Absence of Functional Research Facilities in Bangladeshi Trade-bodies

Absence of Functional Research Facilities in Bangladeshi Trade-bodies

Md. Joynal Abdin

The Daily Sun on May 3, 2017

Bangladesh is considered as one of the potential emerging economic powers around the world. It has a very significant number of achievements in terms of fulfilling MDGs, increase per capita income, GDP growth, and export earnings.

It is one of the N-11, Frontier-5 countries. Bangladesh entered the level of lower middle income country and hopes to progress further. Bangladeshi scientists, innovators and researchers have proved their world class capacity and merits. As a result we are getting name of many Bangladeshi scholars in various prestigious global lists. But till now we hardly have a signboard of Bangladeshi companies out of our territory. Easiest answer of this absence could be that, it is prohibited for Bangladeshi nationals to carry beyond a certain amount of money abroad. Absence of capable entrepreneur could be another cause of it.

Government effort to develop capable entrepreneurs in Bangladesh is very insignificant. We have 122,176 primary schools, 20,297 high schools, 4,113 colleges, 9,319 madrashas, 5,790 technical schools and polytechnic institute and 132 universities in Bangladesh but we do not have a single specialised entrepreneurship development institute. We are producing doctors, engineers, managers, technologists and other professional job seekers through our education system here in Bangladesh. But we are not producing the job provider entrepreneurs through our existing academic curriculum. Globally it is proved that, entrepreneur could be created through proper education, training, mentoring in a congenial policy environment.

There are many challenges/barriers to operate a business enterprise beyond individual capacity. Therefore entrepreneurs became united under a single platform like chamber of commerce or sector specific associations around the world. Similarly Bangladeshi entrepreneurs/businessmen are united under two types of trade bodies namely the chamber of commerce and sectoral associations. There are four different types of chamber of commerce in Bangladesh.

These are district chambers, metropolitan city based chambers, joint chambers and international chamber of commerce. According to a recent list of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) there are 101 chambers of commerce and 379 associations in Bangladesh. The objective of all the trade bodies is capacity building of Bangladeshi private sector from respective fields and negotiating unitedly with the government to create and maintain a congenial business environment in home and abroad. Research based information has no alternative to carry forward this function of the trade-bodies successfully.

Bangladeshi trade bodies including the federation chamber have limitations in terms of research facilities. An effective and functional research centre is absent in all the chambers of commerce including the big players like FBCCI, DCCI and MCCI etc. Scenario is more inferior in the associations including the largest associations like BGMEA, BKMEA etc. Business leaders are providing special commitments for developing the research department of respective trade-bodies before each election during last decade. Another new election of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is heading toward us in the next month. Hope all of the panels will give emphasis on research and development duly in respective election manifesto. But unfortunately research facilities in the trade bodies are not getting momentum. Let’s think a while why research facilities/capacity of research departments of the trade bodies is not reaching up to the standard of our expectations? The followings could be considered as the major causes of current inferior performance of the research departments in Bangladeshi trade-bodies:

Multiple expectations of the management from the research wing: Job responsibility of the research wing is not clearly defined in the trade bodies. As a result management has multiple expectations from the research team. For example an informative letter has to be written, president or vice president has a program then its requires a written speech, a sector studies has to be conducted, a position paper has to be prepared, trade statistics is required, seminar has to be organised, meeting minutes has to be written, project proposal has to be prepared etc. a long list of expectations to research wing. But writing letter could be completed by the administration or respective department, writing speech could be completed by the PR section, writing project proposal is a specialised job of project consultant etc. are similar tasks but having great distinctions than that of the functions of a professional research team. Thus a good research team could be ineffective if it would like to serve every expectations of the management.

Absence of yearly action plan and budgetary allocation: Most of the major trade bodies of Bangladesh have a research department. But it does not have annual action plan with required budgetary allocation. As a result research executives of the trade bodies became day labourer toward ad hock instructions of the higher authority. Therefore, no publishable research is conducting by them and no output is visible after a certain period.

Writing speeches and other ad hock write ups on an emergency basis: Research department of the trade bodies has to write down speeches for the respective presidents and vice presidents on an emergency basis/within short notice. Writing an informative speech requires time, but short notice decreases its quality. On the other hand giving message of the organization is purely a function of public relations (PR) section. So, PR and Research department has an overlapping position regarding writing speeches. Ad hock write ups like letter, meeting minutes etc. destroyed valuable time of a good research team.

Absence of qualified research team: Conducting research is a team work. It requires cross faculty specialized knowledge of economist, statisticians, MIS and business graduates along with sector specific expertise. But most of the research departments of the trade bodies do not have enough manpower to provide respective faculty inputs in a research team. As a result designing and conducting a quality research is not possible by the fractional team.

Absence of skill development initiatives: Conducting a good research requires a number of technical skills which is not available in all faculty of master level education. Therefore special tailor-made training skills are required to design and conduct a good research. You will hardly find a trade body who is investing money to build capacity of the research team by training them up in home and abroad. As a result research departments are not becoming skilled and proficient in respective tasks.

Absence of competitive package of benefits to retain competitive talents: Most of the trade bodies are paying non-competitive benefit to the executives.

Generally research related professionals are more knowledgeable than that of the others. As a result they have more opportunities than that of the others and switched over into a competitive career option and trade-bodies losses these talented people due to lower benefits packages.

Absence of job security and clear career path in the trade bodies: There is a vulnerability as well as ambiguity regarding the career options of a professional in the trade bodies. As a result these are not lucrative positions at all to the talented university graduates. Therefore, deserving graduates are not willing to apply for a position in a trade body.

From the above discussion it is clear enough that, Bangladeshi trade bodies are yet to determine the job responsibilities of respective research department to make them effective and efficient. Following steps could be considered for establishing a strong research cell in a chamber of commerce or sector specific association:

Determine specific objective of the research wing: Management of a chamber of commerce must determine their expectations from the team. Separate team could be formed for separate actions for example a small team could be specialised in speech, letter, meeting minutes etc. writing jobs. Separate team for designing and conducting professional research on specific issues. Similarly another specialised consultant group is required for project relevant tasks. All these activities are similar but needs different types of skills and mentalities. So a trade body must determine specific objective of its research team or form separate team for separate actions.

Prepare an annual action plan with required budgetary allocation and time frame: The chamber authority has to prepare a specific plan of actions with required budgetary allocation to conduct a specific number of researches on predetermined topics in a year. Ad hock assignment diversified focus of the team and make them weak performer.

Team formation and required capacity building: Conducting Research is a team work. It requires cross faculty knowledge including economist, business graduates, statisticians, development studies and MIS professionals. Therefore, forming a balance team is essential for well performance of a research team. Conducting research in practical fields requires few university plus skills. Therefore even the most scholar university team has to be trained up on specific research relevant skills for ensuring same page thinking of the team. Training has no alternative to make the team well performing.

Competitive package and clear career options: Competitive package is required to retain competitive merits. Job satisfaction, job security and clear career path is required to form and retain a functional and effective research team in a trade body.

Finally; we could state that it is the right time to establish a strong research team at every trade body of Bangladesh. Otherwise capacity building of Bangladeshi private sector will be hampered for another decade until we do so. In many countries chamber of commerce is fully financed by the respective governments. As a result they have skilled professionals in trade bodies. Even the neighbouring Indian trade bodies are well equipped with functional research team. Similarly the private sector of Bangladesh could claim government budgetary allotment for the chamber of commerce. The Federation of Indian Chambers of Commerce and Industry (FICCI) counterpart of the FBCCI has a long list higher educated research team with more professionals than that of the total manpower of FBCCI. A functional research team is much more essential today for capacity building of Bangladeshi Private Sector to negotiate with our global partners and enter into international market with our products either in the form of export or internationalisation of our own brands through outward FDI.

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Trade Organisations in Sustainable Economic Development

Trade Organisations in Sustainable Economic Development

Md. Joynal Abdin

The Daily Sun on April 26, 2017

There is no alternative of individual and institutional income generation for economic development and poverty alleviation of a country. Ensuring employment is the most effective tool for facilitating individual and institutional income generation. There are about 162 million populations in Bangladesh and about 120.70 million of them are in workable age group. For providing employment to such a huge number of populations government has only 1.7 million positions in civil service, a mentionable percentage of this government positions remain vacant forever; for example 18% of government positions are vacant now in Bangladesh. As per a recent report there are 58.10 million people involved with private sector jobs.

There are no exact data regarding the total number of businessmen in the country but it is stated that, there are about 30 million businessmen in Bangladesh. From the above statements we could find out a summery that there are about 37.20 million unemployed people in Bangladesh now.

Another recent report shows that there are more than 3 million higher educated unemployed populations in Bangladesh with 2.2 million newcomers in the job markets every year. It is easier to manage and employment opportunity for a low educated or uneducated youth but difficult to manage a career opportunity for a higher educated one. Uneducated or lower educated manpower could migrate into Middle East as a labour but higher educated youth could not do so. Thus the number of unemployed higher educated people is rising day by day. If such a trend continues for next few years they could be another burden for the society as well as for the nation.

Before meeting a terrible situation of the above mentioned problem we must have to identify a way out of it. The government has to take the issue as a new challenge and come out with appropriate solutions. The government could mitigate this problem with professional education system, skills development through practical training, creating entrepreneurs through entrepreneurial education, creating entrepreneurship friendly policy regime, creating start-up friendly fiscal and economic policies, self-employment oriented education / training, hands-on training for creating freelancers etc. Such types of projects should get the highest priority in the upcoming national budget of the government.

There are few problems which are impossible to solve by individual or organisational initiative. These problems are subject to be dealt with collective power and unity. To apply that collective power of the business community, effective trade organisation is required. There are about five hundred trade organisations in Bangladesh; among these 101 are chamber of commerce (district chambers, metropolitan chambers, joint chambers, international chambers etc.) and about 379 sectoral associations are mentionable. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is the apex institution that represents all the trade organisations of Bangladesh.

FBCCI used to negotiate, cooperate and support the government in enacting trade related policies on behalf of the private sector of the country. It represents all the trade bodies in different committee forms by different ministries, agencies, departments, and other organs of the government. It assists all the 500 trade bodies of the country in holding election and other regulatory purposes. FBCCI used to negotiate budgetary facilities for different sectors, products and customs structures with the national board of revenue (NBR) on behalf of the private sector.

To perform all of the above mentioned duties an efficient and functional FBCCI is our national requirement. To make it functional and effective its current manpower has to be increased, professional skills of existing manpower has to be improved and financial capacity of the federation has to be uplifted. There are many countries in the world where federation / national chambers are getting budgetary support from the government.

But till now FBCCI has to depend upon its members’ subscription, building rental and donation of business community. It is not sufficient to employ and retain efficient professionals and expand its services to the economy of Bangladesh. FBCCI will get its new leadership through the upcoming election in next month. We are hopeful that the new management will take necessary initiative to take the organisation as well as its member bodies into new height and serve the nation better. Competing business leaders are supposed to declare respective election manifesto soon. We would like to offer few recommendations as follows for their consideration and include into the election manifesto for making the federation as well as other trade bodies (chambers and association) for functional and effective:

  1. Taking necessary initiative to get budgetary support for operating FBCCI from the government.
  2. Pursuing the government to involve district chambers closely with the development project implementing in respective district.
  3. Undertaking projects to ensure hassle-free visa facility for the business community in consultation with all the foreign missions working here in Bangladesh. It will increase movement of our foreign trade into a new destination.
  4. Increasing research based capacity of the federation through undertaking visible interventions along with a time bound action plan
  5. Increasing capacity of the federation to undertake projects for private sector development and pursue government and other development partners for funding.
  6. Making the initiative of establishing Entrepreneurship Development Institute (EDI) a reality (initiated earlier but failed to get finance). Indian model of EDI, located at Ahmedabad, could be replicated here in this regard.
  7. Capacity building of different trade bodies to provide business support services, registrations and licenses. Negotiating with the government to hand over trade license, small and cottage industry registration etc. responsibilities to the trade bodies.
  8. Participating in foreign investment / trade fairs with own stall of FBCCI to facilitate B2B business matchmaking.
  9. Establishment of product research and new product innovation centre, testing laboratory, and undertaking product diversification initiative to enlarge export basket.
  10. Perusing the central bank and other ministries of the government to inspire the corporate houses, banks, NBFIs to support FBCCI development 10fund from respective CSR budget.
  11. Developing a research fund for conducting a certain number of systematic researches by the FBCCI research team every year.
  12. Providing FBCCI Award to the best growing company, most employment creator company, most Donor Company, best exporting company etc. to recognise their contribution to the society and inspire them to donate most at FBCCI development fund.
  13. Establishment of FBCCI’s branches in important business hubs at home & abroad and fixation of an FBCCI contact point in relevant ministries.
  14. Opening a news department in FBCCI and all major chambers and associations to assist local entrepreneurs to get quality certification of respective products from respective international or foreign authorities. It will help to get more acceptances of Bangladeshi products to the foreign buyers.
  15. Establishing business incubation centre to support new entrepreneurs, perusing the government for start-up financing.
  16. Establishing technology and engineering institute to produce skilled manpower as per demand of different business sectors.
  17. Motivating government for creating an environment to commercialise local inventions.
  18. Undertaking regular research on different international trade arrangements under the WTO, RTA or BFTA to make local entrepreneurs aware about our trade benefits under different agreements and facilitating to utilise the benefits in international trade.
  19. Playing more visible role in creating freelancers and adopting outsourcing friendly infrastructure in Bangladesh by the government.
  20. Undertaking projects to facilitate adoption and utilisation of e-commerce and e-business facility to make the digital revolution fruitful.

Finally we could state that the private sector has to play a visible role to achieve SDGs by 2030. This role could be played more effectively from a common platform like trade bodies instead of personal or institutional level. Therefore the government has to play its due role for capacity building of the trade bodies. New elected panel of FBCCI leaders could play the role of catalyst here in this regard. A common vision of the business community, government and the development partners is required to ensure sustainable development of the economy and achieving a developed Bangladesh as per our national target.

Budgetary Measures for Economic Growth and Sustainability

Budgetary Measures for Economic Growth and Sustainability

Md. Joynal Abdin

The Daily Sun on 21 April, 2017

There are about 162 million populations in Bangladesh and nearly 127 million of them are workable. There are only about 1.7 million positions in government services 18% of those are vacant.

That means government could provide employment to nearly 1% of its total population in its existing setup. What about the employment opportunity of the rest 99% populations of the country? It is stated that, there are about 30 million businessmen in Bangladesh. So government service holders and businessmen are account for 31.7 million populations. Till now there are 95.3 million workable populations of the country. As per a recent report of the ministry of finance there are about 58.1 million people are employed in private sector. As per this statistics till now there are 37.2 million workable but unemployed populations in the Bangladesh.

That means workable but unemployed populations are about 23% in our society. The percentage of total unemployed population would be more than 40% if children and over aged citizens are counted here. Alarming news is that the number of higher educated but unemployed population is rising. Low educated or uneducated people are migrating abroad as labor force. But higher educated unemployed are mostly from the middle class family. They are not able to be labor in home or abroad due to the family status but remaining burden for the family, society and the nation as non-productive unemployed. In such a complex situation increased amount of unemployed populations would be a big burden for the society if government does not take the matter as a serious concern.

As per the constitution of Bangladesh it is the government who is responsible to ensure basic needs of every citizen of the country. Obviously government will not provide services to all but government will create such a congenial environment where surplus unemployed populations will be absorbed by the existing institutions or new institutes will be emerged. Government could facilitate policy and other environmental supports where people will become entrepreneurs (self-employment and creating employment for others), involving more labors in development projects through budgetary measures, increase investment in hands-on skill development programs / projects to facilitate the idle population to be productive, facilitating import substitutions and export orientation  so on and so forth.

Now come to the first point what government could do for creating self-employment / entrepreneurship development. First and foremost initiative would be increasing general levels of confidence / developing confidence of would be entrepreneurs through building hands on capacity to influence their decision making to start a new business through providing skills, industrial location, startup financing, mentoring and other financial & non-financial incubatory supports. Special initiative has to be taken to address and overcome their fear of failure. Mentoring is required for setting up a confidence building scenario to overcome existing cloudy condition about the direction of their business.

Developing their levels of creativity and capacity to innovate has to be strengthening through undertaking newer project like existing Learning and Earning project of the ICT division of the government of Bangladesh. Undertaking local demand based development plan in our national budget could be a way forward to engage more labor force with the government development activities. For example presently government is undertaking a road construction project and provides the tender through a national level tender. As a result the tender winner may not be a local citizen of that territory. He may not know other relevant expectations / priorities of local people with this contraction project. Finally contractors are not bothering about the quality of the project implementation but he is managing the line managers and drawing the bill.

If government takes a reverse initiative that, all the peoples representatives from the union even ward levels will prioritize development needs of their territory in consultation with the citizen and prepare a priority list of development initiative for that territory. They will send the list to concern authority for allotment. Then the decision maker justify the needs and provide the budgetary allotment to the local authority for implementation then the local representatives and administration both will be equally liable for proper monitoring and implementation of the project through using local resources. Such a demand driven budgetary system could help to ensure more peoples engagement in government development projects and create employment. Another more important issue is increasing capacity of the budget implementing agencies and relevant stakeholders to ensure qualitative implementation of government development projects.

Thus government could increase personal sources of earnings through its existing mechanism. We must remember that, personal growth will lead us towards a self-sufficient burden free society. Then institutional / organizational growth will lead us toward out of poverty and sustainability of development. Finally; by ensuring the above two condition we could have economic growth and it will lead us towards job creation and safeguarding the society.

Sustainable Development Goals (SDGs) could be the best guideline to select projects and shifting from existing generalized budgetary system into a specialized one. At the same time harmonization of existing taxation system and justification of the duty structure on CKD, SKD, and finished products is required to harvest a pro-growth environment in the Bangladesh.

We are getting big amount but poorly implemented budgets during last few years. Now we are in need of demand driven, project specific, motive oriented and duly implemented national budget for economic growth and sustainability.

Levelling Trading Field for SMEs

Levelling Trading Field for SMEs

 

Md. Joynal Abdin

 The Daily Sun on April 2, 2017

There is a common debate that Bangladeshi SMEs are “Missing Middle” or “Excluded Middle” categories of enterprises of the economy. The first phrase i.e. the Missing Middle is mainly used by the donor communities and few Bangladeshi economists closely working with the donors.

It means that the SMEs are the middle segment of the enterprises which are missing either microfinance facilities i.e. exclusively for the cottage, and micro enterprises operated by the NGOs. On the other hand upper medium to large enterprises are enjoying every facilities of the institutional support offered by the government agencies and other institutes like banks, leasing companies, and multinational or regional trade negotiation platforms etc. Similarly in the second phrase Excluded Middle the concept is the same but only different is that, missing middles are out of service by error or unknowingly.

On the other hand, Excluded Middle are the missing part who are deliberately excluded by the policy makers, decision markers, government, development partners etc. to offer more benefits to the other segments. I would like to be with the second groups i.e. SMEs in Bangladesh are “Excluded Middle” segment of enterprises. Manufacturing SMEs are not getting any extra privilege over the trading and service sector enterprises from any policy aspects. SME loan are draining away by the traders or defaulter large enterprises that are included in the SME categories by the new definition of SMEs mentioned in the National Industrial Policy 2016 of the government. They are destroying reputation of the manufacturing SMEs through becoming defaulters in repayment of bank loans in time.

That means including trading, service and large enterprises into the categories of SMEs through broadening its threshold in the definition became harmful for the real entrepreneurs, I mean manufacturing SMEs from both the sides. Firstly they are competing with the manufacturers to grab benefits and destroying their reputations by becoming defaulters. Not only for these two reasons but due to many other reasons time has arrived to examine whether we are providing policy support to the real entrepreneurs i.e. local manufacturing enterprises those are creating jobs for the unemployed population in mass scale or their benefit is going to somewhere else due to policy gap of the government. To ensure optimum use of the government incentives and benefits definition of the manufacturing SMEs should be revisited and redefined by the government of Bangladesh.

To ensure inclusive and sustainable development of the economy it is not enough that the government will be happy with the GDP growth and increased amount of export earnings.

But government has to ensure stakes of every segment in the growth and export earnings as well. Large companies have competitive advantage over the SMEs in terms of organisational capacity, technical ability, access to finance, and negotiation capacity etc. aspects. As a result they are dominating in the national as well as the global trade of a country. But it is proved that the SMEs could have a vital stake in national and international market if proper policy support is available from the government. Japanese large companies are outsourcing required tools and equipment’s from their SMEs whereas Bangladeshi large companies are importing these from abroad to assemble or manufacture their products for national or international market. It could be said that the SMEs in Bangladesh are not capable of producing quality goods for supplying to the large companies. The question is how Japanese SMEs are being capable to produce qualitative goods? Why large enterprises, donors and government are not helping Bangladeshi SMEs to overcome their limitations and produce qualitative products for supplying to the large companies?

Arguments could come up survival to the fittest, why government should offer them extra benefit? The answer is quite simple that SMEs are contributing two-thirds of formal non-agricultural private employment around the world. They are contributing 63% of the total employment in OECD countries. In most of the developing countries and LDCs, SMEs are contributing more to employment generation than that of their GDP contribution. It is because SMEs are mainly labour intensive and using traditional low productive machineries due to their inability of further access to technology. But In Japan, Korea, and China it is proved that the SMEs could play the role of feeder organisation and supply qualitative intermediary goods for boosting up mass production of the large entities. On the other hand export orientation of SMEs could increase demand for their products and help them to go for large scale production.

Export orientation of SMEs could be facilitating in various forms like direct exports, indirect exports, non-equity contractual agreements, and foreign direct investment (FDI) etc. A recent study shows that, only 7.6% of the SMEs involved with export around the world are mostly from developing countries. On the other hand 14.1% of the large enterprises of the developing countries (that means double of the SMEs) are involved with export business. In terms of LDCs SMEs export involvement is about 3%, but direct export of manufacturing SMEs is a negligible, where 0.09% of service SMEs are export linked, this figure is 31.9% in case of large enterprises. That means SMEs are missing a level playing field in terms of international trade around the world. But for fostering inclusive and sustainable development a level playing field has to be created for the SMEs in international trade.

In terms of direct export Bangladeshi SMEs have limitation in trade negotiation with the potential buyers, limited ability to go abroad for buyer searching, limited managerial knowledge to handle export procedures and documentation etc. Therefore indirect export through large companies or group wise export could be encouraged here in Bangladesh. For example, one or two SMEs are unable to bear initial export costs but if ten SMEs become united and export under on single brand name and export documentation then it could be worthwhile in terms of export cost bearing and procedure handling. But till now buyer searching and proper positioning of products remains as challenges. In this case all the Bangladeshi embassies located outside Bangladesh could organize Bangladeshi product fairs once a year and display our SME products by inviting local chamber of commerce and business leaders and play the role of match makers in this case.

SMEs participation in indirect export is much better around the world. About 90% of export earnings of developing countries are indirectly contributed by the SMEs. The same report shows that, 78% of global enterprises are SME representative but only 34% of these are involved with direct or indirect international trade. That means SMEs have ability to further contribute in international trade around the world. If a level playing field could be ensured. Major obstacles to create a level playing field for the SMEs are:

SMEs are facing high tariff even more than the large firms due to the existing market mechanism. They are facing double even triple taxation due to their inability to maintain or obtain required tax relevant documents.

Adverse effects of the Non-tariff measures imposed by the importing country hit the SMEs much. Because large companies could adopt newer measures to address NTM requirements and enter into the market as a compliance company. But due to their limited capacity SMEs could not.

Cumbersome boarder procedures and delay shipment or clearance effect the SMEs more due to their inability of bearing highly charged boarder storage cost.

Access to information and distribution channel development is also another major challenge for export orientation of SMEs. Difficulties in access to required amount of trade finance is another major challenge for SMEs export orientation.

Most of above challenges require government policy intervention for creating and maintaining a level playing field for SMEs in national as well as international market. Adoption of ICT, e-marketing, e-commerce adoption could give them advantage over few of the above mentioned challenges but finally it is the government who has to come up with kind heart to support SMEs to grow further and contribute more in employment generation, GDP growth, export earnings and ensure an inclusive and sustainable development of the economy. Otherwise they will remain Missing Middle or Excluded Middle as mentioned.

Creating Investment-friendly Business Environment

Creating Investment-friendly Business Environment

Md. Joynal Abdin

The Daily Sun on March 15, 2017

 

Bangladesh is a land of unutilised opportunities and untapped potentials. Traditionally Bangladesh was an agriculture driven economy but during last few decade it is shifting its agriculture dependency into industrial economy. At the same time a steadily growing service sector is backing the industrial development of the country. According to a recent report contribution of agriculture, industry and service sector to Bangladesh economy was 51.03%, 7.69 % and 41.28% respectively in the year 1971.  Contribution of agriculture decreases into 31.55% and industry increases into 20.63% in the year 1980. Service sector contributed 47.82% to Bangladesh economy in the same year. Since then contribution of industry and service sector to Bangladesh economy is increasing and agriculture is decreasing day by day. It does not mean that the agriculture sector is losing its importance but it indicates industry and service sector is becoming stronger but agriculture is contributing as before. Agro processing industry is fully dependent upon agriculture sector; therefore no way to underscore agriculture sector too. Currently (2015) contribution of the same sectors to the Bangladesh GDP is 15.50% (Agriculture), 28.14% (Industry) and 56.34% (Service). From the above discussion it is quite clear that the economy of Bangladesh is going through a transformation from agriculture dependent economy into industrialized economy.

Agriculture has a highest limit of production per acres of land. But industry and service sector have the liberty to produce unlimited number of units or value by using the same piece of land. Therefor government of Bangladesh took parallel initiatives for agriculture and industrial development.

Foreign Recognitions of Bangladesh:

Prospect of Bangladesh economy is not recognised by the Bangladeshis only. Today it is widely recognised by the global think-tank and investment Banks like Goldman Sachs. The Goldman Sachs Investment Bank described Bangladesh as one of the Next – 11 countries (N-11) due to its prompt growth potentials (Lawson, Heacock, and Stupnytska, 2007). Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam – identified by Goldman Sachs investment bank and economist Jim O’Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world’s largest economies in the 21st century.

Regulatory Environment for Investment in Bangladesh:

Indian subcontinent inherited the British legal system since the colonial period. As a result Bangladesh has a very structured legal system since its inception. It has about 45 laws relevant to the investment, business, trade and commerce in various sectors. There are more than 10 policies with different incentives and supports of the government to promote private sector investment in various sectors.

The foreign private investment (promotion and protection) Act, 1980 has been passed that ensures legal protection to foreign investment against nationalization and expropriation. It also guarantees repatriation of capital and dividend; and equitable treatment with local investors with regard to indemnification, compensation, restitution, or other entitlement as is accorded to investment. The government has made bilateral agreements for avoidance of double taxation with 26 countries and negotiations are going on with 23 countries.

Investment treaty for promotion and protection of investment between Bangladesh and twenty countries have been concluded and negotiations are going on with 9 other countries. Besides these, Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency), OPIC (Overseas Private Investment Corporation) of USA, ICSID (International Centre for Settlement of Investment Disputes) and a number of WIPOs (World Intellectual Property Organisation) a Permanent committee on development and cooperation related to industrial prosperity. Adequate provision is also made available for intellectual property rights, such as patents, design and trademarks and copy right.

The government has already enacted bankruptcy law. A law commission has been constituted with a view to identify the anomalies and weaknesses in the existing laws and legal system. One of the main tasks of this commission is updating the existing laws in relation to industries, trade and business.

All these are expected to improve general business environment along with the environment of FDI. Efforts are being made to reform the bureaucratic administration in order to make it efficient and supportive of better services for inflow of FDI and economic development oriented activities. Substantial modifications have been made to up-date the laws dealing with financial sector. The Companies act 1994 and labour Act 2006 have been enacted for facilitating inflow of FDIs in Bangladesh.

In order to improve the environment of private foreign investment and FDI, several EPZs have been established in Chittagong, Dhaka, Khulna under the Bangladesh Export Processing Zones Authority (BEPZA) in 1980. The private Export Processing Zones (PEPZs) Act has also been enacted to encourage the establishment of “Private Export Processing Zones” by the local and foreign investors. These EPZs are well enriched with the necessary infrastructural facilities and are completely protected from any law and order problems or union activities.

The BEPZA approves all projects to be located in the EPZS and offers “One window same day service” to the investors in the EPZs. The government has also approved the private power generation policy of 1996 and tax exemption on income of the company for 15 years from the date of commercial production is allowed.

The Government has undertaken several steps to make import liberalization and industrial deregulations more effective including announcing its strategy of reducing effective protection over the medium term, continuing its efforts to lower and simplify tariffs, publishing a clear tariff schedule, developing an action plan for legal reforms and a blue pint for deregulation, and putting an action plan for implementing its exports development strategy. These efforts have improved the investment environment in Bangladesh.

Bangladesh is one of the promising economies with a large domestic market, availability of labour with competitive price, low utility charges, two seaports and a potential deep seaport facility, long-term tax holiday, 100% repatriation facility, and easy access to largest regional market like India and China.

Investment Friendly Facilities and Incentives: 

Tax  exemption  on  royalties,  technical  knowhow  and  technical  assistance  fees  and  facilities  for  their repatriation, tax exemption on interests on foreign loans, tax exemptions on capital gains from transfer of shares by the investing company, remittances  of  up  to  50%  of  salaries  of  the  foreigners  employed  in  Bangladesh  and  facilities  for repatriation of their savings and retirement benefits at the time of their return, no restrictions on issuance of work permits to project related foreign nationals and employees, facilities for repatriation of invested capital, profits and dividends, provision of transfer of shares held by foreign shareholders to local investors, reinvestment of remit table dividends would be treated as new investment, and foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned ones etc. facilities are available for foreign investors.

Besides the above facilities Bangladesh is offering corporate tax holiday of 5 to 7 years for selected sectors, reduced tariff on import of raw materials capital machinery, bonded warehousing, accelerated depreciation on cost of machinery is admissible for new industrial undertaking (50% in the first year of commercial production, 30% in the second year, and 20% in the third year), tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange, reduced corporate tax for 5 to 7 years in lieu of tax holding and agricultural deprecation, Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the selected products, At best 90% loans against letters of credit (by banks), and permission  for  domestic  market  sales  of  up  to  20%  of  export-oriented  companies  outside  EPZ  (relevant duties apply) etc. fiscal benefits to the local or foreign entrepreneurs.

Additionally Bangladesh is offering 100% foreign equity allowed, unrestricted exit policy, remittance of royalty, technical know-how and technical assistance fees, full repatriation facilities of dividends and capital at exit, and an  investor  can  wind  up  investment  either  through  a  decision  of  the AGM  or  EGM, he  or  she  can repatriate the sales proceeds after securing proper authorisation from the Central Bank etc. benefits to a foreign investor.

Investment Friendly Factors of Production:

  • Largely a homogenous society with no major internal or external tension Bangladesh has a population with great resilience in the face of adversity.
  • The people of Bangladesh, a liberal democratic country irrespective of race and religion are living in harmony for years.
  • Bangladesh enjoys broad non-partisan political support for market-oriented reforms and offers the most investor-friendly regulatory regime in South Asia.
  • This country has a large trainable, enthusiastic, and hardworking low-cost labour force suitable for any labour-intensive industry.
  • A bridge between ASEAN and SAARC nations, the Geographical location of Bangladesh is ideal for global trades with very convenient access to international sea and air routes.
  • Bangladesh is endowed with abundant supply of natural gas, coal, water and very fertile soil.
  • Although Bangla is the official language. English is widely spoken as second language.
  • Increasing trend of per capita forecasting its purchasing power is increasing in the local market.
  • All Bangladesh products other than armaments enjoy complete duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. However, for apparel export to USA, Bangladesh has a quota regime which ended on 1st January 2005.
  • Export earning is continuously increasing.
  • Increasing trend of remittance earning.

Challenges and Recommendations:

With all of the above benefits Bangladesh have few limitations and challenges to attract further investments. Government could consider following recommendations to make the business environment sustainable and attractive to foreign investors:

  • Decreasing number of permissions / registrations / licenses requirements with a predetermined time frame / one stop investment services.
  • Ensuring hassle free and in-time delivery of industrial utilities like Electricity, Gas and water etc.
  • Making Bangladesh Investment Development Authority functional and effective with adequate resources.
  • Special investment attraction drive with specific project proposals to attract local and foreign investment.
  • Activating entrepreneurship promoters like better business forum or regulatory reform commission.
  • Developing infrastructure as per requirement of tomorrow’s business world.
  • Developing sector specific demand driven skilled manpower with specific technical knowledge.

Finally, we could conclude here with a statement that, Bangladesh has long lists of sectors and wide feature to promote local and foreign investment. But in absence of an effective and functional investment promotion agency (not regulator) Bangladesh is performing not as per the expectations. There are several entrepreneurship development, SME Development and Industrial Promotion agencies of / establish by the government. But due to lack of manpower, financial ability, technical and professional knowledge most of the organisations are less performing. Activating those organisations with right person at the right place could be one of the ways forward to strengthen investment attraction movement of Bangladesh.

Fighting with unemployment

Fighting with unemployment

Md. Joynal Abdin

The Independent on March 03, 2017

Bangladesh is a developing country. With so many development requirements it is fighting to reduce unemployment and provide employment opportunity to all of its workable population. There are about 160.41 million people in Bangladesh. The median age of Bangladeshi population is 26. That means it is dominating by the young for14ce. It is high time to take the population dividend for Bangladesh. But the matter of fact is that, there are about 3 million workable people unemployed, they are neither in education nor in job. Additional 2.2 million educated young forces are entering into job market every year. Another 10.6 million people are day labourers doing odd jobs without any job security for tomorrow’s tasks. Therefore till now 24.8% of the total population is living under the poverty line and extreme poor people are about 6.5% of its total population.

Huge workable population, growing number of higher educated population; population dividend etc. are not matching with its 25% poverty affected people. It is because we have workable hands but government is failing to provide jobs to them. It is impossible for any government of the world to provide jobs to all of its population. But government has a great responsibility to create such a congenial environment in which a person will go for self-employment through entrepreneurship development and employ another five persons in it. Government could inspire private sector for more investment and expansions which will lead to more employment generation, faster GDP growth, increased value addition and export earnings.

A decently employed person can free a family from poverty. On the other hand, an unemployed young man may be a liability for a family and the society. Many skilled but low paid workers want to be entrepreneurs but cannot do so for lack of capital.

Banks can help him with loans on easy terms and conditions. In many cases banks’  authorities do not come forward due to the security of depositor’s money. In such a condition it is only the government that can come forward. Refinancing, pre-financing, credit guarantee, seed financing etc. can be the weapons for the government to fight this tough condition. Government has limitations in terms of its treasury balance. But recent reports are not supporting its treasury balance argument. Because we have gone through the report that, Bangladesh has about USD 35 billion foreign aid in hand but failed to utilize it. We had to deposit back the foreign aids due to our inability to utilize the funds. On the other hand, according to a Bangladesh Bank report idle funds with banks and non-banking financial institutions stood at Tk 1263.24 billion on January 31, 2017.

From the above two statements it is clear that, government can source the fund if a positive thinking is there. So it is the peak time for the government to take necessary initiatives for creating an entrepreneurial friendly environment in Bangladesh for promoting self-entrepreneurship and expansion of existing ventures to increase the movement of employment generation. Along with the entrepreneurship development trained manpower export / formal migration of skilled workers can be another very fruitful tool for the government to fight unemployment and poverty. Following recommendations can be considered by the government and the central bank of Bangladesh:

  1. Easy Formal Channel to Receive Remittance: Bangladesh received USD 15.27 billion as remittance in 2015. In the years 2016 it reduced into USD 13.60 billion. Does it mean the remittance earning is really reducing? No. It is only because sending remittance through formal banking channel is complicated, time consuming and complex to the illiterate or little literate expatriate workers. Whereas using informal channels like Hundi is much easier, quicker and safe. In such way government is losing revenue. Therefore,  the government and the central bank have  to think over the issue of introducing an easy, quick and hassle free way of sending remittance through formal channel by our illiterate labourers from abroad.
  1. Easy Formal Credit for Expatriate Labourers and Professionals: There is a bank to provide bank loan against a labour visa to help expatriate manpower of Bangladesh. But, what is their capacity? How many branches do they have? How much money is being offered by them? How many expatriate labourers are migrating from Bangladesh per year? In the year 2016 about 7, 57,731 labourers and professionals migrated from Bangladesh. If 5% of them want to get bank loan for three to five lac per person then 38,000 probable clients are there to receive more than thousand crore taka.  How much money do they receive from that single bank? Therefore, it is time to think with the issue of offering bank loan to the second largest contributory sector of the country with hassle free bank loans  by the commercial banks and Bangladesh Bank has to come up with a new loan product for them.
  1. Easy Formal Channel to Receive Freelancer’s Earning: According to a recent report published by oDesk there was about USD 3.2 billion freelancing market in 2014. USA, India, Ukraine, Australia, Canada even Pakistan is earning a significant part of that amount. Bangladesh has every possibility to be a significant partner in the global freelancing market. But due to complexities in banking channel to receive freelancing earnings many qualified professionals and unemployed young men are getting frustrated. Digital Bangladesh will be meaningfully digital when common people of the country will easily receive their free-lancing earnings through their ordinary bank account. It is the Bangladesh Bank that has the responsibility to mobilize this process and offer a great service to the local freelancers.
  1. Startup Financing/Seed Financing for Entrepreneurs: There are about 2 million educated people unemployed in Bangladesh. Another 2.2 million graduates are entering into the job market every year. It is impossible for the government to ensure employment to this huge number of population without promoting entrepreneurship and industrial development. Entrepreneurship is the only solution to this unemployment problem of Bangladesh. But till now there are no startup financing / seed financing mechanism for promoting entrepreneurship in Bangladesh. So government can rethink the issue and come up with a mechanism to provide startup financing for the new / would be entrepreneurs.
  1. Promotional Package for Venture Capital Sector: Venture capitalism is a proven tool for supplying interest free loan facility to the entrepreneurs. It is widely received by the entrepreneurs and potential entrepreneurs of Bangladesh as well. But due to the shortage of adequate fund this sector is not booming up as expected. Therefore it is the peak time for the government to inspire venture capital sector for the sustainable industrialization in Bangladesh.
  1. Export Guarantee Scheme: There are about 7.8 million industrial entities in Bangladesh. Most of these are cottage and small in categories. Few of these enterprises are producing excellent quality products having export potentials. But due to lack of knowledge and shortage of finance to operate international trade they are not going to export. To inspire such enterprises Bangladesh Bank/ government can introduce export guarantee scheme and boost up export earnings of the country.
  1. Credit for Export Diversification and Market Expansion: Bangladesh earned USD 34.24 billion in last fiscal year (2015-16FY). It is almost 10% more than that of the previous year. But we have capacity to earn even more than that. We have to diversify our export basket and explore new export destinations to do so. Government can offer credit facilities for export oriented product diversification (procurement of machineries) to the existing exporters. Thus Bangladesh’s export basket could be enlarged and increase amount of export earnings.
  1. Credit Guarantee Scheme: Commercial banks are offering loan by investing depositor’s money. All types of bank loan have risk of return. As a result commercial banks have hesitation to provide bank loan. In such a situation Bangladesh Bank can offer credit guarantee scheme for providing guarantee of loans so that commercial banks’  hesitations go down. Thus government can  promote the industrialization movement of the country.
  1. Security Issues in Online & ATM Banking: Recent ATM Scamming and Bangladesh Bank’s reserve issues created panic among the mass people. As a result people are feeling insecure even to draw money from ATM Booth and deposit money to a bank. Therefore,  it is time for Bangladesh Bank to take necessary measures to stop ATM scamming and ensure security of depositor’s money. Online banking system should be 100% secured and people’s awareness could be developed to relief the panic.
  1. Entrepreneurship Loan for Technical Graduates: There are about 2 million unemployed graduates in the country. Additional 2.2 million graduates are entering into the job market each year. Both the government and private sector does not have ability to offer such a huge number of jobs per year. Therefore government / Bangladesh Bank can offer entrepreneurship loan for the technical graduates and developing them as entrepreneurs in respective fields.
  1. Professional Management of Idle Reserve / Bank Deposit: A recent report showed that the idle reserve / bank deposit is mounting up in the banking sector (BDT 1140 billion) especially there are BDT 1420 billion statutory deposits to the Bangladesh bank. No return is coming out from this huge amount of idle money in comparison with its opportunity cost. Therefore, it is time for thinking to invest at least a portion of this money through professional money managers. Thus a reasonable return could be ensured out of this idle money.

Finally we would like to hope that, the government and the central bank along with other responsible agencies will consider the above recommendations and create a pro-entrepreneurship regime in Bangladesh for fighting unemployment effectively and create a poverty free middle income country before the end of SDG deadline.

Fighting Unemployment and Poverty

Fighting Unemployment and Poverty

Md. Joynal Abdin*

The Daily Sun on March 1, 2017

Bangladesh is a least developed country (LDC). With so many development requirements it is fighting to reduce unemployment and provide employment opportunity to all of its workable population. There are about 160.41 million people in Bangladesh. The median age of Bangladeshi population is 26. That means it is dominating by the young force. It is high time to take the population dividend for Bangladesh. But the matter of fact is that, there are about 3 million working age people unemployed; they are neither in education nor in job. Additional 2.2 million educated young forces are entering into job market every year. Another 10.6 million people are day labourer / doing odd job without any job security. Therefore till now 24.8% of the total populationis living below the poverty line and extreme poor people are about 6.5% of its total population.

Huge working age population, growing number of higher educated population and population dividend etc. issues are not matching with its 25% poverty affected people. It is because we have working hands but the government is failing to offer job to them. It is impossible for any government to offer job to its all population. But the government has a great responsibility to create such a congenial environment in which a person will go for self-employment through entrepreneurship development and employ another five persons in it. The government could inspire private sector for more investment and expansion which will lead to more employment generation, faster GDP growth, increased value addition and export earnings.

A decently employed person means a family is out of extreme poverty. On the other hand, an unemployed young man could create unaffordable situation for the society. Many skilled but low paid workers wanted to be entrepreneurs but cannot have access to high rated and complex bank loan. Bankers not coming forward due to the security of depositor’s money. In such a condition it is only the government that could play the game to move forward with the issue. Refinancing, pre-financing, credit guarantee, seed financing etc. could be the weapon for the government to fight with this tough condition. The government has limitations in terms of its treasury balance. But recent reports are not supporting its treasury balance argument. Because we have gone through the report that, Bangladesh has about USD 35 billion foreign aid in hand but failed to utilise it. We had to deposit back the foreign aids due to our inability to utilise funds. On the other hand, according to a Bangladesh Bank report idle funds with banks and non-banking financial institutions stood at Tk 1263.24 billion on January 31, 2017.

From the above two statements it is clear thatthe government could source the fund if a positive thinking is there. So it is the peak time for the government to take necessary initiatives for creating an entrepreneurship friendly environment for promoting self-entrepreneurship and expansion of existing ventures to increase employment generation. Along with the entrepreneurship development trained manpower export / formal migration of skilled workers could be another very fruitful tool for the government to fight unemployment and poverty. The following recommendations could be considered by the government and the central bank of Bangladesh i.e. the Bangladesh Bank for installing the following tools in this regard:

Easy Formal Channel to Receive Remittance:

Bangladesh received USD15.27 billion as remittance in 2015. In the years 2016 it reduced to USD13.60 billion. Does it mean the remittance earning is really reducing? No. It is only because sending remittance through formal banking channel is complicated, time consuming and complex to the illiterate or less literate expatriate workers. Whereas using informal channels like Hundi is much easier, quicker and safer. In such way government is losing revenue. Therefor the government and the central bank has to think with the issue of introducing an easy, quick and hassle-free way of sending remittance through formal channel by our workers from abroad.

Easy Formal Credit for Expatriate Labours and Professionals:

There is a bank to provide bank loan against a labour visa to help expatriate manpower of Bangladesh. But, what is their capacity? How many branches do they have? How much money is offering by them? How many expatriate workers are migrating from Bangladesh per year? In the year 2016 about 757,731 labours and professionals migrated from Bangladesh. If 5% of them want to get bank loan for three to five lakh per person then 38,000 probable clients are there to receive more than thousand crore taka.  How much money do they received from that single bank? Therefore it is time to think with the issue of offering bank loan to the second largest contributory sector of the country with hassle-free banks loan by the commercial banks and Bangladesh Bank has to come up with a new loan product for them.

Easy Formal Channel to Receive Freelancer’s Earning:

According to a recent report published there was about USD3.2 billion freelancing market in 2014. USA, India, Ukraine, Australia, Canada even Pakistan is earning a significant part of that amount. Bangladesh has every possibility to be a significant partner in the global freelancing market. But due to complexities in banking channel to receive freelancing earnings many qualified professionals and unemployed youths are becoming frustrated. Digital Bangladesh will be meaningfully digital while mass people of the country could easily receive their free-lancing earnings through their ordinary bank account here in Bangladesh.

It is Bangladesh bank who has the responsibility to mobilise this process and offer a great service to the local free lancers.

Startup Financing / Seed Financing for Entrepreneurs:

There are about 2 million educated people unemployed in Bangladesh. Another 2.2 million graduates are entering the job market every year. It is impossible for the government to ensure employment to this huge number of population without promoting entrepreneurship and industrial development. Entrepreneurship and entrepreneurship is the only solution to this unemployment problem. But till now there are no startup financing / seed financing mechanism for promoting entrepreneurship. So the government could rethink with the issue and come up with a mechanism to provide startup financing for the new / would-be entrepreneurs.

Promotional Package for Venture Capital Sector:

Venture capital is a proven tool for supplying interest free loan facility to the entrepreneurs. It is widely received by the entrepreneurs and potential entrepreneurs of Bangladesh as well. But due to shortage of adequate fund this sector is not booming up as expected. Therefore it is the pick time for the government to inspire venture capital sector for the sustainable industrialisation in Bangladesh.

Export Guarantee Scheme:

There are about 7.8 million industrial entities in Bangladesh. Most of these are cottage and small in categories. Few of these enterprises are producing excellent quality products having export potentials. But due to lack of knowledge and shortage of finance to operate international trade they are not going to export. To inspire such enterprises Bangladesh bank / government could introduce export guarantee scheme and boost up export earnings of the country.

Credit for Export Diversification and Market Expansion:

Bangladesh earned USD34.24 billion in last fiscal year (2015-16). It is almost 10% more than that of the previous year. But we have the capacity to earn even more than that. We have to diversify our export basket and explore new export destinations to do so. The government could offer credit facilities for export oriented product diversification (procurement of machineries) to the existing exporters. Thus Bangladesh’s export basket and increase amount of export earningscould be enlarged.

Credit Guarantee Scheme:

Commercial banks are offering loan by investing depositor’s money. All types of bank loan have risk of return. As a result commercial banks have a shyness to provide bank loan. In such a situation Bangladesh Bank could offer credit guarantee scheme for providing guarantee of loans so that commercial banks’ shyness goes down. Thus the government could promote the industrialisation movement of the country.

Security Issues in Online & ATM Banking:

Recent ATM scamming and Bangladesh Bank’s reserve issues spread up a panic among the mass people. As a result people are feeling insecure even to draw money from ATM booths and deposit money to a bank. Therefore, it is time for Bangladesh Bank to take necessary measures to stop ATM scamming and ensure security of depositors’ money. Online banking system should be 100% secured and people’s awareness could be developed to relief the panic.

Entrepreneurship Loan for Technical Graduates:

There are about 2 million unemployed graduates in the country. Additional 2.2 million graduates are entering the job market each year. Both the government and private sector does not have ability to offer such a huge number of jobs per year. Therefor the government / Bangladesh Bank could offer entrepreneurship loan for the technical graduates and developing them as entrepreneurs in respective fields.

Professional Management of Idle Reserve / Bank Deposit:

A recent report showed that the idle reserve / bank deposit is mounting up in the banking sector (BDT 1,140 billion) especially there are BDT 1420 billion statutory deposits to the Bangladesh Bank. No return is coming out from this huge amount of idle money in comparison with its opportunity cost. Therefor it is time for thinking to invest at least a portion of this money through professional money managers. Thus a reasonable return could be ensured out of this idle money.

Finally we would like to hope that, the government and the central bank along with other responsible agencies will consider the above recommendations and create a pro-entrepreneurship regime in Bangladesh for fighting unemployment effectively and create a poverty free middle income country before the end of SDG deadline.

* Writer is a Development Researcher, Columnist and Author. He is serving at SME Foundation as Deputy Manager. Could be reached through mdjoynal@gmail.com