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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 Overview………………………………………………………………………………………………………………………………………………………………………. 1. Overview Introduction A case for optimism The importance of developing an economic vision Improving manufacturing productivity Lessons from Vietnam The key enabling goals Conclusion Investment deas………………………………………………………….………………………………………………………………………… 2. Our Top Investment Ideas Background………………………………………………………………………………………………………………………… 3. FDI in Bangladesh: Background Trends in FDI flows Sector distribution of FDI flows FDI outlook market…………………………………………………………………………………………………………………………………………………………… 4. Capital market International diversification An emerging capital market A favorable environment for foreign investors Banking…………………………………………………………………………………………………………………………………………………………………………. 5. Banking Banking sector performance The regulatory environment Opportunities in a developing economy Energy…………………………………………………………………………………………………………………………………………………………………………… 6. Energy Energy review Meeting the country’s energy needs (non-Energy) 7. Infrastructure (non-Energy)………………………………………………………………………………………………………………………………….. Road, rail and ports Lessons from around the world Strengthening the nations backbone Agriculture iculture…………………………………………………………………………………………………………………………………………………………………... 8. Agriculture A long tradition in agriculture Meeting the needs of the population Improving yields and product innovation Textiles…………………………………………………………………………………………………………………………………………………………………………… 9. Textiles A success story Increasing global market share Exploring the value chain Outsourcing………………………………………………………………………………………………………………………………………………………………. 10. Outsourcing Redefining the supply chain An enabling environment A credible partner Manpower…………………………………………………………………………………………………………………………………………………………………… 11. Manpower Increased global labour mobility Substantial opportunities for global competitiveness Enabling an international workforce 5
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Pharmaceuticals……………………………………………………………………………………………………………………………………………………… 12. Pharmaceuticals Competitive advantages ahead of 2016 A sustainable long term strategy Healthcare……………………………………………………………………………………………………………………………………………………………….…. 13. Healthcare The current state of the market Prospects in medical tourism Developing private health care Biotechnology……………………………………………………………………………………………………………………………………………………………. 14. Biotechnology The importance of biotechnology for Bangladesh Lessons from India Opportunities for investment Engineering…………………………………………………………………………………………………………………………………………………… 15. Light Engineering Industry review Potential growth areas Building on a strong base Building..........……………………………………………………………………………………..………………. 16. Heavy Engineering: Ship Building A booming market Is growth sustainable? Tourism……………………………………………………………………………………………………………………………………………………………………….. 17. Tourism Marketing and promotion strategies An overview of the hotels sector Developing an effective tourism strategy Education……………………………………………………………………………………………………………………………………………………………………. 18. 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 (nonAppendix 3-Infrastructure (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
2005 Appendix 9-Biotechnology Figure 1: Indian Biotech segments Case 1: Major Multinational Biotechnology players in India 10Appendix 10-Heavy Engineering (Shipbuilding) Figure 1: Growth of world shipbuilding capacities 11Appendix 11-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 . 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. 2004 Figure 2: Per capita expenditure on health in various countries Figure 3: Distribution of patients by method of treatment in Bangladesh (%).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.
. not only to attract FDI. Vietnam saw its FDI increase from USD 2bn in 2000 to an estimated USD 1 20bn in 2007. We believe it is realistic for Bangladesh to achieve a similar tenfold increase over a seven year period. education. fiscal policies among other factors.islam@at-capital. We remain optimistic that the next phase of Bangladesh’s economic development and will provide many profitable opportunities for global investors.com 5 . will reduce some of the informational asymmetries that have constrained FDI flows. but also to improve manufacturing productivity. a large domestic market of 150mn people. 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. The growth of private equity firms (those that invest in non-listed securities) can positively impact Bangladesh’s ability. capital markets. to one that can truly join the ranks of the fastest growing economies in the region. law and order. However. Bangladesh has three key attractions for global investors and multinationals: a large base of low-cost labour. and nearly 3bn people in the Asian region that it has market access to. Asian Tiger Capital Partners Ifty Islam Managing Partner +(8801) 715840112 ifty. poor governance and political volatility.AT Capital Research Overview Overview The Bangladesh paradox has been one of surprising economic resilience in the face of natural disasters. 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. the first of a series of more detailed sector analyses we intend to publish. increasing FDI from a projected USD 700mn in 2008 to USD 7bn by 2015. corporate governance. 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 hope this report. a key challenge is whether Bangladesh can move away from an economy that is an impressive underdog. it is important that Bangladesh can attract similar long term investment flows that will help build the infrastructure and productive capacity of the economy.
Even if growth has lagged a number of other economies in Asia. The aim of this paper is to provide global investors with an outline on the challenges and prospects for the Bangladesh economy. the 50 anniversary of its Independence. as Bangladesh integrates more effectively with the global economy . This will clearly require regulatory reforms. But this will require Bangladesh moving from a 5-6% growth trajectory to around 7. The Bangladesh paradox Optimism for becoming middle income country is justified. Building an enabling environment to spur FDI and domestic private investment 6 . for example. saw its FDI increase from USD 2bn in 2000 to an estimated 1 USD 20bn in 2007. and greater infrastructure expenditure. to one that can truly join the ranks of the fastest growing economies in the region.AT Capital Research Introduction The Bangladesh paradox has been one of surprising economic resilience in the face of natural disasters. But a large proportion of this report is dedicated to our review of industry profiles and sector reviews. 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. India and Vietnam. We believe it is realistic for Bangladesh to achieve a similar tenfold increase over a seven year period. increasing FDI from a projected USD 700mn in 2008 to USD 7bn by 2015. It is important that Bangladesh can attract similar long term investment flows that will help build the infrastructure and productive capacity of the economy. This is not impossible given the experience of other countries in the region. We hope this report. The role of government should be to create an enabling environment for both FDI and domestically generated investment capital to prosper. ultimately it is an aggregate of a series of specific investments across a variety of industries. But Bangladesh also needs to market the opportunities it offers to global capital markets and multinationals more effectively. the volatility of Bangladesh’s growth has been lower. But it is not inevitable. will reduce some of the informational asymmetries that have constrained FDI flows. the first of a series of more detailed sector analyses we intend to publish. development of the capital markets. In effect. However. but reflects our belief that the range and breadth of investment opportunities. poor governance and political volatility. especially on power generation. most notably China.is not fully appreciated by many international investors.5%. Vietnam. an entrepreneurial private sector base has compensated for a less supportive macro political environment. We remain optimistic that the next phase of Bangladesh’s economic development will provide many profitable opportunities for global investors. is justified. a key challenge is whether Bangladesh can move away from an economy that is an impressive underdog. While FDI seems to be a generic and nebulous concept to many. Much will achieve depend on the ability of Bangladesh to achieve the acceleration in FDI (Foreign Direct Investment) flows seen in the rest of Asia and parts of Latin America. This is not accidental.
AT Capital Research The need for a more positive “Brand Bangladesh” longA Case for Optimism . global investors should not overlook the scope for transformational shifts. is likely to be one of natural disasters. Similarly with China. natural corruption. Even the most optimistic Indian patriot would have been hard pushed to forecast in 1992. One only needs to look at recent history for evidence that globalization has accelerated the potential pace of economic change. in the immediate aftermath of the political uncertainty the following Tiananmen Square. we are struck by the scope for profound changes in a country’s competitive economic position over the longer-term. 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. US investment bank Goldman Sachs. a country in the heart of Asia and juxtaposed strategically between India and China. that just 15 years later it would become a global 3 powerhouse in services with near USD 300bn in reserves. world. Russian. overpopulation and corruption A more positive impression we believe is appropriate. grinding poverty.In 1825. a very entrepreneurial culture as evidenced both by the resilience of the textile sector to the end of MFA quotas.5tr of reserves. As students of economic history. China and India constituted 50% of global GDP and by 2050 these two nations will again constitute 50% of global GDP. with more than USD 1. who have done much of the pioneering work on BRICs (Brazil. what one might define as “Brand Bangladesh”. very few economic forecasters would have predicted that less than 20 years later China would be the manufacturing power house of the world. India was the second7 . 2007) when commenting on 3 India that: “On the eve of the Industrial Revolution (around 1770). India and China) noted in a recent report (“Brics and Beyond”. GS.a long-term perspective on economic potential might The image of Bangladesh for the rest of the world. when the country was almost bankrupt and going to the IMF for emergency funding. Source: CIA Factbook2 Economic history suggests never underestimate the scope for transformational change When considering what might be possible in Bangladesh.
From a long-term perspective. Progress has been made over the last few years to reduce poverty. By the 1970s. driven to some extent by a lack of openness. increasing literacy levels and moderating population growth to a more sustainable level. and India has begun to play catch-up. We believe it is this potential that will increase the focus. 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. Indonesia. Korea. The result was decades of low growth. Iran. Their goal was to “identify those countries that could potentially have a BRIC-like impact in rivaling the G7”. that share had fallen to 3% the lowest in its recorded history. steadily re-integrating into the global economy. Reforms beginning in 1991 gradually removed obstacles to economic freedom. Egypt. Five-year economic growth is strong at 6. An assertive judiciary. JP Morgan also introduced the concept of the “Frontier five” and included Bangladesh in that list. In their 2007 report (“Ho Chi Minh trail to Mexico”. and severely restricted trade and economic freedom.” 8 . JP 4 Morgan Research. active civil society and a relatively free media have increased public accountability. Goldman Sachs bullish on Bangladesh as part of their “Next 11” EM markets to follow the BRICs (NGoldman Sachs in 2005. After independence in 1947. the post-industrial economic decline of India (and China) is a historical aberration. after two centuries of relative economic stagnation.” They go on to forecast that India will overtake the US as the second largest 3 economy in the world to China by 2050. The country ranks fourth in growth in economically active population. By 2050 it will overtake the US to reclaim 2nd place largest economy in the world.1% (CAGR). reThe purpose of all this historical analysis is to re-iterate that Bangladesh by 2021 today. could be radically different to the country you see today Transformational change is not inevitable but it is certainly possible. Bangladesh’s geographic position gives it every opportunity to participate in the “Asian Century”. Turkey and Vietnam. Nigeria. introduced the concept of the Next Eleven (N-11) and Bangladesh included Bangladesh in that list. India followed inward-looking and state-interventionist policies that shackled the economy through regulations. Their main common ground and the reason for their selection was that they were the next set of largepopulation countries beyond the BRICs. Philippines. contributing more than 20% of total world output. The result was a very diverse grouping that includes Bangladesh.AT Capital Research In 1770 India was the second biggest economy in the world. 3 Pakistan. Mexico. pejoratively termed the Hindu rate of Growth. interest and opportunities for global investors.
this has been at Government level. 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. Bangladesh: The Importance of Developing an Economic Vision There is little doubt that the success of the previous Asian Tigers has been Vision.000. 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. LG and Hyundai. Korea had a per capita GDP of USD 10. predicated on Economic Vision In many cases. When we think of Korea now. Former PM Mahathir adopted his “Vision 2020” strategy in 1994 of moving Malaysia from a 7 developing to an advanced nation. which has just celebrated moving to a per capita GDP of USD 20. the current favourite of the global investors buying into the Asian economic miracle. away from being perceived as a cheaper alternative to Japan.unu.gvu.000 that collapsed to USD 7800 in the aftermath of the 1997 Asian crisis. But not all transformational economic vision comes at a government level. a near trebling in just a decade.AT Capital Research Bangladesh population growth rate one of the fastest in Asia Source: globalis. But Korea managed to re-invent itself despite the collapse in GDP and the crisis of national self-confidence. 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. The redefinition of Korea corporate brands such as Samsung.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. 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. Indeed in 1995. Take South Korea. 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 . Vietnam. it was the “Chaebol” or family conglomerates that had the “Vision” to help the country accelerate to first world status. While the government played an important enabling role. The private sector was the catalyst for the dramatic economic recovery. we associate it with Samsung.
(n. In the latter report. will require better economic governance and business environment without which FDI will continue at low levels. but one still needing a supportive regulatory environment. have also played a pivotal role. 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. 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. closer to the Korean experience. The Bangladesh growth model is likely to be built on the dynamism of its entrepreneurs/corporates. South Korea’s GDP per capita was the same as Bangladesh!). Bangladesh’s Economic Strategy In formulating the likely economic strategy and hence investment opportunities. in turn. continued macroeconomic stability.5% per year. India was probably a hybrid between the two models of public sector versus private sector economic vision. Indeed when Bangladeshi corporates express skepticism about their ability to work with policymakers to deliver necessary regulatory reforms.b. The economic crisis of 1992. Wipro. But the Indian success story was clearly not all down to government reforms. one need only look to India. The July 2007 World Bank Report “Bangladesh: Strategy for Sustained Growth” also provides plenty of food for 9 thought. for evidence of what can be done when the public and private sectors develop a partnership/adopt a mindset of cooperation. whose bureaucracy in the early 1990s was no less unwieldy than Bangladesh’s regulatory framework today. when the country was almost running out of reserves and forced to seek emergency IMF financing. 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. now of the world’s leading IT and outsourcing companies was originally an edible oil company. In 1950. The Valley private sector led by NRIs returning from Silicon Valley to Bangalore. greater integration with global markets and the emergence of dynamic urban sectors. 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. Family companies like Tata and Reliance have re-invented themselves.AT Capital Research questioning the ability of their vision to impact a country. 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. forced a re-thinking on a socialist economic strategy. 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. there have been two excellent and comprehensive reports that we would recommend that global investors take a look at.
the Committee identified a number of new sectors assembled electronic goods. law and order Source: CIA Factbook2 11 . data processing. 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. deeper and more efficient financial sector. v. Building human capital: Higher Education levels and better management training were important contributors to firm productivity. 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%. eco products. education. to help Bangladesh achieve MIC status th by the time of its 50 anniversary from Independence in 2021.AT Capital Research viable energy sector that supports the country’s vast energy needs. manpower and agro-businesses The “Bangladesh Vision 2021” paper from the Nagorik Committee identified eight inter-related goals. data processing. WB survey highlighted key factors to improve productivity … …. iii. ii. increased FDI. Experience gained in export markets was selfreinforcing over time. vi. manpower. New strategic sectors for the economy include offshore light manufacturing. developing the jute industry to benefit from the growing demand for eco-friendly products. innovation. 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. In terms of Goal Three.these included better infrastructure. iv. and a greater emphasis on the quality of education and labour skills”. They emphasized the need to also support Small and Medium Sized Enterprises 8 (SMEs) in terms of access to credit and technology innovations. 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. more open trade. The WB also noted that new measures were needed to encourage the application of a greater innovation and the adoption of more advanced technologies. They also outlined the support for the expansion of existing leading sectors of the economy including textiles. agro-food processing. Strengthening law and order: the ongoing presence of “protection payments” was a negative.
the government has been striving to implement policy measures to promote investment. Sri Lanka. 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. which has seen FDI expand 20bn tenfold from USD 2bn in 2000 to USD 20bn in 2007 with in excess of USD 5bn recorded for Q1 2008. 1992. trade agreements. 2000 and 2003. IT. For lessons Bangladesh can learn from the rest of Asia.” The FDI policy was further regulatory changes and amendments in 12 1990. clear government policies. Vietnam and Cambodia across issues such as product and market diversification.AT Capital Research International Private Equity firms can bring in substantial efficiency for Bangladeshi firms worth It is worth noting that the arrival of international Private Equity firms (those that invest in non-listed securities) can positively impact Bangladesh on all of the nonabove with the exception of law and order. trade promotion. Vietnam’s political stability as a one party state under the Communist Party has given some reassurance to 2 investors. The major “value-added” from private equity is likely to be from strategic capital. (see Appendix 1 for details on Bangladesh’s “Ease of Doing Business” results). 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 ).7%. As a recent Fitch Ratings Report (February 2008) has noted. lean manufacturing. according to the World Bank’s “Doing Business Report 2008”. the UNDP 2005 paper “Report on Identification of Employment Oriented Export Sectors” offers insights including comparables with Thailand. pricing. and procurement and supply chain management. What can Bangladesh learn and what are the lessons for potential global investors experience? in Bangladesh from the Vietnam 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. Fitch also notes that since the introduction of the First Law on Foreign Investment in 1987.4% 6 second only to China at 9. Since the “Doi Moi” policy was launched. 11 Government-Private Sector forum and Investment Climate. and th 13 Cambodia (145 ). tax incentives and industrial facilities. “(Fitch) believes that legal framework. the clear success story in Asia’s Vietnam. Vietnam “has identified itself as a county determined to attract FDI.5% and above India’s 6.” (McKinsey 2005) Other Lessons from 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. In a report on Private Equity. Also. Vietnam increased FDI from USD 2bn in 2000 tenfold to USD 20bn in 2007 Asia’s Vietnam. 1996. Vietnam benefited from its “Doi Moi” policy with a pro-active strategy to attractive FDI 12 . are crucial for foreign 12 direct investment into Vietnam”. Pakistan. However. Vietnam’s growth in the 2000-2006 period has been 7. local market size and cost structures in considering FDI destinations.
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”. Leveraging Diaspora is an area Bangladesh has done with remittances but it can clearly do more. This 6 will reduce reliance on hydropower from around 40% currently. second only to Philippines.6% of the population. On infrastructure. in both power and communications 13 .100 1. July 26. The government also continues to provide preferential incentives to projects investing in the industrial. This compares to 20-25mn and 55-60mn of the Indian and Chinese Diaspora respectively. A strong educational system is also a major attraction for Vietnam as an FDI Vietnam destination. 2007) suggested that an estimated 3mn Vietnamese live abroad mostly in North American and Europe.AT Capital Research Vietnam’s continues to innovate FDI policy including lowering corporate tax rates. especially in terms of attracting higher skilled diasporas back. Vietnam is constructing six international airports with one Bangkok. An additional 22 industrial zones were 6 set up in 2007 alone and the total now stands at 150. However. envisaged to be able to compete with Singapore or Bangkok An elevated railway is planned for Hanoi. more industrial zones To further enhance the country’s attractiveness as an FDI destination. The government plans seven new power plants by 2010. But in other areas such as outsourcing. processing and economic zones. rather than lower wage workers sending money back to the country. the workforce’s English language proficiency compares favourably with many of its 6 neighbors. DB Research. a dynamic and proactive FDI strategy is clearly important. one natural gas plant and one nuclear plant all with the help of foreign investors. It has already done so to some extent in textiles. Bangladesh should aim to position itself as “India+one”. Pakistan at 50% and Bangladesh at 43%. leveraging NRB intellectual and commercial capital. it has been far less effective. So in terms of Vietnam lessons for Bangladesh. Remittances from the Vietnamese Diaspora amounted to 9. 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. especially China. due to Vietnam’s openness to foreign influence and reliance on trade. Vietnam’s focus on education Vietnam’s has focused on improving infrastructure. Its literacy rate of 90% is similar to China’s and significantly higher than India at 60%. Figure 4: Diaspora in 2006 Diaspora (mn) 3 24 39 4 Total population Diaspora as a % (mn) of total population 84 1. Investment in education is another key focus. As the DB report notes. the relative size of this Diaspora is larger at 3.5% of GDP in 2006. 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.
Another constraint has been the lack of investment in equipment in ports such as the addition of more automated gantry cranes. 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. 5 enabling environment goals Encouraging private sector infrastructure investment Creating transparency and accountability Regulatory Enabling Environment Goal 2 – More effective Political. 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 . education. An excellent report on . Without this. law and order. capital markets. They also 8 recommended the establishment of an effective Anti-corruption commission. fiscal policies and so on.AT Capital Research Remittances is important for Vietnam Source: DB Research (2007)6 Supportive The Importance of a Supportive “Enabling Environment” Creating an enabling environment is the key. 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. it is self-evident that economic vision and a dynamic corporate sector will remain capacity constrained. it offers a number of valuable insights that are still relevant. This involves significant expansion of its power generation capacity. Although the paper is several years old. corporate governance. A recent ADB report suggested that to grow at 7% GDP growth would necessitate Bangladesh adding 2000 MW of capacity each year. 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. improving the enabling environment is the Bangladesh Enterprise Institute’s (BEI) 15 “Reducing the Costs of Doing Business in Bangladesh” (2003). 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. Enabling Environment Goal 1 – Better Infrastructure Bangladesh needs to increase investments in its infrastructure both in power and communications.
Even with interests around the world falling sharply. from low salaries for civil servants to 9 inadequate operations and maintenance. Source: The Heritage Foundation16 More effective tax collection is also a key enabling goal. 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. It is also a reflection of a number of companies unwilling to access the stock market as a form of cheaper financing. This is partly a reflection of very wide margins/spreads adopted by banks between deposit and lending rates.9 on economic development and a more dynamic private sector. The regulatory authorities need to ensure better corporate governance which should include more transparent.AT Capital Research in government and the administrative bottlenecks that are an ongoing constraint 8. credible and reliable accounts from Bangladeshi companies. both in capital markets and banking. Bangladesh Bank has been pressuring commercial banks to narrow their spreads which is a positive step. many companies still have to pay 16%+ funding costs which make a number of investment proposals unviable. A more developed financial system. 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.” 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. Bangladesh also needs to develop a corporate bond market which in turn requires greater development and liquidity of the government bond market. will be an important foundation for more rapid growth 15 . 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.
most notably in its emergence as a major global textile and RMG exporter. to corporate and regulatory governance reforms. It’s achievements over the past 37 years has been impressive. It was notably described by US Secretary of State Henry Kissinger as “an international basket case”. electricians. plumbers etc that might underpin a significant expansion in Manpower exports. More broadly. Conclusions: Investment Opportunities Bangladesh emerged from the 1971 war of independence a free nation. despite political instability and natural disasters is a testament to a dynamic and entrepreneurial private sector.” 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.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. 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. 9 especially foreigners. As the 2007 WB Report highlighted “The fractiousness of Bangladeshi politics contributes to political uncertainty and heightens perceptions of economic risks among investors. 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. especially vocational training and English language. by the lower courts in particular. capital markets and law and order. the low volatility and consistency of growth in the past decade. but one whose economy and infrastructure was shattered. 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. and the indifference or incapacity of the police in enforcing law and order. 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. We outlined a number of enabling goals the government needs to deliver on from substantial investment in infrastructure. The very favourable demographics in Bangladesh with its young and growing population contrast with Europe. Russia. China and Japan which will suffer from a rapidly ageing population. 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. key If Bangladesh wants to become the next Asian Tiger.” Enabling Environment Goal 5 – Education Improved education. 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. English Language and other specific areas such as nurses. (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.
Assuming FDI of USD 700mn in 2008. Energy.gov/library/publications/the-world-factbook/index. M. Official website of Globalis available at globalis. 2008. reducing regulatory and tax disincentives for foreign investors. .htm. Agriculture.gvu. References 1. Bangladesh has three key attractions for global investors and multinationals: a large base of low-cost labour. Available at http://www2.epu. Light Engineering.cia. we provide more detailed analysis on the key sectors in Bangladesh including Capital Markets. 3. 7.pdf Mohammad.AT Capital Research Report on the costs of doing business in Bangladesh versus other Asian Countries). Paper presented at the Malaysian Business Council. DB Research. (1991). Textiles. Outsourcing. Non-Energy Infrastructure. Hsieh Weng-Jen.jpm. a large domestic market of 150mn people. “Bangladesh Vision 2021”.html on April 7. this suggests Bangladesh should aim for FDI of USD 7bn by 2015. (2005) "The Determinants of Foreign Direct Investment in South East Asian Transition Countries". B. In the next section of this report we list what we believe are the most compelling investment opportunities for global investors.com/PROD/DBR_INTERNET_ENPROD/PROD0000000000213377. Prepared under the initiative of NAGORIK Committee 2006. This will require among other things a more pro-active FDI strategy such as marketing “Brand Bangladesh more effectively overseas. Available at www. Biotechnology. Pharmaceuticals.unu. (2007). “BRICs and Beyond”. “Understanding Vietnam: a look beyond facts and figures”. (2007). In the remainder of document. Tourism and Education. (2007). 4.my/New%20Folder/publication/the%20way%20forwar d.dbresearch. Central Intelligence Agency-the World Factbook available at https://www.goldmansachs. Goldman Sachs Global Economics Group. “The Way Forward (Vision 2020)”. Healthcare. Available at http://www.com/ideas/brics/BRICs-andBeyond. and nearly 3bn people in the Asian region that it has market access to. (2007). We believe it is credible for Bangladesh to emulate Vietnam’s FDI performance of a tenfold increase over seven years.html. Paper presented at National Chung Kung University.edu. JP Morgan Research. Dhaka: 17 2. and encouraging the private sector and capital markets to develop specific investment ideas foreign companies and funds can actually invest in. Banks. “Ho Chi Minh Trail to Mexico-Launching the JPMorgan Frontier Five and EM8”. 5. Centre for Policy Dialogue (CPD). 8. Manpower Exports. Heavy Engineering . 6.
The World Bank Office. "Private Equity's New Challenge". IRIS. University of Maryland. N.gov/bd/files/jobs_subsectors. & Schneider.AT Capital Research Centre for Policy Dialogue 9. Available at www.pdf. 18 . 10. 11.. “Reducing the Costs of Doing Business in Bangladesh”.doi. World Bank. “Doing Business 2008”. “Bangladesh: Strategy for Sustained Growth”. Available at www. Fitch Ratings Report on Vietnam. Bangladesh Development Series Paper No. (2007). McKinsey Quarterly. W.gov/oia/procurement/reports/2008%20World%20Bank%20EoDB %20Rankings. 15. Harper. Official website of The Heritage Foundation at www. C. Wikipedia search: “Diaspora”.heritage. (February 2008) 13. Bangladesh Enterprise Institute. A.org. (2004). (2005). (2003). 16. 12. Prepared for UNDP Bangladesh. August 2004. 18.pdf 14. “Report on Identification of Employment Oriented Export Sectors”. Dhaka. (2008).usaid.
power (SPP) generation is a key driver in economic development.com 19 . and we anticipate consolidation in the industry. Chittagong and Sylhet. This will give rise to many opportunities in a sector that has yet to fully penetrate the wider economy. markets. Targeting NRBs should be a priority. Bangladesh can develop its comparative advantage given increasing labor costs in the traditional outsourcing/offshoring destinations such as India and China. Asian Tiger Capital Partners Syeed Khan Partner +(8801) 727261267 syeed. Power Purchase Agreements (PPA) with the government mitigates many external risks. Investment in weaving mills and dyeing-finishing mills There is a large demand-supply gap in fabrics and a shortage of weaving mills. Key to the capitalizing on global outsourcing and manpower exports. mills dyeingmills. Coupled with a coordinated national branding and marketing effort. Investment in private commercial banks To comply with Basel II many banks will struggle to meet capital requirements. With significant energy needs in Bangladesh. is targeted training. With medical tourism a growing sector. Only Dhaka benefits from high end hotels. it also reduces wastage and improves margins. This also provides opportunities for LDC based pharmaceutical companies to develop international revenue streams after the TRIPs patent protection lapses in 2016. Investment in pharmaceutical plants with certification for developed markets. Investment in luxury hotels in Cox’s Bazar. benefiting from geographic proximity to tourist destinations of South and South East Asia. both low end and high end. Bangladesh could capitalize on this global shift. 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. promoting tourism provides significant investment opportunities.Our Top Investment Ideas AT Capital Research Our Top Investment Ideas Investment in Independent Power Producers (IPP) and Small Power Plants (SPP). This will allow the development of a higher value-added agriculture export market. Investment in Vocational Training Colleges.khan@at-capital. 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. Investment in modern technology. For the domestic market. Investment in country wide cold storage facilities.
the aggregate FDI inflow to Bangladesh was USD 5. and services. This suggests a target level for Bangladesh of USD 7bn annual FDI by 2015.2% in FY04 and a high of 3.3% due mostly to the large inflow of FDI to the telecommunications sector. With a more focused FDI strategy. Malaysian Azimat Corporation (USD 900mn). For a developing country like Bangladesh. United Arab Emirates based Abu Dhabi Group (USD 2bn). UKbased Global Oil and Energy Ltd (USD 2. There are three broad sectors of FDI inflows: infrastructure. As a ratio of gross investment.4% in FY98 and 0. and Contech Ltd (USD 900mn). Bangladesh has a number of positive attractions like low wage rate and steady macroeconomic growth.51bn. it rose to 1.5% in FY04. Saif Noman Khan saif.9bn). the balance of payments and facilitate knowledge transfer into the country. we believe it is realistic for Bangladesh to replicate the Vietnam experience of a tenfold increase in FDI over the 2000-2007 period. Asian Tiger Capital Partners Md.AT Capital Research FDI Foreign Direct Investment (FDI) Over the last decade. Some very large FDI proposals are currently pending with the government. In FY05. FDI as a share of GDP in Bangladesh varied between 1. Bangladesh has a bright future in terms of attracting a greater amount of FDI provided improvements are initiated in areas like bureaucratic processes.2% in FY98. FDI varied between a low of 1. Over the 1998-2007 period. increasing the level of FDI is likely to have a significant positive impact on export growth. more effective marketing of “Brand Bangladesh” as well as the development of infrastructure.com 20 . The shares of the three sectors are 46%. These include investment proposals made by Indian conglomerate Tata (USD 3bn). 27% and 27% respectively. that can successfully attract the attention of foreign investors from both developed and developing countries.noman@at-capital. manufacturing.
4% in FY98 and 0. the share rose to 1. 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. needs significant institutional reforms. liberalization of the investment regime. In FY05. but also the wider economy and domestic enterprises. at least theoretically. not only to the investee 1. FDI is allowed 1. nuclear energy. FDI also has a positive impact on a country’s foreign exchange reserves 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. 1980’ in an attempt to attract FDI. which is key to attracting higher FDI inflows. and sustained socio-political 1 stability. a crucial year of policy change. both domestic and foreign. and security printing and minting. FDI however played a minor role in the economy of Bangladesh until 1980. and their ability to adjust and respond to the changing pattern and dynamics of international markets. FDI and export opportunities FDI impact on import substituting industries Share of FDI in domestic GDP 21 .2% in FY98. and above all the interest of foreign investors in the energy and telecommunication sectors.5% in FY04. forestry in the reserved forest area. However. opening up of infrastructure and services to the private sector. 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. current account convertibility. FDI in Bangladesh: Background Several underlying factors have contributed to increasing the FDI inflow in Bangladesh. it also transfers a considerable amount of technical and managerial knowledge and skills.3 FY04 and a high of 3. radically reduced levels of control. the FDI/GDP ratio varied between 1. Bangladesh such as trade and exchange liberalization. Except five industries. perceived improvement in investment climate. FDI varied between a low of 1. reserves. FDI in Bangladesh still constitutes a low share of GDP Over the last decade. better provision of essential infrastructure. effective implementation of these measures.2% in 1. As a ratio of gross investment. The Government of Bangladesh (GOB) enacted the ‘Foreign Investment Promotion and Protection Act.2 businesses. FDI not only brings investment capital.3% due mostly to the large inflow of FDI to the telecommunications sector (Figure 1). efficiency of distribution channels. emphasis on private sector led development. which are reserved for the public sector: defense equipment and machinery.AT Capital Research Why FDI for Bangladesh Foreign direct investment (FDI) is a key driver of a developing country’s economic development.2 in every sector of the economy.2.
89bn (16%) (Figure 3).718 5 31 Source: Bangladesh Bank Source: Bangladesh Bank After a relatively high inflow in FY98. Of this. In FY05. over the 10-year period (1998-2007). the outward 1 remittances constituted 65% of the total inflow.986 266 1.634 91 890 569 2.51bn (Figure 2). when FDI and debt inflows are seen in the context of associated remittances on account of dividend/profit repatriation. However. there was a declining trend in FDI inflow up to FY04 with the exception of FY01. reinvested earnings amounted to USD 1. there was an sharp jump in FDI inflows to USD 804mn. and intra-company loans constituted USD 0. new capital investment was USD 2.51bn From 1998 to 2007.AT Capital Research Trend of FDI flow in Bangladesh Source: Bangladesh Bank 5.510 403 2. 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%). disinvestments and debt amortization.99bn (54%). 22 . the aggregate FDI inflows to Bangladesh were USD 5.
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.AT Capital Research Sector distribution of FDI inflows There are three broad sectors of FDI inflows: infrastructure. manufacturing.4%) out of a total of USD 1.510 Source: Bangladesh Bank last Figure 6 illustrates the total FDI inflow in Bangladesh over the last 11 years from world. The third group is the services sector where FDI inflows amounted to USD 1.5%). Within manufacturing.91bn 1. gas and oil.5%).9bn (16.349 909 440 5. and services. 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). there was rapid growth in FDI inflow to the telecommunication sector in FY05 which continued till FY07. 23 .3 (16. gas and oil. In infrastructure sector. services The shares of the three sectors are 46%. 27% and 27% respectively (Figure 4). gas and oil was the main recipient of FDI amounting to USD 1. On the other hand.374 903 142 253 76 1.241 581 965 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.24bn (22. Figure 4: Sector split of FDI f rom 1998 to 2007 27% 46% 27% Service Manufacturing Infrastructure Source: Bangladesh Bank 1998Over the 1998-2007 periods.37bn. textiles. 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. 1997 to 2007 from different countries across the world Figure 6 shows that near about 90% of annual FDI has been received from only 11 countries.35bn during the period out of which trade and commerce was the highest recipient with USD 0. the most significant recipient was the textiles sector amounting to USD 0.287 1.
Malaysian Azimat Corporation (USD 4 900mn).2 24.5 54.6 350.8 0.9 13.5 97.7 Source: Bangladesh Bank This leaves scope for exploring new FDI inflow destinations for Bangladesh.8 45.6 157.9 29.1 0.7 30.1 5.4 33.0 USA 67.5 22.5 152.9 29.0 845.3 18.2 173.0 39.5 24. oil.4 11. United Arab Emirates-based Abu Dhabi Group (USD 2bn).4 53.4 21.0 0.7 161.5 14. and removing inefficient 1 bureaucratic procedures.0 10.1 20.3 0.5 77.1 62. UKbased Global Oil and Energy Ltd (USD 2. Though in recent times we can see increased flow of FDI from the Middle East there remains scope for further FDI from that region.1 46.9 354.2 Norway 0. simplifying regulatory practices.6 25. power. therefore.6 0. parks: Setting up of industrial parks The development of new industrial parks can help in creating a favorable environment of foreign investment.9 55.1 11. The country needs to accelerate the adoption of investmentfriendly policies. for Bangladesh to ensure an investment climate that can attract more FDI flows to the country. 1998-2007* (USD mn) FDI inflow by source country Country 1997 1998 1999 2000 Denmark 0.0 Hong Kong-China 21.6 32. It is important.6 2007 10.7 3.0 17.1 0.1 22.1 111.2 0.1 578.0 0.0 23. they would be operating in a favourable regulatory environment. Bangladesh.0 123.9 40. considering their share 1.3 0.1 1.6 232. Macro factors favoring FDI in Bangladesh: FDI: Way forward for Bangladesh 24 .2 2004 18.5 744.9 187.6 16.0 328.8 Japan 51. Though both UK and USA both has been large contributors to the FDI inflow.3 Others 135. and Contech Ltd (USD 900mn).0 59.7 35.1 240.5 63.5 13.5 Egypt 0.8 460.AT Capital Research Figure 6: Country-wise FDI inflow into Bangladesh.6 69.9 3.5 2002 3.8 19.4 12.8 792. To be successful.5 172. These investment proposals include Indian conglomerate Tata (USD 3bn).7 17.3 576.0 61.0 67.1 53.8 2. FY data for 2006 & 2007 2001 4.7 83.9 6.8 30.7 77.5 29.3 2006 20.5 40.0 Total 575.8 92.3 50.9 35.2 of FDI in other developing economies they might be a good source to tap further.8 115. and they can enjoy investment incentives that are competitive with those offered by other countries in the region and the developing world.0 1.6 13. gas and manufacturing sectors have been pending with the government recently.8 0.9 101.6 2.6 70.1 100.0 UK 255.9 South Korea 34. 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.5 1. Large FDI pipeline multi bntiAround half a dozen multi-bn-dollar proposals of foreign direct investment (FDI) in infrastructure.9 52.9 66.5 16.3 48.4 28.0 11. Simplified custom clearance procedures along with improvement in physical facilities and reforms in the labor management system need to be initiated.7 0.1 123.5 Malaysia 6.8 91.4 43.0 0.5 309.4 UAE 0.0 0.9bn).6 305.5 12.3 15.4 2005 18.4 26. Increased FDI is likely to bring a significant net benefit to Bangladesh The most important positive outcomes include integrating the domestic economy with the global economy and in the area of technology and skill transfer.2 1.0 18.0 Singapore 2.9 11.8 141.0 0.4 31. 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.4 26. The recent flow of FDI from Egypt reflects their investment in the telecom sector of Bangladesh.9 30.7 53.0 0.3 2003 14.0 0.0 5. Bangladesh needs to undertake effective promotion measures to convince potential foreign investors that they can earn significant returns.6 *Calendar year data for 1997-2005.0 2.
& Narayan.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. M. but also to identify potential investors in other countries and undertake appropriate measures to attract them to invest in the country. we believe it is realistic for Bangladesh to replicate the Vietnam experience of a tenfold increase in FDI from 2001 to 2007. http://www. I. 25 . In this respect. References 1. Bangladesh has a bright future in terms of attracting a greater amount of FDI provided improvements are initiated in areas like bureaucratic processes. A. “Foreign Direct Investment: Impact on Sectoral growth in Bangladesh”. G.bd/2007/06/14/mega-fdi-plans-hang-inlimbo/ Accessed on March 15. Bangladesh Bank Policy Note PN0805. improved bilateral relations with potential investor countries can act as a catalyst to increasing FDI inflows to Bangladesh. With a more focused FDI strategy. Robin. Trade Liberalization and Economic Growth: Empirical Evidence from South Asia and Implications for Bangladesh”. Mortaza. D..com. Bangladesh Bank Working Paper Series: WP 0712. Bangladesh Bank Policy Note PN0704. Hossain. C. 3. A. Economic and commercial diplomacy: Strengthening economic and commercial diplomacy diplomacy is a key factor in attracting FDI in the present world characterized by rapid globalization and increasing competition. it is important not only to improve relations with countries that have already invested in Bangladesh. Moreover. “Impact of Foreign Direct Investment on Bangladesh's Balance of Payments: Some Policy Implication”. more effective marketing of “Brand Bangladesh” as well as the development of infrastructure. (2006).bangladeshnews. 2. (2007). 2008. (2007). This suggests a target level for Bangladesh of USD 6-7bn annual FDI by 2015. The private sector may also be further encouraged to set up new EPZs like the Korea EPZ. “Foreign Direct Investment. 4. M.
AT Capital Research Markets Capital 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
arketThe Bangladesh stock market- 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 19% about 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. dominate. Among listed companies, banks 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
2004Figure 2: DSE versus MSCI, 2004-2007 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.
AprilFi gure 4: Stock market returns in selected c ountries, April-July 2007 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. The 2007 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
disaster15. the number of enterprises to be privatized increased to 118.Sidr in 2007. electoral Stocks have shown resilience to both electoral risk and natural disasters.000 DGEN 2. Their equity growth was primarily driven by privatization and the liberalization of foreign investment.900 2. There were 108 public sector enterprises (out of a total of 128) initially marked for privatization through public offering. Fi gure 5: Market performance during the natural disaster-Sidr on November 15 .100 3. pharmaceutical 7 and cement sectors received most of the portfolio investment. outright auctions. According to DSE sources. The relatively stable political environment is another factor behind the rise in portfolio investment in the country's stock market by merchant banks. 2007 3. even in the face of recent devastating flood and hurricane. In addition.750 2.800 2. Fi gure 6 : Market performance during the 8th National Parliament Election on October 01. and strategic sales to investors in 1994. 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. The injection of substantial public sector listings to the stock market has greatly transformed the sector distribution. stocks were unaffected on the parliament election in 2001 (see below).850 2.700 Sid r Source: Dhaka Stock Exchange 01.050 3. power. the banking. The market changed from being textile-dominated (22 % of market capitalization in June 1992) to one that revolves around three to ten large29 . For example. the market maintained its upward momentum.150 3. Historically. By 1996. energy. gas and pharmaceuticals. power.AT Capital Research oriented markets and always look for new quality issues in sectors like telecoms. the market showed resilience on various political/electoral scenarios.950 2. The Bangladesh stock market can be compared to 2 Pakistan’s in the mid 90s by market cap/GDP. Market Development Lessons can be learnt on the development of Bangladesh’s capital markets from the experience of Pakistan.
84bn Government privatization of State Owned Enterprises (SOEs) combined 84bn with a large pipeline of IPOs especially from telecom sector makes us optimistic about future growth of the capital market. and bond issuance rules to govern the market and introduce transparency.7 1. Bangladesh The Bangladesh Capital Market . This traditional system of IPO pricing significantly undervalues the company and is one reason why companies are reluctant to go public.short term outlook: IPOs Last year 14 new companies have been listed on the DSE through IPOs. In the 1 quarter of 2008. Among them.two other profitable State Owned Enterprises (SOEs) from the fuel and power sector. Over the past five years.8 2006 310 7 4.7 4. settlements systems.5 3. 14 companies have been listed in DSE 2003 267 14 1. public issue rules.3 2005 286 17 3. Source: DSE Website3 To overcome the problem of traditional IPO system. 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. None of these top 10 stocks comes from the textile sector.0 30 . and regulation. In most cases. In Bangladesh. The Bangladesh Stock market is small with 368 securities and market cap of USD 11. 11.2 2004 256 3 3. 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. We believe.8 3.8 2007 368 14 10. the capital market of Bangladesh is now poised to achieve a higher degree of stability. the government floated Meghna and Jamuna .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. Premier Bank (BDT 844mn) and International Leasing and Financial Services (BDT112. the offer price is determined by the NAV per share. the pace of privatization is increasing In 2006. have developed new trading rules.6 19. the SEC is about to introduce a new system of IPO called “Book-Building It has been argued that the traditional IPO system has a BookBook Building”. the price will be determined by the market and the issuing company is expected to get a fair price for their stock offering. the Asian Development Bank (ADB).5mn) were the largest. SEC is about to introduce a new system called “Book-building” As part of this development initiative. Under this new book building method. increasing.84bn. maturity. along with the Securities and Exchange Commission. major drawback.
AT Capital Research Expected Expected future entrants to the market The process of divestment of the 3 remaining state-owned banks has already begun. having never annulled treaties. Pakistan has a market cap to GDP ratio of 58% whereas it was around 15. The national airline (“Biman”) is expected to float 49% of its share to the public in December 2008. one of the lowest in world.6% in 2 1998. Government investment regulations are firmly pro-business and pro-FDI. participation of institutions is very low. For Bangladesh. long The Bangladesh Capital Market: long term prospect market capitalization The market capitalization (of DSE) to GDP ratio is only 19%. new companies especially MNC and giant Telco’s listing will help the capital market to grow. the 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. or agreements with the private sector or foreign investors. 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.9bn into the market. investors. The market is dominated by local retail investors Except mutual funds. Remaining large Telco’s are expected to come to the market in the next few years. and have benefited from impressive capital gains. concessions. Investment opportunities in the Bangladesh Capital Market: The Bangladesh stock market provides significant opportunities both for local and foreign investors. This in turn should bolster their confidence. 31 . Foreign-owned Telecom giants such as Grameenphone are expected to be IPOed in 2008. Bangladesh has been ranked 17th in investor protection ranking by the World Bank. increasing FPI. 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. We believe that the growth of the Bangladesh institutional market will occur more rapidly. 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. foreign investors from Europe and the US in 2007 injected BDT 8. At least 8 large profitable SOEs mainly from the power and energy sectors expected to be listed. According to Dhaka Stock Exchange (DSE) statistics.
41 1. regionally Source: Deutsche Bank report1 • Expected listing of telecom companies: One aspect of growing the number of listing publicly listed stocks is fiscal incentives.66 0.01 0. • International Diversification Opportunities: The Bangladesh stock market is dominated by local retail investors.37 0. and is thus less correlated with the rest of the world than other EM equity markets.00 -0.05 CSE HANG SENG 0.59 0.16 -0.00 0. One aspect of contagion is that when large institutional investors such as hedge funds lose money in one market.23 0. if big hedge funds incur losses in US equities.31 0.80 0.25 0.09 -0.59 1.46 1.94 -0.00 NIKKIE 0.91 -0.00 S&P CNX NIFTY -0. So for example.62 -0.27 1. Figure 9: 12M risk and return.29 0. they are forced to sell other markets they hold to enhance their liquidity and potentially meet margin calls.27 1.91 0.00 1. For example. 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.00 STI 0. Bangladesh’s risk-return trade-off is very attractive.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.87 -0.23 0.30 0. the country’s largest mobile phone operator is expected to be listed in this year with the other major Telcos set to follow.40 1.00 0.AT Capital Research • High return with low risk: Among emerging markets. the DSE’s return in 2007 of 81.69 0. Pakistan.09 0.00 FTSE DGEN 100 0. With less than 20% volatility.75 0. Grameenphone.84 0.68 0.5% clearly exceeds the India.95 1.39 0. they might try to recover the loss by selling in other markets 32 .00 1.15 -0.89 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. Hong Kong markets.57 0.
Chou. 5. Financial Express.dsebd.org/Documents/Books/Rising_to_the_Challenge/Pakistan/3-pakcap. 6.pdf.bloomberg. “Foreign portfolio investment encouraging in 2007”. For example. C. Available at www. Official website of Securities and Exchange Commission. analysts. (2008). 4. Accessed on 27 July 2007. Here in Bangladesh. Official website of Dhaka Stock Exchange at www.AT Capital Research like Europe or even EM. the largest telecoms company is expected to be listed in this year. Primary sources: brokers. the market remains uncorrelated with the rest of the world. as no such hedge fund or big institutional investors are present.75bn.secbd. http://www. Retrieved from the website of Equity Partners Limited at http://www. (2008).pdf. This is an attractive reason for foreign investors to buy Bangladeshi equities in terms of diversifying their portfolio.com/guest_pdf_files/07/News. and the author’s personal experience with Dhaka Stock Exchange. 8.com. 7. Bangladesh at www. Deutsche Bank. • Pre-IPO placement: As new companies are coming to the market. Deutsche Bank AG/Hong Kong. It is has been reported that the value of Grameenphone is approximately USD 3. Accessed on 25 March 2008.adb.org. 33 . Grameenphone.org.eplbangladesh. “Reforming Pakistan’s Capital Market”. They may look for private placement opportunities. “Bangladesh Primer: Introduction to the Market”.doingbusiness. 2. there is an Preopportunity for pre-IPO placements. References: 1. Bloomberg at www. 3.org/ExploreEconomies/?economyid=17.
Fuelled by high trade and remittance growth. Recently. Shahidul Islam. money transfer services and loan products. Additionally. Government owned banks are losing their market share while foreign commercial banks’ (FCBs) share is almost static. there has been a surge among FCBs and PCBs in offering technology driven products like ATMs. CFA shahid. NCBs can be attractive investment targets for investors. There are 48 banks in Bangladesh. With their superior customer service and product capabilities. roughly 42% of the country’s GDP. the commercial banking sector is expected to maintain its rapid growth rate. the fast growing PCBs are expected to resort to tier II capital. Large new investments in the form of preferred stocks and subordinated debt are expected. There have been some improvements in credit risk management of the banks in Bangladesh. Despite their late entry. consolidation is anticipated to meet Basel II requirements. nationalized commercial banks (NCBs) collectively have negative capital of BDT 31bn. private commercial banks (PCBs) have the largest and fastest growing market share. By comparison. with many small players in the market.com 34 . To meet capital requirements under Basel II. this ratio is more than 57% in Pakistan. Classified loans as a % of total portfolio has decreased from 41% in 1999 to 14% in 2007. credit cards and debit cards. FCBs and PCBs are expected to benefit from market growth. Banks in Bangladesh mostly offer traditional commercial banking products like deposits. trade finance. With their country-wide branch networks with access to large and varied customer bases.AT Capital Research Banking Banking Asian Tiger Capital Partners Though the financial sector is dominated by banks. Privatization of the NCBs will create large investment opportunities. The banking system asset base is USD 30 bn. Due to recurring losses.islam@at-capital. The government is likely to gradually undertake privatization of NCBs. the vast majority of the people do not have access to banking services.
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. They provide significant opportunities for operational improvements. These banks have 6. compared to 57% in Pakistan . a Saudi prince.295 49 155 Rural branches 2. whereas stock market capitalization is 4 USD 12bn. 5 government owned specialized banks (SBs). leveraging client bases and branch networks. many of them may have to issue preferred stock and subordinated debts. Sustained economic growth of 5%-6% and high growth of trade and remittance in the last 12 years has helped grow the banking sector. The state owned NCBs and SBs have been losing their market share every year since the private banks started operations in the early 80s.5 bn equity injections are required as banks need to raise equity or tier II capital to abide by Basel II norms. The financial sector is dominated by banks As the capital market is relatively underdeveloped. reduction of nonperforming loans and improved service provision. Additionally. All the PCBs. 30 PCBs and 9 4 FCBs. the deal aborted with the buyer. cross selling of products and cost synergies. opportunity. With the fourth largest branch network covering almost the entire country.576 branches. Basel II could be a driver for consolidation in the sector with benefits beyond simply shoring up balance sheets.146 490 0 1. they need additional capital to expand their businesses. The high growth of PCBs and privatization of NCBs will create significant investment opportunities in the sector. The 48 banks include 4 NCBs. new bank licenses have not been issued by current and previous regimes. Non Performing Loans (NPL) have been a nagging problem for NCBs and SBs. Rupali Bank remains an acquisition opportunity The USD 450mn privatization of Rupali Bank. to raise expansion capital. Bangladesh. a national commercial bank (NCB).839 Source: Bangladesh Bank wesite4 Private commercial banks are increasing their market share 35 . was almost finalized recently. banks play a strong role in financial intermediation.203 Total 2.238 1. Presently there are 48 banks operating in Bangladesh The number has remained unchanged in the last 8 years. With unparalleled country wide branch networks. There still remains significant scope for further growth. Total banking system assets are approximately USD 30bn. Privatization of other NCBs The government has said it will privatize the other NCBs. Capitalization of PCBs Though most of the private commercial banks seem to be well capitalized to support their existing asset base. USD 1. In the past there have been concerns about overall lending practices in the NCBs. Despite keen interest from local investors. through rationalization. are listed and are expected to undertake rights issues. Consolidation in the banking sector. a restructured and rationalized Rupali Bank under modern management and technology could provide a significant investment opportunity. However. NCBs can be attractive investment targets for investors.AT Capital Research banks. There are many smaller private commercial banks (PCB) that fall short of Basel II capital requirements. NCBs and SBs used to lend in the ‘priority’ sectors without a systemized and rigorous assessment of creditworthiness of the obligors. to meet the capital requirement under Basel II Tier 2 requirements. pulling out. sector. except two (Bangladesh Commerce Bank Limited and First Security Bank Limited).737 3. The asset base 6 is approximately 42% of GDP.
PCBs have been a real success story in Bangladesh. Bank deposits and credits have been growing 15-16% annually in recent years. 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. Their operations are concentrated in major urban areas like Dhaka and Chittagong. They account for roughly half of Bangladesh’s stock market capitalization. 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 15years. past. The sector is not concentrated. with Standard Chartered being the most dominant. Some regional and global players like Wachovia. They account for more than 2/3 bank branches but their share of assets and deposits are now less than 35%.5% in 2006. 4 Sonali is the largest NCB and largest bank in the country.9 6. While the market share of FCBs remains almost unchanged.8% of total assets employed.1 1. As corporate banking has become increasingly competitive. retail banking business is increasing. particularly in high-end retail banking. Non-interest income in 2005 was 1. maintaining nostro accounts and executing fund transfer instructions). They have adopted new technology. This is due to expansion in trade and remittances. Agrani. FCBs largely target large corporates and local operations of multinational companies. which has come down to 14% in 2007. Overall. Non-interest income accounts for a larger share of total income 2 among foreign banks than local banks.5% of assets respectively. There has also been high growth in non-funded activities. 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. Despite a tough business 7 environment in 2007. classified loans were 41% of total loans in 1999. 26. This figure was 26.0 36 . The PCBs 2 and FCBs had classified loans of 6. Almost all the new bank branches in the country in recent years were opened by private commercial banks. The banking sector has made great progress in reducing classified loans. Foreign commercial banks are less active in Bangladesh than in other countries in the region. some banks are targeting SMEs segments and increasing their focus on retail banking. Banks are also taking exposure to the microfinance sector through wholesale financing to micro finance institutions (MFIs). which increased to 2. the main sources of non-funded income for the banks.11% and 1. Though corporate banking has been the major growth area for most of the FCBs and PCBs. acting as the counterparty in corporate and interbank foreign exchange transactions and serving as correspondent banks for local banks are major business for FCBs. Citi.8% respectively for NCBs and SBs. PCBs have shown 40% growth in operating profit in the year. Four NCBs (Sonali. Janata and Rupali) used to account for more than 70% of banking assets and deposits 20 years ago. that of NCBs and SBs has fallen sharply in the recent years. Some of them have been very successful and are enjoying sustained growth of around 25% annually. gained efficiency and continue to grow fast.0 14.9% and 31. with no single PCB enjoying 4 more than 10% of the market share. HSBC and Standard Chartered are the major foreign banks operating in Bangladesh.5 31. The banking industry in the country is far less concentrated than it has been in the past.AT Capital Research rapidly at the expense of the government owned banks.
5bn. the weighted average interest rate spread was 6. like LC fees and guarantee fees. 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. the weighted average interest rate margin has shrunk slightly over the years. the fees and foreign exchange spreads in Bangladesh are still higher than those in other countries in the region. Typical banking fees.1 118. state owned banks are lagging in adoption of new technology and 2 associated efficiencies . PCBs BDT 84. 91bp higher than the 5. Some banks are making extra ordinary profits while others are failing. debit cards increased by 112% and transaction through ATMs increased by 114%. Efficiency and Spread Shrinkage According to BB studies.4 854.0 Capitalization Most of the banks belonging to the FCB and PCB categories meet the capital adequacy requirements.1 Capital -30. the current interest rate spread is still high in comparison to other countries.16% in Bangladesh.5 125. Internet banking and tele-banking services are also growing fast. Competition. and improved risk management have facilitated greater efficiency. According to the Financial Sector Review by BB. During the same period.597. Adoption of Modern Technology technologyThe rapid adoption of modern and innovative technology-driven products and trend. However.2% of bank loans. In September 2007. the monthly volume of credit card transactions grew by 124%. the NCBs and SBs suffer from capital shortfalls and some have negative capital. not in the branch where the account was opened) is also expanding rapidly.6bn. the money loan court. the total capital of banks stood at BDT 100bn in June 2007 representing 6. The capital of the banks is in the form of equity.8bn. 37 . However. As per Bangladesh Bank (BB). However.9bn. statutory reserves. paid up capital.9 84.25% spread in 2 India . and general provisions. Interest rate and FX spreads are still higher than those in neighboring countries Spreads are shrinking slowly while volumes are growing fast. Customers’ use of online banking (the ability of the customers to execute transactions in any of the bank’s branches. 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. are shrinking fast.5 31. Figure 3: Outstanding loans and capital position of banks as of June 30.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. ATM services are gaining popularity very fast. services by the commercial banks is an encouraging trend. and FCBs BDT 31. Most of the PCBs and all the FCBs have adequate capital.8 100.6 14. NCBs are suffering from negative capital due to their sustained operating losses.1 1. between June and December 2007. transaction through POS and SWIFT grew by 111% and 61% respectively. The development of a credit information bureau. 2007 (BDT bn) Loans NCBs PCBs FCBs SBs Total 499. While FCBs and PCBs are introducing technology driven products in Bangladesh. Capital position of NCBs stood at BDT (-) 30. We believe corporate governance and management effectiveness make the bulk of the difference. Tier II capital in the form of preferred stock or subordinated 2 debts are almost non-existent. SBs BDT 14.
However regulatory vigilance needs to be increased to avoid the recurrence of events like the failure of Oriental Bank. BB has taken some corporate governance initiatives recently. The number of members in the board of directors has been restricted to thirteen. asset quality. BB has also promoted and implemented Anti-Money Laundering rules. These include strengthening a bank’s capital base and making them better prepared for adopting Basel II standards. Currently banks need to maintain 9% capital on risk weighted assets. As tier II capital is almost non-existent. corporate governance and legal issues recently. 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. 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. Professionalism in management is more evident in banking than any other sector in the country. BB has been successful at improving corporate governance in banks. Bank directors are no longer allowed to get involved in operational decisions of the banks. the banks will be required to maintain capital to riskweighted assets ratio of 10% as a minimum with core capital not less than 5%. bank capital is mainly in the form of equity. the board and CEO 38 . In addition to its own ratings based on capital adequacy. Basel II standards will be implemented from early 2009. BB has also made the CEO responsible for implementing the policies taken by the board and looking after all administration. Lending to directors directly as well as the companies they own has been stopped. has improved significantly in recent years. management efficiency and liquidity. In the near future. The role of the CEO and role of chairman of the board have also been defined. The overall health of the banking sector. especially capital adequacy and asset quality. BB has also directed the banks to establish audit committees formed by the board of directors. As per BB directives. BB has issued a number of prudential guidelines regarding capital adequacy.AT Capital Research Regulatory Environment BB as a regulator has been fairly successful. Financial disclosure standards have improved. Several other reforms have also been introduced by BB to ensure good governance in all institutions 4 operating in the financial sector. BB has defined the role of chairman. BB has made it mandatory for the banks to be rated by independent rating agencies. Corporate Governance There has been significant improvement of corporate governance in banks in recent years. BB has also made publication and public disclosure of bank financial statements mandatory. The paid up capital and the statutory reserve of all bank companies has been raised to a minimum floor of BDT 2bn.
In addition. b) Internal Control & Compliance. Most of the banks did not have market risk management practices. BB circulated "Guidelines on Managing Core Risks" to the banks for complying with five core risk management in banks. banks are expected to increase their diversification towards capital market related activities. d) Foreign Exchange Risk Management. As the economy modernizes. Overnight interbank borrowing rates sometimes shoot up to 20%. As a part of their global practice. the 4 trading volume of government treasury bills/bonds is still low. some used to take large speculative FX positions 7/8 years ago which triggered big losses and depleted their capital. Banking services are also expected to spread into rural areas. It is mandatory for all commercial banks to use a due diligence template 2 called Lending Risk Analysis (LRA). In 2003. As a result. Subsequently the interbank repo market has also evolved. tremendous growth and investment opportunities in financial services. we believe there are country. BB has introduced FX exposure related guidelines to the banks. and e) Money Laundering Risk Management. However. As mentioned earlier. due to rural fewer business opportunities. classified loans as % of the total loan portfolio have fallen from 41% in 1999 to 14% in 2007. Risk management Banks lacked professional credit risk management capabilities in the past. 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. FCBs and PCBs were not convinced on the 39 . As a result. commercial banks need to invest 13% of their liabilities in government treasury bills. market liquidity and overnight interbank rates fluctuate abruptly. banks need to depend on the call money market and repo window for liquidity management. BB has adopted several initiatives to improve the risk management practices of the commercial banks. The interbank term lending market is thin. In the past. c) Asset & Liability Management. The repo facility with the central bank was introduced in 2002. 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. Risk grading and risk-based pricing is almost an alien concept among local banks. Due to the absence of an interbank money market and a secondary market of government treasury bills. Outlook The sector is expected to maintain high growth and the branch networks are expected to spread towards rural areas fast access As access to financial services is still low in the country. Overall risk management of the banks in Bangladesh improved significantly in the last few years. In addition. the banking sector may grow even faster. Therefore. Traditionally the overnight interbank call money market was the source of liquidity for banks in Bangladesh.AT Capital Research Better asset liability management and deeper interbank term money market can help avoid occasional liquidity crunch. Those were a) Credit Risk Management. but the correlation between risk grades and loan prices are poor. large FCBs perform risk grading.
Ten other conventional banks including two foreign banks offer Islamic banking products. However. However. Islamic banking is growing faster than conventional banking. intensify. Market Infrastructure: BB has undertaken a project to implement an automated clearing system called Real Time Gross Settlement (RTGS). Continued efforts to privatize Rupali Bank should be a priority for the government. Recently a consortium of banks has decided to set up 9 a net work of 500 ATMs. Priorities NCB NCB and SB Reforms While the recent corporatization of NCBs is a positive development. especially among smaller. BB should implement clear guidelines in this regard. major players in the sector are expected to have presence all over the country in the future. It has been argued that uneconomic factors. may be an obstacle to consolidation in the near-term. Risk Management: As mentioned earlier.AT Capital Research attractions of opening branches in rural areas. 40 . Therefore. like a sponsors’ prestige associated with being a bank director. Only NCBs. thanks to some initiatives by BB. new generation PCBs. used to have a large rural network. PCBs are expanding their branch network into rural areas. country-wide operations are expected to enjoy a competitive advantage with foreign remittances and internal money transfer a high growth business. Currently 6 commercial banks are operating as full-fledged Islamic bank. as per government regulations and requirements. Anticipating consolidation in the industry. Implementation of RTGS needs to be expedited. Players with automated. The competition in the market is expected to intensify International and regional players are expected to increase or expand their operations when the sector is opened up. Therefore. BB has published guidelines for bank mergers and acquisitions. there should be consolidation within the banking sector. 60% of which will be deployed in rural areas. The government’s decision to merge BSB and BSRS is a positive development while steps towards eventual privatization should be taken. growth The growth rate of Islamic banking is expected to remain higher that of conventional banking. risk management practices in banks have improved greatly in recent years. However. However. things are changing rapidly. Attracted by the high growth of foreign wage earners remittances and rural savings. we believe some smaller players will be forced to consolidate if Basel II capital regulations are applied stringently. banks need to manage their risk emanating from capital market exposure through own-account trading or margin lending. RTGS will eliminate time consuming manual clearing operations of the banks and will bring efficiency in money transfer and interbank settlement. medium Consolidation is expected to happen in the medium term. banks with technological and managerial superiority are expected to continue to enjoy a high level of profitability in the medium term. timely privatization is necessary to facilitate the commercial orientation of NCBs and SBs.
com/article/companyNews/idINDHA10801020080116 The New Nation. World Bank Office. issuing longer tenor bonds and appointing primary dealers for acting as intermediaries for dealing in government securities. “Understanding Vietnam”. (2008). 12 November 2006. 2008. Volume III. Akhtar. Accessed on April 6. 8. 2008. (2007). 6. DB Research. Though in recent years BB has taken some initiatives. Available http://nation. Available at http://in. References: 1. 18. “Huge expansion of ATMs planned nationwide: Cash Link Bangladesh. Series I. 2008. Bangladesh Bank. Dhaka. This is important for establishing a treasury yield curve which will be the basis for pricing other fixed income securities. 7. “Rupali Bank dropped from privatisation list”. Rahman. (2007). Bangladesh Development Series Paper No.org. the country lacks a vibrant secondary market for government securities. 5. S. 3. “Bangladesh private banks profit up 40 pct in 2007”. Reuters (2008).reuters. 2. Bangladesh Bank (2006-2007). The New Nation Article on March 11. “Bangladesh Strategy for Sustained Growth”. Bangladesh Bank Annual Report 20062007. Dhaka (2008). like introducing repo transactions.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.htm. Published in The Daily Star on March 28.com/issues/2008/03/11/news0841. 4. 9. Euronet Worldwide tie up”. A vibrant secondary market for government securities can help bank treasuries better manage their liquidity and avoid occasional spikes of overnight interbank rate.bangladesh-bank. “Address by the Governor of the State Bank of Pakistan” at the Pakistan Banking Association. (2006). S. “Financial Sector Overview”. London.ittefaq. Deutsche Bank. 41 . (2008). Official website of Bangladesh at www.
The government estimates that USD 6. It has been estimated that alternative energy sources such as Wind energy.com 42 .397 MW of power is generated by the private sector which is around 25% of total installed capacity of the country.hasan@at-capital. Concerted and co-ordinated efforts by the government. 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. which will require investments of USD 8bn. the country will require new sources to meet the growing demand. It will require an additional 24 trillion cubic feet (TCF) gas output for attaining the projected 7% growth rate by 2025. Bio Gas and Solar energy could generate 2.4bn of new investment will be required by 2015 for new generation and transmission. Significant investment is required in energy production and exploration. The energy shortfall in Bangladesh is progressively getting worse and needs urgent government action for both a short-term and long-term solution.200 MW of power. However. However only coal fired power plants generating 250 MW are currently in operation. Government / first world subsidization is key to commercial viability. it has been estimated that Bangladesh will need to add at least 2. Some estimate that the country's proven reserve of 8.4 TCF gas will start depleting from 2012. Increasing this generation capacity only will cost around USD 1. regulatory and specialist infrastructure agencies and the private sector are a key determinant of success. The government plans to increase power output using renewable resources by 10%. It is forecast that demand for electricity will grow at an annual rate of about 8% for the next 10 years. and after 2015. renewable energy remains relatively expensive compared to conventional power generation. To achieve GDP growth of 7%. Bangladesh has a total of eight production sharing contracts (PSCs) with ten International Oil Companies (IOCs).4bn.000 MW of new power plant capacity could be developed using domestic coal. The Government opened the power sector for private investment in 1996.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. Experts forecast that 4. significant opportunities exist in investing in coal fired power plants.750 MW. Mohammad Emran Hasan emran. Gas is the key source of energy in Bangladesh.000 MW of electricity to the national grid every year. Currently 1. We believe.
FDI of USD 1. we believe there are many opportunities to invest in projects of varying sizes from traditional areas. Bangladesh is now offering its third offshore gas bidding round which will end on May 7. 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.000 1. 7 accounts for around 86% of the power generation of Bangladesh.822mn was invested from 1998 to 2007 in the energy sector 8 of Bangladesh which accounts for 33% of total FDI in the period. although proven reserves are estimated to start depleting from 2012.AT Capital Research FDI increased by 72% from 1998 to 2007 in the energy sector Overview Bangladesh has an installed capacity of 5. 2008. Reserves are depleting Natural gas is currently the only significant source of commercial energy in Bangladesh. Bangladesh has a total of eight production sharing contracts (PSCs) with ten IOCs with companies like Shell. Chevron. This underlines the need for power sector reform. peak demand stood at 4. Under the bidding model. Currently 17 out of 23 fields are producing gas. will get progressively worse.500 MW.4 as at August 2007. to more innovative sectors such as alternative energy. 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. and while total theoretical generation capacity was 4385 MW. Fi gure 1: Per capita consumption of electricity in 2005 2.091 MW. The private sector is generating around 25% of the country’s generation while in 1998 all power generation came from the public 7 sector.4 TCF.600 1. Only Nepal has lower consumption (see figure below). The recoverable proven remaining reserve is around 8. the only widely used indigenous non-renewable energy source. Natural gas.275 MW which is 71% higher than the 1998 capacity of 3. Cairn. per capita 1 electricity consumption and hence the energy crisis. Bangladesh had recoverable (proven + probable) gas reserves of around 14 trillion cubic feet (TCF) 3. gas consumption has been increasing at an average rate of 4 8% per annum. In 2007.400 KWh/year 1. With the supply-demand deficit for electricity continuing to rise. the country's naval 43 Bangladesh Thailand Nepal India Pakistan Sri Lanka .200 1. and Tullow who have sizeable operations. such as 2 gas driven power plants.000 800 600 400 200 0 Source: International Energy Agency Natural gas used for 86% of power generation.800 1. average maximum peak generation was only 3. This resulted in service disruptions and blackouts on 364 days in 2007.717 MW. If Bangladesh grows more rapidly. Since the last decade.
have been discovered in 2 Bangladesh. Renewable energy provides a significant potential source of energy with benefits of reduced negative environmental impacts. Wind energy. provision of electricity in remote locations and reduced reliance on fossil fuels which are either imported or depleting. Around 8% of total power generation in Bangladesh uses liquid fuel. Only the Eastern Refinery in Chittagong. Of the blocks. There are more than 100.000 MW power plant to be fired by its coal. the local community in Phulbari organized a large demonstration against the proposed open pit mine due to concerns over social and environmental impact . 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. meets the required standards.3bn metric tons.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 . Currently there are eleven companies operating under Petrobangla. A 250 MW coal-fired power plant was commissioned in December 2005 with coal supplied from Barapukuria. To make renewable energy economically viable first world funds and government subsidy plays a vital 3 role. overall control and coordination of mineral resources and implementation of production sharing plans with International Oil Companies (IOC). low sulphur coal deposits. Petrobangla is responsible for the exploration and development of mineral resources. production.5bn in October 2005 to develop the Phulbari mine in northern Dinajpur district through the open pit system and set up a 1. Coal is a significant second source of energy. and development and marketing of coal and hard rock.this halted extraction in the Phulbari coal mine. with probable reserves of 3. responsible for oil and gas exploration.AT Capital Research area has been divided into 28 blocks for hydrocarbon exploration.6mn tonnes of refined petroleum products per annum. Power Cell in a study paper has estimated that around 2. Five good quality.2mn tonnes of crude oil along with 2. Currently 4 MW of power is being produced by home solar systems.1mn tonnes oil refinery in Chittagong through a management partnership deal with Cosmopolitan Oil Refinery Management Ltd. Energy and Mineral Resources. The government plans to increase power output using renewable resources by 10%. bio gas and solar energy are particularly suited to the Bangladesh climate. The Saudi Hitech International Group is planning to set up a 5. Bangladesh imports about 1. operating under the administration of the Ministry of Power. London-based Asia Energy had submitted an investment proposal of USD 2. Further extraction of coal resources remains delayed due to the lack of agreement over mining methods among 2 experts.5mn tonnes of crude oil. transmission. Gas is government regulated distribution Petrobangla. with a capacity for 1. Solar power introduced in 2002. 2 eight are located in shallow waters and twenty blocks are in deep-sea areas. But in 2006. Gas distribution remains regulated by Petrobangla. distribution. a statutory body. Experts suggest that solar energy has the potential to provide up to 300 MW of power. 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.200 MW of power could be generated using alternative energy sources.
is meeting only 40% of the country’s requirement. 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. Rahimafrooz and the Infrastructure Development Company Limited (IDCOL). By contrast. Hydropower potential only for mini/micro units. India. resources in Bangladesh’s territorial waters remain largely unexplored. Fiscal incentives to encourage private investment Significant features include the exemption from corporate income tax for a period of 15 years. Thailand. However no tangible steps have been taken so far to explore Bangladesh’s deepwater energy resources. 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. According to Petrobangla statistics. Experts are optimistic that Bangladesh has prospects of discovering major petroleum resources in the deep waters of the Bay of Bengal. World Bank. which is the only conventional hydro-electric power plant in the country. Myanmar. around 300 MW from 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. the sole major refinery. The Saudi Hitech International Group is planning to set up a 5.4 TCF gas starts depleting from 2012. tributaries of main rivers (Karnafuli. Shangu. plants Mongla. all achieved significant successes after years of persistent efforts. 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.1 mn tonne oil refinery in Chittagong through a management partnership deal with Cosmopolitan Oil Refinery Management Ltd. tax exemption on interest on foreign loans and the avoidance of 12 double taxation in case of foreign investors. allowing repatriation of equity freely.10 mainly in off grid areas to encourage renewable energy expansion. Wind energy utilization in Bangladesh is in the early stages of 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. investment. Matamuhuri) as well as small waterfalls suggests there is significant potential for 7 developing mini/micro hydropower power generation. Investment Opportunities Significant investment opportunities in off shore gas exploration. With rising oil prices the oil refinery 45 . if the country's proven reserve of 8. Currently only 230 MW of conventional hydro power is utilized in the Karnafuli Hydro Station. Asian Development Bank and Bangladesh government are subsidizing solar energy 3. However the abundance of canals. stages development.AT Capital Research have been installed by providers including Grameen Shakti. while the remainder is imported. powe ower It has been estimated that 600 MW of power could be generated from bio mass and cogeneration. Investors can set up a refinery plants in Chittagong or Mongla We believe investors should focus on this sector as the Government-owned Eastern refinery.
While political consensus over further coal mining remains an unresolved issue. The supply chain for a nuclear power plant is shorter than gas. 13 Independent Power Producers (IPP) can be a very profitable investment for both investors. SPPs are operated on a Build. The proportion of IPPs power generation is growing significantly. Currently 12 7 to 15 companies have invested in SPPs. which was recently reviewed by an expert panel. plants Small power plants (SPP) provide a significant opportunity with lower capital investment. With the Power Purchase Agreement (PPA) provided by the government. according to sources from the Bangladesh Atomic Energy Commission (BAEC). 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 . Also. As SPPs require less gas. To quicken the process for utilization of coal resources the government is planning to adopt a national coal policy. Installing environment friendly Solar Home Systems provide a compelling investment case. a South Korean company. 2015. an issue.AT Capital Research industry continues to look attractive. has reportedly offered to build and operate 8 a large-scale nuclear power generation plant in Bangladesh. Summit Power Co. we believe opportunities remain for using coal as a significant means of power production. regulatory risk and collection risk.000 MW to meet the country's mounting electricity 14 demand. gas price escalation. It remains challenging to ensure a reliable source of sufficient gas supplies for large power plants until new gas fields are discovered. Bangladesh is planning to install a nuclear power plant by 2015. 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. Aside from domestic supply. Own and Operate (BOO) basis. Ltd. with generation capacity between 700 MW to 1. Gas prices offered to IPPs are also very cheap at 11 around USD 1 / MSCF. A review committee will be constituted to finalize the draft coal policy. IPPs with capacity of 10 to 50 MW are considered as SPPs. 2 from current 3% of the total power generation by 2015. good quality coal can be imported from China and Australia. such as currency devaluation. At present major IPPs in the market include AES. All the IPPs are run with natural gas. coal or liquid fuel based power plants..5bn. The total investment required in setting up a nuclear plant is anywhere between USD 1. The draft policy aims at raising coal-fired power production to 20%. As such there are significant investment opportunities in coal extraction and coal fired power plants.0bn and USD 1. 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% . The coal policy would neither be company specific nor mining method specific. Russia has offered to provide technical support in the proposed nuclear power plant in Rooppur. The government is formulating an attractive financial incentive package for mine developers. Daewoo Engineering. Westmont and Bon Consortium. many external risks are also mitigated. local and foreign investors Currently IPPs have installed capacity of 1397 MW 6 which is roughly 25% of the total installed capacity of the Country. it is more feasible and profitable given current supply constraints.
rice husk.000 MW of power could be generated.com/upload/Bangladesh%20Power%20Data%20Book. 7. The added advantage of biogas is the slurry can be used as good quality organic fertilizer.energybangla. Biogas can be produced from pulp of sugar cane. Website of Energy Bangla at http://www. This 9 sub sector is still in its infancy with many opportunities for growth. Bangladesh has 724 km long coastal belt. 1.pdf. . To achieve this ambitious target.AT Capital Research for all fan and lights used residentially.pdf Primary sources: interviews with IDCOL Officials. “Bangladesh Power Data Book”.powercell. IDCOL. Biogas plants are operated by Grameen Shakti. Biogas is a growing source of power generation. Wind energy could also be used in shrimp farming. Accessed on March 29. Local Government Engineering Department (LGED) and Bangladesh Rural Advancement Committee (BRAC). 6. around 200 km hilly coastline and about 50 islands in the Bay of Bengal. 11 References 1. 4.com/upload/Power.iea. urban waste and poultry waste. Available at energybangla. Accessed all the 29 issues from January 1.asp. 47 2. International Energy Agency database of statistics on various countries available at http://www. broader participation of both local and foreign investors in the power sector is critical. 2008. 5. 2008. coming from the Indian Ocean and hitting the coastal areas of Bangladesh from March to October. Solar energy also provides a significant opportunity for rural development.bd/ Power Cell.gov. 3. 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. ensuring that all the energy sources are maximized both locally and domestically.com/ Power Cell. & Nexant. Conclusion The Government has taken many initiatives to encourage private and foreign investors to invest in the energy sector in Bangladesh.. Energy & Mineral Resources at http://www. Asian Development Bank. (2006). Website of Power Cell. (2006). salt / ice production.ep-bd. 2007 to March 15. The strong south/south-westerly monsoon wind. It has been estimated that if wind turbines were installed along the coast line. particularly through IPPs and SPPs. are a potential source for wind energy. We believe energy remains one of the most attractive sectors for global investors to consider. “Power System Master Plan Update”. Available at http://energybangla. The Government has set the goal of providing electricity to all citizens by 2020.org/Textbase/stats/index. a division of Ministry of Power. 3 vegetable irrigation and domestic/household use. Website of Energy & Power at http://www. with 80% population of the rural area having no access to electricity.com/.
(2007).AT Capital Research 8. I.org/database. (2004).powercell.lgedrein. Website of Renewable Energy Information Network at http://www.org/sre. Website of Eastern Refinery Limited at http://www. “Nuclear power plant to be installed by 2015”. A. Primary sources: interviews with officials of Rural Electrification Board.com. 2007).bd/erlwebsite/home/corporateprofile. Robin. 10. Bangladesh Bank Policy Note PN0704.bd/images/additional_images/PSEPGPB.html 14.thefinancialexpressbd.erl.php?page=detail_news&news_id=20570 48 . (2006). Available at www. A. 11.gov. “Private Sector Power Generation Policy of Bangladesh”. M. “Foreign Direct Investment: Impact on Sectoral growth in Bangladesh”. Rahman.php?pageid=21. Available at http://www. Ministry of Energy and Mineral Resources. Website of Local Government Engineering Department (LGED) at http://lged. 12. 9. Article published in The Financial Express on December 25.pdf 13.com/search_index.
Dhaka city is densely populated with severe traffic congestion. if connected with the Asian Highway.com 49 . support and maintenance facilities. such as transportation. For example. It will also facilitate the growth of other rapid growing large and medium scale industries. Integration with the Asian Highway is a prerequisite for investment in sea ports to be viable. In Chittagong port. has the potential to act as the transit route for trans-national freight transport. makes road transportation another possible investment opportunity. Investment in infrastructure system is critical if the country is to sustain and improve its economic outlook. hotels and restaurants.bari@at-capital. investment in setting up an adjacent private port and a deep sea port in the Bay of Bengal. and other major land ports of the country. restricted land area. with a relatively underinvested bus sector with a large client base. Chittagong. could make it a competitive and credible regional commercial hub. one government proposal is the installation of an underground/subway metro rail. It has very limited resources and assets. large scale national intercity bus operator is a commercially attractive proposition for the private sector. Mongla port has substantial expansion potential. Bangladesh with its high density of roads. a higher quality. capital and existing facilities to build its infrastructure on. There is a need for dredging the Pushur river and building the Padma bridge which will connect the port to commercial hubs. These are all further investment opportunities for private sector players. i. 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. The key to its revitalization as the country’s second port is investment in its operations and in its complementary infrastructure.AT Capital Research Infrastructure (Non-Energy) (NonInfrastructure (Non-Energy) Bangladesh is a small country with a large population. Due to the low availability of land for road expansion. mainly Dhaka. Asian Tiger Capital Partners A M Ashfaque Bari Nahid nahid.e. and fuel companies. The high density of city dwellers makes such an investment a potentially attractive commercial opportunity. Bangladesh.
Similar kinds of arrangements with the private sector may facilitate faster completion times with reduced levels of budgetary expenditure. Largely. the Railways Ministry have been actively seeking and encouraging increased private sector involvement. Contech Ltd. by a private company. Recognizing the need for substantial financial and managerial capital. 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. Bangkok has both an elevated expressway and an underground metro. Cooperation between the public and private sector is key to its successful execution. the Ministry of Communications approved the Strategic Transport Plan (STP) for installing an underground railway system in the capital. With a focused. After a long consultation period of considering various options (i. elevated expressway) to alleviate congestion in Dhaka. communications. flyovers. Bangkok Metro Company Limited (BMCL).835-route kilometer (Broad Gauge 659 km. signaling systems. The underground rail. run in a more efficient manner. The non-power sector. In a marked departure from its legacy. in the recent years. and Bangladesh fulfilling its potential. conducted a feasibility study last year and proposed a 52 km subway with an estimated cost of BDT. Railways Metro rail: Lessons to be learnt from Thailand Bangladesh Railway: reform plan The Bangladesh Railway has a total network of 2. has taken the strategic decision to increase private sector participation in infrastructure development. In order to turn BR into a commercially and financially viable organization. the Mass Rapid Transit Authority of Thailand (MRTA) and handed over to BMCL under 25-year concession agreements.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. long term. BMCL provides M&E equipments. It has been incurring significant losses for the last two decades. has many opportunities for investment after years of underinvestment. from roads to bridges to rail and ports. investment strategy one could facilitate significant improvements to state owned and operated transport systems. The Indian Railway has seen a marked turnaround from a huge loss incurring giant to a profit making company. 5200 crore (USD 750 mn). including electrical trains. improve the operational efficiency of the two major ports and position Bangladesh as a hub in the Asian Highway. reduction in unit costs. Dual Gauge -375 km and Meter Gauge 1801 km). and improvement of quality of service has yielded remarkable results. all civil infrastructures were provided by government sector. subway. the focus on capacity utilization. a local firm. the Government has given it more autonomy and changed its organizational structure. its yearly loss has been around BDT 500 crore (BDT 5bn).e. In the recent years. SCADA. Mass Rapid Transit (MRT). is a robust and supportive infrastructure. The ADB is set to provide the Government with USD 430mn for its development and reform. was built on a concession basis. The total subway project is forecast to take 10-12 years to complete. and PSD for the subway project and fully 2 operates and maintains the system. The first steps in this direction 50 Revolution in Indian Railway . Subway Underground metro rail in Dhaka The Government. commercially viable.
Autopistas del Sol was awarded in 1994. both core and supporting functions. Highways and Rural Infrastructure. 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 . 2001 Recurrent flooding. though a small and densely populated country. we believe. commercial utilization of surplus railway land. Outsourcing or selling. and a high incidence of tropical cyclones provide a challenge in the construction and maintenance of a reliable road system. but also the potential of commercially viable private sector investments in maintenance/repair and new construction given its high density usage. This indicates not only a greater need to maintain this vast network of roads. leasing out its non-operating assets. Roads. high intensity rainfall. large scale national intercity bus operator is. 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. For example.AT Capital Research have been the awarding of container operation licenses to 14 private players. Roads Maintenance of the vast road network Bangladesh. building new rail line tracks could bring significant commercial and operational advantages. A case study of a successfully privatized Build. Valuable lessons for effective private participation in projects can be learnt from around the world. has one of the highest road densities in the world. 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. Bangladesh Railway could emulate this example by incorporating the private sector into its operations. Every year. There are many areas where private sector participation could improve the transport network. Other areas earmarked for Public Private Partnership (PPP) include projects like the dedicated freight corridor. a commercially attractive proposition for private sector investors. to private sector participants. a higher quality. with a relatively underinvested bus sector and given the large client base. Operate and Transfer (BOT) infrastructure project in Argentina is the Autopistas del Sol (ADS) project. and creating 4 inland container depots and warehouses. 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.
both public and freight. the port can flourish as a refueling station for shipping lines. 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.AT Capital Research system. Impreglio and Iglys. the sponsors provided to the lenders full guarantees covering completion risk and limited guarantees covering certain political risk after completion. 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. Investment is required to construct more jetties in the Chittagong port. The project developers Construcciones. connecting the deep water port with transnational oil supply line is built. but the capacity of Chittagong port has not been expanded in line. long-term maturity (12 years) compared to the 5 term of the concession (20 years). as could investment in operators providing transport to the general population Bangladesh currently has two major ports. 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. Such a project bond issue was the first Latin American Yankee bond toll road financing ever. Inland Waterways and Ports Inland water transport The private sector is the major player in inland water transportation sector. Most of the vessels. The project was a success. Integration with the Asian Highway could place Bangladesh as a regional commercial hub. From a financial viewpoint. Additionally. 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. From an operational standpoint. Investment in this sector. both operationally and financially. Chittagong and Mongla. approximately one year after project completion. were Sideco Americana. If a fuel pipeline. build private ports. can be a highly profitable venture. Chittagong is handling more than 80% of the country’s export-import trade while Mongla port is left largely under-utilized. BB-credit rating and significant refinancing risks. The export-import trade of the country is increasing by more than 20% every year. 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. such as no US GAAP-required information (only Argentine GAAP). It successfully overcame hard selling challenges. targeting the niche market of upper class luxury commuters. Rather it is overloaded with the increasing number of ships coming to load and offload. Malaysia. Receiving its 52 Chittagong port: needs to expand its facilities The deep sea port . are owned and operated by the private sector. nationalization and early termination of the concession. and construct more container depots A deep sea port in the Bay of Bengal will likely open up several other investment opportunities. There was no governmental support provided for the project and its financing.
87mn TEUs in 2003 outstripping Port Klang and establishing itself as Malaysia's largest port.7 Singapore. which will be free of traffic jams and take less time. In 2005.6mn TEUs. which were dependent on 6. In 2007.66mn in 2002.05mn in 2001. about USD 1mn). and 2.020. Bangladesh can also. and in 2006 an estimated 4. building structure etc. has the potential to be an alternative to the Chittagong Port. and came in as the world's 16th busiest container port. while also making it an attractive commercial opportunity. PTP handled a further 5. 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.5mn TEUs. can provide an alternative option for the shipping lines doing business in the region. At the end of 1999. like Singapore. Selected Investment Opportunities Underground metro system There is a large investment opportunity in the underground metro rail system in the city of Dhaka. earn significant revenues from a deep water port. 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.000 crore (USD 6bn) and the entire project will be completed by 2055. Pacific Consultants International has completed the first phase of a feasibility study of a deep sea port in the Bay of Bengal. 2. in a similar way.421 TEUs. a growth of 14. The subway system will give the city dwellers an alternative mode of transport. the terminal handled 20. According to the report. Mongla port has existing port facilities and huge assets (land. The port continues to enjoy spectacular growth. The deep sea port could act as a transit port. including Dhaka. which rose to 418. but has been left largely under-utilized. Mongla port needs investment Mongla Port. 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. It has achieved this growth by providing alternative to the shipping lines. The high population density and high capacity of the subway system will bring the fare down to an affordable level.200 crore (USD 750mn).218 TEUs in 2000. In 2004.). PTP handled 1 4. construction of the bridge over river Padma connecting Mongla with the major commercial centers. This project will take 10-12 years to complete. While the government is still considering this project.5% compared to 2006.2% increase to 4. it will require an investment of BDT 46.696 TEUs. the deep sea port will be constructed in three phases. installing new container depots and modern technology support would make Mongla port a profitable investment and revitalize Bangladesh’s second port. we believe investment in this project may offer 53 Mongla Port Integration with the Asian Highway . There are investment opportunities in this port. it registered a 15.AT Capital Research Success story: Port of Tanjung Pelepas of Malaysia maiden vessel on 10 October 1999 on a three-month trial operation. 3.2mn TEUs. Bangladesh. vessels can offload containers here for others ships to upload. Proper dredging of the Pushur river (investment requirement of BDT 50 crore. Hong Kong and Malaysia.
March 17. World Bank & Public-Private Infrastructure Advisory Facility.AT Capital Research significant potential returns for the investors.bangladeshnews.com. Conclusion The strategic importance of infrastructure.thefinancialexpressbd. needs to be improved. 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.org/wiki/Port_of_Tanjung_Pelepas Official Website of Port of Tanjung Pelepas at http://www. C.bangladeshnews. “International Railway Conference New Delhi: A Background Note”.de/docs/International_Railway_Conference_Background_ Note.com. 4.bd/2008/01/15/52b-transport-plan-fordhaka-okayed/ 2. Wikipedia search “Bangkok Metro”. (2007). 6.wikipedia. (1999). 2008. www. 5.ptp. References 1. E. The Financial Express. large capital requirements and long term. If Bangladesh is to exceed its current trajectory and aim to be an MIC in the future. Springer. The backbone in infrastructure. (2003).bd/2006/09/07/dhaka-subway-ministryasked-to-go-ahead-with-proposal/ http://www. “Project Financing and the International Financial Markets”.bd from the following links: http://www. 7.com. 54 .org/wiki/Bangkok_Metro. After years of underinvestment coupled with strong GDP growth.wikipedia. & Park. 3. “Private Solutions for Infrastructure in Bangladesh”. http://www. Available at http://en.kpmg. Accessed on March 27..bangladeshnews.com. whether that be roads. Accessed on March 28. http://www.php?page=detail_news&news_id=28296 KPMG. Y. pp 218-220. 8.my. predictable revenue streams make infrastructure projects extremely attractive for investors both locally and globally.com/search_index. rail or water. 2008. 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. it is essential that investment is made in this sector. Wikipedia Search.pdf Buljevich. Available at http://en. 2008. S.
in particular. and European markets. forests. comprising crops. being sold at more than a 25% discount. underserved domestic market that provides opportunities for many investments along the value chain.500 metric tons each. Only 17% of the domestic demand for milk is met by the domestic supply.farooq@at-capital. There is a shortage of cold storage facilities and those that exist are extremely profitable. The only firm that exports Halal meat is looking for equity partners to expand its operations. can be set up in north Bangladesh. Asian Tiger Capital Partners Abdullah Ibneyy Shahid abdullah.com Abdullah-AlAbdullah-Al.email@example.com 55 . 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. Only a few companies are exporting vegetables and potatoes to the Middle East. The agriculture sector has a large. results in various vegetables.Farooq abdullah. There is a scope for sizable milk production by importing high-yield breeds of cattle. Global market trends for eco-friendly products favor investments in jute and jute-related industries. Niche areas such as frozen fresh water fish and the production of aromatic rice also have significant potential. Innovation opportunities exist in the areas of shrimp production in paddy fields. We believe 30-50 more cold storages with capacity of 4. and high-yielding crops. potatoes. growing strawberries. Growing global demand for Halal food presents export opportunities. A number of companies are looking for joint venture partners to expand their operations.AT Capital Research Agriculture Agriculture Agriculture. This supply deficit. Private equity buyouts of distressed state-owned jute enterprises could provide investment opportunities.
for another 33% . Other crops include maize. twovalue. the largest workforce of the country engaged in agriculture. however. Maize production has grown significantly. oilseeds. tobacco. Shrimp is the second largest foreign exchange earner after the RMG industry and employs 600. In 2006-07. jute.AT Capital Research The case for investment in agriculture is stronger than ever A rapidly growing urban middle class in Bangladesh. The largest employer in the country Crops dominate with rice occupying the major share 2006Figure 1: The composition of AGDP of Bangladesh in 2006. Poultry experienced above 6% growth over the second half of the 1 1990s. the second foreign exchange earner has become stagnant . spices. Rice production contributes about two-third of the total crop value The yield in rice in Bangladesh is lower than that in East Asian economies but better than that in India and Pakistan. 11 sugarcane. However. with agriculture (including crops. rising food prices globally. 56 Rice production commands the highest value addition among the crops Rice and wheat needs productivity boost Shrimp. With more than 50% of the land being arable. potato. and favorable global trends for Halal foods. About 70 % of the population lives in rural areas. organic foods and jute products make the agriculture sector one with significant potential for large-scale investments. which connected rural growing areas with central distribution systems in Dhaka. with 54 % of them employed in agriculture and the remainder in the rural non-farm sector. due to productivity from high yield variety (HYV) seeds and the high demand for maize as poultry feed. The growth in jute. phyto1. sugarcane.11 sanitary. growth has slowed. 1 and pulses has fallen over a decade due to the lack of investment in technology.3. Since 2000.11 sector. and other quality requirements of the buyers. oilseeds. fisheries and forestry) accounting for about 21% and the non-farm 1. key crops such as rice.000 workers. increasing its share of AGDP from 10 % to 23%. the case for agricultural investments in Bangladesh is stronger than ever. also driven primarily by agriculture. pulses.07 8% 14% 56% Crops & vegetable Fishery Livestock Forestry 22% Source: Bangladesh Economic Review 2007 Fisheries experienced rapid growth from 1980 to 2000 Among nonAmong non-crop agriculture. There was 7% growth in potato production from 1990 to 2004. and barley . fisheries have experienced rapid growth from 1980 to 2000. Crops account for the major share of the agriculture sector. The rural economy constitutes a significant component of the national GDP. Wheat yields in Bangladesh are lower than those in the East and South Asian economies. the growth in shrimp exports has stagnated since 1996 due to the shrimp farmers’ inability to meet various sanitary. and large domestic demand and supply gap along various stages in the food value chain. wheat and vegetables held the major share of agriculture GDP (AGDP). while livestock has not grown. mainly due to the construction of the Jamuna Bridge. livestock.
7mn MT of spices.254. rising food prices and increasing demand for Halal foods and organic foods provide 2. Globally. wheat. As for fertilizers. lack of standardization.AT Capital Research High import dependence in rice. wheat. 1.12 new opportunities for agro businesses.5mn metric tons (MT) of vegetables. The gap is currently filled by importing or purchasing from Karnaphully 57 .11 maize production.9.4mn MT of meat and eggs. wheat and oilseeds.3. Imports of key agro-products such as rice. 1. Opportunities in Bangladesh Agriculture The agriculture sector offers ample business opportunities both in domestic and international markets. 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. There is a huge gap between domestic demand and domestic supply of seeds and fertilizers. 1.9mn MT of fish. In urban areas.9.1% of imports of the country. and oilseeds grew 180% from 1995 to 2005 because of low levels of domestic productivity. and oilseeds Agricultural imports are mainly rice. 45% of household income is spent on food and beverage items. Fertilizer constitutes 2. insufficient processing capacity and transportation 1. Large scale investments could expand on the success of the small domestic producers. Rapid urbanization occupies more cultivable land Low-productivity persists because of low technology *This includes some agricultural capital machinery. rapid urbanization using up cultivable land and diversion of resources to 1. The following factors impede diversification towards high value-added crops: shortage of cold storage facilities. 0. and 2.6mn MT of dairy products by 2020 to meet domestic demand. there is a distinct gap of at least 1mn MT per year.11 bottlenecks . 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. A World Bank report found that Bangladesh would need an additional 6. Source: Bangladesh Economic Review 200711 Primary activities continue to occupy the major share of AGDP largely valueAGDP largely consists of low value-add items.6mn MT of fruits. with an average annual household income of USD 3.
and there are many risks associated with marketing these commodities. In 2007.” For example. there was a bumper harvest of potatoes.000 MT per year 12 would require an investment of USD 450m-500m. increasing Rapidly increasing consumption and demand for pulses cannot be met by the current domestic supply. Appropriate policies and investments in key infrastructure are needed to make it viable for farmers to switch to these commodities and increase production. the largest retailers in Europe such as Tesco are gradually increasing their stocks of Halal foods. Australian. 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. every year potato farmers risk large quantities of potatoes going to waste due to inadequate storage facilities. Halal meat processing presents a lucrative business opportunity. The supply chain for milk is highly fragmented. More ventures like BRAC Dairy. and French exporters in the domestic market. Given such demand.200 per MT. where feed is more readily obtainable and where there is a milk-marketing infrastructure.5. The low productivity in pulses is due to low investment in technology and diversion of resources to rice and wheat. exports The global market for Halal food is estimated at USD150bn-USD 500bn. most of which farmers sold to 3. Increasing demand in North America helped fuel the 10. Growing demand for Halal food globally presents opportunities for exports.000 per MT vis-à-vis the local price of BDT 7. Exporting organic food could be a profitable option for the Bangladesh agriculture sector.AT Capital Research Fertilizer Company at BDT 31. The estimate for the industry growth rate ranges between 10-20%. The global market for organic food and drink reached USD 23bn in 2002. and France are the key exporters of the domestic pulse consumption in Bangladesh. Dairying is profitable in certain parts of the country. Pran Milk can help in filling up the gap between the demand and supply of milk. Importing better breeds of cattle 1 would improve yield. Import substitution of pulses has high potential Canada. Domestic production of milk cannot meet domestic demand. as North America overtook Europe as the largest market for organic food and drink. Continued growth is predicted as organic foods customers are less price-sensitive and remain loyal if offered quality products. Australia. Setting up fertilizer plants with a production capacity of 500. Businesses can implement large scale production of pulses and use higher end technology to 1 compete with Canadian.9 intermediaries at a 25% discount due to insufficient cold storage facilities. World Bank Country Director in Bangladesh. According to Xian Zhu.1% increase. “high-value agricultural products tend to be highly perishable. This will help export-oriented high value added agriculture businesses to grow. Organic certification and labeling are needed to tap the 4 market effectively. 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 .
Research and innovation is another area that private investor could explore for could further investments. upholstery. 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. Globally.10 using jute/ cotton. blankets and other home textiles. and jute based handicrafts. Conclusion Agriculture provides significant opportunities for investment across the entire value chain. Halal foods. jute blended yarns. The seed named “O-9897” will give a significant boost to setting up of jute businesses successfully. fine blended yarns 7. Also. the use of which will be banned by mid 2008. jute based fabrics. cold storages. Scalability of the project should be investigated. large markets like China are looking for alternatives to plastics. packaging that can be used for cooking. and packaging designed for easy transport (47%). 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.AT Capital Research up to bring about considerable economies of scale. non-woven and industrial applications. Cultivation of strawberries has been successful on small scale. decorative jute products. and better yielding crops make agriculture an attractive investment destination. 59 . or doubling as a re-sealable container (48%). According to a Nielsen Global Food Packaging Survey. Global market trends for eco-friendly products favor investments in jute and juteecojuterelated industries. “nearly one in two global consumers would give up all forms of packaging provided for convenience purposes if it would benefit the environment. Large scale emulation could be undertaken. jute reinforced plastic. Jute bags are an alternative. composite jute. eco-friendly and organic products. more compelling than ever. Unused excess land of the tea gardens of Bangladesh could be cultivated with long beans and French beans. It has been reported that the company is seeking joint venture partners for further expansion. milk. which includes packaging designed for easy stacking/storing at home (49%). The increase in global food prices has made the need for improved yields and new product innovation. Pulp for making paper can be made from natural fibres like jute. Opportunities in research. The following specific areas can be explored extensively: jute handlooms. from seeds to processed foods. jute rigid packaging. Bengal Meat Processing Industries is a pioneer in meat processing for export. to alleviate the domestic supply shortage and to provide the potential for entering new export markets. people are leaning towards the use of substitutes for wood as raw materials for paper.
Bodalia. “Need to Increase Support for High-value Agriculture and Agribusiness in Bangladesh”. Published in The Daily Star on March 26. 18.bd. Nath. N. Bangladesh Development Series Paper No. “Bangladesh Strategy for Sustained Growth”. Available at http://atnriae. 9. 8. Khan. (2008). “High-value agriculture and agri-business in Bangladesh”. 11. “Organic Food Industry Guide”. “Can lost glory of jute be revived?”. M.meatprocess.theindependent-bd. “Bangladesh: Priorities for Agriculture and Rural Development”. Business Standard published on March 05. D. Published by www. (2008). 2008.AT Capital Research References: 1. 2008.php?nid=23791 --> 2. World Bank. X & Sur.com/details.thedailystar. World Bank Office. 6. K. Published in The Independent on March 26. “Shubir Roy: Global Food Shortage An Opportunity”.moa. 2007.com on May 8. (2008).net/story. (2008).php?nid=77102 --> Zhu. (2008).htm. 7. 60 . (2008). Business & IP Center.gov. S.ca/asia/4057_e. British Library. Available at http://www. Canada. 2008. 10. Merrett. Published in Financial Express on March 6. 2008. “Malaysia plays host to Global Halal Forum”. “Agri Food-Past. World Bank.agr. Present. Government of Bangladesh. World Bank. “Bangladesh Economic Review 2007”. & Future Report Bangladesh”. Ministry of Agriculture of the Government of Bangladesh website at www. (2005). “Investment in Agriculture to Attain Sustainability”. 4. J. 12. (2007). Roy. Available at http://www. 5. 3. “Bangladesh Jute Industry: time to rise to the occasion”. (2007). Agri Food Trade Services. Dhaka (2008). S.
Woven and Knit . Despite rising yarn prices.khan@at-capital. Junaid Khan junaid. There are investment opportunities to set up textile institutes to train more textile workers for manpower exports. Linking up with established high-end US and European accessory companies would provide the platform for doing so. political uncertainty and a sluggish economy. helped by 90% of yarn requirements for the Knit sector being sourced locally. the two arms of the export-oriented RMG Industry .3%). The global market stands at USD 340bn for textile and apparel. Bangladeshi garment workers are increasingly being sought after by other countries.com Masum A Rahman masum.com 61 . The bulk of RMG is exported 3 to the EU and US.g.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.4% of total exports.2% over the past year. The knit Industry has lead growth (14. Investment in branded and high-end RMG accessories can move RMG up the value chain. In 2007. Due to capital constraints.rahman@at-capital. Investment in the Woven Backward Linkage Industry could provide significant opportunity for returns in the local market. Private equity investment could allow this sector to grow substantially. The current lowquality PTS provides investment opportunities for higher quality textiles for RMG clothing as well as for the local market.have grown at a combined rate of 9. Investment opportunities lie in diversifying. Ready-made Garments (RMG) exports 2 stood at USD 9. including high-end items and exporting to largely untapped markets around the world. High interest rates and a new VAT system have seen investment in the 5 Primary Textile Sector (PTS) decline by almost 43% in 2007 . Currently. Paxar does this in Dhaka EPZ.000 will get jobs there . e. only 35% of the yarn 4 requirements in the Woven sector are sourced locally. over 100 skilled garment workers have already left for 6 Romania in February 2008 and a further 1.35bn making up 75.
there has been double-digit growth in the number of new spinning mills over the past few years. dyeing and finishing).g.000 2.000 3. On average. 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.500 2. ensuring that the sector remains competitive. a heavy dependence on imported intermediate inputs 7 and has a high regional concentration of exports (mainly USA and EU). Current trends in the Textile and Clothing Sector and Possible Recommendations The Knitwear sector is particularly promising with 14. the industry is characterized by a high concentration of low value-added products.500 1. with an average of 15 new 8 knit factories coming into operation every month in Bangladesh.500 4.000 4. The RMG industry relates to the forward linkage of Bangladesh’s textile sector (e. local spinning mills cater to about 90% of the yarn 9 requirements for the knit sector. weaving.000 500 0 Knitwear Export Woven Export USD mn *For the first four months Source: The Daily Star4 Growth of spinning mills. F igure 1: Comparative exports of woven and knitwear garments 5.g. The locally produced yarn provided by the spinning mills to the knitwear industry reduces lead time.3% annual growth and has surpassed the Woven sector as the chief RMG export.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. 62 .000 1. In terms of highlights. As a result. spinning. Woven wear and Knitwear) and has a largely export-oriented focus. The Primary Textile Sector (PTS) relates to the backward linkage of the textile sector (e.500 3. polyester and blended fibers for the RMG Sector and provide backward linkage support. but only 35% of that of the woven sector.
RMG manufacturers are concerned that they may lose international competitiveness due to the persistent price rises of yarn domestically. Relaxing bureaucratic procedures to allow efficient importation from India would facilitate import. Entrepreneurs were not interested in making new investments due to higher bank interest rates of 15-16%. viscose staple fibre. The government aims to involve two-to-three key middle managers from each of the country's 4000 12 factories. This measure will also put pressure on local yarn manufacturers to increase their efficiency. 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. citing the rise on the cost of raw materials. The specific investment opportunities are: 63 . Business confidence had eroded due to political 5 uncertainty and the government’s aggressive anti-corruption drive.000 4. the price of yarn has risen considerably. Cotton.000 0 2005 2006 Year 2007 Source: The Daily Star5 Rising Yarn Prices. Investment in PTS declined by 42.000 BDT mn 10.AT Capital Research Decline in investment in PTS. Three sessions have already been held with groups of around 30 managers in each. 10% duty and 15% VAT on the import of raw materials (polyester staple fibre.000 16. Despite yarn being 25 cents cheaper in India. manufacturers hardly import yarn through Benapole land port due to challenging problems in customs. the main raw material for yarn.000 8. while local spinners 10 constitute 75-80% of the demand. Training Programs.000 12.000 2.8% in 2007 mainly due to high interest rates. Yarn is the main raw material for knitwear manufacturing that makes up around 60% of export value. yarn producers of the PTS say they have no choice. Also. 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.000 14.000 6. Fi gure 3: Investment in PTS 18. However. 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. Since 2007. in the 2007-08 Fiscal Budget. mainly due to global cotton price increases. bond licenses 11 and transportation . acrylic staple fibre and pet-chips) were imposed which was previously tax-free. Specific Opportunities for Investment in Textiles The Textile Sector provides ample opportunities for investment in a wide variety of fields.
while its UNLIMITED brand is targeted at young and 64 . Another constraining factor is the rising price of chemicals that are used in dyeing and washing plants. Westecs. Further research should be done to explore investment opportunities in high-end garment accessory industry which is virtually untouched in Bangladesh. 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. there was a 30-50 % rise in the last year. Thirdly. Cats Eye Group has started developing sub-brands in order to appeal to different segments of the local market. Garment Accessories Investment in the Garment Accessory Industry. Bangladeshiapparel. 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. An interesting feature of the garment accessory industry is that such plant investment costs are low. and sweaters. However. Due to lack of quality fabrics from the weaving mills. its Monsoon Rain label is aimed at executives. Currently. There is a lack of modern technology. Secondly. Currently 100 accessory manufacturing firms meet 80% demand for accessories used in exportable garments and knit items. most of the dyeing-finishing units have to import the fabric. As a result. There would be three main advantages. There are significant opportunities for investment introducing new technology to take the advantage of the available demand. The 356 medium-to-large weaving mills produce only about 50% of the total 9 requirement with the remainder imported . there would be more local value-addition thus enabling preferential access to Europe and America as well as creating employment. Monsoon Rain. it would reduce lead time. an entrepreneur can set up a full-fledged accessories industry in Bangladesh at a cost of BDT 40 crore. Chinese investors have shown interest to produce fabrics for 13 the woven sector so Bangladesh could benefit from Chinese FDI. which are now being imported mainly from Hong Kong . Local dyeing-printing-finishing mills meet around 25% fabric demand of the RMG units. thus increasing efficiency and competitive advantage. shirts. the vast majority of exports are t-shirts. and Ecstasy are some popular local brands. Cats Eye. For example. Bangladesh’s RMG industry can benefit from substantial investment to move up the value-chain and export branded clothing. foreign currency would be saved because only the raw material (cotton) would have to be imported. local industries have failed to manufacture costly accessories like ornamental stones. Exporting Bangladeshi-branded apparel. belt and clips for use in brand-exportable 15 garment items. Bangladeshi manufacturers focus their production on clothing for big global brands. appealing to both upper-income and middle-income Bangladeshis. For example. the quality of fabric produced by the weaving mills falls far short of the requirements of the export-oriented RMG sector. This fabric is used to cater to the local market. For example.AT Capital Research Primary Textiles Sector PTS. Bangladeshi-branded Apparel Bangladesh has the potential to export and market branded apparel since there are already home-grown brands. new machinery and modern production processes in the weaving mills. Firstly. whereas more than BDT 1bn is 15 required for setting up a small textile mill or woven factory. Investment in the 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.
repairs and spares for all the different machines and equipment used. maintenance. State owned assets. and most importantly. there are 21 textile companies under the BTMC in the nationalized sector. 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. Larkmade and UK-based Urchin. There is no need for heavy textile machinery.500 textile and RMG units in Bangladesh. The PTS remains undeveloped in many ways but has strong domestic demand and private equity capital could be critical in developing this sector. With almost 9. Investment is needed to support the cost of developing and marketing Bangladeshi clothing brands in European and US Markets.450) on the Yellow Label website .892 spindles and 1. These institutes add value to merchandise exports from the industry through training professionals at all levels.99 (BDT 2. Both Yellow and Cats Eye are now considering exporting their designs and brands and setting up stores abroad. They operate 24 spinning mills with an installed capacity of 17 490. but they are inadequate to meet the demands of the burgeoning textile sector. handInvestment in hand-knitted toy market. an attractive strategy is in moving up the value chain with locally branded products. These mills provide a lucrative private equity investment opportunity through privatization. there is a large and growing potential for investing into textile light engineering support. 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. institutes. Every week about 15 new knit factories are set up alone. the 46 public vocational textile institutes and the 4 fashion design institutes provide training courses such as fashion merchandising and production technology. There is a growing demand for hand-knitted children's clothes. blankets and birthday party decorations in the European and US markets. there remains many investment opportunities. Need for machinery. At present. Investment in textile and fashion design institutes Currently.036 looms. Fit Elegance is already exporting 16 its own range of suits. high-end accessories and franchises with foreign brands. Privatization of state owned mills Investment in Light Engineering of Textiles Textile and fashion design institutes Hand-knitted toy market 65 .a box of 18 five knitted donuts sells at USD 34. While the RMG industry is fairly developed. hand-knitting can be done at home. 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. The hand-knitting industry is attractive in many ways. mns of rural women know how to knit and thus require little training. blazers and trousers to the UK. For example.AT Capital Research modern buyers. ethically produced toys . There are investment opportunities for establishing new textile institutes to train 20 engineers and fashion designers to create locally designed fashion accessories . Initiatives should also be undertaken to attract foreign young designers to forge links with the institutes to widen experiences.
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. NASSCOMThe 2005 NASSCOM-McKinsey Report suggests that the total potential market for 300bn bn, 110bn global offshoring is approximately USD 300bn, of which USD 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
phenomenon The 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
BD firms’ major exporting destination is the North American market but recent new ventures are with European and East Asian (mainly Japan) markets. There has been a recent push for Bangladesh to enter this market. Pharmacy. China. At least 30 companies have set up joint venture or ODCs (Offshore Development Centre) with 100% foreign 4 investment. software export has seen significant growth in recent years. A new hope. And with rising costs. smaller players can look 9 to Bangladesh as an alternative centre’. VP.000 40. The total size of the ITES sector in Bangladesh which includes both export and domestic BPO is only USD 150mn. According to NASSCOM. Sri Bangladesh. IT-related engineers Source: BASIS 4 Increasing knowledge base Fresh Addition 2. Figure 3: The graduate workforce of Bangladesh Upcoming Computer science and software engineers IT-related field.500 5.000 69 . BTRC has started to issue call-center licenses at a 5 very low price. 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 hope. Vietnam. English. Environment. in 2007 companies worldwide spent USD 280bn on outsourced call-centre services. global services practice. Pakistan and Bangladesh Nikhil Rajpal.AT Capital Research The market is getting bigger The global outsourcing focus is shifting towards Philippines. Law and Computer Engineering.500 15. 9 Industry experts forecast it to be double or triple in the next three to five years . According to BASIS. at both undergraduate and graduate levels. Everest Group said ‘India cannot possibly handle all the work it gets. Each year educational demand in these 4 fields is increasing creating a need for more quality educational institutions. Israel. Global player Cisco also believes that Bangladesh could get 10% of the estimated USD 142bn IT and back-office outsourcing market. Lanka. environment An enabling environment recent The 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.
Bangladesh already has a large number of NRBs working in IT related professions around the world. telemarketing. provision of technical support. and website development. Rajendra Bhandari of IIM. that can be done in a cost effective manner in 70 . help-desk service online and general information.g. they chose that country because a well-placed Sri Lankan 1 worked for the European firms.000 or more Scope of joint ventures informationThe growth of information-technology (IT) related universities. medical claims processing. multimedia software development. directory assistance. animation. It will take credibility. EPZs The Government continues to set up EPZs to facilitate different industries. Educational institute providing custom made programs consisting of threeyear degree courses supplemented by one-year technical certificates can be formed to meet industry demand. for example. The government of India did the same to encourage BPO in India. They can be encouraged to set up IT enterprises in Bangladesh through various incentives e. access to funds etc. website publishing CAD (Architecture. Similar industrial parks for the IT sectors with appropriate fiscal incentives will create an advantage for entrepreneurs. institutions.000 or more 8. handling of credit and billing problems. may . market research. provide financing. Industry promotion offices can be set up in key cities around the world. hotel and airlines reservations. mechanical. follow-up sales support and service. The involvement of NRBs with expertise and experience from Silicon Valley. Leveraging NRBs The government’s role Changing perception Capable human capital should be developed by setting up training centers for should skills. and training centers has led to the emergence of about 400 IT and Information Technology Enabled Services (ITES). Three major categories are: custom software development and maintenance. construction) Source: BASIS 4 Size of the workforce 12. Government. English.AT Capital Research Figure 4: Potential workforce in Bangladesh for BPO and ITES Skills type Graphics (2D/3D). Growing importance towards the sector will open up infrastructure investment opportunity for the investors. database development. will enhance the credence of Bangladesh’s ability to provide quality services. There is cost saving incentive for the global player and the 4 benefit of knowledge transfer for the local firm. credit card sales. loan processing. human resources functions. There are more than 100 companies exporting to around 30 countries. tax benefits. Bangalore studied five European firms who have outsourced to Sri Lanka. DTP. capability and cross-cultural understanding to achieve operational efficiencies. account management. Such a strategy will remove the problem of low access to finance for such unconventional businesses from the traditional banks. website design New media. as well as private venture funds.000 or more 5. Their enthusiasm to come back has been reflected in the recent NRB conference in Dhaka. IT and other necessary skills A partnership between the industry and the academia should be formed to increase availability of graduates with the right kind of skills. BPO has a wealth of business opportunities for local businesses such as selling of various products and services for various companies. There is significant opportunity here to develop joint ventures with credible global players.
Although the sector has yet to flourish Nikhil Rajpal foresees in 9 the next 2-5 years. there will be a need for 850. After two years of operation. It has been established in collaboration with Danida. only 10-20% of these 9 are BPO ready. With additional focused vocational training coupled with end user specific development.000 graduates every year but. data research. remote education.000 more IT professionals in 11 Europe.AT Capital Research Bangladesh. Setting up universities and training colleges to cater to the significant demand. 20052006 revenue has doubled. database creation. With low cost human resources and the development of quality education and technological infrastructure. analytical services. Businesses need to be informed of the opportunities they may be able to leverage from their existing operations. we believe Bangladesh can capture significant market share if the necessary focused investment strategy is in place. outsourcing Knowledge process 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. Most of these jobs will be outsourced. Conclusion With a growing global outsourcing and offshoring market. ventures transfer. market research. Between. Soaring demand for IT graduates will make such universities and training colleges highly desired. content development. Proximity to India should be leveraged. These can be developed with global players in outsourcing. Its client list includes international brands such as Dell and Intersport. Call centers opportunities The BTRC is facilitating the development of call centres with the issue of new licenses. The country has yet to have the capability.000 call centre jobs will be generated.000 to 20. while the number of employees has risen from 20 in 2005 to 34 in 2007. credibility and cultural understanding about the industry as India but it can offer significant cost advantage and also diverse expertise. and diminishing cost advantages of the traditional providers. medical content and services. nearly 10. International accredited training centers will also be in high demand. The firm offers a full range of DTP solutions. animation and simulation. R&D in pharmaceuticals and biotechnology. there are substantial opportunities for Bangladesh. Such relationships will diversify risks in the JV partners cost base and provide much needed credibility for the local partner. Experts forecast by 2015. 71 . publishing and legal support. may provide an opportunity from the overspill from India’s resource constrained market. Centres developed in tandem with English speaking classes. The firm enabled its clients to cut as much as 80% expenses without sacrificing quality. which has supported the project through its B2B program. Bangladesh according to an industry analysis produces 200. financial modeling. Joint ventures can provide knowledge transfer. opportunities Global opportunities 10 Case Study: GraphicPeople’s Danish Alliance GraphicPeople started its operation in Bangladesh in 2004 as a subsidiary of Danish communication house PeopleGroup. skills could be developed in all these areas. equity research. With focused training the knowledge gap can be closed. its success is reflected in its positive bottom-line growth.
Corbitt. Danish Success with Outsourcing In Bangladesh. BASIS.AT Capital Research References 1. 2. Dhaka. Financial Express (2008). F. CiteHR Human Resource Management Community (2008). (2007). (2008). 2008. R. 9. “50 Management Ideas”. K. Available at http://www. & Chaudhuri. Available at http://www. Available at http://timesofindia. (2004).. Accessed on 23 March. 11. Embassy of Denmark. Ray.dk/en/menu/DevelopmentIssues/Businesstobusin ess(B2B)Programme/B2B+Case+Stories/Case+Story+no+1+GraphicPeopl th rd e/.html. “Extending India’s Leadership of the Global IT and BPO Industries”. Chicago: Dearborn Trade Books. S. The World Bank. 2007. “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of USUSD 30 bn Annual Migrant Remittances by 2015”. Article th published in The Times of India on 20 February. A. E. Accessed on 23 March. The Economist (2004). 2008. “Doing Business in 2008”. Ministry of Foreign Affairs Denmark. NASSCOM-McKinsey Report (2005). Article th published in the Financial Express on 20 March. Sachdeva. 7.pdf. 8. London: Quercus. 2008. 3.com/Business/India_Business/Bangladesh_to rd _issue_call_centre_licences/articleshow/2796515.doingbusiness. Available at http://www. S. S. rd Accessed on 23 March.indiatimes. Sinha.citehr. (2007). “Survey on Outsourcing”. 2008. (2008) “Bangladesh to issue call centre license”.ambdhaka. 4. Walling. 10..com/knowledge-process-outsoucingkpo-vt4579.um. M. India: Indian Institute of Management Calcutta.org/documents/FullReport/2008/DB08_Full_Rep ort. Content & Publication Department.D. 6. 5. 72 .cms. Article published on 8 November. 2008.. “Call centre licences from next month”. “The Outsourcing Revolution: Why it Makes Sense and How to Do it Right”.
computer programmer. surveyors and managerial jobs. Ashek Ishtiak Haq ashek.Manpower AT Capital Research Manpower Asian Tiger Capital Partners The global manpower industry will amount to USD 600 bn by 2015. Bangladesh can fill this labour email@example.com mn-0. teacher. A recent report by DANIDA has estimated that Bangladesh could capture 5% of this – USD 30bn. Bangladesh with a young and energetic population has a huge opportunity to benefit. For skilled jobs these include doctors. fabricators. Bangladesh could aim to emulate the Philippines’ story and develop more nurses targeting an aging demand in developed economies.com 73 . The industrialized world is aging and facing negative growth in population. With focused investment in training Bangladesh could capitalize on these opportunities. 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. There is substantial demand for unskilled/semi skilled jobs such as masons. Bangladesh would have to send 0. carpenter and garment operators. Vocational Training Institutes are critical in developing a more profitable manpower exports further up the value chain. cleaners.9 mn people abroad annually. There are substantial opportunities to create stand-alone recruitment agencies and Manpower Consultancy firms which provide integrated training & HR services. To gain 5% market share by 2015. engineer. The current manpower recruitment agency sector remains relatively undeveloped and unregulated.
from USD 1. Nepal. The top destinations are Saudi Arabia and UAE.000 added annually. and China (USD 22.000 2006 20. 74 Mexico India Morocco Pakistan UK .000 10. up 25% from the prior year. Through focused and targeted training and investment in HR 1 consultancies we believe it could achieve this goal. temporary or permanent migration figure will cross 80100mn. and Bangladesh has an opportunity to capture 5%. With the inclusion of unrecorded flows it has been estimated that remittances exceed FDI flows to developing countries.000 USD mn 15.8bn accounting for 6% of the increase in GDP. 8 are from developing countries. Countries receiving the most remittances are Mexico (over USD 25bn). remittances are a significant contributor. Pakistan.AT Capital Research Bangladesh can grow its manpower industry from USD 8bn to USD 30bn year.5bn).0bn. Developing countries’ share is forecast at 70% of the total. Indonesia and the Philippines. Global mobility is increasing F i gure 1: Top 15 remittance earners 2005 25. The cumulative. The main competition for Bangladesh will be from India. A 2003 UN report suggests about 3% of people are on the move in the world.000 0 Bangladesh Philippines Romania Spain Lebanon Serbia France Germany China Belgium Source: Ray. or USD 30bn. Sinha & Chaudhuri (2007) Remittances have grown three fold from 2001 to 2006 1976. India (USD 23. Among the global top 20 remittance receivers. Global remittances through official channels were estimated to be USD 268bn in 2006. Including contributions coming 1 through informal channels it could exceed USD 8. WTO’s GATS Mode 4 agreement will grant much greater freedom of movement of temporary workers. The Bangladesh manpower export industry is worth USD 8bn a year In a country with GDP USD 70bn. A recent report sponsored by the Royal Danish Embassy estimated that the Global Manpower industry will be USD 600bn.000 5. 30% of export earnings and 20% of import earnings. This is forecast to expand to USD 400bn by 2010 and cross USD 600bn by 2015.8bn in remittances. In recent times Nepal and Vietnam have 1 emerged as new sources of labor supply. Bangladesh started to send manpower abroad in the 1976 Since then a total of 4mn workers went abroad with 300.8% share).5bn). Remittance earnings have grown three fold between 2001 and 2006. In 2006 Bangladesh received USD 4. The manpower agencies and other supporting services revenue is estimated to be between USD 250mn to USD 400mn. By 2015 it could reach USD 1bn if Bangladesh can capitalize on the opportunity.6bn to USD 4. of the market (it now has a 1. Sri Lanka.
75 . carpenter and garment operators can create more profitable manpower which can be a more lucrative export.A Kuwait Malaysia Singapore 30% Bahrain Others Source: Ray. One of the key competitive advantages is the low average age of the workers. Bangladesh has a strong presence in manpower exports in many countries Its workers have a good reputation and are known to be loyal. Only 10-20% are certified vocationally trained and less than 10% general college graduates are exportable. unskilled. Most Bangladeshi migrants are young. disciplined. who suffer from domestic unemployment rate of 39. invest in human capital through education and training. Sinha & Chaudhuri (2007) Manpower can provide more benefits than just remittances provide benefits. free of local economic downturns. With the current deficiency in vocational training. Bangladesh can learn from the Philippines’ story and develop more nurses targeting western aging population demand. 95m citizens are between the 1.4 ages of 15-64.AT Capital Research Figure 2: Top destination countries for Bangladeshi workers in 2006 5% 6% 10% 4% 9% 36% UAE K. cleaner. Manpower exports can provide significant national benefits. male. one cannot underestimate the value derived from returning migrants bringing back managerial skills and technical know-how. Training has become a necessity with the structural shift towards activities demanding higher skill and the emergence of automation.S. Bangladesh has to industry. While remittances are widely seen as the key economic benefit. Sinha & Chaudhuri (2007) A structural change where destination countries are looking for higher skills. exports countries.9%. training Institutions serving targeted labor pool such as mason. The community abroad creates 1 significant international networks. aged between 15-30 years and poorly educated. 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. fabricator. hardworking and adaptable and have a propensity to save. targeted vocational training key to move up the value chain Challenges To capture market share of the growing manpower industry.
The Philippines have one of the most enviable education systems in Asia. education. Restructuring the existing system and developing new products can attract forex e. Vietnam. Poland. The Philippines have dominated the manpower export industry since the 1970s. A computer databank can play a vital role here. increasing the minimum wage from USD 200 to USD 400 and interviewing the employer. Colombia. special pension funds which include resettlement and medical services for returning migrant workers. Jamaica. The Philippines have 190 universities and colleges training 9. Sub-Saharan Africa. 76 Policy level relationship building The emerging competition Effective and economic financial channels required for legitimate remittance transfer . competition: The emergence of newer competition New countries such as Turkey.000 household workers in 2006. an association of 700 member agencies. and Philippines are making the market more competitive. image. Another essential objective is building trust and through a superior brand image Strategic ties and relationships with countries where migrants go to work should be developed. Romania. People refrain from the formal channels because of better exchange rates. Bangladesh needs to position itself effectively increasing its skills base and retaining its traditional comparative advantages over other suppliers.000 nurses each year. Tying the agent’s commission to salary negotiated will align their interest with that of the employees. time savings. and Nepal with the older competitors such as India. The government’s recent initiatives regarding the industry are upgrading worker skills. This success story has become possible due to several factors. efficient and customized delivery system of remittances.9bn more than triple Bangladesh’s official remittances. Tunisia. Fiji. Increasing channeling of remittances through legal channels can be facilitated through reduction in transaction costs using financial instruments. They have exported 9. Mexico. orientation courses on country specific culture and language. obliging the employers to pay for travel fees. compelling the agent to recruit from listed workers. Morocco. They have over 800 higher education institutes. 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. LINKAPIL floated development bonds targeting migrant workers. For years The Philippines’ teachers have successfully met and cleared US teacher licensure examination. English is the primary medium of instruction. low transaction costs and ease of remittance. They have established LINKAPIL to enable migrants to support development projects at home.g. should ensure better monitoring. screening and regulation of recruitment agencies in priority. Somalia. China. They produce 50. 25% of the world’s seafarers are from Philippines. Bulgaria. Bangladesh and at destination locations is a priority The sector suffers from a poor local and international image with a reputation of charging excessive fees. in infrastructure. Trade attaches have to proactively promote Bangladesh. The Bangladesh Association of International Recruiting Agencies (BAIRA). exchange rate incentives for migrants.000 teachers per year. Changed economic policies and incentives may encourage migrants to send more remittances home.1 Reforming the recruitment agency sector The identification. and healthcare. ensuring health and safety at the job-site. Philippines remittance earnings for 2006 were USD 14.AT Capital Research study: Case study: The Philippines’ Revolution. dishonesty and inappropriate contract negotiation. Through the organization the migrants have invested USD 1bn in the economy. Also recent initiatives like Western Union joining the postal 1 service to deliver money will facilitate money transmitted through legal channels. A combined marketing effort both from private and public sector showcasing the substantial manpower resources needs to be formulated and executed.
cleaner. Aligning training need with the opportunities can present the local entrepreneurs prospects with prospects in vocational training institute. It has been forecast that by 2015 there will be demand for 850. For skilled workers this includes doctors. Bangladesh could take 5% or USD 30bn of the global market.g. Hungary and Bosnia. Japan. sales rep. financial The financial industry can target manpower employees with innovative products. managers. nursing. and income equality are the EU. Targeted skills training. The most sought after unskilled worker jobs are for mason. deposit schemes or bonds. Recently Romania has been seeking Bangladeshi workers for its garments industry. For example. the expansion of global labor markets. For example engineers.AT Capital Research As the workers from Emerging European economies are leaving for better opportunities in Western Europe. accountants are in higher demand all over the world. scientists. Until now. waiter. teachers. low birth rate. oneHR High quality one-stop training and HR consultancy providers for prospective migrants will certainly help the industry. With a large. Estonia. young and dynamic population suffering from high unemployment domestically. foreign employment is a significant opportunity. janitors. plumbers and electricians to the UK and is suffering from shortage in its own market. USA and South Asian countries. surveyors and managerial jobs. The most attractive countries in terms of unemployment rate. Focused targeting of these 1 markets provides significant investment opportunities. orderlies). International network can 1 provide more options for their placements. 77 New EU member nation migration provide an opportunity for Bangladesh to fill the gap Developed nation demographic is and continues to age. Seven of the ten occupations with the fastest growth are in low-wage services that require minimal training (e. a shortage of highly educated workers and an aging workforce in industrialized countries. and also special pension fund. Entrepreneurs providing these vocational skills will have significant investment opportunities. carpenter and garment operators. could propel Bangladesh further up the value chain. current The current surge in labor demand has been prompted by faster and cheaper transportation.000 IT or E-skill workers in Europe. the US will need 21mn more workers by 2014. recruitment and career consultancy could provide a more comprehensive service to workers and users. Bangladesh has been able to access 20% of the global manpower market. Bangladesh has the opportunity to serve this market. For example Poland has seen an outflow of carpenters. A fully integrated high quality service focusing on the migrants’ vocational and cultural training. Philippine government has used the government body LINKAPIL program to float development bonds targeting migrant workers. computer programmer. Conclusion: Conclusion: As demand increases for manpower globally. an efficient and transparent employment agency industry and alliances with international agencies. teacher. venture alliances Joint venture alliances with a reputed international placement agency for skilled workers can open up a profitable market for higher value human resources. software programmers. fabricator. Both government and private sector can take similar initiatives for the migrant workers. engineer. 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 . Similar opportunities can be found in Poland. OECD will require 25mn workers by 2014 and 50mn by 2020.
Ray. “Romania to recruit more Bangladeshi RMG th workers”. The Daily Star.cia. 4. (2008).AT Capital Research References 1.thedailystar. 78 . 2008. Sinha..thedailystar. Available at http://www. Accessed on 25 March. Article published in the Daily Star on 28 February. CIA Factbook.net/2004/10/13/d4101301011. M. (2004).htm. (2007). “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of USUSD 30 bn Annual Migrant Remittances by 2015”. S. Accessed on h 25t March.html. Mahmud.. 3. 2008. A. 2004. 2008. K.gov/library/publications/theth world-factbook/geos/bg. Article published in The th Daily Star on 13 October. Available at http://www. 2. Available at https://www.php?nid=23894. & Chaudhuri. Accessed th on 25 March.net/story. India: Indian Institute of Management Calcutta. S. 2008. “Youth lost to Joblessness”.
With the demise of reverse-engineering in India and China. Sanwar Ahmed sanwar. Since many companies have acquired international certifications like USFDA. Between 2003 and 2006 pharmaceutical exports increased to about 61 countries from 51 and quadrupled in value from USD 7. the industry can emerge as a regional hub for pre-clinical testing and clinical trials. Asian Tiger Capital Partners According to the WTO TRIPS agreement. the top ten players account for 65% market share.5mn. This provides a unique opportunity for Bangladesh over India and China.000 different brands which meet 97% of the domestic demand. LDC’s are exempted from “Patent Protection” until 2016 allowing legal reverse engineering and sale of patented products.hossain@at-capital. Bangladesh has made significant progress in the export market. 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. Of the 245 registered pharmaceuticals. UKMHRA and TGA. who are under the patent regime.AT Capital Research Pharmaceuticals Pharmaceuticals With a USD 600mn industry and an average annual growth rate of 12%. Through the establishment of modern technical facilities. Establishment of adequate reverse engineering and API manufacturing facilities provide a substantial market for import substitution as currently 80% of the APIs are imported. Bangladesh can penetrate into regulated and unregulated markets. Bangladesh is in a position to emerge as one of the regional R&D centres for Pharmaceutical Research. Local manufacture of vaccines and injectables will enable Bangladesh to become self sufficient in the production of formulations.9mn to USD 36.com 79 . Primarily a generics industry producing about 8. Bangladesh provides a strong platform for off-shoring/outsourcing generic bulk and formulation drugs due to a cheap labor force and established infrastructure.com Dewan Ashrakat Hossain ashrakat. Local companies enjoy 86% market share. the Bangladeshi pharmaceutical industry is the biggest (in volume) amongst all the LDCs.ahmed@at-capital.
Sri Lanka meets 98% of its drug requirements through imports mainly from India. In 2007 the market was worth USD 600mn and has grown at an average rate of 12% over the last five years. India has recently been subjected to patent protection in 2005.9 91.6 590. Germany and India. Nepal. Given this position.35 4. the Indian pharmaceutical industry is one of the largest generic pharmaceutical industries in the world. The TRIPS agreement has given it an advantage as an LDC to legally reverse-engineer patented products and sell in the local market.4 128.6 490 1 2006 123. Steady Growth in Market Size Figure 2: Bangladesh pharmaceuticals market (USD mn) 2004 1st quarter 2 nd 2005 95. only Bangladesh and Pakistan have self13 sufficiency in the formulation segment.3 the industry compete on a globally.2 137.6 510 2007 142.1 110. while the top ten domestic manufacturers constitute about 64% of the total pharmaceutical 1.4 market in Bangladesh.3t The global pharmaceutical industry is expected to grow to USD 1. Nepal. This places Bangladesh at an advantage in the generics market until 2016.0 28 210 0. The Bangladesh pharmaceutical industry is the largest white-collar labor employer It is primarily a generics market.10 600 6. Currently. Bangladesh imports 80% of its bulk drugs mainly from India. China and Europe.3tn by 2020. However.6 10. The Bangladeshi market.8 157. Pakistan and Sri Lanka have the capability to make finished products (formulations) from imported ingredients (bulk drugs). Although Bangladesh.6 94.2 145. The top two domestic manufacturers. Square and Beximco Pharmaceuticals have a combined market share of over 27%. is growing rapidly at an average rate of 12%.7 136.8 120.000 11. Pakistan and Sri Lanka can produce formulations.4 416. with the new patent regime MNC dominance is 13 anticipated with the need for more R&D. producing both patented and off-patent products. investment in various areas such as adequate reverse engineering facilities and API (Active Pharmaceutical Ingredients) plants will help 1. India has the capability to produce both bulk drugs and formulations in the South Asian region.5 104.6 154. the UK.4th Quarter . Bangladesh has the largest pharmaceutical industry among the Least Developed Countries (LDC).5 quarter 3rd quarter 4th quarter Total Source: IMS Report.2007 80 . though currently small from a global perspective. Japan. 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 9.2 156. The industry is dominated by local manufacturers who account for 86% market share.6 107.AT Capital Research The Bangladesh Pharmaceutical Industry 1. Import of bulk drugs in neighboring countries Pakistan meets 90% of its bulk drug requirements through imports from China.10 whiteemployer.
10 0. Regulatory environment The local drug ordinance established in 1982 was designed in a manner to protect the local players. Strong manufacturing base Among the LDCs Bangladesh is the only country which is almost 100% dependent on drugs produced locally. Malaysia. no MNC can import that drug.9 7. Increasing Penetration of Exports Figure 3: Export statistics (USD mn) Finished Raw Year products materials 2001 2002 2003 2004 2005 2006 2007 4. are able to export their patented drugs. Other countries.5 35.02 0. In terms of finished formulations.30 0.5 5.10 n/a No. License fees would be applicable for export to any non-LDC where the patent holder has registered his patent. Saudi Arabia. This means that Bangladesh can legally reverse-engineer patented products and sell them in the local market as well as export to other LDCs. Although 21 local pharmaceutical companies are producing 41 APIs.9 20. Bangladesh also has the largest market size among the LDCs giving Bangladesh a strong manufacturing base. The TRIPS agreement along with the national drug policy gives the local companies 9 in the generics market a significant advantage. Bangladesh. No license fees Due to its LDC status and the fact that Bangladesh has no patent protection for pharmaceutical products. no license fees are payable for manufacturing and for export to other LDCs. has to import a large portion of API required for finished formulations. The TRIPS agreement can be used to ensure access to innovation.20 0. around 80% of the total API required by the industry comes from 4. the ‘Doha Declaration’ of TRIPs was adopted. Canada. including India and China will not be able to export their patented 4 drugs. Korea.AT Capital Research Over the last few years the Bangladeshi pharma industry has seen a significant increase in exports. either because the patent is not filed or because it is not 4 enforced. as the facility will be reserved for LDCs until 2016. of countries 17 32 51 62 67 61 65 Source: Primary Interview.11 imports. 81 . 9 Italy.3 20. One clause states that if 4 or more local companies manufacture a certain drug. LDCs were exempted from ‘Pharmaceutical Patent Protection’ until Year 2016. No such fee has to be paid. Only 49 LDCs. DDA Competitive Advantages Patent exemption In 2002.9 0. the pharmaceutical industry in Bangladesh accounts for 97% of local demand with the balance relating primarily to the import of vaccines. the majority of which are LDCs. Export destinations include Japan.6 36. invention and affordability of 4 pharmaceutical products and processes by developing nations. including Bangladesh. the UK and the USA . At present Bangladesh exports to over 65 countries around the world. however.60 0.
API facilities will not only play a significant role in import substitution. Labor cost may account for up to 50% of the overall manufacturing cost for APIs.AT Capital Research Low logistics costs According to the World Bank’s Doing Business report. To be able to do this. proper R&D is required. Bangladesh currently has to import 80% of the API from countries including India and China as the local R&D required 82 Development of domestic API market . both quality is and cost advantage. inland transportation and handling costs are very competitive in Bangladesh at USD 150 per standard cargo compared to USD 404 in India. China and Brazil are all sources of raw materials and signatories of WTO. declining R&D revenues. it will also open the doors 4 to mass scale exports. and trim the ‘time to market’ for new drugs. increase development capacity. The allowable limit for pharmaceutical samples export is USD10. Competitive labor force Bangladesh is internationally very competitive in terms of labor cost. Bangladesh needs to invest in ‘DMF Standard API Facilities’ with all basic infrastructures. amenities and special facilities. such as drug discovery and marketing.Although companies Bangladesh Investment 2013 as& bulk offers/ global pharmaceutical as an LDC. outsourcing of research and clinical trials to reduce costs. rather than on manufacturing. 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. it is difficult to source raw materials or Investment Opportunities APIs to produce patented drugs. Since Bangladeshi manufacturers are not fully backward integrated. comarketing alliances. The country’s existing “Export and Import Policy” is followed. Export regulations & prospects Currently. 10 Case Study : Success in Outsourcing Facing lagging sales of patented drugs by MNCs like GSK and Pfizer in their home markets. 10 Success in outsourcing Over the last 5 years the CRAMS industry has been contributing close to 8% of the total Indian pharmaceutical business. it is expected that they will not produce raw materials of patented products. Import license of raw materials are issued to all manufacturers which allow them to import 6. Developed countries are expected to further propel the CRAMS industry to grow at nearly 32% from 2006 to in R&D India drug API facility . many MNCs have turned to contract manufacturing and research services (CRAMS). According to the new three-year Export Policy for FY07 to FY09 pharmaceutical products were included in the list of thrust sectors. Outbound passengers will be able to carry USD200 worth of products with them abroad. 7. USD 520 in Tanzania and USD 12 600 in Ethiopia. India has emerged as the principal destination for global pharmaceutical companies. These strategies permit MNCs to focus on their core competencies. 8 from most parts of the world. they 4 can capture only part of this competitive advantage. In order to take full advantage of the ‘Post-2005 Opportunities’. and rising costs. As countries like India. allowed to manufacture patented products. making 4 prices very competitive.000. there are no restrictions on the export of pharmaceuticals.
the industry has to come up with its own portfolio of product patents. Thus. Injectables. Dr. there is no such R&D facility. insulin and vaccine plants. Bangladesh might collaborate with global players and perform outsourced R&D activities for them. In order to compete with global players. Bangladesh has export opportunities in the developed and regulated markets in the form of contract /toll manufacturing and under-license manufacturing. Bangladesh should aim to capitalize on the redundancy of India’s generics 1 industry’s’ significant resource. manufacturers of Bangladesh need to invest in manufacturing plants and apply for certification (e.leveraging a low cost base facilities.AT Capital Research for the reverse engineering is not adequate. 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. insulin and vaccine plants. In order to take full advantage of the Post-2005 opportunities. only 6 are locally manufactured which does not include the highest revenue generating molecule. a potential investment opportunity lies in establishing such plants. facilities ities. the vast reverse engineering sector in India which is more technically adept than Bangladesh is at a loss. Investment in contract manufacturing facilities Considering the large number of medium and small sized pharmaceutical firms in Bangladesh requiring funds to setup production units for specific drugs. Ranbaxy allocated approximately 7 %. Bangladesh could become a contract manufacturing venue for global players. 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. Bangladesh needs to invest in R&D for reverse-engineering of patented drugs. This would ensure substantial import substitution. Outsourced R&D . In 2005. India and China have been involved in pharmaceutical R&D for several years. Investment in R&D for developing new drugs. In Bangladesh. Insulin and vaccine production 83 . the country should invest in injectables. Optimum capacity utilization and investment in plants is important for 3 penetrating the export market. Investment in R&D outsourcing facilities.g. India has recently started investments in new drug development after entering the patent regime. India has had to abide by patent protection. none of which are currently present. Investment in injectables. Reddy’s committed 14 % of its annual sales to R&D. Of the top 15 API molecules. UKMHRA and TGA) in regulated markets. 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. The rest are imported. Due to low skilled labor costs and other factors such as subsidized power. USFDA. In order to capitalize on these export opportunities. To take full advantage of the Post 2005 opportunities. The toll manufacturing industry in India was worth 3 USD350 mn in 2007. Bangladesh has an advantage as a location for possible outsourced R&D. Since 2005. 10 whereas.
Generic Drugs Market”. (2005). W.gov. Hassan. 7. (2007).bd. 8. 10. References References: 1. (2007). 360-Global Pharmaceutical Perspectives”.bd. (2008). Primary sources: interviews with officials of GSK Bangladesh. This makes the generics market of Bangladesh much more attractive than that of India and China. Begum. (2006). With the right strategy Bangladesh has every chance of capturing a substantially larger market share. Official website of Centre of Trade and Development at www. India has recently been (2005) included into the patent regime.gov. Available at http://www. Greene. 2. Federal Ministry for Economic Cooperation and Development.org.centad. (2007). Vaccine and injectable product lines remain relatively underdeveloped. 3.bd/pdf/2007/73-89. Furthermore.S. 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. GTZ. 13. (2006).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. “Intelligence. 84 . 6. local companies can take advantage of reverse engineering and produce patented products at lower cost.org.ndc.3tn by 2020 and the emerging markets are expected to grow at double digit figures in the near future. 5. World Bank. As Bangladesh imports a major share (80%) of its API. 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. The global pharmaceutical markets will more than double in value to USD1.boi. It is likely that a majority of the companies will not be able to afford quality R&D facilities. 4. “Study on the Viability of High Quality Drugs Manufacturing in Bangladesh”. 11. Heavy investment in R&D is essential. 4th Quarter 2007”. BAPI.ddabd. R. “Improving the Competitiveness of the Pharmaceuticals Sector in Bangladesh”.pdf. 12. Primary sources: interviews with officials of Directorate of Drug Administration. USITC: Office of economics working paper. Official website of Export Promotion Bureau at www. “Emergence of India’s Pharmaceutical Industry and the Implications for the U. Official website of Board of Investment Bangladesh at www. N. IMS. World Bank Draft Policy Note. In the long term Bangladesh should prepare for the “Post 2016” phase. Official website of Directorate of Drugs Administration (DDA) at www. IMS. As a result. “Post WTO opportunities & Bangladesh Pharma Sector”. 9.gov. “IMS Quarterly Review. February 2005.epb. “Pharmaceutical industries: Potential and Possibilities”. NDC Journal.
a sizeable reduction of fertility and child mortality rates. the lowest maternal mortality rate in South Asia. Global pharmaceutical giants can lower their research and development costs by shifting the pre-clinical trials of drugs to cheaper locations like Bangladesh. Medical tourism in Asia is experiencing a growth rate of 20-30%. Firoz Ahmed Ph.firstname.lastname@example.org 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. Substantial investment is required in Bangladesh if it is to reach the standards of neighboring countries in terms of the medical infrastructure and facilities. Bumrungrad (Thailand) and Apollo Hospitals have opened operations in Bangladesh.com Tami Zakaria tami. 85 . World class medical service providers like KPJ Healthcare (Malaysia).AT Capital Research Healthcare Healthcare The global healthcare industry was worth USD 4. India. laboratories. Bangladesh can take advantage of its weak currency and strategic location in the Asian hub to attract medical tourists. insurance companies and fitness centers in Bangladesh.ahmed@at-capital. Malaysia. As developed countries are forecast to run short of their domestic supply of medical staff. The growing purchasing power of a sizable middle class provide opportunities for investments in hospitals. This will require significant support from information and communication technology infrastructure. travel and accommodation facilities. diagnostic centers. Bangladesh has made significant progress in the healthcare sector including absolute eradication of polio. South Korea and Singapore are attracting the maximum number of medical tourists by providing quality medical service at economic prices. Thailand.5tn in 2006 and is still email@example.com Ahmad Sajid ahmad.D firoz. Bangladesh needs to invest heavily in health care infrastructure. there are significant opportunities in training and exporting manpower from Bangladesh.
442 3.000 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.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. Nepal and Pakistan. resulting from lack of standardization of treatment 2 charges at hospitals.AT Capital Research 15 With its large population of around 150mn people needing improved healthcare. Most of the specialist doctors are stationed in Dhaka and work with private hospitals. especially in diagnostic facilities.169 and nurse to population ratio is 1:6. This has been possible with the increased participation of the private sector. These are wide ranging and span across various subsectors. WHO statistics show that 0. Areas for improvement: Lack of world-class medical infrastructure support. The infant mortality rate is lower than India. telemedicine for the geographically dispersed population. Bangladesh has made excellent progress in many of the key health indicators. Asia’s biggest healthcare service 14 provider Apollo has been operating in Bangladesh since 2005. Mostly patients go abroad for diagnosis of disease and ultimate treatment. Inadequate number of skilled manpower. Outside Dhaka primary and preventive healthcare is provided by community health clinics. organ 12 transplants and other major treatments. mainly NGOs and MFIs.54% down from 2.1% of the Bangladeshis are insured2 140 3. It has fully eradicated polio and 97% of the population has access to safe drinking water. health insurance for more than 98% of the non-insured population. Square Hospital in Dhaka has an affiliation with Bumrungrad Hospital of Thailand. Government hospitals and healthcare centers of NGOs. medical tourism for the NRBs. pre-clinical trial centers for local and global drug manufacturers and export of trained medical staff to developed countries. The number of specialist doctors with international recognition is few. The proportion of underweight children has gone down from 72% in 1986 to 51% in 1 2000. Tertiary healthcare is mostly Dhaka city based. The doctor to population ratio is 1:3. The medium sized hospitals and clinics based all around the country refer patients to private and government hospitals in Dhaka.442. Government of Bangladesh 13 A vast customer base for healthcare Polio has been fully eradicated 0. For example. This sector is unprofitable due to lack of control over costs. Upazilla Health complex. These hospitals 86 . Bangladesh has significant investment opportunities. Figure 1: Key health indicators of Bangladesh. 2005 Total population (mn) Hospital beds per 10. KPJ Healthcare of Malaysia operates as a joint venture partner with United Hospitals Ltd. The population growth rate is now 1.43 3 6.5% in 1990. Health insurance plans are rare.000 population Physicians per 10.1% of the population was insured in 2005. especially for heart surgery.
South Korea and Malaysia for medical purposes today. Total change. The pharmaceutical giants are striving to find cheaper sources of facilities for developing new drugs. Global pharmaceutical sales account for USD 602bn. Achieved a 99. 4 USA. US & OECD countries account for USD 4. adoption of the latest technology and strong customer focus. With an estimated 1. 4Although the tourism sector as a whole is growing by 4-6% a year in Asia. In India. they are being targeted by top medical service providers. Global healthcare trends are changing healthcare The global healthcare industry is currently undergoing significant change.000 specialists and super-specialists and 3. with an annual growth rate of 7%. China.7bn.5tn in 2006. Australia. 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. industry USD10 10bn Globally. 87 Clinical trial industry growing at 15% per year . While occupancy rates in India are around 77% they are much lower in Dhaka.000 medical officers spanning 53 clinical departments in patient care. 6 40% of which goes behind drug testing.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. India. 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. India. health care expenditure across the world was USD 4. medical tourism is a growth area.AT Capital Research attract patients who are in need of tertiary medical care. medical 20tourism is growing between 20-30% year on year. As the middle income groups of the population are gaining purchasing power. Singapore. Apollo’s experience is quite different in Bangladesh since its arrival in 2005. Of this. the clinical trial industry is estimated to be worth over USD10bn and is growing at 15% a year. It takes around USD 800mn to bring a new drug to market. this business sector is expected to grow at a CAGR of 36% from 2006 to 2011 and be 7 worth USD 1bn. with low capital costs and less time required to recruit volunteers for clinical trial centers. Apollo DKV Insurance Company offers comprehensive cover products. 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. and France are market leaders in biotech. With increasing medical costs in developed nations and increased rate of non-insured population. study: Case study: Apollo Hospital – India vs Bangladesh experience 3. the sector 5 is expected to swell to USD 4bn in Asia by 2012. Some of the key facts about Apollo in India are: • • • Employs over 4. out-patient products and hospital cash policies. The biotechnology industry has mushroomed since its inception and at present is equivalent to USD 50. where lower take up and occupancy has somewhat limited investment in associated products and services. 15.5mn people visiting countries like Thailand. There are mixed results regarding performance of these hospitals.2tn.
accessing the rural population 88 . can pave the way for the development of the health 18. monitoring and treatment of patients via video conferencing over 19 the internet.000. Telemedicine involves the remote diagnosis. 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. ophthalmology.AT Capital Research Opportunities for Investment The healthcare sector in Bangladesh has moved a long way during the last few decades. dental. It has been estimated that the middle class accounts for 22% of the urban 8 population. different Creating telemedicine centers in different districts With 80% of the population being rural. orthopedic. Taking advantage of the weak currency and strategic location in the Asian hub. worldEstablishing a world-class hospital The primary target market will be the upper income section of Bangladeshis who go abroad for medical treatment and the 4. access to treatment in remote locations is required. neurology. To attract tourists a comprehensive range of treatments would need to be available . Bangladesh can also attract significant number of medical 1 tourists from developed countries. Joint ventures with foreign insurance companies. nephrology. the health insurance market is still ill explored. center. As health care services are becoming more expensive there is an opportunity for expanding health insurance market.000 NRBs worldwide. Joint ventures with leading healthcare providers like Parkway Hospitals in Singapore would provide credibility and access to leading service provision. 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. Staffing the hospital with a pool of specialist doctors such as reputed NRB doctors based in the UK or the USA. Health insurance administration In Bangladesh. As the global healthcare industry is experiencing shifts. midEstablishing a mid-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. Delta Life Insurance has a hospitalization insurance scheme. will be a key factor in determinant of success.20 insurance market. ENT and cosmetic surgery facilities. 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. The hospital should be backed by a world class diagnostic center The diagnostic center will be equipped with state of the art technology in diagnosing every major disease class. This is another precondition for this hospital to be successful. NGOs like Grameen Bank provide micro health insurance schemes for rural Bangladeshis. third party administrators and specialized health insurance plans (Plan for diabetics for instance). Some of the corporate houses offer group insurance for their employees. Both public and private incentives should be developed to make Bangladesh an attractive destination. an opportunity for JV’s with foreign insurance providers Provision of medical care for large and growing middle class Telemedicine.for various disease classes including cardiology. the doctors.
Training and educational institutes need to be established to feed this opportunity. For example. with highest shortage experienced in USA. Evolving the correct business model. 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.10. a “Medical City”. Australia.11 supplier nations. Medical education facility By the year 2010. such as Philippines. and the Saudi Arabia. capitalizing on the global shift in healthcare. Even the major exporter countries of trained nurses. Most of the pharmaceutical companies in Bangladesh do BE (Bio-equivalence) testing of drugs in India for export permission. requires a targeted investment approach. Canada. while international health care companies have entered into the market. Gazipur or Chittagong. Aureos Capital have recently taken a stake in the Apollo hospital – recognizing the substantial opportunity for private equity. The idea of this medical city is to create an establishment which will be a comprehensive solution for healthcare service in Bangladesh. the global shortage in nurses is forecast to cross 300. with longer pay back periods. integrating pre clinical. As well as being a primary supplier.000 across the globe. Bangladesh has a large young population.AT Capital Research Development of preclinical trial centres precentres Establishing pre-clinical trial 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. in a sector with high initial capital outlays. Nurse training centres: a global shortage in supply of nurses Medical City: One stop shop 89 . with its large and economically diverse population. An integrated one stop solution. are facing nurse shortage for their domestic markets. Bangladesh can also become a supplier to current 9. Despite the challenges faced. who can be trained as nurses/medical assistants. both men and women. Healthcare provides substantial avenues for investment in various sub sectors from primary care to education. JVs with foreign companies have not met expectations with initial occupancy rates remaining lower than anticipated. If such facilities are developed in Bangladesh. Tongi. locally manufactured drugs will be more competitive 12 in the global market. Conclusion Bangladesh. clinical and post surgical after care. Suitable locations could be Uttara. improving service provision and changing perceptions are critical factors of success.
19. Goozner. Official website of Themedica available at http://www.apollodkv. 90 . 5. Ford Foundation.efnweb. 2. “The World Urbanization Prospects: The 2005 Revision”.co. Official website of hotelmarketing. New Zealand Trade and Enterprise (2007). Primary sources: telephone interviews with officials of Apollo Help Desk. 13.com/industryoverview.html. Agri Food Trade Services. Director. 20. “Global Trends and Issues in the Corporate. Official website of Ministry of Health and Family Welfare. 16. Dhaka. Official website of World Health Organization available at http://www.. University of Dhaka.themedica. Government of Bangladesh at www.bd.grameeninfo. Official website of Apollo Hospitals Group at www.in/home/EasyHealthIndi. 18.org/version1/en/documents/PressReleaseEuropeannursingshortage.com/cgi/content/full/320/7241/1030.hotelmarketing.who.int/en/Section313/Section1515_6922.AT Capital Research References: 1.pdf. 15. 14. “Thee USD800 Mn Pill: The Truth Behind The Cost of New Drugs”.com.gov. Merrill (2004). Industry and Government Training Markets”.com/index. Primary sources: interviews with Lecturers of Institute of Health Economics. 12.prlog.bmj. Journal of Advanced Nursing available at http://www.html. United Nations.pdf.aspx. 9. Official website of Apollo DKV Health Insurance available at http://www. Scoop. 7. Ministry of Health and Family Welfare. Several Sources Compiled by Wikipedia. 10. “Roundtable on Microinsurance Services in the Informal Economy: The Role of Microfinance Institutions”. 17. 3. (2005). 4. (2000). Official website of World Health Organization available at http://www. Present. Official website of BMJ at http://www. 8.com available at http://www. 11.searo. “Philips helps provide rural healthcare in India”. & Future Report Bangladesh”.htm. (2006).int/nha/country/BGD. “Agri Food-Past. http://www.html. University of California Press.apollohospitals. Canada.mohfw.php/content/article/060410_medical_touris m_asias_growth_industry.org/bank/index. 6.org/10036648-booming-clinical-trials-market-in-india.who. Official website of Grameen Bank at http://www. (2005).
Food Processing Industries. especially in the agricultural and healthcare sectors. Bangladesh should pay special attention to the TRIPS agreement (Trade Related Aspects of Intellectual Property Rights) before the year 2016 is over. potato. Fruit Crop Production. Serum Institute of India Ltd.g. Bamboo and Potato Starch Industries. Leveraging the NRB platform. we believe there is significant potential in this sector. Bangladesh should proactively form partnerships with the international Biotech industries especially in the agricultural and health care sectors. and upgrade its’ generic pharmaceutical sector by integrating biotechnology-driven pharma products. Potted Plants and Cut Foliage Production. The team identified several areas in the agricultural sector. However.AT Capital Research Biotechnology Biotechnology While the global biotechnology industry is booming. Thailand’s National Center for Genetic Engineering and Biotechnology.com 91 . e. The suggested areas of investment opportunities are in the agrobiotechnology which include cotton production and processing (backward linkage to RMG/Spinning Mills).ahmad@at-capital.D. firoz. such as Ornamental Plants and Cut Flowers. rice. investment in education and research is important. Microbial Seed Cultivation Technology. Asian Tiger Capital Partners Mir Firoz Ahmad. Bangladesh is at an early stage of development. Monsanto (USA). etc. and Biocon India Group. Medicinal Plants and Herbal Products Technology. and in medicinal biotechnology in vaccine and recombinant insulin manufacturing. Knowledge development and transfer is critical. Mushroom Cultivation Technology. The potential areas of development and commercialization of the biotechnology sector in Bangladesh were studied by a Thai Biotechnology team. Ph.
there has been a biotech revolution. investment in R&D and new product development is critical. antibiotics. With use in yoghurt to rice to leather and vaccines biotechnology has wide and varied applications.1bn. animal biotechnology. With the population forecast to grow by 2mn annually. The application of biotechnology With 150mn people in Bangladesh. a four member expert team from Thailand (sponsored by SEDF and 92 . sectors.75 tons/ha. GM rice strains capable of being grown all year round coupled with improvements in irrigation area.AT Capital Research Bangladesh’s Biotechnology can play a significant role in Bangladesh’s push for new export sectors. NGOs and the government created the National Institute of Biotechnology (NIB) in 1999 which introduced a bio-safety guideline.44 to more than 3. the demand for basics such as food. fisheries or aquaculture could positively impact the country’s largest sector by enhancing product yield. The scientific community. Many of the next generation of medicines (e. Revenues of publicly listed biotech companies worldwide grew 18 % in 2005 to USD 63. Bangladesh has yet to develop a significant 1 biotechnology industry and capitalize on a fast growing USD 100bn global industry. after the TRIP’s market protection lapses in 2016. 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. resistant to adverse environmental conditions.2bn in the year 2010 with 2. The Indian biotech product market is forecast to be USD 4. drugs. Rice yield would need to 4 increase from the present 2. with annual growth rates consistently above 15%. Unlike its neighbor India. is substantial. hormones and vaccines) will be biotechnology derived – if the local pharmaceuticals industry is to remain competitive in export markets.5mn hectares. 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.3mn hectares in the same period. Bangladesh has not benefitted from such advances to the extent it could. antibodies. Bangladesh produces about 25mn tons of rice annually. Agriculture and pharmaceuticals are key sectors with specific and proximate applicability in Bangladesh. Agricultural biotechnology.g. Bangladesh could benefit significantly if agricultural output could be increased.1 bn in 2005. with already 280 biotech companies and 180 bio-product suppliers contributing to 2% share of the global market. 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. be it plant biotechnology. an all-time high in the sector's 30-year history. Biotechnology could revolutionize agriculture and pharma sectors Global biotechnology revenue was USD63. Rice is the staple food for about 150mn people and is grown on about 10. Biotechnology and agriculture in Bangladesh While biotechnology and GM innovation have revolutionized product development globally with high yielding. technology and mechanized cultivation can provide the solution. disease free crops. which continues to expand fast. How can Bangladesh learn from and leverage from its proximity to India. Given the importance of agriculture in its economy and the current shortfall in production for domestic consumption.3 investment opportunities of USD 2bn over the next five years. clothing and health care. due to limitations in investment in business and research infrastructure. innovation and resistance to natural hazards. In India for example.
There is a shortage of qualified scientists in the biotechnology area.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. in the case of agriculture. hormones and vaccines. 93 Lessons to be learnt from India .000 scientists are estimated to be engaged in India’s biotechnology sector. although this has not been applied extensively. Many of the next generation medicines will be biotechnology derived. in pharmaceuticals are conducted. corn and pulses. There are 11 research organizations where biotechnology has relevance. 15. Knowledge transfer has been facilitated by NRIs going back to India or by arranging entry/alliances of foreign companies. Bangladesh. In the last 50 years Dhaka University has produced approximately 5. Biotechnology and Pharmaceuticals in Bangladesh.500 PhDs qualify in scientific streams each year in India.000 Life Science graduates. Impact on the population and ecosystems has to be assessed. Biotechnology does not come without its risks. 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 Bangladesh. especially in the areas of antibiotics. Companies are largely engaged in producing generic medicine. be it plant or animal. and preclinical and clinical trials. to learnt. rice. NRIs . India’s success in biotechnology sector – lessons to be learnt. especially. antibodies. Infrastructure constraints in Bangladesh. 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. 700.000 post graduates and 1. India has been 7 successful in growing its industry for many reasons: A skilled workforce 3mn graduates. It is imperative that sufficient field studies. run potential risks such as bug resistance. Releasing and utilizing biotechnology derived products without testing and pilot studies. food chain pollution and medical side effects.It is estimated that 15% of the scientific population of pharmaceutical and biotechnology companies in the US are of Indian origin. The government has recently taken initiatives starting with 12 science universities. There have been no significant initiatives from any of the pharmaceutical companies to incorporate biotechnology derived product lines in their portfolio. many of which work abroad. 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.
cell culture. agriculture and poultry products . Targeted international investment for knowledge transfer. knowledge.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.an excellent network of research laboratories necessary essary. 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.AT Capital Research Alliances and joint ventures with leading global names such as Monsanto. The government needs to be proactive to attract foreign technical expertise. transfer. Roche. 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. Further specific investments and partnerships with Bangladesh by the Thai entrepreneurs in the agro sector are potential investment areas. or with Serum Institute of India to produce vaccines for the health care/pharmaceutical sector. 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. private sector and NGOs need to collaborate in order to succeed. Effective international collaboration in research and development would form the base for technological knowledge transfer. in India. Leverage NRB knowledge. protein engineering and enzyme technology. 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 . For example. World-class education and research infrastructure . with Mahyco Monsanto Biotech (India) Ltd (MMBL) to produce and market cotton to support Bangladesh’s garment sector. Investment in education and research. research. Stakeholder collaboration in R&D is necessary. Bangladesh: Thai investment in Bangladesh Thai businesses have conducted research and invested approximately USD 60mn in the past 5 years in Bangladesh in various 2 sectors including. and Agilent Technologies to name but a few. The Government. Active government support . 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. cell fusion. in the agricultural sector. Currently most R&D initiatives are at the individual level.
13th December 2007. http://www. 2007. & Islam.htm National Center for Genetic Engineering and Biotechnology. London. The Joint UK Biotechnology Company Showcase/ Genesis VII. But with active government support. 5. Queen Elizabeth II. 6. (2005). investment in technical skills could transform this sector and other connected sectors. With a large domestic population. 2.htm Rice in Bangladesh.html Pharmaceutical and Hospitality Optimization. “Unprecedented Growth Opportunity”. Agriculture and Pharma sectors could benefit significantly. RNCOS.in/abdr_nov4. (2005).AT Capital Research Conclusion Biotechnology applies to many sectors – producing new products. The potential benefits for the private sector and wider society is considerable. UK. July 1. National Institute of Biotechnology. “Biotechnology in Bangladesh”.org. Ramna. 7. Onco life Sciences Pvt. Prepared for South Asia Enterprise Development Facility (SEDF). “Indian Biotech Industry 2005”. M.piribo. (2003).com/publications/biotechnology/indian_biotech_industry_ 2005.com/conference_reports/Joint-UKBiotechnology-Show-jan2008.14.ris. Conference Reports. Available http://www.pharmaprojects. References 1.knowledgebank-brri. Bangkok.104/search?q=cache:thAAZDk98bEJ:ibef. Available at http://www. leveraging the NRB platform and alliances and joint ventures internationally should be developed. Dhaka1000. 95 . Bangladesh Atomic Energy Commission. Biotechnological research in Bangladesh has been initiated only recently.org/download/bi otech19jan. infrastructure development. Knowledge transfer. N. improving yields and protecting against environmental risks. “The Potential Commercialization of Biotechnology in Bangladesh”. S. Available at http://72. Conference Centre. Asian Biotechnology and Development Review. 4. 3. Bangladesh Rice Knowledge Bank.org/riceinban. Thailand.. http://www.235. Ltd.pdf BIOTECHNOLOGY. Choudhury.
Hossain@at-capital. Chinese and Indian bicycles control over 100% of the domestic market. 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. it presents an added potential export market. This contributes to 2. Asian Tiger Capital Partners Sanwar Ahmed Sanwar. In 2007 Meghna Bicycles won a USD 13mn export order to Germany. the demand of light engineering goods is also increasing Export-oriented production in light industries has gained momentum in the past few years.com 96 . from USD 96.com Dewan Ashrakat Hossain Ashrakat.500 crores (USD 1. as India becomes more industrialized. However.AT Capital Research Light Engineering Light Engineering The annual revenue generated by the sector amounts to around BDT 9. plastic consumption in Bangladesh is one of the lowest in the world. There is a probable USD 260mn import-substitution industry that can be met through recycling plants. With rapid economic development this figure is bound to increase significantly as demand for plastic increases. Currently. A growing and increasingly affluent middle class indicates demand for consumer durables. due to insufficient infrastructure they lack adequate education and training.Ahmed@at-capital. Furthermore. Investment is in Technical Training would be lucrative as the sector expands. The three bicycle manufacturers in Bangladesh manufacture high quality bicycles for the US and EU market.600mn). At 3. Products worth USD 209mn were exported during the last fiscal. 40% of the raw materials required for plastic production are imported. There is a large low-wage labor force employed in the sector.5mn in the previous year. As the demand and usage of engineering and electronic goods increases.6 kg per capita a year. The sector presents significant opportunities for further expansion into the local and export markets.15% of national GDP.
equipment and spare parts is around USD 217mn with imports of USD 289mn. total exports were worth USD 209mn of which USD 145mn was through the RMG sector.0 90.400 enterprises in Bangladesh involved directly with the Agro-tools industry.2% uses tractors.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. 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. There are currently around 3. neighboring countries like India. years.6 5. The plastic industry has grown at over 20% per annum over the last decade The decade.8% spraying and threshing. transportation. There are almost 9.AT Capital Research The LE Industry in Bangladesh subThe primary sub-sectors of the Light Engineering Sector (LES) in which currently agroBangladesh currently has a strong presence are bicycle manufacturing. 5. plastics. The sector is characterized by small. The rapid growth of the RMG & Textile sectors bring forth a promising opportunity for the expansion of the LE Sector. family based businesses.500 units in the RMG & Textiles industry in Bangladesh. Bangladesh. replacement spares. The LE sector supports these units and also 148. Of the total cultivable land in Bangladesh.0 24.16% India USD 6bn 12% 0. also agrarian economies could be potential export targets.2 markets. domestic market was valued at approximately USD 116mn in 2006. 97 LE plays a critical role in Bangladesh’s largest export earner . agro-tools. capital machinery parts and plastics LES output plays a critical role in key national sectors such as agriculture. The agro-tools industry is one of the largest industries in the LES Annual average production of agro machinery. Pakistan. USD 200mn worth of spare parts are imported. Every year.000 small. 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. Furthermore. tools.0 20. which operate in small scale using back-dated 6 technology. China. construction and RMG.9% power tillers and 23. Bangladesh is a country poised to further develop its light engineering industry to meet both local needs and explore export 1. In 2007. LE is an important support sector for the RMG & Textile industry. In Bangladesh. medium and large plastic manufacturing 4 units operating across the country.342 (SME) units in the domestic handloom industry through regular maintenance. repairs. 32.70% The agro-tools sub-sector is yet to explore export markets agroLES. as well replacement and expansion of the different machines and equipment used. and 3 Myanmar. There are over 2.
some 20 years old or more. as a Thrust Sector. railways. inadequate. Due to the lack of adequate capital. proper documentation and risk associated with these ventures. development and quality testing is inadequate. and subsidies for utility services 13 such as electricity. shoe manufacturers. and components for machinery have to be imported at very high import duty. These include project and export loans with reduced interest rates on a priority basis.AT Capital Research The key dynamics of the LES technol echnology competitiveness. RMG and washing plants. are sorted. Strengths of the LES The LES presents several strengths through which it can emerge as one of the leading industries for the country. Access to technology is one of the main determinants of 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. recycled and sold without testing or certification. These small and medium firms are largely family owned with 70% being sole proprietorships. On-theOn-the-job learning is the primary form of training. BUET and BSTI are 1 inadequate in meeting international standards. Income tax exemptions. Access to research. The SMEs in the industry lack adequate access to finance. Despite this. metals. LES The firms in the LES lack management structure. parts. the Government provides substantial incentives for the sector to develop as an export 98 . The current standard of the quality testing facilities at BANSDOC. low start up cost and simple production process provide significant incentive for growth. LE is one of the Thrust Sectors 2006sectors. In all areas of the LES sector. intelligence ntelligence. although owners (59%) and plant managers (73%) have some work relevant technical qualifications. water and gas. products overseas. the 3. Raw materials. The LE sector relies heavily on recycled metals A large majority of the raw materials are sourced from the ship breaking industry. the enterprises are unable to expand their 6 businesses. The National Board of Revenue needs to design policies that will 3 ensure cheaper imports of raw materials. The cheap workforce. There is no sophisticated system which provides this information resulting in an inability to promote their 1. Due to a lack of structured management. sugar mills. The materials. Last but not least. jute mills. The local market is unsaturated and there is sufficient demand within the various manufacturing concerns such as textile mills. The management structure of the LES firms lack sophistication with small firms having 1-3 employees. Lack of market intelligence The firms in the LES receive very little or no market information about the international or domestic market. on-the-job training. Banks and other access financial institutions are reluctant to finance these small setups due to the lack of 6 collateral. learning their trades is through informal.9 workforce is highly adept and skillful at emulating products. most of the light engineering firms invest in R&D activities. the workers are all virtually unskilled when they enter the sector. The Export Policy 2006-09 recognizes the LES as one of the thrust sectors According to the export policy the government has devised several policies to promote the LE sector.
Firms can benefit from research and testing facilities. have been exporting bicycle parts and full bicycles. making it impossible to judge the quality of the raw materials. It has not just been a question of the cheap availability of labor in Bangladesh. Technical Training Institutes (TTIs) can act as the source of skilled labor that the industry currently lacks. R&D facilities/ private testing institute. Investment metal testing. 1. Investment Opportunities In the LE Sector Training Centers can be a lucrative investment. 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. 99 . institute. Recycling plants can be a costcompetitive substitute to imports in meeting the increasing demand of raw materials for the plastic industry. The industry currently lacks adequate metal testing or R&D facilities. the price of raw materials is by far the major cost component. This keeps the price of lower quality goods competitive and it reduces the amount of plastic waste in the environment. but of the need to ensure a high and consistent quality level.4 5 study: Story-TransCase study: A Success Story-Trans-world Bicycles Co. As a majority of the LE firms are small in size. This has meant that Trans-World Bicycle and Meghna Bangladesh Ltd have needed to be extremely competitive. access to modern technology and all other infrastructural resources. In October 2007. For the plastic manufacturers. Chinese and Indian manufactures supply almost one hundred % of Bangladesh's domestic demand for bicycles. Many plastic products are made from recycled plastics raw materials.3. & Meghna Bangladesh Ltd Trans-world Bicycle Co Ltd and Meghna Bangladesh Ltd. Exports have also been helped by a system of bonded warehouses and by duty free access to the European market.AT Capital Research based industry. both part of the same group.000 tons of which 40% is met through imports. it was announced that the companies had won a USD 13 mn export order at the 'IFMA Cologne Show' in Germany. the supply is only 438. technical training facilities. Also. The present demand for plastic resin is 540. the small firms will be able to outsource to each other which will increase productivity through possible specialization of labor. The companies' roots lie in the privatization of the former government owned Bangladesh Cycle Ltd. an industrial hub will ensure increase in production efficiency and quality assurance. Due to the current lack of proper training facilities. and the Chinese in particular have dominated export markets in the West. Recycling plants for plastics.000 tons/year. cheaper access to raw materials. Investment Investment in a LE Industrial Park. to Europe for more than a decade. Metal testing facilities can ensure the quality of local products meet international standards. greater subcontracting and access for export facilities. there is a demand for institutions that will provide technical knowledge and job-specific training to the semi-skilled labor force in this sector.
the size of the automobile sector in 8 India is USD 15mn with exports worth USD 2. There is immense potential for the country to export many LE products including agro-tools. the Export Policy for FY07 to FY09 has included the Light Engineering Sector as one of the thrust sectors.9bn. Consequently. Bangladesh can provide the same capability. As a supporting industry to many of the other sectors. The Indian industry is moving towards automobile manufacturing presenting an opportunity for outsourcing of spare parts manufacturing to Bangladesh. Investments will enable the industry to enjoy economies of scale and compete with the foreign products. low infrastructure costs and government initiatives provides a significant platform for the industry to move into large scale production and export diversification. 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. Moreover. it has a considerable impact on the overall development of the country.AT Capital Research larger The industry can move into larger scale production. Since LES in Bangladesh is already an established industry. plastic goods. The competitiveness of the LES has been proven on the international scene with the recent success of the plastic sector. targeting primarily import-substitution. Foreign Manufacturers can setup OEMs. bicycles and automobile spare parts. it has the potential to act as an outsourcing destination for various Original Equipment Manufacturers (OEMs). The industry requires investment and innovations if it is to fulfill its true potential. The Bangladeshi LES currently operates in a very small scale. Conclusion The LES is a sector of significant opportunity. A low-wage semi skilled labor force. such as India and Pakistan who have excelled in this area. 100 . With investment in the LES.
(2005). Available at 2. (2005). Katalyst. “SMEs in Bangladesh and Their Financing: An Analysis and Some Recommendations”.katalystbd. “Indian Plastic Industry – Review and Outlook”.. Available at http://www.nerve.com/downloads. M. “Sector Brief – Agro Tools Industry”. Available at www. A presentation by the Indian Automotive Components Manufacturers Association. “Bangladeshi bikes go to Europe.katalystbd.org/light_engineer. S.bd/export_policy2003-06. Prepared for UNDP Bangladesh. Published in The Daily Star on 13 November 2007. 3. Islamic University of Technology. S. (2007). 5. M. 7. 4. Bangladesh”.com/downloads. Katalyst. (2005). (2006). S.%20Helping%20and%20Advising%20SME%20Sectors%20 for%20Employment%20Generation. (2002). (2006). & McVay. Vol 34. M.html. “Riding to export success. (2006). Action For Enterprise. Uddin. & Ullah. Plastindia. A. Published in The Nerve News of India on 13 November 2007. 12.com/downloads. “Plastic Waste Recycling & Its Opportunities In Bangladesh”. Official website of Export Promotion Bureau Bangladesh.sedf. “Market Development in Practice Sector Development & Business Services Strategy-Experience of SEDF. Alam. 8. 13.. http://www.iutoicdhaka./4. local bicycle makers go global”. ACMA. “Sector Brief – Plastics”. (2007). No.php. Katalyst. (2006). Available at http://www.php?catid=5. 3.AT Capital Research References 1. “Helping and Advising SME Sectors for Employment Generation”. http://www. but India rules at home”. The Cost and Management. University of Maryland. “Indian Automotive Component Industry -Engine of Growth Driving the Indian Manufacturing Sector”. 9. (2007). Dhaka: South Asian Enterprise Development Facility (SEDF).edu/. “Report on Identification of Employment Oriented Export Services”.katalystbd. IRIS. May-June 2006.php?catid=6. Nerve News of India.epb.57-72.in/news:253500114546.pdf. Adhikary.php?catid=6. (2006). Available at http://www. 10. 6. “Review of Sub Sector Work in Bangladesh”. 11. pp. A presentation by the Plastindia Foundation.gov. Available at http://www. Prepared by Action for Enterprise (AFE) for USAID Bangladesh.. D. 101 ..
Ship Building The Global ship building industry is enjoying strong growth. and by 2013 is forecast to make three times as many ships as in 2004. Investment into technology and the modernization of the ship building infrastructure is key to ensuring competitive advantage in this sector.Ship Building Heavy Engineering . 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. Bangladesh has recently become a player in the global ship building market. Ananda Shipyards Limited and Western Marine Shipyards Limited have received orders for small ships that are expected to run up to 2010. Prices for ships have risen sharply. Ananda Shipyard Limited is expanding their capacity and aims to be the leading ship builder in the country. All major ship building nations are running at or near full capacity to meet the demand for ships. with two companies winning USD 250mn worth of orders. The two companies.com 102 .sajid@at-capital.AT Capital Research Heavy engineering. Asian Tiger Capital Partners Ahmad Sajid ahmad. Global ship building capacity is rising fast. There is an increasing ship delivery backlog as the demand has been outpacing supply. 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.
Malaysia and countries from the Middle East have entered the market. and various developing countries.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.8 3.7 27. In the past. 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. Bangladesh could carve itself out a profitable niche.3%.7 3. China. seeking low cost building and the abundance of labor supply.3 2004 8. Although the current ship building industry is ripe for investment in the near term.0 37. a forecast fall in demand from 2011 and global dominance from China.2 38.8 11.3 4.AT Capital Research Bangladesh is enjoying a boom in ship building.6 3.7 2005 6.8 35. existing players in the market have been able to capitalize on a global backlog in orders and sharp rises in prices. the industry grew at an annual compounded rate of 8.9 4. investment in new yards may less compelling given two to three year lead times. Japan. Driven by rising demand and a global supply shortage. 3 Indonesia.9 4. but has been moving to Korea. adopting new technologies.97mn tons in 2005.experts say this could be after 2011. The government of Vietnam has identified shipbuilding as one of the main priority sectors for the country and has made various facilities available. compared to 2. 20 mid-sized builders and a number of small ship makers as well.2 41.1mn tons in 2000 to158. the government has made USD 750mn available for the 103 Lessons to be learnt from Vietnam . Shipbuilding has been shifting to Asia The shipbuilding industry has been based in Europe and the USA historically.3 3. 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.1 2000 12.7 13. In 2004 the world shipyard capacity was around 60mn dwt (dead weight tonnes) per annum. high prices expected to tail off in medium term 1995 18. Vietnam is now one of the main destinations of foreign ship buyers.5 36. However. by 2013 it is forecast to be around 200mn dwt per year. Shipbuilding industry is experiencing rapid growth gloablly shipbuilding 2000.1 36. All ship building plants in Vietnam have been booked until 2010. India.8% over 1 the years from 1985 to 2005. once a downward cycle begins . The industry is gradually shifting towards developing countries mainly for availability of cheap labour force. The global shipbuilding industry has been on the rise since 2000 From 2001-2005.4 2. The ship building industry is also one of the main priority sectors of the government of Vietnam. Most recently. coupled with government incentives and a strategic focus on areas such as small ships. ship builders from Korea and China have been known to sell 4 their ships at or even below capacity when down cycles have arrived.8 3.9 2. While investment in existing shipyards provides significant investment opportunities. Countries like Vietnam are now benefiting.supply and demand scenario will not be so rosy. Strong demand for ships has led to an increase of the 2 global backlog from 71. leveraging its low cost base.4 38. By 2010 China aims to have 15 mega builders.
Since ship building is a labour intensive industry.AT Capital Research sector to finance the development of a modern industry that can meet future international quality demands.000 tonnes.10bn to set up two dry docks in their shipyard with a planned completion by early next year. Ananda has also set up a modern slipway on the river Karnaphuli.000 tonnes and ship repairing of 400. Duty free import of steel against a bond system is especially relevant. Vietnam aims to be the 5 fourth largest shipbuilder within the next decade. Ananda are planning to invest around BDT 1. The ship building industry is rapidly modernizing. 35 cents in Pakistan and 27 cents in Sri Lanka. cargo ships of 100. with increased use of technology and machinery greatly improving productivity. 39 cents in India. The material would be used only for export purposes. Bangladesh has lower wage rates that 7 is19 cent an hour. duty exemption for import of capital machinery. and have recently signed deals worth USD 82mn. 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. Bangladesh stands to gain from its highly competitive wage rates. hourly minimum wage is 38 US cents in China. while Vietnam is providing 40% financial subsidy to its ship makers. bonded warehouse facilities. The ship building industry in Bangladesh would benefit from government support Experts in Bangladesh have advocated the establishment of deep-draft ports. Regional comparables show that.000 tonnes. India is provided 30% financial subsidy to aid its ship building industry.Ananda Shipyards Limited and Limited. 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. and it would create scope for 6 export orders facilitating use of the country’s cheap labour force. special financial subsidy and providing green channel for importing raw materials to ensure healthy growth of the sector. Once in operation Ananda claims it take orders up to USD 500mn. Western Marine 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 government has decided to make shipbuilding a key export industry through the Shipbuilding Industry development Program 20022010. has also signed a letter of intent with two 6 foreign companies to construct 14 small vessels at a cost of around USD 150mn. 45 cents in Vietnam. world Bangladesh has two players in world ship building . Bangladesh joins the global ship building industry Other countries benefit from subsidies Bangladesh lower labour costs a key advantage 104 . It aims to export USD 5bn worth of ships by 2010 and extend the shipbuilding capacity to container ships of 1500 TEU. oil tanker of 100.
Article published on February 15.equitymaster. 8. (2005).asp?date=2/15/2007&story=1. Paper presented at The IMF Shipbuilding Action Group meeting.600 1. February 25. 4.com.maritimeshows. 2007. (2008). Primary sources: interviews with an international shipbroker. & Tholen.” University of Bremen & Intitute of Law and labour Germany. 2. R.. 5. Wu.ppt.400 1. T.200 1.com/detail. Article published in Ethical Corporation Magazine on March10. Ludwig. China.com/download/1266/x/Hubei%20Marine%20Indu sry%20Overview%20210307.AT Capital Research Figure 2: Wages per m onth in 2002 1.com/vietnam/Vietnam_Country_Information270907.pdf. 2008. (2008). Article published in the Financial Express on February 5. . (2007). 6. Maritime Vietnam. (2006). References References: ferences 1.000 800 600 400 200 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. they also must incorporate technology and machinery into their businesses to have an edge. To remain competitive. 2007. Jackson. Available at http://www. Equitymaster. D. “Industry Market Outlook – Shipbuilding.maritimepartenariate. “Shipbuilding in China and its impacts on European shipbuilding industry. November 14 – 16.800 1. 7. Available at http://www.” Available at www. Bangladesh stands to gain from joining the ship building industry. “Wage rates – China’s rising costs make buyers think twice”. (2007). The Shipbuilders’ Association of Japan. (2007). “Bangladesh set to emerge as new shipbuilding hub”. The two current Bangladeshi players today are expected to keep bringing in more business from around the globe over the next five years. ”Global shipbuilding: An overview”. 105 3. 2005. Financial Express. Ports and Logistics”. “Overview of Maritime Industry in Hubei Province.” Global Shipbuilding Industry: Status and Challenges”. J. 2008.
the longest natural unbroken beach strip in the world.com 106 . The country’s proximity to other key tourist spots such as India. the world’s largest natural mangrove forest. Consistent economic growth and development of export businesses such as ready-made garments have encouraged an increasing number of business-related trips from abroad. and Thailand may also provide an opportunity as a combination location with these countries. In order to cater to this growing demand.shams@at-capital. there are significant areas for investment in an industry which could show substantial growth in the future. In the Southwest region are the Sundarbans. Nepal. Asian Tiger Capital Partners S Adeeb Shams adeeb. relatively few people globally are aware of the existence of these locations due to poor marketing and inadequate infrastructure. Given the relative immaturity of the market. have entered the market. Bangladesh is home to Cox’s Bazar.AT Capital Research Tourism Tourism Tourism in Bangladesh provides a number of untapped opportunities relative to other comparables in the region. including two foreign chains since 2006. With a marketing push. However. new luxury hotels. Bangladesh could place itself as an alternative destination as tourists seek exotic locations.
the opportunities for investment in projects remain significant.457 Sri Lanka 298 400 566 Nepal 255 464 385 Bangladesh 115 199 271 Source: World Tourism Organization (WTO).579 11.483 10. Hiron Point. although they lack professionalism and are rarely maintained/updated. Maheskhali. There are some packaged tours currently available but are poorly promoted on international travel sites. but would not meet international expectations of a high end traveler and lacks provision for making reservations online. Sundarbans. is inadequate and information on these areas is not readily available to tourists internationally. the situation is quite analogous to that of Cox’s Bazar in that the physical infrastructure. Although there has been some growth in terms of new accommodation over the past decade.2 mn in 2007. Martin’s Island and Teknaf. the Seagull has some basic amenities. the world’s largest mangrove forest. For many years Dhaka was home to only two international luxury brand hotels. both owned by the Government. the Sundarbans is home to the Royal Bengal Tiger.034 1. Starwood also operates the Westin Dhaka.4.4 mn and an operating profit of USD6. St. have opened in Dhaka since 2006. development has focused on mid-quality hotel development. The beach area lacks international standard restaurants and facilities for recreation that would attract foreigners. Places of interest in the Sundarbans include Katka. The only luxury hotel in the region. is the world’s longest sea beach stretching 120km. This was despite the Dhaka Sheraton making an operating profit of USD 3. Good quality hotels are being introduced in Dhaka Two new international luxury hotels. Dublar Char and Tiger Point.121 132 248 513 64 158 230 11 50 67 While tourism in Bangladesh has grown in recent years. is spread across Bangladesh and West Bengal. spotted deer. However. It covers an area of approximately 6.299 9. In 2007. one of the country’s most popular tourist attractions.000 square kilometers in Bangladesh. in terms of tourist facilities. Cox’s Bazar. Areas of interest apart from the main sea beach in Cox’s Bazar are Inani.737 India 1.326 7.AT Capital Research Figure 1: Regional Tourism Comparables International Tourist Country Arrivals (Thousands) 1990 2000 2004 Thailand 5. 107 . crocodiles.460 6. Some hotels in the Cox’s Bazar area do have websites.5 4.649 3. by deciding against extending its current contract with Bangladesh Services Ltd (BSL). Pan Pacific Sonargaon and Dhaka Sheraton.707 2. the Westin and Radisson Water Garden. largest forest.513 3. The Sundarbans present many prospects for Ecotourism provided there is some initiative from the private sector to introduce package tours to 2 visitors. 20051 International Tourist Receipts (USD Millions) 1990 2000 2004 4. snakes and a variety of different species of birds. Proper marketing and promotion needed in top tourist locations Bazar. such as a swimming pool and a fitness center. Starwood Hotels and Resorts announced its decision to discontinue managing Dhaka Sheraton from 2009. Radisson Water Garden Hotel generated revenue of USD 13. making it the most successful hotel in Bangladesh in its first full year of operations. Inducted as a UNESCO World Heritage site in 1987.7 mn.
What might be done to promote Tourism? 108 . sales and promotion. development of existing facilities and services. Dhaka has some other luxury hotels. Encouraging tourists to spend a few days in Bangladesh during a stopover trip to neighboring countries such as India. these developments have been stalled. For example the Maldives. inadequate investment in infrastructure and a focused promotional programme. Opportunities may arise from the recent introduction of local airliners. may provide 8 further opportunities. has prepared three detailed tourism plans over the past few decades.AT Capital Research International projects have been delayed. along with an Intercontinental Hotel and a Holiday Inn adjacent to Zia International Airport. existing finances. human 7 resource development. Privatizing BPC has been on the Government’s agenda for many years. A few other luxury hotels in the capital. However. environmental hazards. such as the recently opened Dhaka Regency. Tourism Master Plan. owned by three NRBs from the UK. 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. as a majority of these have plans of introducing international routes by the end of 2008. If successfully completed. this 6 would be the first foreign-managed hotel in the port city. It has a thorough analysis of budgeting. is widely believed to be the best hotel in the port city at present. private sector contributions. Chittagong is yet to have an international hotel.10 hotels. a small nation with a population of under half a million. Bangladesh can learn about the development of Tourism activities from its neighboring countries. Establish the country as a transit location for Tourism. The recent Air Services Agreement signed between the Bangladeshi and Indian Governments. Hotel Sarina in Banani. Under private sector management. although a firm plan has yet to be drawn up. With the exception of La Vinci. Hotel Agrabad had been Chittagong’s premier hotel for many years. which opened in early 2006. but is not of an international standard. The construction of a Hilton at Maghbazar. Nepal and Thailand might generate a positive response. country Tourism. had begun in the past couple of years. the latest of which was published in 2005 containing a comprehensive outline of the Tourism industry. The Peninsula Chittagong. all of the other hotels are very poorly marketed outside Bangladesh and have limited provisions for making online reservations. Rebranding Bangladesh Parjatan Corporation (BPC) and greater private sector participation. Best Western La Vinci in Kawran Bazar and Purbani in Motijheel. Bangladesh has suffered from poor planning. to and from cities in either country. The Government earlier this month announced plans of rebranding BPC as the National Tourism Authority. The Thai Ambassador in March 2008 announced that Dusit Thani has plans to set up a property in Chittagong. Parjatan could be more competitive with private 9. whereby there might be a maximum of 61 flights per week. Development of a Tourist Industry Development Plan. Representatives of the Thai luxury hotel chain have already started discussions with the Bangladeshi Government in this regard. It is believed that BSL is currently in search of a 5 new international operator from 2009.
hotels Need for more luxury hotels outside Dhaka. Extensive marketing in these areas will provide tourists with access to information that is presently not available in Bangladesh. the only luxury hotel in the area. Even though they might be better marketed within the country. For example. Attracting and partnering with worldclass hotel brands in tourist areas such as Cox’s Bazar and the Sundarbans is a viable option. With the exception of foreign brands. providing integrated packages where NRBs can visit relatives and also enjoy holiday breaks in. Attracting an international hotel to Cox’s Bazar will provide some much needed competition for the Seagull. for example. These hotels will target the rapidly growing upper-middle class population locally. particularly on the Dhaka-Chittagong and Dhaka-Sylhet routes is required complemented with setting up facilities such as food outlets and rest areas. Orbitz and Travelocity. This hotel may cater to the growing middle-class population in Bangladesh. Investment in infrastructure and state owned hotels. would be an attractive proposition to NRBs. the top local brands even in Dhaka. Setting up a higher end Shangri La. Sylhet. the introduction of booths at airports in Dhaka. strengthening the existing highway network. Marketing holidays in areas in London and New York with high concentrations of NRBs. along with the Benapole intersection bordering India. Public-private initiatives. local hotels are hardly found in the most popular travel sites on the Internet such as Expedia. Better marketing of local hotels. investment in infrastructure. There are numerous agencies in other countries in the region such as Malaysia. as they have been extensively marketed and promoted across the globe. in addition to visiting friends and family. There are no notable tourism promotion organizations other than BPC. To remain competitive. This would inevitably provide the NRBs a greater incentive of visiting their native land. such as Sarina and Regency. Berjaya Hotel & Resorts specifically specialize in setting up properties in beach areas and they presently have a reasonable presence in South East Asia. as well as foreign tourists. Dhaka Sheraton. 109 . Thailand and India. Parjatan properties and other tourist attractions.AT Capital Research There needs to be a concerted effort also from the private sector over the longer term. specifically targeting the higher-income group from Dhaka. Additionally. Chittagong. These organizations have contributed considerably towards the development of tourism in those countries. foreign tourists including NRBs. otels. investment is required in the current state-owned establishments dedicated towards tourism. provides a great opportunity in turning Cox’s Bazar into a luxury destination. Cox’s Bazar and the Sunderbans. have minimal global recognition. The few luxury hotels that exist in the country are restricted to Dhaka. NonTargeting the Non-Resident Bangladeshi (NRB) base in the US and the UK is an excellent opportunity for additional revenue from tourism. such as Pan Pacific Sonargon.
J. requires substantial investment.net/story. there remains a severe shortage of good quality accommodation facilities throughout the country. Article published in The Daily Star on March 4. 2008.thedailystar. Article published in The Daily Star on March 25.net/story. 9. As a large developing Muslim nation. & Haque.php?nid=27623. M. The New Nation. Investment in infrastructure. (2008). “2nd anniversary celebrated: Radisson Hotel earns USD6.72m operating profit”. R. 2008. Khan. particularly in Dhaka. highways and oil”. Negative connotations traditionally associated with Bangladesh need to be dispelled and a coordinated national branding plan needs to be devised. 5. (2000). Article published in The Financial Express on Feb 26. Akter.net/story. Article published February 6. 6.php?nid=29171. (2007). 2008. “Dhaka Sheraton keeps up pace in battle for guests”. private airlines lock horns over deal with India”. UK: Institute of Aquaculture. Bangladesh has all the pre-requisites to turn locations such as Cox’s Bazar and the Sundarbans into world-class tourist destinations. 2008. M.AT Capital Research Conclusion Bangladesh needs to have a tourism-specific identity. 2008. “Eco-tourism to protect the reserve mangrove forest the Sundarbans and its flora and fauna”. “Sheraton Hotel to get new name next year”. Available at http://www. “Maldives Third Tourism Master Plan 2007 – 2011”. The road network connecting larger metro areas needs to be improved and air transport. Khan. 110 . M. “Thai investment plans for hotels.tourism. Reza. 8.thedailystar. I. UNB. Article published in The Daily Star on March 14. Ross. M. “BIMSTEC – Japan Cooperation in Tourism and Environment: Bangladesh Perspective”. a coordinated marketing effort and attracting world class operators provide the backdrop for developing a vibrant sector. R.thefinancialexpressbd. Despite the recent advent of international hotels. U.. http://www. L.com/search_index.gov.mv/downloads/ttmp.net/story.php?nid=26049/ Ministry of Tourism and Civil Aviation.php?page=detail_news&news_id=26444. S. (2008). (2008).thedailystar. 3.net/story. “Public. “Parjatan Corporation to be National Tourism Authority”. 10.. (2008).. 4. Available at http://www. Salam. despite recent positive developments. such as Malaysia Truly Asia or Incredible India. http://www.pdf. G. Article published in The Daily Star on February 29. S. (2008). Bangladesh needs to find the right blend between maintaining its Muslim traditions and being an attractive tourist destination. Dhaka. India: CSIRD Discussion Paper # 27. (2008). C. http://www. The Daily Star. References 1. & Beveridge. Available at www. 2008. “Privatizing commercial activities of BPC under consideration”. http://thedailystar.php?nid=24986. University of Stirling. 2.thedailystar. (2008). 7. Tourism in Bangladesh is characterized by a lack of proper infrastructure.php?nid=25403. M. Hasan. A. The Daily Star on February 26. 2008.
Syeda Tasnuva Akhter syeda. using the same curriculum. and English language which will introduce skilled workers for the Export Processing Zones (EPZs). Poor quality English-based education makes the market ripe for growth in this sector.etc. There is scope to drive country wide growth through Scaling up large number of English medium primary and secondary educational institutes e.g. the quality of education is variable.rahman@at-capital. Though many small private players are mushrooming in the primary. Asian Tiger Capital Partners The education system in Bangladesh is characterized by the co-existence of three separate streams: a vernacular-based secular system.Education AT Capital Research Education The education sector accounts for 14.com 111 . Sunbeams. local job market.2% of total government expenditure in Bangladesh.tasnuva@at-capital. Investing in Indian Institute of Management (IIM) type business and management schools in Bangladesh that can produce global standard managers. secondary and tertiary levels. Scholastica. 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. teacher’s training. an Islam-based religious system known as Madrassa and an English-based system modeled after the British education system.com Masum A Rahman masum. and international market. technical. known as Bengali Medium. Setting up Vocational Training Institutes (VTIs) linked to manpower export companies in the field of nursing.
compared to a 1 3. graphic design. some have argued that the educational system needs better planning so as to improve the quality and relevance of the education and training offered. call centre. The gap in educational facilities between urban and rural areas should be reduced. However. • The way forward for the education sector forward The way forward A summary of the structure of educational institutions can be found in the appendices. improving policies and the institutional environment. animation.3% of GNP. Private investments in the education sector should continue to focus on improving the quality and relevance of education through capacity-building. engineering and business for developing skilled workers required by emerging industries. Investment may be made in institutes and universities specializing in advanced technology. The efficiency and standard of teachers should be improved through intensive training.5% regional average). 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. The main problem with technical education is the lack of linkage with employers and the job market.). 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. management. Academic collaboration with 112 • . This will create opportunities for the students to enter in the local and international job market.AT Capital Research Expenditure on education from development Education is primarily funded by the Government with support from development partners and the private sector. Large scale private tuitions by the teachers at the primary and secondary levels have made classroom teaching-learning practically redundant for passing the exams. Government expenditure on education in Bangladesh is currently the lowest in South Asia (2. • • • • • 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. The quality of science and English language education at secondary and higher secondary levels should be improved. Suitable job-oriented subjects at the secondary level should be introduced to enable students to be self-employed. 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. hotel management and tourism. IT. etc. From the outset.
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. Korea. 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. Among the existing schools in Dhaka. tuition and other expenses associated with English-medium schooling in Dhaka have gradually risen beyond the reach of many middle-class families. Maple Leaf. Investment in vocational training centres for paramedics. Scholastica. Singapore etc. Green Herald. etc. Investment opportunities also exist in establishing teachers’ training institutes for school. welders. cleaners. and examinations under international boards. BDT 10.20.000 to BDT 15. Sunnydale. given their high international standards and increased prospects for gaining entry to overseas degrees.000 Bangladeshi children are studying at about 200 English medium schools in Darjiling. nurses. On the other hand.500 in monthly fees totaling to an annual fees of BDT 1. interested in working overseas (Malaysia. English-medium residential schools may be established in every district to provide quality education to students living in district towns all over Bangladesh. electricians. car mechanics. these centres can provide relevant foreign language training including English which will facilitate the communication skills of the workers. plumbers. gardeners. It is worth noting that 10. Shiliguri and Kurseong in India. drivers. Saudi Arabia. especially among the urban middle and upper middle class. The growing popularity of the English Medium education system continues. 113 .000 to BDT 30. This is because the admission fees. Englishmedium schools have provided an alternative stream of education in Bangladesh to the state-run system. • • • • 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. One of the better schools in Dhaka takes BDT 20.000 as admission fees. college and university levels.000 in annual fees and up to BDT 7. There is no uniform curriculum for English medium schools in Bangladesh.AT Capital Research leading foreign universities will enhance the academic and training standards of the students. 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. Mastermind and Aga may be considered among the top ones in terms of performance of the students/popularity. UAE.) can change the picture. industrial workers including textile & RMG workers. Sunbeams. South Breeze. Apart from technical training.000. With global standards. Customized vocational training programs can be designed for specific job descriptions of local and foreign employers.
Berggruen Holdings.5. While these achievements should not be underestimated. in training schools.25 mn in education and career counseling entity Career Launcher. 114 . establishing an academic collaboration and exchange program with foreign schools and providing boarding school facilities for students who are too far away from home. Education India Pvt. • • • • • Conclusion Despite the proliferation of private schools and universities in recent years. The talent shortage in the job market is compelling these firms in investing more in education sector. The requirement of talent is 200mn 4 over the following six years. There are a lot of local and international PE firms which have already invested or are trying to invest in India. Mumbai-based Hurix Systems Pvt. In 2007. ICA Infotech. in major cities in the provinces.AT Capital Research We believe there are investment opportunities in setting up new English medium schools. 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. Ltd. 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. an effort by a group of IIM alumni. Ltd. Bangalore-based TutorVista.7 Study: Case Study: Private Equity Investments in Indian Education Sector • India-focused private equity firm GCP invested USD8. Novak Biddle Venture Partners. coaching centers and vocational skills although previously the focus was on export-oriented education. Much has been written recently regarding the successes Bangladesh has experienced in increasing access to education. the recent trend in investment is towards training in tutoring services. have together received funding of more than USD 12mn. which would make inroads into the huge untapped education market outside the capital. As a result. Footprint Ventures. Ltd and 24×7 Learning Solutions Pvt. 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). 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. The Indian private equity firms are focusing more on the education firms these days targeting the domestic market. 4. there still remains a large investment opportunity in the education sector. USD 10mn in English training academy Veta.6. Sequoia Capital India has invested in two e-learning companies-TutorVista and Brainvisa. a New-York based fund. plus an undisclosed sum in another vocational training company. Helix investments invested USD 12mn into preparatory education company Mahesh Tutorials and SAIF partners.
Available at http://www. 2004. 7.moedu. 5. “Secondary Education Regional Information Base: Country Profile Bangladesh”. “Learning assessment company gets venture capital funding”. (2004). 115 . Sarker. (2005).gov. UNESCO Asia and Pacific Regional Bureau for Education. Government of Bangladesh at http://www. India Private Equity. UNESCO. India Today. (2008). “IIM-A alumni’s EI gets venture funding”. 2008. Educational Initiatives. 4. (2007).bd. Article published in the Economic Times on November 15. R. 3. (2007). 6. “Talent crunch: PEs bet big on education sector”. The Economic Times. Bangkok. “Education Statistics 2005”. (2008).AT Capital Research References 1. Article published in The Daily Star on December 1. Ministry of Education. Available at the official website of Ministry of Education. 2007.ei-india. “Exodus for education to India”.com/archives 2. 2007. 2007. December 26. Article published in India Private Equity on March 7.
3 62.4 40.7 44 20 40 35 0 104 116 .7 OECD 6 14.2 39.6 33.8 20.6 17.2 Figure 3: Ease of dealing with licences Indicator Procedures (number) Duration (days) Cost (% of income per capita) Source: Doing Business 2008. World Bank Region 7.1 8 74 46.9 5. World Bank Region 23.7 25.2 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 2008.3 3.7 66 OECD 25.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 2008.2 27.230.9 30.AT Capital Research Appendices Appendix 1.5 40 27 6.3 247.00 OECD 14 153. 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. World Bank Bangladesh 14 252 751 Region 16.
World Bank Region 43.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 2008.047.4 5.0 63.4 986.6 8 425 10.5 1.3 6.179.5 20.3 7.4 4.5 6 Figure 8: Cost and procedural ease with regards to trading across border Indicator Bangladesh Region Documents for export (number) 7 8.2 OECD 31.3 4.7 Region 4.8 905 5 10.1 1.1 4 8 23.1 6. World Bank Bangladesh 6 7 7 6.1 27. World Bank OECD 4.1 OECD 1.417.7 1.3 17.4 5 OECD 6.9 Figure 7: Dimension of protecting investors Indicator Disclosure Index Director Liability Index Shareholder Suits Index Investor Protection Index Source: Doing Business 2008. World Bank Region 6.5 9.8 8.9 0.4 134.3 443.6 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 2008.5 1.7 0 3.3 7 2 0.90 9. World Bank Region 5 6.148.3 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. World Bank OECD 6.0 1.90 Figure 9: Ease or difficulty of enforcing commercial contacts Indicator Bangladesh Procedures (number) Duration (days) Cost (% of claim) Source: Doing Business 2008.9 1.9 28 4.00 32.1 32.7 41.6 59.5 74.1 28 844 9 32 1.442.3 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 2008.2 117 .1 6 OECD 4.
2007 Source: The 17th Survey of Investment Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment Investment-Related Cost Comparison. JETRO. 2007 118 . 2007 Source: The 17th Survey of Investment-Related Cost Comparison. Related JETRO. Related JETRO. Related JETRO. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison.AT Capital Research Source: The 17th Survey of Investment-Related Cost Comparison. JETRO. JETRO.
JETRO. JETRO. JETRO. 2007 119 . 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison. JETRO. JETRO. JETRO.AT Capital Research Source: The 17th Survey of Investment-Related Cost Comparison. 2007 Source: The 17th Survey of Investment-Related Cost Comparison.
Joupurhat Dighipara. Dinajpur Source: Power System Master Plan Update.AT Capital Research Appendix 2 . Power Cell & Asian Development Bank 120 . Dinajpur Jamalganj.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. Rangpur Phulbari.
AT Capital Research (nonAppendix 3 . 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 .Infrastructure (non-energy) Source: Bangladesh Economic Review. 2007. 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.
pdf 2006 .jp/english/oec/before/2007/pdf/bangladesh02. a modal shift from road transportation to environment friendly railway transportation is indispensable.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 . World Bank. safe. and environment friendly – resulting in reduced transportation volume.02 2002 .07 122 .AT Capital Research Fi gure .go. In parallel with the robust GDP growth (5–6%) in recent years.04 2004 . the amount of cargo handled at the port of Chittagong has been increasing by more than 10% annually. poorer service and a smaller role for the railway in the overall transport sector. Source: Japan Bank for International Cooperation. rapid. http://www. projects in the railway sector require more time and funds to bear fruit than do projects in the road and other sectors. connecting Dhaka. Asian Development Bank and Japan bank for International Cooperation are jointly funding the project. virtually all railway facilities and equipment now in use were developed during the British colonial period (up to 1947).00 2000 . they have become so old and decrepit that they are unable to fully capitalize on the railway’s inherent strengths – massive. thus posing a bottleneck for the economic growth in the years ahead. punctual. Consequently. 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. (The railway’s CO2 emission per ton-kilometer is less than 1/8 of that of the automobile. Indeed. 2007 Case 1: Reform of Bangladesh Railway In Bangladesh. For this and other reasons. administrative and institutional improvements of Bangladesh Railway (BR).06 Source: Bangladesh Economic Review. showing particularly rapid growth in the demand for transport in the Dhaka–Chittagong section.) The government of Bangladesh is scheduled to formulate the Railway Development Plan. Since 2001. in order to achieve sustainable development that takes the environment into consideration. and Chittagong. 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.jbic.01 2001 . the government plans to take up sector reforms through organizational. the demand for transport in the Dhaka–Chittagong section can be expected to increase even further. but if the port facilities are expanded and enough private companies are attracted to the Export Processing Zone (EPZ).03 2003 . In addition. it seems difficult. the government of Bangladesh has scarcely made any new investments in railway development since independence in the 1970s. Additionally. the second largest city and industrial hub with the country’s largest seaport. demand for freight transportation has steadily increased by 5–6% annually in Bangladesh. the capital city and political and economic hub of the country.05 2005 . for the current railway facilities to meet such expectations.99 1999 . which will include the plan for implementing projects in the railway sector over the next 20 years. both in terms of transportation volume and quality of service.
6 1.8 56.313.4 5.5 108.5 2.7 65.0 1.556.9 16.6 33.751.1 36.4 285.9 13.1 22. and Zinc Note: TSP= Triple super phosphate.0 ASP 5.2 701.2 6.1 5.0 125.3 136.360.4 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 1.2 67.517.5* 284.0* 268.0 6.9 932.8 5.6 0.0 13.2 278.394.4 261.7 1.100.1 359.3 8.0 3.878.412.3 TSP 67.5 1.0 451.123.748.0 1.698.0 895.9 Total 2.7 59.7 848.5 0.2 689.896.0 0.164.2 3.293. NPKS.5 3. DAP= Diamonimum phosphate.8 4.3 TSP 363.351.9 431.7 2.024.5 Total 964.1 2001-02 18.0 101.0 1.0 Source: Ministry of Agriculture.4 0.0 2.5 55.6 9.738.4 10.525.0 0.2 250.9 10.0 176.6 1.Agriculture Figure 1: Food grain production in Bangladesh (in 100.935.0 1.0 0.6 243 16.4 4.878.1 2006-07 15.7 268.1 DAP 126.682.222.0 3.0 100.003.013. NPKS= a composition of nitrogen.057.513.5 135.0 0.665.8 29.493.0 0.188. DAP= diamonimum phosphate 123 .0 16.0 0.500.523.4 2.774.0 1.5 7.6 1.8 3.0 0.5 111.0 1.655.0 1.9 2.588. NPKS= composition.7 2003-04 18.0 32.4 Total BDT (mn) 5.143.2 438.1 NPKS 10.0 522.5 4.9 8.6 1.3 9.2 1.230.3 1.268.509.3 2.3 88.163.8 4.7 1.106.442.0 125.2 251.278.0 3.792.0 457.4 5.1 107.6 Urea 302.739.0 0.3 208.2 *Others 50.7 2.968.5 119.8 2004-05 15 98.0 4.4 2.0 4.0 0.2 998.0 0.473.6 65. potassium.634.537.7 295. 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 1.0 57.4 8.2 128.8 25.509.570.0 18.104.22.168 26.0 0.4 276. Government of Bangladesh *Others mean Gypsum.0 1.0 3.1 766.130.380.437.0 820.1 1.9 1.850.0 0.995.0 32.0 0.9 15.6 1.6 4.0 1.1 7.3 770.0 0.772.3 12.087.0 1.0 3.456.3 0.0 1.442.6 3.550.730.027.510.0 1.2 122.0 Source: Ministry of Agriculture.5 57.545.4 145.1 974.4 9.5 46.0 0. ASP= Ammonium sulphate.0 30.621. phosphate.0 36.0 2.5 260.0 886.5 407.4 373.7 40.4 141.9 12.1 1.8 47.4 613.2 11.000 metric tonnes) 2000-01 Aus Aman Boro Total rice Wheat Maize Grand total 19.289.4 2.163.2 112.5 4.6 359.2 879.0 0.9 Import MP 123.0 0.7 12.9 427.5 7.0 340.1 108.098.760.3 115.0 3. SSP= Single super phosphate.8 13.056.2 1.0 1.0 0.254.0 0.386.283.2 1.4 SSP 119.4 2.822.0 3.675.3 27.3 127.175.9 Gypsum 77.2 25.6 73.0 60.AT Capital Research Appendix 4 .3 11.0 1.0 87.986.9 327.9 7.4 977.0 0.7 2.180. and sulphur.841.2 139.7 118.5 23.0 1.9 17.5 101.0 0.8 1.597.0 1.5 1.0 247.8 6. MP= Melamine phosphate.6 2002-03 18.0 0.0 0.420.6 265 2005-06 17.8 7. MP= Melamine phosphate.883.0 567.5 269.0 0.5 20.475.0 0.7 1.8 265.0 53.9 28.9 278.0 5.0 1.0 0.7 235.916.9 27.4 251.670.2 138.0 1.1 1.5 271.6 6.0 0.4 12.0 0.4 5.3 1.539.2 5.781.242.0 1.4 135.0 7.2 9.0 79.
8 308.9 4.4 391.1 100.06 2006 .9 461.9 351.201.0 412.6 417.7 315.6 1.056.3 906. compiled by BGMEA Figure 2: Main apparel items exported from Bangladesh (Figures in USD) Fiscal Year 2000 .7 282.334.7 2.0 766.1 645.1 471.9 663.3 12.0 -0.7 345.9 12.4 12.9 311.3 322.4 -6.9 Sweater 476.1 5.7 943.3 2.2 10.1 T-Shirt 597.2 100.9 8.116.9 314.9 862.3 19.0 7.248.5 1.4 17.4 349.0 447.4 15.3 389.019.378.5 746.5 387.5 11.6 4.3 893.7 0.1 26.349.9 406.6 643.6 5.Textiles Figure 1: Ready Made Garment (RMG) exports (in USD mn) in 2006 and 2007 Woven Knit Annual growth rate 2007 (%) 330.4 18.7 2006 650.7 858.4 Annual growth gate 2007 (%) 275.3 663.3 Jackets 573.208.4 474.7 9.8 Source: Export Promotion Bureau.5 961.1 Total (Woven+Knit) Annual growth rate 2007 (%) 605. compiled by BGMEA 124 .9 1.1 9.0 351.0 -7.0 1.0 Source: Bangladesh Bureau of Statistics: Labour Force Survey Bangladesh 1999-2000.3 5.9 387.1 40.933.1 Total 3.4 778.01 2001 .4 -6.5 -23.005.7 412.6 -9. August 2002 Appendix 5 .5 -5.2 -5.05 2005 .073.9 446.1 355.03 2003 .6 871.388.1 451.4 Trousers 656.2 1.9 0.044.5 8.8 578.6 -23.9 -23.7 46.2 4.8 15.5 904.984.1 486.9 758.9 908.2 987.3 3.0 32.9 37.3 2.7 415.608.8 430.7 314.494.4 616.9 616.0 2.3 1.9 859.0 mn 15.2 51.606.3 464.6 19.2 4.7 Month January February March April May June July August September October November December Total 2006 354.5 364.3 459.2 8.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 17.0 353.9 33.667.2 6.781.394.8 8.2 701.5 346.9 349.741.165.544.3 343.9 634.4 546.1 516.7 421.4 % 53.3 642.2 691.5 Source: Export Promotion Bureau.349.7 1.0 mn 32.6 1.5 1.1 1.8 635.07 Shirts 1.8 700.9 21.3 100.2 352.8 2006 296.5 3.4 Female % 78.0 4.3 636.4 330.4 -0.9 4.02 2002 .4 15.8 445.4 452.5 1.437.053.350.7 293.8 Total % 62.3 21.2 417.5 2.9 517.04 2004 .2 19.8 368.062.3 391.0 437.1 1.1 325.9 1.7 774.7 4.1 4.7 1.3 442.
090.342 498.9 4.040mn Kg 50mn Kg 0.608 310 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 1.6 11.03 2003 .9 23.000 Spindles NA 2.2 15.4 11.05 2005 .100mn meters 6.000 handlooms 17.7 7.6 125 . page 27 34.5 2.1 0.1 16.800 Knit/Dye Machines 152.720mn meters 148.04 2004 .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.07 Source: BTMA Annual Report 2007.01 2001 .888 Reeling NA 25.06 2006 .02 2002 .000 Looms 23.8 44.066 Installed Capacity 6.250.9 25.000 Looms Production Capacity 1.000 2.8 12.400mn meters 300mn meters 837mn meters 4. 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 1.7 -5.1m Kg 1.637mn meters 1.
229 109.1 22. K.6 39.4 -8. A. Figure 2: Different categories of Bangladeshi migrant workers Years Professional Skilled Semi-skilled 1976-1985 1986-1995 1996-2004 6.050 Source: Ray.6 -16. Employment and Training Un-skilled 89.449 44.2 73.461 2001 5..1 38.907 32.12% 32.785 116.9 41. “Making Bangladesh a Leading Manpower Exporter: Chasing a Dream of US$ 30 billion Annual Migrant Remittances by 2015”.35% 20.19% Unskilled 51.177 28..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) 4.01% 7.76% 32.5 36.265 36.352 59.97% 48.301 34.3 -9.0 -2.1 -11.5 57.34% 4.511 131.558 1998 9.590 1999 8.3 16.6 -2.574 74.188 64.327 Source: Bureau of Manpower.606 26.2 10.3 126 . & Chaudhuri.045 98. 1999-2050 -21.536 118.940 42.211 43. 2000 Absolute population loss.947 2000 10.4 8.8 -6. Employment and Training Figure 3: Overseas Employment by Profession Worker's Category Year Professional Skilled Semi-skilled 1995 6.72% 3. S.7 104. Sinha.5 -2.4 126.950 109.18% 15.90% 34.7 7. S.669 99.516 134.3 50.797 65.202 110.AT Capital Research Appendix 6 .236 2004 12.702 2002 14.055 1996 3.562 122.742 30.54% 42.2 39.581 118.718 51.252 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.025 2003 15. (2007).4 5.530 29.862 74.6 82.450 56.3 30.741 85.8 200 24 10 1% 240 48 288 2015 30 400 75 10 1% 750 300 1.88% Source: Bureau of Manpower.689 1997 3.
5 234.1 3.8 0.6 64.1 1.6 6.S.8 30.3 1.3 673.4 170.6 25.9 5.5 423.9 42.3 404.9 33.6 35.4 0.3 1.3 83.2 0.0 165.8 0.5 0.2 114.0 470.0 0.5 276.3 4.4 12.2 246.0 0.8 68.9 61.8 103.0 2001 980.249.8 2003 1.2 8.3 0.2 0.6 35.313.9 4.5 2000 933.3 123.1 349.561.5 322.3 477. Korea Australia Iran Libya Total 1995 485.8 1.6 390.5 445.0 248.9 16.6 19.847.A.3 147.1 0.071.244.7 62.AT Capital Research Figure 5: Sources of Remittances to Bangladesh (in USD mn) Country Saudi Arabia U.0 31.8 11.1 153.0 0.E Kuwait U.2 0.1 2.5 68.2 39.0 0.0 0.7 18.3 27.0 0.0 0.5 380.4 108.2 4.6 125.2 56.5 8.6 46.0 0.4 110.0 0.4 342.6 0.0 71.0 0.3 1.9 0.9 254.6 49.1 2.9 265. Employment and Training 127 .5 34.0 2.A U.6 3.1 47.7 4.8 110.2 87.9 76.955.9 104.2 3.9 3.2 143.0 25.1 7.1 10.0 0.3 2005 1.9 Source: Bureau of Manpower.201.0 0.8 10.K Qatar Oman Others Bahrain Singapore Italy Malaysia Germany Japan Hong Kong S.0 1.2 0.3 92.0 0.3 1.0 2002 1.7 90.8 6.1 0.3 338.0 186.4 32.8 63.0 28.4 78.4 11.7 496.9 15.2 0.2 22.8 4.6 57.4 2004 1.0 70.463.0 0.6 82.609.7 0.0 45.9 49.177.
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
6 4.7 24.7 0.0 131 . doctor (private practice) Govt. institution) Homeopathic doctor Kabiraj/hekim/ayurbed Govt.4 15.5 0.3 0.7 1. doctor (Govt.AT Capital Research Figure 3: Use of different methods of treatment in Bangladesh in 2005 Different Methods Pharmacy/dispensary/compounder Private doctor Govt.1 0. health worker Family treatment Self treatment NGO doctor NGO health worker Peer/fakir/tantric/ojha/baidya Others Total Source: Bangladesh Bureau of Statistics % 38.2 5.4 1.1 7.0 100.5 0.
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. • The other international CRO and bioservices companies operating in India include Covance. MWG. T. ClinTec. For instance. Clinworld. Simbec and Pharmanet. Appendix 10 . Baxter. and Roche. 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. Novo Nordisk. AstaZeneca. Indo American Hybrid Seeds and Syngenta. • Opportunities in the agro-biotech sector have also brought in world’s major biotech companies into India.AT Capital Research Appendix 9 .2 100 Case 1: Major Multinational Biotechnology players in India The Indian Biospace is dotted with a growing number of Multinationals like Eli Lilly.Biotechnology Figure 1: Indian Biotech segments Types Bio-IT Bio Agro Bio Industrial Bio Service Bio Pharma Total Source: www. wherein international companies like Quintiles Transnational have actively proceeded to leverage the India advantage. RCC. J. (2006). • The clinical research is another field. Some of the other leading MNCs present in India’s bio-agri segment are Advanta.” University of Bremen & Source: Ludwig.1 7 6. “Shipbuilding in China and its impacts on European shipbuilding Institute of Law and labour Germany.ibef. 132 . & Tholen. developed by Monsanto.org % 2.7 9 75. Parexel.
453.929 91.789 7. Ministry of Education.725 80.929 11.211 9.084 182.526 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 37.887 7.265 No.495 232.629 2.274 79.891 6.728 60 162 222 80 108 188 162.500 261 2.183 18.487 10.648 207.869 858.688 2. • 23 new Polytechnic Institutes excluded above have already been established but are yet to open.658 221. of Students Source: Education Statistics 2005.AT Capital Research Appendix 11 .483.577 48.483 3.360 241.160 3 9.552 511.976 192.767 16.741. Government of Bangladesh Note: • Teacher and Students of National University and Open University are not included in Public Universities.517 60.439 90.221 115.043 21.132 9.225.185 1.705 344.529 4. of Teachers No.336 17. 133 .852 3.885 151.109 597.372 36.434 225.450.738 3.899 3.158 917 1.Education Figure 1: Bangladesh educational institutes Type of Management No.967 6.246 18.398.176.548 2.672 42.713 82 151.339 2.215 26 56 82 180 2.665 7.397 317 18.893 14.215 2.939 15.
189 465 792 10 16 45 331 359 17 7.935 3.AT Capital Research Figure 2: Number of public and private technical-vocational institutes 2005 Type of institution Management No.548 174 255 856 5.037 56 198 18 27 442 32 124 232 29 31 15 625 54 20 No.954 358 782 252 486 14.682 8. Government of Bangladesh Figure 3: Number of public and private professional college 2005 Type of institution Management No.684 312 1.180 16 12 No.324 515 628 435 17.683 7. of Teachers 1. 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.097 4.867 557 95. of Students 17. Ministry of Education. 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 1.458 79. Government of Bangladesh 134 .224 1.103 Source: Education Statistics 2005.218 1.787 407 120 Source: Education Statistics 2005. of Student 11. Ministry of Education.731 6. of Teachers 1.288 3.120 68 112 No.511 6.836 9.
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