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Bangladesh-Japan Trade and Investment:
Opportunities and Challenges
Abu Reza Khan
Member, BOI
Dhaka 22 July 2007
Government of Bangladesh
Board of Investment
IBFB Discussions on Trade and Investment Opportunities with
Japan, 22 Jul 2007
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Bangladesh-Japan Trade & Investment: Opportunities and Challenges
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1. Bangladesh Macro Economic Scenario
2. Investment Climate, Incentives and Costs
3. Bangladesh-Japan Business Relations
4. Potential Investment Sectors
5. Facilitation Issues
6. Business Process Guideline
Contents
Discussion would adhere to following sequence:
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Bangladesh-Japan Trade & Investment: Opportunities and Challenges
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Macro Economic
Scenario
.
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Source: Bangladesh Economic Review 2006.
4.62
5.39 5.234.87
5.94
5.27
4.42
5.26
6.27 5.96
6.71
FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Rising Trend of GDP Growth (%)
Bangladesh Macroeconomic Scenario
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Source: Bangladesh Economic Review 2006.
Sectoral Contribution in GDP FY 2007
Services
& Others
44.50%
Agriculture,
Fisheries &
Forestry
26.49%
Industry
29.01%
Agriculture 16.91
Livestock 2.93
Forestry 1.79
Fisheries 4.86
Total 26.49
Mining & Quarrying 1.16
Manufacturing 17.05
Utility 1.65
Construction 9.15
Total 29.01
Wholesale& Retail 14.17
Transport & Comm. 10.10
Real Estate etc 7.88
Community services 7.25
Others 5.10
Total 44.50
Bangladesh Macroeconomic Scenario
Sector Share(%)
Manufacturing 17.05
Agriculture 16.91
Wholesale &
Retail 14.17
Transport
& Commn. 10.10
Construction 9.15
Top 5 Sectors - GDP
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Sustained and Rising Industrial Growth (%)
6.98%
5.80%
8.32%
4.92%
6.17%
7.44%6.53%
7.26% 7.60%8.28%
9.56%
FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Source: Bangladesh Economic Review 2006.
Bangladesh Macroeconomic Scenario
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Recent Surge in Manufacturing Growth (%)
6.41
5.05
8.58
3.19
4.76
6.68
5.48
6.757.10
8.19
10.45
FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Source: Bangladesh Economic Review 2006.
Bangladesh Macroeconomic Scenario
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Growth in Bilateral Trade (Million US$)
Source: Bangladesh Economic Review 2006.
4,4275,172 5,324 5,752
6,4675,986
6,548
7,603
8,655
10,526
7,1
52
7,5
20
8,0
06
8,3
74 9,3
35
8,5
40 9,6
58 1
0,9
03
13,1
47
14,7
46
FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Export Import
Bangladesh Macroeconomic Scenario
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Bangladesh Macroeconomic Scenario
Growing Private Investment (% of GDP)
Source: Bangladesh Economic Review 2006
6.3
25.024.524.023.423.123.123.022.2
6.26.7 7.4 7.2 6.4 6.2 6.2
18.718.317.817.216.815.815.5 15.6
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Total Investment Public Private
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Bangladesh Macroeconomic Scenario
Annual Private Investment (in Crore Taka)
Source: Bangladesh Economic Review 2006
24,750
30,56033,990
40,150
45,840
51,720
59,370
67,920
77,700
37,010
FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006
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350460
845700
2003 2004 2005 2006*
In Million US$
Source: World Investment Report 2006 and Bangladesh Bank * = Estimated
FDI Inflow (Mill US$, Calendar Year basis)
7% 31% 50% -17%
Macroeconomic Conditions
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Broad Sectors2004
(Mill.US$)
Share
(%)2005
(Mill.US$)
Share
(%)
Energy & Power 124.0 27% 208.3 25%
Manufacturing 139.4 30% 219.4 26%
Trade & Commerce 66.6 14% 130.5 15%
Telecommunication 127.5 28% 278.8 33%
Other Services & Misc 2.8 1% 8.4 1%
Total 460.3 100% 845.4 100%
Bangladesh Macroeconomic Scenario
FDI Inflow 2005: Sectoral Break Up
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Bangladesh Macroeconomic Scenario
FDI Inflow: Distribution of Sources by Region
Sources / Regions FDI US$ Mill Share (%)
Developed Economies 434.90 51.45%
Western Europe 245.90 29.09%
European Union 243.60 28.82%
Other Western Europe 2.30 0.27%
North America 142.50 16.86%
Other Developed Economies 46.50 5.50%
Developing Economies 365.40 43.23%
Africa 48.40 5.73%
Latin America & the Caribbean - -
Asia & the Pacific 317.00 37.50%
Asia 317.00 37.50%
South, East and South-East Asia 260.70 30.84%
Others 45.00 5.32%
Total 845.30 100.00%
FDI Source-2005
Country $.Mill
UK 152.8
USA 141.8
Singapore 97.5
UAE 55.4
Norway 53.5
Japan 46.5
8th among 30 sources
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Investment Climate,
Incentives & Costs
.
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Investment Climate
Bangladesh is a profitable investment location, featuring:
• Strategic geographic location
• Natural Resources availability
• Skilled Human Resources
• Good Governance
• Competitive Cost of Doing Business
• Private Sector led economic development strategy(FY 2005-06, share of private investment was 74.8%.)
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Investment Climate
Bangladesh is a profitable investment location, featuring:
1. No Ceiling, no Flooring on FDI amount.
2. Foreign Investment Protection by Law.
3. Market Access Opportunity.
4. 100% Foreign Ownership allowed.
5. Tax and Duty Exemption for Exports.
6. Specified Export Incentives.
7. Easy repatriation and remittance facility.
8. Unhindered Exit.
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Investment Costs
Investment Costs
The 17th Survey of Investment-Related Cost
Comparison in Major Cities and Regions in Asia”
conducted by the Japan External Trade Organization
(JETRO) in March 2007 found out that
Bangladesh remains highly cost-competitive compared
to the other economies in Asia.
Let’s see some figures … …
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Investment Costs
17th Survey Findings of JETRO: Wage/Salary, House Rent
Source: The 17th Survey of Investment-Related Cost Comparison in Major Cities and Regions in Asia JETRO, 2007
57126
310246
597
1,190
164
383
684
174
254
680
Worker Wage Engineer Salary Mid-Manager Salary
Dhaka New Delhi
Bangkok Beijing
Figures in US$
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Investment Costs
Source: The 17th Survey of Investment-Related Cost Comparison in Major Cities and Regions in Asia JETRO, 2007
0.0
5
0.3
2
0.0
7
0.7
9
0.4
5
0.1
1
1.0
8
0.0
9
1.0
5
0.7
2
0.0
5
0.5
8
0.6
9
0.6
4
0.0
7
0.7
0
0.2
3
0.6
5
0.6
1
Electricity for Business
/per kWh
Water for Business use
(per cu.m)
Gas for Business use
(per cu.m)
Gasoline (per liter) Diesel Oil (per liter)
Dhaka
New Delhi
Bangkok
Beijing
17th Survey Findings of JETRO: Utility, Gasoline, Telecom
Figures in US$
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Investment Costs
Source: The 17th Survey of Investment-Related Cost Comparison in Major Cities and Regions in Asia JETRO, 2007
7.1
10
.0
25
.0
42
.7
10
.5
33
.7
13.7 15.0
37.0
42
.0
10
.0
45
.0
Office Rent (sqm/month) Tax on Royalties (Highest Rate) Personal Income Tax (Highest Rate)
Dhaka New Delhi
Bangkok Beijing
17th Survey Findings of JETRO: Office Rent & Tax Rates-%
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Bangladesh-Japan
Business Relations
.
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Bangladesh-Japan Business Relations
Bilateral Business Relations Framework Milestones
a. Bilateral Investment Protection Treaty 10 Nov 1998
b. Avoidance of Double Taxation Treaty 06 Aug 1991
c. Bangladesh Japan Joint Commission
d. Japan Bangladesh Chamber of Commerce & Industry (JBCCI)
e. GSP Facilities to Bangladeshi Products
f. Substantial Equipment and Raw Materials Imports from Japan
g. Bangladeshi Diaspora in Japan
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Bangladesh-Japan Business Relations
Japan’s Export to Bangladesh
Japan is the 5th largest import source of Bangladesh.
Recent Trend in Japan’s Export to Bangladesh (U$ million)
255
336
695647
494
685
846
655605
552 559
651
482483
1985-86 1990-91 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Jul-
Feb)Source: Bangladesh Economic Review 2007.
Million US$
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Bangladesh-Japan Business Relations
Currently, Japan is Bangladesh’s 9th largest export market.
In FY1995-96, Bangladesh export to Japan crossed 100 million dollar mark.
Trend in Bangladesh Export to Japan (Million US$)
61.2
41.3
99.7
120.8112.0
92.897.6
107.6
96.1
108.0118.2
122.5
137.8
112.2114.1
1985-
86
1990-
91
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07 (Jul-
Mar)
Source: Bangladesh Economic Review 2007.
Million US$
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Bangladesh-Japan Business Relations
FDI Outflows from Japan and Share of Bangladesh
Source: World Investment Report 2006 and Bangladesh Bank
38,333
32,28128,800
45,781
30,951
2001 2002 2003 2004 2005
Japanese FDI in Bangladesh (Million US$)
6.9 17.6 29.1 30.0 46.5
Million US$
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Potential
Investment Sectors
.
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Potential Investment Sectors
1.Textile
• RMG
• Yarn & Fabric
• Manmade Fibre
2. Pharmaceuticals
3. Agro-processing
4. Agro-engineering
5. Ceramics Tableware
6. Leather & Leather Goods
7. Steel
8. Frozen Food
Manufacturing – Broad Sectors
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Potential Investment Sectors
Services & Others – Broad Sectors
1. Information & Communication
Technology (ICT)
2. Infrastructure
3. Natural & Mineral Resources
4. Hospitality and Tourism
5. Health care
6. Education
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Facilitation
Issues
.
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Facilitation Issues
Following issues are significant about facilitating Japanese
investments:
• Investment related costs.
• Business Regulatory Framework and Process
• Utility and other infrastructure
• Port
Government has taken note on the comments made by the
JETRO Representative in Dhaka on 19 June 2007.
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Business Process
Guideline
.
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Business Process Guideline
Investment Facilitating Agencies
• Board of Investment (BOI)
• Bangladesh Export Processing Zones Authority (BEPZA)
• Registrar of Joint Stock Companies & Firms (RJSCF)
• National Board of Revenue (NBR)
• Bangladesh Bank (BB)
• Ministry of Industries (MOI) &
• Bangladesh Small & Cottage Industries Corps. (BSCIC)
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Business Process Guideline
Broad functions of BOI:
1. Investment Promotion
Promoting the country, sectors, facilities etc.
2. Investment Facilitation
Business start-up and others approval processes
including Visa-on-Arrival, Registration of Industrial
Projects and Commercial/Branch/Liaison Offices, Work
Permit, IRC, Remittance, Foreign Loan approvals etc.
3. Policy Advocacy
Suggesting coherent and favorable policy regime
specially for private sector development.
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Business Process Guideline
Business Startup Roadmap
BOIAssistance
Available Getting Structured
Plant Set-up
Commercial Operation
Info Search
Physical Verification
1
2
3
4
5
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Business Process Roadmap – Details
Intention to
Invest in
Bangladesh
Arrival to Bangladesh
Reception by
BOI Welcome Service
BOI Counseling
at Investment Facilities
& Services Section
Immigration &
Customs Formalities
Decision
to Invest
Information Collection
Information/data on
Country, Industry & Overall
Climate from BOI
Hotel / Accommodation
More Information
& Documents from BOI
Independent
Counseling / Services
at investor’s discretion
Continued …
BOIAssistance
Available
BOIAssistance
Available
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Plant Set-up
Company Formation
& RJSCF Registration
Commercial Operation
Trade License
from LG Bodies
Project Profile
Memorandum of
Association
Articles of Association
Land Information
Machinery Details
Financing Sources
Application for
BOI Registration
… from previous page
BOIAssistance
Available
BOIAssistance
Available
Business Process Roadmap – Details
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Contact Points
Contact details are available at the following websites:
• Board of Investment www.boi.gov.bd
• BEPZA www.epzbangladesh.org.bd
• Registrar of Joint Stock http://roc.gov.bd
Companies & Firms
• National Board of Revenue www.nbr-bd.org
• Bangladesh Bank www.bangladesh-bank.org
• Ministry of Industries & www.moind.gov.bd
BSCIC