Business environment and development prospects of Bangladesh

Introduction:
Bangladesh is a country of immense potential for investment. It has all the natural endowments which are considered essential elements for a particular region to thrive up as a very covetous trade and investment center. But owing to lack of prudencey, myopic vision, lack of timely initiatives and policy interventions as well as week commitment and aslow implementation process of the schemes on part of the Government(s) are attributed to the under exploitation of its immense potentials. The country has a maritime Port called Chittagong port which is the only natural port of the world. Its navigability is God gifted. Moreover, it has tremendous strategic geographic advantages which can contribute immensely the country to be an ideal global trade and business pivot. It is the gateway of the country as well as of a vast landlocked region of across the border. This port has all the prospects to serve most economically and cost effectively the landlocked eight northeastern states of India, Nepal, Bhutan and a vast region of Myanmar and China. Those countries have also expressed their keen interest to use Chittagong Port for their international trade. Bangladesh is also at the bridgehead point of the worlds two most burgeoning and vibrant economic blocks SAARC and ASEAN. From Bangladesh particularly from Chittagong the vast market of the entire region which is the adobe of about one thirds population of the world, can be served and covered most cost effectively. The proposed Trans Asian Highway and Railway are also expected to have direct linkage with Bangladesh. So, in future, Bangladesh will have all good international sea, air, rail and road communication linking SAARC and ASEAN at the middle. Simply this fact postulates the ample potential of trade and business development in Bangladesh. In brief, it can be emphatically said that B angladesh has all the prospects and opportunities to be an ideal transnational trade and investment hub for the whole South and Southeast Asia. Apart from the strategic positional advantage, Bangladesh also possesses unique biodiversity rich in flora and fauna. It is endowed with huge enchanting landscape, green pasture, undulating topography in greater Chittagong, natural lakes & waterfalls, mountains, hills, hillocks, deep forests, wild life, worlds largest unbroken beach, worlds largest mangrove forest, coral island, huge sandy beach, many different tribal and primitive culture & life style, historical establishments, cris-cross of rivers and water bodies. People of the country are also very hospitable and have no xenophobia. All these features reveal the enormous opportunities for the robust growth of tourism industry in Bangladesh which also act as a catalyst to woo enhanced investment in the country. In this regard, it is also worth mentioning that Bangladesh is an agrarian country where various fruits like pineapple, jackfruit, banana, lichi, mango, watermelon, guava, lemon, papaya, coconut and many other citrus fruits and vegetables grow in plenty. Different environment and climatic condition of different parts of the country are suitable for the production of different kinds of fruits and vegetables. But lack of modern preservation facility, modern food processing industry, bad road communication and inadequate professional and entrepreneurial skill have been thwarting directly in exploiting these huge prospects. In fact, Bangladesh has also enormous prospects to grow as a potential agro based industrial hub.Apart from this advantageous geographic location and enriched biodiversity, Bangladesh has also huge natural gas, high quality coal reserve a nd hydropower generation scope, which also contributes for rapid industrialization. Besides, the country has the worlds cheapest but intelligent and easily trainable huge abundant workforce, which can also amply contribute to promote and develop trade and investment in the country. Moreover, complete duty and quota free market access given by EU, Norway, Canada, Australia, Japan and New Zealand and privileged market access granted by many other developed and higher developing countries to Bangladesh together with its other unique competitive edges, have surely bolstered the prospects and potentials of Bangladesh manifold to be developed as a very alluring transnational trade and investment hub in near future.

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Apart from having a unique strategic position and competitive edge, in order to cope with the newly evolving global economic and trade regime, the Government of Bangladesh, has also been pursuing a private sector led export oriented growth strategy, incorporating substantial restructuring at all economic fronts including export, import, banking, administration, law & act, privatization, investment, intellectual property right, protection to wealth etc. The strategy are aimed at catering to the growing need of trade and business. The Government has also declared a very stimulating incentive package programme to allure domestic as well as foreign investment. In fact Governments role is no more regulatory rather promotional. To speak frankly, being encouraged by our liberal and lucrative incentive programmes and sensing the huge potential of investments, there has been a long queue of foreign investors to invest a huge amount in the country. In a nutshell, it can be safely said that Bangladesh is poised to emerge as a very attractive trade and investment destination for the potential entrepreneurs. Now it is the responsibility of the policy and decision makers of the country as to how effectively and rapidly they can harness these opportunities with their proactive leadership quality and forward looking vision.

Main Body:
Potential sectors for investment Based on our natural resources galore, strategic geographic location, distinct competitive edge and comparative advantages - sectors like petrochemicals & its dependent industries, oil refineries, pulp & paper industries, tourism & amusement industries, cement clinker, ship building & repairing industries, chemicals, pharmaceuticals and its ancillary industries, electrical & electronic industries, light engineering, leather & jute, melamine & ceramic industries, power generation, water treatment industry, deep draft port, telecommunication, composite textile & garments backward linkage industries, timber, agro processing and gas based industries have huge prospects to grow in Bangladesh to cater to the vast domestic market as well as to capitalize the privileged market access being enjoyed by Bangladesh from developed countries through export. Impediments to Investment From the above delineation, it is evident that Bangladesh has all the prospects, potentials and distinct cutting edges to grow as a very lucrative and attractive epi-center of investment, if nurtured with forward looking vision and necessary policy supports. But ironically lack of vision & mission on part of the successive Governments, dearth of prudence & statesmanship, lackadaisical effort, inconsistent & unpredictable policy measures, slow decision making process, lackluster & protracted implementation process, lack of proactiveness and leadership acuity have colossally contributed to under-exploitation of the ample potentials of Bangladesh. The following factors impeding seriously the desired level of economic development of and inflow of foreign investment in Bangladesh and thus dwindling the prospects of our comprehensive national prosperity. Infrastructure Weakness: Electricity: Frequent power supply disruption costs heavy on trade, business and production in Bangladesh. Due to very erratic power supply, production and service are seriously hampered. Telecommunication: Telecommunication in terms of service quality and getting connection is a great problem for business in Bangladesh. On the other hand, cost of using cellular phone is much higher in Bangladesh compared to other developing countries at same level. Moreover, inadequate teledensity and bandwidth in Bangladesh is a great barrier to business. Road Communication & Transportation: Transportation problem is also a great problem for business . Lack of required road facilities appear as a formidable challenge to business. Apart from dearth of needed road facilities, inefficient transportation system stemming particularly from weak traffic management system in Bangladesh, sometimes cause havoc to business.

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Port and ICD: Inadequate port and ICD facility is one of the main roadblocks to business. Port service is very inefficient which makes it the most costliest port in the region. Congestion of vessels and containers is a regular phenomenon. Corruption, mismanagement and inefficiency of Chittagong Port sometimes makes our exportable items incompetitive in international market. Gas Connection: Getting gas connection for industry is a very big problem. Unusual delay and huge rent seeking by the gas company officials is a common phenomenon. Sometimes the gas pressure becomes very low, hampering production. Water and Sewerage: Getting water and sewerage connection for business and industry is also a great problem. Moreover, water supply is very erratic resulting in serious disruption in production particularly which is water related. Weak Railway and Waterway: The inadequate and weak railway and waterway has been seriously precluding the desired growth and development of trade and investment in the country. Poor navigability of the rivers and lack of access to railway hinder the prospects of setting up industries in a particularly area of country to harness its competitive edge. Institutional Problems: Bank: Access to fund in Bangladesh, though is not a great problem, but the cost of getting it is huge. Lending rate for industry is very high which is still over 12%. But the lending rate is 3% 7% in neighbouring and comparable countries like India, Pakistan, Sri Lanka and Thailand. Moreover, whenever a businessman is to get loan from bank, he is to spend a certain percentage of loan as kickbacks to dishonest bank officials. Due to this, the cost of getting fund for industry from bank is simply enormous which does not support sustainable business development. Political influence and pressure from vested quarter is also rampant in banking system. Customs, VAT and IT: Customs has been widely recognized as the most conspicuous barrier for the growth of business in Bangladesh. The corrupt customs officials are responsible for the drainage of large chunk of money of the businessmen without any receipt. The willful delay and harassment by the officials in clearing document for personal gains, sometimes appear as a great blow to business and production. Paying VAT and Income Tax and getting refund or rebate of it when becomes due is highly embarrassing for the businessmen. Sometimes he is to spend 50% of his rebatable/refundable tax amount. Moreover, the capacity of the department is very weak. Other Government Functionaries: The capacity of other Government functionaries, like port, shipping, insurance, finance, commerce, energy, environment, industry etc. affecting trade, commerce, industry and investment of the country is very meager. The personnel of most of these so called trade and investment facilitating Government functionaries are seemingly busy with making their own fortune by harassing and trapping the valued entrepreneurs rather building their knowledge base to help businessmen to get their problem solved. Lack of good Governance: Policy Initiatives: Governance, which is related to government interaction and dealing with business by means of regulatory affairs, is rather a great problem for the sustainable business development in Bangladesh. The rules and regulations, enacted with the benign view of facilitating and helping business, rather acts as a regulatory and problem creating mechanism. In most cases, these policies are unpredictable, visionless, discriminatory, biased and devoid of reality. These non-transparent and ambiguous policies help the corrupt government officials to ensnare the businessmen for undue personal advantages and gains. Corruption: Corruption is pervasive. Getting any approval, giving speed money is must. Discriminatory power of the Govt. officials encourage them to be corrupt and whimsical. Centralized and slow decision making process: One of the most formidable challenges to business in Bangladesh is centralized and slow decision making process. As a result, the geographical dispersion of business and production depending on comparative prospects and resources base does not grow. Due to lack of decentralization of administration, the

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businessmen have to frequently visit to or establish permanent office in Dhaka, increasing the cost of business. The problem becomes colossal for SMEs. Complexed and lengthy permission procedure: In doing business , the entrepreneurs have to take permissions from a number of different ministries and departments. But the process is very complexed and slow. Most of the case, taking permission from a certain ministry or department is quite irrelevant to the particular type of business. Even then, for quite bizarre reasons, the businessmen have been made compelled to take NOC from them. Inexperienced and non-responsive Government Officials: In most cases, the Govt. Officials are inexperienced, less knowledgeable, non-committed and non-responsive to the need of the trade and business. They cannot meet the information need and facilitation requirement of the entrepreneurs. This is a great problem for business growth and investment inflow in the country. Procrastinating Implementation process: Sometimes, the implementation of development programmes and supportive policy initiatives already undertaken is very slow and lackadaisical. This go slow mentality in materializing the development schemes and policy initiatives simply disheartens the entrepreneurs to go with any investment plan in Bangladesh. Flagging law and order situation: Flagging law and order situation in the country including extortion, smuggling, mugging, kidnapping, killing etc. are big problems to business development. Recommendations to attract and sustain investment: Political consensus: Political consensus should be reached for the greater interest of trade, commerce and investment of the country. Establishing the office of Ombudsmen: In order to help monitor and investigate the allegations against the so called influentials and immunes and bring them to justice, establishing the office of ombudsman is must. Setting up a separate counter intelligence department: To monitor the corruption, nepotism and any other irregularities by any Government department including police, port, custom etc., a counter intelligence department have to be formed immediately. Strengthening Parliamentary Standing Committee: Parliamentary Standing Committees on various ministries should be strengthened and given more power to consolidate its oversight role in investigating and monitoring performance of respective fields under jurisdiction. Strengthening the independent anti-corruption Commission: To check unabated corruption of the government functionaries without any interference from any quarter, the independent anticorruption Commission should be strengthened further. Corruption by the Government functionaries are most injurious for the business. Speedy judicial System: Judicial system of the country is very lengthy and inefficient. It has to be separated from the Executive and made speedy. Inefficient Judicial system is a major roadblock to enhance trade and investment. 4 Laned Dhaka-Chittagong Highway: The Dhaka-Chittagong Highway has to be made 4 laned on priority basis. The other key national highways connecting inter-districts have also to be made 4 laned gradually. Dedicated new Dhaka-Chittagong Express Highway: A dedicated and toll based new DhakaChittagong Express Highway has to be constructed on priority basis. Double Tracked Dhaka-Chittagong Railway with a Chord Line: The Dhaka-Chittagong railway line has to be made dual with construction of a chord line from Laksam to Narayangonj. Other key railway lines also have to be double tracked.

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Effective Inland Water & Railway Transport: An efficient Inland Water Transport System across the country has to be developed. The silted riverbed has to be dredged on priority basis to maintain its navigability. 3rd and more bridges on Karnaphuli: On very urgent basis 3rd Karnaphuli bridge has to be constructed to woo foreign and domestic investment at the other side of the th river. Gradually 4 and 5th Karnaphuli bridge have to be constructed keeping in mind our future road communication need with Southeast Asian countries and full exploitation of potentials of greater Chittagong for needed boost to our economy. Deep Seaport: As, due to strategically advantageous geographic location, Chittagong is poised to emerge as a lucrative trade and investment hub linking entire South and Southeast Asia, construction of a deep seaport at Moheshkhali or any other near suitable place will be badly needed in near future. This port will a lso help to provide transit facility to landlocked neighbouring countries. New Telephone Exchange: Some new telephone exchanges of 5 million capacities across the country have to be established. New Power Generation Plant: A plan has to be made to setup some more power generation plant(s) of 7000-10000 mw capacity in next 5 years. Private sector can be -7 encouraged in this regard. The existing distribution and transmission line has to be refurbished. Distribution line should be underground to avoid accident and ensure aesthetic view of the city. All the individual power plants as well as distribution area have to be transformed as SBUs. Improve Port Service: Port facility and service quality has to be improved. Operation of under- construction NMCT should be handed over to private sector to ensure a fair competition between public and private sector. Private CFS should also be allowed to handle import cargo. Port will act as an interface only. Online Linkage and coordination between Organizations: As lack of exchange of information and coordination among port and customs creates problems in expediting export import activities, an online communication should be established between them. Other related agencies/bodies like Shipping Agent, C&F etc. should also be brought under this network to accelerate delivery process and ensure transparency and accountability. Other govt. Ministries and offices have to be made automated and well coordinated for the needed promotion of trade and investment. Modern Tourist Spots and Amusement Parks: A good number of tourist spots and amusement and theme parks have to be established with necessary amenities for the tourists. Government should declare more incentives to woo private investment in this sector. Simple and easy Approval Procedure: Approval procedure related to trade and business by any Government/Semi Government/Private body should be simplified and online. Devolution of adequate power to all local Government Offices: All the local government offices have to be delegated adequate power and authority, so that they can take any decision locally and independently without sending the file to Dhaka for higher 5

authoritys approval for the promotion and development of local industries. Improvement of Law & Order Situation: Security for goods and life should be intensified at every level. A sense of security should be installed in the mind of prospective investors. Availability of trade & investment facilitating information: All the information related to trade and investment facilitation should be made readily available to business.

Brand Bangladesh:
The country which was considered to be a basket case in 1971, is today offering a mirror to others on how developing countries can become a development state and is being referred to as the `development surprise` of the 21st century. At the same time, it has also ensured that democracy is developing as a strong and permanent alternative to military rule, under which it has had many years of painful repression. That this overwhelmingly Muslim country is also constitutionally and increasingly in practice politically secular is also a lesson for other Muslim majoritarian countries to emulate. The Supreme Court struck down a 31-year-old constitutional amendment and restored the country to its founding status as a secular republic, banning the writings of some radical Islamic ideologues. The country which in the mid-1960s was heralded as a role model for other developing countries, where the international press had praised its military-led development model no end, stating that it might just reach the levels of development achieved only by the United States, has just appeared as the world`s 10th most failed, or failing, state. On the course towards reaching this rather ignominious distinction, this country has also been called the most dangerous place in the world, and a rogue state with a nuclear arsenal. In the world of development achievements and democratic and secular credentials, it is Bangladesh today which offers a rather sad comment on Pakistan`s numerous failed promises. Bangladesh is one of the six countries in Asia and Africa which has been feted for its progress towards achieving its Millennium Development Goals, a set of targets that seek to eradicate extreme poverty and boost health, education and the status of women worldwide by 2015. It has also halved its birth rate over the last few decades, happily giving up its title of the sixth most populous country to Pakistan. And despite the fanfare of having a larger number of women parliamentarians, it is Bangladesh which has far greater gender parity than does Pakistan, and women`s rights are better ensured in the former than in the latter.

Moreover, Bangladesh`s economy has grown at nearly six per cent a year over the past three years, despite the global downturn and high fuel and food prices which Pakistani finance officials cite as reasons for Pakistan`s failure. Furthermore, Bangladesh`s exports of garments worth $12.3bn last year, make it the fourth in the world behind China, the European Union and Turkey, leaving behind cotton-producing and exporting Pakistan. Bangladesh gave the model of microfinance to the rest of the world and the man behind this received the Nobel Prize based on work undertaken at home for alleviating poverty. The fact that he was celebrated as a national hero differs sharply from the public and official treatment meted out to Pakistan`s Nobel laureate who was forced to do all his work abroad, in exile-like conditions, and never acknowledged as a son of Pakistan`s soil. Even in terms of diverse identities and religious tolerance, Pakistan can learn from the traditions of its former province. Economist In a list of 167 countries listed by the magazine in its `Index of Democracy`, Bangladesh moved up the table from being 91st in 2008 to 83rd in 2010, while Pakistan also moved up, but from 108th to 104th. And despite being a democracy in 2010 and one of the two democracies on this list, Pakistan is 10th in the `Failed States Index`, and is part of a group that includes Somalia, Chad, Sudan, Zimbabwe and, of course, Afghanistan. One can dispute such a caricature for being politically motivated, however, this does require far greater and honest reflection. Bangladesh as East Pakistan was probably a greater disaster created by the British than the one left behind and still unresolved in Kashmir. This was a union which the West Pakistani elite eventually forced and exploited. It should not have been, and it took 25 years for the Bangladeshi people to free themselves from the worst forms of West Pakistani repression cultural, linguistic, economic, political and, of course, military. Clearly, Bangladesh is not the only country which offers possible lessons for Pakistan, and the former is not devoid of a whole host of afflictions typical of developing countries. The argument being emphasised here is one of relative progress and possibilities. Clearly, at the moment Bangladesh seems to offer more of either than does Pakistan. And rather than fantasise about becoming another Turkey or Malaysia, as Pakistan`s elite is so fond of doing, perhaps it would be instructive to look closer home, and at small initial steps rather than grand, unachievable schemes. In many ironic ways, it is Bangladesh which has become Jinnah`s Pakistan democratic, developmental, liberal, secular while Pakistan has become his worst nightmare intolerant, authoritarian, illiberal and fundamentalist. The West Pakistani elite which lived off the resources of East Pakistan for 25 years and was happy to see the basket case East Pakistan become Bangladesh, needs to seriously come to terms with its continuing hubris

and past. The least that the civilian and military Pakistani elite can do is to seek forgiveness for the crimes committed four decades ago, and to begin to learn how basket cases and failed states can become successful democratic, developmental and secular states. Following are some positive aspects which make Bangladesh an attractive location to foreign investors:

i) We have opened up our economy with rapid liberalization of import policies helping globalization of our economy; ii) According to a Survey of the Economist-risk factors for FDI in Bangladesh are minimum compared to many other countries of this region; iii) Cost of production especially cost of labor both skilled and semi-skilled is comparatively lower; ix) Cost of living is also quite low and reasonable and there is no communal or ethnic problems; v) English language is widely spoken and understood;

vi) Working capital loan as well as term loan from local commercial banks allowed to the industries setup with foreign capital; vii) Citizenship by investing a minimum of US $5,00,000 or by transferring US $10,00,000 to any recognised financial institutions (non-repatriable); viii) Permanent residentship is granted to an expatriable by investing a minimum of US $75,000 (nonrepatriable); ix) Avoidance of Double Taxation Agreements and Bilateral Investment Promotion Treaties have been signed with many countries including U.K. Legal security for investment i) Foreign Private Investment (Promotion and Protection) Act, 1980 ensures legal protection to foreign investment. ii) Bangladesh is a member of Multi-Lateral Investment Guarantee Agency (MIGA), Overseas Private Investment Corporation (OPIC) of USA and International Centre for Settlement of Industrial Disputes (ICSID) iii) Member of World Intellectual Property Organization (WIPO) and World Association of Investment Promotion Agencies (WAIPA).

62. Sustainable Economic Growth. ADB will assist the Government to improve policies and institutional capacity to support broad-based, private sector-led growth. This catalytic process will build upon, increase, and deepen reforms initiated through long-standing programs of support to key sectors (Box 1). Specifically, ADB will contribute to the achievement of the Government's pro-poor economic growth strategy by (i) developing and upgrading strategic transport corridors (including Dhaka-Chittagong) by modernizing management and catalyzing private sector investment, and facilitating cross-border trade and investment flows; (ii) increasing access and improving quality of energy supplies by fostering competitive, impartially

Figure 1: The Strategic Framework regulated, and financially sound power and hydrocarbon entities; (iii) connecting the southwest region to the balance of the country, and linking national and regional economies by developing the Padma Bridge; and (iv) complementing support by the International Monetary Fund (IMF) and World Bank for improving the soundness and depth of the financial markets, particularly to enhance SME access to sustainable financial markets.

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