Assignment on:

International Business

Date of Submission: 17th June, 2020.

Submitted by: Sanjida Hossain

Submitted to: Professor Dr. Abhinaya Chandra Saha ID: 319BBA0009
Vice Chancelor, Course: International Business
The Millenium University, Dhaka. Program: BBA
Former Director, IBA (RU) Batch: 44th
Chairman, Dept of AIS (RU),
 1. What is Balance of Trade?
Balance of Trade (BOT):

Balance of trade (BOT) is the difference between the value of a country's imports and exports for a given
period and is the largest component of a country's balance of payments (BOP).

A country that imports more goods and services than it exports in terms of value has a trade deficit
while a country that exports more goods and services than it imports has a trade surplus.

For example, In 2019, Germany had the largest trade surplus followed by Japan and China while the
United States had the largest trade deficit, even with the ongoing trade war with China, beating out the
United Kingdom and India.

Calculating Balance of Trade (BOT)

Assuming, if the United States imported $1.5 trillion in goods and services in 2017, but exported only $1
trillion in goods and services to other countries, then the United States had a trade balance of -$500
billion, or a $500 billion trade deficit.

$1.5 trillion in imports - $1 trillion in exports = $500 billion trade deficit

2. What is Balance of Payment?

Balance of Payment (BOP):

The balance of payments (BOP) is a statement of all transactions made between entities in one country
and the rest of the world over a defined period of time, such as a quarter or a year. The Balance of
Payment includes both the current account and capital account.

The sum of all transactions recorded in the balance of payments should be zero; however, exchange rate
fluctuations and differences in accounting practices may hinder this in practice.

It combines all the public-private investments to know the inflow and outflow of money in the economy
over a period. If the BOP is equal to zero, then it means that both the debits and credits are equal, but if
the debit is more than credit, then it is a sign of deficit while if the credit exceeds debit, then it shows a
surplus.

The Balance of Payment has been divided into the following sets of accounts:

Current Account: The account that keeps the record of both tangible and intangible items. Tangible
items include goods while the intangible items are services and income.
Capital Account: The account keeps a record of all the capital expenditure made and income generated
collectively by the public and private sector. Foreign Direct Investment, External Commercial Borrowing,
Government loan to Foreign Government, etc. are included in Capital Account.

Errors and Omissions: If in case the receipts and payments do not match with each other then balance
amount will be shown as errors and omissions.

3. What are the differences between BOT and BOP?

Difference between Balance of Trade (BOT) and Balance of Payment (BOP):

BASIS FOR
BALANCE OF TRADE BALANCE OF PAYMENT
COMPARISON

Meaning Balance of Trade is a statement that Balance of Payment is a statement that

captures the country's export and keeps track of all economic transactions
import of goods with the remaining done by the country with the remaining
world. world.

Records Transactions related to goods only. Transactions related to both goods and
services are recorded.

Capital Transfers Are not included in the Balance of Are included in Balance of Payment.
Trade.

Which is better? It gives a partial view of the country's It gives a clear view of the economic
economic status. position of the country.

Result It can be Favorable, Unfavorable or Both the receipts and payment sides
balanced. tallies.

Component It is a component of Current Account Current Account and Capital Account.

of Balance of Payment.
 4. What are the Problems of International Business in
Bangladesh?
Problems of International Business in Bangladesh:

a. GEOGRAPHICAL LOCATION and NATURAL CALAMITIES:

From the geographical viewpoint, Bangladesh is not located in such a place to trade vigorously. India
encompasses Bangladesh from three sides. Due to economy of scale, India can produce the same quality
products at a cheaper price. This is a problem in Bangladesh’s foreign trade operation.

b. LEGAL CONSTRAINTS:

The first and the foremost problems in foreign trade operations arise due to legal constraints. Foreign
trade indicates exchange of goods and services between two countries. So, problems arise in foreign
trade operations. Suppose, an exporter of Bangladesh receives an L/C from the importer of England, in
which the goods are to be shipped via an American ship and delivered to China.

c. LIMITED SKILLED MANPOWER:

Foreign trade related jobs involve proper communication with clients, as well as with local and foreign
banks. Bangladesh lacks adequately skilled workforce who fully understand and are well capable to
handle foreign trade dealings.

d. LACK OF INVESTMENT AND EXPORT BASE :

Bangladesh has a very limited export base. It does not have the sufficient supply of raw materials
needed to use in the production process. As a result, production cost increases and consumers have to
spend more to avail that particular product.

e. LACK OF STABLE POLICY:

Policy and structure are an integral part of any kind of operation. Change of Government in Bangladesh
often comes with new policies, which is very difficult to cope with. Business organizations and
businessmen find it difficult to settle their businesses. Change in policy make them deviate from the old
track and run after the new track.

f. POLITICAL INSTABILITY:

Political stability is essential for smooth foreign trade operations. Instability in politics has been a major
problem to conduct foreign trade business in Bangladesh.
 g. OTHER PROBLEMS:

Whenever an importer comes to the bank to issue a L/C in his favor, he has to deposit a certain amount,
known as “L/C margin”. After receiving the export documents from the exporter, the importer pays the
rest amount. But till this point in time, this L/C margin amount is kept by the bank without giving any
return to the importer, so it is a loss for the client. He could invest this money elsewhere to earn some
return. Consequently, the importer adds this loss to production cost so the product price goes up, which
has to borne by the ultimate customers.

5. What are your suggestions for minimizing this problem?

Suggestions for minimizing the International Business problems in Bangladesh:

a. Market Research:

We should increase our market research to minimize the problems of international business in
Bangladesh.

b. Increasing female Labor Participation and cost control:

We should ensure our female labor participation as well as control our production cost to minimize the
problems of international business in Bangladesh.

c. Enhancing quality of education using Latest Technology:

It is necessary to enhance quality of education using latest technology to improve our current miserable
status of international business.

d. Boosting Private Investments:

Public and Private investment should be boosted. Without adequate investment it is very difficult to
improve international business in Bangladesh.

e. Increase Quality Domestic Product:

We should manufacture quality domestic product in more number to minimize international business in
Bangladesh.