Sherpa Hossainy's Blog

Bangladesh sees billion-dollar trade potential in Myanmar

Posted in Bangladesh, Dhaka, Economy, Export and Import, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Renews pledge to boost cooperation

Published in Myanmar Business Today (Vol 1, Issue 21) on June 27, 2013

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Bangladesh and Myanmar can increase their bilateral trade up to a billion dollar if service-based trade can be bolstered, a top Bangladesh government official said.

“Our current bilateral trade is mainly goods-related, but the service-related trade hasn’t expanded that much. Bangladesh has an established service sector in banking and insurance, and these sectors haven’t developed much here. There’s also good potential for pharmaceuticals and IT services,” Md Shahidul Haque, foreign secretary of Bangladesh, told Myanmar Business Today.

“There are opportunities for expanding the exchange of services. The potential is huge. It can definitely cross the billion-dollar mark if we can add the services sector in our trade,” he said.

The bilateral trade between the two neighbours amounted to only about $79 million in 2011-12 fiscal year, while it stood at $190 million in 2010-11 fiscal. Bangladesh exported goods to Myanmar worth $13.45 million during the fiscal year 2011-12.

Bangladesh Foreign Secretary

Md Shahidul Haque (L), foreign secretary of Bangladesh, with Anup Kumar Chakma, ambassador of Bangladesh to Myanmar. Sherpa Hossainy

“At first we want to take the current trade volume up to $500 million,” Shahidul said. Myanmar was in a difficult situation and under various sanctions, so increasing the trade volume was hard as “we had to work within certain limits,” he added.

Shahidul said Bangladeshi private sector can facilitate in providing technical assistance to Myanmar, especially in garment industry, being the second largest garment exporter in the world behind China. “Exchange of technical expertise will be discussed during the next Joint Trade Commission meeting,” he said.

The Bangladesh Foreign Secretary was in Myanmar from June 12-17 to attend the 7th round of Foreign Office Consultations (FOC), where foreign secretaries of the two countries meet and review a range of bilateral political, economic and security issues. “We looked at ways to strengthen our relations and how both countries can grow,” Shahidul said, adding that trade and border issues were the main focal points.

During the talks Myanmar welcomed the four-country “Kunming initiative”, a sub-regional organisation that includes Bangladesh, China, India and Myanmar (BCIM), born in 1999 out of the attempts to link the development plans of the southwestern Chinese province of Yunnan to India’s ‘Look East policy.’ BCIM is a sub-regional organisation of Asian nations aimed at greater integration of trade and investment between the four countries.

“For a long time it was a Track II initiative but India and China has brought it up to Track I. Bangladesh and Myanmar has now decided to actively take part in the initiative and we will join the Track I force,” Shahidul said.

‘Track II diplomacy’ is a specific kind of informal diplomacy, in which non-officials engage in dialogue with the aim of confidence-building, while the term ‘Track I diplomacy’ refers to official governmental diplomacy, or a technique of state action, which is essentially a process whereby communications from one government go directly to the decision-making apparatus of another.

Shahidul led a 14-member Bangladesh delegation to the talks, while his counterpart Deputy Foreign Minister U Thant Kyaw, led a 20-member Myanmar delegation. Ambassador of Bangladesh to Myanmar Anup Kumar Chakma, along with senior officials from seven ministries and agencies of the Bangladesh government also took part.

During his visit in Nay Pyi Taw, the Foreign Secretary called on Deputy Ministers for Commerce, Home and Electric Power, and concerned members of the delegation met the Ministry of Transport officials. Both countries acknowledged the importance of increasing connectivity and expressed intention to sign the revised air service agreement soon.

“We will quickly start the air link programme. However, it’s not easy for the government to start the air link; private sector also has to take the initiative. We hope the agreement will be finalised next month” Shahidul said.

In a bid to have the best of neighbourly relations, Bangladesh and Myanmar pledged to begin an era of partnership based on trust and confidence for stronger economic ties and stability along the borders. To enhance security and stability at their common borders at land and sea, the two sides expressed willingness to address a range of trans-boundary crimes along the borders, including human, drugs and arms trafficking, and money laundering. The two sides also agreed to bolster regular interactions between the two border forces as well as civil administrations of the bordering districts of Bangladesh and Myanmar.

The two countries talked about the establishment of direct coastal shipping link and agreed to complete all necessary formalities for the purpose. They also agreed to renew the expired Agreement on Cultural Cooperation and conclude a memorandum of understanding on cultural exchange programme.

Bangladesh offered to arrange short diplomatic training courses for the mid-and junior-level diplomats of Myanmar, and invited Myanmar to send a delegation to an international conference on peace, tolerance and non-violence to be held in Bangladesh later this year. Bangladesh also proposed greater exchanges between Buddhist scholars to deepen intercultural understanding between the two countries.

The bilateral talks also focused on cooperation under regional frameworks like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and BCIM. BIMSTEC is a regional cooperation organisation involving Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. Myanmar is the current Chair of BIMSTEC and will hold the next BIMSTEC Summit in early September this year.

The Myanmar delegation said the discussions will “strengthen goodwill, confidence, mutual trust and understanding between the two countries,” while Shahidul hoped “the existing trade barriers will be removed soon in a bid to strengthen the political, cultural and economic cooperation between the two neighbours.”

Myanmar introduces 2pc advance tax on all imports and exports

Posted in Business, Export and Import, Finance, Myanmar, Tax, Yangon by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 19) on June 13, 2013

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In a move to improve tax compliance the Internal Revenue Department will start collecting a 2 percent income tax on the value of nearly all imported and exported goods, according to a new government notification.

The newly imposed tax will be implemented from June 14.

According to the notification, importers must pay an advance income tax assessment of 2 percent on the customs value of the goods for import and exporters must pay an advance income tax assessment of 2 percent on the value of all exported goods.

However, there are a few exceptions, including import of materials and equipment during the construction period of projects with an investment permit from the Myanmar Investment Commission (MIC).

The tax collected is counted as an advance payment of the income tax payable by the importer or exporter, and can also be reimbursed.

“A two percent cash leakage for all imports is likely to impact every businesses and consumers in Myanmar, but in most cases rather slightly,” Edwin Vanderbruggen, a partner at VDB Loi, a specialised law and tax advisory with offices all across Southeast Asia, said.

“Trading companies working on high volumes with very tight margins might be affected if their contractual framework doesn’t allow to pass on any unforeseen costs to their customers, and if they have difficulty in financing the sudden missing 2 percent,” he added.

“In theory exporters should not be adversely affected, and foreign investors should not be impacted if they have MIC permit,” Edwin said.

Myanmar-Bangladesh bilateral trade: Mired in lack of connectivity

Posted in Bangladesh, Banking, Business, Dhaka, Economy, Export and Import, Finance, Interviews, Investment, Myanmar, Yangon by Sherpa Hossainy on July 9, 2013

Bangladesh is keen to resolve all the barriers to trade and tap the huge potential of Myanmar, which it sees as a key regional partner and gateway to Southeast Asia, says Bangladesh Commerce Minister

Published in Myanmar Business Today (Vol 1, Issue 11) on April 4, 2013

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A dearth of basic land, air and sea connectivity is daunting the prospects of boosting the bilateral trade between Myanmar and Bangladesh, the Minister for Commerce of Bangladesh said.

“The transport and communication infrastructure is very poor between Myanmar and Bangladesh despite being neighbours. We still haven’t been able to resume the air linkage and we don’t even have land links with Myanmar’s major cities. This is gravely hurting the prospects of a better trade,” GM Quader told Myanmar Business Today.

GM Quader, Minister for Commerce of Bangladesh, speaks to Myanmar Business Today during his visit to Myanmar at the Bangladesh Embassy in Yangon. Sherpa Hossainy

GM Quader, Minister for Commerce of Bangladesh, speaks to Myanmar Business Today during his visit to Myanmar at the Bangladesh Embassy in Yangon. Sherpa Hossainy

Myanmar and Bangladesh have been working to re-establish direct air link to connect Yangon and Dhaka after Biman Bangladesh Airlines, the national flag carrier of Bangladesh, suspended its flight between Dhaka and Yangon in 2007 against the backdrop of economic losses.

Bangladeshi cabinet in June last year approved a proposal for inking a deal with its Southeastern neighbour to resume direct flight service, which will allow seven passenger and four cargo flights to fly between Dhaka and Yangon every week.

“The agreement has been finalised and signed. However, Biman is not in a position financially to start a route which will take some time to become profitable, and airlines from Myanmar are also hesitant about getting into a financially risky venture,” Quader said.

During Bangladeshi Prime Minsiter Sheikh Hasina’s visit to Myanmar in 2011, the two countries agreed to develop their land, sea and air connectivity.

“These three are the biggest barriers for us. India, China and Thailand have a good connectivity structure with Myanmar in place via air, sea and land. We have to improve our connectivity if we have to improve the trade,” the Bangladeshi Commerce Minister said while visiting Myanmar last month.

When asked why Bangladesh have reacted slower than other Myanmar neighbours such as India, China and Thailand to the recent economic reform process the minister said they were “well-ahead than anyone even before the reforms began.”

“China and Thailand have basic advantages. Their manufacturing and production base is much stronger and they are way ahead than us in terms of investing in other countries.”

China is Myanmar’s biggest trading partner, followed by Thailand. Bilateral trade between China and Myanmar was worth about $3.6 billion in the fiscal year 2011-12, according to Myanmar’s Ministry of Commerce, while bilateral trade between Myanmar and Thailand stood at $4.576 billion in 2012. Myanmar-India bilateral trade reached $1.19 billion in 2009-10, making it Myanmar’s fourth largest trading partner after Thailand, China and Singapore.

Besides air linkage, Bangladesh and Myanmar also haven’t been able to develop any reliable road network in the bordering areas. However, the minister hoped that the proposed Asian Highway will hugely boost the road connectivity.

The Asian Highway project, also known as the Great Asian Highway, is a cooperative project among countries in Asia and Europe and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), to improve the highway systems in Asia.

A sub-regional organisation of Asian nations called the Bangladesh-China-India-Myanmar Forum for Regional Cooperation (BCIM), established in 1999 for greater integration of trade and investment between the four countries, organises a car rally, widely known as Kolkata to Kunming (K2K) car rally, to explore the potentials of expanding trade, investment and tourism, and enhance connectivity in the region along the Kolkata-Kunming route.

“We have to establish major road links with Myanmar to get access to Southeast Asia. Myanmar is our gateway to get into the markets of Thailand, Laos and Cambodia,” Quader said. Talks are also underway to allow Myanmar water vessels into Bangladesh’s inland waterways and vice versa to strengthen the sea connectivity, he added.

Asian Highway mapThe Bangladeshi minister also pointed out banking as “one of the biggest barriers” to Myanmar Bangladesh bilateral trade as there is a cap on transaction amount in place. Both countries are trying to increase border trade, which was hit hard by the recent sectarian violence in Myanmar’s Rakhine state.

“We are planning to set up wholesale markets and warehouses along the border. Bank draft margin has also been increased from $30,000 to $50,000 to facilitate trade. These issues were not stressed that much before as the trade volume was low and there were sanctions against Myanmar banks, but now we are developing mechanisms to remove the existing obstacles,” he said.

The border trade between the two countries is still low (125 commodities) compared to the existing potential and overseas trade. About 10,000 commodities are traded along the Myanmar-China border, while about 3,000 commodities are traded in Myanmar-Thailand border trade.

During the 6th Joint Trade Commission (JTC) meeting between Myanmar and Bangladesh held in Dhaka in November last year, both countries agreed to enhance the volume of bilateral trade to $500 million from around $100 million annually.

The bilateral trade between the two neighbours amounted to only about $79 million in 2011-12 fiscal year, while it stood at $170 million in fiscal 2010-11. Bangladesh exported goods to Myanmar worth $13.45 million during the fiscal year 2011-12.

However, the volume of unofficial trade between the two countries is about $300 million per year, Border Guards of Bangladesh (BGB) sources were quoted as saying in Bangladeshi media.

Bangladesh exports steel products, light engineering machinery, cement, dry foods, medicines and cosmetics to Myanmar and imports fish, timber, spices, synthetic foot-wears, among others. Besides the formal trade, a large quantity of petroleum products, fertilisers, agricultural inputs, and automobile parts are also smuggled into Myanmar.

The minister agreed that illegal border trade has been a problem as there were no formal banking channels in place. “Businesspeople don’t want to do illegal trade. But the payment system was complicated and they had to do transactions through hundis. But we are trying to clear the restrictions now so that all businesses can be done legally.”

During the Bangladesh Prime Minister’s visit Myanmar and Bangladesh signed memorandum of understandings to establish a Joint Commission for bilateral cooperation and a Joint Business Council (JBC) between the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

Bangladesh is also interested in importing power from Myanmar as a power-starved country, the Minister said. “Not only power, we have to develop all kinds of infrastructures to facilitate business. Now people do business via Singapore or Bangkok and it takes a lot of time and money for businesspeople.”

“However, we have identified the barriers and efforts are being made from both sides to overcome those,” he said.

The Bangladeshi Commerce Minister said the trade volume between Myanmar and Bangladesh hasn’t reached a satisfactory level because of former Western sanctions and economic isolation of Myanmar, but the doors for business seem to have opened again.

“The opportunities are huge in Myanmar as it’s a very resourceful country. They have abundant agricultural products such as rice, pulse and beans. They have timber, oil and gas and jade, and most of the resources are mostly untapped here,” he said.

“The biggest advantage for Bangladesh is its geographical location. Many of our products are globally well-known for their quality such as readymade garments, leather and pharmaceuticals. Even Bangladesh’s shipbuilding industry, a sector where Bangladesh is recently registering remarkable export growth, has a great potential here.”

Bangladesh is the world’s second largest readymade garment exporter behind China with annual exports of about $20 billion and its leather industry is set to cross $1-billion mark in export earnings this fiscal year. The pharmaceutical industry in Bangladesh is one of the most developed hi-tech sectors within the country’s economy, with an export amount of over $50 million.

“If we can further the ties between the businesspeople of the two countries, and from the government’s part if we can ease the existing barriers then we can definitely develop our bilateral trade at a very faster rate,” he said.

“We both have goods that we need and can provide. So, the possibilities are endless.”

However, the Minister said it would take some time for Bangladeshi investors to come and invest in Myanmar because of Bangladesh government’s “rather strict” policy towards its businesspeople investing in other countries. “Only three to four months ago we started allowing foreign investments from Bangladesh in a case-by-case basis. Investment policy from our side to outside is still too restricted.”

“However, we are interested to invest in the cement industry in Myanmar as they have available raw materials. If Bangladeshi entrepreneurs are interested and Myanmar agrees to supply the raw materials we can go ahead and set up cement factories here,” Quader said. We also welcome any Myanmar investors who are interested to invest in Bangladesh, he added.

“We are very hopeful that there will be positive development. The Bangladeshi businesspeople who came here said they received overwhelming response from the Myanmar side.

“There is a huge trade prospect for both countries. The whole world is trying to establish their presence in Myanmar now. As a next door neighbour we shouldn’t just sit idly and let the opportunities fly past,” the Minister said.

State-run banks losing shine in export financing

Posted in Bangladesh, Banking, Business, Dhaka, Export and Import, Finance by Sherpa Hossainy on January 4, 2012

Published in The Independent on 4 January 2012

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The state-run banks are becoming a lacklustre option for export financing despite the fact that they offer lower interest rates and have better access to funds, exporters say.

Exporters nowadays are rather opting for private commercial banks, which provide fast and well-organised service, while the government banks are fraught with inept and complex procedures, bureaucratic red tapes and sluggish service. However, exporters still rely on state-run banks when it comes to big volume financing as arranging vast amount of cash is often hard for private banks.

“The processing of simple loan applications in state-run banks is very lengthy and it’s difficult to go through all the voluminous paperwork,” said Abdus Salam Murshedy, president of the Exporters Association of Bangladesh (EAB).

The EAB chief said the state-owned banks played an extraordinary role in industrialisation and export financing during the 80s and 90s but couldn’t keep up with the changing needs of exporters and struggled to provide efficient service.

“The private banks slowly took over the financing of export-oriented sectors because of their superior services. They also maintain better customer relations,” Murshedy told The Independent. The state-run banks are performing poorly in industrial loan recovery, he added.

The private banks’ top-notch service and hassle-free financing had made an increasing number of exporters move away from state-run banks.

Anowarul Islam, a garment exporter, said, “Private banks have state-of-the-art facilities and they are proactive in communication. Opening letters of credit and availing loans are much easier in private banks.”

The state-run banks, on the other hand, claim that they are providing better facilities such as lower lending rates and easy access to loans.

Md Abdur Razzaque, assistant general manager of Foreign Trade Department of Janata Bank, said, “State-run banks’ interest rate for exporters is 7 per cent, while the private banks charge 18 per cent. We have no extra fees and ‘hidden charges’ like private banks.”

Razzaque said private banks are reluctant to help small clients and state banks are still the solution to  them. He said the regular collateral ratio is 1:1.5, but for exporters it is either 1:1 or collateral-free.

He said the state banks are serving a big customer base and that could sometime lead to slow service. “If a private bank serves 10 clients, we serve 110. They have a selective customer base, we serve everyone,” Razzaque said.

Razzaque said state-run banks are working in line with the government’s export policy and give highest priority to the export sector. The state banks arranged quick cash during Eid for the garment exporters to pay their workers which helped avert labour unrest, he added.

Financing exports at a subsidised rate also makes it hard for the state-run banks to make any profit. “Sometimes we even make losses, but we are following government policy to help exports,” Razzaque said.

However, private banks defended their high interest rates, citing rising inflation and monetary policy pressures. “On top of the inflationary growth and tight fiscal policy, we have to think about availability of funds and the costs of running an operation. If you consider these things I’d say we are not charging high interest rates,” said Muhammad A (Rumee) Ali, chairman of BRAC Bank.

Murshedy said state banks can afford lending at a lower rate because they face much less liquidity crisis and get big funds from the government. “The private banks collect money from the public and they have a much higher risk factor,” he said.

He, however, said, “When it comes to big loans, there is little to do but to go to the government banks. Private banks have to form consortiums to put together such big amounts.”

At present, the government under the Export Credit Guarantee Scheme provides Export Credit Guarantee (Pre-shipment), Export Credit Guarantee (Post-shipment), Export Payment Risk Policy (Comprehensive Guarantee) and Whole Turnover Pre-shipment Finance Guarantee, covering risks on export credit as well as probable commercial and political risks occurring abroad.

The government also provides loans and venture capital on easy terms and low interest rates from the Export Promotion Fund (EPF) for the exporters. The Export Policy 1997-2002 also ensured incentives such as rebate on insurance premium, income tax rebate on export earnings, duty drawbacks, tax holiday and cash subsidies.

Nordic chamber liaises to bring more investments

Posted in Bangladesh, Business, Economy, Export and Import by Sherpa Hossainy on December 18, 2011

Published in The Independent on 17 December 2011

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The Nordic countries are growingly interested in setting up more joint venture operations in Bangladesh if provided with transparent business rules and adequate policy support, a Norwegian business leader said.

In an exclusive interview with The Independent, Arild Klokkerhaug, president of the Nordic Chamber of Commerce and Industry (NCCI) in Bangladesh, discussed how the chamber is working as a “positive actor” to bring in more Nordic investments. “The Nordic companies that are doing business here believe that Bangladesh has a tremendous potential. We project Bangladesh as a prospective business destination to the Nordic businesses at home,” Klokkerhaug said.

The NCCI president said Bangladesh comes way down on the list of potential countries when Nordic companies wants to invest in Asia and the chamber is working on to improving the image. “When we meet Nordic companies we try to display the positive sides and potentials of Bangladesh. Being here and operating profitably, the existing Nordic companies are the proof of good business,” he said.

Since its inception one year ago, NCCI is helping Nordic companies, which are interested in investment and establishing operation in Bangladesh, by acting as a knowledge-sharing platform. Klokkerhaug said human resources and skilled workforce is the key strength of Bangladesh. “Bangladesh has a huge market in a compact place. There’s very small distance from anywhere in Bangladesh to the ports,” he said.

Arild Klokkerhaug, president of Nordic Chamber of Commerce and Industry (NCCI)

The biggest investments of Nordic countries in Bangladesh are in the telecom sector from the global giants Telenor, Ericsson, Nokia and Nokia-Siemens Network, while big production names like Ikea, H&M, Lindex and Kappahl are also in operation in textile sector. The NCCI has arranged business visits from Denmark, Norway, Sweden and Iceland and the focus was on energy sector such as natural gas and power plants. In November, the Danish government also expressed its interest to invest in Bangladesh, particularly in solar power and biogas.

The Norwegian embassy launched in 2010 the Bangladesh Business Matchmaking Programme (BBMP), which establishes business ventures between Norwegian and Bangladeshi companies. “Many of these meetings results in joint partnership or trade,” Klokkerhaug said. He also said there has been increased interest after setting up NCCI. “We are here to stretch out a hand and help a company start. This is like a public-private partnership to build awareness about the high potential in Bangladesh.”

NCCI is a 45 member companies that have Nordic background and operating in Bangladesh. Denmark has more than 20 companies, while Sweden and Norway has 18 and 5 respectively, operating in Bangladesh.

The exports to the Nordic countries — Norway, Denmark, Sweden, Finland, Iceland — has seen major a growth in recent years. According to Export Promotion Bureau data, exports to Nordic region in the fiscal year 2010-11 rose 54.75 per cent to $818.6 million than the previous fiscal. Denmark and Sweden is the biggest export destinations for Bangladesh but exports to Norway and Finland also marked a rise of 79.05 and 78.20 per cent in the 2010-11 fiscal than the previous one. The exports in July-November period of 2011-12 fiscal stood at $360.78 million.

However, the NCCI president said more concerted efforts are needed to remove the existing bottlenecks in Bangladesh to bring in more investments. Besides the perennial energy and power crisis, Klokkerhaug pointed out the changing rules of business as a big obstacle. “If you look at the telecom industry, it does not have fully transparent rules of business. If the rules of the game change while you are playing it is somewhat difficult; and that is scaring out new potential big investments,” he said.

Klokkerhaug said many foreign companies struggle to get money out of Bangladesh while it’s not a problem to get money in. “When finally they have a profit and want to take back some of their return many face big hassles. That is also one of the reasons why many companies hesitate to invest in Bangladesh.” He said there is a lack of understanding in certain government organisations such as National Board of Revenue as to how important it is for the companies to take the profit out so that it can be re-invested. “If one company takes profit out five new companies will come in. That’s how you do business,” he said.

The NCCI is also trying to build up a dialogue with the government to make the investment process more easy and smooth, especially with Board of Investment. “The government is doing a lot of good things and has good intentions. To set up a business is quite easy now. But some policy failures are making the good intentions backtrack,” he said, mentioning that Bangladesh has slipped four places in the global index of ease of doing business since last year on the World Bank’s report. “This is related partly to the policy failures and partly to lack of transparency in business dealings,” he said.

Arild Klokkerhaug

Klokkerhaug believes Bangladesh is yet to utilise the potential of its female population and it is hard for women entrepreneurs to set up a business in Bangladesh due to lack of transparency and hassles while setting up a venture. He thinks Bangladesh would do better in the business world by empowering local women entrepreneurs which would lead to much stronger value addition.

Recently, the Nordic chamber has started networking with local women chambers and women bodies to motivate them to build confidence, and encourage and make them more visible. The NCCI is also trying to implement strong business ethics that Nordic countries follow in carrying out business deals and operations and trying to implement better employment environment and work policies. He said companies like IKEA and H&M contributed a lot for improving work situation in the factory because they have strict rules to live up to in terms of child labour, health safety and environment guidelines.

“We encourage people to train and educate themselves more, have a life so that they don’t get exploited and burned out. We also invest in talents and the employees that will hopefully inspire local businesses to focus more on their human resources,” Klokkerhaug said.

Thailand flood likely to impact investments in Bangladesh

Posted in Bangladesh, Business, Dhaka, Export and Import by Sherpa Hossainy on November 5, 2011

Published in The Independent on 05 November 2011

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Thailand’s worst floods in decades could possibly slowdown potential Thai investments in Bangladesh and dent the burgeoning bilateral trade between the two countries, businesspersons feared.

Almost nine million people were hit by the recent flood, which inundated one third of Thailand’s provinces, and forced almost 1,000 factories to shut down. The Bank of Thailand (BOT) on 28 October slashed the growth forecast to 2.6 per cent from an initial projection of 4.1 per cent.

BOT estimated the damage to industry at $3.3 billion, and analysts warned that any substantial damage to the capital Bangkok, which contributes almost 41 per cent to Thai GDP, could see the losses go double.

Mohammed Ali, vice president of Bangladesh-Thai Chamber of Commerce and Industry (BTCCI), said, “A BTCCI delegation was supposed to visit Thailand on 12 November and hold talks with the Thai government and businesspersons about possible Thai investments and bilateral trade but it was postponed due to the flood.”

Although, a Thai business delegation from Thailand Bangladesh Business Council (TBCC) is expected to arrive in Dhaka on 15 November, he said.

“We are preparing ourselves to hear not-so-positive things about the possible investments here because they have to deal with their own problem now. We’ll see how the discussions go,” Ali told The Independent.

During Thai Deputy Minister of Commerce Alongkorn Ponlaboot’s visit to Bangladesh last year the Thai minister said Bangladesh has become an attractive destination for Thai investors in readymade garment, leather, tourism, pharmaceutical and infrastructure sectors, and they are eager to invest.

“Some Thai businessperson wanted to set up jute processing industries and light engineering factories. We were eager to share the technology from Thailand. But those projects are most likely to be pushed back,” Ali said.

Total sector-wise Thai investments in Bangladesh, as registered by the Board of Investments (BOI), up to April 2011 were $4,228.40 million.

Thailand has also shown interest in Dhaka’s subway system project as well as the Dhaka-Chittagong Expressway project, and The Italian-Thai, a Thai owned construction company, has won the bid to undertake the $1.2 billion Dhaka Elevated Expressway Project.

The BTCCI vice president said the chamber has been vigorously trying to improve the bilateral trade with Thailand and encouraging Thai entrepreneurs to invest here in Bangladesh.

“We could’ve gone made further progress if the natural disaster had not have happened,” he said. A Thai trade fair, which was supposed to be take place in November in Dhaka, was also cancelled because of the flood, Ali said.

In July this year, Thailand sought land from Bangladesh government to set up new power plant and paper mills, preferably in Khulna to use the Mongla Port facilities. Commerce Minister Faruk Khan assured Thai delegation about acquiring land and hinted that a special economic zone could be in the offing.

“There are some industries in Thailand that want to relocate to Bangladesh because of cheap labour here and rising manufacturing costs in Thailand. But now we have to wait and see for Thailand to recover from their imminent economic debacle,” Ali said.

Although the trade volume between Bangladesh and Thailand has increased steadily over the years, the trade balance continues to remain in favour of Thailand. The bilateral trade between Bangladesh and Thailand was more than $909 million in 2010, over 39 per cent more than 2009, and the trade volume is expected to cross $1-billion mark this year.

In July-September of 2011-12 Bangladesh exported only $5.01 million worth of goods and in 2010-11 fiscal the total export was $33.01 million. Thailand enjoys a yawning trade surplus with Bangladesh as its export stood at $729.14 million against its import of only $22.88 million during 2010 (January-October).

Ali said, “Our exports will not feel the pressure because the volume is low. But the imports will surely be hit by the flood because the transportation system has collapsed in Thailand. But hopefully it will not stay like this for long.”

“Exporters, in the meantime, are also taking a go-slow approach because of the recent flood,” he added.

Major export items from Bangladesh to Thailand include frozen foods, chemical products, leather, raw jute, jute goods, agri-products, knitwear, woven garment, pharmaceutical products, furniture and testing appliances and instruments; while major import items from Thailand include cement, plastic products, textiles, yarn, machinery, rice, synthetic yarns and chemicals.

ABM Musa, managing director of Astex Fashions Ltd and a member of BTCCI, said, “Right now the impact is not being felt on imports but it could probably be felt after two or three months.”

Mahmudul Islam Chowdhury, president of International Business Forum of Bangladesh, said, “There could be a probable impact on our imports because shipments will be delayed.”

The widespread flooding in Thailand, world’s biggest rice exporter, has also damaged some 3.5 million tonnes of paddy rice in the country. Thailand exported rice worth $42.8 million to Bangladesh during 2010 (January-October). Bangladesh’s import of Thai rice was zero in 2008 and 2007 with import valued at only $5.4 million and $1.3 million in 2006 and 2005.

“As for the essentials (rice and daal) there would be no problem. The food items that we import are mostly consumed by upper-middle class, so the impact will be negligible,” Chowdhury said.

“Those businesspersons who have opened back to back LCs would be in trouble even though the overall impact on economy will be negligible,” he added.

Santi Pongchaisopon, president of CP Bangladesh Co Ltd, a Thailand-based multinational company, and director of BTCCI, said, “Our supply chain is not hurt because the factory is based in Bangladesh.”

Usa Wijarurn, minister counsellor (commercial) of Royal Thai Embassy in Bangladesh, said, “There hasn’t been any estimation on the damage on bilateral trade from our part and we also haven’t received any report from the Thai commerce ministry. We’ll have to wait for the actual figures.”

Move on diverse use of potato

Posted in Agriculture, Bangladesh, Export and Import by Sherpa Hossainy on November 5, 2011

Published in The Independent on 3 November 2011

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An agro processing company is set to resume its starch-making factory to use the huge stockpile of potatoes in cold storages in northern Bangladesh, a move to avert an alarming overstock situation to save farmers.

Flamingo Agro-tech Ltd will restart its operation from mid-November in Joypurhat district, the largest potato growing area in the country. The factory will require 220 tonnes of potato everyday, officials of the company said.

The $5.5 million (Tk 420 million) factory, which started in 2005, was forced to shut down a few months ago after operating for only two and a half months following a long break.

Flamingo Agro-Tech Ltd factory

“We always had to stop our operation from time to time because banks were unwilling to give us working capital and there was also lack of government subsidies on potato cultivation and exports,” said Abdul Kader Siddique, Flamingo’s managing director.

“The situation is so dire now that we have to come forward and save the farmers, even though the banks and government don’t understand the gravity of it; otherwise farmers will lose interest in potato cultivation,” he said.

A few months earlier, farmers started to store Diamond and Rosetta type potatoes in cold storages hoping to make more profit. But amid potato price-drop and diminishing  demand, farmers are left with a huge stockpile with few or no potential buyers.

There is an approximate stock of 70,000 tonnes of potatoes in all the 13 cold storages in Joypurhat, which have capacity to store 103,045 tonnes, cold storage owners said.
Production cost of every sack (84 kg) of Diamond and Lady Rosetta including storage charge is about Tk 1,000 but those  are sold at a maximum of Tk 600 per sack now because of the demand-drop, they said.

“Upon observing the market and considering the farmers’ condition, Flamingo decided to buy Rosetta and Diamond type potatoes from the farmers and resume production at the factory,” Siddique said.

The company has one starch-making and three potato flake factories in the country that demand over 2-3 lakh tonnes of potatoes every year, the official said.

Siddique said the government should have encouraged diversified use of potato long time ago and should have provided proper incentives.

“In China farmers get 10 per cent incentives only on cultivation, plus there is export incentive. Rather than giving us incentive, the government took down the existing 30 per cent incentive to 20 per cent,” he said.

Siddique said potato, other than consuming it as vegetable, has versatile uses in fast foods, noodles and pharmaceuticals and Bangladesh should bank on the rising demands of diverse use of potatoes.

“We export starch to Japan, South Korea, Vietnam and the Middle East. If the factory runs all year round we can earn around $6-7 million a year by exporting 12-14,000 tonnes of starch,” Siddique said.

A labourer working inside Flamingo Agro-Tech Ltd factory

“I’ve been going from door to door of various officials for the last 4-5 years, holding meetings with banks, government offices, but nothing happened,” lamented Siddique.

“We directly employ 300 persons and indirectly a couple of thousands, who will lose jobs if we are forced to shut down once and for all,” he said.

Siddique said despite all hindrances, Flamingo keeps running. “We know what it can bring to Bangladesh and the farmers. But our machines are sophisticated, they can’t be used intermittently like that for long,” he said.

Siddique also stressed production of high-quality potatoes like Diamond and Rosetta. “The market is now flooded with low quality Granola type. Companies must understand which one is industrial grade and which one will bring them profit and can be put to good use.”

Flamingo can only use Lady Rosetta type in their factories as only this variety complies with the industrial starch standard. Chips making factories also need Rosetta types because of the quality and the crispness they offer.

Siddique said to encourage farmers to cultivate potato, Flamingo is supplying quality seeds at fair prices and taking initiatives to cultivate high-quality variety of potato. Besides, the company is organising seminars for farmers jointly with Southpole Seed Ltd, another agro processing company, so that they do not get cheated while buying high quality seeds.

Md Nafisur Rahman, managing director of South Pole Seeds, said, “There are so many unused potatoes in the cold storage. They would’ve been consumed by now if there was diverse use of potatoes.”

Rahman said that he had visited China to import machines that can extract protein and fibre from the float water and pulp respectively – the items that are left as residue after starch production — and both have high export potential.

“We will go to China in December to get the machines so that we can extract protein and fibre from the residue that Flamingo will produce,” Rahman said.

“No one in Bangladesh knows how to use those residues. We are also trying to introduce it as fish and cattle food in Chalan Beel area,” he said. Rahman said private entrepreneurs are trying hard to promote diverse use of potato but government should step in urgently to encourage the farmers and provide cash incentives for exports.

“Chips making factories have just started operating in Bangladesh and there should be more processing industries. But every initiative is taken by the private entrepreneurs, why not government?” he said.

Machines inside Flamingo Agro-Tech Ltd factory

Liton Hossain, a farmer from Joypurhat who took part in Flamingo seminars, said, “Farmers were not really interested in farming potato because they incurred huge losses this year. But Flamingo has assured us that we don’t have to worry if we produce high quality potatoes.”

Hossain hopes to cultivate Lady Rosetta variety potato on 20 bighas of land next season.

Abdul Alim, another marginal farmer, said, “In previous seasons I sold every maund of Rosetta at Tk 400. I had put 45 sacks of potato in the cold storage to make more profit this year. Now I can’t even sell a kilo at Tk 6.” Alim said that he is happy that Flamingo is going to buy these potatoes; otherwise, he thinks, all those potatoes would have gotten wasted.

Mojibor Rahman, a wealthy farmer from Karimpur village, said, “I incurred a loss of Tk 700,000 this year. Last year was the same.” He said that as Flamingo Agro-tech restarts its factory, farmers will at least get “something” from now on.

German trade show eyes advancing relations

Posted in Bangladesh, Business, Dhaka, Export and Import by Sherpa Hossainy on November 3, 2011

Published in The Independent on 28 October 2011

Read the article on Independent website

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The bilateral trade between Bangladesh and Germany is growing at a significant pace as the mutual ties were fortified in the areas of trade and politics recently, commerce minister Faruk Khan said on Thursday.

“The relation between the two countries has flourished based on mutual confidence and it’ll continue to grow,” the commerce minister said while inaugurating the three-day “German Trade Show 2011” at Bangabandu International Conference Centre in the city.

Bangladesh German Chamber of Commerce and Industry (BGCCI) organised the show where German ambassador to Bangladesh Holger Michael, BGCCI president Saiful Islam and executive director Daniel Seidl were also present.

Faruk Khan said the upcoming visit of the German President to Dhaka will be very significant in strengthening the bilateral relations. Germany’s Federal President Christian Wulff is likely to arrive in Dhaka on November 28, which will be the first visit by a German head of state in last 25 years.

Khan emphasised the need to increase exports to Germany and hoped that the trade show would focus more potentials in trade and investment relation between the two countries.

German ambassador Holger Michael said, “Bangladesh and Germany not only have political and business cooperation, we have cooperation in development, environmental, educational and cultural sectors.”

He said there were successful talks during the visit of Prime Minister Sheikh Hasina, foreign minister Dipu Moni and commerce minister Faruk Khan to Germany in the last few months.

BGCCI president Saiful Islam said Bangladesh now holds the third position instead of the previous seventh in terms of exports to Germany. He hoped of more German investments in Bangladesh.

Islam said the two ways trade was at $4 billion in fiscal year 2010-11, with 80 per cent trade was in favour of Bangladesh. The trade show aims to build on the outstanding Bangladesh-German trade relationship, he said.

Bangladesh exported goods worth $3.43 billion to Germany and imported goods worth $691.30 million in fiscal 2010-11, according to the commerce ministry of Bangladesh.

German chamber executive director Daniel Seidl said interests of German companies on Bangladesh market had increased vigorously in recent times.

Organisers say it is the biggest ever trade show in the country and almost 70 top companies from Germany and Bangladesh are showcasing their offerings from diverse industries including RMG, shipbuilding, energy, IT, logistics and pharmaceuticals.

The BGCCI president said they expect over 25,000 visitors in the three-day trade show, which will end on October 29. Having 200 plus memberships, BGCCI is the largest bilateral chamber in Bangladesh.

The first ever German Trade Show in Bangladesh was from 6-8 November 2009 where 60 companies and organisations exhibited their products and services.

Two Nobel laureates — Prof Muhammad Yunus of Bangladesh and German climate change expert Prof Wolfgang Cramer — are scheduled to deliver lectures at the seminars in the fair.

Veg export upswing may not last long

Posted in Bangladesh, Business, Export and Import by Sherpa Hossainy on October 9, 2011

Published in The Independent on 8 October 2011

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A visibly healthy upswing in exports could well become short-lived, if the government does not step in to provide apt logistics support, warned vegetable and fruit exporters.

The exporters expressed fears that the lack of central warehousing facility, non-availability of air cargo services from state-run Biman Bangladesh Airlines, and unprecedented rise in prices in domestic market, will make a dent in rising vegetable and fruit exports, soon.

As the European Union (EU) continues to impose strict quality regulations on vegetable exports, absence of a central warehouse, which is necessary to maintain international packaging standards and quality of vegetables, could result in lower demands from the international market, they said.

“We solely depend on air cargo services for exporting perishable items. It’s impossible to maintain the freshness of fruits and vegetables, if there is no central warehouse close to the airport,” said Mohammad Monsur, general secretary of Bangladesh Fruits, Vegetables and Allied Products Exporters Association (BFVAPEA).

Although the exporters have their own warehouses, those are not enough to store vegetables for longer periods, he said, adding that there should be a central warehouse for all agricultural products in the country.

Vegetables and fruits

“We’ve been urging the government for almost seven years, yet no actions were taken,” he added.

The BFVAPEA secretary also demanded cash subsidies from the government, to offset spiralling vegetable prices in local market.

“Vegetable prices have been going up for the last three months. The government should provide cash subsidies to us, like it does to garment makers, to balance the price disadvantage.

“Buyers won’t wait for us. They are already shifting to India, Sri Lanka and Pakistan, as they are getting better prices there,” Monsur said.

Md Mostafizur Rahman, another vegetable exporter, said that the recurrent problem of cargo space does not exist any more, but foreign carriers are charging ways to hike freight charges.

Rahman, proprietor of Sadman International, said, “If Biman starts cargo services, we’ll get to export vegetables cheaply and the exports will increase manifold.”

There is no alternative to starting cargo facilities to important international destinations by Biman, the national flag carrier, if vegetable exports have to sustain growth, said Monsur, also proprietor of Monsur General Trading Company.

Vegetable exports from Bangladesh marked a 20.92 per cent rise in the first two months of the current fiscal year, compared to the same period last year, Export Promotion Bureau (EPB) data showed.

Export earnings for July-August, 2011, stood at USD 15.43 million, against a target of USD 14.27 million, while export earnings were at USD 12.76 million, during the same period last year, EPB data showed.

Exports of vegetables, in fiscal year 2010-11, was USD 71.73 million. Export revenues rose remarkably from fruits, at USD 10.14 million in the first two months of the current fiscal year, marking a 112.58 per cent rise than the same period last year.

Soaring demand of betel leaf in Saudi Arabia and the UK, and rising consumer demand for mangoes, blackberries, bananas in the EU helped the course, exporters said. Exports of beans, red amaranths and gourds, also increased, they added.

However, Monsur sees the rise as “unsustainable”, saying that the adverse impact of existing bottlenecks, on vegetable and fruit exports, will be felt “probably within six months”.

Beach house export prospect bright

Posted in Bangladesh, Business, Export and Import, Interviews by Sherpa Hossainy on September 4, 2011

Published in The Independent on 4 September 2011

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“Sometimes I find it hard to believe that I export such an unusual product,” said Anowarul Islam, managing director of Pioneer Group, as he explained export prospects of an unconventional product — beach house.

As the name suggests, beach houses are small huts placed by beaches, used for refreshment, taking foods and changing by the beach-goers as they enjoy the sun-bathing.

Islam told The Independent that earlier he was reluctant to share the concept with anyone because there are some “idea-thieves” in Bangladesh. “Now we are an established company and I feel there is a need to share,” he added.

Raw material for beach house (hay)

The lone exporter of beach houses, Pioneer Overseas Corporation (POC), a sister concern of Pioneer Group, started exporting beach houses in 2006 on a trial basis after a Bulgarian company expressed interest to buy the exceptional product.

Islam said POC, established in 1982, was mainly involved in exporting kite-parts made of bamboo, mainly to Pakistan. Through one of his Pakistani clients he met a Bulgaria-based company Baron Ltd representative, who was impressed by the motifs of the old-style small village huts made of bamboo and hay — known as “Kachari Ghor” in Bangladesh.

Raw material for beach house (hay)

“The Bulgarian buyer said there is a big demand for such houses in Europe and wanted us to make something similar,” Islam said. It was so successful and profitable that the company never looked back.

The raw materials of beach houses are primarily bamboo poles and sticks, paddy straw and hay. “The raw materials are purely natural and local; we don’t use any imported item,” said Islam.

So far POC has exported 400 such houses, which are usually 10’X10’ in size, mainly to Bulgaria, Croatia and Pakistan. The total export volume of POC now stands at $450,000.

“Last year we made 75 shipments, and this year 37 shipments are completed and 100 more are in the pipeline,” he said. Manufacturing cost of one beach house is around $1,500-2,000, depending on the intricacy of design.

The house parts like roof, bamboo poles and walls are shipped usually in 40′ containers and get assembled abroad.

As the world now shifts to using more eco-friendly products, demand for bamboo-made beach houses are surging exponentially. “Beach houses have a high demand in sea-side hotels and resorts in Europe nowadays,” he said.

Islam said that big orders for temples — a collection of beach houses which can accommodate 100 to 150 people as opposed to 10’X10’ beach houses which are for couples — are coming in but material and manpower shortage poses a big problem. “It’s a big project, we have orders, but we can’t take them as this will require more money, manpower, complex designs and raw materials,” he said.

Currently POC is working with a workforce of 500 craft persons, but the figure was only 20 when it started. “Mostly indigenous people are employed by us as they are really adroit at this,” Islam said.

Most manufacturing takes place in Rangamati, Kaptai, Chittagong and Sunamganj where good quality raw materials are available, he added.

As demand rises, the beach house manufacturing might face a raw material crunch as production of quality bamboo is few and far between. “We need 1,000,000 bamboos every year, and we are trying to lease 100 to 150 hills in Rangamati to cultivate bamboos,” Islam said.

POC only could get lease of six hills as the government seems unenthusiastic about POC’s venture and more interested to lease the hills for cultivation of rubber, a much-vaunted export item.

Islam said: “We are the only one with an application. No one really knows much about it and does not appreciate what we are doing.  “If we can produce quality bamboo in our own hills, our costs will come down and we can take more orders.”

Roof of a beach house

Naming India, Indonesia and Vietnam as the biggest market players globally, Islam said there is a need to use improved tools to accelerate the manufacturing process.

“One labourer can only cut 120 pieces of bamboos a day using manual tools, whereas in a foreign country 1,000 can be cut because of availability of superior tools,” he said.

Anowarul Islam sought government incentives and effective policies to boost the production of bamboos to have adequate supply of raw materials. Recently the commerce minister said the government will declare handicrafts as a thrust sector and exempt it from all existing value added tax to boost its exports.

The global handicrafts market is $120 billion and the present export volume of handicrafts from Bangladesh is merely $4.47 million.

“We have spoken to the chairman of National Board of Revenue, the Environment Ministry and the International Business Forum of Bangladesh for support and we hope this new product will catch the high-ups’ attention,” Islam said.

The beach house export also involves other handicrafts item as they are used to decorate those houses.

“It’s not that only beach houses are exported; there are many decorative items needed for the house like flower vase and wall mat, which are also exported.

“Now we are also providing Nakshikatha to add aesthetic value to the beach houses; so beach house exports will also help other handicraft items’ export to grow,” Islam added.

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