Bangladesh: Investment Opportunities Farooq Sobhan President Bangladesh Enterprise Institute (BEI)
Bangladesh economy GDP and GDP Growth rate Year GDP (current US$) GDP Growth Rate (annual %) 2009 89.3 billion 5.7 2010 100.4 billion 6.1 2011 111.9 billion 6.7 2012 116.03 billion 6.2 2013 129.9 billion 6.0 [Source: World Bank national accounts data, and OECD National Accounts data files] GDP Growth Forecast- Bangladesh Year GDP Growth (annual %) 2014 5.4 2015 5.9 2016 6.2 [Source: World Bank]
FDI in Bangladesh Year 2009 960.59 2010 913.02 FDI Inflows( in million US$) 2011 779.04 2012 1194.88 2013 1730.63 [Source :Statistics Department, Bangladesh Bank]
KEY AREAS OF INVESTMENT IT & Telecom Power Sector Infrastr ucture Light and Heavy Vehicles Growth and Thrust Sectors Skills Develop ment and Entrepre neurship Ship- buildin g Agrobusines s Leather Pharma ceutical s Fisheries
Power Sector Current market size FDI inflows in Power, gas and petroleum- $99 million (6% of Total FDI in FY 2013) Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 Total FDI Inflows (million US$) 46.89 73.66 127.19 244.94 93.67 Potential Projected data 2011 2012 2013 2014 2015 Projected demand (MW) 6,298 6,832 7,709 8,699 9,812 Capacity retired (MW) - - 448 378 - Projected supply (MW) (excluding quick rental) Projected supply (MW) (including quick rental) Shortage/surplus (MW) (exlcuding quick rental) Shortage/surplus (MW) (including quick rental) 5,177 7,029 8,326 9,545 11,625 6,363 8,683 9,764 10,527 12,601-1,121 197 617 846 1,813 65 1,851 2,055 1,822 2,789
Strength: Government s priority sector PPP is highly encouraged Exemption from corporate income tax for a period of 15 years. Allowed to import plant and equipment and spare parts up to a maximum of ten percent (10%) of the original value of total plant without payment of customs duties, VAT and any other surcharges as well as import permit fee Repatriation of equity along with dividends allowed freely. Exemption from income tax for foreign lenders to such companies. The foreign investors are free to enter into joint ventures but this is optional and not mandatory.
Infrastructure Bangladesh is situated between Central and Southeast Asia A gateway for regional and Asian trade Asian Highway Roadmap one:
Asian Highway Roadmap two:
Need for investment in infrastructure Bangladesh needs $100b till 2020 for infrastructural development Bangladesh needs $36 billion to $45 billion for expanding its communication network Power sector will require an investment between $11 billion to $16.5 billion Supply and sanitation will need a flow of investment of $12 billion to $18 billion Solid waste management needs $2.1 billion to $4.2 billion Telecom needs $5 billion, and irrigation $7.7 7 billion to $11.6 Potential sectors: Roads and Highways Inland Waterways Railways Traditional and Renewable energy Green and clean technology Water supplies Health, sanitation and waste management Telecom EPZs
Export Processing Zones(EPZs) Current EPZs in Bangladesh Eight EPZs One Korean owned EPZ Five new special economic zones will be set up by 2016 Special Features of EPZs Fast and duty free access to first world markets Strategic location of EPZs with excellent air and sea connection Favourable investment policies for (foreign) investors Attractive and comprehensive incentive packages Low production cost for high competiveness Comparatively cheap labour Availability of skilled productive labour force in the area Industrial friendly and congenial work environment Up to date Environmental Management Plan (EMP) Essential civic i amenities including housing and recreational facilities in the zone Professional one-stop service Easy permission for industrial operations Issue of import/export permits
IT and Telecom Current market size Over 400 IT companies are now thriving in the country supplying to local and international markets worldwide. Total estimated IT Industry Size: US$ 120 Million (including export) Export to 60+ countries worth of US $ 45.31 Million 55,000 + IT experts in the country Accenture has acquired 51 per cent of GPIT in 2013 and it employs 550 IT experts Samsung has expressed interest to invest in the telecom sector which may create 50,000 jobs and widen export basket by more US$ 1 billion Potential a. Software Development and Solutions b. Telecom Equipments Strength: Government s priority sector Government is keen in establishing IT related infrastructure for the development of the industry. Telecom industry size is expanding. 116.871 million people out of 160 million population has mobile subscription Bangladesh has a cheaper and rapidly growing IT workforce. Availability of substantial number of qualified and experienced young people Comparatively short training period and low investment have made such ventures highly profitable.
Skills and Entrepreneurship Development Current Issues The Bangladesh manpower export industry is worth USD 8bn a year. The Global Manpower industry will be USD 600bn, and Bangladesh has an opportunity to capture 5% The manpower agencies and other supporting services revenue is estimated to be between USD 250mn to USD 400mn Bangladesh can develop its comparative advantage given increasing labor costs in the traditional outsourcing/offshoring destinations such as India and China. Investment potential Substantial demand for skilled, unskilled/semi skilled jobs With focused investment in training Bangladesh could capitalize on these opportunities. Need for world-class training centers for integrated training & HR services exist The current manpower recruitment agency sector remains relatively undeveloped and unregulated Investment in Technical and Vocational Training Institutes are critical in developing a more profitable manpower exports further up the value chain.
Agro-based Industries Current market size About 84% of the total population lives in rural areas and are directly or indirectly engaged in a wide range of agricultural activities. Agriculture contributes about 20.29% of the country s GDP. About 43.6% of the labor force is employed in agriculture with about 57% being employed in the crop sector. Future demand Well organized and managed agro industry is required for optimal production Strengths Over 90 varieties of vegetable are grown in Bangladesh Bangladesh has supply of raw materials for the agro-based industry. Fruits and vegetable production has increased significantly in recent years. Government and NGOs have been conducting regular training programs in developing a skilled manpower for this industry. There is a substantial demand supply gap in the agro-based industry. Domestic demand for quality agro and dairy product is very high
Fisheries Sector Bangladesh has huge water resources, covering area of 4,575,000 hectares. Major Sources of Fisheries Major Sources of Fisheries Inland Culture/Aquaculture 48% Marine Capture 34% Inland Capture 18%
Strengths Vast water resources Favorable climate Cheap manpower Geographical position Huge domestic demand Investment Potentials The export gradually rising. Fish processing plants and international standard laboratories are vital for fish export. Presently there are more than 148 processing plants. Shrimp/prawn is the main exported item in this industry. But there are opportunities to increase export by producing value-added products. Feasible investment in- fish grow out process with international branding and traceability, hatchery industry, feed industry, values added products (like fish fillets), cold chain management testing laboratory.
Pharmaceuticals Current Market value In 2005, the size of the Bangladeshi pharmaceutical market was $500 million in terms of production, and it is expected to grow at 10% per annum Bangladesh is exporting more than 67 different countries of the world. 450 generics/substances registered in Bangladesh. Potential: Contract manufacturing with the product intended for export to a regulated market. Contract manufacturing with the product intended for the domestic market Strength Pharmaceuticals sector is one of the fastest growing sectors in Bangladesh. Annual growth rate of 34% Fulfilling 97% of the total medicine requirement of the local market. Now more than 200 registered pharmaceutical manufacturers in Bangladesh. Around 35,000 people work in the industry i.e.50% are pharmacists, chemists, biochemists and microbiologists.
Leather Industries Market value In 2008-09 09 total t export of leather, leather goods was $381.14m. 14 Bangladesh produces between 2% and 3% of the world s leather. Potential oe a. Finished Leather b. Leather Goods Strength Most of the livestock base for this production is domestic, which is estimated as comprising 1.8 % of the world s cattle stock and 3.7 % of the goat stock. The hides and skins (average annual output is 15m sq.m.) have a good international reputation Comparatively cheap, skilled and abundant labor. Adequate domestic supply of good quality raw material, as hides and skins are a byproduct of large livestock industry Adequate government support in the form of tax holidays, duty free imports of raw materials and machinery for export-oriented leather market The Government has established separate Leather Zone
Light and Heavy Vehicle Manufacturing FDI in Light and Heavy Vehicle is rising: Fiscal Year Total FDI Inflows (million US$) 2008-09 0.10 2009-10 0.77 2010-11 035 0.35 2011-12 1.52 2012-13 17.81 Strengthth A growing and increasingly affluent middle class indicates demand for consumer durables. Domestic demands for cheaper cars and transport utility vehicles have gained momentum in the past few years. Need for public transport has created a demand for domestic production Bangladesh imports reconditioned vehicles at higher rate
Shipbuilding Sector Market Size Exported ocean-going cargo vessels and more export orders are being executed. The delivery value has exceeded US$ 100 million. Export to grow at about $2 billion annually in the five years time The global l market for small vessels (3,000 to 12,000 DWT) is about $400 billion with China, India and Vietnam as the main competitor to Bangladesh. The shipbuilding industry receives government subsidies. Potential ti 60% of the ships in the world are under 500 TEU and more than 20 years old. Under the current shipping regulations, European ports require that ships more than 20 years old must be surveyed every time she enters post. This is a huge cost and such ships cannot be run profitably. The Government has introduced 5% subsidy. Even without the subsidy, the shipbuilders in Bangladesh had been doing well because of better productivity. Currently the extent of value addition in the shipbuilding industries is 35%. This share may rise to more than 50%
Concluding Remarks 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 GDP is expected to grow at 6% despite political challenges The growing number of global investment banks focusing on Bangladesh clearly suggests increasing potential to step up both FDI and foreign portfolio flows Bangladesh presents strong domestic market with vibrant economy Language and education as advantages for market driven economy Government is committed to encourage PPP and FDI