Investment scenario By Dr. Syed Abdus Samad

  Investment in Bangladesh has been taking a steep rise, with sustained growth from 2009 and policy regimes becoming more conducive. Since time immemorial, Bangladesh has harboured the spirit of free enterprise and innovative entrepreneurship, which is well-knit into the economic fabric of Bangladesh. 

'Vision 2021' envisions a Bangladesh which “will be a middle income country where poverty will be drastically reduced, where our citizens will be able to meet every basic need, and where development will be on fast track, with ever-increasing rates of inclusive growth." The key milestones of Vision 2021 are as follow:    

*  Democracy and strong democratic institutions

* Accountability of the government and an effective parliament

* Local government institutions of adequate strength and jurisdiction

* Rule of law and good governance

 *Establishment of human rights (political, legal, social, economic, cultural)

 *Separation of power with independent judiciary

* Delegation, decentralisation, de-concentration and devolution of power at local levels of government.

* Meeting basic human needs

* Alleviation of poverty from 45 percent to 15 percent

* Social safety nets for the extreme poor

* Autarky in food production

* Universal primary healthcare and sanitation

* Housing for all 

* Comprehensive handling of the fallout effects of climate change

* Planned reduction of air, land and water pollution and congestion

* Formation of a comprehensive regional water policy

* Rights to information

* 100 percent enrolment in schools by 2010

* Elimination of illiteracy by 2014

* High priority to information and communication technology sector

* Transformation of political culture

* Elimination of religious bigotry, terrorism, violence, organised crime and corruption from the society

* Effective mechanism for dissent and conflict management/resolution in a spirit of respect and tolerance

* Elevating Bangladesh to the level of a middle income country 

*The benefit of adopting digitisation as a tool to attain Vision 2021 and improve the quality of life of the people was embraced in the philosophy of 'Digital Bangladesh', whose salient features include:

* The use of information and communication technology (ICT) in all walks of life to provide the goods and services needed for human subsistence and growth

* The importance of people's democracy, basic rights, transparency, accountability, equity,  justice and an optimal public delivery system of services including public goods

* The inclusion of all classes of citizens on the principles of non-discrimination and non-exclusion

* Equal access to technology and knowledge-based services for all

ECONOMY OF BANGLADESH AT A GLANCE

Per capita income    : 1192 USD 

GDP             : 130 billion USD

GDP growth        : 6.2 percent p.a

FDI inflow        : 1.6 billion USD (CY 2013)

Export            : 30.1 billion USD (FY 2014)

Import            : 37.18 billion USD (FY 2014)

FOREX Reserve     : 21.59 billion USD (Nov, 2014)  

INVESTMENT CLIMATE OF BANGLADESH

The government of Bangladesh has given highest priority to augmenting private investment in Bangladesh. The incentives offered are considered as the most competitive in South Asia.

There is no restriction on the amount of share of investment. Foreign investors are eligible to take advantage of a wide range of generous tax concessions and other fiscal incentives and facilities. 

Investment in Bangladesh is secure vis-à-vis nationalisation and expropriation. To facilitate investment Bangladesh became a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group, Overseas Private Investment Corporation (OPIC) of the US, and International Centre for Settlement of Investment Disputes (ICSID), as well as a member of World Association of Investment Promotion Agencies (WAIPA), World Intellectual Property Organisation (WIPO) and World Trade Organisation (WTO). 

General packages of incentives for investment include:

* Reduced import duty on machinery and spares 

** Bonded warehousing facility for export-oriented industries

* 90 percent loans against letters of credit (by banks)

* Funds for export promotion

* Export credit guarantee scheme

* Domestic market sales up to 20 percent allowed to export-oriented companies outside EPZ  (relevant duties apply)

* Cash incentives and export subsidies granted on the FOB values ranging from 5 percent to 20 percent on selected products

* Corporate tax holiday from 5 to 7 years in certain areas and sectors

* Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange

* Accelerated depreciation on cost of machinery for new industries in lieu of tax holiday

* Avoidance of double taxation under bilateral tax convention 

* Tariff concessions on import of raw materials of the export-oriented industries

* Duty free market access to EU and most developed countries

* 100 percent foreign equity is allowed

* Unrestricted exit policy

* Remittance of royalty, technical know-how and technical assistance fees

* Full repatriation of dividends and capital is allowed

* Income derived from any Small and Medium Enterprise (SME) engaged in production of any goods and having an annual turnover of not more than BDT 24 lakh is exempt from tax 

* An amount equal to 50 percent of the income derived from export business is exempted from tax 

* Listed companies are entitled to 10 percent tax rebate if they declare dividend of 20 percent or more

*Incentives for power generation projects and coal-based power plants: 

*As per Private Sector Power Generation Policy of Bangladesh, any power generation company established within 31 December, 2014, and any coal-based power plant established within 30 June, 2020, will have the following benefits:

* Exemption of tax for 15 years from date of commercial operation

* Income tax exemption of the expatriates for three years 

* Exemption on the interest of the foreign borrowings 

* Exemption on the tax of royalties, technical know-how and technical assistance fees

* Exemption on the capital gain 

Industries which started power generation after 1 January, 2015, will enjoy tax tholiday in the following manner:

Counry credit ratings:

Moody's Investors' service has rated Bangladesh BA3, and Standard and Poor's has rated it BB- for the consecutive 5th year. Stable real GDP growth and strong external balances has also helped Bangladesh to achieve BB- rating with Stable Outlook from Fitch Ratings for the first time.

Public private partnership (PPP):

PPP is a key element of the 6th Five Year Plan to deliver infrastructure investments required to achieve middle income status by 2021. As of now 42 projects worth approximately USD 14 billion are in various stages of implementation.

Economic zones:  

To mitigate land crisis for industrial use and create fully serviced industrial zones, the government has taken measures to build economic zones inside the country. As of now, 8,827 acres of land were demarcated in the areas of Mongla, Sirajganj, Anowara, Mirershorai and Moulvibazar. Japan and China have shown particular interest in these zones.   

One stop service at Board of Investment (BOI):

One stop service at BOI has been established to serve the investors at one stretch in pre- and post-investment facilitation. Officials of related agencies such as the Power Division, Petro Bangla, National Board of Revenue, WASA, Department of Environment, BTCL and Bangladesh Bank, have been deputed in BOI to facilitate investors in their utility needs.

Acclamation on Bangladesh:

* Citi Investment Research & Analysis stated that Bangladesh, alongside China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam, is having the most promising (per capita) growth prospects. 

* Goldman Sachs branded Bangladesh in its 'Next 11' list after the BRIC nations

* The International Monetary Fund (IMF) termed the economy of Bangladesh as resilient, its export and remittance flows bolstering growth and external stability

* The Wall Street Journal (WSJ) dismissed the previous branding of Bangladesh as a 'Basket Case', adding that with a higher growth rate, lower birth rate, and a more internationally competitive economy, Bangladesh is an emerging market economy of high potentials

* JPMorgan Chase commented that Bangladesh ranks fourth in growth of economically active population

* Morgan Stanley announced that Bangladesh is at the very early stages of an investment boom

* New York Times has termed Bangladesh as “an unlikely corner of Asia, with strong promise of growth”

* A 2012 HSBC report titled The World in 2050, listed Bangladesh as one of the top 7 countries expected to deliver the fastest growth en route to 2050

* “World Economic Situation and Prospects 2013” of the United Nations state that Bangladesh's “…strong growth performances (have) continued.”

* McKinsey & Co.  in its latest survey remarked that “Bangladesh is still No. 1” as  the global sourcing hub for RMG 

* The Deutsche Bank AG, Germany, described Bangladesh as having  a robust economic growth pattern, a comfortable buffer against external shocks, and a favourable external liquidity profile

PRESENT TREND IN PRIVATE INVESTMENT

a. Local investment Trends

It is seen from the above table that the amount of local investment since 2009 is increasing.

b. Foreign Investment Trends

FDI is coming in the following forms:

 Equity capital: direct investor's purchase of shares of an enterprise in another country

 Intra-company loans: debt transactions between parent enterprises and affiliates

 Reinvested earnings: direct investor's share of profits not distributed as dividend or remitted which is reinvested.

FDI can be of the following types:

* Greenfield FDI which entails establishment of new production facilities and movement of intangible capital (in services) contributing to capital formation and employment generation

 Cross-border mergers and acquisitions which end up transferring production assets to foreign investors and do not increase capital stock.

Achievement of Bangladesh in terms of receiving FDI 

In 2013, Bangladesh received FDI of USD 1,599 million which is 24 percent higher than 2012. Since 2009, FDI has been growing by 20 percent on average.

The following table depicts the trends of FDI inflow in Bangladesh:

During the first six months of 2014, USD 829.43 million of FDI has flowed in to Bangladesh.

The sectoral analysis of the above years has been shown below:

The investment scenario of the South Asian region is as shown below:

In recent times, foreign borrowings for project financing have increased mostly due to funding by multilaterals and investment banks. These are seen as a low cost finance to implement the projects more viably, and are mainly allocated to textile and power sector projects to supplement foreign currency financing needs. This trend can be seen from the table below:

These multipronged efforts will definitely increase the volume of investment.

 

REFORMS INITIATIVES

Many reform initiatives have been taken by this government to augment investment and further ease conducting business in Bangladesh. For the purpose of business regulation simplification 18 reforms have been made; in the area of legal/policy amendments and new laws 12 reforms have been made; and in private-public joint efforts four efforts have been made. Some of the efforts have been detailed below:

 Automation of investor registration processes at BOI

BOI introduced an automated registration system for both local and foreign investors in Bangladesh in December 2010. The online platform enables potential investors to complete the entire registration process, including submitting the application, attaching relevant documents, tracking the registration status, providing interactive feedback and seeking approval, without visiting the BOI office or using an intermediary. As a result, the average time taken to register has reduced from 42 days to 12 days in 2012 to less than a week in recent times), while the average cost to register has reduced by 81.8 percent. Automation of registration services has yielded USD 16 million in total aggregated compliance cost savings (USD 0.14 million in direct compliance cost savings and USD 15.9 million in indirect compliance cost savings). Recent surveys show that 18 percent of industrial projects are now being registered within 10 days. This has benefited all industrial projects (local, joint-venture and foreign) that obtained registrations post-automation.

 Automation of export permit issuance at DEPZ

Bangladesh Export Processing Zone Association introduced an automated export permit issuance process at the Dhaka Export Processing Zone in June 2010. Once the export permit application gets submitted, the system automatically notifies the applicant through a return email and/or an SMS as soon as it is approved. As a result, the average time to issue an export permit has reduced by 33 percent.  Number of interfaces between companies and DEPZ authority has reduced to zero from four in obtaining export permits. As of 2011, 77 firms used the automated export permit system which is 91 percent of firms operating in DEPZ, and a total 48,871 export permits were issued by BEPZA for that year. Automated export permit issuance system is expected to save USD 1.9 million in direct compliance cost in four years. Beneficiaries of the system include all active firms currently operating in DEPZ.

 Automation of Company Registration with RJSC&F

Registrar of Joint Stock Companies & Firms introduced online name clearance in February 2009 and automated business registration in March 2009. The automated system allows businesses to complete the entire registration process online. The number of visits has reduced by 40 percent since initiation. Furthermore, there has been a 26 percent reduction in time required for registration (23 days in 2009 to 17 days in 2012) and 98 percent reduction in time required to obtain name clearance (nine days in 2009 to 1.58 hours in 2012). This will benefit all businesses (public, private, partnerships, societies and associations) that obtained registrations post-automation and all future business registration applicants.

 Cash subsidy claim process simplification of Bangladesh Bank

Following Core Group recommendations, Bangladesh Bank passed a circular in September 2009 for streamlining the cash subsidy claim procedure and reducing the time taken by firms to obtain their cash subsidies. Manufacturers of export products get cash subsidies on domestic raw materials used as inputs. Subsidy rates vary from sector to sector between 5 to 20 percent of the value of the local inputs. Prior to this circular, firms' claims were only disbursed after a full audit by Bangladesh Bank and subject to fund availability. Smaller firms were suffering more from uncertainty in disbursement time before the circular and are thus benefited the most. As of 2011, firms were getting 70 percent of a claim on the same day after a preliminary verification by commercial banks. The remaining 30 percent is received within 15 days. The steps to obtain a cash subsidy have reduced from seven to two. Simplification of cash subsidy claim procedure was expected to save USD 20.7 million in direct compliance cost within 4 years of initiation.

 Bonded warehouse licensing simplification

The Customs Bond Commissionerate (an agency under the purview of National Board of Revenue) implemented the bonded warehouse licensing simplification process, with support from BICF. In June 2008, the government issued a set of rules to streamline the licensing

process and reduce uncertainty and discretion. The new rules stipulated a reduction in required documents, set a time limit for issuance of the license and omitted the requirement to get approval from an additional agency. Furthermore, through the Business Initiative Leading Development - BUILD (a platform for public-private dialogue), the bonded warehouse licensing process was further simplified in July 2012. The overall time taken to obtain a bonded warehouse license reduced by 53.5 percent by 2013.

Contrary to popular perception investment in Bangladesh has been steadily raising since 2009, FDI in particular. In 2013, annual growth was a robust 24 percent – the highest ever in the history of the country. In the years to come this will increase even further. Bangladesh as an investment destination of prime value is an idea whose time has certainly come.  

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Dr. Syed Abdus Samad is the Executive Chairman and Md. Ariful Hoque is the Deputy Director of the Board of Investment.

A creative economy By M H Haider

“Think left and think right

And think low and think high.

Oh! The thinks you can think up

If only you try” -- Dr Seuss

It is true what Dr Seuss had said. If only we try to think, we can think of so many things, in different dimensions and beyond parameters and across boundaries. And that is what sparks creativity. 

Twenty first century has seen a boost in creativity in our country, we believe. Businesses -- like event management firms, bakeries or advertisement agencies -- which previously, generally speaking, found comfort in the age-old ways of doing things, are now pushing their boundaries and trying to be more creative.

Of course, Bangladesh has always been very creative. There is no reason to think otherwise of a land whose weavers (to mention just one example) have been weaving the fine, fabulous Jamdani for countless generations. 

Despite that, it is safe to say that Bangladesh has taken big leaps forward in terms of generating creative products and services in the recent years. Adding value through creativity is nowadays of supreme importance. Television commercials (TVCs) are a prime example. 

Asiatic 3 Sixty is one of the leading communications company. It is more than just an advertising agency, offering a complete solution to all communication needs, be it advertising, public relations, printing, audiovisual production, etc. 

Sara Zaker, the managing director, is also a theatre and television actor and a social activist. Being in the creative field for a long time, she understands the changing dynamics well.

“Previously, most advertisements used to follow a few simple formulas, like the song-and-dance routine. There was nothing very original or creativity in many of the ads,” recollects Zaker. “But nowadays, many TVCs evoke emotions, be it through portraying patriotism, the bond between a mother and a child or of that between friends. Other than the ones with emotional appeal, there are now many ads focusing on wit and humour too.”

Increase in competition may be argued to be one of the factors that has contributed to this trend. When there are several brands competing in the market, the need for distinguishing your brand from that of your competitors' is of course vital. 

This naturally gives rise to the need for originality. “You may want to do something unusual; then, you have to think in a different way. Lateral thinking is important if you want to create something out-of-the-box,” she says. 

Lateral thinking or creating something out-of-the-box is of course not easy. Amitabh Reza Chowdhury, producer/director, Half Stop Down, believes that one of the reasons why there has been a boost in creativity in the TVCs is because of the fact that a lot of highly talented and brilliant people have joined the corporate sector and the world of advertising. 

“Since the last couple of decades or so, many students began studying business and joining the corporate sector or the advertising field. On the other hand, many brilliant students with a degree in engineering have also boldly landed in such jobs,” observes Reza. “As a portion of the cream of the human resources is now working in such sectors, creativity and originality will of course come about.”

Reza also feels that the ad agencies and the advertisers nowadays patronise creative works and understand the value of creativity, thus providing audiences with wonderful ads. 

Of course, advertising is not the only field where creativity has become second nature. It spans across various kinds of businesses. 

Take for example, the advent of wedding planners. Matrimonial ceremonies are in no way less hectic and demanding than any other event. Even at the end of the twentieth century, families would not consider hiring a wedding planner. But they are now in demand, providing you with fabulous and awe-inspiring ceremonies -- from innovative stage designs to wonderful floral arrangements to theme-based weddings. A lot of emphasis is put on aesthetics. 

The Flourist is an online bakery shop that opened in 2013. It offers delicacies such as cakes, tarts, cupcakes, cheesecakes, pies, etc. Saria Tasnim Ahmed, the owner, provides her own creative twist. The products look superbly enticing, gorgeous and strikingly beautiful. 

After she studied French Patisserie and Basic Cuisine in the London campus of Le Cordon Bleu, a prestigious and world famous culinary and hospitality institution, Saria came back to Dhaka and eventually started this venture. Saria imports many of the ingredients from abroad. 

Consumer expectations have increased. “Due to media exposure and globalisation, people are more demanding than ever. Knowledge among the consumers is now very high; you cannot fool your client,” Saria tells. “Consumers are savvier, and you must be able to meet their high expectations.”

Indeed, exposure to various media is a prime reason why the demand for creative, premium and aesthetically superior products has increased so much.  

The internet has contributed a lot. It has raised consumer expectations, since the medium has opened our eyes to a world of limitless options, choices, preferences, ideas and inspirations -- consequently amplifying our expectations from businesses and service providers. 

Moreover, the last decade has seen a rise of 'online entrepreneurs'. Businesses as varied as food delivery services to digital marketplaces have sprang up. “Entrepreneurship is a phenomenon that is prevalent in our country,” Zaker opines. “Add to that the explosion in internet usage and digital and social media. So, a generation of entrepreneurs have embraced this trend, opening up creative ventures.”

More and more people are opting out for creative professions, be it by becoming an entrepreneur or by working for a company that fosters creativity. Reza said, “There are people who want to be different, who seek to leave their mark on the world. They want to be unique, and they want their own identity. Out of this desire, many people are now pursuing a career where creativity is the key.”  

Despite everything, the notion of being creative ought not to be restricted to those people who are doing the so-called 'creative jobs'. Every job has a scope for creativity. Every output engineered becomes better by providing creative input. 

Creativity is everywhere. And an interesting thing about creativity is that it has the ability to spread from one person/organisation to the other: if one brand in an industry becomes creative, others must become creative too in order to survive. This is probably what happened in Bangladesh. 

As Albert Einstein once noted, “Creativity is contagious. So pass it on.”

ART: POET BY GOUTAM CHAKRABORTY

WATERCOLOUR ON PAPER, 2015

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The writer is a Feature Writer, Star Lifestyle, The Daily Star. Special thanks to Amitabh Reza Chowdhury, producer/director, Half Stop Down, Sara Zaker, managing director, Asiatic 3 Sixty and Saria Tasnim Ahmed, owner, The Flourist for providing valuable insights for the write-up

Why you should care about Fair Trade-By Mehereen Aziz

Have you ever thought about where the products you use everyday come from?

Consider this: You visit the supermarket and buy the Pink Soap, because it smells nicer than the Green Soap. Immediately, you have toppled a string of dominoes. The supermarket will recognise the higher demand for the Pink Soap and order it more than the Green Soap.

The Pink Soap owner will see a rise in sales. To meet the increased demand, the owner will hire more workers. A new employee will now be able to fund her child's education thanks to her wages. The Pink Soap factory landlord will be guaranteed a steady stream of rent income. The small restaurant by the factory will have more customers. The farmer who supplies vegetables to the restaurant will have more sales. Thanks to his increased income, he will be able to purchase more nutritious food such as proteins for his young family. His children will grow up as more physically and cognitively adept citizens.

As a consumer, every product you buy and every product you shun play a part in determining not only the income of some individuals, but the growth of the economy as a whole.

There is, however, another side to the coin. The Pink Soap factory does not comply with environmental standards, and dumps all its waste into the neighbouring lake. The small restaurant's primary water source is this lake. The owner has hired more people, but has not expanded the premises; hence the workers operate in a congested, hazardous environment.

And this is why you should care about the source of your products, especially due to the lack of compliance with and enforcement of health, safety and environment standards in our country.

What is Fair Trade?

Contrary to popular belief, fair trade is more than an embroidered bed sheet with the background story of a woman in rural Bangladesh who makes them for a living. As consumers, we get to see only the retail side of it; however, the question of fairness arises much earlier, when the production process initiates. The concept of "Fair Trade" seeks to tackle exploitation of workers in developing countries by offering better trading conditions to, and securing the rights of, marginalised producers and workers. According to the World Fair Trade Organization (WFTO), fair trade has 10 principles that must be complied with in the supply chain, which not only includes producers but also the buying behaviour of organisations and individuals.

Making Fair Trade Mainstream

If you visit fairs such as the Dhaka Craft Bazaar, you will be pleasantly surprised at the amount of small fair trade firms and their beautiful products. However, you are unlikely to come across them on a regular basis. In this regard, foremost natural dye organisation Aranya is one of the few firms who have successfully brought fair trade principles to the masses through their handicrafts and clothing line. The question, though, is why aren't more fair trade organisations competing in the mass market?

"When I started Aranya, I followed the commercial business model, but I wanted to establish favourable working conditions and supporting benefits for my employees. So I had adopted the fair trade principles incidentally," says Ruby Ghuznavi, Executive Chairman of Aranya Crafts Ltd. and Honorary Member of World Crafts Council-Asia Pacific Region. 

For fair trade to be sustainable, perhaps the key is to work the other way round. "Instilling fair trade best practices in commercial operations is possible, if producers are made aware of the long term benefits of looking after employees' and consumers' wellbeing," adds Ghuznavi.

Misconceptions about Fair Trade

Fair Trade is not charity; to purchase fair trade products is a mark of consciousness, and to produce fair trade products should be viewed as a smart business decision that will improve operations.

Fair trade goods are also mistakenly perceived to be more expensive, but they are actually competitively priced because they eliminate the middlemen, who take a sizeable chunk of earnings as commission.  

Fair trade is not just about highlighting your company externally; internally, the practices fair trade promotes, such as safe working conditions, will go a long way in increasing the efficiency of a business due to staff satisfaction, a fall in appeals for sick leave, and hence higher staff retention rates.

Rephrasing Fair Trade to "Fair Corporations"

The 10 principles of fair trade should not only apply to business who seek the "fair trade" label; in fact, it is unfortunate otherwise, as it this implies people who do not fall under this label do not comply with such basic standards.

The concept of fair trade has created quite a stir in first world countries due to some of the terrible working conditions of developing countries displayed in the media. Incidents such as the Rana Plaza collapse further confirmed the need to address workers' rights when manufacturing any product. 

While other countries are concerned about the welfare of our workforce, time and again it is apparent that a lot of our local producers are not. The attitude of producers regarding their employees need to change; due to the huge supply of labour, we tend to grossly undervalue our workers. On the other hand, it is true that importers pressure local producers to cut down on costs as much as possible. To really bring fairness to trade, there has to be a mutual acknowledgement of the value of human beings who are involved in the production process.

As consumers, we play an integral part in deciding what goods we buy, and we should consider the impact our purchases have on people behind the scenes as much as we can. Realistically, we might be inclined to buy the cheaper product. But if it is not a question of price and there are substitutes available, it is our responsibility to consider where the products we buy come from. Every purchase can make a difference. 

Photo: Sazzad Ibne Sayed

Model: Azim, Meghla

Wardrobe: Aranya

Location: Aranya Production Centre

Special thanks to Ruby Ghuznavi

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The writer is a Feature Writer, Star Lifestyle, The Daily Star.