system is critical if the country is to sustain and improve its economic outlook. i. hotels and restaurants.
Similar kinds of arrangements with the private sector may facilitate faster completion times with reduced levels of budgetary expenditure. Contech Ltd. Bangkok Metro Company Limited (BMCL). subway. commercially viable. It has been incurring significant losses for the last two decades. In a marked departure from its legacy. the Mass Rapid Transit Authority of Thailand (MRTA) and handed over to BMCL under 25-year concession agreements. With a focused. After a long consultation period of considering various options (i. all civil infrastructures were provided by government sector. from roads to bridges to rail and ports. has taken the strategic decision to increase private sector participation in infrastructure development. the Government has given it more autonomy and changed its organizational structure. reduction in unit costs. elevated expressway) to alleviate congestion in Dhaka. In order to turn BR into a commercially and financially viable organization.e. long term. BMCL provides M&E equipments. Mass Rapid Transit (MRT).AT Capital Research Major opportunities in infrastructure A significant enabling factor in economic growth. The initial 1 implementation of the STP will take 2 years to complete. The ADB is set to provide the Government with USD 430mn for its development and reform. Dual Gauge -375 km and Meter Gauge 1801 km). Largely. Railways Metro rail: Lessons to be learnt from Thailand Bangladesh Railway: reform plan The Bangladesh Railway has a total network of 2. The first steps in this direction 50 Revolution in Indian Railway . and PSD for the subway project and fully 2 operates and maintains the system. the Railways Ministry have been actively seeking and encouraging increased private sector involvement. improve the operational efficiency of the two major ports and position Bangladesh as a hub in the Asian Highway. Subway Underground metro rail in Dhaka The Government. the Ministry of Communications approved the Strategic Transport Plan (STP) for installing an underground railway system in the capital. The total subway project is forecast to take 10-12 years to complete. The funds are being given with the provision that Bangladesh Railway is turned into a public 3 limited company (PLC) when the reforms have been completed. signaling systems. flyovers. conducted a feasibility study last year and proposed a 52 km subway with an estimated cost of BDT. The underground rail. was built on a concession basis.835-route kilometer (Broad Gauge 659 km. the focus on capacity utilization. in the recent years. and improvement of quality of service has yielded remarkable results. is a robust and supportive infrastructure. In the recent years. investment strategy one could facilitate significant improvements to state owned and operated transport systems. including electrical trains. Recognizing the need for substantial financial and managerial capital. The Indian Railway has seen a marked turnaround from a huge loss incurring giant to a profit making company. run in a more efficient manner. 5200 crore (USD 750 mn). Bangkok has both an elevated expressway and an underground metro. SCADA. Cooperation between the public and private sector is key to its successful execution. communications. has many opportunities for investment after years of underinvestment. its yearly loss has been around BDT 500 crore (BDT 5bn). The non-power sector. a local firm. and Bangladesh fulfilling its potential. by a private company.
Autopistas del Sol was awarded in 1994. high intensity rainfall. commercial utilization of surplus railway land. There are many areas where private sector participation could improve the transport network. but also the potential of commercially viable private sector investments in maintenance/repair and new construction given its high density usage. F igure 1: Road densities in selected countries 80 70 Road Density (km roads per 100 km2) 60 50 40 30 20 10 0 USA Malaysia Thailand China India Korea Bangladesh Sri Lanka Nepal 8 Source: Bangladesh: Public Expenditure Review.AT Capital Research have been the awarding of container operation licenses to 14 private players. we believe. and a high incidence of tropical cyclones provide a challenge in the construction and maintenance of a reliable road system. a higher quality. This indicates not only a greater need to maintain this vast network of roads. Highways and Rural Infrastructure. Valuable lessons for effective private participation in projects can be learnt from around the world. A case study of a successfully privatized Build. to private sector participants. Outsourcing or selling. 2001 Recurrent flooding. Roads. miles of roads are destroyed and the Government of Bangladesh (GOB) struggles to repair them as well as constructing new roads at the same time. though a small and densely populated country. Other areas earmarked for Public Private Partnership (PPP) include projects like the dedicated freight corridor. Operate and Transfer (BOT) infrastructure project in Argentina is the Autopistas del Sol (ADS) project. with a relatively underinvested bus sector and given the large client base. both core and supporting functions. Every year. Bangladesh Railway could emulate this example by incorporating the private sector into its operations. leasing out its non-operating assets. has one of the highest road densities in the world. a 20-year BOT toll-road concession for the construction and operation of the Buenos Aires city northern access highway 51 Toll roads in Argentina . Privatized toll road The introduction of privatized toll roads can ease the stress on the current road system and give the country a better maintained and operated transport network. building new rail line tracks could bring significant commercial and operational advantages. and creating 4 inland container depots and warehouses. Roads Maintenance of the vast road network Bangladesh. a commercially attractive proposition for private sector investors. large scale national intercity bus operator is. For example.
as could investment in operators providing transport to the general population Bangladesh currently has two major ports. both public and freight. Inland Waterways and Ports Inland water transport The private sector is the major player in inland water transportation sector. Investment is required to construct more jetties in the Chittagong port. Such a project bond issue was the first Latin American Yankee bond toll road financing ever. Chittagong is handling more than 80% of the country’s export-import trade while Mongla port is left largely under-utilized. the port can flourish as a refueling station for shipping lines. Citibank and ADS were able to arrange a two-tranche USD 380mn Yankee bond offering for the purpose of taking out the commercial bank facility. were Sideco Americana. From an operational standpoint. Integration with the Asian Highway could place Bangladesh as a regional commercial hub. Chittagong and Mongla. Rather it is overloaded with the increasing number of ships coming to load and offload. both operationally and financially. Receiving its 52 Chittagong port: needs to expand its facilities The deep sea port . are owned and operated by the private sector. The Malaysian Experience The Port of Tanjung Pelepas is a deep water port for container ships located on the eastern mouth of the Pulai River in south-western Johor. can be a highly profitable venture. nationalization and early termination of the concession. targeting the niche market of upper class luxury commuters. the project facilities were completed according to schedule and specifications providing Buenos Aires with a state-of-the-art highway system at a reasonable cost for the consumers and without any significant cost for the Argentine budget. Most of the vessels. connecting the deep water port with transnational oil supply line is built. Investment in this sector. If a fuel pipeline. such as no US GAAP-required information (only Argentine GAAP). The export-import trade of the country is increasing by more than 20% every year. the sponsors provided to the lenders full guarantees covering completion risk and limited guarantees covering certain political risk after completion. build private ports. From a financial viewpoint. The project developers Construcciones.AT Capital Research system. It successfully overcame hard selling challenges. The security package consisted of a security interest over accounts receivables as well as over indemnification rights of ADS payable by the Argentine government in the event of expropriations. approximately one year after project completion. and construct more container depots A deep sea port in the Bay of Bengal will likely open up several other investment opportunities. Additionally. There was no governmental support provided for the project and its financing. Malaysia. long-term maturity (12 years) compared to the 5 term of the concession (20 years). Impreglio and Iglys. Gragados Y The initial project cost of approximately USD 400mn was financed by a bank syndicated project financing facility arranged by Citibank and an export credit facility provided by the sponsors. but the capacity of Chittagong port has not been expanded in line. BB-credit rating and significant refinancing risks. The project was a success.
The port continues to enjoy spectacular growth. earn significant revenues from a deep water port.05mn in 2001. Selected Investment Opportunities Underground metro system There is a large investment opportunity in the underground metro rail system in the city of Dhaka. According to the report. it set a world record as the fastest growing port with 1mn TEUs (Twenty-Foot Equivalent Units) of containers handled after 571 days of operations.5% compared to 2006.2% increase to 4. like Singapore. PTP handled a further 5. in a similar way. and 2. including Dhaka.218 TEUs in 2000.7 Singapore.). Bangladesh can also. it registered a 15. It has achieved this growth by providing alternative to the shipping lines. Bangladesh. PTP handled 1 4. At the end of 1999. Mongla port has existing port facilities and huge assets (land. This project will take 10-12 years to complete. which rose to 418. we believe investment in this project may offer 53 Mongla Port Integration with the Asian Highway . has the potential to be an alternative to the Chittagong Port.6mn TEUs. 3. Pacific Consultants International has completed the first phase of a feasibility study of a deep sea port in the Bay of Bengal.2mn TEUs. This port can be a great source of revenue if an effective road and rail network from Mongla to Dhaka and other commercial centers of the country is established and the rivers of Pushur and Mongla are properly dredged so that the incoming ships have the water depth that is needed for their safe movement. In 2007. Proper dredging of the Pushur river (investment requirement of BDT 50 crore. which were dependent on 6. The subway system will give the city dwellers an alternative mode of transport.000 crore (USD 6bn) and the entire project will be completed by 2055. While the government is still considering this project. vessels can offload containers here for others ships to upload. Mongla port needs investment Mongla Port. In 2005. There are investment opportunities in this port. it will require an investment of BDT 46. which will be free of traffic jams and take less time. but has been left largely under-utilized. can provide an alternative option for the shipping lines doing business in the region. The high population density and high capacity of the subway system will bring the fare down to an affordable level. Hong Kong and Malaysia. building structure etc. while also making it an attractive commercial opportunity.5mn TEUs. In 2004. and in 2006 an estimated 4. installing new container depots and modern technology support would make Mongla port a profitable investment and revitalize Bangladesh’s second port.696 TEUs. 2. a growth of 14. and came in as the world's 16th busiest container port. the terminal handled 20. The deep sea port could act as a transit port.66mn in 2002. construction of the bridge over river Padma connecting Mongla with the major commercial centers.87mn TEUs in 2003 outstripping Port Klang and establishing itself as Malaysia's largest port.020.200 crore (USD 750mn). the deep sea port will be constructed in three phases. about USD 1mn).421 TEUs. The Government of Bangladesh has recently approved the Strategic Transportation Plan (STP) to build a 52 km subway in Dhaka which will require BDT 5.AT Capital Research Success story: Port of Tanjung Pelepas of Malaysia maiden vessel on 10 October 1999 on a three-month trial operation.
http://www. Wikipedia search “Bangkok Metro”. “Private Solutions for Infrastructure in Bangladesh”. it is essential that investment is made in this sector. Wikipedia Search.bangladeshnews. large capital requirements and long term.bd/2008/01/15/52b-transport-plan-fordhaka-okayed/ 2. With vast global pools of infrastructure funds looking for projects to invest in – more than ever before – the challenge for Bangladesh is to be able to package and present the opportunities.com. 2008. 5. (2007). Accessed on March 28. whether that be roads. 6.bangladeshnews. 3.bangladeshnews.thefinancialexpressbd. “International Railway Conference New Delhi: A Background Note”. E.com.bd from the following links: http://www. The backbone in infrastructure.my. (2003). http://www.AT Capital Research significant potential returns for the investors. & Park. pp 218-220.wikipedia. 7.org/wiki/Port_of_Tanjung_Pelepas Official Website of Port of Tanjung Pelepas at http://www. rail or water. Springer.bd/2006/09/07/dhaka-subway-ministryasked-to-go-ahead-with-proposal/ http://www. 2008. Available at http://en. 54 . Available at http://en. “Project Financing and the International Financial Markets”.com/search_index.com. World Bank & Public-Private Infrastructure Advisory Facility. predictable revenue streams make infrastructure projects extremely attractive for investors both locally and globally. (1999). Accessed on March 27. The Financial Express.com. 8. References 1. C.pdf Buljevich.ptp.org/wiki/Bangkok_Metro. www. Y.php?page=detail_news&news_id=28296 KPMG.de/docs/International_Railway_Conference_Background_ Note. Conclusion The strategic importance of infrastructure. 2008. S.kpmg. March 17. Integration with the Asian Highway and a fuel pipeline connecting this port with transnational fuel supply will open up global trade opportunities and greater revenues for this port. 4.wikipedia. After years of underinvestment coupled with strong GDP growth. needs to be improved. If Bangladesh is to exceed its current trajectory and aim to be an MIC in the future..
Only a few companies are exporting vegetables and potatoes to the Middle East. underserved domestic market that provides opportunities for many investments along the value email@example.com 55 . The agriculture sector has a large. A number of companies are looking for joint venture partners to expand their operations.500 metric tons each. and European markets. There is a huge gap between the domestic demand and domestic supply of seeds and fertilizers that can be filled by large-scale investments. fisheries and livestock accounts for more than 20% of GDP and employs over 63% of the workforce of Bangladesh. Innovation opportunities exist in the areas of shrimp production in paddy fields.Farooq abdullah. and high-yielding crops. being sold at more than a 25% discount. comprising crops. results in various vegetables. There is a scope for sizable milk production by importing high-yield breeds of cattle.farooq@at-capital. forests. Asian Tiger Capital Partners Abdullah Ibneyy Shahid abdullah. We believe 30-50 more cold storages with capacity of 4. in particular. potatoes.AT Capital Research Agriculture Agriculture Agriculture. can be set up in north Bangladesh. This supply deficit. growing strawberries. There is a shortage of cold storage facilities and those that exist are extremely profitable. Global market trends for eco-friendly products favor investments in jute and jute-related industries.com AbdullahAbdullah-AlAl. Niche areas such as frozen fresh water fish and the production of aromatic rice also have significant potential. Only 17% of the domestic demand for milk is met by the domestic supply. Private equity buyouts of distressed state-owned jute enterprises could provide investment opportunities. The only firm that exports Halal meat is looking for equity partners to expand its operations. Growing global demand for Halal food presents export opportunities.
Maize production has grown significantly. sugarcane. due to productivity from high yield variety (HYV) seeds and the high demand for maize as poultry feed. and large domestic demand and supply gap along various stages in the food value chain. and favorable global trends for Halal foods. Shrimp is the second largest foreign exchange earner after the RMG industry and employs 600. 1 and pulses has fallen over a decade due to the lack of investment in technology. which connected rural growing areas with central distribution systems in Dhaka. oilseeds. and barley . There was 7% growth in potato production from 1990 to 2004. 11 sugarcane. however. Crops account for the major share of the agriculture sector.11 sector. 56 Rice production commands the highest value addition among the crops Rice and wheat needs productivity boost Shrimp. In 2006-07. and other quality requirements of the buyers. oilseeds. However. also driven primarily by agriculture. Wheat yields in Bangladesh are lower than those in the East and South Asian economies.000 workers. the case for agricultural investments in Bangladesh is stronger than ever. The largest employer in the country Crops dominate with rice occupying the major share Figure 1: The composition of AGDP of Bangladesh in 20062006. mainly due to the construction of the Jamuna Bridge. wheat and vegetables held the major share of agriculture GDP (AGDP). value The yield in rice in Bangladesh is lower than that in East Asian economies but better than that in India and Pakistan. Since 2000.07 8% 14% 56% Crops & vegetable Fishery Livestock Forestry 22% Source: Bangladesh Economic Review 2007 Fisheries experienced rapid growth from 1980 to 2000 Among Among nonnon-crop agriculture. the second foreign exchange earner has become stagnant . while livestock has not grown. livestock. fisheries and forestry) accounting for about 21% and the non-farm 1. The growth in jute. the growth in shrimp exports has stagnated since 1996 due to the shrimp farmers’ inability to meet various sanitary. About 70 % of the population lives in rural areas. pulses.11 sanitary. phyto1. spices. With more than 50% of the land being arable. organic foods and jute products make the agriculture sector one with significant potential for large-scale investments.3. with 54 % of them employed in agriculture and the remainder in the rural non-farm sector. potato. growth has slowed. the largest workforce of the country engaged in agriculture. with agriculture (including crops. jute. The rural economy constitutes a significant component of the national GDP. for another 33% .AT Capital Research The case for investment in agriculture is stronger than ever A rapidly growing urban middle class in Bangladesh. Poultry experienced above 6% growth over the second half of the 1 1990s. Other crops include maize. increasing its share of AGDP from 10 % to 23%. rising food prices globally. tobacco. key crops such as rice. fisheries have experienced rapid growth from 1980 to 2000. Rice production contributes about twotwo-third of the total crop value.
45% of household income is spent on food and beverage items. 1. Fertilizer constitutes 2.11 maize production. with an average annual household income of USD 3. There is a huge gap between domestic demand and domestic supply of seeds and fertilizers. wheat.6mn MT of dairy products by 2020 to meet domestic demand.3. Globally.11 bottlenecks . 1. lack of standardization.12 new opportunities for agro businesses.1% of imports of the country. Opportunities in Bangladesh Agriculture The agriculture sector offers ample business opportunities both in domestic and international markets. and oilseeds grew 180% from 1995 to 2005 because of low levels of domestic productivity. rising food prices and increasing demand for Halal foods and organic foods provide 2. Large scale investments could expand on the success of the small domestic producers. wheat and oilseeds.254. The gap is currently filled by importing or purchasing from Karnaphully 57 . 1. and 2. The following factors impede diversification towards high value-added crops: shortage of cold storage facilities. 0. Imports of key agro-products such as rice.4mn MT of meat and eggs. A World Bank report found that Bangladesh would need an additional 6. Large scale investment opportunities exist for domestic seeds and fertilizer production 95% of all agricultural seeds are imported and only 5% come from local private sources.6mn MT of fruits. Rapid urbanization occupies more cultivable land Low-productivity persists because of low technology *This includes some agricultural capital machinery.9.AT Capital Research High import dependence in rice. Source: Bangladesh Economic Review 200711 Primary activities continue to occupy the major share of AGDP AGDP largely largely consists of low valuevalue-add items.9mn MT of fish. insufficient processing capacity and transportation 1. As for fertilizers.7mn MT of spices.9. In urban areas. rapid urbanization using up cultivable land and diversion of resources to 1. there is a distinct gap of at least 1mn MT per year.5mn metric tons (MT) of vegetables. wheat. and oilseeds Agricultural imports are mainly rice. Increasing urban middle class in the domestic market opens up more business opportunities The urban population is approximately 29mn people of which 22% are middle class.
there was a bumper harvest of potatoes. every year potato farmers risk large quantities of potatoes going to waste due to inadequate storage facilities. most of which farmers sold to 3. Setting up fertilizer plants with a production capacity of 500. According to Xian Zhu. In 2007. Given such demand.000 MT per year 12 would require an investment of USD 450m-500m. Growing demand for Halal food globally presents opportunities for exports exports. and France are the key exporters of the domestic pulse consumption in Bangladesh. Dairying is profitable in certain parts of the country. Businesses can implement large scale production of pulses and use higher end technology to 1 compete with Canadian. Australia.9 intermediaries at a 25% discount due to insufficient cold storage facilities.1% increase. and there are many risks associated with marketing these commodities. World Bank Country Director in Bangladesh. This will help export-oriented high value added agriculture businesses to grow. Cold-storage facilities are an urgent necessity for greater diversification into high-value adding products Lack of cold storage or a functioning cold chain provides opportunities for a countrywide chain of such facilities.5. Exporting organic food could be a profitable option for the Bangladesh agriculture sector.AT Capital Research Fertilizer Company at BDT 31. Domestic production of milk cannot meet domestic demand. Pran Milk can help in filling up the gap between the demand and supply of milk. The low productivity in pulses is due to low investment in technology and diversion of resources to rice and wheat. the largest retailers in Europe such as Tesco are gradually increasing their stocks of Halal foods. Australian. Rapidly increasing increasing consumption and demand for pulses cannot be met by the current domestic supply.200 per MT. where feed is more readily obtainable and where there is a milk-marketing infrastructure. Appropriate policies and investments in key infrastructure are needed to make it viable for farmers to switch to these commodities and increase production. The supply chain for milk is highly fragmented. “high-value agricultural products tend to be highly perishable. The global market for Halal food is estimated at USD150bn-USD 500bn.” For example. as North America overtook Europe as the largest market for organic food and drink. Organic certification and labeling are needed to tap the 4 market effectively. Continued growth is predicted as organic foods customers are less price-sensitive and remain loyal if offered quality products. Importing better breeds of cattle 1 would improve yield. More ventures like BRAC Dairy. and French exporters in the domestic market. Increasing demand in North America helped fuel the 10. The global market for organic food and drink reached USD 23bn in 2002. Import substitution of pulses has high potential Canada.000 per MT vis-à-vis the local price of BDT 7. Halal meat processing presents a lucrative business opportunity. The fragmented meat processing activities in the country can be organized and scaled 58 Milk production does not meet domestic demand Global organic market niche is on the rise Demand for Halal food is experiencing sizable growth . The estimate for the industry growth rate ranges between 10-20%.
fine blended yarns 7. jute reinforced plastic. Globally. According to a Nielsen Global Food Packaging Survey. people are leaning towards the use of substitutes for wood as raw materials for paper. Global market trends for ecoeco-friendly products favor investments in jute and jutejuterelated industries. Research and innovation is another area that private investor could could explore for further investments. Jute bags are an alternative. Bengal Meat Processing Industries is a pioneer in meat processing for export. and packaging designed for easy transport (47%). large markets like China are looking for alternatives to plastics. The following specific areas can be explored extensively: jute handlooms. blankets and other home textiles. composite jute. or doubling as a re-sealable container (48%). Cultivation of strawberries has been successful on small scale. The increase in global food prices has made the need for improved yields and new product innovation. Bangladesh has developed a unique variety of jute seed that is expected to double the current per acre yield of crop and act as model for other jute producing nations. non-woven and industrial applications. jute blended yarns. and better yielding crops make agriculture an attractive investment destination. which includes packaging designed for easy stacking/storing at home (49%). milk.AT Capital Research up to bring about considerable economies of scale. Unused excess land of the tea gardens of Bangladesh could be cultivated with long beans and French beans. Pulp for making paper can be made from natural fibres like jute. cold storages. “nearly one in two global consumers would give up all forms of packaging provided for convenience purposes if it would benefit the environment. upholstery. Halal foods. Scalability of the project should be investigated. The seed named “O-9897” will give a significant boost to setting up of jute businesses successfully. Also. It has been reported that the company is seeking joint venture partners for further expansion.10 using jute/ cotton. packaging that can be used for cooking. Revival of jute is timely due to favorable global market trends for jute-related products Scope for investment in research and innovation Shrimp production in paddy field has been successful on a small scale. Large scale emulation could be undertaken. decorative jute products. to alleviate the domestic supply shortage and to provide the potential for entering new export markets. jute rigid packaging. more compelling than ever. and jute based handicrafts. from seeds to processed foods. Opportunities in research. Conclusion Agriculture provides significant opportunities for investment across the entire value chain. jute based fabrics. the use of which will be banned by mid 2008. 59 . eco-friendly and organic products.
World Bank. 11.moa. “Shubir Roy: Global Food Shortage An Opportunity”. Government of Bangladesh. World Bank. D. (2008). Present. K. “High-value agriculture and agri-business in Bangladesh”.net/story. (2008). X & Sur.meatprocess. 60 . World Bank. Published in The Independent on March 26. S. “Agri Food-Past. M. 2008.agr. 12. 7. “Need to Increase Support for High-value Agriculture and Agribusiness in Bangladesh”. 18. Bangladesh Development Series Paper No. Bodalia. Canada. Dhaka (2008). “Bangladesh: Priorities for Agriculture and Rural Development”. (2008). 5. J. “Bangladesh Jute Industry: time to rise to the occasion”.com/details. Nath. 10. Agri Food Trade Services. “Can lost glory of jute be revived?”. Published in Financial Express on March 6. World Bank Office.php?nid=23791 --> 2. 4. Khan. S. Published by www. 9. British Library. (2005). Available at http://www.theindependent-bd. (2008). 6. Merrett. “Investment in Agriculture to Attain Sustainability”. Available at http://www.thedailystar. “Malaysia plays host to Global Halal Forum”. “Bangladesh Strategy for Sustained Growth”. & Future Report Bangladesh”. “Organic Food Industry Guide”. Business & IP Center. Roy.htm. 3. Business Standard published on March 05. 2008. 8. N. 2007.AT Capital Research References: 1.com on May 8. Published in The Daily Star on March 26. (2008). “Bangladesh Economic Review 2007”. Ministry of Agriculture of the Government of Bangladesh website at www.gov. (2008). Available at http://atnriae.php?nid=77102 --> Zhu. (2007). 2008. (2007).bd.ca/asia/4057_e. 2008.
Junaid Khan junaid. High interest rates and a new VAT system have seen investment in the 5 Primary Textile Sector (PTS) decline by almost 43% in 2007 . The global market stands at USD 340bn for textile and apparel. Investment in the Woven Backward Linkage Industry could provide significant opportunity for returns in the local market. the two arms of the export-oriented RMG Industry .Woven and Knit .g. Despite rising yarn prices.35bn making up 75. Ready-made Garments (RMG) exports 2 stood at USD 9. Paxar does this in Dhaka EPZ.have grown at a combined rate of 9. Investment opportunities lie in diversifying. Linking up with established high-end US and European accessory companies would provide the platform for doing so. Currently. over 100 skilled garment workers have already left for 6 Romania in February 2008 and a further 1. Investment in branded and high-end RMG accessories can move RMG up the value chain.000 will get jobs there .com Masum A Rahman masum.3%). political uncertainty and a sluggish economy. e.com 61 . There are investment opportunities to set up textile institutes to train more textile workers for manpower exports.AT Capital Research Textiles Textiles Asian Tiger Capital Partners Bangladesh’s USD 23bn Textile and Clothing Industry is the country’s 1 largest export earner.2% over the past year. helped by 90% of yarn requirements for the Knit sector being sourced locally. The knit Industry has lead growth (14. The bulk of RMG is exported 3 to the EU and US. The current lowquality PTS provides investment opportunities for higher quality textiles for RMG clothing as well as for the local market. Private equity investment could allow this sector to grow substantially. In 2007. Due to capital constraints. only 35% of the yarn 4 requirements in the Woven sector are sourced locally. Bangladeshi garment workers are increasingly being sought after by other countries.4% of total exports.rahman@at-capital. including high-end items and exporting to largely untapped markets around the world.khan@at-capital.
The RMG industry relates to the forward linkage of Bangladesh’s textile sector (e. Woven wear and Knitwear) and has a largely export-oriented focus. As a result. F i gure 2: Number of new s pinning mills 35 30 25 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08* Number 20 15 10 5 0 2005 2006 Year 2007 Source: BTMA19 The spinning mills produce yarn.3% annual growth and has surpassed the Woven sector as the chief RMG export.000 1. local spinning mills cater to about 90% of the yarn 9 requirements for the knit sector.AT Capital Research Many opportunities to further expand the Textile Sector The USD 23bn Textiles and RMG sector has the potential to grow into a USD 50bn sector.500 2. On average. spinning. but only 35% of that of the woven sector.500 3. ensuring that the sector remains competitive.000 3. with an average of 15 new 8 knit factories coming into operation every month in Bangladesh. 62 .000 500 0 Knitwear Export Woven Export USD mn *For the first four months Source: The Daily Star4 Growth of spinning mills. weaving.500 4.500 1.000 4. The locally produced yarn provided by the spinning mills to the knitwear industry reduces lead time.g. polyester and blended fibers for the RMG Sector and provide backward linkage support. F igure 1: Comparative exports of woven and knitwear garments 5.g. dyeing and finishing). the industry is characterized by a high concentration of low value-added products. Current trends in the Textile and Clothing Sector and Possible Recommendations The Knitwear sector is particularly promising with 14. The Primary Textile Sector (PTS) relates to the backward linkage of the textile sector (e.000 2. there has been double-digit growth in the number of new spinning mills over the past few years. In terms of highlights. a heavy dependence on imported intermediate inputs 7 and has a high regional concentration of exports (mainly USA and EU).
the main raw material for yarn.AT Capital Research Decline in investment in PTS. while local spinners 10 constitute 75-80% of the demand. The government aims to involve two-to-three key middle managers from each of the country's 4000 12 factories. Entrepreneurs were not interested in making new investments due to higher bank interest rates of 15-16%.000 16.000 8. Specific Opportunities for Investment in Textiles The Textile Sector provides ample opportunities for investment in a wide variety of fields. citing the rise on the cost of raw materials. 10% duty and 15% VAT on the import of raw materials (polyester staple fibre. yarn producers of the PTS say they have no choice. mainly due to global cotton price increases.8% in 2007 mainly due to high interest rates. has registered a 30-35% hike in the international market over the last two to three months and Bangladesh is struggling to import the yarn from China and India due to 11 the price rise. Fi gure 3: Investment in PTS 18. in the 2007-08 Fiscal Budget. Yarn is the main raw material for knitwear manufacturing that makes up around 60% of export value.000 0 2005 2006 Year 2007 Source: The Daily Star5 Rising Yarn Prices. Also. Training Programs. Investment in PTS declined by 42. Relaxing bureaucratic procedures to allow efficient importation from India would facilitate import.000 4. However. RMG manufacturers are concerned that they may lose international competitiveness due to the persistent price rises of yarn domestically. The specific investment opportunities are: 63 .000 14. Since 2007. Three sessions have already been held with groups of around 30 managers in each. This measure will also put pressure on local yarn manufacturers to increase their efficiency. the price of yarn has risen considerably. The government has set up special training sessions on workers’ rights for garment factory managers in an attempt to counter the labor unrest that has threatened the success of the RMG.000 2. Cotton. viscose staple fibre. Mistreatment of the workers and inappropriate handling of issues by the mid-level managers has been one of the main reasons behind recent labor unrest. manufacturers hardly import yarn through Benapole land port due to challenging problems in customs. acrylic staple fibre and pet-chips) were imposed which was previously tax-free.000 BDT mn 10. Business confidence had eroded due to political 5 uncertainty and the government’s aggressive anti-corruption drive. Despite yarn being 25 cents cheaper in India.000 12. bond licenses 11 and transportation .000 6.
which are now being imported mainly from Hong Kong . The 356 medium-to-large weaving mills produce only about 50% of the total 9 requirement with the remainder imported . The industry has earned the reputation of being known simply as a “cut and paste” manufacturer for foreign buyers and the international textile community have this perception that Bangladeshi garment manufacturers lack ambition.AT Capital Research Primary Textiles Sector Investment in the PTS. it would reduce lead time. Another constraining factor is the rising price of chemicals that are used in dyeing and washing plants. Garment Accessories Investment in the Garment Accessory Industry. while its UNLIMITED brand is targeted at young and 64 . apparel. Currently. Bangladeshi manufacturers focus their production on clothing for big global brands. An interesting feature of the garment accessory industry is that such plant investment costs are low. the quality of fabric produced by the weaving mills falls far short of the requirements of the export-oriented RMG sector. and sweaters. there would be more local value-addition thus enabling preferential access to Europe and America as well as creating employment. Cats Eye. For example. Local dyeing-printing-finishing mills meet around 25% fabric demand of the RMG units. As a result. its Monsoon Rain label is aimed at executives. whereas more than BDT 1bn is 15 required for setting up a small textile mill or woven factory. Further research should be done to explore investment opportunities in high-end garment accessory industry which is virtually untouched in Bangladesh. Investment should be made to set-up dyeing-Finishing units with the latest 14 technology to meet the fabric demand for export as well as local markets. most of the dyeing-finishing units have to import the fabric. Due to lack of quality fabrics from the weaving mills. there was a 30-50 % rise in the last year. the vast majority of exports are t-shirts. new machinery and modern production processes in the weaving mills. belt and clips for use in brand-exportable 15 garment items. There are significant opportunities for investment introducing new technology to take the advantage of the available demand. There would be three main advantages. an entrepreneur can set up a full-fledged accessories industry in Bangladesh at a cost of BDT 40 crore. thus increasing efficiency and competitive advantage. shirts. local industries have failed to manufacture costly accessories like ornamental stones. Bangladesh’s RMG industry can benefit from substantial investment to move up the value-chain and export branded clothing. Secondly. Bangladeshi-branded Apparel Bangladesh has the potential to export and market branded apparel since there are already home-grown brands. foreign currency would be saved because only the raw material (cotton) would have to be imported. However. appealing to both upper-income and middle-income Bangladeshis. and Ecstasy are some popular local brands. Thirdly. This fabric is used to cater to the local market. Exporting BangladeshiBangladeshi-branded apparel. For example. Chinese investors have shown interest to produce fabrics for 13 the woven sector so Bangladesh could benefit from Chinese FDI. For example. There is a lack of modern technology. Westecs. Cats Eye Group has started developing sub-brands in order to appeal to different segments of the local market. Monsoon Rain. Currently 100 accessory manufacturing firms meet 80% demand for accessories used in exportable garments and knit items. PTS Investment should be made in spinning mills for the woven sector to reduce dependence on imported yarn and reduce the 65% yarn requirement that has to be imported. Firstly.
repairs and spares for all the different machines and equipment used.a box of 18 five knitted donuts sells at USD 34. high-end accessories and franchises with foreign brands. Need for machinery. the 46 public vocational textile institutes and the 4 fashion design institutes provide training courses such as fashion merchandising and production technology. mns of rural women know how to knit and thus require little training. For example. ethically produced toys . Larkmade and UK-based Urchin. and most importantly.500 textile and RMG units in Bangladesh. hand-knitting can be done at home. there is a large and growing potential for investing into textile light engineering support. there are 21 textile companies under the BTMC in the nationalized sector. Every week about 15 new knit factories are set up alone. There is a growing demand for hand-knitted children's clothes. These institutes add value to merchandise exports from the industry through training professionals at all levels. blankets and birthday party decorations in the European and US markets. there remains many investment opportunities. These mills provide a lucrative private equity investment opportunity through privatization. Privatization of state owned mills Investment in Light Engineering of Textiles Textile and fashion design institutes Hand-knitted toy market 65 . At present. maintenance. Initiatives should also be undertaken to attract foreign young designers to forge links with the institutes to widen experiences. Investment in this segment would also open the doors of employment to mns of rural Bangladeshi women who do not have the choice of working in a garment factory because of family and farming duties. With almost 9. an attractive strategy is in moving up the value chain with locally branded products.036 looms. institutes Currently. There are investment opportunities for establishing new textile institutes to train 20 engineers and fashion designers to create locally designed fashion accessories .AT Capital Research modern buyers. Hathay Bunano is a Bangladeshi hand-knit manufacturer that exports certified Fair Trade products with the majority of the goods shipped to European retailers such as Yellow label kids. Both Yellow and Cats Eye are now considering exporting their designs and brands and setting up stores abroad. Conclusion Despite the textile sector already being Bangladesh’s key export industry. The products are expensive but demand is quite high because customers outside Bangladesh are prepared to pay for well-made. blazers and trousers to the UK.892 spindles and 1. but they are inadequate to meet the demands of the burgeoning textile sector. There is no need for heavy textile machinery. Fit Elegance is already exporting 16 its own range of suits. They operate 24 spinning mills with an installed capacity of 17 490.99 (BDT 2. Investment is needed to support the cost of developing and marketing Bangladeshi clothing brands in European and US Markets. While the RMG industry is fairly developed. The hand-knitting industry is attractive in many ways. State owned assets.450) on the Yellow Label website . The PTS remains undeveloped in many ways but has strong domestic demand and private equity capital could be critical in developing this sector. Investment in textile and fashion design institutes. Investment in handhand-knitted toy market.
AT Capital Research
References 1. Interview with Mahmudur Rahman, Executive Chairman, Bangladesh Board of Investment (circa 2005) and Malhotra, T. C. (2006). “Bangladesh: A Growing Textile Economy”. Official website of BKMEA at http://www.bkmea.com/facts_figures.php The Indo-Italian Chamber of Commerce and Industry. (2007). “Overview of the Textile Industry in India”. Mirdha, R. U. (2008). “Knitwear emerges as No 1 export item”. Published in The Daily Star on 6 January 2008. Mirdha, R. U. (2008). “Political turmoil, import duty takes toll on primary textiles”. Published in The Daily Star on 20 January 2008, The Daily Star. (2008). “Romania to recruit more Bangladeshi RMG workers”. Published in The Daily Star on 18 February 2008. Sampath, P, (2007). “Intellectual Property and Innovation in Least Developed Countries: Pharmaceuticals, Agro-Processing, and Textiles and RMG in Bangladesh”. UNCTAD. Mirdha, R. U, (2008). “Strong knitwear exports to exceed Govt targets”. Published in The Daily Star on 9 March 2008. Sarker, A. H, (2007), “Backward Linkage in Promoting Textile & ClothingChallenges from a Practitioner’s View”, BTMA Annual Report 2007, Dhaka, Bangladesh, page 24. The Daily Star. (2008). “22pc rise in yarn price to hit knitwear exports”. Published in The Daily Star on 14 February 2008. The Daily Star. (2008). “BTMA defends yarn price hike; Terms allegation of price manipulation as baseless”. The Daily Star on 20 February 2008. Khan, J. U. (2008). “Govt moves to train RMG managers to counter labour unrest”. Published in The Daily Star on 06 February 2008. The Daily Star. (2008). “China keen to invest in textile sector”. Published in The Daily Star on 13 March 2008. Sarker, A. H. (2007), Backward Linkage in Promoting Textile & ClothingChallenges from a Practitioner’s View, BTMA Annual Report 2007, Dhaka, Bangladesh, page 26. . Mirdha, R. U. (2007). “Local garment accessory industry meets 80pc demand”. Published in The Daily Star, 13 December 2007, Mirdha, R. U. (2007). “Local clothes are cool”. Published in The Daily Star, on 25 March 2008, Khan, K, (2008). “Business can be child's play”. Published in The Daily Star on 21 March 2008. . BTMA. (2007). “BTMA Annual Report 2007”, BTMA: Dhaka, Bangladesh. Primary sources: interviews with BTMC officials.
AT Capital Research Outsourcing
The global offshoring market is estimated to be USD 300bn of which USD 110bn will be offshored by 2010. There are significant opportunities for Bangladesh to take increase its presence in this sector. Bangladesh, with a favourable demographic in terms of a large, young, population (Age: 15-64, 95mn) compared to the ageing population in the developed world can play a role in the global outsourcing industry. Bangladesh has nearly 1mn students enrolled in tertiary level education.
Asian Tiger Capital Partners
It has been forecasted that the wage advantage that India is enjoying versus many Western labour markets will diminish by 2020. The Government has put increasing emphasis on outsourcing with the introduction of licensing for call-centers. BTRC is giving priority to create an enabling environment in which call-centers can grow. Connections and networks are crucial for the industry to flourish. Leveraging the NRB base could also help to win clients for local companies. Government initiatives like industrial parks will help the sector. Venture capital investment can also play a crucial role. The opportunity for investment in the education sector will be significant as there is a clear need for skilled workers. Demand for such professionals will be much higher than current supply. IT and outsourcing is emerging in Bangladesh. Last year the country earned USD 28.6mn from the sector. There are over 100 companies in this sector in Bangladesh. We see significant growth opportunities ahead.
Ashek Ishtiak Haq firstname.lastname@example.org
AT Capital Research
Growing attention on Bangladesh Increasing global attention. Recently Crain’s New York Business ran a front page article titled “Outsourcing moves to Bangladesh”. This enthusiasm about the Bangladeshi BPO industry is not isolated. Industrial analysts from Goldman Sachs to Cisco Systems are also predicting that Bangladesh has the potential to follow in the steps of India. As the latter loses its labour cost advantage, opportunity for Bangladesh is becoming increasingly clear. With investments in universities and vocational training colleges there are many commercial prospects in the BPO and 4 KPO space. The 2005 NASSCOMNASSCOM-McKinsey Report suggests that the total potential market for global offshoring is approximately USD 300bn 300bn, bn, of which USD 110bn 110bn will be offshored by 2010. India is forecast to generate export revenues of approximately USD 60bn by growing at 25% year-on-year till 2010. China, Vietnam and Sri Lanka 3 are emerging as preferred offshoring destinations.
Fi gure 1: Global spending on IT and BPO outsourcing 260 240 220
A potential USD 300 bn global industry
200 180 160 140 2006 2007 2008
Global wealth creation
The phenomenon phenomenon of global wealth creation. Diana Farrell of the McKinsey Global Institute termed Outsourcing as the “Phenomenon of global wealth creation”. Bruce Herald of IBM estimated that globally companies between them spend USD 19tr each year on sales and general and administrative expenses; only USD 1.4tr of this has been outsourced to other firms. McKinsey in a survey found that software engineering, banking and IT services between them employ more than 20mn workers worldwide. In 2004, 16% of IT service work, 6% of software work and only 1% banking work are done remotely. McKinsey has also forecast that as much as half of the work could be moved abroad. A java programmer in India only costs USD 5,000 whereas the US programmer costs USD 60,000. US trained and licensed radiologists in India can 1,2 read X-rays, MRIs and CT scans for less than half their US counterparts cost. India is slowly losing its IT outsourcing and BPO advantage. advantage Wages are rising in India. For example, 10,000 keystrokes of data entry may take around USD 10 in India whereas the same work can be done at half the rate in 8 Bangladesh. Some researchers believe that the wage difference enjoyed by India will be completely gone by 2020. Arman Rousta of Blue-liner Marketing, a New York online-marketing consultant comments, “India is almost oversaturated, but 9 Bangladesh is up-and-coming”. Additionally the Indian Budget 2008-2009 has removed some of the incentives that the country used to provide for the export units under the Software Technology Parks (STP) and also imposed a minimum alternate 5 tax since April 1, 2007. 68
India is losing its cost advantage
000 40. According to NASSCOM. Israel. hope. VP. BTRC has started to issue call-center licenses at a 5 very low price. smaller players can look 9 to Bangladesh as an alternative centre’.500 15. at both undergraduate and graduate levels. China. IT-related engineers Source: BASIS 4 Increasing knowledge base Fresh Addition 2. The total size of the ITES sector in Bangladesh which includes both export and domestic BPO is only USD 150mn. Everest Group said ‘India cannot possibly handle all the work it gets. Figure 3: The graduate workforce of Bangladesh Upcoming Computer science and software engineers IT-related field. An enabling environment environment The recent recent boom in private universities (from a handful few in 1993 to about 54 at the end of 2007) has expanded the pool of relevant human capital in Business Administration. Each year educational demand in these 4 fields is increasing creating a need for more quality educational institutions. Bangladesh Nikhil Rajpal. At least 30 companies have set up joint venture or ODCs (Offshore Development Centre) with 100% foreign 4 investment. global services practice. software export has seen significant growth in recent years. BD firms’ major exporting destination is the North American market but recent new ventures are with European and East Asian (mainly Japan) markets. According to BASIS. Figure 2: Value of Bangladesh's exports of software and ITES 30 25 20 USD mn 15 10 5 0 2002-03 2003-04 2004-05 Fiscal Year 2005-06 2006-07 Source: Bangladesh Bank Outsourced call centres A new hope. in 2007 companies worldwide spent USD 280bn on outsourced call-centre services. And with rising costs. There has been a recent push for Bangladesh to enter this market. Global player Cisco also believes that Bangladesh could get 10% of the estimated USD 142bn IT and back-office outsourcing market. Sri Lanka. Law and Computer Engineering. Pakistan and Bangladesh.AT Capital Research The market is getting bigger The global outsourcing focus is shifting towards Philippines. Vietnam.000 69 . Environment. Pharmacy.500 5. English. 9 Industry experts forecast it to be double or triple in the next three to five years .
Rajendra Bhandari of IIM. credit card sales. market research.000 or more 8. construction) Source: BASIS 4 Size of the workforce 12. website design New media. Bangalore studied five European firms who have outsourced to Sri Lanka. database development. follow-up sales support and service. help-desk service online and general information. Government. and website development. hotel and airlines reservations. institutions. The involvement of NRBs with expertise and experience from Silicon Valley.000 or more 5. loan processing. Industry promotion offices can be set up in key cities around the world. The Government continues to set up EPZs EPZs to facilitate different industries. Growing importance towards the sector will open up infrastructure investment opportunity for the investors. will enhance the credence of Bangladesh’s ability to provide quality services. may provide financing. IT and other necessary skills. There is significant opportunity here to develop joint ventures with credible global players. for example. handling of credit and billing problems. account management. mechanical. Such a strategy will remove the problem of low access to finance for such unconventional businesses from the traditional banks. medical claims processing. Their enthusiasm to come back has been reflected in the recent NRB conference in Dhaka. Leveraging NRBs The government’s role Changing perception Capable human capital should should be developed by setting up training centers for English. website publishing CAD (Architecture.000 or more Scope of joint ventures The growth of informationinformation-technology (IT) related universities. directory assistance. Educational institute providing custom made programs consisting of threeyear degree courses supplemented by one-year technical certificates can be formed to meet industry demand.AT Capital Research Figure 4: Potential workforce in Bangladesh for BPO and ITES Skills type Graphics (2D/3D). The government of India did the same to encourage BPO in India. There is cost saving incentive for the global player and the 4 benefit of knowledge transfer for the local firm. DTP. capability and cross-cultural understanding to achieve operational efficiencies.g. Similar industrial parks for the IT sectors with appropriate fiscal incentives will create an advantage for entrepreneurs. access to funds etc. provision of technical support. It will take credibility. telemarketing. . animation. BPO has a wealth of business opportunities for local businesses such as selling of various products and services for various companies. There are more than 100 companies exporting to around 30 countries. they chose that country because a well-placed Sri Lankan 1 worked for the European firms. Three major categories are: custom software development and maintenance. and training centers has led to the emergence of about 400 IT and Information Technology Enabled Services (ITES). skills A partnership between the industry and the academia should be formed to increase availability of graduates with the right kind of skills. tax benefits. They can be encouraged to set up IT enterprises in Bangladesh through various incentives e. as well as private venture funds. human resources functions. Bangladesh already has a large number of NRBs working in IT related professions around the world. that can be done in a cost effective manner in 70 . multimedia software development.
Call centers opportunities The BTRC is facilitating the development of call centres with the issue of new licenses.000 more IT professionals in 11 Europe. skills could be developed in all these areas. With focused training the knowledge gap can be closed. After two years of operation. Global opportunities opportunities Case Study: GraphicPeople’s Danish Alliance10 GraphicPeople started its operation in Bangladesh in 2004 as a subsidiary of Danish communication house PeopleGroup. content development. With additional focused vocational training coupled with end user specific development. With low cost human resources and the development of quality education and technological infrastructure. R&D in pharmaceuticals and biotechnology. The firm offers a full range of DTP solutions. equity research. Such relationships will diversify risks in the JV partners cost base and provide much needed credibility for the local partner. publishing and legal support. 20052006 revenue has doubled. market research.000 graduates every year but. nearly 10. Businesses need to be informed of the opportunities they may be able to leverage from their existing operations. remote education. Its client list includes international brands such as Dell and Intersport.AT Capital Research Bangladesh. Between.000 to 20. Joint ventures ventures can provide knowledge transfer. Centres developed in tandem with English speaking classes. may provide an opportunity from the overspill from India’s resource constrained market. we believe Bangladesh can capture significant market share if the necessary focused investment strategy is in place. The firm enabled its clients to cut as much as 80% expenses without sacrificing quality. The country has yet to have the capability. Soaring demand for IT graduates will make such universities and training colleges highly desired. Although the sector has yet to flourish Nikhil Rajpal foresees in 9 the next 2-5 years. Most of these jobs will be outsourced. transfer. Experts forecast by 2015. These can be developed with global players in outsourcing. Setting up universities and training colleges to cater to the significant demand. Proximity to India should be leveraged. financial modeling.000 call centre jobs will be generated. data research. only 10-20% of these 9 are BPO ready. database creation. and diminishing cost advantages of the traditional providers. medical content and services. while the number of employees has risen from 20 in 2005 to 34 in 2007. there are substantial opportunities for Bangladesh. International accredited training centers will also be in high demand. analytical services. Conclusion With a growing global outsourcing and offshoring market. credibility and cultural understanding about the industry as India but it can offer significant cost advantage and also diverse expertise. there will be a need for 850. animation and simulation. It has been established in collaboration with Danida. Knowledge process outsourcing outsourcing (KPO) work can be a developed Recent growth in private universities is providing us with graduates who could be utilized for intellectual property or patent research. Bangladesh according to an industry analysis produces 200. which has supported the project through its B2B program. 71 . its success is reflected in its positive bottom-line growth.
html. R. S. 3.D. 6. Embassy of Denmark. Ray. 8. M.AT Capital Research References 1.ambdhaka. “50 Management Ideas”. 11.. India: Indian Institute of Management Calcutta.. Walling. Chicago: Dearborn Trade Books.pdf. Sachdeva. “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of USUSD 30 bn Annual Migrant Remittances by 2015”. Corbitt. 5. Available at http://www. Financial Express (2008).doingbusiness. Article published on 8 November.org/documents/FullReport/2008/DB08_Full_Rep ort. 2008. The World Bank. F. 4. 2007. Available at http://www. Accessed on 23 March. 2008. “Call centre licences from next month”.um. A. S.cms.dk/en/menu/DevelopmentIssues/Businesstobusin ess(B2B)Programme/B2B+Case+Stories/Case+Story+no+1+GraphicPeopl th rd e/. CiteHR Human Resource Management Community (2008). & Chaudhuri. (2004). Ministry of Foreign Affairs Denmark. K. 2. (2008). E. The Economist (2004). 10. (2007).indiatimes. (2008) “Bangladesh to issue call centre license”. (2007). “The Outsourcing Revolution: Why it Makes Sense and How to Do it Right”. 2008. “Doing Business in 2008”. Accessed on 23 March. BASIS.. Article th published in the Financial Express on 20 March. Dhaka. 72 . “Extending India’s Leadership of the Global IT and BPO Industries”. S. 2008.com/knowledge-process-outsoucingkpo-vt4579. “Survey on Outsourcing”.citehr. 9. Article th published in The Times of India on 20 February. NASSCOM-McKinsey Report (2005). Available at http://www. Danish Success with Outsourcing In Bangladesh. rd Accessed on 23 March. Sinha. 7. Content & Publication Department. 2008. Available at http://timesofindia. London: Quercus.com/Business/India_Business/Bangladesh_to rd _issue_call_centre_licences/articleshow/2796515.
Vocational Training Institutes are critical in developing a more profitable manpower exports further up the value chain. Bangladesh would have to send 0.Manpower AT Capital Research Manpower Asian Tiger Capital Partners The global manpower industry will amount to USD 600 bn by 2015. cleaners. The current manpower recruitment agency sector remains relatively undeveloped and unregulated. For skilled jobs these include doctors. computer programmer. Bangladesh with a young and energetic population has a huge opportunity to benefit. carpenter and garment operators.8 mn-0. To gain 5% market share by 2015. teacher. surveyors and managerial jobs. Bangladesh could aim to emulate the Philippines’ story and develop more nurses targeting an aging demand in developed economies. There is substantial demand for unskilled/semi skilled jobs such as masons.9 mn people abroad annually. fabricators. There are substantial opportunities to create stand-alone recruitment agencies and Manpower Consultancy firms which provide integrated training & HR services. Emerging Europe as well as Central Asian economies are sending their own manpower to more prosperous economies which is creating a vacuum in their own countries.com 73 . With focused investment in training Bangladesh could capitalize on these opportunities.haq@at-capital. Ashek Ishtiak Haq ashek. Bangladesh can fill this labour shortage. A recent report by DANIDA has estimated that Bangladesh could capture 5% of this – USD 30bn. engineer. The industrialized world is aging and facing negative growth in population.
Sinha & Chaudhuri (2007) Remittances have grown three fold from 2001 to 2006 Bangladesh started to send manpower abroad in the 1976. from USD 1. The manpower agencies and other supporting services revenue is estimated to be between USD 250mn to USD 400mn. The main competition for Bangladesh will be from India. WTO’s GATS Mode 4 agreement will grant much greater freedom of movement of temporary workers. Nepal.8bn accounting for 6% of the increase in GDP. A recent report sponsored by the Royal Danish Embassy estimated that the Global Manpower industry will be USD 600bn.000 USD mn 15. Pakistan. Among the global top 20 remittance receivers.5bn). By 2015 it could reach USD 1bn if Bangladesh can capitalize on the opportunity. Including contributions coming 1 through informal channels it could exceed USD 8. temporary or permanent migration figure will cross 80100mn. year In a country with GDP USD 70bn. With the inclusion of unrecorded flows it has been estimated that remittances exceed FDI flows to developing countries.000 10. or USD 30bn. Global remittances through official channels were estimated to be USD 268bn in 2006. and China (USD 22.000 2006 20.000 added annually.AT Capital Research Bangladesh can grow its manpower industry from USD 8bn to USD 30bn The Bangladesh manpower export industry is worth USD 8bn a year. In recent times Nepal and Vietnam have 1 emerged as new sources of labor supply.5bn). Indonesia and the Philippines. Global mobility is increasing F i gure 1: Top 15 remittance earners 2005 25.0bn. Developing countries’ share is forecast at 70% of the total. India (USD 23.000 5.8% share). of the market (it now has a 1. This is forecast to expand to USD 400bn by 2010 and cross USD 600bn by 2015. The cumulative. Countries receiving the most remittances are Mexico (over USD 25bn). up 25% from the prior year.000 0 Bangladesh Philippines Romania Spain Lebanon Serbia France Germany China Belgium Source: Ray.8bn in remittances. 30% of export earnings and 20% of import earnings.6bn to USD 4. A 2003 UN report suggests about 3% of people are on the move in the world. remittances are a significant contributor. In 2006 Bangladesh received USD 4. Through focused and targeted training and investment in HR 1 consultancies we believe it could achieve this goal. Remittance earnings have grown three fold between 2001 and 2006. The top destinations are Saudi Arabia and UAE. and Bangladesh has an opportunity to capture 5%. 74 Mexico India Morocco Pakistan UK . Sri Lanka. 8 are from developing countries. 1976 Since then a total of 4mn workers went abroad with 300.
Bangladesh can learn from the Philippines’ story and develop more nurses targeting western aging population demand. countries Its workers have a good reputation and are known to be loyal. Sinha & Chaudhuri (2007) A structural change where destination countries are looking for higher skills. With the current deficiency in vocational training. Only 10-20% are certified vocationally trained and less than 10% general college graduates are exportable. The community abroad creates 1 significant international networks. Most Bangladeshi migrants are young. Training has become a necessity with the structural shift towards activities demanding higher skill and the emergence of automation. fabricator. who suffer from domestic unemployment rate of 39. Sinha & Chaudhuri (2007) Manpower can provide more benefits than just remittances Manpower exports can provide provide significant national benefits.S. unskilled. carpenter and garment operators can create more profitable manpower which can be a more lucrative export. Bangladesh’s comparative advantage as a destination for manpower Fi gure 3: Manpower exports by profession 8% 8% 6% 43% Labour Cleaning Driver Technical Personnel 10% 15% 10% Agriculture Construction Labour Catering Services Source: Ray. 95m citizens are between the 1. training Institutions serving targeted labor pool such as mason. One of the key competitive advantages is the low average age of the workers. disciplined.4 ages of 15-64. targeted vocational training key to move up the value chain Challenges To capture market share of the growing manpower industry. 75 .AT Capital Research Figure 2: Top destination countries for Bangladeshi workers in 2006 5% 6% 10% 4% 9% 36% UAE K. cleaner. one cannot underestimate the value derived from returning migrants bringing back managerial skills and technical know-how.9%. free of local economic downturns. hardworking and adaptable and have a propensity to save. industry. benefits.A Kuwait Malaysia Singapore 30% Bahrain Others Source: Ray. While remittances are widely seen as the key economic benefit. male. Bangladesh has a strong presence in manpower exports exports in many countries. aged between 15-30 years and poorly educated. Bangladesh has to invest in human capital through education and training.
Tying the agent’s commission to salary negotiated will align their interest with that of the employees. Philippines remittance earnings for 2006 were USD 14. The government’s recent initiatives regarding the industry are upgrading worker skills. 25% of the world’s seafarers are from Philippines. Somalia. an association of 700 member agencies. 76 Policy level relationship building The emerging competition Effective and economic financial channels required for legitimate remittance transfer . China. Romania. image Strategic ties and relationships with countries where migrants go to work should be developed. Bulgaria. The Philippines have one of the most enviable education systems in Asia. efficient and customized delivery system of remittances. They have over 800 higher education institutes. They have established LINKAPIL to enable migrants to support development projects at home.g.AT Capital Research Case study: study: The Philippines’ Revolution. English is the primary medium of instruction. Increasing channeling of remittances through legal channels can be facilitated through reduction in transaction costs using financial instruments. and healthcare. Trade attaches have to proactively promote Bangladesh. Morocco. Also recent initiatives like Western Union joining the postal 1 service to deliver money will facilitate money transmitted through legal channels. The emergence of newer competition: competition New countries such as Turkey.000 nurses each year. They have exported 9. The government has been treating temporary labor migration as a foreign policy priority in both bilateral and regional trade negotiations for the past three decades. and Philippines are making the market more competitive. ensuring health and safety at the job-site. Tunisia. Colombia. compelling the agent to recruit from listed workers. Mexico. Restructuring the existing system and developing new products can attract forex e. Fiji. The Bangladesh Association of International Recruiting Agencies (BAIRA). dishonesty and inappropriate contract negotiation. education. People refrain from the formal channels because of better exchange rates. Another essential objective is building trust and through a superior brand image. A computer databank can play a vital role here. LINKAPIL floated development bonds targeting migrant workers. Vietnam. This success story has become possible due to several factors.9bn more than triple Bangladesh’s official remittances. They produce 50.000 household workers in 2006. Through the organization the migrants have invested USD 1bn in the economy.1 Reforming the recruitment agency sector The identification. Poland. priority The sector suffers from a poor local and international image with a reputation of charging excessive fees. and Nepal with the older competitors such as India. The Philippines have 190 universities and colleges training 9. screening and regulation of recruitment agencies in Bangladesh and at destination locations is a priority. obliging the employers to pay for travel fees. Sub-Saharan Africa.000 teachers per year. exchange rate incentives for migrants. time savings. should ensure better monitoring. For years The Philippines’ teachers have successfully met and cleared US teacher licensure examination. Bangladesh needs to position itself effectively increasing its skills base and retaining its traditional comparative advantages over other suppliers. in infrastructure. low transaction costs and ease of remittance. The Philippines have dominated the manpower export industry since the 1970s. Jamaica. special pension funds which include resettlement and medical services for returning migrant workers. Changed economic policies and incentives may encourage migrants to send more remittances home. increasing the minimum wage from USD 200 to USD 400 and interviewing the employer. A combined marketing effort both from private and public sector showcasing the substantial manpower resources needs to be formulated and executed. orientation courses on country specific culture and language.
For skilled workers this includes doctors. waiter. OECD will require 25mn workers by 2014 and 50mn by 2020. orderlies). Aligning training need with the opportunities can present the local entrepreneurs with prospects prospects in vocational training institute. accountants are in higher demand all over the world. Bangladesh has the opportunity to serve this market. fabricator. and also special pension fund. The most attractive countries in terms of unemployment rate. Targeted skills training. For example. low birth rate. The financial financial industry can target manpower employees with innovative products. A fully integrated high quality service focusing on the migrants’ vocational and cultural training. Entrepreneurs providing these vocational skills will have significant investment opportunities.g. scientists. 77 New EU member nation migration provide an opportunity for Bangladesh to fill the gap Developed nation demographic is and continues to age. recruitment and career consultancy could provide a more comprehensive service to workers and users. It has been forecast that by 2015 there will be demand for 850. Philippine government has used the government body LINKAPIL program to float development bonds targeting migrant workers. With a large. The most sought after unskilled worker jobs are for mason. the expansion of global labor markets. managers. Conclusion: Conclusion: As demand increases for manpower globally. Similar opportunities can be found in Poland. an efficient and transparent employment agency industry and alliances with international agencies. janitors. the US will need 21mn more workers by 2014. Hungary and Bosnia. Both government and private sector can take similar initiatives for the migrant workers.000 IT or E-skill workers in Europe. International network can 1 provide more options for their placements. Recently Romania has been seeking Bangladeshi workers for its garments industry. Seven of the ten occupations with the fastest growth are in low-wage services that require minimal training (e. Japan. The current current surge in labor demand has been prompted by faster and cheaper transportation. Bangladesh has been able to access 20% of the global manpower market. young and dynamic population suffering from high unemployment domestically. could propel Bangladesh further up the value chain. plumbers and electricians to the UK and is suffering from shortage in its own market. carpenter and garment operators. cleaner. foreign employment is a significant opportunity. High quality oneone-stop training and HR HR consultancy providers for prospective migrants will certainly help the industry. teachers. sales rep. engineer. Joint venture venture alliances alliances with a reputed international placement agency for skilled workers can open up a profitable market for higher value human resources. new markets are opening up Targeted high quality vocational training institutes could be very lucrative Banks could position themselves for growing transaction fees with tailored products One stop shop for manpower exports Leveraging international networks and experience .AT Capital Research As the workers from Emerging European economies are leaving for better opportunities in Western Europe. and income equality are the EU. For example engineers. Estonia. software programmers. For example Poland has seen an outflow of carpenters. Until now. surveyors and managerial jobs. deposit schemes or bonds. a shortage of highly educated workers and an aging workforce in industrialized countries. teacher. Bangladesh could take 5% or USD 30bn of the global market. computer programmer. USA and South Asian countries. nursing. Focused targeting of these 1 markets provides significant investment opportunities.
html.net/story. Mahmud.cia. Accessed th on 25 March. CIA Factbook.AT Capital Research References 1. Available at http://www.php?nid=23894. Available at http://www. A. (2008). 2008. 4. 3. K. M. 2. 78 . 2008.thedailystar. S. Accessed on h 25t March. Sinha.net/2004/10/13/d4101301011. “Romania to recruit more Bangladeshi RMG th workers”.gov/library/publications/theth world-factbook/geos/bg. “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of USUSD 30 bn Annual Migrant Remittances by 2015”.. Article published in The th Daily Star on 13 October. S. 2008. 2008. Available at https://www. Article published in the Daily Star on 28 February. Ray.htm. (2007). India: Indian Institute of Management Calcutta. & Chaudhuri. 2004. The Daily Star. (2004).thedailystar. Accessed on 25 March.. “Youth lost to Joblessness”.
the top ten players account for 65% market share.AT Capital Research Pharmaceuticals Pharmaceuticals With a USD 600mn industry and an average annual growth rate of 12%. Bangladesh is in a position to emerge as one of the regional R&D centres for Pharmaceutical Research. UKMHRA and TGA. Primarily a generics industry producing about 8. Local manufacture of vaccines and injectables will enable Bangladesh to become self sufficient in the production of formulations. Bangladesh has made significant progress in the export market. Through the establishment of modern technical facilities. Of the 245 registered pharmaceuticals. Between 2003 and 2006 pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from USD 7.com 79 . Since many companies have acquired international certifications like USFDA.ahmed@at-capital. Sanwar Ahmed sanwar. With the demise of reverse-engineering in India and China.9mn to USD 36. LDC’s are exempted from “Patent Protection” until 2016 allowing legal reverse engineering and sale of patented products. the industry can emerge as a regional hub for pre-clinical testing and clinical trials.hossain@at-capital. who are under the patent regime. Local companies enjoy 86% market share. Bangladesh provides a strong platform for off-shoring/outsourcing generic bulk and formulation drugs due to a cheap labor force and established infrastructure. Bangladesh can penetrate into regulated and unregulated markets.5mn. The Patent exemption through TRIPS and the government endorsement as a thrust sector have presented a perfect platform for the industry to launch itself into the global arena. the Bangladeshi pharmaceutical industry is the biggest (in volume) amongst all the LDCs.com Dewan Ashrakat Hossain ashrakat.000 different brands which meet 97% of the domestic demand. Asian Tiger Capital Partners According to the WTO TRIPS agreement. Establishment of adequate reverse engineering and API manufacturing facilities provide a substantial market for import substitution as currently 80% of the APIs are imported. This provides a unique opportunity for Bangladesh over India and China.
AT Capital Research The Bangladesh Pharmaceutical Industry The global pharmaceutical industry is expected to grow to USD 1. Although Bangladesh.1 110. Japan. The top two domestic manufacturers. Pakistan and Sri Lanka can produce formulations.8 157.4 128. Given this position. India has recently been subjected to patent protection in 2005.2007 80 .5 104. The TRIPS agreement has given it an advantage as an LDC to legally reverse-engineer patented products and sell in the local market. though currently small from a global perspective.9 91.2 145.3 the industry compete on a globally.3t 1.6 94.35 4. Currently. However.4 market in Bangladesh. Bangladesh imports 80% of its bulk drugs mainly from India.7 136. is growing rapidly at an average rate of 12%. the UK. Steady Growth in Market Size Figure 2: Bangladesh pharmaceuticals market (USD mn) 2004 1st quarter 2 nd 2005 95.10 600 6. investment in various areas such as adequate reverse engineering facilities and API (Active Pharmaceutical Ingredients) plants will help 1. Nepal.6 154.6 490 1 2006 123. Nepal.4th Quarter . Sri Lanka meets 98% of its drug requirements through imports mainly from India. The Bangladesh pharmaceutical industry is the largest white employer It is primarily a generics market.6 107. The industry is dominated by local manufacturers who account for 86% market share. China and Europe. while the top ten domestic manufacturers constitute about 64% of the total pharmaceutical 1.8 120.6 10. Bangladesh has the largest pharmaceutical industry among the Least Developed Countries (LDC).0 28 210 0.6 510 2007 142.6 590. This places Bangladesh at an advantage in the generics market until 2016.10 white-collar labor employer. only Bangladesh and Pakistan have self13 sufficiency in the formulation segment. The Bangladeshi market.000 11. producing both patented and off-patent products.2 137.5 quarter 3rd quarter 4th quarter Total Source: IMS Report. with the new patent regime MNC dominance is 13 anticipated with the need for more R&D. India has the capability to produce both bulk drugs and formulations in the South Asian region. Import of bulk drugs in neighboring countries Pakistan meets 90% of its bulk drug requirements through imports from China. Germany and India. the Indian pharmaceutical industry is one of the largest generic pharmaceutical industries in the world. In 2007 the market was worth USD 600mn and has grown at an average rate of 12% over the last five years. Brief comparison with India Figure 1: Comparison of the Indian and Bangladeshi Market size Growth rate API industry Export share (USD mn) (%) (USD mn) (%) Bangladesh India Source: DDA & USITC 9.3tn by 2020.4 416. Pakistan and Sri Lanka have the capability to make finished products (formulations) from imported ingredients (bulk drugs).2 156. Square and Beximco Pharmaceuticals have a combined market share of over 27%.
including Bangladesh. Saudi Arabia. has to import a large portion of API required for finished formulations.02 0. the majority of which are LDCs. 81 . including India and China will not be able to export their patented 4 drugs. Malaysia. This means that Bangladesh can legally reverse-engineer patented products and sell them in the local market as well as export to other LDCs. around 80% of the total API required by the industry comes from 4. No such fee has to be paid. Canada. At present Bangladesh exports to over 65 countries around the world.5 35.11 imports. License fees would be applicable for export to any non-LDC where the patent holder has registered his patent. the pharmaceutical industry in Bangladesh accounts for 97% of local demand with the balance relating primarily to the import of vaccines.10 n/a No. Only 49 LDCs. One clause states that if 4 or more local companies manufacture a certain drug. Bangladesh also has the largest market size among the LDCs giving Bangladesh a strong manufacturing base. are able to export their patented drugs.60 0.30 0. No license fees Due to its LDC status and the fact that Bangladesh has no patent protection for pharmaceutical products. the UK and the USA .9 7. Other countries. Bangladesh. invention and affordability of 4 pharmaceutical products and processes by developing nations.6 36. In terms of finished formulations. the ‘Doha Declaration’ of TRIPs was adopted. Strong manufacturing base Among the LDCs Bangladesh is the only country which is almost 100% dependent on drugs produced locally. Korea. however. no license fees are payable for manufacturing and for export to other LDCs.20 0. LDCs were exempted from ‘Pharmaceutical Patent Protection’ until Year 2016.AT Capital Research Over the last few years the Bangladeshi pharma industry has seen a significant increase in exports. Export destinations include Japan. 9 Italy. The TRIPS agreement can be used to ensure access to innovation. The TRIPS agreement along with the national drug policy gives the local companies 9 in the generics market a significant advantage. DDA Competitive Advantages Patent exemption In 2002. Although 21 local pharmaceutical companies are producing 41 APIs. either because the patent is not filed or because it is not 4 enforced. Increasing Penetration of Exports Figure 3: Export statistics (USD mn) Finished Raw Year products materials 2001 2002 2003 2004 2005 2006 2007 4.10 0.9 20. of countries 17 32 51 62 67 61 65 Source: Primary Interview.9 0. as the facility will be reserved for LDCs until 2016. Regulatory environment The local drug ordinance established in 1982 was designed in a manner to protect the local players. no MNC can import that drug.3 20.5 5.
Over the last 5 years the CRAMS industry has been contributing close to 8% of the total Indian pharmaceutical business. Since Bangladeshi manufacturers are not fully backward integrated. and rising costs. Export regulations & prospects Currently. To be able to do this. The allowable limit for pharmaceutical samples export is USD10.AT Capital Research Low logistics costs According to the World Bank’s Doing Business report. rather than on manufacturing. Case Study : Success in Outsourcing 10 Facing lagging sales of patented drugs by MNCs like GSK and Pfizer in their home markets. Competitive labor force Bangladesh is internationally very competitive in terms of labor cost. As countries like India. API facilities will not only play a significant role in import substitution. it will also open the doors 4 to mass scale exports. According to the new three-year Export Policy for FY07 to FY09 pharmaceutical products were included in the list of thrust sectors. it is expected that they will not produce raw materials of patented products. Bangladesh needs to invest in ‘DMF Standard API Facilities’ with all basic infrastructures. they 4 can capture only part of this competitive advantage. Labor cost may account for up to 50% of the overall manufacturing cost for APIs. India has emerged as the principal destination for global pharmaceutical companies. and trim the ‘time to market’ for new drugs. such as drug discovery and marketing. The country’s existing “Export and Import Policy” is followed. there are no restrictions on the export of pharmaceuticals. inland transportation and handling costs are very competitive in Bangladesh at USD 150 per standard cargo compared to USD 404 in India.000. increase development capacity. it is difficult to source raw materials or allowed to manufacture Investment Opportunities APIs to produce patented drugs. making 4 prices very competitive. Developed countries are expected to further propel the CRAMS industry to grow at nearly 32% from 2006 to 2013 as& India pharmaceutical companies quality is . 7. outsourcing of research and clinical trials to reduce costs. Bangladesh currently has to import 80% of the API from countries including India and China as the local R&D required 82 10 Success in outsourcing Development of domestic API market . The government has plans to introduce a policy to boost export of pharmaceuticals in the near future. LowLow-cost energy Fuel and energy is highly subsidized in Bangladesh. In order to take full advantage of the ‘Post-2005 Opportunities’. comarketing alliances. both Bangladesh Investment in R&D bulk offers drug / global API facility and cost advantage.Although as an LDC. These strategies permit MNCs to focus on their core competencies. many MNCs have turned to contract manufacturing and research services (CRAMS). proper R&D is required. patented products. Import license of raw materials are issued to all manufacturers which allow them to import 6. declining R&D revenues. amenities and special facilities. Outbound passengers will be able to carry USD200 worth of products with them abroad. China and Brazil are all sources of raw materials and signatories of WTO. 8 from most parts of the world. USD 520 in Tanzania and USD 12 600 in Ethiopia.
the industry has to come up with its own portfolio of product patents. The toll manufacturing industry in India was worth 3 USD350 mn in 2007. Bangladesh might collaborate with global players and perform outsourced R&D activities for them. manufacturers of Bangladesh need to invest in manufacturing plants and apply for certification (e. Reddy’s committed 14 % of its annual sales to R&D. Insulin and vaccine production 83 . Outsourced R&D . Due to low skilled labor costs and other factors such as subsidized power. 10 whereas. In Bangladesh. This would ensure substantial import substitution.g. USFDA. Bangladesh has export opportunities in the developed and regulated markets in the form of contract /toll manufacturing and under-license manufacturing. Since 2005. Dr. Ranbaxy allocated approximately 7 %. facilities. Investment in contract manufacturing facilities facilities. insulin and vaccine plants. India and China have been involved in pharmaceutical R&D for several years. Thus. the country should invest in injectables. insulin and vaccine plants.leveraging a low cost base Investment in R&D outsourcing facilities. India has had to abide by patent protection. Investment in R&D facilities would enable Bangladesh to develop its own molecules and drugs once the ‘patent exemption period’ will be over in 2016. UKMHRA and TGA) in regulated markets. In order to compete with global players. The concept of a privatized common R&D facility can prove to be very promising as a majority of the local companies might not be able to establish self-owned R&D facilities. The rest are imported. Investment in R&D for developing new drugs. the vast reverse engineering sector in India which is more technically adept than Bangladesh is at a loss. India has recently started investments in new drug development after entering the patent regime. Bangladesh has an advantage as a location for possible outsourced R&D. Bangladesh could become a contract manufacturing venue for global players. ities Considering the large number of medium and small sized pharmaceutical firms in Bangladesh requiring funds to setup production units for specific drugs. In 2005. only 6 are locally manufactured which does not include the highest revenue generating molecule. Bangladesh needs to invest in R&D for reverse-engineering of patented drugs. To take full advantage of the Post 2005 opportunities. Injectables. Of the top 15 API molecules. a potential investment opportunity lies in establishing such plants. Developing a toll manufacturing sector R&D for new drugs key to developing competitive advantage post 2016 Plant certification for foreign markets Investment in plants for certification in developed markets. Optimum capacity utilization and investment in plants is important for 3 penetrating the export market. Investment in injectables. In order to capitalize on these export opportunities. Bangladesh should aim to capitalize on the redundancy of India’s generics 1 industry’s’ significant resource. none of which are currently present. there is no such R&D facility.AT Capital Research for the reverse engineering is not adequate. In order to take full advantage of the Post-2005 opportunities.
Hassan. Official website of Export Promotion Bureau at www. Official website of Centre of Trade and Development at www.gov. Official website of Board of Investment Bangladesh at www. India has recently been (2005) included into the patent regime.gov. 6. 4th Quarter 2007”. With the right strategy Bangladesh has every chance of capturing a substantially larger market share. “Emergence of India’s Pharmaceutical Industry and the Implications for the U. “Study on the Viability of High Quality Drugs Manufacturing in Bangladesh”. R. Available at http://www.ddabd.org. Primary sources: interviews with officials of Directorate of Drug Administration.epb. Generic Drugs Market”. 12. February 2005. 84 .S. Greene.AT Capital Research Conclusion The pharmaceutical industry in Bangladesh is currently the largest among the LDCs which are not required to comply with patent rights. Furthermore.org. “Pharmaceutical industries: Potential and Possibilities”. 360-Global Pharmaceutical Perspectives”. (2007). 2. (2007). IMS.pdf. 9.boi. (2005). Begum. W. World Bank Draft Policy Note. “Intelligence. As a result. there is a scope for the setting up of API manufacturing plants which will reduce the cost of finished goods making the Bangladesh Pharmaceutical Industry much more competitive in the domestic and export market as well. (2007).bd. “Post WTO opportunities & Bangladesh Pharma Sector”. This makes the generics market of Bangladesh much more attractive than that of India and China.centad. The Contract Research And Manufacturing Services (CRAMS) structure in India can be seen as an example as Bangladesh presents similar advantages as an outsourcing destination for manufacturing and research.gov. “IMS Quarterly Review. Vaccine and injectable product lines remain relatively underdeveloped. References References: 1. (2006). N. (2008). 4.bd/pdf/2007/73-89. local companies can take advantage of reverse engineering and produce patented products at lower cost. IMS. NDC Journal. 3. 11. “Improving the Competitiveness of the Pharmaceuticals Sector in Bangladesh”. The global pharmaceutical markets will more than double in value to USD1. USITC: Office of economics working paper. BAPI. It is likely that a majority of the companies will not be able to afford quality R&D facilities. GTZ.ndc. 8. Heavy investment in R&D is essential. 5.bd. 13. Primary sources: interviews with officials of GSK Bangladesh. As Bangladesh imports a major share (80%) of its API. Official website of Directorate of Drugs Administration (DDA) at www. (2006).3tn by 2020 and the emerging markets are expected to grow at double digit figures in the near future. In the long term Bangladesh should prepare for the “Post 2016” phase. World Bank. 10. 7. Federal Ministry for Economic Cooperation and Development.
5tn in 2006 and is still expanding.ahmed@at-capital. Bangladesh has made significant progress in the healthcare sector including absolute eradication of polio. The growing purchasing power of a sizable middle class provide opportunities for investments in hospitals. there are significant opportunities in training and exporting manpower from Bangladesh.zakaria@at-capital. India. Bumrungrad (Thailand) and Apollo Hospitals have opened operations in Bangladesh. World class medical service providers like KPJ Healthcare (Malaysia).sajid@at-capital. As developed countries are forecast to run short of their domestic supply of medical staff. Medical tourism in Asia is experiencing a growth rate of 20-30%.AT Capital Research Healthcare Healthcare The global healthcare industry was worth USD 4. South Korea and Singapore are attracting the maximum number of medical tourists by providing quality medical service at economic prices. travel and accommodation facilities.com Tami Zakaria tami. the lowest maternal mortality rate in South Asia. Thailand.com Asian Tiger Capital Partners Telemedicine can be a means to provide superior medical services to 70% of the total population residing in the rural areas of Bangladesh. laboratories. a sizeable reduction of fertility and child mortality rates. diagnostic centers. insurance companies and fitness centers in Bangladesh. Malaysia. Substantial investment is required in Bangladesh if it is to reach the standards of neighboring countries in terms of the medical infrastructure and facilities. Bangladesh can take advantage of its weak currency and strategic location in the Asian hub to attract medical tourists. 85 . This will require significant support from information and communication technology infrastructure. Bangladesh needs to invest heavily in health care infrastructure.com Ahmad Sajid ahmad.D firoz. Firoz Ahmed Ph. Global pharmaceutical giants can lower their research and development costs by shifting the pre-clinical trials of drugs to cheaper locations like Bangladesh.
mainly NGOs and MFIs.442. medical tourism for the NRBs. Government hospitals and healthcare centers of NGOs.54% down from 2.43 3 6.000 population Population per nurses Total expenditure on health (THE) as % of GDP Public expenditure on health as % of THE Private expenditure on health as % of THE Source: Ministry of Health and Family Welfare. 2005 Total population (mn) Hospital beds per 10. WHO statistics show that 0. Tertiary healthcare is mostly Dhaka city based. Government of Bangladesh 13 A vast customer base for healthcare Polio has been fully eradicated 0. Outside Dhaka primary and preventive healthcare is provided by community health clinics.1% of the population was insured in 2005. Upazilla Health complex.4 31 69 Joint venture hospitals received USD 110mn investments in past 5 years Bangladesh has attracted number of reputed international healthcare service providers in the last 5 years. The number of specialist doctors with international recognition is few. Inadequate number of skilled manpower. These are wide ranging and span across various subsectors. The proportion of underweight children has gone down from 72% in 1986 to 51% in 1 2000. Nepal and Pakistan.AT Capital Research With its large population of around 15 150mn people needing improved healthcare. resulting from lack of standardization of treatment 2 charges at hospitals. This sector is unprofitable due to lack of control over costs. pre-clinical trial centers for local and global drug manufacturers and export of trained medical staff to developed countries. especially in diagnostic facilities. This has been possible with the increased participation of the private sector.5% in 1990. Areas for improvement: Lack of world-class medical infrastructure support. Bangladesh has significant investment opportunities. The medium sized hospitals and clinics based all around the country refer patients to private and government hospitals in Dhaka. The doctor to population ratio is 1:3. Figure 1: Key health indicators of Bangladesh. KPJ Healthcare of Malaysia operates as a joint venture partner with United Hospitals Ltd. Asia’s biggest healthcare service 14 provider Apollo has been operating in Bangladesh since 2005. Most of the specialist doctors are stationed in Dhaka and work with private hospitals.000 population Physicians per 10. Health insurance plans are rare. These hospitals 86 . telemedicine for the geographically dispersed population.1% of the Bangladeshis are insured2 140 3. health insurance for more than 98% of the non-insured population. organ 12 transplants and other major treatments.169 and nurse to population ratio is 1:6.442 3. Bangladesh has made excellent progress in many of the key health indicators. especially for heart surgery. Mostly patients go abroad for diagnosis of disease and ultimate treatment. The population growth rate is now 1. The infant mortality rate is lower than India. For example. Square Hospital in Dhaka has an affiliation with Bumrungrad Hospital of Thailand. It has fully eradicated polio and 97% of the population has access to safe drinking water.
Singapore.AT Capital Research attract patients who are in need of tertiary medical care. In India.5mn people visiting countries like Thailand. The biotechnology industry has mushroomed since its inception and at present is equivalent to USD 50. While occupancy rates in India are around 77% they are much lower in Dhaka. Globally. It takes around USD 800mn to bring a new drug to market. with low capital costs and less time required to recruit volunteers for clinical trial centers. South Korea and Malaysia for medical purposes today. Apollo DKV Insurance Company offers comprehensive cover products. Total health care expenditure across the world was USD 4. Although the tourism sector as a whole is growing by 44-6% a year in Asia. change.000 medical officers spanning 53 clinical departments in patient care. The pharmaceutical giants are striving to find cheaper sources of facilities for developing new drugs. Global healthcare trends are changing The global healthcare healthcare industry is currently undergoing significant change. and France are market leaders in biotech. medical tourism is a growth area. India. they are being targeted by top medical service providers. this business sector is expected to grow at a CAGR of 36% from 2006 to 2011 and be 7 worth USD 1bn.6% success rate in cardiac bypass surgery A 70% success rate in Bone Marrow Transplant The success of Apollo in India comes from the combination of world renowned doctors. 15. Case study: study: Apollo Hospital – India vs Bangladesh experience 3. where lower take up and occupancy has somewhat limited investment in associated products and services. There are mixed results regarding performance of these hospitals. 4 USA. With increasing medical costs in developed nations and increased rate of non-insured population. 6 40% of which goes behind drug testing.000 specialists and super-specialists and 3. Apollo Hospitals’ joint venture with German company Deutsche Krankenversicherung (DKV) is expected to tap into the nascent health insurance market in India from FY’08. 16 Apollo Hospitals Group of India has become the largest healthcare service provider with 41 hospitals in and around India within 25 years since inception. As the middle income groups of the population are gaining purchasing power.5tn in 2006. With an estimated 1. US & OECD countries account for USD 4.7bn. Achieved a 99. 87 Clinical trial industry growing at 15% per year . India.2tn. the clinical trial industry industry is estimated to be worth over USD10 USD10bn 10bn and is growing at 15% a year. There is less provision of related services in Dhaka – for example telemedicine and medical tour plans are available in India while they are not in Dhaka. medical tourism is growing between 2020-30% year on year. China. Global pharmaceutical sales account for USD 602bn. Some of the key facts about Apollo in India are: • • • Employs over 4. adoption of the latest technology and strong customer focus. Of this. the sector 5 is expected to swell to USD 4bn in Asia by 2012. Apollo’s experience is quite different in Bangladesh since its arrival in 2005. with an annual growth rate of 7%. Australia. out-patient products and hospital cash policies.
It has been estimated that the middle class accounts for 22% of the urban 8 population. monitoring and treatment of patients via video conferencing over 19 the internet. doctors such as reputed NRB doctors based in the UK or the USA. As the global healthcare industry is experiencing shifts. The hospital should be backed by a world class diagnostic center. will be a key factor in determinant of success. Establishing a midmid-range hospital A mid range hospital may be established to tap a large and growing middle income section and could be located in all major cities. Joint ventures with leading healthcare providers like Parkway Hospitals in Singapore would provide credibility and access to leading service provision. an opportunity for JV’s with foreign insurance providers Provision of medical care for large and growing middle class Telemedicine. To attract tourists a comprehensive range of treatments would need to be available . can pave the way for the development of the health 18. orthopedic. Bangladesh can also attract significant number of medical 1 tourists from developed countries. This is another precondition for this hospital to be successful. Joint ventures with foreign insurance companies. it is the right time to work out a comprehensive plan by involving both the public and the private sector to maximize the opportunities that lie ahead. Creating telemedicine centers in different different districts With 80% of the population being rural. As health care services are becoming more expensive there is an opportunity for expanding health insurance market.000.for various disease classes including cardiology. Delta Life Insurance has a hospitalization insurance scheme. neurology. Establishing a worldworld-class hospital The primary target market will be the upper income section of Bangladeshis who go abroad for medical treatment and the 4. Health insurance administration In Bangladesh. third party administrators and specialized health insurance plans (Plan for diabetics for instance). NGOs like Grameen Bank provide micro health insurance schemes for rural Bangladeshis. Both public and private incentives should be developed to make Bangladesh an attractive destination.000 NRBs worldwide. nephrology. The need for world class credible hospitals for medical tourism Attracting foreign and NRB doctors State of the art technology in diagnostic centers is required The health insurance market remains undeveloped. center The diagnostic center will be equipped with state of the art technology in diagnosing every major disease class. ENT and cosmetic surgery facilities. Taking advantage of the weak currency and strategic location in the Asian hub. access to treatment in remote locations is required. Staffing the the hospital with a pool of specialist doctors. accessing the rural population 88 . Different approaches may be taken for establishing the hospitals either as a greenfield project or acquisition of existing non-performing hospitals in both the public and private sectors. Telemedicine involves the remote diagnosis. the health insurance market is still ill explored. Some of the corporate houses offer group insurance for their employees. dental.20 insurance market.AT Capital Research Opportunities for Investment The healthcare sector in Bangladesh has moved a long way during the last few decades. ophthalmology.
integrating pre clinical. Australia. clinical and post surgical after care. who can be trained as nurses/medical assistants. Canada. Suitable locations could be Uttara. Bangladesh has a large young population. Gazipur or Chittagong.10. Bangladesh can also become a supplier to current 9. JVs with foreign companies have not met expectations with initial occupancy rates remaining lower than anticipated. a “Medical City”.11 supplier nations. Training and educational institutes need to be established to feed this opportunity. Conclusion Bangladesh. both men and women. requires a targeted investment approach. Medical education facility By the year 2010. Healthcare provides substantial avenues for investment in various sub sectors from primary care to education. locally manufactured drugs will be more competitive 12 in the global market. As well as being a primary supplier. The idea of this medical city is to create an establishment which will be a comprehensive solution for healthcare service in Bangladesh. capitalizing on the global shift in healthcare. Most of the pharmaceutical companies in Bangladesh do BE (Bio-equivalence) testing of drugs in India for export permission. Even the major exporter countries of trained nurses. If such facilities are developed in Bangladesh. the global shortage in nurses is forecast to cross 300. An integrated one stop solution. Investment in enabling avenues such as education and insurance coupled with the establishment of high quality hospitals and diagnostic centers provides opportunities locally as well as for medical tourism. Aureos Capital have recently taken a stake in the Apollo hospital – recognizing the substantial opportunity for private equity. Despite the challenges faced. while international health care companies have entered into the market. with highest shortage experienced in USA.000 across the globe. Evolving the correct business model. such as Philippines. are facing nurse shortage for their domestic markets.AT Capital Research Development of preclinical trial centres Establishing prepre-clinical trial centres centres A pre-clinical trial centre could be created for local drug makers and also for global pharmaceutical companies wishing to offshore their operations. affluent Bangladeshis still travel to the far east for medical care. Nurse training centres: a global shortage in supply of nurses Medical City: One stop shop 89 . in a sector with high initial capital outlays. and the Saudi Arabia. with its large and economically diverse population. improving service provision and changing perceptions are critical factors of success. with longer pay back periods. For example. Tongi.
Ford Foundation.grameeninfo.prlog.int/en/Section313/Section1515_6922.aspx..org/version1/en/documents/PressReleaseEuropeannursingshortage. “The World Urbanization Prospects: The 2005 Revision”.htm. 8.apollodkv. http://www. 18. 15.co. 2. (2006). University of California Press. United Nations. Official website of BMJ at http://www.mohfw.who. Primary sources: telephone interviews with officials of Apollo Help Desk. Director.html. 20. Official website of Apollo Hospitals Group at www.com. Official website of World Health Organization available at http://www. Present. Official website of Apollo DKV Health Insurance available at http://www. Journal of Advanced Nursing available at http://www.who.themedica. New Zealand Trade and Enterprise (2007).php/content/article/060410_medical_touris m_asias_growth_industry. Ministry of Health and Family Welfare. 16. 6. Several Sources Compiled by Wikipedia. Official website of Themedica available at http://www. Agri Food Trade Services. 4. 13. Primary sources: interviews with Lecturers of Institute of Health Economics. 5.pdf.gov. 12. Dhaka. Government of Bangladesh at www. Official website of World Health Organization available at http://www. (2005).searo.html. 7. “Roundtable on Microinsurance Services in the Informal Economy: The Role of Microfinance Institutions”. (2005).com/industryoverview. 9.AT Capital Research References: 1. University of Dhaka. Canada. 10.com/cgi/content/full/320/7241/1030.org/10036648-booming-clinical-trials-market-in-india. Official website of Ministry of Health and Family Welfare.bd. Industry and Government Training Markets”.int/nha/country/BGD. Goozner.apollohospitals. “Thee USD800 Mn Pill: The Truth Behind The Cost of New Drugs”.bmj. (2000). Official website of Grameen Bank at http://www. Official website of hotelmarketing. & Future Report Bangladesh”. Scoop.in/home/EasyHealthIndi. 19. Merrill (2004).efnweb. 90 . “Agri Food-Past.pdf. “Global Trends and Issues in the Corporate. 14. 17.html.com available at http://www. 3. 11.com/index.org/bank/index.hotelmarketing. “Philips helps provide rural healthcare in India”.
The suggested areas of investment opportunities are in the agrobiotechnology which include cotton production and processing (backward linkage to RMG/Spinning Mills). Serum Institute of India Ltd.ahmad@at-capital. Bamboo and Potato Starch Industries.AT Capital Research Biotechnology Biotechnology While the global biotechnology industry is booming. Knowledge development and transfer is critical. Fruit Crop Production. Food Processing Industries. Asian Tiger Capital Partners Mir Firoz Ahmad. firoz. and in medicinal biotechnology in vaccine and recombinant insulin manufacturing.g. rice. Mushroom Cultivation Technology. and upgrade its’ generic pharmaceutical sector by integrating biotechnology-driven pharma products. The team identified several areas in the agricultural sector. Ph. such as Ornamental Plants and Cut Flowers. and Biocon India Group. The potential areas of development and commercialization of the biotechnology sector in Bangladesh were studied by a Thai Biotechnology team. Bangladesh should pay special attention to the TRIPS agreement (Trade Related Aspects of Intellectual Property Rights) before the year 2016 is over. especially in the agricultural and healthcare sectors. etc. Monsanto (USA). we believe there is significant potential in this sector. However.com 91 . Bangladesh should proactively form partnerships with the international Biotech industries especially in the agricultural and health care sectors. potato.D. Bangladesh is at an early stage of development. investment in education and research is important. Potted Plants and Cut Foliage Production. Thailand’s National Center for Genetic Engineering and Biotechnology. e. Medicinal Plants and Herbal Products Technology. Leveraging the NRB platform. Microbial Seed Cultivation Technology.
an all-time high in the sector's 30-year history. fisheries or aquaculture could positively impact the country’s largest sector by enhancing product yield. NGOs and the government created the National Institute of Biotechnology (NIB) in 1999 which introduced a bio-safety guideline. with already 280 biotech companies and 180 bio-product suppliers contributing to 2% share of the global market. disease free crops. Unlike its neighbor India. be it plant biotechnology. technology and mechanized cultivation can provide the solution. Many of the next generation of medicines (e.1bn.5mn hectares. Bangladesh is expected to need about 30mn tons of rice annually in the year 2021 while total rice growing area is forecast to shrink to 10. a four member expert team from Thailand (sponsored by SEDF and 92 . With use in yoghurt to rice to leather and vaccines biotechnology has wide and varied applications. In India for example. Biotechnology could revolutionize agriculture and pharma sectors Global biotechnology revenue was USD63. The Indian biotech product market is forecast to be USD 4. The successful introduction of GM products require research and field testing to develop tailored products and to ensure there are limited negative impacts to the surrounding ecosystem. Bangladesh has yet to develop a significant 1 biotechnology industry and capitalize on a fast growing USD 100bn global industry. Biotechnology and agriculture in Bangladesh While biotechnology and GM innovation have revolutionized product development globally with high yielding. due to limitations in investment in business and research infrastructure. there has been a biotech revolution. sectors .3 investment opportunities of USD 2bn over the next five years. investment in R&D and new product development is critical. antibiotics.3mn hectares in the same period. Bangladesh has not benefitted from such advances to the extent it could. clothing and health care. which continues to expand fast.75 tons/ha. How can Bangladesh learn from and leverage from its proximity to India. innovation and resistance to natural hazards.1 bn in 2005.2bn in the year 2010 with 2. Rice yield would need to 4 increase from the present 2. an all-time high in the sector's 30-year history Bangladesh’s rice production has to increase to support the growing population In 2003. The global biotechnology industry has expanded rapidly over the past five years. drugs. animal biotechnology. Rice is the staple food for about 150mn people and is grown on about 10. with annual growth rates consistently above 15%. Bangladesh could benefit significantly if agricultural output could be increased. after the TRIP’s market protection lapses in 2016. GM rice strains capable of being grown all year round coupled with improvements in irrigation area. The application of biotechnology With 150mn people in Bangladesh. Bangladesh produces about 25mn tons of rice annually. hormones and vaccines) will be biotechnology derived – if the local pharmaceuticals industry is to remain competitive in export markets. With the population forecast to grow by 2mn annually. The scientific community.g.AT Capital Research Biotechnology can play a significant role in Bangladesh’s Bangladesh’s push for new export sectors. Agriculture and pharmaceuticals are key sectors with specific and proximate applicability in Bangladesh. is substantial. the demand for basics such as food. antibodies. Revenues of publicly listed biotech companies worldwide grew 18 % in 2005 to USD 63. resistant to adverse environmental conditions. Agricultural biotechnology.44 to more than 3. Given the importance of agriculture in its economy and the current shortfall in production for domestic consumption.
There are 11 research organizations where biotechnology has relevance. food chain pollution and medical side effects. antibodies. be it plant or animal. NRIs . 5 They highlighted the following areas: Ornamental Plants and Cut Flowers Food Processing Industries Mushroom Cultivation Technology Medicinal Plants and Herbal Products Technology Microbial Seed Cultivation Technology Other small-scale agro-businesses were also identified as having significant potential for business promotion: Fruit Crop Production Potted Plants and Cut Foliage Production Bamboo Potato Similar initiatives need to be made in the area of food production. In the last 50 years Dhaka University has produced approximately 5. Infrastructure constraints in Bangladesh.AT Capital Research Thai biotech study group assessed the prospects for the commercialization of biotechnology in Bangladesh BIOTEC) undertook a study to assess the prospect for commercialization of biotechnology in Bangladesh and to identify areas for development and promotion. Companies are largely engaged in producing generic medicine. The government has recently taken initiatives starting with 12 science universities. Impact on the population and ecosystems has to be assessed. Bangladesh. especially in the areas of antibiotics. 15. many of which work abroad.500 PhDs qualify in scientific streams each year in India. It is imperative that sufficient field studies. The TRIPS (Trade Related Aspects of Intellectual Property Rights) agreement exemption lapses in 2016 – as such the generics market will be lost and most of the companies will lose business to the foreign companies. learnt. 700. rice. hormones and vaccines. There is a shortage of qualified scientists in the biotechnology area. in the case of agriculture. especially. Knowledge transfer has been facilitated by NRIs going back to India or by arranging entry/alliances of foreign companies. Releasing and utilizing biotechnology derived products without testing and pilot studies.000 Life Science graduates. although this has not been applied extensively. India has been 7 successful in growing its industry for many reasons: A skilled workforce 3mn graduates. Bangladesh. run potential risks such as bug resistance. Many of the next generation medicines will be biotechnology derived. There have been no significant initiatives from any of the pharmaceutical companies to incorporate biotechnology derived product lines in their portfolio. and preclinical and clinical trials. 93 Lessons to be learnt from India . TRIPS (Trade Related Aspects of Intellectual Property Rights) agreement ends in 2016 There is a need for more science graduates Field testing and preclinical trial investment Biotechnology and Pharmaceuticals in Bangladesh. in pharmaceuticals are conducted. Biotechnology does not come without its risks.000 post graduates and 1. India’s success in biotechnology sector – lessons to to be learnt. corn and pulses.000 scientists are estimated to be engaged in India’s biotechnology sector.It is estimated that 15% of the scientific population of pharmaceutical and biotechnology companies in the US are of Indian origin.
and Agilent Technologies to name but a few. For example.AT Capital Research Alliances and joint ventures with leading global names such as Monsanto. The Bangladesh government and private sectors should create viable opportunities to attract suitably qualified NRBs back to Bangladesh in areas of biotechnology such as genetic engineering. Target partnerships/joint ventures with global firms who have already formed JV’s with firms in Asia. The prospects of access to a large domestic market may appeal to MNCs. in the agricultural sector. agriculture and poultry products . private sector and NGOs need to collaborate in order to succeed. The government needs to be proactive to attract foreign technical expertise. Specific products The following are the specific areas of investment opportunities: AgroAgro-biotechnology Collaboration in R&D is fundamental Leverage NRB platform Investment in education Knowledge transfer through JVs. knowledge. research. cell culture. or with Serum Institute of India to produce vaccines for the health care/pharmaceutical sector. in India. transfer. World-class education and research infrastructure . cell fusion. Leverage proximity to India’s booming biotech industry Deepen existing Thai interests Some products to focus on • Cotton production and processing (backward linkage to RMG/Spinning Mills) • Potato • Rice Medicinal biotechnology • Vaccine manufacturing • Recombinant insulin 94 . Further specific investments and partnerships with Bangladesh by the Thai entrepreneurs in the agro sector are potential investment areas. Targeted international investment for knowledge transfer. Leverage NRB knowledge. with Mahyco Monsanto Biotech (India) Ltd (MMBL) to produce and market cotton to support Bangladesh’s garment sector. Bangladesh needs to produce more graduates and post-graduates in this rapidly advancing field and introduce suitable training that would allow research ideas to evolve and produce marketable products. Thai investment in Bangladesh: Bangladesh Thai businesses have conducted research and invested approximately USD 60mn in the past 5 years in Bangladesh in various 2 sectors including. Currently most R&D initiatives are at the individual level. Roche. protein engineering and enzyme technology. essary. Active government support . The Government. Investment in education and research. Effective international collaboration in research and development would form the base for technological knowledge transfer.an excellent network of research laboratories Stakeholder collaboration in R&D is necessary necessary.the Indian government provided incentives for biotech firms and fostered relationships with international institutes such as the National Institute in Health (NHI) in the US.
Asian Biotechnology and Development Review. N. (2003). 2007. Bangkok. investment in technical skills could transform this sector and other connected sectors. Conference Centre. 95 . http://www. improving yields and protecting against environmental risks. Knowledge transfer. Available at http://72. 3. The potential benefits for the private sector and wider society is considerable.14. 7. infrastructure development. “Unprecedented Growth Opportunity”. & Islam. Biotechnological research in Bangladesh has been initiated only recently. UK.pdf BIOTECHNOLOGY. Available http://www. But with active government support.knowledgebank-brri. The Joint UK Biotechnology Company Showcase/ Genesis VII.htm Rice in Bangladesh. (2005). 6. 13th December 2007. With a large domestic population. London.in/abdr_nov4. 4.html Pharmaceutical and Hospitality Optimization. Thailand. 2. M.ris. (2005).piribo. Agriculture and Pharma sectors could benefit significantly. Bangladesh Rice Knowledge Bank. RNCOS.235. July 1. Onco life Sciences Pvt. “Biotechnology in Bangladesh”.org/download/bi otech19jan. Dhaka1000.104/search?q=cache:thAAZDk98bEJ:ibef.pharmaprojects. Choudhury. “The Potential Commercialization of Biotechnology in Bangladesh”. “Indian Biotech Industry 2005”.com/conference_reports/Joint-UKBiotechnology-Show-jan2008. Ltd. Queen Elizabeth II.org/riceinban. Available at http://www.. http://www. leveraging the NRB platform and alliances and joint ventures internationally should be developed. References 1. Ramna.com/publications/biotechnology/indian_biotech_industry_ 2005. Bangladesh Atomic Energy Commission.org. S.AT Capital Research Conclusion Biotechnology applies to many sectors – producing new products. 5. Conference Reports. National Institute of Biotechnology. Prepared for South Asia Enterprise Development Facility (SEDF).htm National Center for Genetic Engineering and Biotechnology.
In 2007 Meghna Bicycles won a USD 13mn export order to Germany.com 96 . due to insufficient infrastructure they lack adequate education and training. The three bicycle manufacturers in Bangladesh manufacture high quality bicycles for the US and EU market.Ahmed@at-capital.AT Capital Research Light Engineering Light Engineering The annual revenue generated by the sector amounts to around BDT 9. Asian Tiger Capital Partners Sanwar Ahmed Sanwar. Investment is in Technical Training would be lucrative as the sector expands. it presents an added potential export market. As the demand and usage of engineering and electronic goods increases. Products worth USD 209mn were exported during the last fiscal. With rapid economic development this figure is bound to increase significantly as demand for plastic increases. The plastic industry has experienced significant export growth 117% over the last year. The Agro-tools sub sector of the LES is worth USD 217mn with potential imports substitution market worth USD 289mn. Furthermore. At 3. Chinese and Indian bicycles control over 100% of the domestic market.5mn in the previous year. plastic consumption in Bangladesh is one of the lowest in the world. However.500 crores (USD 1.15% of national GDP. The sector presents significant opportunities for further expansion into the local and export markets. A growing and increasingly affluent middle class indicates demand for consumer durables. from USD 96. There is a large low-wage labor force employed in the sector.600mn). as India becomes more industrialized. 40% of the raw materials required for plastic production are imported. Currently.6 kg per capita a year.com Dewan Ashrakat Hossain Ashrakat.Hossain@at-capital. the demand of light engineering goods is also increasing Export-oriented production in light industries has gained momentum in the past few years. This contributes to 2. There is a probable USD 260mn import-substitution industry that can be met through recycling plants.
the LES has grown with informal cottage status over the years Light engineering businesses have been principally set up through private initiatives with little assistance from the government. decade The domestic market was valued at approximately USD 116mn in 2006. Pakistan. The rapid growth of the RMG & Textile sectors bring forth a promising opportunity for the expansion of the LE Sector.342 (SME) units in the domestic handloom industry through regular maintenance. and 3 Myanmar. 32. total exports were worth USD 209mn of which USD 145mn was through the RMG sector. which operate in small scale using back-dated 6 technology. neighboring countries like India. construction and RMG.400 enterprises in Bangladesh involved directly with the Agro-tools industry.8% spraying and threshing. family based businesses. agroagro-tools. 5.2 markets.70% The agro-tools sub-sector is yet to explore export markets The agroagro-tools industry is one of the largest industries in the LES. Figure 1: Average per capita consumption of plastic Consumption – kg/year Bangladesh India China North America World Source: Katalyst11 The plastic sub-sector is growing significantly 3. medium and large plastic manufacturing 4 units operating across the country. In Bangladesh.0 Figure 2: Comparison of the placit market of India and Bangladesh Market size Growth rate Contribution to GDP Source: Katalyst11 Bangladesh USD 116mn 20% 0. There are almost 9. also agrarian economies could be potential export targets. Furthermore. equipment and spare parts is around USD 217mn with imports of USD 289mn. USD 200mn worth of spare parts are imported. LE is an important support sector for the RMG & Textile industry. In 2007. There are over 2. There are currently around 3. The plastic industry has grown at over 20% per annum over the last decade. LES Annual average production of agro machinery. The LE sector supports these units and also 148.16% India USD 6bn 12% 0. China. Bangladesh is a country poised to further develop its light engineering industry to meet both local needs and explore export 1. 97 LE plays a critical role in Bangladesh’s largest export earner .000 small.6 5. as well replacement and expansion of the different machines and equipment used.9% power tillers and 23.0 90.AT Capital Research The LE Industry in Bangladesh The primary subsub-sectors of the Light Engineering Sector (LES) in which Bangladesh currently currently has a strong presence are bicycle manufacturing.0 20.500 units in the RMG & Textiles industry in Bangladesh. The sector is characterized by small. Every year. repairs. Bangladesh. replacement spares. tools.2% uses tractors. transportation. years. plastics LES output plays a critical role in key national sectors such as agriculture.0 24. Of the total cultivable land in Bangladesh. capital machinery parts and plastics.
RMG and washing plants. The management structure of the LES firms lack sophistication with small firms having 1-3 employees. recycled and sold without testing or certification. as a Thrust Sector. Despite this. Last but not least. OnOn-thethe-job learning is the primary form of training. The local market is unsaturated and there is sufficient demand within the various manufacturing concerns such as textile mills. jute mills. the enterprises are unable to expand their 6 businesses. and subsidies for utility services 13 such as electricity. competitiveness Use of dated technology in the LES hampers productivity and degrades the quality of the 7 output making them unable to compete with international products. ntelligence The firms in the LES receive very little or no market information about the international or domestic market. metals A large majority of the raw materials are sourced from the ship breaking industry. parts. the Government provides substantial incentives for the sector to develop as an export 98 . Due to the lack of adequate capital. These include project and export loans with reduced interest rates on a priority basis. In all areas of the LES sector. Banks and other financial institutions are reluctant to finance these small setups due to the lack of 6 collateral.AT Capital Research The key dynamics of the LES Access to technol technology echnology is one of the main determinants of competitiveness. are sorted. The LE sector relies heavily on recycled metals.9 workforce is highly adept and skillful at emulating products. Access to research. Due to a lack of structured management. sectors According to the export policy the government has devised several policies to promote the LE sector. These small and medium firms are largely family owned with 70% being sole proprietorships. The current standard of the quality testing facilities at BANSDOC. shoe manufacturers. LE is one of the Thrust Sectors The Export Policy 20062006-09 recognizes the LES as one of the thrust sectors. Lack of market intelligence intelligence. There is no sophisticated system which provides this information resulting in an inability to promote their 1. The materials. Strengths of the LES The LES presents several strengths through which it can emerge as one of the leading industries for the country. on-the-job training. and components for machinery have to be imported at very high import duty. inadequate. learning their trades is through informal. some 20 years old or more. The National Board of Revenue needs to design policies that will 3 ensure cheaper imports of raw materials. proper documentation and risk associated with these ventures. although owners (59%) and plant managers (73%) have some work relevant technical qualifications. most of the light engineering firms invest in R&D activities. The firms in the LES LES lack management structure. the workers are all virtually unskilled when they enter the sector. sugar mills. Raw materials. development and quality testing is inadequate. railways. Income tax exemptions. the 3. low start up cost and simple production process provide significant incentive for growth. products overseas. water and gas. BUET and BSTI are 1 inadequate in meeting international standards. The SMEs in the industry lack adequate access access to finance. The cheap workforce.
& Meghna Bangladesh Ltd Trans-world Bicycle Co Ltd and Meghna Bangladesh Ltd. Many plastic products are made from recycled plastics raw materials. there is a demand for institutions that will provide technical knowledge and job-specific training to the semi-skilled labor force in this sector. Also. Investment Opportunities In the LE Sector Training Centers can be a lucrative investment. to Europe for more than a decade. It has not just been a question of the cheap availability of labor in Bangladesh.3. greater subcontracting and access for export facilities. but of the need to ensure a high and consistent quality level. R&D facilities/ private testing i currently lacks adequate metal testing or R&D facilities. An industrial park is a large-scale cluster of LE firms working in a common area with access to infrastructural and cost leverage that they cannot acquire on their own. an industrial hub will ensure increase in production efficiency and quality assurance. it was announced that the companies had won a USD 13 mn export order at the 'IFMA Cologne Show' in Germany. The industry Investment metal testing. Chinese and Indian manufactures supply almost one hundred % of Bangladesh's domestic demand for bicycles. institute. 99 . Investment Investment in a LE Industrial Park. both part of the same group. nstitute. the small firms will be able to outsource to each other which will increase productivity through possible specialization of labor. access to modern technology and all other infrastructural resources. The companies' roots lie in the privatization of the former government owned Bangladesh Cycle Ltd. Exports have also been helped by a system of bonded warehouses and by duty free access to the European market. the supply is only 438.AT Capital Research based industry. cheaper access to raw materials. Due to the current lack of proper training facilities. Technical Training Institutes (TTIs) can act as the source of skilled labor that the industry currently lacks. the price of raw materials is by far the major cost component. 1. Metal testing facilities can ensure the quality of local products meet international standards. making it impossible to judge the quality of the raw materials. and the Chinese in particular have dominated export markets in the West. For the plastic manufacturers. technical training facilities. Firms can benefit from research and testing facilities. have been exporting bicycle parts and full bicycles. As a majority of the LE firms are small in size.000 tons/year. This keeps the price of lower quality goods competitive and it reduces the amount of plastic waste in the environment. Recycling plants for plastics. The present demand for plastic resin is 540. Recycling plants can be a costcompetitive substitute to imports in meeting the increasing demand of raw materials for the plastic industry. This has meant that Trans-World Bicycle and Meghna Bangladesh Ltd have needed to be extremely competitive.4 5 study: StoryTransCase study : A Success Story -Trans -world Bicycles Co.000 tons of which 40% is met through imports. In October 2007.
bicycles and automobile spare parts. Major OEMs are now focusing more on R&D of new models of vehicles and the engineering work (mainly labor and process oriented steps) has been outsourced to suppliers. The Indian industry is moving towards automobile manufacturing presenting an opportunity for outsourcing of spare parts manufacturing to Bangladesh. the Export Policy for FY07 to FY09 has included the Light Engineering Sector as one of the thrust sectors. it has the potential to act as an outsourcing destination for various Original Equipment Manufacturers (OEMs). With investment in the LES. plastic goods. Bangladesh can provide the same capability. Conclusion The LES is a sector of significant opportunity. it has a considerable impact on the overall development of the country. Since LES in Bangladesh is already an established industry.9bn. The Bangladeshi LES currently operates in a very small scale. Investments will enable the industry to enjoy economies of scale and compete with the foreign products. The industry requires investment and innovations if it is to fulfill its true potential. There is immense potential for the country to export many LE products including agro-tools. Foreign Manufacturers can setup OEMs. Moreover. The competitiveness of the LES has been proven on the international scene with the recent success of the plastic sector. Consequently. low infrastructure costs and government initiatives provides a significant platform for the industry to move into large scale production and export diversification. targeting primarily import-substitution. 100 . As a supporting industry to many of the other sectors.AT Capital Research The industry can move into larger larger scale production. the size of the automobile sector in 8 India is USD 15mn with exports worth USD 2. such as India and Pakistan who have excelled in this area. A low-wage semi skilled labor force.
No. (2006). Available at www.katalystbd. A. (2002). Katalyst.php?catid=6. Available at 2. Uddin.gov. 13. D. http://www. Available at http://www.bd/export_policy2003-06. IRIS. (2006)./4.katalystbd. ACMA. 3.nerve.epb. but India rules at home”.iutoicdhaka..php?catid=6. “Indian Plastic Industry – Review and Outlook”. S. Available at http://www.php?catid=5. May-June 2006. S.AT Capital Research References 1. (2005). “Plastic Waste Recycling & Its Opportunities In Bangladesh”. M.%20Helping%20and%20Advising%20SME%20Sectors%20 for%20Employment%20Generation. Published in The Nerve News of India on 13 November 2007. A presentation by the Plastindia Foundation. Adhikary. Bangladesh”. 9..com/downloads. & McVay. University of Maryland. (2005). M.katalystbd. “Indian Automotive Component Industry -Engine of Growth Driving the Indian Manufacturing Sector”. Islamic University of Technology. 4. Katalyst. Plastindia. (2007). Prepared for UNDP Bangladesh.html. 101 . 11.. http://www. Official website of Export Promotion Bureau Bangladesh. Published in The Daily Star on 13 November 2007. A presentation by the Indian Automotive Components Manufacturers Association. (2006). & Ullah.. Available at http://www. Alam. S. 10. “Riding to export success.sedf. “Bangladeshi bikes go to Europe. Nerve News of India. “Helping and Advising SME Sectors for Employment Generation”. Dhaka: South Asian Enterprise Development Facility (SEDF). 8. “Review of Sub Sector Work in Bangladesh”. local bicycle makers go global”. (2006). M. “Report on Identification of Employment Oriented Export Services”.com/downloads. 6. 12. 3. (2007). 5. (2007).edu/.com/downloads. Vol 34. (2005). Available at http://www.org/light_engineer. Prepared by Action for Enterprise (AFE) for USAID Bangladesh.php. (2006). “Sector Brief – Plastics”. Action For Enterprise.pdf. Katalyst. The Cost and Management. “SMEs in Bangladesh and Their Financing: An Analysis and Some Recommendations”.in/news:253500114546. “Sector Brief – Agro Tools Industry”.57-72. “Market Development in Practice Sector Development & Business Services Strategy-Experience of SEDF. 7. pp.
Global ship building capacity is rising fast.sajid@at-capital. Prices for ships have risen sharply.Ship Building The Global ship building industry is enjoying strong growth. China has been the most aggressive in increasing its capacity as it aims to be the world’s largest ship maker by the next decade. Ananda Shipyard Limited is expanding their capacity and aims to be the leading ship builder in the country. Ananda Shipyards Limited and Western Marine Shipyards Limited have received orders for small ships that are expected to run up to 2010. Bangladesh has the most competitive labour rates amongst the existing and new ship building nations and technology is being adopted increasingly into the industry and its use will provide significant productivity gains for the future. with two companies winning USD 250mn worth of orders.AT Capital Research Heavy engineering.Ship Building Heavy Engineering . There is an increasing ship delivery backlog as the demand has been outpacing supply. and by 2013 is forecast to make three times as many ships as in 2004. Bangladesh has recently become a player in the global ship building market. The two companies.com 102 . Investment into technology and the modernization of the ship building infrastructure is key to ensuring competitive advantage in this sector. Asian Tiger Capital Partners Ahmad Sajid ahmad. All major ship building nations are running at or near full capacity to meet the demand for ships.
the industry grew at an annual compounded rate of 8.4 2.3 4.8 3. Japan.1 2000 12. seeking low cost building and the abundance of labor supply. compared to 2. Although the current ship building industry is ripe for investment in the near term.2 38. the government has made USD 750mn available for the 103 Lessons to be learnt from Vietnam .7 3. 20 mid-sized builders and a number of small ship makers as well.0 37.2 41. Vietnam is now one of the main destinations of foreign ship buyers.1 36. Shipbuilding has been shifting to Asia The shipbuilding industry has been based in Europe and the USA historically. Countries like Vietnam are now benefiting. once a downward cycle begins .8% over 1 the years from 1985 to 2005. adopting new technologies.3 2004 8.97mn tons in 2005. Strong demand for ships has led to an increase of the 2 global backlog from 71. Figure 1: Global share of ship building by region/country (figures in %) Year EU Other European countries Japan South Korea China Other countries Source: Ludwig & Tholen (2006) Shipbuilding has been moving to lower cost locations Strong demand.7 27. India. and various developing countries. In the past.experts say this could be after 2011. but has been moving to Korea.3%.7 13. Prospective new entrants to the market should be cautious as the market becomes saturated New shipyards in Korea and China will commence operations in the next 2-3 years nearly tripling capacity.9 4. investment in new yards may less compelling given two to three year lead times. Shipbuilding industry is experiencing rapid growth gloablly The global shipbuilding shipbuilding industry has been on the rise since 2000. By 2010 China aims to have 15 mega builders. high prices expected to tail off in medium term 1995 18. China.4 38.8 35.9 4.1mn tons in 2000 to158. The ship building industry is also one of the main priority sectors of the government of Vietnam. leveraging its low cost base.5 36. by 2013 it is forecast to be around 200mn dwt per year.AT Capital Research Bangladesh is enjoying a boom in ship building.9 2.8 3. All ship building plants in Vietnam have been booked until 2010. Driven by rising demand and a global supply shortage.3 3.8 11. existing players in the market have been able to capitalize on a global backlog in orders and sharp rises in prices. In 2004 the world shipyard capacity was around 60mn dwt (dead weight tonnes) per annum.7 2005 6. 2000 From 2001-2005.supply and demand scenario will not be so rosy.9 Traditional East Asian manufacturers see labour costs rise Experts pointed out that ship building in East Asian countries has become costly due to high wages. ship builders from Korea and China have been known to sell 4 their ships at or even below capacity when down cycles have arrived. a forecast fall in demand from 2011 and global dominance from China. Bangladesh could carve itself out a profitable niche. coupled with government incentives and a strategic focus on areas such as small ships. 3 Indonesia. While investment in existing shipyards provides significant investment opportunities. The industry is gradually shifting towards developing countries mainly for availability of cheap labour force. The government of Vietnam has identified shipbuilding as one of the main priority sectors for the country and has made various facilities available. Most recently. Malaysia and countries from the Middle East have entered the market.6 3. However.
and have recently signed deals worth USD 82mn. bonded warehouse facilities.000 tonnes.Ananda Shipyards Limited and Western Marine Limited. cargo ships of 100. and it would create scope for 6 export orders facilitating use of the country’s cheap labour force.AT Capital Research sector to finance the development of a modern industry that can meet future international quality demands. Bangladesh joins the global ship building industry Other countries benefit from subsidies Bangladesh lower labour costs a key advantage 104 . Since ship building is a labour intensive industry. 35 cents in Pakistan and 27 cents in Sri Lanka. has also signed a letter of intent with two 6 foreign companies to construct 14 small vessels at a cost of around USD 150mn. with increased use of technology and machinery greatly improving productivity. Duty free import of steel against a bond system is especially relevant. Bangladesh should also start improving its technology by incorporating computer aided design elements in its processes as low wage rates alone will not keep the country competitive forever. duty exemption for import of capital machinery. Ananda have signed deals worth around USD 100mn with two German shipping companies to build eight vessels with capacity for 325 containers by June 2010. hourly minimum wage is 38 US cents in China. The material would be used only for export purposes. Bangladesh has lower wage rates that 7 is19 cent an hour. oil tanker of 100.000 tonnes and ship repairing of 400. Limited Meghnaghat based Ananda Shipyards has signed agreements worth around USD 180mn and Chittagong based Western Marine has total orders worth more than USD 70mn. The ship building industry is rapidly modernizing. Bangladesh stands to gain from its highly competitive wage rates. Regional comparables show that. Once in operation Ananda claims it take orders up to USD 500mn. Bangladesh has two players in world world ship building . special financial subsidy and providing green channel for importing raw materials to ensure healthy growth of the sector. Ananda has also set up a modern slipway on the river Karnaphuli. while Vietnam is providing 40% financial subsidy to its ship makers. Ananda are planning to invest around BDT 1.000 tonnes.10bn to set up two dry docks in their shipyard with a planned completion by early next year. 45 cents in Vietnam. 39 cents in India. The government has decided to make shipbuilding a key export industry through the Shipbuilding Industry development Program 20022010. It aims to export USD 5bn worth of ships by 2010 and extend the shipbuilding capacity to container ships of 1500 TEU. India is provided 30% financial subsidy to aid its ship building industry. The ship building industry in Bangladesh would benefit from government support Experts in Bangladesh have advocated the establishment of deep-draft ports. Vietnam aims to be the 5 fourth largest shipbuilder within the next decade.
com. (2008).” University of Bremen & Intitute of Law and labour Germany. Article published in the Financial Express on February 5. Financial Express. J. Article published on February 15. “Industry Market Outlook – Shipbuilding. China. “Wage rates – China’s rising costs make buyers think twice”.000 800 600 400 200 0 Japan South Korea Singapore China India Bangladesh USD Country Source: Ludwig & Tholen (2006) Conclusion With ship prices at an all time high and all major ship producing countries running at full capacity. (2006).pdf. Bangladesh stands to gain from joining the ship building industry. 105 3. 5.ppt. The Shipbuilders’ Association of Japan. The two current Bangladeshi players today are expected to keep bringing in more business from around the globe over the next five years. . Article published in Ethical Corporation Magazine on March10. 7.com/vietnam/Vietnam_Country_Information270907. ”Global shipbuilding: An overview”..AT Capital Research Figure 2: Wages per m onth in 2002 1. (2007). References References: ferences 1. November 14 – 16. & Tholen. R. Available at http://www.com/detail.maritimepartenariate.200 1. 2008.com/download/1266/x/Hubei%20Marine%20Indu sry%20Overview%20210307. they also must incorporate technology and machinery into their businesses to have an edge. February 25. Wu. “Shipbuilding in China and its impacts on European shipbuilding industry. 4. Jackson. 2008. T. Ports and Logistics”. (2008).asp?date=2/15/2007&story=1.600 1. “Bangladesh set to emerge as new shipbuilding hub”.” Global Shipbuilding Industry: Status and Challenges”. (2007). 2. Paper presented at The IMF Shipbuilding Action Group meeting. Maritime Vietnam. Ludwig. Equitymaster.800 1. (2007). 2007. To remain competitive.400 1. 2007. 8. 6. D. Available at http://www. Primary sources: interviews with an international shipbroker. “Overview of Maritime Industry in Hubei Province.” Available at www. (2005). 2005.maritimeshows.equitymaster.
have entered the market. In the Southwest region are the Sundarbans. relatively few people globally are aware of the existence of these locations due to poor marketing and inadequate infrastructure.com 106 . the world’s largest natural mangrove forest. the longest natural unbroken beach strip in the world. and Thailand may also provide an opportunity as a combination location with these countries. there are significant areas for investment in an industry which could show substantial growth in the future. However.AT Capital Research Tourism Tourism Tourism in Bangladesh provides a number of untapped opportunities relative to other comparables in the region. Bangladesh is home to Cox’s Bazar. With a marketing push.shams@at-capital. Asian Tiger Capital Partners S Adeeb Shams adeeb. including two foreign chains since 2006. The country’s proximity to other key tourist spots such as India. new luxury hotels. In order to cater to this growing demand. Consistent economic growth and development of export businesses such as ready-made garments have encouraged an increasing number of business-related trips from abroad. Nepal. Given the relative immaturity of the market. Bangladesh could place itself as an alternative destination as tourists seek exotic locations.
the Westin and Radisson Water Garden.326 7. Hiron Point. The Sundarbans present many prospects for Ecotourism provided there is some initiative from the private sector to introduce package tours to 2 visitors. Proper marketing and promotion needed in top tourist locations Cox’s Bazar. 20051 International Tourist Receipts (USD Millions) 1990 2000 2004 4. the opportunities for investment in projects remain significant. crocodiles. is spread across Bangladesh and West Bengal. Sundarbans.460 6. forest. Bazar. In 2007. by deciding against extending its current contract with Bangladesh Services Ltd (BSL). The beach area lacks international standard restaurants and facilities for recreation that would attract foreigners.649 3. 107 .513 3.299 9. Pan Pacific Sonargaon and Dhaka Sheraton. There are some packaged tours currently available but are poorly promoted on international travel sites. Dublar Char and Tiger Point. spotted deer. in terms of tourist facilities. snakes and a variety of different species of birds.483 10. although they lack professionalism and are rarely maintained/updated.000 square kilometers in Bangladesh.5 4. For many years Dhaka was home to only two international luxury brand hotels. but would not meet international expectations of a high end traveler and lacks provision for making reservations online. is the world’s longest sea beach stretching 120km. making it the most successful hotel in Bangladesh in its first full year of operations. St. is inadequate and information on these areas is not readily available to tourists internationally.737 India 1. It covers an area of approximately 6. the Seagull has some basic amenities. Places of interest in the Sundarbans include Katka. The only luxury hotel in the region. Maheskhali. the world’s largest largest mangrove forest. have opened in Dhaka since 2006.4. Martin’s Island and Teknaf.121 132 248 513 64 158 230 11 50 67 While tourism in Bangladesh has grown in recent years. This was despite the Dhaka Sheraton making an operating profit of USD 3. development has focused on mid-quality hotel development.4 mn and an operating profit of USD6.579 11. one of the country’s most popular tourist attractions. Starwood also operates the Westin Dhaka.707 2. the situation is quite analogous to that of Cox’s Bazar in that the physical infrastructure. Good quality hotels are being introduced in Dhaka Two new international luxury hotels. the Sundarbans is home to the Royal Bengal Tiger. such as a swimming pool and a fitness center. Starwood Hotels and Resorts announced its decision to discontinue managing Dhaka Sheraton from 2009.034 1. Some hotels in the Cox’s Bazar area do have websites.457 Sri Lanka 298 400 566 Nepal 255 464 385 Bangladesh 115 199 271 Source: World Tourism Organization (WTO). Areas of interest apart from the main sea beach in Cox’s Bazar are Inani. However.AT Capital Research Figure 1: Regional Tourism Comparables International Tourist Country Arrivals (Thousands) 1990 2000 2004 Thailand 5. both owned by the Government. Although there has been some growth in terms of new accommodation over the past decade.7 mn. Radisson Water Garden Hotel generated revenue of USD 13. Inducted as a UNESCO World Heritage site in 1987.2 mn in 2007.
Hotel Agrabad had been Chittagong’s premier hotel for many years. although a firm plan has yet to be drawn up.10 hotels. which opened in early 2006. along with an Intercontinental Hotel and a Holiday Inn adjacent to Zia International Airport. It has a thorough analysis of budgeting. The construction of a Hilton at Maghbazar. environmental hazards. inadequate investment in infrastructure and a focused promotional programme. human 7 resource development. For example the Maldives. What might be done to promote Tourism? 108 . The Government earlier this month announced plans of rebranding BPC as the National Tourism Authority. Privatizing BPC has been on the Government’s agenda for many years. Hotel Sarina in Banani. Bangladesh has suffered from poor planning. this 6 would be the first foreign-managed hotel in the port city. all of the other hotels are very poorly marketed outside Bangladesh and have limited provisions for making online reservations. has prepared three detailed tourism plans over the past few decades. as a majority of these have plans of introducing international routes by the end of 2008. With the exception of La Vinci. sales and promotion. Key to the success of such an initiative would be in the investment and refurbishment of Zia International Airport with complementary investment in supporting accommodation and leisure facilities in adjacent locations. a small nation with a population of under half a million. to and from cities in either country. these developments have been stalled. but is not of an international standard. owned by three NRBs from the UK. whereby there might be a maximum of 61 flights per week. may provide 8 further opportunities. Encouraging tourists to spend a few days in Bangladesh during a stopover trip to neighboring countries such as India. the latest of which was published in 2005 containing a comprehensive outline of the Tourism industry. The Thai Ambassador in March 2008 announced that Dusit Thani has plans to set up a property in Chittagong. Development Development of a Tourist Industry Tourism Master Plan.AT Capital Research International projects have been delayed. Establish the country country as a transit location for Tourism. private sector contributions. such as the recently opened Dhaka Regency. Plan. Parjatan could be more competitive with private 9. Best Western La Vinci in Kawran Bazar and Purbani in Motijheel. Tourism. Bangladesh can learn about the development of Tourism activities from its neighboring countries. The recent Air Services Agreement signed between the Bangladeshi and Indian Governments. A few other luxury hotels in the capital. Representatives of the Thai luxury hotel chain have already started discussions with the Bangladeshi Government in this regard. Nepal and Thailand might generate a positive response. Rebranding Bangladesh Parjatan Corporation (BPC) and greater private sector participation. Dhaka has some other luxury hotels. Opportunities may arise from the recent introduction of local airliners. Under private sector management. development of existing facilities and services. had begun in the past couple of years. is widely believed to be the best hotel in the port city at present. If successfully completed. However. existing finances. The Peninsula Chittagong. Chittagong is yet to have an international hotel. It is believed that BSL is currently in search of a 5 new international operator from 2009.
in addition to visiting friends and family. Setting up a higher end Shangri La. Need for more luxury hotels hotels outside Dhaka. This would inevitably provide the NRBs a greater incentive of visiting their native land. along with the Benapole intersection bordering India. To remain competitive. have minimal global recognition. as well as foreign tourists. investment in infrastructure. There are numerous agencies in other countries in the region such as Malaysia. These hotels will target the rapidly growing upper-middle class population locally. Public-private initiatives. the only luxury hotel in the area. specifically targeting the higher-income group from Dhaka. Marketing holidays in areas in London and New York with high concentrations of NRBs. such as Sarina and Regency. would be an attractive proposition to NRBs. Even though they might be better marketed within the country. providing integrated packages where NRBs can visit relatives and also enjoy holiday breaks in. local hotels are hardly found in the most popular travel sites on the Internet such as Expedia. the introduction of booths at airports in Dhaka. Extensive marketing in these areas will provide tourists with access to information that is presently not available in Bangladesh. strengthening the existing highway network. Attracting and partnering with worldclass hotel brands in tourist areas such as Cox’s Bazar and the Sundarbans is a viable option. Chittagong. There are no notable tourism promotion organizations other than BPC. investment is required in the current state-owned establishments dedicated towards tourism. Sylhet. otels. Thailand and India. Berjaya Hotel & Resorts specifically specialize in setting up properties in beach areas and they presently have a reasonable presence in South East Asia. such as Pan Pacific Sonargon. Orbitz and Travelocity. Targeting the NonNon-Resident Bangladeshi (NRB) base in the US and the UK is an excellent opportunity for additional revenue from tourism. the top local brands even in Dhaka. Better marketing of local hotels.AT Capital Research There needs to be a concerted effort also from the private sector over the longer term. provides a great opportunity in turning Cox’s Bazar into a luxury destination. The few luxury hotels that exist in the country are restricted to Dhaka. for example. Cox’s Bazar and the Sunderbans. 109 . Parjatan properties and other tourist attractions. This hotel may cater to the growing middle-class population in Bangladesh. Attracting an international hotel to Cox’s Bazar will provide some much needed competition for the Seagull. These organizations have contributed considerably towards the development of tourism in those countries. With the exception of foreign brands. Investment in infrastructure and state owned hotels. Dhaka Sheraton. Additionally. as they have been extensively marketed and promoted across the globe. For example. particularly on the Dhaka-Chittagong and Dhaka-Sylhet routes is required complemented with setting up facilities such as food outlets and rest areas. foreign tourists including NRBs.
UK: Institute of Aquaculture. “Sheraton Hotel to get new name next year”. Akter. M. “Eco-tourism to protect the reserve mangrove forest the Sundarbans and its flora and fauna”. The Daily Star on February 26.pdf. Bangladesh has all the pre-requisites to turn locations such as Cox’s Bazar and the Sundarbans into world-class tourist destinations. private airlines lock horns over deal with India”. http://www. U. S. 110 . 9. http://www. 2008. G. “Dhaka Sheraton keeps up pace in battle for guests”. Article published in The Daily Star on March 4. 2008. M. University of Stirling.php?nid=25403. R.gov. (2008). 2.thedailystar. (2008). “2nd anniversary celebrated: Radisson Hotel earns USD6.thefinancialexpressbd. there remains a severe shortage of good quality accommodation facilities throughout the country. M. Article published February 6.php?nid=29171.php?nid=27623. Khan. L. Despite the recent advent of international hotels. Khan. S. Article published in The Daily Star on March 14. (2007). 2008. & Beveridge.tourism.. 2008. Tourism in Bangladesh is characterized by a lack of proper infrastructure.php?page=detail_news&news_id=26444. 2008.php?nid=24986. “BIMSTEC – Japan Cooperation in Tourism and Environment: Bangladesh Perspective”.php?nid=26049/ Ministry of Tourism and Civil Aviation. Article published in The Daily Star on February 29. The New Nation. I. “Privatizing commercial activities of BPC under consideration”. 2008. R. (2008). 7.mv/downloads/ttmp.net/story. Ross.thedailystar. Investment in infrastructure. 10. Available at http://www. & Haque. As a large developing Muslim nation. M. http://thedailystar. a coordinated marketing effort and attracting world class operators provide the backdrop for developing a vibrant sector. Available at www. requires substantial investment. Hasan. 3. 2008. despite recent positive developments. M. A. References 1.thedailystar. India: CSIRD Discussion Paper # 27.com/search_index. (2008). “Public. Negative connotations traditionally associated with Bangladesh need to be dispelled and a coordinated national branding plan needs to be devised. “Thai investment plans for hotels. highways and oil”. The Daily Star.thedailystar. particularly in Dhaka. The road network connecting larger metro areas needs to be improved and air transport. Dhaka. 6. 8.net/story. Article published in The Daily Star on March 25.net/story. J. (2000). Reza. Salam. “Parjatan Corporation to be National Tourism Authority”. (2008).net/story. Available at http://www. “Maldives Third Tourism Master Plan 2007 – 2011”. such as Malaysia Truly Asia or Incredible India. Article published in The Financial Express on Feb 26. (2008).. http://www. Bangladesh needs to find the right blend between maintaining its Muslim traditions and being an attractive tourist destination. 5.72m operating profit”. C. UNB.net/story. 4. (2008)..AT Capital Research Conclusion Bangladesh needs to have a tourism-specific identity.
rahman@at-capital. Setting up Vocational Training Institutes (VTIs) linked to manpower export companies in the field of nursing.Education AT Capital Research Education The education sector accounts for 14. Though many small private players are mushrooming in the primary. Sunbeams.email@example.com Masum A Rahman masum. the quality of education is variable. Scholastica. teacher’s training. Asian Tiger Capital Partners The education system in Bangladesh is characterized by the co-existence of three separate streams: a vernacular-based secular system.etc.g. and English language which will introduce skilled workers for the Export Processing Zones (EPZs). an Islam-based religious system known as Madrassa and an English-based system modeled after the British education system. known as Bengali Medium. The acute shortage of both the number and quality of teachers at all levels highlights an investment opportunity for upgrading existing public and private teachers’ training institutes or establishing new ones. and international market. local job market.2% of total government expenditure in Bangladesh. using the same curriculum. technical.com 111 . secondary and tertiary levels. Syeda Tasnuva Akhter syeda. Poor quality English-based education makes the market ripe for growth in this sector. Investing in Indian Institute of Management (IIM) type business and management schools in Bangladesh that can produce global standard managers. There is scope to drive country wide growth through Scaling up large number of English medium primary and secondary educational institutes e.
The gap in educational facilities between urban and rural areas should be reduced. hotel management and tourism. • • • • • Investment opportunities The ineffectiveness of some areas of the current public and private education system in Bangladesh offers significant investment opportunities in this sector. Employers complain that the training institutions do not develop or deliver the skills that employers require. IT.5% regional average). engineering and business for developing skilled workers required by emerging industries. some have argued that the educational system needs better planning so as to improve the quality and relevance of the education and training offered. • The way forward for the education sector The way forward forward A summary of the structure of educational institutions can be found in the appendices. Private investments in the education sector should continue to focus on improving the quality and relevance of education through capacity-building. Investment may be made in institutes and universities specializing in advanced technology. This will create opportunities for the students to enter in the local and international job market. The main problem with technical education is the lack of linkage with employers and the job market. The quality of science and English language education at secondary and higher secondary levels should be improved. The efficiency and standard of teachers should be improved through intensive training. compared to a 1 3. Large scale private tuitions by the teachers at the primary and secondary levels have made classroom teaching-learning practically redundant for passing the exams. Suitable job-oriented subjects at the secondary level should be introduced to enable students to be self-employed. From the outset. These include: • Training institutions/colleges can be established so that the National University students can receive vocational training in various global trades (accounting and financial services. The absence of academic supervision hampers the academic environment in the schools resulting in poor performance of the teachers. But we would suggest the following: • More emphasis should be given on technical and vocational education programmes at secondary/higher secondary levels and also at the university level to enlarge the technological skill base which will be an important foundation for economic development. management.). However. There are specific reasons for the poor quality of education at all levels: • • • The recruitment and placement process of teachers is not up to the mark. call centre.3% of GNP. graphic design. improving policies and the institutional environment.AT Capital Research Expenditure on education Education is primarily funded by the Government with support from from development development partners and the private sector. animation. etc. Government expenditure on education in Bangladesh is currently the lowest in South Asia (2. Academic collaboration with 112 • .
gardeners. college and university levels. Singapore etc. Sunbeams. Korea.500 in monthly fees totaling to an annual fees of BDT 1. especially among the urban middle and upper middle class. The growing popularity of the English Medium education system continues. Green Herald. Maple Leaf. drivers. Scholastica. these centres can provide relevant foreign language training including English which will facilitate the communication skills of the workers.000 to BDT 15. One of the better schools in Dhaka takes BDT 20.000 to BDT 30.000 in annual fees and up to BDT 7. cleaners. On the other hand. Customized vocational training programs can be designed for specific job descriptions of local and foreign employers. • • • • English Medium schools: Regional Expansion Opportunities The huge growth in the number of English Medium schools in the past decade is certainly one of the more encouraging trends in the private education sector. There is no uniform curriculum for English medium schools in Bangladesh. This trend can be expected to continue given: • • • The population growth with a higher %age of young children The rapid economic growth leading to greater disposable income and purchasing power to spend for children’s education. Sunnydale. interested in working overseas (Malaysia.000 as admission fees. This should prove to be a profitable investment opportunity since many people outside Dhaka are interested in educating their children in English-medium schools but do not have easy access. all English 3 medium schools in India follow the same curriculum prescribed by Delhi Board. electricians. nurses. South Breeze. It is worth noting that 10. Englishmedium schools have provided an alternative stream of education in Bangladesh to the state-run system. The fee structures of these schools are also considerably higher than the other English medium schools as these schools tend to target the premium segment of the market. plumbers. Shiliguri and Kurseong in India. BDT 10. This is because the admission fees. Investment opportunities also exist in establishing teachers’ training institutes for school.20.000 Bangladeshi children are studying at about 200 English medium schools in Darjiling. tuition and other expenses associated with English-medium schooling in Dhaka have gradually risen beyond the reach of many middle-class families.AT Capital Research leading foreign universities will enhance the academic and training standards of the students.) can change the picture. UAE. given their high international standards and increased prospects for gaining entry to overseas degrees. Saudi Arabia. Investment in vocational training centres for paramedics. 113 . Mastermind and Aga may be considered among the top ones in terms of performance of the students/popularity. and examinations under international boards. Among the existing schools in Dhaka. English-medium residential schools may be established in every district to provide quality education to students living in district towns all over Bangladesh. car mechanics. etc. With global standards. industrial workers including textile & RMG workers. Apart from technical training.000. welders.
Education India Pvt.7 Case Study: Study: Private Equity Investments in Indian Education Sector • India-focused private equity firm GCP invested USD8. Sequoia Capital India has invested in two e-learning companies-TutorVista and Brainvisa. Ltd and 24×7 Learning Solutions Pvt. have together received funding of more than USD 12mn. in training schools.25 mn in education and career counseling entity Career Launcher. Mumbai-based Hurix Systems Pvt. which would make inroads into the huge untapped education market outside the capital. establishing an academic collaboration and exchange program with foreign schools and providing boarding school facilities for students who are too far away from home. a New-York based fund. coaching centers and vocational skills although previously the focus was on export-oriented education. Helix investments invested USD 12mn into preparatory education company Mahesh Tutorials and SAIF partners. 4.AT Capital Research We believe there are investment opportunities in setting up new English medium schools. ICA Infotech. Footprint Ventures.5. an effort by a group of IIM alumni. 114 . Ltd. The strong selling point of these English medium schools will be international standard education which will be achieved by bringing in foreign trainers from the UK and US to train the teaching staff. Much has been written recently regarding the successes Bangladesh has experienced in increasing access to education. Ltd. While these achievements should not be underestimated. As a result. in major cities in the provinces. Berggruen Holdings. • • • • • Conclusion Despite the proliferation of private schools and universities in recent years. the ICICI Bank-supported IFMR Trust and industrialist Gautam Thapar are interested to invest in school education and assessment with Educational Initiatives Pvt Ltd (EI). There are a lot of local and international PE firms which have already invested or are trying to invest in India. The requirement of talent is 200mn 4 over the following six years. plans to invest USD 300mn in India over the next three years. Private equity investments in the Indian education sector Education is emerging as a key investment sector for venture capitalists in India. USD 10mn in English training academy Veta. The talent shortage in the job market is compelling these firms in investing more in education sector. plus an undisclosed sum in another vocational training company. Novak Biddle Venture Partners. there still remains a large investment opportunity in the education sector. it is imperative to recognize that there are still many challenges that must be met and wide range of investment needs to be made to enhance equity and access in the education sector. In 2007.6. the recent trend in investment is towards training in tutoring services. Bangalore-based TutorVista. The Indian private equity firms are focusing more on the education firms these days targeting the domestic market.
com/archives 2. Ministry of Education. 6. December 26. UNESCO. “Talent crunch: PEs bet big on education sector”. India Today. (2005). Educational Initiatives. 115 . Article published in the Economic Times on November 15. 2007. 2004. (2007). 7. “IIM-A alumni’s EI gets venture funding”. Available at the official website of Ministry of Education. 2007. The Economic Times. India Private Equity. Government of Bangladesh at http://www. “Exodus for education to India”. 2008. Article published in India Private Equity on March 7. Sarker. 5. (2004).bd. Bangkok. 2007. “Education Statistics 2005”. Article published in The Daily Star on December 1. 3.ei-india.moedu. “Secondary Education Regional Information Base: Country Profile Bangladesh”. UNESCO Asia and Pacific Regional Bureau for Education. (2008).AT Capital Research References 1. “Learning assessment company gets venture capital funding”. (2007). (2008). R. Available at http://www.gov. 4.
9 30.230.00 OECD 14 153.7 44 20 40 35 0 104 116 .7 OECD 6 14.7 66 OECD 25.AT Capital Research Appendices Appendix 1.1 8 74 46.3 62.2 Figure 4: Difficulties faced in hiring and firing workers Indicator Bangladesh Difficulty of hiring index Rigidity of hours index Difficulty of firing index Rigidity of employment index Non-wage labour cost (% of salary) Firing costs (weeks of wages) Source: Doing Business 2008. World Bank Rank in 2007 107 92 116 129 171 48 15 81 112 175 102 Rank in 2008 102 75 113 117 168 45 15 76 139 175 93 Change -5 -17 -3 -12 -3 -3 0 -5 27 0 -9 Figure 2: Launching a business in Bangladesh Bangladesh Procedures (number) Duration (days) Cost (% GNI per capita) Source: Doing Business 2008.2 27.9 5.6 33.Overview Figure 1: Ease of doing business in Bangladesh Indicators of doing business with ease Doing business (average) Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business Source: Doing Business 2008.4 40.3 3.2 39. World Bank Bangladesh 14 252 751 Region 16. World Bank Region 23. World Bank Region 7.2 Figure 3: Ease of dealing with licences Indicator Procedures (number) Duration (days) Cost (% of income per capita) Source: Doing Business 2008.7 25.6 17.3 247.8 20.5 40 27 6.
1 32.4 4.1 6.417.3 Figure 10: Time and cost required resolving bankruptcies Indicator Bangladesh Time (years) Cost (% of estate) Recovery rate (cents on the dollar) Source: Doing Business 2008.90 9.9 Figure 7: Dimension of protecting investors Indicator Disclosure Index Director Liability Index Shareholder Suits Index Investor Protection Index Source: Doing Business 2008.2 117 .1 1. World Bank OECD 6.9 1.1 28 844 9 32 1.4 986.3 6.148. World Bank Region 5 6.179.3 17.0 1.7 1. World Bank Region 6.8 8.7 41.5 20.3 7 2 0.3 7.9 0.047.5 1.1 6 OECD 4. World Bank Region 43.4 134.4 5.3 443.5 9.AT Capital Research Figure 5: Ease with which business can secure right of property Indicator Bangladesh Procedures (number) Duration (days) Cost (% of property value) Source: Doing Business 2008.6 8 425 10.3 4.5 1. World Bank OECD 4.1 4 8 23.1 OECD 1.3 Figure 6: Ease of credit information sharing and legal rights of borrower and lender Indicator Bangladesh Region Legal rights index Credit information index Public registry coverage (% adults) Private bureau coverage (% adults) Source: Doing Business 2008.5 6 Figure 8: Cost and procedural ease with regards to trading across border Indicator Bangladesh Region Documents for export (number) 7 8.7 0 3.0 63.00 32.9 28 4.1 27.8 905 5 10.6 59.6 Time for export (days) Cost to export (US$ per container) Documents for import (number) Time for import (days) Cost to import (US$ per container) Source: Doing Business 2008.442.5 74.4 5 OECD 6.90 Figure 9: Ease or difficulty of enforcing commercial contacts Indicator Bangladesh Procedures (number) Duration (days) Cost (% of claim) Source: Doing Business 2008.2 OECD 31. World Bank Bangladesh 6 7 7 6.7 Region 4.
AT Capital Research Source: The 17th Survey of Investment-Related Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 118 . JETRO. 2007 Source: The 17th Survey of Investment-Related Investment Cost Comparison. JETRO. JETRO. 2007 Source: The 17th Survey of Investment-Related Investment Cost Comparison. JETRO. JETRO. 2007 Source: The 17th Survey of Investment-Related Related Cost Comparison. JETRO. 2007 Source: The 17th Survey of Investment-Related Related Cost Comparison.
JETRO. JETRO. JETRO. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 119 . 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. JETRO. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. JETRO.AT Capital Research Source: The 17th Survey of Investment-Related Cost Comparison. JETRO.
Energy Source: Bangladesh Power Data Book 2006 by Power Cell Source: Bangladesh Power Data Book 2006 by Power Cell Figure 3: Coal reserves of Bangladesh Location Year of discovery 1985-87 1989-90 1997 1962 1994-95 Number of drilled wells 31 4 1 10 3 Depth (meter) 118-509 257-483 150-240 640-1158 328-407 Proven reserves (MT)*) 390 685 386 1053 N/A Barapukuria Khalaspir. Joupurhat Dighipara. Rangpur Phulbari.AT Capital Research Appendix 2 . Dinajpur Jamalganj. Dinajpur Source: Power System Master Plan Update. Power Cell & Asian Development Bank 120 .
Infrastructure (non(non-energy) Source: Bangladesh Economic Review. 2007. Figure 2: Revenue earnings and expense of Bangladesh Railway 900 Revenue Earnings & Expenditure (in crore BDT) 800 700 600 500 400 300 200 1995-96 Revenue Earnings Revenue Expense Source: Bangladesh Economic Review. Ministry of Finance 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 121 . 2007.AT Capital Research Appendix 3 .
04 2004 . the government plans to take up sector reforms through organizational. rapid.00 2000 . the amount of cargo handled at the port of Chittagong has been increasing by more than 10% annually.AT Capital Research Fi gure .06 Source: Bangladesh Economic Review. Additionally. but if the port facilities are expanded and enough private companies are attracted to the Export Processing Zone (EPZ). a modal shift from road transportation to environment friendly railway transportation is indispensable. the government of Bangladesh has scarcely made any new investments in railway development since independence in the 1970s. the second largest city and industrial hub with the country’s largest seaport. http://www. both in terms of transportation volume and quality of service.02 2002 . World Bank. In parallel with the robust GDP growth (5–6%) in recent years. Indeed.05 2005 . punctual. Whereas the government has high expectations for the railway – as an alternative mode of transportation to roads – to play a leading role in meeting this increasing demand. virtually all railway facilities and equipment now in use were developed during the British colonial period (up to 1947). showing particularly rapid growth in the demand for transport in the Dhaka–Chittagong section. they have become so old and decrepit that they are unable to fully capitalize on the railway’s inherent strengths – massive.pdf 2006 . thus posing a bottleneck for the economic growth in the years ahead. In addition. and has formulated long-term planning and organizational realignment proposals (collectively designated as the BR Reform Program) with an eye to changing BR to a public corporation. it seems difficult. 2007 Case 1: Reform of Bangladesh Railway In Bangladesh.) The government of Bangladesh is scheduled to formulate the Railway Development Plan.jp/english/oec/before/2007/pdf/bangladesh02.99 1999 . the capital city and political and economic hub of the country. Source: Japan Bank for International Cooperation. Since 2001. For this and other reasons.03 2003 . which will include the plan for implementing projects in the railway sector over the next 20 years. in order to achieve sustainable development that takes the environment into consideration. administrative and institutional improvements of Bangladesh Railway (BR).07 122 . demand for freight transportation has steadily increased by 5–6% annually in Bangladesh. projects in the railway sector require more time and funds to bear fruit than do projects in the road and other sectors. (The railway’s CO2 emission per ton-kilometer is less than 1/8 of that of the automobile. for the current railway facilities to meet such expectations. safe. and Chittagong. Consequently.go. Asian Development Bank and Japan bank for International Cooperation are jointly funding the project. and environment friendly – resulting in reduced transportation volume.jbic. poorer service and a smaller role for the railway in the overall transport sector. connecting Dhaka.01 2001 .3: Toll target and collection by Jamuna Multipurpose Bridge Authority 180 160 Target & Collection (in crore BDT) 140 120 100 80 60 40 Target Collection 1998 . the demand for transport in the Dhaka–Chittagong section can be expected to increase even further.
293.1 1.1 7.087.140.6 1.5 55.188.7 1.4 276.5 1.3 TSP 67.7 235.0 5.8 5.0 2.473.5 7.3 2.123.2 138.9 Gypsum 77. phosphate.0 0.730.0 1. Government of Bangladesh *Others mean Gypsum.013.2 250.130.774.751.0 36.9 28.0 1.878.0 1.4 2.0 0.250.0 0.1 107.1 22.0 0.0 26.163.8 4.5 46.0 886.6 65.5 119.4 261.0 125.0 100.539.0 6.313.6 4.0 1.7 2.7 2.268.278.0 0.0 895.0 0.360.995.0 2.9 27.0 57.878.738.4 613.7 1.1 5.7 2.545.670.8 47.003.4 Source: Bangladesh Economic Review 2007 Figure 2: Export of selected agricultural commodities from Bangladesh from Fiscal Year (FY) 1990-91 to FY 2004-05 Fiscal Jute Fruits Vegetables Tea Year Thousand bales MT* BDT (mn) MT BDT (mn) MT BDT(mn) BDT (mn) 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Total 1.9 Total 2.781.0 30.2 67.180.4 977.3 136.056.0 0. MP= Melamine phosphate.4 5.9 Import MP 123.0 1.6 359.0 1.7 12.0 0.380.1 108.822.883.057.0 0.175.1 1.525.9 278.935.792.6 265 2005-06 17.289.597.0 0.0 125.2 122.2 139.3 88.254.0 32.4 2. MP= Melamine phosphate.0* 268.4 9.6 Urea 302. potassium.437.1 NPKS 10.7 59.0 1.0 1.9 431.0 176.5 108.0 1.570.420.0 0.024.2 6.698.106.588.0 0.4 Total BDT (mn) 5.8 1.475.493.0 1.2 1.1 359.0 4.739.0 567.4 10.0 0.0 1.0 0.230.4 2.386.0 0.0 ASP 5.0 87.0 4.8 29.8 13.9 932.4 5.0 3.5 20.509.5 111.0 1.5 Total 964.0 162.3 9.0 820.0 0.5 2.222.Agriculture Figure 1: Food grain production in Bangladesh (in 100.0 1.394.3 11.4 373.8 4.2 701.0 13.510.0 Source: Ministry of Agriculture. ASP= Ammonium sulphate.242.0 1.2 1.0 16.164.523.0 247.655.2 998.537.0 1.5 4.5 101.0 0.6 1.2 278.6 1.5 260.6 3.5 269.634.0 53.5 0.5 4.6 73.986.748.2 11.0 0.9 15. NPKS.6 1.841.6 1.916.1 36.9 10.027.2 438.3 127.000 metric tonnes) 2000-01 Aus Aman Boro Total rice Wheat Maize Grand total 19.9 1.0 3.3 27. and Zinc Note: TSP= Triple super phosphate.4 4.0 340.0 79.3 TSP 363.0 0.100.2 *Others 50.5* 284.3 115.4 12.6 243 16.8 56.7 848.4 285.442.665.7 268.7 65.1 1.8 7.850.968.3 0.2 689.0 32.7 118.1 DAP 126.2 879.143.9 12.0 7.9 17.772.9 16.9 327.6 6.5 7.0 3. Government of Bangladesh *MT=metric tonne Figure 3: Production and import of chemical fertilizers by Bangladesh (in 1000 metric tonnes) Production Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Urea 1.8 25.621.4 SSP 119.0 0.8 3.0 0.675. and sulphur.8 6.8 265.5 1. NPKS= a composition of nitrogen.283.5 3.6 33.0 0.4 8.0 0.517.9 8.7 40.500.6 2002-03 18.6 0.456.0 0.1 2001-02 18.5 135.3 1.0 1.9 2.4 2.2 1.3 8.3 12.556.0 0.2 112.7 2003-04 18.6 9. DAP= Diamonimum phosphate.2 251.5 23.9 13.0 60.9 7.0 451.442.2 3.098.0 0.3 208.4 145.5 407. SSP= Single super phosphate.509.760.0 522.412.4 251.2 25.0 101.0 1.1 766.4 5.4 135.9 427.8 2004-05 15 98.3 1.0 3.163.0 3.4 141.0 1.3 770.7 295.7 1.896.0 3.5 57.0 0.0 3.513.0 0.682. NPKS= composition.0 457.2 128.550.AT Capital Research Appendix 4 . DAP= diamonimum phosphate 123 .351.1 974.1 2006-07 15.4 0.2 5.5 271.0 Source: Ministry of Agriculture.0 1.2 9.
9 21.9 1.05 2005 .2 51.208.2 4.3 1.01 2001 .5 3.2 -5.8 635.3 389.0 Source: Bangladesh Bureau of Statistics: Labour Force Survey Bangladesh 1999-2000.9 517.9 0.6 417.1 T-Shirt 597.2 701.4 15.0 437.9 862.0 mn 15.9 12.Textiles Figure 1: Ready Made Garment (RMG) exports (in USD mn) in 2006 and 2007 Woven Knit Annual growth rate 2007 (%) 330.6 1.2 987.0 1.388.8 Total % 62.9 406.2 4.7 282.8 Source: Export Promotion Bureau.1 516.7 421.5 1.5 Source: Export Promotion Bureau.2 19.8 445.350.3 Jackets 573. August 2002 Appendix 5 .02 2002 .06 2006 .056.6 -23.3 19.4 12.2 8.5 961.4 474.7 46.5 11.201.1 Total 3.3 906.9 349.9 446.3 343.019.165.07 Shirts 1.0 766.044.7 293.1 Total (Woven+Knit) Annual growth rate 2007 (%) 605.2 417.8 15.3 12.3 464.334.8 430.1 451.3 322.1 471.073.5 -23.9 351.8 578.7 774.0 351.2 100.741.5 364.7 4.3 459.04 2004 .5 746.5 1.9 616.0 2.0 mn 32.7 858.9 8.7 1.4 349.7 315.0 7.7 345.3 442.1 355.3 2.248.6 -9.8 368.005.394.9 1.5 1.1 645.1 486.6 4. compiled by BGMEA Figure 2: Main apparel items exported from Bangladesh (Figures in USD) Fiscal Year 2000 .3 100.9 387.4 Trousers 656.1 1.1 40.0 353.062.9 314.4 546.9 4.667.1 100.1 325.378.1 5.494.7 Month January February March April May June July August September October November December Total 2006 354.8 700.606.9 Sweater 476.8 308.4 Female % 78.4 18.5 8.5 346.9 758.437.3 636.7 2006 650.7 1.7 412.03 2003 .9 461.053.5 2.9 4.3 663.8 8.1 1.2 10.5 387.6 19.3 3.984.7 9.4 391.9 311.4 330.1 26.2 691.781.4 778.4 Annual growth gate 2007 (%) 275.9 634.9 33.6 643.0 447.0 4.2 352.3 642.6 871.9 -23.3 5.5 904.7 0.4 -6.3 893.7 415.933.4 % 53.4 -0.8 2006 296.544.3 2.4 17.AT Capital Research Figure 4: Employment (persons 15 years and over) by broad economic sectors from 1999 to 2000 Male mn Agriculture Non-agriculture Total 17.0 412.2 1.3 391.7 314.9 663.9 859.4 -6.6 5.7 943.349.4 15.0 32.1 4.2 6.349.4 452.0 -0.4 616.1 9.9 37.116.9 908.3 21.5 -5. compiled by BGMEA 124 .608.0 -7.7 2.6 1.
04 2004 .05 2005 .040mn Kg 50mn Kg 0.000 Knit/Dye Machines 2.6 11.100mn meters 6.1 0.9 23.250.608 310 NA Figure 4: Comparative growth between spindle capacity and growth in RMG Fiscal Year Growth in spindle capacity (%) Growth in total RMG exports (%) 2000 .06mn Kg 1.8 12.02 2002 .637mn meters 1.342 498.06 2006 .8 44.1 16.000 handlooms 17.6 125 .066 Installed Capacity 6.01 2001 .1m Kg 1. knit dyeing mills Total Weaving and Knitting Mills Total Dyeing and Finishing Mills Source: Adapted from BTMA Annual Report 2007 No of Mills 311 11 1 322 400 1. page 27 34.400mn meters 300mn meters 837mn meters 4.000 Looms Production Capacity 1.AT Capital Research Figure: 3 Structure of Bangladesh’s Primary Textile Sector (PTS) Sub-Sector Spinning Mills: Cotton yarn mills Synthetic yarn mills Silk yarn mills Total Spinning Mills Weaving and Knitting Mills: Weaving mills (grey fabric) Specialized textiles & power loom mills Handloom mills Knitting.090.9 4.000 Looms 23.2 15.7 -5.07 Source: BTMA Annual Report 2007.888 Reeling NA 25.03 2003 .5 2.9 25.720mn meters 148.800 152.4 11.7 7.000 Spindles NA 2.
590 1999 8.669 99.574 74.188 64.1 22.025 2003 15.6 82.0 -2..1 -11.742 30.202 110.8 -6.177 28.AT Capital Research Appendix 6 .9 41.461 2001 5.530 29.6 39..1 38.6 -16.54% 42.689 1997 3.3 126 .536 118.5 57.12% 32.229 109.4 -8.236 2004 12.01% 7. & Chaudhuri.718 51.72% 3. (2007).558 1998 9.947 2000 10.450 56.5 -2. Sinha.301 34.3 30.940 42.581 118.19% Unskilled 51. S.3 50. Figure 2: Different categories of Bangladeshi migrant workers Years Professional Skilled Semi-skilled 1976-1985 1986-1995 1996-2004 6.449 44.702 2002 14.4 8. Employment and Training Figure 3: Overseas Employment by Profession Worker's Category Year Professional Skilled Semi-skilled 1995 6.18% 15.797 65.516 134. K. “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of US$ 30 billion Annual Migrant Remittances by 2015”. 2000 Absolute population loss.8 200 24 10 1% 240 48 288 2015 30 400 75 10 1% 750 300 1.907 32. 1999-2050 -21.97% 48.741 85. S.327 Source: Bureau of Manpower.4 5.511 131.045 98.265 36.2 39.050 Source: Ray.055 1996 3.606 26.2 10.35% 20.Manpower Figure 1: Estimated size of remittances market in Bangladesh 2006 Bangladesh Remittance Figure (USD bn) Average Transaction Size (USD) Transaction Volume (mn) Average Price per Transaction (USD) Average foreign exchange (FX) spread Transaction Revenue (USD mn) FX Revenue (USD mn) Total System Revenue (USD mn) 4.252 Figure 4: The demographic implosion in developing world (mn) Population Estimated population in in 1999 2050 Japan Italy Ukraine Spain Germany Rumania Bulgaria Hungary Poland Source: UNDP.785 116.5 36.4 126.6 -2.3 16.950 109.34% 4.352 59.7 104.211 43.3 -9. A.88% Source: Bureau of Manpower.7 7.76% 32.862 74.2 73.562 122.90% 34. Employment and Training Un-skilled 89.
5 445.0 0.3 1.3 1.0 45.9 265.6 35.244.9 76.7 18.0 0.8 30.561.463.8 6.6 64.3 27.6 6.0 0.1 2.0 0.3 83.9 42.8 11.3 338.2 56.8 103.1 0.2 143.0 0.3 2005 1.4 2004 1.0 0.9 16.3 1.2 3.0 25.9 49.4 0.6 82.S.0 31.2 0.3 673.4 110.7 62.7 496.201.8 1.6 125.8 10.AT Capital Research Figure 5: Sources of Remittances to Bangladesh (in USD mn) Country Saudi Arabia U.2 246.249.8 63.1 0.9 15.5 322.071.6 57.6 0.2 0.2 4.0 28.5 2000 933.5 0.0 0.6 3.9 61.6 49.0 0. Employment and Training 127 .1 47.2 0.1 7.9 104.A.6 35.5 8.0 1.3 147.847.5 380.9 33.9 4.3 0.6 46.5 423.4 32.0 0.313.3 4.3 404.7 0.6 25.4 342.9 0.1 153.0 2.9 5.0 2001 980.8 110.609.8 0.8 4.1 349.2 114.1 10.9 Source: Bureau of Manpower.2 22.5 34.5 234.1 2.2 39.8 68.5 68.2 87.0 70.2 0.0 0.9 3.3 477.0 186.9 254.8 0.4 78.6 19.1 1.7 90.0 2002 1.0 248.1 3.0 0.8 2003 1.4 11.0 470. Korea Australia Iran Libya Total 1995 485.7 4.2 8.3 123.3 92.3 1.2 0.0 71.6 390.E Kuwait U.4 108.5 276.4 12.177.0 0.955.4 170.A U.K Qatar Oman Others Bahrain Singapore Italy Malaysia Germany Japan Hong Kong S.0 0.0 165.0 0.
AT Capital Research
Appendix 7 - Pharmaceuticals
Figure 1. World market by geographic region - 2007 Value (USD bn) USA Europe France Germany UK Italy Japan Asia Pacific Latin America Middle East, Africa Canada Total
Source: GlaxoSmithKline Annual Report, 2007
Annual growth % of total 44 28 5 5 3 3 10 7 5 3 3 100 (%) 9 6 4 3 3 7 -3 14 21 13 19 8
288 185 35 33 21 21 62 46 32 22 17 652
Figure 2: Top 10 manufacturers in Bangladesh by sales - 2007 Sales (USD mn) Square Beximco Incepta Acme Eskayef Drug INT. Aristopharma sanofi-aventis A.C.I. Renata Total
Source: IMS Report, 4 Quarter – 2007
Share (%) 18 9.2 7.4 5.4 4.5 3.9 3.9 3.8 3.8 3.6 63.5
106 54 44 32 27 23 23 22 22 21 374
Figure 3: Top 10 Therapeutic segments in Bangladesh by sales - 2007 Sales ( USD mn) Alimentary T.& Metabolism Systemic Anti-Infectives Nervous System Respiratory System Musculo-Skeletal System Dermatologicals G.U.System & Sex Hormones Hospital Solutions Blood + B.Forming Organs Parasitology Total
Source: IMS Report, 4 Quarter – 2007
Share (%) 32 24.9 8.9 7.9 5.2 2.5 2.1 2.1 2 1.9 100
Growth (%) 20.4 5.4 17.4 20.8 14.9 21.9 19.4 7.4 13.5 13.6 15.8
189 147 53 47 31 15 12 12 12 11 591
AT Capital Research
Figure 4: Top 14 molecules in Bangladesh by sales 2007 Yearly sales (USD mn) 32 31 21 18 16 15 13 12 11 11 9 8 8 7
Omeprazole Ranitidine Ciprofloxacin Cefradine Amoxicillin Paracetamol Cefixime Ceftriaxone Diclofenac Azithromycin Amlodipine Salbutamol Cefuroxime Axetil Pantoprazole
Source: IMS Report, 4th Quarter – 2007
Figure 5: Major API manufacturers in Bangladesh and their products 2007 Company Beximco Pharmaceuticals Ltd. List of API Products Amlodipine, Amoxycillin, Ampicillin, Celecocib, Rofecoxib, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Cetirizine Fluconazole, Ciprofloxazin, Ranitidine, Cephalexin Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Cephalexin Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin Amoxycillin, Diclofenac, Cloxacillin, Flucloxacillin, Cephalexin Amoxycillin, Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Cephalexin Paracetamol Amoxycillin, Paracetamol, Diclofenac
Square Pharmaceuticals Ltd. Drug International Ltd. Globe Pharmaceuticals Ltd. Gonoshashtaya Pharmaceuticals Ltd. Sunipun Pharmaceuticals Ltd. Opsonin Chemicals Ltd.
Source: GTZ. (2007). 'Study on the Viability of High Quality Drugs Manufacturing in Bangladesh.' Federal Ministry of Economic Cooperation and Development
Source: GTZ. (2007). 'Study on the Viability of High Quality Drugs Manufacturing in Bangladesh.' Federal Ministry of Economic Cooperation and Development
AT Capital Research
Appendix 8 - Healthcare
Figure 1: Total expenditure on health as a % of GDP in 2004 8% 7% 6% 5% 4% 3% 2% 1% 0%
Bangladesh Maldives Thailand Sri Lanka India Nepal Myanmar Indonesia North Korea
Source: Official website of World Health Organization
Figure 2: Per capita expenditure on health in 2004 500 400 300
200 100 0
Source: Official website of World Health Organization
0 100.6 4. health worker Family treatment Self treatment NGO doctor NGO health worker Peer/fakir/tantric/ojha/baidya Others Total Source: Bangladesh Bureau of Statistics % 38.1 0. institution) Homeopathic doctor Kabiraj/hekim/ayurbed Govt.AT Capital Research Figure 3: Use of different methods of treatment in Bangladesh in 2005 Different Methods Pharmacy/dispensary/compounder Private doctor Govt. doctor (private practice) Govt.3 0.7 1.2 5.1 7.4 15. doctor (Govt.0 131 .7 0.5 0.7 24.5 0.4 1.
“Shipbuilding in China and its impacts on European shipbuilding Institute of Law and labour Germany. Indo American Hybrid Seeds and Syngenta. (2006).AT Capital Research Appendix 9 .Heavy Engineering (Shipbuilding) Figure 1: Growth of world s hipbuilding capacities f rom 2004 t o 2010 50 Cumulative Gross Tonnage (mn) 45 40 35 30 25 20 15 10 5 0 Japan South Korea 2004 2010 China Europe Others World industry. Neeman Medical International. MWG. & Tholen. 132 . Novo Nordisk.org % 2.2 100 Case 1: Major Multinational Biotechnology players in India The Indian Biospace is dotted with a growing number of Multinationals like Eli Lilly. Maharashtra Hybrid Seeds Corporation (Mahyco) Ltd and Monsanto India have formed a 50:50 joint venture called Mahyco Monsanto Biotech (India) Ltd (MMBL) to market Bollgard cotton.1 7 6. and Roche.7 9 75.Biotechnology Figure 1: Indian Biotech segments Types Bio-IT Bio Agro Bio Industrial Bio Service Bio Pharma Total Source: www. • The other international CRO and bioservices companies operating in India include Covance. Simbec and Pharmanet. ClinTec. Clinworld. Appendix 10 .” University of Bremen & Source: Ludwig. Parexel. AstaZeneca. developed by Monsanto. For instance. wherein international companies like Quintiles Transnational have actively proceeded to leverage the India advantage. Some of the other leading MNCs present in India’s bio-agri segment are Advanta. RCC. Baxter. T. • The clinical research is another field. • Opportunities in the agro-biotech sector have also brought in world’s major biotech companies into India. J.ibef.
725 80.891 6.160 3 9.688 2.211 9.483 3. of Teachers No.869 858.672 42.398. Government of Bangladesh Note: • Teacher and Students of National University and Open University are not included in Public Universities.487 10.109 597.Education Figure 1: Bangladesh educational institutes Type of Management No.893 14.517 60.453.185 1.552 511.526 42. of Institutions Institution Primary Public Private Total Secondary Public Private Total College Public Private Total Madrasa Public Private Total University Public Private Total Technicalvocational Professional Public Private Total Public Private Total Teacher Training Public Private Total 37.929 11.629 2.336 17.967 6.084 182.274 79.495 232.132 9.577 48.500 261 2.939 15.176.741. of Students Source: Education Statistics 2005.043 21.738 3.705 344.976 192.439 90.372 36.665 7.434 225.885 151.450.215 26 56 82 180 2.728 60 162 222 80 108 188 162.339 2.767 16.158 917 1.397 317 18. 133 .899 3.AT Capital Research Appendix 11 .483. • 23 new Polytechnic Institutes excluded above have already been established but are yet to open.246 18.215 2.852 3.548 2.225.265 No.360 241.183 18.221 115. Ministry of Education.929 91.529 4.658 221.789 7.713 82 151.887 7.648 207.
097 4. of Institutions Polytechnic Institutes Technical School & Colleges Institute of Glass & Ceramic Institute of Graphics Arts Textile Institutes Textile Vocational Centers Technical Training Centers Survey Institutes SSC (Vocational) Schools HSC (Business Management) Institutes Commercial Institutes Agricultural Training Institutes Public Private Public Public Public Public Public Public Public Private Private Public Public 37 97 64 1 1 6 28 13 2 1.189 465 792 10 16 45 331 359 17 7.458 79. of Student 11.103 Source: Education Statistics 2005.180 16 12 No. of Teachers 1. of Teachers 1.120 68 112 No.324 515 628 435 17.037 56 198 18 27 442 32 124 232 29 31 15 625 54 20 No.787 407 120 Source: Education Statistics 2005.954 358 782 252 486 14.288 3.867 557 95. of Institution Type of institution Medical Colleges Public 15 Private 27 Dental Colleges Public 1 Private 8 Nursing College Public 1 Homeopathic Colleges Unani/ Ayurvedic Colleges Nursing Training Institutes Textile College Leather Technology College Law Colleges Art Colleges Music Colleges Public Private Public Private Public Private Public Public Private Private Private 1 29 2 14 39 5 1 1 70 7 2 No.836 9. Ministry of Education.AT Capital Research Figure 2: Number of public and private technical-vocational institutes 2005 Type of institution Management No.224 1.935 3.511 6.548 174 255 856 5.683 7.684 312 1. Ministry of Education.218 1. Government of Bangladesh Figure 3: Number of public and private professional college 2005 Management No.682 8. Government of Bangladesh 134 .731 6. of Students 17.
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