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:: Bangladesh - Potential Sectors For Investment ~


Bangladesh, traditionally known for jute and tea exports, has recently attracted world- wide attention for readymade garments and leather exports. Bangladesh foresees an expansion of her agricultural sector, as well as increased diversity in non traditional industries and business. Below is a short account of a few potential investment areas. 

*130 million population *50 million civilian labour force *trained and educated workforce at low wage rate *sizeable domestic market *political stability *steady growth of GDP * stable rate of exchange *low interest rate *low rate of inflation *comfortable foreign exchange reserve.

Textile

Bangladesh is a land of nearly 112 million people with annual per capita income of US$ 386. Clothing being the second basic need there exists a vast market for textile products in this country.

The readymade garments (RMG.) is the manufacturing success story in Bangladesh from US$ 7.00 million in 1981-82 to US$ 1949 million in 1995-96 and from 11% to 50% of total export earning during the period. Only knit fabric for the knitted garments and hosiery are domestically produced. But the predominant raw materials for readymade garments are woven fabrics, most of which are now imported.

Due to lack of quality woven fabrics required by buyers, the readymade garments sector in Bangladesh had to import a total of 2.5 billion linear yards of fabrics in 1995. The projected fabrics demand for the RMG. industry for 1996 is around 2.85 billion yards light woven, heavy woven and mixed woven 2.38 billion yards, and knit 0.47 billion yards) Currently 240 readymade garments units spend approximately 65% of their export earnings on import of fabrics.

It is estimated that in order to meet the demand gap by the year 2000 additional investment in 156 spinning mills (each having 25000 spindles), 371 weaving mills (each having 300 shuttles or 120 shuttles looms) and 371 dyeing, printing and finishing units (each having production capacity of 10 million meters annually) will be required to setup.

Leather goods

There is already a substantial domestic leather industry, mostly export-oriented. The leather includes some readymade garments, although that, aspect is confined mainly to a small export-trade in 'Italian made' garments for the US market. Footwear is more important in terms of value added, accounting for just over US$ 4 million exports in FY 1992-93. The figure raised at US$ 22.77 million in FY 1996-97. This is the fast growing sector for leather products. Bangladesh produces between 2 and 3 percent of the world's leather market. Most of the livestock base for this production is domestic which is estimated as comprising 1.8 percent of the world's cattle stock and 3.7 percent of the goat stock. The hides and skins (average annual output is 150 million sq.ft.) have a good international reputation. Foreign direct investment in this sector along with the production of tanning chemicals appears to be highly rewarding.

Having the basic raw materials for leather goods as well as for the production of leather shoe, a large pool of cheap but trainable labour force together with tariff concession facility to major importing countries under GSP coverage Bangladesh can be a potential off shore location for leather and leather products manufacturing with low cost but high quality.

Frozen food

The frozen fish export sector is the second largest export sector of the country with annual turnover of US$ 321 milion (17.05 M.Lbs) in 1996-97. The average annual growth rate is 28%. This 100% export oriented industry includes the following sub-sectors which need proper attention for augmentation of production and export earning.

Hatcheries-sustainable aqua-culture technology-feed meals plants-processing unit for value added products.

Foreign investment with technology in this potential sector has been recognised as most viable areas in Bangladesh. This sector has various incentive for foreign investment/jointventure in one of the above mentioned areas or may be under a composite project with potential high return.

Jute goods

Bangladesh is one of the leading producers of jute in the world. At present the annual production is 890,000 MT. In 1996-97 Bangladesh exported raw jute worth US$ 116.32 million and jute goods worth US$ 317.86 million in the form of sacking hessian. carpet & carpet backing cloth, jute yarn/twine etc. This is one of the very prospective areas for investment with higher technology.

Oil and Gas

Bangladesh has an estimated gas reserve of about 23 TCF. Out of this about 14 TCF is considered recoverable. So far 57 wells have been drilled in 19 discovered gas fields and present production is about 280 BCF per annum.

The government of Bangladesh has decided that future exploration for oil and gas will be done through the private sector to the maximum extent possible. With this end in view the first round of bidding took place in 1993 and 4 companies eventually signed Production Sharing Contracts (PSCS) with Rexwood Okland, United Meridiam and Occidental.

The second round of bidding was held in July 1997 and the bidding process is still continuing. During this bidding for the remaining 15 blocks bids have been received for 12 blocks. The competition in some of the blocks with good gas prospects has been intensive and all the biggest names in the oil and gas business in the world have shown active interest in Bangladesh. This bidding round will close in December 1997 and exploration activities are expected to begin immediately.

So far the private sector oil and gas exploration companies have invested US$ 100 million. With the amount of the contracts in the second round bidding there will be manifold augmentation of investment. Besides exploration which is an upstream activity in the down stream activities also the international investors have shown keen interest to set up joint ventures on their own as well as with public sector enterprises.

Coal

Besides Oil and gas a contract has been signed to extract coal from Barapukuria coal mine in Dinajpur district with a Chineses consortium designed to extract 1.0 million MT coal a year. Another contract has been signed with a North Korean company for the extraction of 1.6 million MT hard rock per year at Madhyapara in the same district.

Power

Bangladesh is still at a low level of electrification with only 16% of it population having access to electricity and per capita generation is only 96 KW per annum. Hence, there is a great need and urgency to expand the electrification programs. The government of Bangladesh has attached priority for the development of the power sector.

The present installed generation capacity is 2908 MW. But the available generation capacity is about 2200 MW due to old age of few power plants. The route length of transmission line is 3500 Km, the total length of distribution network is 1,28,000 KM and the number of consumers is 35,00,000 at present.

The present demand of electricity is about 22,00 MW. It is estimated that the peak demand in FY 2000 will be about 3150 MW and this will increase to about 4600 MW in FY 2005. A total of 2700 MW generation capacity is planned to be added to the system during the Fifth Five Year Plan period FY 1998-FY 2002.

Bangladesh has amended its Industrial Policy and the power sector is open to private investment. The government has approved the Private Sector Power Generation. Policy of Bangladesh to attract private investment in power generation. Under the policy, the private power companies shall be exempted from corporate income tax for a period of 15 years and the companies will be allowed to import plant and equipment without payment of custom duties and VAT.

Because of the favorable conditions for private investment a large number of Independent power producers (IPPs) have shown interests for setting up power plants in Bangladesh. A Rural Power Plant is being implemented by RPC at Mymensingh. A Rural Power Company (RPC) has been created A 60 MW Gas Turbine Power Plant is being implemented by RPC at Mymensingh.Contracts with four IPPs selected through competitive bidding have already been negotiated and are expected to be signed shortly. Bids received for setting up a 360 MW combined cycle power plant at Haripur and 450 MW combined cycle power plant at Meghna Ghat in the private sector are being evaluated. There is need for more private investment in power generation to meet the increasing demand in future.

The government of Bangadesh has undertaken some reform measures with a view to achieving operational and management efficiency and commercial characteristics in the power sector. Power Grid Company of Bangladesh (PGCB) has been created. Initially PGCB will own the transmision lines associated with Meghna Ghat Power Project. Ultimately it will take over the entire transmission system of the country. Dhaka Electric Supply Comapny (DESCO) has been created to manage the distribution area of Mirpur. DESCO will eventually take over the entire distribution responsibilities of Dhaka metropolitan city area.

Telecommunication

The recent revolution in information technology has opened up a new area for private investment in the telecommunication sector. Previously in the public sector. this has now been opened up for private investment.

Bangladesh Telegraph and Telephone Board (BTTB) is developing communication facilities with modern technology, Communications with the outside world are also being developed. Private sector operations in the rural telecommunications, paging, cellular telephones and reverine radio trucking have already been allowed. BTTB has already started providing VSAT (Very Small Aperture Terminals) facilities to the private sector. In the meantime two private companies have been given license for providing telecommunication in 390 thanks, till now they have covered 221 upa-zillas. So far licenses have been issued to four private operators for cellular or mobile telephone services in the country.

Air Transportation

In air transport, the government has given provisional domestic air transport operating licenses to six private companies for STOL Services. Seven airports have been refurnished to cater to their needs. International air & cargo transport in the private sector is now allowed for operation in Bangladesh.

Electronics

Bangladesh's experience in basic electronics spans over two decades. In recent years, European and Asian electronic firms have established technical collaboration with their Bangladeshi counterparts to produce some electronic goods at competitive prices. This has tremendous potentiality for expansion.

Light engineering industries

Light industries in Bangladesh produce a multitude of labour intensive goods including toys, consumer items, small tools and paper products for the domestic market. Further development of these industries offers various investment opportunities.

Export oriented production in light industries has gained momentum in the past few years. Entrepreneurs from Hong Kong, Japan and Korea have taken advantage of Bangladesh's cheap and easily trainable labour and its infrastructure facilities to manufacture products for the export market.

Tourism

With growing international interest in travelling through Asia tourism is taking roots in Bangladesh. Bangladesh offers a variety of historically significant and culturally unique sites for tourists. Sylhet's tea gardens, Cox's Bazar sea-beach, the Royal Bengal Tiger, Deer and the Sundarbans, the largest mangrove forest in the world with unique bio-diversity offer tourist attractions. Ancient mosques, Buddhist monasteries, Hindu temples, monuments and other landmarks dot the countryside. Additional hotel and resort facilities could be created for attracting tourists from home and abroad. Dhaka and Chittagong also have an unmet demand for additional hotel rooms, restaurants, entertainment and recreational facilities.

Agriculture

Raw jute, tea, tobacco, vegetables, spices and tropical fruits are the key potential products. Agiculture is the biggest private sector operation contributing 35% of GDP. The government has gradually removed the contsraints imposed by state intervention deregulated and liberalised the markets to allow further private participation particularly in the supply of imputs and distribution of outpus. The govenment has drastically rediced duties and taxes on a rage of agriculture imputs. Fertizer is exempted from customs duties and VAT.

Bangladesh continues to grow about 2 percent of the world's tea in some 150 plantations on the North-East region of Sylhet. Tropical fruits and vegetables are grown seasonlly and have recently begun to be exported in various forms. Tobacco farming is also well established.

Agro based industries

Bangladesh has the basic attributes for successful agro based industries, namely, rich alluvial soil, a year-round frost free environment, an adequate water supply and an abundance of cheap labour. Increased cultivation of vegetables, spices and tropical fruits now grown in Bangladesh could supply raw materials to local agro processing industries for both domestic and export markets. Progressive agricultural practices, improved marketing techniques and modern processing facilities would enable the agro processing industry to improve its quality and expand production levels significantly. Computer software development, data entry & data processing.

Availability of substantial number of unemployed qualified young people in various branches of engineering, science and technologies have opened up the scope of profitable investment in these sectors. Comparatively short training period and low investment have made such ventures highly profitable.

 


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