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T h e F e d e ra tio n o f B a n g la d e sh C h a m T h e F e d e ra tio ...

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The The Fede<strong>ra</strong><strong>tio</strong>n Fede<strong>ra</strong><strong>tio</strong>n of of Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Cham Cham Chambers bers of of Commerce Commerce and and Industry<br />

Industry<br />

6 6 December 2008<br />

EDITORS<br />

Annisul Huq<br />

President, FBCCI<br />

Ifty Is<strong>la</strong>m<br />

MD, AT Capital<br />

Addi<strong>tio</strong>nal<br />

Contributors<br />

Samir Asaf<br />

Member BBBF<br />

Manzur Ahmed<br />

Advisor, FBCCI<br />

Arif Dow<strong>la</strong><br />

MD, ACI Ltd<br />

Syed Nasim Manzur<br />

MD, Apex Adelchi Footwear Ltd<br />

Rubana Huq<br />

MD, Mohammadi Group<br />

Abdul Haque<br />

Director, FBCCI<br />

Aftab-ul Is<strong>la</strong>m<br />

Director, FBCCI<br />

Kazi Azizul Is<strong>la</strong>m<br />

New Age<br />

Senior Advisors<br />

Ahsan Mansur<br />

Zaidi Sattar<br />

VC, Millenium University<br />

Farooq Sobhan<br />

President, BEI<br />

FBCCI<br />

Fede<strong>ra</strong><strong>tio</strong>n Bhaban<br />

60, Motijheel Commercial Area<br />

Dhaka 1000<br />

Cable: FEDCOMERCE, DHAKA<br />

Fax: +88-02-7176030, 9560588<br />

Email: fbcci@bol-online.com<br />

www.fbcci-bd.org<br />

Maximizing Maximizing Growth Growth for for Bang<strong>la</strong>de<strong>sh</strong>: Bang<strong>la</strong>de<strong>sh</strong>: A A Private Private Sector Sector Vision<br />

Vision<br />

An An An Economic Economic Roadmap: Roadmap: While the return to democ<strong>ra</strong>cy is welcomed, there are substantial<br />

expecta<strong>tio</strong>ns for the next government to unlock the country’s economic potential. Though<br />

Bang<strong>la</strong>de<strong>sh</strong> has grown at 6% for the past 5 years, despite all the challenges from Mother Nature and<br />

political vo<strong>la</strong>tility, we at the FBCCI believe that the best years for the country are ahead of us. This<br />

paper offers a roadmap to put Bang<strong>la</strong>de<strong>sh</strong> firmly on the path towards inclusive growth of at least 8%<br />

with an economy joining the <strong>ra</strong>nks of Asia’s most dynamic emerging market countries. Important<br />

factors include: Solving the Power Crisis; Reducing inf<strong>ra</strong>structure bottlenecks in t<strong>ra</strong>nsporta<strong>tio</strong>n;<br />

Increased private sector investment and focus on greater FDI inflow; An effective B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong><br />

St<strong>ra</strong>tegy; Skills development and improving voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns; Improving access to<br />

finance; An effective Diaspo<strong>ra</strong> st<strong>ra</strong>tegy; Creating a dynamic SME sector; Increasing exports with<br />

renewed focus on diversifica<strong>tio</strong>n of products as well as destina<strong>tio</strong>n; Improving regional inf<strong>ra</strong>structure.<br />

• Energy: Energy: A p<strong>la</strong>n to gene<strong>ra</strong>te 2000MW with imported coal is needed with 500MW more from<br />

Rental Power P<strong>la</strong>nts (RPP) installed to overcome the <strong>sh</strong>ort term power crisis; BAPEX <strong>sh</strong>ould<br />

set up 6 drilling wells per year. The Na<strong>tio</strong>nal Coal Policy adop<strong>tio</strong>n <strong>sh</strong>ould be expedited.<br />

• T<strong>ra</strong>nsport T<strong>ra</strong>nsport T<strong>ra</strong>nsport Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Priorities: Priorities: The government may opt for PPP for the construc<strong>tio</strong>n of the<br />

USD 500mn Dhaka Elevated Expressway (DEE) to ease Dhaka city’s severe t<strong>ra</strong>ffic problem.<br />

Construc<strong>tio</strong>n of the Dhaka-Chittagong highway <strong>sh</strong>ould be accele<strong>ra</strong>ted. Among other<br />

inf<strong>ra</strong>structure priorities are <strong>ra</strong>pid comple<strong>tio</strong>n of the Padma and Karnaphuli Bridge Projects.<br />

• Increasing Increasing FDI FDI and and an an Effective Effective B<strong>ra</strong>nd B<strong>ra</strong>nd B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> St<strong>ra</strong>tegy St<strong>ra</strong>tegy: St<strong>ra</strong>tegy St<strong>ra</strong>tegy:<br />

: The proposed reform prog<strong>ra</strong>m for<br />

the Board of Investment (BOI) including the setting up of a new “Investment Bang<strong>la</strong>de<strong>sh</strong>” wing<br />

<strong>sh</strong>ould be accele<strong>ra</strong>ted. A comprehensive, t<strong>ra</strong>nsparent and predictable FDI policy is needed.<br />

The reb<strong>ra</strong>nding of BD as an att<strong>ra</strong>ctive investment destina<strong>tio</strong>n is critical.<br />

• Exports/T<strong>ra</strong>de Exports/T<strong>ra</strong>de Diversifica<strong>tio</strong>n: Diversifica<strong>tio</strong>n: An integ<strong>ra</strong>ted Export Promo<strong>tio</strong>n Scheme (EPS) must be<br />

adopted. Bang<strong>la</strong>de<strong>sh</strong> has significant potential in seve<strong>ra</strong>l export-oriented industries, including<br />

pharmaceuticals, leather goods, frozen foods, <strong>sh</strong>ipbuilding, and ITES.<br />

• Increase Increase Agriculture Agriculture R&D: R&D: Agro-sector can be a wealth gene<strong>ra</strong>tor. There are still <strong>la</strong>rge<br />

opportunities to <strong>ra</strong>ise productivity via hybrid rice and improving yields in aquaculture.<br />

• Leve<strong>ra</strong>ging Leve<strong>ra</strong>ging Leve<strong>ra</strong>ging Diaspo<strong>ra</strong> Diaspo<strong>ra</strong>: Diaspo<strong>ra</strong> : The Government needs to set up a Diaspo<strong>ra</strong> taskforce that will have<br />

dedicated secretariat, connecting the Diaspo<strong>ra</strong> overseas, both professional organiza<strong>tio</strong>ns in<br />

technology, finance, medicine, pharmaceuticals and broader community networks.<br />

• Na<strong>tio</strong>nal Na<strong>tio</strong>nal Skills Skills Development Development Development Council: Council: The government <strong>sh</strong>ould adopt and support the<br />

recommenda<strong>tio</strong>ns of this Council to encou<strong>ra</strong>ge more coope<strong>ra</strong><strong>tio</strong>n between the public and<br />

private sectors for voca<strong>tio</strong>nal t<strong>ra</strong>ining to facilitate manpower exports and build a local <strong>la</strong>bour<br />

force.<br />

• Expand Expand Expand EP EPZ/SEZ EP /SEZ /SEZ: /SEZ Invest in Export Processing Zones (EPZ) as well as the development of<br />

industry focused Special Economic Zones (SEZ) in st<strong>ra</strong>tegically important sectors that offer<br />

export or t<strong>ra</strong>de–diversifica<strong>tio</strong>n benefits <strong>sh</strong>ould be actively pursued by the new government.<br />

1


Table Table Table of of of Contents<br />

Contents<br />

LETTER LETTER LETTER FROM FROM PRESIDEN<br />

PRESIDENT PRESIDEN T OF FBCCI FBCCI 4<br />

EXECUTIVE EXECUTIVE EXECUTIVE SUMMARY SUMMARY<br />

5<br />

OVERVIEW<br />

OVERVIEW OVERVIEW<br />

9<br />

THE IMPORTANCE OF A NATIONAL ECONOMIC VISION 10<br />

KEY ECONOMIC CHALLENGES FACING THE NEXT GOVERNMENT 10<br />

SOLVING THE POWER CRISIS 10<br />

GREATER FOCUS ON DIVERSIFYING EXPORTS 10<br />

GREATER INVESTMENT AND THE IMPORTANCE OF FDI 11<br />

AN EFFECTIVE BRAND BANGLADESH STRATEGY 11<br />

EDUCATION, SKILLS DEVELOPMENT, VOCATIONAL TRAINING AND MANPOWER EXPORTS 11<br />

CREATING A DYNAMIC SME SECTOR 12<br />

BANGLADESH AS A SIZEABLE FOOD AGRO-EXPORTER 12<br />

ENVIRONMENTALLY SUSTAINABLE GROWTH 12<br />

BETTER INFRASTRUCTURE VIA REGIONAL INTEGRATION 12<br />

A FOCUSED DIASPORA STRATEGY 13<br />

LOOKING AHEAD 13<br />

ECONOMIC ECONOMIC ROADMAP<br />

ROADMAP ROADMAP<br />

15 15<br />

1.DEVELOP A NATIONAL ECONOMIC VISION 15<br />

2. ENERGY 15<br />

3. TRANSPORT INFRASTRUCTURE PRIORITIES 16<br />

4. INCREASING FDI AND AN EFFECTIVE BRAND BANGLADESH STRATEGY 17<br />

5. A NATIONAL VOCATIONAL TRAINING/ENGLISH LANGUAGE INITIATIVE 18<br />

6. REDUCING THE COST/IMPROVING ACCESS TO FINANCE 18<br />

7. IMPROVING INFRASTRUCTURE THROUGH REGIONAL INTEGRATION 19<br />

8. A STRATEGY FOR ASIAN REGIONAL INTEGRATION 19<br />

9. PROMOTE ECONOMIC DECENTRALIZATION/ INCREASED REGIONAL AUTONOMY 19<br />

10. FORMULATE A NATIONAL POLICY ON "INDUSTRIAL CLUSTER DEVELOPMENT" 19<br />

11. ENHANCE EFFECTIVENESS OF BANGLADESH BETTER BUSINESS FORUM’S THROUGH A STRONGER SECRETARIAT 20<br />

12. MAKE THE REGULATORY REFORMS COMMISSION (RRC) A PERMANENT BODY 20<br />

13. REVISE THE CURRENT PRSPII THROUGH GREATER PPP AND CIVIL SOCIETY PARTICIPATION 20<br />

14. NEW WORKING GROUP UNDER BBBF, TO IMPROVE THE QUALITY OF GOVERNMENT-BUSINESS INTERFACE 20<br />

15. THE NATIONAL PRODUCTIVITY ORGANIZATION NEEDS TO BE MADE EFFECTIVE UNDER THE MINISTRY OF INDUSTRIES 20<br />

16. A COMPREHENSIVE PUBLIC ADMINISTRATION REFORM NEEDED 21<br />

17. RECONSTITUTE THE BOARDS OF PUBLIC INSTITUTIONS, BRINGING IN SPECIALIZED PRIVATE SECTOR MEMBERS 21<br />

18. PRIVATIZE TARGET PUBLIC CORPORATIONS WITHIN 12-18 MONTHS 21<br />

19. IMPROVE ADP IMPLEMENTATION RATE BY CAPACITY BUILDING INITIATIVES 21<br />

20. THE MINISTRIES OF INDUSTRIES, FINANCE, AND COMMERCE SHOULD ENCOURAGE DIVERSIFICATION OF EXPORTS 21<br />

21. INTEGRATED EXPORT PROMOTION SCHEME (EPS) 22<br />

22. IMPROVING THE LEGAL SYSTEM AND DISPUTE RESOLUTION 22<br />

23. LEVERAGING DIASPORA 22<br />

24. GREATER FOCUS ON INCREASING PRODUCTIVITY AND WEALTH CREATION FROM AGRICULTURE 23<br />

25. POLICIES TO INCREASE PRODUCTION OF HIGH-VALUE HIGH-YIELDING RICE 23<br />

26. ENCOURAGE GREATER ADOPTION OF FARM MACHINERY AND FERTILIZERS 23<br />

27. ENCOURAGING MORE EFFECTIVE AGRICULTURAL R&D 24<br />

28. COMPETITION POLICY NEEDS TO BE REVISED 25<br />

29. A FOCUSED STRATEGY TO ENCOURAGE E-COMMERCE 25<br />

30. RE-ENFORCE THE RIGHT-TO-INFORMATION AND MORE EFFECTIVE PUBLIC AUDITS 25<br />

31. A STRATEGY FOR DEVELOPING THE SME SECTOR 25<br />

32. A STRATEGY FOR DEVELOPING A TECHNOLOGY AND OUTSOURCING SECTOR 26<br />

33. ESTABLISH BANGLADESH CLIMATE CHANGE VENTURE CAPITAL/ CLEANTECH FUND 27<br />

34. MITIGATING EFFECTS OF GLOBAL FINANCIAL CRISIS: RECOMMENDATIONS FROM FBCCI 27<br />

35. RECOMMENDATIONS FOR THE RMG SECTOR 28<br />

36. REVISED EXPORT AND INDUSTRIAL POLICIES 28<br />

37. MACRO POLICIES TO MITIGATE THE GLOBAL FINANCIAL CRISIS 28<br />

2


APPENDIX APPENDIX 1 1 – SOLVING THE POWER POWER CR CRISIS CR<br />

ISIS – SHORT TERM MEASURES<br />

MEASURES & LONG TERM SOLUTION<br />

SOLUTIONS SOLUTION<br />

31<br />

APPENDIX APPENDIX 2 2 - NON NON-POWER NON<br />

POWER INFRASTRUCTURE INFRASTRUCTURE<br />

34<br />

APPENDIX APPENDIX 3 3 – EDUCATION, VOCATIONA<br />

VOCATIONAL/SKILLS VOCATIONA<br />

L/SKILLS TRAINING, MMANPOWER<br />

M<br />

ANPOWER EXPORTS 36<br />

APPENDIX APPENDIX 4 4 – STRENGTHENING THE SM SME SM<br />

E SECTOR 40<br />

APPENDIX APPENDIX 5 5 – IMPROVING ACCESS TO DOMESTIC FINANCE 44<br />

APPENDIX APPENDIX 6 6 – ASIAN REGIONAL INTEG INTEGRATION: INTEG<br />

RATION: BANGLADESH’S UNTAPPED OPPORTUNITY 46<br />

APPENDIX APPENDIX 7 7 – AGRICULTURE AGRICULTURE SECTOR OOF<br />

O<br />

F F BANGLADESH 53<br />

APPENDIX APPENDIX 8 8 – TECHNOLOGY 58<br />

APPENDIX APPENDIX 9 9 – READY MADE GARMENTS (RMG) 60<br />

APPENDIX APPENDIX 10 10 – BANGLADESH BETTER BU BUSINESS BU<br />

SINESS FORUM WORKING GROUP PENDING DECISI DECISIONS<br />

DECISI<br />

ONS ONS 61<br />

APPENDIX APPENDIX APPENDIX 11 11 11 – CLIMATE CLIMATE CHANGE CHANGE 65 65<br />

APPENDIX APPENDIX 12 12 – ADDITIONAL POLICY POLICY RE RECOMMENDATIONS RE<br />

COMMENDATIONS COMMENDATIONS FOR TH THE TH<br />

E GOVERNMENT 68<br />

APPENDIX APPENDIX 13 13 – 52 RECOMMENDATIONS RECOMMENDATIONS FFROM<br />

F<br />

ROM ROM THE NOV 15 2008 2008 FBCCI BUSINESS CONFE CONFERENCE CONFE<br />

RENCE ON THE<br />

COLLECTIVE COLLECTIVE ECO ECONOMIC ECO NOMIC AGENDA 70 70<br />

APPENDIX APPENDIX 14 14 – MACRO ECONOMIC POLIC POLICIES POLIC<br />

IES 73<br />

APPENDIX APPENDIX 15 15 – EXECUTIVE EXECUTIVE SUMMARY OF OF BANGLADESH 22<br />

2<br />

ND NSAPR (OCT (OCT 2008) 2008) 74<br />

3


From From the the desk desk of of the the President, President, FBCCI<br />

FBCCI<br />

In 2009, Bang<strong>la</strong>de<strong>sh</strong> will be returning to democ<strong>ra</strong>tic government in a uniquely challenging environment of the global<br />

financial crisis. While, we need to ensure that the country’s near-term growth remains resilient, at the same time, the<br />

na<strong>tio</strong>n will also look to be to be led by a longer-term st<strong>ra</strong>tegic vision.<br />

In times like this, we believe the whole spectrum of Bang<strong>la</strong>de<strong>sh</strong>i society, from policymakers to business leaders as<br />

well as the gene<strong>ra</strong>l public, need to gather and set aside differences to reach a consensus on how best we <strong>sh</strong>ould<br />

move forward to maximize the potential of the country. Bang<strong>la</strong>de<strong>sh</strong> has made impressive progress in many areas of<br />

the Millenium Development Goals, namely poverty reduc<strong>tio</strong>n. Our view is that the key to achieving more on this front<br />

remains maximizing Bang<strong>la</strong>de<strong>sh</strong>’s growth <strong>ra</strong>te.<br />

Can Bang<strong>la</strong>de<strong>sh</strong> grow at 8% consistently? Will Bang<strong>la</strong>de<strong>sh</strong> be able to rise above the global stereotypes and prove<br />

one more time, that we are a resilient and resourceful na<strong>tio</strong>n?<br />

While we address our fears today, we must also find time to st<strong>ra</strong>tegize in order to maximize our potential and optimize<br />

our existing resources. In order to do that, the business community needs to have an open dialogue with economists<br />

and policy makers in order to accele<strong>ra</strong>te Bang<strong>la</strong>de<strong>sh</strong>’s progress towards Middle Income Status.<br />

Thus, this vision paper is a col<strong>la</strong>bo<strong>ra</strong>tive attempt by a group of extremely distingui<strong>sh</strong>ed economists and committed<br />

business people to convey to the new government, the basic requirements of this na<strong>tio</strong>n to g<strong>ra</strong>duate to the next level<br />

of an emerging economy. While we all look through the paper, let us not forget a few basic realities: no na<strong>tio</strong>n is<br />

immune to failures, no community is above accountability and most of all, all are answe<strong>ra</strong>ble to the people.<br />

If the US can be p<strong>la</strong>gued with a meltdown, if China can experience cont<strong>ra</strong>c<strong>tio</strong>n in growth, if most of the economies are<br />

apparently facing near col<strong>la</strong>pse, what gives Bang<strong>la</strong>de<strong>sh</strong> the right to expect better times? What will arrest exacerbating<br />

fears of deterio<strong>ra</strong>ting exports and a declining economy? The answer to this is: plentiful evidence of a young na<strong>tio</strong>n that<br />

has proved its resilience in the past as well as one that is hungry to compete more effectively in the global economy in<br />

the future.<br />

While we have covered a broad <strong>ra</strong>nge of issues in this report, there is much we have not touched upon. This paper, a<br />

private sector initiative of the FBCCI, may suffer from omissions or understatements for which we apologize and seek<br />

your feedback. Meanwhile, we urge all readers, whether policy makers, civil society or the business community, to<br />

consider our sugges<strong>tio</strong>ns and work together with us in partner<strong>sh</strong>ip to help Bang<strong>la</strong>de<strong>sh</strong> maximize growth and fulfill its<br />

potential.<br />

Annisul Annisul Annisul Huq Huq<br />

Huq<br />

President, President, FBCCI FBCCI<br />

FBCCI<br />

Saturday<br />

06 December, 2008<br />

4


Executive Executive Summary<br />

Summary<br />

• A A Case Case for for Optimism: Optimism: While Bang<strong>la</strong>de<strong>sh</strong> has grown at around 6% for the past 5 years, despite all the<br />

challenges both from Mother Nature and political vo<strong>la</strong>tility, we at the FBCCI believe that the best years for the<br />

country are ahead of us. Bang<strong>la</strong>de<strong>sh</strong> has three key att<strong>ra</strong>c<strong>tio</strong>ns for global investors and multina<strong>tio</strong>nals: a <strong>la</strong>rge<br />

base of low-cost <strong>la</strong>bour, a <strong>la</strong>rge domestic market of 150mn people, and nearly 3bn people in the Asian region<br />

that it has market access to.<br />

• Key Key Key Challenges: Challenges: Factors that need to be addressed by the government in order to achieve an inclusive growth<br />

of at least 8% include: Solving the Power Crisis; Increased private sector investment and focus on greater FDI<br />

inflow; An effective B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> St<strong>ra</strong>tegy; Skills development and improving voca<strong>tio</strong>nal t<strong>ra</strong>ining<br />

institu<strong>tio</strong>ns; Improving access to finance; An effective Diaspo<strong>ra</strong> st<strong>ra</strong>tegy; Creating a dynamic SME sector;<br />

Increasing exports of high value agricultu<strong>ra</strong>l products; Improving the legal system; focusing on<br />

environmentally sustainable growth; and Improving regional inf<strong>ra</strong>structure.<br />

• An An Economic Economic Vision: Vision: It is critical for Bang<strong>la</strong>de<strong>sh</strong> to develop a long term na<strong>tio</strong>nal vision 2020 with detailed<br />

analysis and a p<strong>ra</strong>ctical roadmap for policy development and implementa<strong>tio</strong>n. The structu<strong>ra</strong>l changes in the<br />

economy and the global scenario need to be anticipated while formu<strong>la</strong>ting a realistic vision. Extensive<br />

dialogue <strong>sh</strong>ould be undertaken with civil society members, business chambers, non-government<br />

organiza<strong>tio</strong>ns, and other stakeholders.<br />

An An An Economic Economic Roadmap Roadmap Roadmap to to deliver deliver 8% 8% inclusive inclusive inclusive growth:<br />

growth:<br />

• Energy: Energy: More Rental Power P<strong>la</strong>nts (RPP) need to be installed to overcome the <strong>sh</strong>ort term power crisis, and<br />

the government needs to closely supervise the implementa<strong>tio</strong>n of the p<strong>la</strong>nts to ensure timely commencement<br />

of power gene<strong>ra</strong><strong>tio</strong>n. The Coal Policy needs to be finalized as early as possible. The government <strong>sh</strong>ould<br />

implement the merchant power policy immediately - Merchant power p<strong>la</strong>nts can be installed in a <strong>sh</strong>orter<br />

period of time as there is no tendering process. The government can set up some small coal fired power<br />

p<strong>la</strong>nts and can import coal from India on a tempo<strong>ra</strong>ry basis before developing our own coal mines. A more<br />

efficient and faster procurement and tendering process <strong>sh</strong>ould be adopted for quicker implementa<strong>tio</strong>n of any<br />

project. Reducing system loss in the power sector <strong>sh</strong>ould be a priority as a reduc<strong>tio</strong>n of 1% system loss can<br />

save around 45 MW of power. Lastly, all the old and inefficient power p<strong>la</strong>nts <strong>sh</strong>ould be rep<strong>la</strong>ced immediately<br />

to ensure better utiliza<strong>tio</strong>n of primary fuel and smooth ope<strong>ra</strong><strong>tio</strong>n.<br />

• T<strong>ra</strong>nsport T<strong>ra</strong>nsport T<strong>ra</strong>nsport Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Priorities: Priorities: The government may opt for public-private partner<strong>sh</strong>ip (PPP) for the<br />

construc<strong>tio</strong>n of the USD 500mn Dhaka Elevated Expressway (DEE) to ease Dhaka city’s severr t<strong>ra</strong>ffic<br />

problem. Construc<strong>tio</strong>n of the Dhaka-Chittagong highway <strong>sh</strong>ould be accele<strong>ra</strong>ted. It <strong>sh</strong>ould be a priority to<br />

upg<strong>ra</strong>de the existing highways linking Dhaka, Chittagong, Sylhet, Raj<strong>sh</strong>ahi, and other key points of the<br />

country into four <strong>la</strong>nes. The government <strong>sh</strong>ould move forward with the Chittagong Deep Sea Port Project, as<br />

Bang<strong>la</strong>de<strong>sh</strong> has a better opportunity to set up the port due to the upside down V <strong>sh</strong>ape of the Bay of Bengal<br />

and being posi<strong>tio</strong>ned at the apex.<br />

• Increasing Increasing Increasing FDI FDI and and an an Effective Effective B<strong>ra</strong>nd B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> St<strong>ra</strong>tegy: St<strong>ra</strong>tegy: The proposed reform prog<strong>ra</strong>m for the Board of<br />

Investment (BOI) including the setting up of a new “Investment Bang<strong>la</strong>de<strong>sh</strong>” wing <strong>sh</strong>ould be accele<strong>ra</strong>ted. This<br />

new organiza<strong>tio</strong>n will be solely tasked with att<strong>ra</strong>cting FDI by developing sector research and direct marketing<br />

to prospective investors either on a country or company specific basis. The reb<strong>ra</strong>nding of Bang<strong>la</strong>de<strong>sh</strong> as an<br />

att<strong>ra</strong>ctive investment destina<strong>tio</strong>n is critical. The new Government <strong>sh</strong>ould set up a B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong><br />

taskforce with a core committee composed of the heads of the BOI, EPB, the Foreign Ministry, FBCCI and<br />

NRBs professional groups from the Europe and the US.<br />

• More More More Effective Effective Export Export Promo<strong>tio</strong>n: Promo<strong>tio</strong>n: A Na<strong>tio</strong>nal Export Development Commission <strong>sh</strong>ould be created with an<br />

active Secretariat. The proposed commission will monitor, analyze and direct the activities of the EPB,<br />

ministries re<strong>la</strong>ted to export promo<strong>tio</strong>n including commercial councils in other countries and all other relevant<br />

departments. A key goal of the EPB is to support the process of export diversifica<strong>tio</strong>n. It also needs to work<br />

5


closely with Ministry of Commerce and Foreign Ministry to support greater t<strong>ra</strong>de within the SAARC region by<br />

securing the effective implementa<strong>tio</strong>n of SAFTA as well as stronger bi<strong>la</strong>te<strong>ra</strong>l ba<strong>la</strong>nced t<strong>ra</strong>de with India.<br />

• Expand Expand Expand the the NSDC NSDC Voca<strong>tio</strong>nal Voca<strong>tio</strong>nal Voca<strong>tio</strong>nal T<strong>ra</strong>ining T<strong>ra</strong>ining Initiative: Initiative: The recently establi<strong>sh</strong>ed Na<strong>tio</strong>nal Skills Development Council<br />

(NSDC) <strong>sh</strong>ould be strengthened with addi<strong>tio</strong>nal resources. The roadmap developed by the Skills Development<br />

Working Group of the BBBF <strong>sh</strong>ould be implemented by the new government. One example is the p<strong>la</strong>n for a<br />

Comprehensive Orienta<strong>tio</strong>n T<strong>ra</strong>ining for would-be Mig<strong>ra</strong>nt Workers & Special Government mig<strong>ra</strong><strong>tio</strong>n support<br />

services for safe mig<strong>ra</strong><strong>tio</strong>n and livelihood. Over the medium-term, a sepa<strong>ra</strong>te Manpower and Voca<strong>tio</strong>nal<br />

T<strong>ra</strong>ining ministry <strong>sh</strong>ould be establi<strong>sh</strong>ed.<br />

• Reducing Reducing Costs/Improving Costs/Improving Access Access Access to to Finance: Finance: It is critical to reduce the cost of credit as bank interest <strong>ra</strong>tes in<br />

Bang<strong>la</strong>de<strong>sh</strong> and the loan-deposit <strong>ra</strong>te spread remains wide re<strong>la</strong>tive to some of our regional competitors.<br />

There is also an over-col<strong>la</strong>te<strong>ra</strong>liza<strong>tio</strong>n of loans due to insufficient informa<strong>tio</strong>n avai<strong>la</strong>ble to bank credit officers.<br />

It is important to make the cent<strong>ra</strong>l credit informa<strong>tio</strong>n bureau avai<strong>la</strong>ble online and extended to all loans above<br />

BDT 10,000, in order to help smaller firms build up reputa<strong>tio</strong>n-based credit. There <strong>sh</strong>ould also be greater<br />

pressure to develop longer-term debt and lending instruments to allow companies to match longer-term<br />

investment requirements. Finally there <strong>sh</strong>ould be a greater pu<strong>sh</strong> to develop risk-based access to capital<br />

through venture or private equity funds.<br />

• Improving Improving Improving the the legal legal legal system system and and dispute dispute rresolu<strong>tio</strong>n:<br />

rr<br />

esolu<strong>tio</strong>n: Although gene<strong>ra</strong>l <strong>la</strong>w and order has improved in recent<br />

years, the new government needs to reduce spontaneous workers protests and violent demonst<strong>ra</strong><strong>tio</strong>ns. The<br />

government needs to develop a fair, t<strong>ra</strong>nsparent and equitable arbit<strong>ra</strong><strong>tio</strong>n court to resolve disputes quickly and<br />

to the satisfac<strong>tio</strong>n of all parties.<br />

• Regional Regional Integ<strong>ra</strong><strong>tio</strong>n: Integ<strong>ra</strong><strong>tio</strong>n: For South Asia the crucial t<strong>ra</strong>nsport links to be developed would be along the alignment<br />

of Asia Highway (AH). The AH network is a component of the Asian Land T<strong>ra</strong>nsporta<strong>tio</strong>n Inf<strong>ra</strong>structure<br />

(ALTID) project developed by ESCAP (Economic and Social Commission for Asia and the Pacific). The route<br />

criteria for ALTID project include capital to capital links, connec<strong>tio</strong>n to main industrial and agricultu<strong>ra</strong>l centres<br />

as well as growth zones, connec<strong>tio</strong>n to major sea and river ports and connec<strong>tio</strong>n to major in<strong>la</strong>nd container<br />

terminals arid depots. For Bang<strong>la</strong>de<strong>sh</strong>, it is critical to integ<strong>ra</strong>te with both India and China into Asia Highway<br />

(AH). In recent years China has upg<strong>ra</strong>ded the old Burma road between Kunming and Myanmar as part of its<br />

associa<strong>tio</strong>n with the AH. The link between Kunming and the Bay of Bengal is 5,800 kilometers <strong>sh</strong>orter than<br />

Yunan's link with the nearest Chinese port at Shanghai or China's pacific coast. The Jamuna bridge in<br />

Bang<strong>la</strong>de<strong>sh</strong> would make it possible for the AH to provide uninterrupted t<strong>ra</strong>vel between Bang<strong>la</strong>de<strong>sh</strong> and Ca<strong>la</strong>is<br />

routed through India, Pakistan and then either into Cent<strong>ra</strong>l Asia or through West Asia into Europe.<br />

• Expenditure Expenditure on on Agriculture Agriculture R&D R&D <strong>sh</strong>ould <strong>sh</strong>ould be be increased: ncreased: In this regard, public-private partner<strong>sh</strong>ips (PPPs) <strong>sh</strong>ould<br />

be encou<strong>ra</strong>ged. The government <strong>sh</strong>ould work towards removing barriers to private investment in R&D. A<br />

primary const<strong>ra</strong>int to private R&D investment is weak investment climate. Secondly, there is a <strong>la</strong>ck of demand<br />

from smallholders for improved technologies because of risks, credit const<strong>ra</strong>ints, and poor access to<br />

informa<strong>tio</strong>n. Added to these two are restric<strong>tio</strong>ns on private sector imports of technologies and high regu<strong>la</strong>tory<br />

barriers to the release of new technologies.<br />

• Encou<strong>ra</strong>ge Encou<strong>ra</strong>ge de de-cent<strong>ra</strong>liza<strong>tio</strong>n/Greater de cent<strong>ra</strong>liza<strong>tio</strong>n/Greater regional regional autonomy autonomy: autonomy Some estimates suggest that Dhaka will be a city of<br />

over 20mn by 2015. The st<strong>ra</strong>ins on the capital are already causing conges<strong>tio</strong>n, bottlenecks and <strong>la</strong>bour<br />

<strong>sh</strong>ortages. Supporting the growth of seve<strong>ra</strong>l other regional centres for manufacturing would yield both<br />

economic benefits as well as supporting the drive for inclusive growth. The problem of too much cent<strong>ra</strong>l<br />

control has led to Bang<strong>la</strong>de<strong>sh</strong>’s prosperity being Dhaka-centered. Decontrol of power and authority from the<br />

cent<strong>ra</strong>l government in Dhaka, and t<strong>ra</strong>nsfer of decision-making powers to districts and upazil<strong>la</strong>s has become a<br />

na<strong>tio</strong>nal impe<strong>ra</strong>tive.<br />

• Expand Expand EPS/SEZ EPS/SEZ Prog<strong>ra</strong>mme: Prog<strong>ra</strong>mme: The expansion of the Export Processing Zones (EPZ) prog<strong>ra</strong>m as well as the<br />

development of industry focused Special Economic Zones (SEZ) in st<strong>ra</strong>tegically important sectors that offer<br />

export or t<strong>ra</strong>de–diversifica<strong>tio</strong>n benefits <strong>sh</strong>ould be actively pursued by the new government. Economic zones<br />

are meant to boost an investor’s competitiveness and reduce business entry and ope<strong>ra</strong>ting costs. Exportoriented<br />

free zones (EPZs) are intended to convey “free t<strong>ra</strong>de status” to export manufacturers to enable them<br />

to compete in globally, may counterba<strong>la</strong>nce the anti-export bias of t<strong>ra</strong>de policies.<br />

6


• Form Form a a FFinancial<br />

F inancial Crisis Taskforce: Although the global financial crisis has had a smaller impact on<br />

Bang<strong>la</strong>de<strong>sh</strong> than many other Emerging Markets, the col<strong>la</strong>pse in commodity prices and the increased risk<br />

aversion of domestic banks has caused severe liquidity problems among a number of corpo<strong>ra</strong>te borrowers.<br />

The Government <strong>sh</strong>ould include private sector representatives in the recently establi<strong>sh</strong>ed Financial Crisis<br />

Taskforce.<br />

• Leve<strong>ra</strong>ging Leve<strong>ra</strong>ging Diaspo<strong>ra</strong>: Diaspo<strong>ra</strong>: The Government needs to set up a Diaspo<strong>ra</strong> taskforce that will incorpo<strong>ra</strong>te a<br />

Bang<strong>la</strong>de<strong>sh</strong>-based secretariat and dedicated secretariat and sub-committees in Europe, the US and Middle<br />

East that will connect the various Diaspo<strong>ra</strong> networks overseas, both professional organiza<strong>tio</strong>ns in technology,<br />

finance, medicine, pharmaceuticals, as well as broader community networks to build a more comprehensive<br />

NRB database. Policymakers need to develop a st<strong>ra</strong>tegy to att<strong>ra</strong>ct more Diaspo<strong>ra</strong> to return home on either a<br />

tempo<strong>ra</strong>ry or a permanent basis, potentially through fiscal incentives such as lower import taxes for personal<br />

effects for NRBs who bring substantial capital as well as industry experience back to Bang<strong>la</strong>de<strong>sh</strong>.<br />

Addi<strong>tio</strong>nally by offering att<strong>ra</strong>ctive sa<strong>la</strong>ry packages and career prospects.<br />

• Accele<strong>ra</strong>te Accele<strong>ra</strong>te Privatiza<strong>tio</strong>n: Privatiza<strong>tio</strong>n: State owned enterprises include Bang<strong>la</strong>de<strong>sh</strong> Chemical Industries Corpo<strong>ra</strong><strong>tio</strong>n<br />

(BCIC), Bang<strong>la</strong>de<strong>sh</strong> Sugar and Food Industries Corpo<strong>ra</strong><strong>tio</strong>n (BSFIC), Bang<strong>la</strong>de<strong>sh</strong> Steel & Engineering<br />

Corpo<strong>ra</strong><strong>tio</strong>n (BSEC), and others. Bang<strong>la</strong>de<strong>sh</strong> Biman and Sonargaon Hotel, in particu<strong>la</strong>r, need to be seriously<br />

considered for privatiza<strong>tio</strong>n. For the proper and efficient func<strong>tio</strong>ning of activities of industrial produc<strong>tio</strong>n in<br />

commercial areas, be it jute, or textile, or chemical, steel or food, this role <strong>sh</strong>ould be performed by the private<br />

sector. The Bang<strong>la</strong>de<strong>sh</strong> bureauc<strong>ra</strong>cy in its present state <strong>la</strong>cks sufficient capacity to run industries.<br />

• Re Re-enforce Re<br />

enforce role role of of BBBF BBBF and and RRC: RRC: Consider regional/local level better business forums under simi<strong>la</strong>r publicprivate<br />

partner<strong>sh</strong>ip principles. P<strong>la</strong>ce greater emphasis on effective implementa<strong>tio</strong>n of the 249 BBBF<br />

recommenda<strong>tio</strong>ns, of which 39 are long term in nature. Consider expanding BBBF with addi<strong>tio</strong>nal<br />

professionals and at the local district/division levels, and forming industry-based working groups. Assessment<br />

of the 202 <strong>la</strong>ws currently under review by RRC need to be effectively expedited through the <strong>la</strong>w ministry. The<br />

SRO database and the e-registry work needs to be completed. RRC proposals on <strong>la</strong>nd reform needs to be<br />

effectively implemented. The process of Regu<strong>la</strong>tory Impact Assessment (RIA) needs to be institu<strong>tio</strong>nalized<br />

within the RRC.<br />

• SME: SME: SME: Lack of finance is one of the major const<strong>ra</strong>ints – as commercial banks are inherently skeptical of lending<br />

to SMEs due to the high risks and monitoring costs associated with lending to them. The government <strong>sh</strong>ould<br />

compensate by using g<strong>ra</strong>nts, perhaps in coordina<strong>tio</strong>n with donor agencies, as a major instrument for<br />

providing financial support for a limited period of time to selected SMEs which have good potential and wide<br />

linkages. Banking Institu<strong>tio</strong>ns <strong>sh</strong>ould immediately start solving the problem of de<strong>la</strong>yed payments to SMEs. A<br />

Network of Factoring Services must be set up at home and abroad ope<strong>ra</strong>ted through banks. To provide<br />

greater support to SMEs in the middle of the global financial turmoil each of the Commercial banks and nonbanking<br />

financial institu<strong>tio</strong>ns (NBFIs) must provide a mandated <strong>sh</strong>are of their respective ove<strong>ra</strong>ll disbursed<br />

loans to SMEs without asking for any col<strong>la</strong>te<strong>ra</strong>l at a simple single digit <strong>ra</strong>te of interest.<br />

• Comprehensive omprehensive public public administ<strong>ra</strong><strong>tio</strong>n administ<strong>ra</strong><strong>tio</strong>n reform reform reform is is needed needed: needed<br />

In the current structure, only 6% of almost 200,000<br />

government employees (civil service) are c<strong>la</strong>ss I officers. This <strong>ra</strong><strong>tio</strong> needs to be reba<strong>la</strong>nced, with a reduc<strong>tio</strong>n<br />

in non-c<strong>la</strong>ss 1 staff. In addi<strong>tio</strong>n, higher sa<strong>la</strong>ries, t<strong>ra</strong>ining, career development, and tenured posi<strong>tio</strong>ns need to<br />

be ensured.<br />

• Improve Improve ADP ADP implementa<strong>tio</strong>n implementa<strong>tio</strong>n <strong>ra</strong>te <strong>ra</strong>te by by capacity capacity building building initiatives: initiatives: The Ministries <strong>sh</strong>ould have professional<br />

units to monitor and evaluate the status of project implementa<strong>tio</strong>n on a regu<strong>la</strong>r basis. In FY 2007-08, the ADP<br />

implementa<strong>tio</strong>n <strong>ra</strong>te was 82%. Improve the speed and efficiency of the Economic Re<strong>la</strong><strong>tio</strong>ns Division (ERD)<br />

under the P<strong>la</strong>nning Ministry to efficiently manage donor funding as part of the Annual Development<br />

Prog<strong>ra</strong>mme (ADP). Given the recent announcement of the Finance Adviser that World Bank funding for<br />

development projects under IDA credit is uncertain beyond 2008 as a result of a <strong>la</strong>ck of completed project<br />

proposals indicates the inadequacies of the P<strong>la</strong>nning Ministry and the urgency with which its capacity needs<br />

to be enhanced.<br />

7


OVERVIEW<br />

8


Overview<br />

Overview<br />

The upcoming Na<strong>tio</strong>nal Elec<strong>tio</strong>ns and the return to an<br />

elected democ<strong>ra</strong>cy will be rightly welcomed both by<br />

civil society within Bang<strong>la</strong>de<strong>sh</strong>, as well the<br />

Interna<strong>tio</strong>nal Community. There will be an expecta<strong>tio</strong>n<br />

that we move towards a more well-func<strong>tio</strong>ning political<br />

system and away from the confronta<strong>tio</strong>nal and<br />

fric<strong>tio</strong>nal politics that has cha<strong>ra</strong>cterized much of<br />

Bang<strong>la</strong>de<strong>sh</strong>’s history. But there will also be<br />

substantial economic expecta<strong>tio</strong>ns for the next<br />

government to become an agent of economic reform<br />

that can unlock Bang<strong>la</strong>de<strong>sh</strong>’s economic potential.<br />

This paper offers an economic roadmap for the future<br />

government to put Bang<strong>la</strong>de<strong>sh</strong> firmly on the path<br />

towards inclusive growth in excess of 8%. In addi<strong>tio</strong>n<br />

to longer-term st<strong>ra</strong>tegic goals, we also outline a<br />

number of key ac<strong>tio</strong>nable policy decisions that <strong>sh</strong>ould<br />

be implemented as soon as the new government<br />

takes office that we believe will catalyze the economy<br />

and provide momentum to a new agenda of economic<br />

reform as well as Public-Private Partner<strong>sh</strong>ip (PPP).<br />

Can Can Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Achieve Achieve Growth Growth of of 8+%?<br />

8+%?<br />

The resilience of Bang<strong>la</strong>de<strong>sh</strong>’s economy and financial<br />

markets so far in 2008 to the global financial crisis<br />

must be commended. Indeed, the country has a<br />

history of exceeding expecta<strong>tio</strong>ns. Bang<strong>la</strong>de<strong>sh</strong><br />

emerged from the 1971 War of Independence a free<br />

na<strong>tio</strong>n, but one whose economy and inf<strong>ra</strong>structure<br />

was <strong>sh</strong>attered. It was notably described by US<br />

Secretary of State Henry Kissinger as “an<br />

interna<strong>tio</strong>nal basket case”. It’s achievements over the<br />

past 37 years has been impressive, most notably in its<br />

emergence as a major textile and RMG exporter.<br />

More broadly, the low vo<strong>la</strong>tility and consistency of<br />

growth in the past decade, despite political instability<br />

and natu<strong>ra</strong>l disasters is a testament to a dynamic and<br />

entrepreneurial private sector.<br />

Bang<strong>la</strong>de<strong>sh</strong> has been recognized as the pioneer in<br />

Microfinance reflected in 2007 by the Nobel Prize won<br />

by Professor Yunus. Both G<strong>ra</strong>meen and BRAC not<br />

only extending credit and empowering the poor within<br />

Bang<strong>la</strong>de<strong>sh</strong> but also exporting the model to many<br />

countries around the world. Bang<strong>la</strong>de<strong>sh</strong> has also<br />

developed an impressive record in effective disaster<br />

management as evidenced by the cont<strong>ra</strong>st between<br />

the speed of response/limited loss of life from Cyclone<br />

Sidr versus the massive and t<strong>ra</strong>gic human and<br />

logistical catastrophe suffered by Burma from Cyclone<br />

Nargis.<br />

While Bang<strong>la</strong>de<strong>sh</strong> has grown at around 6% for the<br />

past 5 years, despite all the challenges both from<br />

mother nature and political vo<strong>la</strong>tility, we at the FBCCI<br />

believe that the best years for the country are ahead<br />

of us. Bang<strong>la</strong>de<strong>sh</strong> has three key att<strong>ra</strong>c<strong>tio</strong>ns for global<br />

investors and multina<strong>tio</strong>nals: a <strong>la</strong>rge base of low-cost<br />

<strong>la</strong>bour, a <strong>la</strong>rge domestic market of 150 mn people,<br />

and nearly 3bn people in the Asian region that it has<br />

market access to.<br />

But this is not a time for comp<strong>la</strong>cency. The darkening<br />

global recessionary storm clouds amid the worst<br />

financial crisis since the Great Depression of the<br />

1930s will provide the incoming elected government in<br />

2009 with a uniquely challenging economic<br />

environment. Demand condi<strong>tio</strong>ns in our key export<br />

markets will continue to weaken over the course of the<br />

next 12 months. JP Morgan has forecast that in 2009<br />

global growth will be -0.4% versus 1.9% in 2008 and<br />

3.5% in 2007. The developed economies are<br />

expected to cont<strong>ra</strong>ct with growth of -1.4% and<br />

Emerging Markets (EM) at +3.3% China is forecast to<br />

slow from 11.9% in 2008 to 8.1% while India is<br />

expected to slow from 9% in 2008 to 6.1% in 2009<br />

Capital flows to Emerging Markets are also likely to<br />

dimini<strong>sh</strong> as risk aversion dominates which will make<br />

att<strong>ra</strong>cting foreign investment challenging.<br />

The good news is that unlike many of its Asian<br />

neighbours, prudent macroeconomic management<br />

leaves both monetary and fiscal policy tools avai<strong>la</strong>ble<br />

to respond with either a <strong>ra</strong>te cut, exchange <strong>ra</strong>te<br />

deprecia<strong>tio</strong>n or targeted fiscal injec<strong>tio</strong>ns to exporters if<br />

the economy does begin to feel the effects of the<br />

global economic slowdown. Bang<strong>la</strong>de<strong>sh</strong> remains well<br />

poised to continue to outperform the rest of the world,<br />

with any slowdown in 2009 likely to be modest and<br />

tempo<strong>ra</strong>ry. While keeping <strong>sh</strong>ort-term stimulus<br />

measures avai<strong>la</strong>ble makes sense, the real focus<br />

<strong>sh</strong>ould also be on the next elected government<br />

pursuing an economic reform agenda in areas like<br />

power, inf<strong>ra</strong>structure, export diversifica<strong>tio</strong>n and<br />

att<strong>ra</strong>cting FDI that will <strong>ra</strong>ise the structu<strong>ra</strong>l long-term<br />

growth <strong>ra</strong>tes for Bang<strong>la</strong>de<strong>sh</strong>.<br />

9


The The The Importance Importance of of a a Na<strong>tio</strong>nal Na<strong>tio</strong>nal Economic Economic Vision<br />

Vision<br />

There There There There is is is is little little little little doubt doubt doubt doubt that that that that the the the the success success success success of of of of the the the the previous previous previous previous<br />

Asian Asian Asian Asian Tigers Tigers Tigers Tigers has has has has been been been been predicated predicated predicated predicated on on on on Economic Econom Econom Economic<br />

ic ic<br />

Vision. Vision Vision Vision In many cases, this has been at Government<br />

level. Witness Chinese Pa<strong>ra</strong>mount Leader Deng<br />

Xiaoping’s “Open Door” policy of the early 1980s in<br />

moving the Communist economic system towards a<br />

more market and export based st<strong>ra</strong>tegy. Vietnam, the<br />

current favourite of the global investors buying into the<br />

Asian economic mi<strong>ra</strong>cle, adopted its “Doi Moi”<br />

(roughly t<strong>ra</strong>ns<strong>la</strong>tes as “change or something new”) or<br />

“Renova<strong>tio</strong>n” policy back in 1986 that culminated in<br />

peak FDI flow 10 years <strong>la</strong>ter in 1996. The Asian crisis<br />

hit Vietnam hard but the ability to grow FDI flow from $<br />

2bn in 2000 to “$ no t<strong>ra</strong>ce 20bn in 2007 underlines the<br />

important founda<strong>tio</strong>ns the “Doi Moi” policy made.<br />

Former PM Mahathir adopted his “Vision 2020”<br />

st<strong>ra</strong>tegy in 1994 of moving Ma<strong>la</strong>ysia from a<br />

developing to an advanced na<strong>tio</strong>n.<br />

India India India India was was was was probably probably probably probably a a a a hybrid hybrid hybrid hybrid between between between between the the the the two two two two models models models models<br />

of of of of public public public public sector sector sector sector versus versus versus versus private private private private sector sector sector sector economic economic economic economic vision. vision. vision. vision.<br />

The economic crisis of 1992 when the country was<br />

almost running out of reserves and forced to seek<br />

emergency IMF financing, forced a re-thinking on a<br />

socialist economic st<strong>ra</strong>tegy, the “Hindu” <strong>ra</strong>te of growth<br />

of 3% and all the problems of the “License Raj” with a<br />

<strong>la</strong>byrinthine and suffocating bureauc<strong>ra</strong>tic appa<strong>ra</strong>tus. It<br />

took the vision of the then finance minister (now prime<br />

minister) Manmohan Singh to create the right<br />

environment for change that included cutting the<br />

excessive tariff barriers and regu<strong>la</strong>tory const<strong>ra</strong>ints on<br />

foreign owner<strong>sh</strong>ips and repatria<strong>tio</strong>n of profits that was<br />

limiting FDI flows. Indeed when Bang<strong>la</strong>de<strong>sh</strong>i private<br />

sector p<strong>la</strong>yers express skepticism about the ability to<br />

work with policymakers to deliver necessary<br />

regu<strong>la</strong>tory reforms, one need only look to India,<br />

whose bureauc<strong>ra</strong>cy in the early 1990s was no less<br />

unwieldy than Bang<strong>la</strong>de<strong>sh</strong>’s regu<strong>la</strong>tory f<strong>ra</strong>mework<br />

today for evidence of what can be done when the<br />

public and private sectors develop a partner<strong>sh</strong>ip/adopt<br />

a mindset of coope<strong>ra</strong><strong>tio</strong>n<br />

China and India, both have extremely detailed 5 year<br />

economic p<strong>la</strong>ns. But in addi<strong>tio</strong>n, we are struck by the<br />

degree to which every government minister and<br />

senior civil servant is familiar with the details of such 5<br />

year p<strong>la</strong>ns, both the goals and how they are to be<br />

achieved. We believe that the next government needs<br />

to urgently formu<strong>la</strong>te a simi<strong>la</strong>r Bang<strong>la</strong>de<strong>sh</strong> Na<strong>tio</strong>nal<br />

Economic Vision and P<strong>la</strong>n in partner<strong>sh</strong>ip with the<br />

private sector. Such a p<strong>la</strong>n needs to have all-party<br />

support so that we move away from the economic<br />

policy vo<strong>la</strong>tility to a na<strong>tio</strong>nal consensus on the way<br />

forward that is independent of the political cycle.<br />

Key Key Economic Economic Challenges Challenges Faci Facing Faci ng the the Next<br />

Next<br />

Government<br />

Government<br />

So what <strong>sh</strong>ould the economic priorities be for the next<br />

government to meet the na<strong>tio</strong>n’s expecta<strong>tio</strong>ns in<br />

delivering 8% inclusive growth. At a Macro level,<br />

according to the recently publi<strong>sh</strong>ed “Bang<strong>la</strong>de<strong>sh</strong><br />

Second Investment Climate Report” from the World<br />

Bank (October 2008) the top five investment climate<br />

const<strong>ra</strong>ints, in the opinion of metropolitan firms, are<br />

electricity, political instability, governance, access to<br />

<strong>la</strong>nd, and access to finance. Below we discuss some<br />

of the key economic challenges facing the country<br />

and then outline an immediate ac<strong>tio</strong>n p<strong>la</strong>n for the new<br />

government.<br />

Solving Solving Solving the the the Power Power Power Crisis Crisis<br />

Crisis<br />

Some estimates put the cost of electricity <strong>sh</strong>ortages to<br />

Bang<strong>la</strong>de<strong>sh</strong> at as much as two percentage points of<br />

annual GDP growth. While there are many reasons to<br />

believe that Bang<strong>la</strong>de<strong>sh</strong> can emu<strong>la</strong>te the Foreign<br />

Direct Investment (FDI) success story of other Asian<br />

countries like India or Vietnam, one factor that could<br />

de-<strong>ra</strong>il even perennial Bang<strong>la</strong>de<strong>sh</strong> optimists is the<br />

esca<strong>la</strong>ting power crisis gripping the country.<br />

So where has the power crisis originated? We think<br />

there are seve<strong>ra</strong>l sources: i) Many power p<strong>la</strong>nts are<br />

idle due to the gas supply <strong>sh</strong>ortage; ii) An inefficient<br />

t<strong>ra</strong>nsmission and distribu<strong>tio</strong>n system ope<strong>ra</strong>ted by<br />

state owned companies are the main factor behind<br />

high system loss. A reduc<strong>tio</strong>n of 1 % system loss can<br />

save around 45 MW of power; iii) Another factor is the<br />

<strong>la</strong>ck of political and environmental consensus to tap<br />

Bang<strong>la</strong>de<strong>sh</strong>'s coal resources. We have a probable<br />

coal reserve of 3.3 billion tones, which is around 5<br />

times higher than our current proven gas reserve in<br />

terms of its heating value. 4) A <strong>la</strong>ck of t<strong>ra</strong>nsparency in<br />

power gene<strong>ra</strong><strong>tio</strong>n procurement and tendering in the<br />

past.<br />

Greater Greater Focus Focus on on Diversifying Diversifying Diversifying Exports<br />

Exports<br />

Diversifying exports requires an improved business<br />

climate, adequate incentives for entrepreneur<strong>sh</strong>ip<br />

development, and efficient app<strong>ra</strong>isal of foreign direct<br />

investment (FDI) proposals. Bang<strong>la</strong>de<strong>sh</strong> has<br />

significant potential in seve<strong>ra</strong>l export-oriented<br />

industries, including pharmaceuticals, leather goods,<br />

frozen foods, <strong>sh</strong>ipbuilding, and informa<strong>tio</strong>n technologyenabled<br />

services (ITES). With adequate private sector<br />

investment and regu<strong>la</strong>tory support, these sectors could<br />

contribute to export diversifica<strong>tio</strong>n.<br />

10


Greater Greater Investment Investment and and th the th e Importance of of FDI<br />

Investment (Gross Domestic Investment) is currently at<br />

24% of GDP, of which 19% is private and 5% public.<br />

FDI net flows are below potential at 1.3%. Higher<br />

investment levels domestically would depend on the<br />

ability of the financial system to perform more<br />

effectively as the facilitating mechanism between<br />

savings and investment. The World Bank has<br />

estimated that to reach East Asian growth <strong>ra</strong>tes of 7-<br />

8%, investment levels in Bang<strong>la</strong>de<strong>sh</strong> would have to<br />

rise to 30%. FDI will likely be key, as foreign-owned<br />

firms are a source of innova<strong>tio</strong>n and may have a<br />

synergistic effect in terms of greater productivity than<br />

their domestic counterparts. Addi<strong>tio</strong>nally, Bang<strong>la</strong>de<strong>sh</strong><br />

currently saves about 30% of GDP – with improved<br />

efficiency in financial intermedia<strong>tio</strong>n and inf<strong>ra</strong>structure,<br />

this would provide a significant source of capital for<br />

domestic investment.<br />

An An Effective Effective B<strong>ra</strong>nd B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> St<strong>ra</strong>tegy St<strong>ra</strong>tegy<br />

St<strong>ra</strong>tegy<br />

In 2007 Vietnam att<strong>ra</strong>cted Foreign Direct Investment<br />

(FDI) flows of USD 20bn and if Bang<strong>la</strong>de<strong>sh</strong> is to<br />

benefit from the surge in global investor interest in<br />

Asia, we need to address the key ques<strong>tio</strong>ns of “Why<br />

Bang<strong>la</strong>de<strong>sh</strong>? Why Now?”. A new and effective<br />

st<strong>ra</strong>tegy for developing B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> will be a<br />

critical part in credibly answering these ques<strong>tio</strong>ns.<br />

One report from leading b<strong>ra</strong>nd consultants Interb<strong>ra</strong>nd,<br />

defined Na<strong>tio</strong>n B<strong>ra</strong>nding as “the ability to act and<br />

speak in a coordinated and repetitive way about the<br />

themes that are the most motivating and<br />

differentiating a country can make.” The 2007 Anholt<br />

Report noted “Globalisa<strong>tio</strong>n means that countries<br />

compete with each other for the atten<strong>tio</strong>n, respect and<br />

trust of potential customers, investors, tourists…a<br />

strong and positive na<strong>tio</strong>n b<strong>ra</strong>nd provides a crucial<br />

competitive image.”<br />

Educa<strong>tio</strong>n, Educa<strong>tio</strong>n, Educa<strong>tio</strong>n, Skills Skills Development, Development, Voca<strong>tio</strong>nal Voca<strong>tio</strong>nal T<strong>ra</strong>ini T<strong>ra</strong>ining T<strong>ra</strong>ini ng<br />

and and Manpower Manpower Exports<br />

Exports<br />

Bang<strong>la</strong>de<strong>sh</strong>’s major asset is its <strong>la</strong>rge <strong>la</strong>bour force.<br />

Indeed, South Asia ove<strong>ra</strong>ll has 25% of the world’s<br />

popu<strong>la</strong><strong>tio</strong>n. As the India State Minister for Commerce<br />

HE Jai Ram Rame<strong>sh</strong> noted on November 1 at the<br />

DCCI 50 th Anniversary conference, this can either be<br />

a popu<strong>la</strong><strong>tio</strong>n dividend or a popu<strong>la</strong><strong>tio</strong>n disaster as far<br />

as growth and poverty reduc<strong>tio</strong>n is concerned. The<br />

defining factor will be the ability of countries like India,<br />

Bang<strong>la</strong>de<strong>sh</strong> and Pakistan with <strong>ra</strong>pidly growing young<br />

popu<strong>la</strong><strong>tio</strong>ns to educate and give them the skills to<br />

compete in the global economy.<br />

As the Skills Development Working Group of the<br />

Bang<strong>la</strong>de<strong>sh</strong> Better Business Forum (BBBF) noted in a<br />

recent report: “Bang<strong>la</strong>de<strong>sh</strong> needs to p<strong>la</strong>ce greater<br />

emphasis on the ret<strong>ra</strong>ining and skills upg<strong>ra</strong>ding of the<br />

workforce. This is necessary not only to increase the<br />

knowledge and skill intensity of the workforce, but also<br />

to equip them with specialized and up to date skills as<br />

produc<strong>tio</strong>n techniques become increasingly automated<br />

and businesses more competitive. Ret<strong>ra</strong>ining and skills<br />

upg<strong>ra</strong>ding is also of pa<strong>ra</strong>mount importance to enhance<br />

the quality of the workforce so that it is versatile and<br />

adaptable to the ever-changing technological and<br />

business environment of a globalized market p<strong>la</strong>ce.<br />

As demonst<strong>ra</strong>ted by the Ma<strong>la</strong>ysian growth model,<br />

Skills Development and Voca<strong>tio</strong>nal T<strong>ra</strong>ining must<br />

come to the forefront of our Human Resources<br />

Development Agenda. (e.g. Ma<strong>la</strong>ysia spends 30% of<br />

11


its Budget on Educa<strong>tio</strong>n of which 50% is spent on<br />

Voca<strong>tio</strong>nal and Technical Educa<strong>tio</strong>n).”<br />

By 2015 revenues in the manpower sector could<br />

reach USD 30bn according to a recent Danida report.<br />

This will require a focused and targeted st<strong>ra</strong>tegy on<br />

voca<strong>tio</strong>nal t<strong>ra</strong>ining along with investment in HR<br />

consultancies. Most Bang<strong>la</strong>de<strong>sh</strong>i mig<strong>ra</strong>nts are young,<br />

male, unskilled, aged between 15-30 years and poorly<br />

educated. Only 10-20% are certified voca<strong>tio</strong>nally<br />

t<strong>ra</strong>ined and less than 10% of gene<strong>ra</strong>l college<br />

g<strong>ra</strong>duates are exportable. T<strong>ra</strong>ining has become a<br />

necessity with the structu<strong>ra</strong>l <strong>sh</strong>ift towards activities<br />

demanding higher skill and the emergence of<br />

automa<strong>tio</strong>n. With the current deficiency in voca<strong>tio</strong>nal<br />

t<strong>ra</strong>ining, the government needs to work in partner<strong>sh</strong>ip<br />

with the private sector in setting up institu<strong>tio</strong>ns serving<br />

targeted <strong>la</strong>bor pool such as electricians, fabricators,<br />

carpenters and garment ope<strong>ra</strong>tors, who can create<br />

more profitable manpower exports.<br />

Creating Creating a a dynamic dynamic dynamic SME SME sector<br />

sector<br />

The Small and Medium-Sized Enterprises (SME)<br />

sector has the potential to be a more significant driver<br />

of economic growth. Smaller companies are<br />

responsible for the bulk of employment growth in the<br />

country, and represent more than half of GDP.<br />

Furthermore, productivity analysis indicates that<br />

smaller firms are more productive than <strong>la</strong>rger ones in<br />

many industries. In an efficient economic system, they<br />

would therefore receive greater resources. But small<br />

entrepreneurs <strong>la</strong>ck the connec<strong>tio</strong>ns and ability to<br />

access support, and most importantly, they are<br />

severely credit-<strong>ra</strong><strong>tio</strong>ned by the banks. Without<br />

resources to these more productive and povertyreducing<br />

sectors, Bang<strong>la</strong>de<strong>sh</strong> is losing a major<br />

opportunity to make faster progress towards not only<br />

<strong>ra</strong>ising the ove<strong>ra</strong>ll level of productivity and GDP<br />

growth, but also deliver more inclusive growth to a<br />

broader segment of society which is key in delivering<br />

more <strong>ra</strong>pid poverty reduc<strong>tio</strong>n.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> as as as a a sizeable sizeable Agro Agro-food Agro food exporter<br />

Bang<strong>la</strong>de<strong>sh</strong> has made major progress in becoming<br />

more self-sufficient in a number of agricultu<strong>ra</strong>l<br />

products and increasing productivity. Products of high<br />

value agriculture accounted for about 5% of total<br />

export earnings for Bang<strong>la</strong>de<strong>sh</strong> in 2004. But we<br />

believe there are still substantial opportunities given<br />

scope for increased research in areas such as hybrid<br />

rice and improving yields in areas such as <strong>sh</strong>rimp<br />

farming where a hectare of produc<strong>tio</strong>n still delivers<br />

around 10% of the return from a hectare of <strong>sh</strong>rimp<br />

farming in Thai<strong>la</strong>nd.<br />

Environmentally Environmentally Sustainable Sustainable Growth<br />

Growth<br />

Tackling climate change will undoubtedly be the major<br />

challenge of both our lifetimes and that of future<br />

gene<strong>ra</strong><strong>tio</strong>ns. Global climate change, driven <strong>la</strong>rgely by<br />

the combus<strong>tio</strong>n of fossil fuels and by <strong>ra</strong>pid<br />

deforesta<strong>tio</strong>n, is a growing threat to popu<strong>la</strong><strong>tio</strong>ns in<br />

developing and industrialized na<strong>tio</strong>ns alike. Significant<br />

harm from climate change is already occurring, and a<br />

further negative impact on the p<strong>la</strong>net is a certainty.<br />

Given the frequency of floods, cyclones and storm<br />

surges in Bang<strong>la</strong>de<strong>sh</strong>, coupled with low eleva<strong>tio</strong>n,<br />

clearly it is one of the world's most vulne<strong>ra</strong>ble<br />

countries to the impact of climate change. The<br />

challenge now is to keep climate change from<br />

becoming a catastrophe.<br />

Better Better Better Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure via via Regional Regional Regional Integ<strong>ra</strong><strong>tio</strong>n<br />

Integ<strong>ra</strong><strong>tio</strong>n<br />

Fifty years ago the t<strong>ra</strong>nsport networks of South Asia<br />

were one of the most integ<strong>ra</strong>ted in the developing<br />

world, but these were disrupted following the parti<strong>tio</strong>n<br />

of the region into seven independent states. At<br />

present, highways, waterways and <strong>ra</strong>il links which<br />

t<strong>ra</strong>verse each country are unable to service the region<br />

as they stop at na<strong>tio</strong>nal borders. The rebuilding of this<br />

physical inf<strong>ra</strong>structure has been const<strong>ra</strong>ined by<br />

security driven apprehensions which the countries<br />

found impelling enough to sacrifice mutual economic<br />

benefits.<br />

In this process of rebuilding the t<strong>ra</strong>nsport inf<strong>ra</strong>structure<br />

of the eastern region of South Asia, Bang<strong>la</strong>de<strong>sh</strong><br />

emerges as the hub around which reconstruc<strong>tio</strong>n of<br />

<strong>la</strong>nd links could take p<strong>la</strong>ce. Bang<strong>la</strong>de<strong>sh</strong> was once a<br />

major highway linking main<strong>la</strong>nd India with both North<br />

Bengal and North-East India. The development of the<br />

<strong>la</strong>nd alignments, which would provide the North East of<br />

India access to the sea through the Bay of Bengal and<br />

integ<strong>ra</strong>te its market with Bang<strong>la</strong>de<strong>sh</strong> could establi<strong>sh</strong><br />

this undeveloped region as a staging post for<br />

economic links within South Asia and with <strong>la</strong>nd locked<br />

South West China. The Chittagong port could be built<br />

up as the nodal point for handling the t<strong>ra</strong>de of the<br />

region.<br />

As the Nagorik Committee noted in their<br />

comprehensive 2006 report “Bang<strong>la</strong>de<strong>sh</strong>’s st<strong>ra</strong>tegic<br />

geog<strong>ra</strong>phical loca<strong>tio</strong>n presents it with a unique<br />

opportunity to become a regional economic and<br />

commercial hub by 2021. Two of our neighbouring<br />

countries, India and China, will be the world’s <strong>la</strong>rgest<br />

and second <strong>la</strong>rgest markets in the near future. This<br />

<strong>sh</strong>ould allow us to att<strong>ra</strong>ct global companies to use<br />

12


Bang<strong>la</strong>de<strong>sh</strong> as a base to manufacture, and take<br />

advantage of our loca<strong>tio</strong>n to export goods and services<br />

to these countries. When formu<strong>la</strong>ting off-<strong>sh</strong>oring p<strong>la</strong>ns,<br />

companies take into account low <strong>la</strong>bour costs as well<br />

as the prospects of establi<strong>sh</strong>ing a future sales foothold<br />

in a low-cost country.<br />

A A Focused Focused Diaspo<strong>ra</strong> Diaspo<strong>ra</strong> SSt<strong>ra</strong>tegy<br />

S St<strong>ra</strong>tegy<br />

t<strong>ra</strong>tegy<br />

Around the world repeated waves of emig<strong>ra</strong><strong>tio</strong>n have<br />

led to the crea<strong>tio</strong>n of vib<strong>ra</strong>nt Diaspo<strong>ra</strong>s that possess<br />

cutting-edge technology, capital and professional<br />

contacts. In addi<strong>tio</strong>n, mig<strong>ra</strong>nts have often p<strong>la</strong>yed a<br />

valuable role in the t<strong>ra</strong>nsfer of market-based<br />

institu<strong>tio</strong>ns, such as venture capital, entrepreneur<strong>sh</strong>ip<br />

and corpo<strong>ra</strong>te t<strong>ra</strong>nsparency, to their countries of<br />

origin.<br />

NRBs can offer intellectual, commercial as well as<br />

financial capital along with a credible interface with<br />

potential investors and corpo<strong>ra</strong>tes in the rest of the<br />

world. There is<br />

little doubt that greater focus on a more effective<br />

Diaspo<strong>ra</strong> st<strong>ra</strong>tegy could p<strong>la</strong>y a key role in accele<strong>ra</strong>ting<br />

Bang<strong>la</strong>de<strong>sh</strong>'s future economic development.<br />

Figure Figure 4: 4: Diaspo<strong>ra</strong> Diaspo<strong>ra</strong> in in in 2006<br />

2006<br />

Countries<br />

Diaspo<strong>ra</strong><br />

(mn)<br />

Total popu<strong>la</strong><strong>tio</strong>n<br />

(mn)<br />

Diaspo<strong>ra</strong> as a %<br />

of total popu<strong>la</strong><strong>tio</strong>n<br />

Vietnam 3 84 4%<br />

India 24 1,100 2%<br />

China 39 1,300 3%<br />

Bang<strong>la</strong>de<strong>sh</strong> 4 142 3%<br />

Looking Looking Looking Ahead<br />

Ahead<br />

The charts below from a survey of 1200 people<br />

conducted by the Bang<strong>la</strong>de<strong>sh</strong> Investment Climate<br />

Fund (BICF) highlight the ongoing perceived need for<br />

major economic reforms in Bang<strong>la</strong>de<strong>sh</strong> as well as the<br />

<strong>la</strong>ck of c<strong>la</strong>rity that the next government will deliver on<br />

them.<br />

Source: BICF 2008<br />

BD’s macroeconomic fundamentals are sound and its<br />

resilience to the global crisis compares very<br />

favou<strong>ra</strong>bly with other countries in the region. Inf<strong>la</strong><strong>tio</strong>n<br />

is also on a declining trend and growth has stayed<br />

firm. The next government’s priority would be to<br />

consolidate on the gains achieved so far, and make<br />

further progress to achieve higher growth (8-9<br />

percent) and reduce inf<strong>la</strong><strong>tio</strong>n to 4-5 percent <strong>ra</strong>nge. For<br />

this to happen, the new government must ref<strong>ra</strong>in from<br />

populist expansionary fiscal spending and reaffirm its<br />

commitment to forcefully implement the projects<br />

already under process implementa<strong>tio</strong>n. The<br />

government <strong>sh</strong>ould underscore policy continuity and<br />

avoid reversals under the pretext of reviewing the<br />

projects. The government <strong>sh</strong>ould be forward looking<br />

with new and bold initiatives and never look back.<br />

13


ECONOMIC ROADMAP<br />

14


Economic Economic Roadmap<br />

Roadmap<br />

Policy Policy sugges<strong>tio</strong>ns sugges<strong>tio</strong>ns for for the the first first hundred hundred days days of of the<br />

the<br />

new new government:<br />

government:<br />

1.Develop 1.Develop a a Na<strong>tio</strong>nal Na<strong>tio</strong>nal Economic Economic Economic Vision<br />

Vision<br />

Develop a long term na<strong>tio</strong>nal vision 2020 with with detailed detailed<br />

analysis analysis and and a a p<strong>ra</strong>ctical roadmap for policy<br />

developme development developme development<br />

nt and and implementa<strong>tio</strong>n. implementa<strong>tio</strong>n. The structu<strong>ra</strong>l<br />

changes in the economy and the global scenario<br />

needs to be anticipated while formu<strong>la</strong>ting a realistic<br />

vision. Extensive dialogue <strong>sh</strong>ould be undertaken with<br />

civil society members, business chambers, nongovernment<br />

organiza<strong>tio</strong>ns, and other stakeholders.<br />

2. 2. Energy Energy<br />

Energy<br />

2.1 More Rental Power P<strong>la</strong>nts (RPP) need to be<br />

installed to overcome the <strong>sh</strong>ort term power crisis. In<br />

RPP, project developers are allowed to install second<br />

hand engines, thus <strong>sh</strong>ortening the project<br />

implementa<strong>tio</strong>n time, which is currently 120 days as<br />

set by the government. RPPs are usually costlier as<br />

the cont<strong>ra</strong>ct period for these projects are three years.<br />

The government needs to att<strong>ra</strong>ct more local / foreign<br />

investors to increase the competi<strong>tio</strong>n in the tendering<br />

process which will eventually reduce the tariff. Along<br />

with that, the government needs to closely supervise<br />

the implementa<strong>tio</strong>n of the project to ensure timely<br />

commencement of power gene<strong>ra</strong><strong>tio</strong>n.<br />

2.2 The Coal Policy needs to be finalized as early as<br />

possible. The first d<strong>ra</strong>ft of the policy was publi<strong>sh</strong>ed by<br />

the government on December, 2005. Since then, the<br />

d<strong>ra</strong>ft policy has undergone many revisions on the<br />

basis of discussions with various stakeholders and<br />

experts and still has not been finalized. To develop<br />

the coal sector efficiently, a well thought out coal<br />

policy is mandatory.<br />

2.3 The government <strong>sh</strong>ould implement the merchant<br />

power policy immediately. Merchant power p<strong>la</strong>nts can<br />

be installed in a <strong>sh</strong>orter period of time as there is no<br />

tendering process. In this type of power p<strong>la</strong>nt,<br />

government does not ensure any fuel supply, power<br />

purchase, <strong>la</strong>nd lease or any other agreements with<br />

the private companies. After identifying prospective<br />

demand in a particu<strong>la</strong>r area, the investor can set up<br />

the power p<strong>la</strong>nt and can start selling power to the<br />

local consumers. It could be argued that merchant<br />

power p<strong>la</strong>nts can enable the investors to monopolize<br />

the power sector and negatively affect the consumers,<br />

but the government can ensure competi<strong>tio</strong>n in the<br />

long run by adding more power in the na<strong>tio</strong>nal power<br />

grid.<br />

However, the government also needs to recognize the<br />

need to move tariff prices paid to new power<br />

gene<strong>ra</strong><strong>tio</strong>n companies to more realistic market levels.<br />

In order to be self propelling and to ensure<br />

sustainability of uninterrupted supply of power,<br />

investment in the sector must be commercially viable.<br />

The real cost of power is always cheaper and better<br />

than no power. FBCCI therefore supports the proposal<br />

for <strong>ra</strong><strong>tio</strong>naliza<strong>tio</strong>n of power price at agency and<br />

consumer level; provided that power supply to<br />

industries and agriculture must be adequately<br />

subsidized with alloca<strong>tio</strong>n in the Na<strong>tio</strong>nal Budget.<br />

2.4 Single Power Purchaser: Each gene<strong>ra</strong>ting<br />

company, IPPs including Captive and Co-gene<strong>ra</strong>tors<br />

<strong>sh</strong>all sell electricity to the single purchaser and<br />

t<strong>ra</strong>nsmitting authority, the BPDB under the power<br />

purchase agreement which <strong>sh</strong>all be finalized by the<br />

BERC.<br />

2.5 To facilitate more <strong>ra</strong>pid increased power<br />

gene<strong>ra</strong><strong>tio</strong>n capacity, the government can set up some<br />

small coal fired power p<strong>la</strong>nts and can import coal from<br />

India on a tempo<strong>ra</strong>ry basis before developing our own<br />

coal mines.<br />

2.6 The government <strong>sh</strong>ould adopt a more efficient and<br />

faster procurement and tendering process for quicker<br />

implementa<strong>tio</strong>n of any project. Though it is believed<br />

that there is a negative corre<strong>la</strong><strong>tio</strong>n between a faster<br />

tendering process and t<strong>ra</strong>nsparency, we think it is<br />

possible to <strong>sh</strong>orten the existing tendering process<br />

without hampering t<strong>ra</strong>nsparency.<br />

2.7 All the old and inefficient power p<strong>la</strong>nts <strong>sh</strong>ould be<br />

rep<strong>la</strong>ced immediately to ensure better utiliza<strong>tio</strong>n of<br />

primary fuel and smooth ope<strong>ra</strong><strong>tio</strong>n.<br />

2.8 The government needs to focus on new gas field<br />

explo<strong>ra</strong><strong>tio</strong>ns to fuel the existing gas based power<br />

p<strong>la</strong>nts. The recove<strong>ra</strong>ble proven remaining reserve of<br />

gas is around 8.1 TCF which will start depleting after<br />

2012. The maritime boundary dispute with India and<br />

Myanmar is a major barrier to off<strong>sh</strong>ore gas<br />

explo<strong>ra</strong><strong>tio</strong>n, and <strong>sh</strong>ould be resolved as soon as<br />

possible.<br />

• The government <strong>sh</strong>ould dec<strong>la</strong>re next 5 years’ p<strong>la</strong>n<br />

of ac<strong>tio</strong>n of BAPEX. Should set up at least 6<br />

explo<strong>ra</strong><strong>tio</strong>n wells every year.<br />

• Should start the work of at least 1 explo<strong>ra</strong><strong>tio</strong>n well<br />

in the 1 st 100 days.<br />

• If needed, energy bond or levies <strong>sh</strong>ould be<br />

charged to <strong>ra</strong>ise funds<br />

15


2.9 All existing power gene<strong>ra</strong>ting units of the country/<br />

BPDB <strong>sh</strong>ould be t<strong>ra</strong>nsformed in to public limited<br />

companies under the Companies Act 1994 with [51 %]<br />

<strong>sh</strong>are for BPDB, 45% for Bang<strong>la</strong>de<strong>sh</strong> private sector,<br />

non-resident Bang<strong>la</strong>de<strong>sh</strong>is and foreign investors and<br />

[4 %] for the officials and workers of the respective<br />

utilities.<br />

2.10 2.10 IPP, Distributed energy resources, Captive Power<br />

and Co-gene<strong>ra</strong><strong>tio</strong>n <strong>sh</strong>ould also be encou<strong>ra</strong>ged and<br />

<strong>sh</strong>ould be provided with necessary assistance and<br />

coope<strong>ra</strong><strong>tio</strong>n. Clustered Industrial and SME zones,<br />

Market Complexes, Housing Estates and other bulk<br />

consumers of power <strong>sh</strong>ould be encou<strong>ra</strong>ged to set up<br />

co-gene<strong>ra</strong><strong>tio</strong>n and captive power p<strong>la</strong>nts by ensuring :-<br />

• Low interest (


public-private partner<strong>sh</strong>ip could be the best op<strong>tio</strong>n for<br />

the proposed DEE. According to the proposal, the<br />

government would take 49 per cent while the st<strong>ra</strong>tegic<br />

partner from the private sector would contribute 51 per<br />

cent of the project cost.<br />

3.2 Accele<strong>ra</strong>te the Dhaka-Chittagong Highway: There<br />

has been significant interest from interna<strong>tio</strong>nal<br />

investors and corpo<strong>ra</strong>tes to participate in proposed the<br />

Dhaka-Chittagong Second Highway. For example, the<br />

Thai<strong>la</strong>nd government has previously <strong>sh</strong>own interest to<br />

provide technical and financial help for this project.<br />

Azimat Consortium – a consortium of six Ma<strong>la</strong>ysian<br />

private sector investment firms – submitted an<br />

unsolicited offer to construct the Dhaka-Chittagong<br />

highway in July, 2006 at a total cost of BDT 58.24bn<br />

(USD 850mn) under build-own-ope<strong>ra</strong>te-and-t<strong>ra</strong>nsfer<br />

(BOOT) scheme.<br />

3.3 The 30+ <strong>ra</strong>ilway crossings within Dhaka are a<br />

major cause of t<strong>ra</strong>ffic. An immediate priority would be<br />

to build enough overpasses/tunnels at these <strong>ra</strong>ilway<br />

intersec<strong>tio</strong>ns so that the regu<strong>la</strong>r flow of road t<strong>ra</strong>ffic<br />

remains uninterrupted.<br />

3.4 Upg<strong>ra</strong>ding the existing highways linking Dhaka,<br />

Chittagong, Sylhet, Raj<strong>sh</strong>ahi, and other key points of<br />

the country into four <strong>la</strong>nes, and undertaking necessary<br />

policy measures to keep these major highways of the<br />

country smooth and of interna<strong>tio</strong>nal standards.<br />

3.5 To ensure this along with a smooth t<strong>ra</strong>nsporta<strong>tio</strong>n<br />

network in the country, government has to allocate<br />

more budgetary fund in the communica<strong>tio</strong>n sector and<br />

ensure proper utiliza<strong>tio</strong>n of that fund.<br />

3.6 Move forward on Chittagong Deep Sea Port<br />

Project: Due to the upside down V <strong>sh</strong>ape of the Bay of<br />

Bengal and being posi<strong>tio</strong>ned at the apex, Bang<strong>la</strong>de<strong>sh</strong><br />

has a better opportunity to set up a Deep Sea Port,<br />

which might be used by Bang<strong>la</strong>de<strong>sh</strong>, India, Nepal,<br />

Bhutan, and China. What Bang<strong>la</strong>de<strong>sh</strong> needs to do at<br />

the moment, is to take the lead ahead of India.<br />

Otherwise it may lose the opportunity. A deep seaport<br />

means:<br />

• Handling more cargo for the region and support<br />

the export and import.<br />

• Get foreign-currency revenue from the neighbors<br />

by providing T<strong>ra</strong>nsit Services.<br />

• Create new jobs and industries along the East<br />

Coast.<br />

• Develop the communica<strong>tio</strong>n on the East Coast<br />

Belt.<br />

• Find alternatives for Chittagong and Mong<strong>la</strong> Port.<br />

• Reduce the affect of political and <strong>la</strong>bor unrest.<br />

• Ultimate development of the South East Region.<br />

3.7 Within 100 days, a ‘Na<strong>tio</strong>nal Sea and River<br />

Inf<strong>ra</strong>structure Development Council’ <strong>sh</strong>ould be<br />

establi<strong>sh</strong>ed. This council <strong>sh</strong>ould quickly take and<br />

implement necessary steps to improve the sea and<br />

river inf<strong>ra</strong>structure to create a easy and cheap rout for<br />

the t<strong>ra</strong>nsporta<strong>tio</strong>n of agricultu<strong>ra</strong>l and industrial<br />

products.<br />

3.8 Every industry and ports <strong>sh</strong>ould be made free from<br />

hartals and blockades. Every political party <strong>sh</strong>ould<br />

announce this initiative in their pre-elec<strong>tio</strong>n<br />

memo<strong>ra</strong>ndum and advertisements before elec<strong>tio</strong>n.<br />

3.9 Government <strong>sh</strong>ould provide surety that the current<br />

productivity and discipline of ports can never decrease.<br />

Government <strong>sh</strong>ould also provide necessary services to<br />

the ports.<br />

4. 4. Increasing Increasing FDI FDI and and an an Effective Effective B<strong>ra</strong>nd B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

St<strong>ra</strong>tegy<br />

St<strong>ra</strong>tegy<br />

4.1 BOI Reforms: Accele<strong>ra</strong>te the proposed reform<br />

prog<strong>ra</strong>m for the Board of Investment (BOI) including<br />

the setting up of a new “Investment Bang<strong>la</strong>de<strong>sh</strong>” wing.<br />

This new organiza<strong>tio</strong>n will be solely tasked with<br />

att<strong>ra</strong>cting FDI by developing sector research and direct<br />

marketing to prospective investors either on a country<br />

or company specific basis.<br />

4.2 4.2 It is critical to att<strong>ra</strong>ct more qualified and credible<br />

senior BOI officials from the private sector if the reenergisa<strong>tio</strong>n<br />

of the BOI is to be effective. The BOI<br />

Chairman <strong>sh</strong>ould come from the private sector. This<br />

clearly necessitates that sa<strong>la</strong>ry levels for the BOI need<br />

to be increased towards commercial levels.<br />

4.3 FBCCI <strong>sh</strong>ould form a sub-committee for FDI that<br />

deepens re<strong>la</strong><strong>tio</strong>ns with t<strong>ra</strong>de bodies in target markets<br />

and ensures higher frequency dialogue and<br />

inte<strong>ra</strong>c<strong>tio</strong>ns to maximize potential investments and<br />

joint ventures. There <strong>sh</strong>ould be participa<strong>tio</strong>n from the<br />

Finance and Commerce Ministries and Bang<strong>la</strong>de<strong>sh</strong><br />

Bank.<br />

4.4 4.4 New B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> Taskforce: The reb<strong>ra</strong>nding<br />

of Bang<strong>la</strong>de<strong>sh</strong> as an att<strong>ra</strong>ctive investment destina<strong>tio</strong>n<br />

is critical. The new Government <strong>sh</strong>ould set up a B<strong>ra</strong>nd<br />

Bang<strong>la</strong>de<strong>sh</strong> taskforce with a core committee<br />

composed of the heads of the BOI, EPB, Foreign<br />

Ministry, FBCCI, Finance Ministry, Bang<strong>la</strong>de<strong>sh</strong> Bank<br />

and NRB professional groups from Europe and the US.<br />

It is also important to set up sub-committees within the<br />

key export destina<strong>tio</strong>ns.<br />

4.5 The Committee <strong>sh</strong>ould appoint a professional<br />

b<strong>ra</strong>nd st<strong>ra</strong>tegist with interna<strong>tio</strong>nal experience of na<strong>tio</strong>n<br />

b<strong>ra</strong>nding for successful investment destina<strong>tio</strong>ns such<br />

as Ma<strong>la</strong>ysia and Singapore.<br />

4.6 The Na<strong>tio</strong>nal B<strong>ra</strong>nding Taskforce <strong>sh</strong>ould also<br />

focusing on providing t<strong>ra</strong>ining, guidance and<br />

17


monitoring of commercial sec<strong>tio</strong>ns of Bang<strong>la</strong>de<strong>sh</strong><br />

Embassies in key target markets.<br />

4.7 The Committee <strong>sh</strong>ould also liaise with donor<br />

agencies and bi<strong>la</strong>te<strong>ra</strong>l aid organiza<strong>tio</strong>ns such as DFID,<br />

USAID, CIDA, DANIDA and others to leve<strong>ra</strong>ge their<br />

contacts.<br />

5. 5. A A Na<strong>tio</strong>nal Na<strong>tio</strong>nal Voca Voca<strong>tio</strong>nal Voca Voca <strong>tio</strong>nal T<strong>ra</strong>ining/Engli<strong>sh</strong> Language<br />

Initiative<br />

Initiative<br />

5.1 The recently establi<strong>sh</strong>ed Na<strong>tio</strong>nal Skills<br />

Development Council <strong>sh</strong>ould be further strengthened<br />

with addi<strong>tio</strong>nal resources. The Educa<strong>tio</strong>n Budget<br />

needs to be increased significantly and 50% of that<br />

budget <strong>sh</strong>ould go towards voca<strong>tio</strong>nal t<strong>ra</strong>ining as we<br />

see in Ma<strong>la</strong>ysia.<br />

5.2 5.2 There <strong>sh</strong>ould be a greater use of PPP within<br />

educa<strong>tio</strong>n and voca<strong>tio</strong>nal t<strong>ra</strong>ining so that both<br />

domestic worker and manpower exports are geared<br />

towards the demands of employers and the<br />

marketp<strong>la</strong>ce.<br />

5. 5.3 5. 3 The Government <strong>sh</strong>ould encou<strong>ra</strong>ge the popu<strong>la</strong><strong>tio</strong>n<br />

by announcing Engli<strong>sh</strong> as the ‘Second Working<br />

Language’.<br />

5.4 5.4 To increase and encou<strong>ra</strong>ge interna<strong>tio</strong>nal business<br />

communica<strong>tio</strong>n and Engli<strong>sh</strong> <strong>la</strong>nguage t<strong>ra</strong>ining re<strong>la</strong>ted<br />

work p<strong>la</strong>n <strong>sh</strong>ould be implemented.<br />

5.5 5.5 As per the advice of BBBF, the government <strong>sh</strong>ould<br />

establi<strong>sh</strong> a USD100mn or BDT700 crore development<br />

fund. (<strong>la</strong>st year remittances and exports accounted for<br />

USD 22bn. Every year s simple por<strong>tio</strong>n of this income<br />

can be attributed to the development of <strong>la</strong>bor skills.)<br />

5.6 5.6 As a starting point, government <strong>sh</strong>ould establi<strong>sh</strong><br />

voca<strong>tio</strong>nal t<strong>ra</strong>ining institutes in 50 untapped, but<br />

popu<strong>la</strong>ted Union Pari<strong>sh</strong>ods (Union Councils)<br />

5.7 5.7 The roadmap developed by the Skills Development<br />

Working Group of the BBBF outlined below <strong>sh</strong>ould be<br />

implemented by the new government:<br />

5.8 5.8 5.8 FAST-TRACK: (1 – 2 MONTHS)<br />

1. Establi<strong>sh</strong>ment of Na<strong>tio</strong>nal Skills Development<br />

Council (NSDC) – Approved by the BBBF and in p<strong>la</strong>ce.<br />

2. All Technical & Voca<strong>tio</strong>nal Educa<strong>tio</strong>nal & T<strong>ra</strong>ining<br />

Centres (including TTCs) to be made domestic and<br />

overseas industry-oriented; demand-driven; through<br />

revamping of management, t<strong>ra</strong>iners, curriculum,<br />

pedagogy<br />

3. T<strong>ra</strong>ining of Teachers (TOT) and Instructors with<br />

special focus on func<strong>tio</strong>nal Engli<strong>sh</strong> and IT proficiency<br />

4. Comprehensive Orienta<strong>tio</strong>n T<strong>ra</strong>ining for would-be<br />

Mig<strong>ra</strong>nt Workers & Special Government mig<strong>ra</strong><strong>tio</strong>n<br />

support services for safe mig<strong>ra</strong><strong>tio</strong>n & livelihood<br />

5. Establi<strong>sh</strong>ment of Industry-led, Sector-based &<br />

Agricultu<strong>ra</strong>l Public-Private Skills Development Working<br />

Groups with Government as Facilitator and Incentivizer<br />

6. Engli<strong>sh</strong> and IT proficiency courses to be provided in<br />

all t<strong>ra</strong>ining and formal educa<strong>tio</strong>n institutes – Approved<br />

by BBBF<br />

7. Develop p<strong>ra</strong>ctical micro-entrepreneur<strong>sh</strong>ip and SME<br />

Skills<br />

8. Convert existing BIM into private-sector-oriented<br />

Management Institutes for both private and public<br />

sector<br />

9. Higher percentage of Na<strong>tio</strong>nal Educa<strong>tio</strong>n Budget<br />

alloca<strong>tio</strong>n to Technical & Voca<strong>tio</strong>nal Educa<strong>tio</strong>n &<br />

T<strong>ra</strong>ining (TVET) Approved by BBBF<br />

5.9 5.9 MID-TERM: (1 – 6 MONTHS)<br />

1. Na<strong>tio</strong>nal Policy on Skills Development and<br />

Voca<strong>tio</strong>nal T<strong>ra</strong>ining<br />

2. Establi<strong>sh</strong>ment of “Na<strong>tio</strong>nal Human Resource<br />

Development Fund”<br />

3. Conduct a Na<strong>tio</strong>nal Survey and establi<strong>sh</strong> a Skills<br />

Development Database<br />

5.10 5.10 5.10 LONG-TERM: (1 - 12 MONTHS +)<br />

1. Independent Human Resource Development<br />

Ministry<br />

2. Establi<strong>sh</strong> Division-wise World-c<strong>la</strong>ss public lib<strong>ra</strong>ry<br />

facilities<br />

6. 6. Reducing Reducing the the cost/Improving cost/Improving Access Access to to to Finance<br />

Finance<br />

6.1 6.1 The cost of bank borrowing is too high, loans are<br />

over-col<strong>la</strong>te<strong>ra</strong>lized and the volume of credit avai<strong>la</strong>ble is<br />

not sufficient to fund investment. More bank credit<br />

officers need to have sufficient t<strong>ra</strong>ining and informa<strong>tio</strong>n<br />

to make risk-based assessments of lending on the<br />

basis of business prospects and not just col<strong>la</strong>te<strong>ra</strong>l.<br />

6.2 6.2 Bang<strong>la</strong>de<strong>sh</strong> Bank needs to encou<strong>ra</strong>ge the<br />

development of longer-maturity lending products so<br />

that corpo<strong>ra</strong>tes can better match their funding with<br />

long-term investment p<strong>la</strong>ns.<br />

6.3 6.3 The government <strong>sh</strong>ould encou<strong>ra</strong>ge the<br />

development of a Private Equity and Venture Capital<br />

industry so that there is greater access to risk capital to<br />

encou<strong>ra</strong>ge entrepreneur<strong>sh</strong>ip, new business<br />

development and innova<strong>tio</strong>n.<br />

6.4 6.4 Computerize a cent<strong>ra</strong>l credit informa<strong>tio</strong>n bureau<br />

and extend to all loans above BDT 10,000. A credit<br />

informa<strong>tio</strong>n bureau is ope<strong>ra</strong>ted by the cent<strong>ra</strong>l bank<br />

containing current loan informa<strong>tio</strong>n for all borrowers of<br />

financial institu<strong>tio</strong>ns regu<strong>la</strong>ted by the Bang<strong>la</strong>de<strong>sh</strong><br />

Bank. The system is not computerized. It only contains<br />

informa<strong>tio</strong>n about current loans above BDT 50,000<br />

(and not the full banking history of the borrower), and<br />

does not have a unique identifier for borrowers. This<br />

reduces the effectiveness of the system particu<strong>la</strong>rly<br />

18


hurting smaller firms who cannot build up reputa<strong>tio</strong>nbased<br />

credit.<br />

7. 7. Improving Improving Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure through through Regional<br />

Regional<br />

Integ<strong>ra</strong><strong>tio</strong>n Integ<strong>ra</strong><strong>tio</strong>n<br />

Integ<strong>ra</strong><strong>tio</strong>n<br />

Road Road Road Network:<br />

Network:<br />

7.1 7.1 For South Asia the crucial t<strong>ra</strong>nsport links to be<br />

developed would be along the alignment of the Asia<br />

Highway (AH). The AH network is a component of the<br />

Asian Land T<strong>ra</strong>nsporta<strong>tio</strong>n Inf<strong>ra</strong>structure (ALTID)<br />

project developed by ESCAP which also comprises the<br />

T<strong>ra</strong>ns Asian Railway (TAR) project including measures<br />

for the facilita<strong>tio</strong>n of <strong>la</strong>nd t<strong>ra</strong>nsporta<strong>tio</strong>n. The route<br />

criteria for ALTID project include capital to capital links,<br />

connec<strong>tio</strong>n to main industrial and agricultu<strong>ra</strong>l centres<br />

as well as growth zones, connec<strong>tio</strong>n to major sea and<br />

river ports and connec<strong>tio</strong>n to major in<strong>la</strong>nd container<br />

terminals arid depots.<br />

7.2 7.2 For Bang<strong>la</strong>de<strong>sh</strong>, it is critical to integ<strong>ra</strong>te with both<br />

India and China into the Asia Highway (AH).In recent<br />

years China has upg<strong>ra</strong>ded the old Burma road<br />

between Kunming and Myanmar as part of its<br />

associa<strong>tio</strong>n with the AH. The link between Kunming<br />

and the Bay of Bengal is 5,800 kilometers <strong>sh</strong>orter than<br />

Yunan's link with the nearest Chinese port at Shanghai<br />

or China's pacific coast.<br />

7.3 7.3 The Jamuna bridge in Bang<strong>la</strong>de<strong>sh</strong> would make it<br />

possible for the AH to provide uninterrupted t<strong>ra</strong>vel<br />

between Bang<strong>la</strong>de<strong>sh</strong> and Ca<strong>la</strong>is routed through India,<br />

Pakistan and then either into Cent<strong>ra</strong>l Asia or through<br />

West Asia into Europe. At the same time the bridge<br />

could establi<strong>sh</strong> links between Nepal and Bhutan<br />

through an unbroken <strong>la</strong>nd route to the port of<br />

Chittagong which may emerge as a far cheaper<br />

alternate route to Kolkata/ Haldia in India for Nepal and<br />

Bhutan.<br />

8. 8. A A St<strong>ra</strong>tegy t<strong>ra</strong>tegy for for Asian Regional egional egional Integ<strong>ra</strong><strong>tio</strong>n nteg<strong>ra</strong><strong>tio</strong>n nteg<strong>ra</strong><strong>tio</strong>n<br />

Below we outline five mains areas for developing<br />

Bang<strong>la</strong>de<strong>sh</strong>’s economic and commercial opportunities<br />

with the rest of Asia:<br />

8.1 8.1 Increasing Increasing int<strong>ra</strong> int<strong>ra</strong>-regional int<strong>ra</strong> regional t<strong>ra</strong>de t<strong>ra</strong>de and moving away<br />

from a reliance on EU and US export markets. While<br />

Bang<strong>la</strong>de<strong>sh</strong> has become a more open economy when<br />

defined by the rising <strong>sh</strong>are of exports+imports as a %<br />

of GDP, the standout feature is just how little of the<br />

country’s exports go to Asia - 3% goes to the South<br />

Asian Associa<strong>tio</strong>n of Regional Coope<strong>ra</strong><strong>tio</strong>n (SAARC)<br />

versus 55% to the EU and 28% to NAFTA countries.<br />

8.2 8.2 Asia Asia as as a a source source of of FDI FDI an and an and<br />

d portfolio capital capital. capital<br />

How<br />

can Bang<strong>la</strong>de<strong>sh</strong> benefit from the massive reserve<br />

growth in the region? Asian cent<strong>ra</strong>l banks have, along<br />

with the oil surplus countries, been the fastest<br />

accumu<strong>la</strong>tors of FX reserves in recent years. China<br />

has more than $1.5 tr, Japan more than $1tr and<br />

Korea, Taiwan, Singapore and India in excess of<br />

$300bn each. In addi<strong>tio</strong>n, Asian countries have very<br />

high savings <strong>ra</strong>tes and in the case of Japan, excess<br />

funds in domestic pensions. How does Bang<strong>la</strong>de<strong>sh</strong><br />

posi<strong>tio</strong>n itself to capture a greater propor<strong>tio</strong>n of these<br />

flows.<br />

8.3 8.3 Low Low cost cost manufacturing anufacturing hub. hub. Can Bang<strong>la</strong>de<strong>sh</strong><br />

benefit from spillover demand and the desire of<br />

companies to diversify their produc<strong>tio</strong>n away from other<br />

countries in Asia, especially India?<br />

8.4 8.4 Regional Regional inf<strong>ra</strong>structure nf<strong>ra</strong>structure st<strong>ra</strong>tegy. st<strong>ra</strong>tegy. There is<br />

consensus that a key growth “enabler” for Bang<strong>la</strong>de<strong>sh</strong><br />

and indeed many other countries in the region is to<br />

increase investment in inf<strong>ra</strong>structure and remove the<br />

bottlenecks to economic development from power and<br />

t<strong>ra</strong>nsport. How can Bang<strong>la</strong>de<strong>sh</strong> integ<strong>ra</strong>te with<br />

neighboring countries, and especially India, in<br />

overcoming the energy crisis and leve<strong>ra</strong>ge its loca<strong>tio</strong>n<br />

to integ<strong>ra</strong>te into regional t<strong>ra</strong>nsporta<strong>tio</strong>n networks.<br />

8.5 8.5 Economic Economic lessons lessons from from Asia’s Asia’s Asia’s economic economic success<br />

success<br />

stories: stories: The fact that Bang<strong>la</strong>de<strong>sh</strong> is <strong>la</strong>gging in the<br />

economic development chain provides the country with<br />

the opportunity to learn from the experiences of other<br />

countries both in this region and in the emerging<br />

markets (EM) more broadly.<br />

9. 9. Promote Promote Economic Economic Decent<strong>ra</strong>liza<strong>tio</strong>n/ Decent<strong>ra</strong>liza<strong>tio</strong>n/ Decent<strong>ra</strong>liza<strong>tio</strong>n/ Increased<br />

Increased<br />

Regional Regional Aut Autonomy Aut onomy<br />

Some estimates suggest that Dhaka will be a city of<br />

over 20 mn by 2015. The st<strong>ra</strong>ins on the capital are<br />

already causing conges<strong>tio</strong>n, bottlenecks and <strong>la</strong>bour<br />

<strong>sh</strong>ortages. Supporting the growth of seve<strong>ra</strong>l other<br />

regional centres for manufacturing would yield both<br />

economic benefits as well as supporting the drive for<br />

inclusive growth. The poverty gap between Dhaka,<br />

Chittagong and the other regions has grown so the<br />

government needs to support a policy of economic and<br />

administ<strong>ra</strong>tive decent<strong>ra</strong>liza<strong>tio</strong>n. Decision-making<br />

power is too cent<strong>ra</strong>lized in government ministries and<br />

there needs to be a proactive policy of allowing<br />

municipalities to take responsibility for revenue and<br />

budgets.<br />

10. 10. Formu<strong>la</strong>te Formu<strong>la</strong>te a a na<strong>tio</strong>nal na<strong>tio</strong>nal policy policy on on "industrial "industrial cluster<br />

cluster<br />

development"<br />

development"<br />

10.1 10.1 10.1 As the World Bank and a number of other<br />

research agencies have noted, access to <strong>la</strong>nd is a<br />

major factor restricting entry of new firms into the<br />

market, and limiting competi<strong>tio</strong>n. Serviced <strong>la</strong>nd in<br />

Bang<strong>la</strong>de<strong>sh</strong> is hard to find, and prohibitively<br />

19


expensive, especially for small firms. This problem is<br />

by far more severe in Bang<strong>la</strong>de<strong>sh</strong> than in any other<br />

compa<strong>ra</strong>tor country. Property regist<strong>ra</strong><strong>tio</strong>n in the<br />

country is one of the ten longest and most expensive<br />

such procedures in the world.<br />

10.2 10.2 For developing countries, free zones have<br />

t<strong>ra</strong>di<strong>tio</strong>nally had both a sector development and<br />

inf<strong>ra</strong>structure <strong>ra</strong><strong>tio</strong>nale. The typical free zone policy<br />

package of import and export duty exemp<strong>tio</strong>ns;<br />

streamlined customs and administ<strong>ra</strong>tive controls and<br />

procedures; libe<strong>ra</strong>l foreign exchange policies; income<br />

tax incentives – are meant to boost an investor’s<br />

competitiveness and reduce business entry and<br />

ope<strong>ra</strong>ting costs. Export-oriented free zones (EPZs) are<br />

intended to convey “free t<strong>ra</strong>de status” to export<br />

manufacturers to enable them to compete globally may<br />

counterba<strong>la</strong>nce the anti-export bias of t<strong>ra</strong>de policies.<br />

10.3 10.3 The expansion of the Export Processing Zones<br />

(EPZ) prog<strong>ra</strong>m as well as the development of industry<br />

focused Special Economic Zones (SEZ) in st<strong>ra</strong>tegically<br />

important sectors that offer export or t<strong>ra</strong>de–<br />

diversifica<strong>tio</strong>n benefits <strong>sh</strong>ould be actively pursued by<br />

the new government.<br />

11. 11. Enhance Enhance effectiveness effectiveness of of Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Better<br />

Better<br />

Business Business Forum’s Forum’s (BBBF) (BBBF) through through a a stronger stronger<br />

stronger<br />

secretariat secretariat<br />

secretariat<br />

11.1 11.1 11.1 Consider regional/local level better business<br />

forums under simi<strong>la</strong>r public-private partner<strong>sh</strong>ip<br />

principles. P<strong>la</strong>ce greater emphasis on effective<br />

implementa<strong>tio</strong>n of the 249 BBBF recommenda<strong>tio</strong>ns, of<br />

which 39 are long term in nature. Consider expanding<br />

BBBF with addi<strong>tio</strong>nal professionals and at the local<br />

district/division levels, and forming industry-based<br />

working groups.<br />

12. 12. Make Make the the Regu<strong>la</strong>tory Regu<strong>la</strong>tory Reforms Reforms Commission Commission (RRC)<br />

(RRC)<br />

a a a permanent permanent permanent body<br />

body<br />

12.1 12.1 Assessment of the 202 <strong>la</strong>ws currently under<br />

review by RRC need to be effectively expedited<br />

through the Law Ministry. The SRO database and the<br />

e-registry work needs to be completed. RRC proposals<br />

on <strong>la</strong>nd reform needs to be effectively implemented.<br />

The process of Regu<strong>la</strong>tory Impact Assessment (RIA)<br />

needs to be institu<strong>tio</strong>nalized within the RRC.<br />

13. 13. Revise Revise the the current current PRSPII PRSPII through through through greater greater PPPP<br />

P PP<br />

and and civil civil society society society participa<strong>tio</strong>n<br />

participa<strong>tio</strong>n<br />

13.1 13.1 PRSP I was not p<strong>la</strong>ced before the parliament,<br />

who openly disowned it. Therefore, the PRSP II must<br />

be endorsed by the elected parliament through<br />

exhaustive debate. Particu<strong>la</strong>rly since no formal<br />

assessment has been made by the caretaker<br />

government on the successes and failures of the first<br />

PRSP, and the very limited public consultative process<br />

undertaken in its formu<strong>la</strong><strong>tio</strong>n.<br />

13.2 13.2 According to the PRSP II projec<strong>tio</strong>n, the total cost<br />

of implementing the second PRSP for the period 2009-<br />

2011 is estimated at Tk. 3,190 billion, including a Tk.<br />

1,052 billion deficit financing. Of the deficit, Tk. 631<br />

billion or over 60 percent would come from foreign<br />

assistance and the remaining Tk. 421 billion from<br />

domestic borrowing. The PRSP II clearly envisages a<br />

foreign aid dependent economic p<strong>la</strong>n, an assump<strong>tio</strong>n<br />

which is not tenable given the likelihood of lower, not<br />

higher levels of donor support in the next two years.<br />

13.3 13.3 In addi<strong>tio</strong>n, the new PRSP p<strong>la</strong>ns reduc<strong>tio</strong>n of<br />

ave<strong>ra</strong>ge protective tariff to 15 percent and<br />

enhancement of revenue mobilisa<strong>tio</strong>n efforts for<br />

reducing dependence on import taxes. Given that the<br />

NBR does not currently have the capacity to assess<br />

inter-secto<strong>ra</strong>l t<strong>ra</strong>nsmission of economic impact through<br />

a computable gene<strong>ra</strong>l equilibrium (CGE) model with an<br />

updated social accounting matrix, the lowering of the<br />

weighted ave<strong>ra</strong>ge tariff <strong>ra</strong>te needs to be analysed in a<br />

rigorous manner.<br />

14. 14. 14. New New working working group group group under under BBBF, BBBF, to to improve improve the<br />

the<br />

quality quality quality of of Government<br />

Government-Business Government Business interface<br />

interface<br />

14.1 14.1 The business climate <strong>sh</strong>ould be made more<br />

att<strong>ra</strong>ctive to investors by enhancing the efficiency and<br />

quality of service of government-business interfaces.<br />

At the g<strong>ra</strong>ss-roots level, the elements that dampen<br />

na<strong>tio</strong>nal competitiveness in the business sector<br />

includes the unsatisfactory quality of government<br />

departments that serve the business community (these<br />

include approx. 40 government departments under 17<br />

Ministries, as identified by the BBBF governmentbusiness<br />

interface initiative, under which the<br />

Bang<strong>la</strong>de<strong>sh</strong> Bank and the Department of Environment<br />

have already been diagnosed and specific<br />

recommenda<strong>tio</strong>ns submitted).<br />

15. 15. The The Na<strong>tio</strong>nal Na<strong>tio</strong>nal Productivity Productivity Organiza<strong>tio</strong>n Organiza<strong>tio</strong>n (NPO)<br />

(NPO)<br />

needs needs to to be be be made made made effective effective effective under under under the the Ministry Ministry Ministry of<br />

of<br />

Industries<br />

Industries<br />

NPO is a Government Department under the Ministry<br />

of Industries establi<strong>sh</strong>ed in 1989. It is a na<strong>tio</strong>nal level<br />

specialized organisa<strong>tio</strong>n to promote productivity and<br />

thereby accele<strong>ra</strong>te the pace of economic development<br />

through its multidimensional activities like crea<strong>tio</strong>n of<br />

productivity awareness, development of productivity<br />

inf<strong>ra</strong>structure and implementa<strong>tio</strong>n of productivity<br />

improvement prog<strong>ra</strong>mme. As the only organisa<strong>tio</strong>n<br />

responsible for formu<strong>la</strong><strong>tio</strong>n and implementa<strong>tio</strong>n of<br />

productivity policy of the Government, NPO has not<br />

20


een as effective and successful as was originally<br />

envisaged.<br />

16. 16. A A comprehensive comprehensive Public Public Public Administ<strong>ra</strong><strong>tio</strong>n Administ<strong>ra</strong><strong>tio</strong>n reform reform<br />

reform<br />

needed<br />

needed<br />

In the current structure, only 6% of almost 200,000<br />

government employees (civil service) are c<strong>la</strong>ss I<br />

officers. The <strong>ra</strong><strong>tio</strong> needs to reba<strong>la</strong>nce with reduc<strong>tio</strong>ns<br />

in non-c<strong>la</strong>ss 1 staff. In addi<strong>tio</strong>n, higher sa<strong>la</strong>ries,<br />

t<strong>ra</strong>ining, career development, and tenured posi<strong>tio</strong>ns<br />

need to be ensured. In addi<strong>tio</strong>n, higher sa<strong>la</strong>ries,<br />

t<strong>ra</strong>ining, career development, and tenured posi<strong>tio</strong>ns<br />

need to be ensured.<br />

17. 17. 17. Reconstitute Reconstitute Reconstitute the the the Boards Boards Boards of of of public public public in institu<strong>tio</strong>ns,<br />

in in stitu<strong>tio</strong>ns,<br />

bringing bringing in in specialized specialized private private sector sector members members<br />

members<br />

In addi<strong>tio</strong>n to p<strong>la</strong>cing business chamber leaders as exofficio<br />

members in various public boards, the<br />

government <strong>sh</strong>ould consider inducting subject matter<br />

experts to these boards, which may be co-chaired by<br />

public and private sector members to engender greater<br />

dynamism in the governance and management of<br />

public enterprises. Three key agencies that would<br />

benefit from this PPP initiative include the BOI, the<br />

EPB and the SEC.<br />

18. 18. Privatize Privatize target target publi public publi c corpo<strong>ra</strong><strong>tio</strong>ns within 12 12-18 12<br />

18<br />

months<br />

months<br />

State owned enterprises include Bang<strong>la</strong>de<strong>sh</strong> Chemical<br />

Industries Corpo<strong>ra</strong><strong>tio</strong>n (BCIC), Bang<strong>la</strong>de<strong>sh</strong> Sugar and<br />

Food Industries Corpo<strong>ra</strong><strong>tio</strong>n (BSFIC), Bang<strong>la</strong>de<strong>sh</strong><br />

Steel & Engineering Corpo<strong>ra</strong><strong>tio</strong>n (BSEC), and others.<br />

Bang<strong>la</strong>de<strong>sh</strong> Biman and Sonargaon Hotel, in particu<strong>la</strong>r,<br />

need to be seriously considered for privatiza<strong>tio</strong>n. The<br />

Ministry of Industries and the Privatiza<strong>tio</strong>n Commission<br />

<strong>sh</strong>ould work in tandem. All state owned enterprises<br />

under the Ministry of Industries and the four former<br />

Na<strong>tio</strong>nalized Commercial Banks need to be managed<br />

professionally. Sonali Bank, Rupali Bank, Janata Bank,<br />

and Utta<strong>ra</strong> Bank need further organiza<strong>tio</strong>nal<br />

restructuring and streamlining so that they are<br />

managed on a commercial basis. The SCBs still<br />

undermine the efficiency of the financial system. While<br />

their market <strong>sh</strong>are is declining, they still account for<br />

over 30 percent of total banking sector assets and<br />

remain mainly moribund, with negative capital and high<br />

(30 percent) NPL <strong>ra</strong><strong>tio</strong>s. Divestment p<strong>la</strong>ns appear to<br />

be at a standstill following the failure of the Rupali<br />

Bank sale.<br />

19. 19. Improve Improve ADP ADP implementa<strong>tio</strong>n implementa<strong>tio</strong>n implementa<strong>tio</strong>n <strong>ra</strong>te <strong>ra</strong>te by by capacity<br />

capacity<br />

building building initiatives initiatives<br />

initiatives<br />

The Ministries <strong>sh</strong>ould have professional units to<br />

monitor and evaluate the status of project<br />

implementa<strong>tio</strong>n on a regu<strong>la</strong>r basis. In FY 2007-08, the<br />

ADP implementa<strong>tio</strong>n <strong>ra</strong>te was 82%. Improve the speed<br />

and efficiency of the Economic Re<strong>la</strong><strong>tio</strong>ns Division<br />

(ERD) under the P<strong>la</strong>nning Ministry to efficiently<br />

manage donor funding as part of the Annual<br />

Development Prog<strong>ra</strong>mme (ADP). Given the recent<br />

announcement of the Finance Adviser that World Bank<br />

funding for development projects under IDA credit is<br />

uncertain beyond 2008 as a result of a <strong>la</strong>ck of<br />

completed project proposals indicates the<br />

inadequacies of the P<strong>la</strong>nning Ministry and the urgency<br />

with which its capacity needs to be enhanced.<br />

20. 20. 20. The The The Ministries Ministries of of Industries, Industries, Industries, Finance, Finance, Finance, and<br />

and<br />

Commerce Commerce <strong>sh</strong>ould <strong>sh</strong>ould encou<strong>ra</strong>ge encou<strong>ra</strong>ge encou<strong>ra</strong>ge diversifica<strong>tio</strong>n diversifica<strong>tio</strong>n of of exports<br />

exports<br />

20.1 20.1 20.1 Currently, knitwear, garments, and frozen foods<br />

comprise more than 75% of export revenues, while the<br />

USA and EU are the major destina<strong>tio</strong>ns. Such<br />

concent<strong>ra</strong><strong>tio</strong>n of sector and geog<strong>ra</strong>phy is a risk that is<br />

gene<strong>ra</strong>lly acknowledged in both the public and private<br />

sectors. Therefore, the economic wings of Bang<strong>la</strong>de<strong>sh</strong><br />

Embassies in current and prospective t<strong>ra</strong>ding partners<br />

need to be made more effective. This also links up with<br />

the country b<strong>ra</strong>nding requirement which has already<br />

been highlighted.<br />

20.2 20.2 Internally, the government <strong>sh</strong>ould seek advice<br />

from the BBBF as to which emerging sectors <strong>sh</strong>ould be<br />

provided fiscal and/or other incentives for their growth<br />

to support import substitu<strong>tio</strong>n as well as export<br />

promo<strong>tio</strong>n st<strong>ra</strong>tegies.<br />

20.3 20.3 In assessing which are the “thrust” export sectors,<br />

it is worth careful analysis of where does Bang<strong>la</strong>de<strong>sh</strong><br />

really have compa<strong>ra</strong>tive advantage and Bang<strong>la</strong>de<strong>sh</strong>i<br />

firms can build competitive advantages. We do not<br />

have the resources or the capacity to try and compete<br />

everywhere with everyone, so let us pick our niches.<br />

Of course we must do that based on market and<br />

economic realities but we must remember to also<br />

consider value addi<strong>tio</strong>n and job crea<strong>tio</strong>n. Export<br />

sectors may be important for differing reasons such as<br />

product diversifica<strong>tio</strong>n, market diversifica<strong>tio</strong>n, job<br />

crea<strong>tio</strong>n or value addi<strong>tio</strong>n so the matrix for evaluating<br />

sectors for support <strong>sh</strong>ould include all these attributes.<br />

20.4 20.4 Key potential export sectors to diversify the<br />

current over-reliance on RMG and Manpower include:<br />

i) Leathergoods and Footwear; Agro and Agro-food<br />

processing; Light Engineering; Technology/ICT; and<br />

Outsourcing.<br />

21


20.5 20.5 Reference <strong>sh</strong>ould be made towards developing<br />

service sector exports which are less reliant on <strong>la</strong>rge<br />

quantities of power given the current energy crisis<br />

facing the country.<br />

21. 21. 21. Integ<strong>ra</strong>ted Integ<strong>ra</strong>ted Export Export Promo<strong>tio</strong>n Promo<strong>tio</strong>n Scheme Scheme (EPS)<br />

(EPS)<br />

21.1 21.1 An integ<strong>ra</strong>ted Export Promo<strong>tio</strong>n Scheme (EPS)<br />

must be initiated to expedite and facilitate <strong>sh</strong>ort,<br />

medium and long term export promo<strong>tio</strong>n efforts with a<br />

<strong>sh</strong>arp focus on specific country and re<strong>la</strong>ted products.<br />

21.2 21.2 The EPS <strong>sh</strong>ould be implemented by the joint<br />

Public Private Partner<strong>sh</strong>ip management consisting of<br />

EPB, Export Promo<strong>tio</strong>n Councils, Banks, Industry and<br />

T<strong>ra</strong>de associa<strong>tio</strong>ns, line Agencies of the Government<br />

and Missions abroad and other eligible entities. The<br />

IEPS, among others, <strong>sh</strong>ould include:<br />

• Market studies.<br />

• Setting up of <strong>sh</strong>owroom/ warehouse, interna<strong>tio</strong>nal<br />

departmental stores.<br />

• Sales promo<strong>tio</strong>n and publicity campaigns.<br />

• Participa<strong>tio</strong>n in interna<strong>tio</strong>nal t<strong>ra</strong>de fairs.<br />

• B<strong>ra</strong>nd promo<strong>tio</strong>n.<br />

• Regist<strong>ra</strong><strong>tio</strong>n charges for pharmaceuticals and<br />

testing charges for engineering products etc.<br />

• Financial assistance to deserving exporters for<br />

meeting the cost of legal expenses re<strong>la</strong>ting to<br />

t<strong>ra</strong>de re<strong>la</strong>ted matters.<br />

• Facilitate and encou<strong>ra</strong>ge manufacturers and<br />

exporters to attain interna<strong>tio</strong>nally accepted<br />

•<br />

standards of quality for their products.<br />

Establi<strong>sh</strong>ment, moderniza<strong>tio</strong>n and upg<strong>ra</strong>da<strong>tio</strong>n of<br />

test houses and <strong>la</strong>bo<strong>ra</strong>tories in order to bring them<br />

at par with interna<strong>tio</strong>nal standards.<br />

Each of these export promo<strong>tio</strong>n activities can receive<br />

financial assistance from the Government <strong>ra</strong>nging from<br />

30% to 100% of the total cost depending upon the<br />

activity and the implementing agency, as may be<br />

indicated in the detailed guidelines.<br />

21.3 21.3 It is also worth ensuring that t<strong>ra</strong>nsac<strong>tio</strong>n costs for<br />

exporters are carefully monitored to ensure they<br />

remain competitive and adjust with global prices. For<br />

example, we <strong>sh</strong>ould ensure freight charges, both<br />

incoming and outgoing, are market based and<br />

competitive and not subject to arbit<strong>ra</strong>ry or<br />

overextended surcharges such as the jet fuel price<br />

hike surcharge that continues even after prices come<br />

down or conges<strong>tio</strong>n surcharges in Chittagong that<br />

don’t come down after the conges<strong>tio</strong>n is cleared or<br />

how forwarders charge 11,000Tk + for container<br />

movement by <strong>ra</strong>ilway where the cost is about Tk 5500.<br />

It may be worth considering a t<strong>ra</strong>de cost watchdog<br />

func<strong>tio</strong>n to ensure we maintain maximum<br />

competitiveness.<br />

22. 22. Improving Improving the the the legal legal system system and and dispute dispute resolu<strong>tio</strong>n<br />

resolu<strong>tio</strong>n<br />

22.1 22.1 Although gene<strong>ra</strong>l <strong>la</strong>w and order has improved in<br />

recent years, the new government needs to reduce<br />

spontaneous workers protests and violent<br />

demonst<strong>ra</strong><strong>tio</strong>ns. The recent destruc<strong>tio</strong>n of property in<br />

the garments sector risks serious disrup<strong>tio</strong>n to an<br />

economically critical sector of the economy. The new<br />

Government needs to develop a fair, t<strong>ra</strong>nsparent and<br />

equitable arbit<strong>ra</strong><strong>tio</strong>n court to resolve such disputes<br />

quickly and to the satisfac<strong>tio</strong>n of all parties. Given the<br />

slow progress in the official legal system, this needs to<br />

be an independent body.<br />

23. 23. Leve<strong>ra</strong>ging Leve<strong>ra</strong>ging Diaspo<strong>ra</strong><br />

Diaspo<strong>ra</strong><br />

23.1 23.1 In ensuring a more effective st<strong>ra</strong>tegy to leve<strong>ra</strong>ge<br />

Bang<strong>la</strong>de<strong>sh</strong>’s Diaspo<strong>ra</strong> the Government needs to set<br />

up a Diaspo<strong>ra</strong> taskforce that will incorpo<strong>ra</strong>te a Dhaka<br />

Committee and dedicated secretariat and subcommittees<br />

in Europe, the US and Middle East that<br />

will connect the various Diaspo<strong>ra</strong> networks overseas<br />

both professional organiza<strong>tio</strong>ns in technology,<br />

finance, medicine, pharmaceuticals as well as broader<br />

community networks to build a more comprehensive<br />

NRB database.<br />

23.2 23.2 The NRB conference in December 2007 was a<br />

welcome start but we need a regu<strong>la</strong>r and ongoing<br />

interface or forum between the Diaspo<strong>ra</strong>, local<br />

Bang<strong>la</strong>de<strong>sh</strong>i corpo<strong>ra</strong>tes and policymakers. Multi<strong>la</strong>te<strong>ra</strong>l<br />

agencies such as the World Bank, ADB, the<br />

UN, DFID and USAID can contribute both funding as<br />

well as research on the effective leve<strong>ra</strong>ge of<br />

Diaspo<strong>ra</strong>s in China, India and other emerging market<br />

countries.<br />

23.3 23.3 Policymakers need to actively develop a st<strong>ra</strong>tegy<br />

to att<strong>ra</strong>ct more Diaspo<strong>ra</strong> to return home on either a<br />

tempo<strong>ra</strong>ry or a permanent basis. This could include<br />

fiscal incentives such as lower import taxes for<br />

personal effects for NRBs who bring substantial<br />

capital as well as industry experience back to<br />

Bang<strong>la</strong>de<strong>sh</strong>. Another possibility is special stipends<br />

and visiting professor<strong>sh</strong>ips for leading NRB<br />

academics in key st<strong>ra</strong>tegic sectors such as<br />

technology, engineering, renewable energy, finance<br />

etc. Also learn from the Chinese st<strong>ra</strong>tegy, with more<br />

public recogni<strong>tio</strong>n/status for Diaspo<strong>ra</strong> who make a<br />

contribu<strong>tio</strong>n to Bang<strong>la</strong>de<strong>sh</strong>.<br />

23.4 23.4 The Special Economic Zones projects <strong>sh</strong>ould be<br />

expanded to target NRBs from Europe, the US and<br />

the Middle East <strong>ra</strong>ther than just by sector to<br />

encou<strong>ra</strong>ge <strong>la</strong>rger and more focused investments by<br />

the Bang<strong>la</strong>de<strong>sh</strong>i Diaspo<strong>ra</strong>. Such zones <strong>sh</strong>ould be<br />

focused in areas with <strong>la</strong>rge numbers of NRBs such as<br />

Sylhet and Nohakhali.<br />

22


24. 24. Greater Greater focus focus on on increasing increasing productivity productivity productivity and and<br />

and<br />

wealth wealth crea<strong>tio</strong>n crea<strong>tio</strong>n from from Agriculture<br />

Agriculture<br />

24.1 24.1 Significant gains have been made in the post-Sidr<br />

period through record produc<strong>tio</strong>n of major crops (boro<br />

and aman rice, potato, maize and wheat). The country<br />

became self-sufficient in rice and rice stocks held by<br />

the government have been doubled, which helped<br />

stabilize the domestic market. Farmers responded<br />

strongly to the high domestic procurement price for<br />

rice, contributing to record supply response. While<br />

protecting these gains, in particu<strong>la</strong>r the price support<br />

for the farmers, efforts <strong>sh</strong>ould be made to improve<br />

productivity by increased agriculture R&D.<br />

24.2 24.2 Agriculture needs to be seen as a sector that can<br />

gene<strong>ra</strong>te significant surplus wealth for the ru<strong>ra</strong>l <strong>la</strong>bour<br />

force <strong>ra</strong>ther than just in the context of gene<strong>ra</strong>ting<br />

subsistence living for farmers.<br />

25. 25. Polic Policies Polic ies to to increase produc<strong>tio</strong>n of high high-value high<br />

value high-<br />

high<br />

yielding yielding rice<br />

rice<br />

In Bang<strong>la</strong>de<strong>sh</strong>, t<strong>ra</strong>di<strong>tio</strong>nal varieties still cover about<br />

half of the rice area in the Aman season, while High<br />

Yielding Varieties (HYV) dominates in the Boro<br />

season. High value rice accounts for only about 5% of<br />

the total annual rice produc<strong>tio</strong>n of Bang<strong>la</strong>de<strong>sh</strong>. The<br />

most serious const<strong>ra</strong>ints to increased produc<strong>tio</strong>n and<br />

sales of high-value rice involve problems with post<br />

harvest processing and milling, thre<strong>sh</strong>ing, drying etc.<br />

<strong>la</strong>rge-scale exports of long-g<strong>ra</strong>ined rice (such as<br />

basmati) from Bang<strong>la</strong>de<strong>sh</strong> are feasible, in principle, if<br />

the post harvest problems that particu<strong>la</strong>rly p<strong>la</strong>gue longg<strong>ra</strong>ined<br />

rice can be overcome. Some <strong>sh</strong>ort term<br />

policies that the government needs to take <strong>sh</strong>ould<br />

include:<br />

25.1 25.1 Formu<strong>la</strong><strong>tio</strong>n, distribu<strong>tio</strong>n, and enforcement of<br />

g<strong>ra</strong>des and standards:<br />

• A na<strong>tio</strong>nal committee may be formed in<br />

•<br />

col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n with BSTI as the lead organiza<strong>tio</strong>n, to<br />

research and establi<strong>sh</strong> g<strong>ra</strong>des for fine and high<br />

value rice.<br />

The committee <strong>sh</strong>ould include members from<br />

BRRI, BD rice exporters associa<strong>tio</strong>n, the ministry<br />

of agriculture, and other institu<strong>tio</strong>ns re<strong>la</strong>ted to rice<br />

t<strong>ra</strong>de.<br />

• BRRI <strong>sh</strong>ould continue to develop improved<br />

varieties of t<strong>ra</strong>di<strong>tio</strong>nal fine rice and concent<strong>ra</strong>te on<br />

developing a slender, long g<strong>ra</strong>ined high yielding<br />

variety suited to local condi<strong>tio</strong>ns in produc<strong>tio</strong>n,<br />

postharvest management, and processing.<br />

25.2 25.2 Monitor the key financial sector indicators and<br />

take remedial measures as required.<br />

25.3 25.3 If necessary, define minimum regu<strong>la</strong>tory liquidity<br />

narrowly with a dominant role to ca<strong>sh</strong> in order to retain<br />

unques<strong>tio</strong>ned liquidity in times of stress. There <strong>sh</strong>ould<br />

not be any undue economiza<strong>tio</strong>n in <strong>sh</strong>ares of ca<strong>sh</strong> and<br />

liquid assets in the total assets of banks.<br />

25.4 25.4 Strengthen oversight of the banking system, apply<br />

social criteria to all lending, and prioritize lending to<br />

meet social needs and expand domestic productive<br />

capacity.<br />

26. 26. Encou<strong>ra</strong>ge Encou<strong>ra</strong>ge greater greater adop<strong>tio</strong>n adop<strong>tio</strong>n of of of Farm Farm Machinery<br />

Machinery<br />

and and Fertilizers<br />

Fertilizers<br />

The ave<strong>ra</strong>ge yield per Hectare of Rice in Bang<strong>la</strong>de<strong>sh</strong><br />

is 2.7 tonnes versus nearly 7 tonnes in India and 11<br />

tonnes in China. There is a need for greater educa<strong>tio</strong>n<br />

and access to credit to ensure better use of fertilizers,<br />

appropriate use of pesticides<br />

Some st<strong>ra</strong>tegies that need to be encou<strong>ra</strong>ged include:<br />

26.1 26.1 Ensure Ensure vai<strong>la</strong>bility vai<strong>la</strong>bility of of fertilizer fertilizer fertilizer duri during duri ng cultiva<strong>tio</strong>n cultiva<strong>tio</strong>n<br />

In Bang<strong>la</strong>de<strong>sh</strong> fertilizer produc<strong>tio</strong>n is const<strong>ra</strong>ined by<br />

gas and power <strong>sh</strong>ortage. Moreover, farmers<br />

sometimes have to negotiate hard with the middlemen<br />

and government for the fertilizer. This unavai<strong>la</strong>bility of<br />

fertilizer is caused by a demand-supply gap. The<br />

produc<strong>tio</strong>n is less than the demand. Secondly, there is<br />

no efficient supply chain management system in the<br />

country for distributing fertilizers. Even though<br />

sometimes farmers’ demand is met by providing<br />

adequate fertilizers, they do not get it in a timely<br />

manner.<br />

26.2 26.2 Better Better educa<strong>tio</strong>n educa<strong>tio</strong>n to to ensure ensure appropriate appropriate use use of<br />

of<br />

fertilizer<br />

fertilizer<br />

Modern applica<strong>tio</strong>ns of fertilizers are very important to<br />

get high crop yield. The farmers do not have the<br />

technology to ascertain the requirement of fertilizer in<br />

their fields. This is why they have to apply fertilizers<br />

based on their estima<strong>tio</strong>n. This inappropriate usage of<br />

fertilizer is always injurious to the crops and thus<br />

reduces crop productivity.<br />

26.3 26.3 26.3 Introduce Introduce an an efficient efficient water water water management management system<br />

system<br />

Although irriga<strong>tio</strong>n water is avai<strong>la</strong>ble in most areas,<br />

there is <strong>la</strong>ck of efficient water management. Affluent<br />

farmers set up their own water pumps and use them<br />

for their own use, while the marginal farmers rent these<br />

machines at a high cost. Previously, BADC had water<br />

supply machines to help the marginal farmers which<br />

are now almost nonexistent. Moreover, p<strong>la</strong>ces, which<br />

are highly dependent on river water, are very affected<br />

during the dry season. Altogether these factors reduce<br />

the crop yields every year.<br />

26.4 26.4 Educa<strong>tio</strong>n Educa<strong>tio</strong>n Educa<strong>tio</strong>n to to ensur ensure ensur ensure<br />

e farmer farmer avoid avoid avoid excess excess use use of<br />

of<br />

pesticides pesticides<br />

pesticides<br />

Most of the farmers have limited educa<strong>tio</strong>n on the<br />

ba<strong>la</strong>nced applica<strong>tio</strong>n of fertilizer and the harmful<br />

23


effects of it. This is why most of the times they apply<br />

more than enough pesticides that hampers the crop<br />

productivity.<br />

26.5 26.5 Lack Lack of of cold cold sto<strong>ra</strong>ge sto<strong>ra</strong>ge or or a a func<strong>tio</strong>ning func<strong>tio</strong>ning cold cold chain<br />

chain<br />

suggests suggests the the government government government <strong>sh</strong>ould <strong>sh</strong>ould encou<strong>ra</strong>ge encou<strong>ra</strong>ge encou<strong>ra</strong>ge a<br />

a<br />

na<strong>tio</strong>nwide na<strong>tio</strong>nwide na<strong>tio</strong>nwide chain chain of of such such facilities.<br />

facilities.<br />

This will help export-oriented high value added<br />

agriculture businesses to grow. According to Xian Zhu,<br />

World Bank Country Director in Bang<strong>la</strong>de<strong>sh</strong>, “highvalue<br />

agricultu<strong>ra</strong>l products tend to be highly<br />

peri<strong>sh</strong>able, and there are many risks associated with<br />

marketing these commodities. Appropriate policies and<br />

investments in key inf<strong>ra</strong>structure are needed to make it<br />

viable for farmers to switch to these commodities and<br />

increase produc<strong>tio</strong>n.” For example, every year potato<br />

farmers risk <strong>la</strong>rge quantities of potatoes going to waste<br />

due to inadequate sto<strong>ra</strong>ge facilities. In 2007, there was<br />

a bumper harvest of potatoes, most of which farmers<br />

sold to intermediaries at a 25% discount due to<br />

insufficient cold sto<strong>ra</strong>ge facilities.<br />

27. 27. Encou<strong>ra</strong>ging Encou<strong>ra</strong>ging more more more effective effective Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l R&D<br />

R&D<br />

27.1 27.1 Promoting Promoting knowledge knowledge knowledge management management for for agro-<br />

agro<br />

business<br />

business<br />

� Between 1997/98 and 2004/05, expenditure for<br />

agricultu<strong>ra</strong>l research as a <strong>sh</strong>are of total<br />

agricultu<strong>ra</strong>l GDP <strong>ra</strong>nged from 0.2% to 0.34%.<br />

This level of expenditure is conside<strong>ra</strong>bly lower<br />

than it is in other developing countries as a<br />

whole, which ave<strong>ra</strong>ged 0.62% of agricultu<strong>ra</strong>l<br />

GDP, and significantly lower than expenditure on<br />

agricultu<strong>ra</strong>l research in developed countries,<br />

which ave<strong>ra</strong>ged 2.8% of agricultu<strong>ra</strong>l GDP.<br />

� Research for high-value agro commodities like<br />

horticultu<strong>ra</strong>l crops, fi<strong>sh</strong>eries and livestock <strong>sh</strong>ould<br />

receive greater atten<strong>tio</strong>n.<br />

• Seve<strong>ra</strong>l Seve<strong>ra</strong>l areas areas are are identified identified where where tthe<br />

tt<br />

he PPP PPP in<br />

in<br />

Agro Agro-research Agro research research could could be be beneficial:<br />

beneficial:<br />

� Fruits and vegetables processing, where<br />

research is needed to assist with processing<br />

techniques, equipment applica<strong>tio</strong>n and<br />

manufacture, and new product development.<br />

� Aquaculture, where research is needed to<br />

reduce genetic deg<strong>ra</strong>da<strong>tio</strong>n in carp stocks. The<br />

DOF and BFRI have extensive facilities; the<br />

universities (including BAU) and BFRI have<br />

strengths in genetics and technical know-how;<br />

and the private sector would bring an element of<br />

commercial drive to the prog<strong>ra</strong>m and possibly<br />

partial financing.<br />

� The poultry industry, where there is demand for<br />

more research on produc<strong>tio</strong>n methods and<br />

technologies, nutri<strong>tio</strong>n, processing and bio-<br />

security. A partner<strong>sh</strong>ip between public research<br />

institu<strong>tio</strong>ns and the private sector would yield<br />

mutual benefits.<br />

� The high-value rice industry, where closer<br />

coordina<strong>tio</strong>n between p<strong>la</strong>nt breeders and those<br />

involved in t<strong>ra</strong>de, especially the rice milling<br />

industry, is needed to develop improved varieties<br />

of t<strong>ra</strong>di<strong>tio</strong>nal fine rice with such cha<strong>ra</strong>cteristics as<br />

pa<strong>la</strong>tability, aroma, higher milling out-turn, and<br />

lower cost of produc<strong>tio</strong>n.<br />

27.2 27.2 Taking Taking a a proactive proactive proactive stance stance towards towards food food safety<br />

safety<br />

and and quality quality management<br />

management<br />

• Improving Improving the the regu<strong>la</strong>tory regu<strong>la</strong>tory environment<br />

environment<br />

� Establi<strong>sh</strong>ing appropriate food safety regu<strong>la</strong><strong>tio</strong>ns<br />

and ensuring compliance with the regu<strong>la</strong><strong>tio</strong>ns is<br />

of critical importance for consumer welfare as<br />

well as maintaining and expanding t<strong>ra</strong>de in highvalue<br />

agricultu<strong>ra</strong>l products.<br />

� In 2003, FAO reviewed food control systems in<br />

Bang<strong>la</strong>de<strong>sh</strong> and recommended (1) formu<strong>la</strong>ting a<br />

comprehensive food safety policy; (2)<br />

streamlining and improving coordina<strong>tio</strong>n among<br />

the various ministries and agencies involved in<br />

food control; (3) enacting the Consumer<br />

Protec<strong>tio</strong>n Act and Feed Act; (4) harmonizing the<br />

provisions/standards in various <strong>la</strong>ws/rules; (5)<br />

establi<strong>sh</strong>ing and issuing guidelines on GAP and<br />

GMP for all foods, including fruits and<br />

vegetables; and (6) developing and enacting a<br />

comprehensive <strong>la</strong>beling <strong>la</strong>w with appropriate<br />

provisions for <strong>la</strong>beling local and imported<br />

packaged food in conformity with CODEX.<br />

• Improving Improving compliance compliance with with sanitary sanitary and<br />

and<br />

phytosanitary phytosanitary standards.<br />

standards.<br />

� Growing evidences indicate that for wellprepared<br />

countries and suppliers, rising<br />

standards represent an opportunity to<br />

modernize export supply and regu<strong>la</strong>tory<br />

systems and adopt safer and more sustainable<br />

p<strong>ra</strong>ctices. Consignments from such countries<br />

are subjected to compa<strong>ra</strong>tively less inspec<strong>tio</strong>n<br />

by t<strong>ra</strong>ding partners. Good reputa<strong>tio</strong>ns gained<br />

through demonst<strong>ra</strong>ted compliance yield lower<br />

t<strong>ra</strong>nsac<strong>tio</strong>n costs for farmers and exporters.<br />

� The future competiveness in luc<strong>ra</strong>tive export<br />

markets depends on making urgently needed<br />

improvements in <strong>la</strong>bo<strong>ra</strong>tory and testing<br />

inf<strong>ra</strong>structure.<br />

27.3 27.3 Developing Developing market market connec<strong>tio</strong>ns<br />

connec<strong>tio</strong>ns<br />

• Encou<strong>ra</strong>ging Encou<strong>ra</strong>ging cont<strong>ra</strong>ct cont<strong>ra</strong>ct farming<br />

farming<br />

� Cont<strong>ra</strong>ct farming is expanding <strong>ra</strong>pidly in<br />

Bang<strong>la</strong>de<strong>sh</strong>, which now has many examples of<br />

successful cont<strong>ra</strong>ct farming ar<strong>ra</strong>ngements.<br />

The vertical coordina<strong>tio</strong>n between producers<br />

24


and purchasers becomes valuable for highvalue<br />

agriculture products because of the high<br />

t<strong>ra</strong>nsac<strong>tio</strong>n cost and risk involved.<br />

� Cont<strong>ra</strong>ct farming also offers small-scale<br />

producers a chance to remain involved in highvalue<br />

agriculture. Cont<strong>ra</strong>ct farming can reduce<br />

the number of intermediaries, wastage,<br />

t<strong>ra</strong>nsac<strong>tio</strong>n costs, and market risks.<br />

� Enforceability of cont<strong>ra</strong>cts remains a challenge<br />

in Bang<strong>la</strong>de<strong>sh</strong>, where breach of cont<strong>ra</strong>ct is<br />

common among producers and purchasers<br />

alike. Other countries have devised legal and<br />

regu<strong>la</strong>tory mechanisms to address cont<strong>ra</strong>ct<br />

enforceability issues.<br />

27.4 27.4 27.4 Strengthening Strengthening institu<strong>tio</strong>ns institu<strong>tio</strong>ns and and organiza<strong>tio</strong>ns<br />

organiza<strong>tio</strong>ns<br />

• Strong commodity, industry and professional<br />

based associa<strong>tio</strong>ns are essential. For example,<br />

there are needs for a Na<strong>tio</strong>nal Dairy Coordina<strong>tio</strong>n<br />

Committee, a Na<strong>tio</strong>nal Poultry Coordina<strong>tio</strong>n<br />

Committee, an en<strong>la</strong>rged and strengthened<br />

fede<strong>ra</strong>ted t<strong>ra</strong>de body for the high-value rice<br />

industry and t<strong>ra</strong>de and stronger capacity within<br />

BFVAPEA.<br />

• Long term technical support through NGOs and<br />

other agencies would help to build and strengthen<br />

producers’ organiza<strong>tio</strong>n.<br />

28. 28. Competi<strong>tio</strong>n Competi<strong>tio</strong>n Competi<strong>tio</strong>n Policy Policy needs needs to to be be revised revised<br />

revised<br />

The The proposed proposed Competi<strong>tio</strong>n Competi<strong>tio</strong>n Act Act (2008) (2008) needs needs to to be<br />

be<br />

carefully carefully reviewed reviewed before before before approval, approval, since since it it appears appears to<br />

be be overly overly restrictive restrictive on on businesses. businesses. The proposed<br />

"Competi<strong>tio</strong>n Commission" is authorized to ref<strong>ra</strong>in<br />

businesses from abuse of dominant posi<strong>tio</strong>n through<br />

direct or indirect imposi<strong>tio</strong>n of unfair or discriminatory<br />

condi<strong>tio</strong>ns in purchase or sale of goods or service or<br />

price in purchase or sale (including predatory price) of<br />

goods or service. Re<strong>la</strong>ting to Mergers and Acquisi<strong>tio</strong>ns<br />

(Combina<strong>tio</strong>ns), the Act simply states that<br />

"Combina<strong>tio</strong>ns and matters re<strong>la</strong>ting to combina<strong>tio</strong>ns<br />

<strong>sh</strong>all be governed by the rules/regu<strong>la</strong><strong>tio</strong>ns as may be<br />

prescribed by the Commission." However, no specifics<br />

are provided re<strong>la</strong>ting to the rules/regu<strong>la</strong><strong>tio</strong>ns that may<br />

be so prescribed. Especially objec<strong>tio</strong>nable is c<strong>la</strong>use<br />

21(1) which states: Power of Commission to regu<strong>la</strong>te<br />

its own procedure - 21. (1) The Commission <strong>sh</strong>all not<br />

be bound by the procedure <strong>la</strong>id down by the Code of<br />

Civil Procedure, 1908 (5 of 1908), but be guided by the<br />

principles of natu<strong>ra</strong>l justice and, subject to the other<br />

provisions of this Act and of any rules made by the<br />

Government, the Commission <strong>sh</strong>all have powers to<br />

regu<strong>la</strong>te its own procedure including the p<strong>la</strong>ces at<br />

which they <strong>sh</strong>all have their sittings, du<strong>ra</strong><strong>tio</strong>n of o<strong>ra</strong>l<br />

hearings when g<strong>ra</strong>nted, and times of its inquiry. It is<br />

surprising to note that the final d<strong>ra</strong>ft of the proposed<br />

Competi<strong>tio</strong>n Act (2008) has not eliminated this c<strong>la</strong>use<br />

even after seve<strong>ra</strong>l public dialogue seminars on this<br />

topic where members of the business community<br />

objected to this c<strong>la</strong>use.<br />

29. 29. A A Focused Focused St<strong>ra</strong>teg St<strong>ra</strong>tegy St<strong>ra</strong>teg y to Encou<strong>ra</strong>ge EE-Commerce<br />

E<br />

Commerce<br />

The The Government Government <strong>sh</strong>ould <strong>sh</strong>ould expedite expedite the the process process to<br />

to<br />

ensure ensure "e "e-commerce" "e commerce" as as a a viable viable electronic<br />

electronic<br />

t<strong>ra</strong>nsac<strong>tio</strong>n t<strong>ra</strong>nsac<strong>tio</strong>n processing processing medium medium medium for for businesses businesses and<br />

and<br />

consumers. consumers. A na<strong>tio</strong>nal taskforce <strong>sh</strong>ould be formed with<br />

representatives from relevant ministries/departments<br />

e.g. the Ministry of Commerce, Bang<strong>la</strong>de<strong>sh</strong> Telecom<br />

Regu<strong>la</strong>tory Commission, Bang<strong>la</strong>de<strong>sh</strong> Bank, Ministry of<br />

Finance, and the Ministry of Law. Appropriate ecommerce<br />

<strong>la</strong>ws and inf<strong>ra</strong>structure need to be put in<br />

p<strong>la</strong>ce. For this purpose, required t<strong>ra</strong>nsac<strong>tio</strong>n<br />

management gateways and secure datastream<br />

t<strong>ra</strong>nsfers will need to be ensured including encryp<strong>tio</strong>n<br />

and digital signatures authorized by <strong>la</strong>w.<br />

30. 30. Re Re-enforce Re enforce the the Right Right-to Right to to-Informa<strong>tio</strong>n to Informa<strong>tio</strong>n and and more more<br />

more<br />

Effective Effective Effective Public Public Audits Audits<br />

Audits<br />

30.1 30.1 Implement the Right to Informa<strong>tio</strong>n Act (RIA)<br />

within all ministries including Ministries of Commerce,<br />

Industries, Finance, P<strong>la</strong>nning Commission, and other<br />

relevant ministries/departments.<br />

30.2 30.2 Undertake an initiative to strengthen audit<br />

p<strong>ra</strong>ctices within public sector institu<strong>tio</strong>ns. For this<br />

purpose, the Office of the Comptroller and Auditor<br />

Gene<strong>ra</strong>l of Bang<strong>la</strong>de<strong>sh</strong> (CAG) needs to embark on a<br />

capacity building project. The Entity Wide Audit (EWA)<br />

p<strong>ra</strong>ctice needs to be expanded to all Ministries and<br />

divisions within the government on regu<strong>la</strong>r intervals<br />

31. 31. A A st<strong>ra</strong>tegy st<strong>ra</strong>tegy for for developing developing the the SME SME Sector<br />

Sector<br />

31.1 31.1 31.1 First and foremost, for the sustainable<br />

development of SMEs, a standard defini<strong>tio</strong>n of SME<br />

needs to be establi<strong>sh</strong>ed by the government, in<br />

accordance with different stakeholders including donor<br />

agencies, NGOs, and private sector entrepreneurs.<br />

31.2 31.2 The government needs to protect small<br />

enterprises by re<strong>la</strong>xing tax and VAT policies aimed<br />

towards them, so that they can yield profits by keeping<br />

their cost of produc<strong>tio</strong>n low.<br />

31.3 31.3 Lack of finance is one of the major const<strong>ra</strong>ints –<br />

as commercial banks are inherently skeptical of<br />

lending to the SMEs due to the high risks and<br />

monitoring costs associated with lending to them, the<br />

government <strong>sh</strong>ould compensate by using g<strong>ra</strong>nts,<br />

perhaps in coordina<strong>tio</strong>n with donor agencies, as a<br />

major instrument for providing financial support for a<br />

25


limited period of time to selected SMEs which have<br />

good potential and wide linkages.<br />

31.4 31.4 Banking Institu<strong>tio</strong>ns <strong>sh</strong>ould immediately start<br />

solving the problem of de<strong>la</strong>yed payments to SMEs. A<br />

Network of Factoring Services must be set up at home<br />

and abroad ope<strong>ra</strong>ted through banks.<br />

31.5 31.5 In case of providing refinance facilities to banks<br />

and financial institu<strong>tio</strong>ns, the government <strong>sh</strong>ould issue<br />

appropriate directives re<strong>la</strong>ted to col<strong>la</strong>te<strong>ra</strong>l<br />

requirements and interest <strong>ra</strong>tes that are consistent with<br />

SME cha<strong>ra</strong>cteristics. Furthermore, banks <strong>sh</strong>ould be<br />

required to make the loan applica<strong>tio</strong>n and acquiring<br />

procedure much less tedious and cumbersome. Also,<br />

the lead SME financing institu<strong>tio</strong>ns, such as BASIC<br />

Bank, <strong>sh</strong>ould extend their cove<strong>ra</strong>ge in ru<strong>ra</strong>l areas<br />

targeting different potential SMEs.<br />

31.6 31.6 More SME development funds, such as the fund<br />

currently managed by the SME Founda<strong>tio</strong>n, may be<br />

created to subsidize the projects of potential<br />

entrepreneurs. The funds could be disbursed through<br />

banks and financial institu<strong>tio</strong>ns, and could be<br />

distributed through targeted support schemes, such as<br />

the women entrepreneur fund.<br />

31.7 31.7 More venture capital investments <strong>sh</strong>ould be<br />

encou<strong>ra</strong>ged so that small enterprises can gain access<br />

to equity; also private fund managers could provide<br />

management consultancy and advisory services to the<br />

enterprises whose funds they manage – services could<br />

include, pre-investment counseling, technical<br />

informa<strong>tio</strong>n services, accounting services, preparing<br />

feasibility studies, economic cost benefit analysis of<br />

project implementa<strong>tio</strong>n, and work<strong>sh</strong>ops to enhance<br />

entrepreneurial skills.<br />

31.8 31.8 The government <strong>sh</strong>ould keep aside funding for<br />

R&D projects in order to improve the product quality of<br />

SMEs, in col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n with top <strong>ra</strong>nked technical<br />

universities in the country. To address the problems of<br />

skilled <strong>la</strong>bor <strong>sh</strong>ortages, it <strong>sh</strong>ould be ensured that the<br />

teaching curriculum of the numerous poly-technic<br />

institutes and voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns comply<br />

with market demands.<br />

31.9 31.9 The government <strong>sh</strong>ould facilitate the expansion of<br />

the SMEs by upg<strong>ra</strong>ding their productivity and valueadded<br />

capabilities through enabling fiscal and tariff<br />

measures, facilitating effective backward linkage<br />

produc<strong>tio</strong>n chain under sub-contacting ar<strong>ra</strong>ngements,<br />

and the g<strong>ra</strong>nting of incentives and benefits to gene<strong>ra</strong>te<br />

much-needed employment and alleviate poverty.<br />

31.10 31.10 To provide greater support to SMEs in the<br />

middle of the global financial turmoil each of the<br />

Commercial banks and non-banking financial<br />

institu<strong>tio</strong>ns (NBFIs) must provide a mandated <strong>sh</strong>are of<br />

their respective ove<strong>ra</strong>ll disbursed loans to SMEs<br />

without asking for any col<strong>la</strong>te<strong>ra</strong>l at a simple single digit<br />

<strong>ra</strong>te of interest.<br />

31.11 31.11 Purchase and Price Preference Policy: These<br />

facilities <strong>sh</strong>ould include tender documents free of cost,<br />

exemp<strong>tio</strong>n from earnest money and security deposit<br />

and 15% price preference in Government purchases –<br />

from SME units.<br />

31.12 31.12 31.12 Sub-cont<strong>ra</strong>cting ar<strong>ra</strong>ngements: SMEF/BSCIC<br />

<strong>sh</strong>ould, to ensure efficient and cost effective produc<strong>tio</strong>n<br />

management, undertake to enhance complementarity<br />

in produc<strong>tio</strong>n prog<strong>ra</strong>mmes of <strong>la</strong>rge, medium and small<br />

industrial sectors through sub-cont<strong>ra</strong>cting<br />

ar<strong>ra</strong>ngements with small scale ancil<strong>la</strong>ry units.<br />

31.13 31.13 31.13 Marketing and exports: In spite of the vast<br />

domestic market, marketing remains a problematic<br />

area for SMEs. Mass consump<strong>tio</strong>n products are predominantly<br />

being marketed by the big and organized<br />

sector. The SME sectors <strong>sh</strong>ould be enabled to have a<br />

significant <strong>sh</strong>are of such markets. SMEF/BSCIC/EPB<br />

<strong>sh</strong>ould encou<strong>ra</strong>ge, promote and facilitate duty free<br />

marketing of SME products under b<strong>ra</strong>nd names in<br />

regional and global markets.<br />

31.14 31.14 31.14 Ru<strong>ra</strong>l non-farm SME: Government must<br />

recognize the need to enhance the spread of ru<strong>ra</strong>l and<br />

cottage industries towards stepping up non-farm<br />

employment opportunities.<br />

31.15 31.15 Self-employment prog<strong>ra</strong>mme with the objective<br />

of establi<strong>sh</strong>ing a <strong>la</strong>rge number of micro-enterprises in<br />

ru<strong>ra</strong>l areas with expanded micro-credit schemes<br />

without asking for any col<strong>la</strong>te<strong>ra</strong>l at a simple single digit<br />

<strong>ra</strong>te of interest.<br />

31.15 31.15 To encou<strong>ra</strong>ge and facilitate investments<br />

government <strong>sh</strong>ould immediately announce a Green<br />

Channel tax-incentives package providing for tax free<br />

investment opportunities in prioritized sectors without<br />

asking for any exp<strong>la</strong>na<strong>tio</strong>n.<br />

32. 32. A A St<strong>ra</strong>tegy for Developing a Technology and and<br />

Outsourcing Outsourcing Sector<br />

Sector<br />

If If Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> is is to to develop develop it’s it’s IT IT and and Outsourcing<br />

Outsourcing<br />

sector, sector, the the government government needs needs to to address address some some of of the<br />

the<br />

key key challenges challenges below.<br />

below.<br />

We believe there have been five major areas the<br />

government and the ICT industry need to focus on to<br />

develop Bang<strong>la</strong>de<strong>sh</strong> as a serious technology<br />

sector/outsourcing destina<strong>tio</strong>n:<br />

32.1 32.1 Improve Improve EE-HR/Set<br />

E HR/Set Up Up Up more more IT IT Voca<strong>tio</strong>nal Voca<strong>tio</strong>nal T<strong>ra</strong>ining<br />

T<strong>ra</strong>ining<br />

Institutes: Institutes: A <strong>la</strong>ck of IT <strong>la</strong>bour supply with the requisite<br />

26


critical mass of technical skills. While the limited<br />

number of engineers and computer scientists<br />

g<strong>ra</strong>duating from Bang<strong>la</strong>de<strong>sh</strong>i universities is modest<br />

re<strong>la</strong>tive to India, perhaps a bigger const<strong>ra</strong>int is the<br />

<strong>sh</strong>ortage of voca<strong>tio</strong>nal t<strong>ra</strong>ining institutes to supply<br />

workers with the requisite technical and IT knowledge.<br />

32.2 32.2 Adopt Adopt Second Second Submarine Submarine Cable/Cut Cable/Cut High High Internet<br />

Internet<br />

Costs Costs further: further: The de<strong>la</strong>yed acquisi<strong>tio</strong>n of a submarine<br />

fibre optic cable re<strong>la</strong>tive to other countries in the region<br />

was believed to be the primary factor behind one of the<br />

highest broadband costs in the region. But even after<br />

the introduc<strong>tio</strong>n of the cable in 2006, internet costs in<br />

Bang<strong>la</strong>de<strong>sh</strong> have only recently declined to any degree.<br />

BTRC <strong>sh</strong>ould ensure BTTB cuts bandwidth costs a<br />

further 50% in the next 12 months and acquires the<br />

second submarine cable to ensure effective backup.<br />

32.3 32.3 Poor Poor Poor Country Country Image: Image: Image: B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> is<br />

associated with political instability, corrup<strong>tio</strong>n, natu<strong>ra</strong>l<br />

disasters and poverty. Foreign corpo<strong>ra</strong>tes do not<br />

natu<strong>ra</strong>lly associate the country as one that is a serious<br />

tech destina<strong>tio</strong>n. We need to include Technology as<br />

part of the B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> St<strong>ra</strong>tegy.<br />

32.4 32.4 Establi<strong>sh</strong> Establi<strong>sh</strong> a a credible credible domestic domestic tech tech p<strong>la</strong>yer: p<strong>la</strong>yer: there<br />

are too many small companies (more than 300<br />

companies in a $30mn export sector) and none with<br />

the scale or critical mass to meet the demands of major<br />

global multina<strong>tio</strong>nal outsourcing cont<strong>ra</strong>cts. The<br />

Government <strong>sh</strong>ould encou<strong>ra</strong>ge consolida<strong>tio</strong>n among a<br />

number of smaller p<strong>la</strong>yers which, perhaps with a JV<br />

with a <strong>la</strong>rge foreign tech company, might develop<br />

Bang<strong>la</strong>de<strong>sh</strong>’s na<strong>tio</strong>nal tech champion that may<br />

eventually evolve into a Wipro, Infosys, TCS or Satyam<br />

for the country.<br />

32.5 32.5 32.5 Ensure Ensure Effective Effective Overseas Overseas Marketing Marketing and<br />

and<br />

Distribu<strong>tio</strong>n: Distribu<strong>tio</strong>n: Weak sales effort/front end in key client<br />

markets such as in Silicon Valley. In 2003,<br />

Bang<strong>la</strong>de<strong>sh</strong>, with the support of the World Bank, set up<br />

an off<strong>sh</strong>ore marketing office in Santa C<strong>la</strong><strong>ra</strong>, California<br />

with the help of the Bay Area Chapter of the American<br />

Associa<strong>tio</strong>n of Bang<strong>la</strong>de<strong>sh</strong>i Engineers and Architects<br />

(AABEA). After two years of efforts from Bang<strong>la</strong>de<strong>sh</strong>i<br />

IT entrepreneurs, government and AABEA members<br />

and nearly a million dol<strong>la</strong>rs in state funding, the project<br />

closed without realizing its objectives of <strong>la</strong>unching<br />

Bang<strong>la</strong>de<strong>sh</strong> as an effective outsourcing destina<strong>tio</strong>n.<br />

33. 33. Establi<strong>sh</strong> Establi<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Climate Climate Chan Change Chan Change<br />

ge Venture<br />

Venture<br />

Capital/ Capital/ Cleantech Cleantech Fund<br />

Fund<br />

33.1 33.1 Private Private Sector Sector Funds Funds and and Climate Climate Change: Change: The<br />

<strong>ra</strong>pid growth in global cleantech funds has been<br />

followed by the emergence of Asian-focused cleantech<br />

that will be specifically focused on funding emerging<br />

opportunities in the region. Bang<strong>la</strong>de<strong>sh</strong> policymakers<br />

and the private sector need to work together to<br />

develop a series of specific investment opportunities<br />

along with effective marketing of these projects to<br />

global/regional cleantech funds.<br />

This will not only bring in addi<strong>tio</strong>nal funding to help<br />

Bang<strong>la</strong>de<strong>sh</strong> battle climate change but also critically<br />

bring the country much-needed technical expertise that<br />

is commercially focused that will be an important<br />

complement to the technical expertise that exists<br />

within the public sector, whether it is the Climate<br />

Change Cell within the Department of Environment or<br />

technical assistance supported by the donor agencies.<br />

33.2 33.2 Expand Expand So<strong>la</strong>r So<strong>la</strong>r Energy Energy for for Water Water Heating: Heating: The<br />

World World Bank Bank (WB) (WB) estimates estimates that that there there are are about about 4.8<br />

4.8<br />

million million people people in in of off-grid of grid loca<strong>tio</strong>ns loca<strong>tio</strong>ns who who have have have the the need<br />

need<br />

for for for SHS. SHS. SHS. However, only about 5% of the off-grid<br />

household demand has been fulfilled. The<br />

Government of Bang<strong>la</strong>de<strong>sh</strong> has p<strong>la</strong>nned to increase<br />

the number of SHS to one million, but such an<br />

increase will only serve a small <strong>sh</strong>are of the untapped<br />

market. Huge market expansion possibility exists in<br />

terms of installing SHSs. Another potential direc<strong>tio</strong>n<br />

of SHS expansion could be the instal<strong>la</strong><strong>tio</strong>n of these<br />

systems in urban areas as a backup during power<br />

outages.<br />

34. 34. Mitigating Mitigating effect effects effect s of Global Global Financial Crisis: Crisis:<br />

Recommenda<strong>tio</strong>ns Recommenda<strong>tio</strong>ns Recommenda<strong>tio</strong>ns from from FBCCI<br />

FBCCI<br />

34.1 34.1 GoB/WB/IMF <strong>sh</strong>ould assist Bang<strong>la</strong>de<strong>sh</strong> exporters<br />

and manufacturers with adequate financial back up<br />

packages against the adverse consequences of the<br />

falling commodity price and credit repayment<br />

capacities and also by ensuring single digit interest<br />

credit flow to them.<br />

34.2 34.2 A GFC mitiga<strong>tio</strong>n fund [15,000 crore] <strong>sh</strong>ould<br />

immediately be created for the purpose with g<strong>ra</strong>nts<br />

from the donor agencies. The US Congress approved<br />

an aid package worth $25 billion in September to help<br />

the auto industry invest in new gene<strong>ra</strong><strong>tio</strong>n car<br />

technology and is under pressure to set aside another<br />

$25 billion to help the three major US automakers -<br />

Gene<strong>ra</strong>l Motors, Ford and Chrysler - survive the<br />

<strong>sh</strong>arpest market downturn in decades.<br />

34.3 34.3 The vulne<strong>ra</strong>ble sectors <strong>sh</strong>ould be identified and<br />

secto<strong>ra</strong>l mitiga<strong>tio</strong>n st<strong>ra</strong>tegies <strong>sh</strong>ould be formu<strong>la</strong>ted and<br />

a prudent rescue package <strong>sh</strong>ould be developed in<br />

consulta<strong>tio</strong>n with FBCCI and Secto<strong>ra</strong>l representatives.<br />

The rescue package may include, among others,<br />

interest freeze, rescheduling of loans, continua<strong>tio</strong>n of<br />

credit flow at single digit interest <strong>ra</strong>te, ipso-fecto<br />

applica<strong>tio</strong>n of BBBF prescrip<strong>tio</strong>ns and issuing<br />

sovereign gua<strong>ra</strong>ntee.<br />

27


35. 35. Recommenda<strong>tio</strong>ns Recommenda<strong>tio</strong>ns for for the the the RMG RMG sector<br />

sector<br />

In order to retain competitiveness, the private sector<br />

needs to col<strong>la</strong>bo<strong>ra</strong>te with the public sector to secure:<br />

35.1 35.1 New markets through coordinated marketing and<br />

sales efforts<br />

35.2 35.2 High value added business with a g<strong>ra</strong>dual<br />

prepa<strong>ra</strong><strong>tio</strong>n to enhance skills, technology and capacity<br />

35.3 35.3 35.3 FDI/JV and long term loans for backward and<br />

forward linkage industries for woven products, as only<br />

about 35% of the woven fabric is produced locally,<br />

whereas knit sector receives ca<strong>sh</strong> incentives.<br />

35.4 35.4 implementa<strong>tio</strong>n of cent<strong>ra</strong>l bonded warehouse as<br />

per BGMEA sugges<strong>tio</strong>n in order to cope with <strong>sh</strong>orter<br />

lead time requirements<br />

35.5 35.5 Workers’ t<strong>ra</strong>ining for improving skills for<br />

successful ope<strong>ra</strong><strong>tio</strong>n of the industry is crucial.<br />

35.6 35.6 Active participa<strong>tio</strong>n in multi<strong>la</strong>te<strong>ra</strong>l and regional<br />

p<strong>la</strong>tforms for duty free market access in EU, US and<br />

the rest of the globe.<br />

35.7 35.7 A defined Code of Conduct for Freight Forwarders<br />

35.8 35.8 Garments vil<strong>la</strong>ge in order to encou<strong>ra</strong>ge industrial<br />

clusters.<br />

36. 36. Revised Revised export export and and industrial industrial policies<br />

policies<br />

Update Update all all major major economic economic policies policies of of the the government<br />

government<br />

government<br />

so so th that th at they reflect the current global economic and<br />

business business business environment, environment, are are internally internally internally consistent,<br />

consistent,<br />

coordinated coordinated and and forward forward-looking.<br />

forward looking. Many of these<br />

policies are deficient in fundamental ways. These<br />

include the PRSP II (2008), Industrial Policy (1995,<br />

Ministry of Industries), Import Policy (2006-09, Ministry<br />

of Commerce), Export Policy (2006-09, Ministry of<br />

Commerce), SME policy (2005, Ministry of Industries),<br />

Investment Board Act (1989, Board of Investment),<br />

Consumers Right Protec<strong>tio</strong>n Ordinance (2008, Ministry<br />

of Commerce), and other re<strong>la</strong>ted economic policies.<br />

The Import and Export policies that are currently<br />

effective (2006-09) do not provide adequate treatment<br />

of the Service Sector, and therefore need to be<br />

urgently updated. The 13 year-old Industrial Policy is<br />

currently being updated by the Ministry of Industries,<br />

but public consulta<strong>tio</strong>ns have been <strong>la</strong>rgely absent in<br />

the process of the update. The d<strong>ra</strong>ft of the new<br />

Industrial Policy must take into conside<strong>ra</strong><strong>tio</strong>n of the<br />

new "alloca<strong>tio</strong>n of business" required of the Ministry of<br />

Industries. For example, there is no men<strong>tio</strong>n of<br />

"Industrial Clusters" in the Industrial Policy, 2005.<br />

37. . Macro Macro Policies Policies to to Mitigate Mitigate the the the Global Global Financial<br />

Financial<br />

Crisis<br />

Crisis<br />

The Global economy continues to head towards<br />

recession. JP Morgan has forecast that in 2009. Global<br />

growth will be -0.4% versus 1.9% in 2008 and 3.5% in<br />

2007. The developed economies are expected to<br />

cont<strong>ra</strong>ct with growth of -1.4% and Emerging Markets<br />

(EM) at +3.3% China is forecast to slow from 11.9% in<br />

2008 to 8.1% while India is expected to slow from 9%<br />

in 2008 to 6.1% in 2009.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bank (BB) has forecast that GDP growth<br />

in BD will only slow to 6.2% in FY 2008/09. Key<br />

ques<strong>tio</strong>ns are: Is Bang<strong>la</strong>de<strong>sh</strong>’s current economic<br />

resilience likely to be sustained? Are policymakers,<br />

both Bang<strong>la</strong>de<strong>sh</strong> Bank (BB) and the Government<br />

adopting the appropriate monetary and fiscal st<strong>ra</strong>tegy<br />

to mitigate against a further spillover between the<br />

global meltdown and Bang<strong>la</strong>de<strong>sh</strong>?<br />

In terms of the Macro prospects going forward and<br />

policy choices avai<strong>la</strong>ble, even if there is a modest<br />

slowing in growth, Bang<strong>la</strong>de<strong>sh</strong> Bank and the<br />

Government have policy op<strong>tio</strong>ns avai<strong>la</strong>ble: Key issues<br />

include:<br />

In terms of the Macro prospects going forward and<br />

policy choices avai<strong>la</strong>ble, even if there is a modest<br />

slowing in growth, Bang<strong>la</strong>de<strong>sh</strong> Bank and the<br />

Government have policy op<strong>tio</strong>ns avai<strong>la</strong>ble: Key issues<br />

include:<br />

1) Inf<strong>la</strong><strong>tio</strong>n: Inf<strong>la</strong><strong>tio</strong>n: We believe inf<strong>la</strong><strong>tio</strong>nary pressures will be<br />

significantly more mode<strong>ra</strong>te than BB is currently<br />

forecasting. With def<strong>la</strong><strong>tio</strong>n a real prospect in a<br />

number of economies around the world, and broad<br />

based commodity price declines persisting, lower<br />

inf<strong>la</strong><strong>tio</strong>n will be the dominant global trend (though<br />

relief at mode<strong>ra</strong>ting inf<strong>la</strong><strong>tio</strong>n appears to be turning<br />

into panic on def<strong>la</strong><strong>tio</strong>n as evidenced by the recent<br />

Bank of Eng<strong>la</strong>nd 1.5% <strong>ra</strong>te cut). With food 60%+ of<br />

the CPI basket, and energy prices set by the<br />

government and buffered from Global levels,<br />

Bang<strong>la</strong>de<strong>sh</strong> may see a smaller decline in inf<strong>la</strong><strong>tio</strong>n<br />

than other countries. But price pressures <strong>sh</strong>ould<br />

no longer be a policy const<strong>ra</strong>int.<br />

2) Monetar Monetary Monetar Monetary<br />

y Policy: Policy: Although credit growth,<br />

especially private sector bank lending, remains<br />

strong, it is encou<strong>ra</strong>ging that BB is vigi<strong>la</strong>nt to the<br />

need for emergency liquidity injec<strong>tio</strong>ns. While<br />

premature monetary easing would run risks of<br />

perpetuating asset price bubbles within<br />

Bang<strong>la</strong>de<strong>sh</strong>, the trends in other economies<br />

underline the need to be willing to lower interest<br />

<strong>ra</strong>tes if there is clear evidence of a <strong>ra</strong>pid<br />

slowdown.<br />

3) Exchange Exchange Rates: Rates: In the PAU report, it is clear that<br />

BB feels that the recent apprecia<strong>tio</strong>n in the BDT<br />

versus the currencies of some of its major t<strong>ra</strong>ding<br />

partners, most notably EUR and GBP, is merely a<br />

correc<strong>tio</strong>n of an undervalued posi<strong>tio</strong>n. They<br />

highlight that the Real Effective Exchange Rate<br />

28


differential to the nominal exchange <strong>ra</strong>te is still in<br />

Bang<strong>la</strong>de<strong>sh</strong>’s favour. They emphasise the need to<br />

keep inf<strong>la</strong><strong>tio</strong>n in check. But Bang<strong>la</strong>de<strong>sh</strong>’s main<br />

t<strong>ra</strong>de competitors, especially in RMG, Jute,<br />

Leather goods and frozen foods have all seen<br />

significant deprecia<strong>tio</strong>n in their exchange <strong>ra</strong>tes<br />

versus the USD (most notable India and Pakistan).<br />

As a result, Bang<strong>la</strong>de<strong>sh</strong> has lost competitiveness<br />

by holding the BDT- USD peg re<strong>la</strong>tively stable.<br />

This argues, in our view, for a modest controlled<br />

deprecia<strong>tio</strong>n of the BDT versus the USD. One can<br />

see it as an insu<strong>ra</strong>nce policy for future economic<br />

weakness/declining t<strong>ra</strong>de competitiveness. The<br />

government <strong>sh</strong>ould consider VAT or other tax<br />

reduc<strong>tio</strong>ns to help importers offset rising costs if<br />

the BDT is depreciated.<br />

4) 4) Fiscal Fiscal Fiscal Policy: Policy: Policy: The sugges<strong>tio</strong>n from BB that fiscal<br />

policy <strong>sh</strong>ould incorpo<strong>ra</strong>te some scope for<br />

measures to tackle the impact of the global crisis<br />

through targeted support for certain sectors under<br />

pressure has significant merits. For example, the<br />

jute sector could one potential recipient of<br />

tempo<strong>ra</strong>ry subsidies to offset substantial loss of<br />

progress versus India. Ove<strong>ra</strong>ll, the stance of fiscal<br />

policy does appear to allow addi<strong>tio</strong>nal easing<br />

measures to be taken if needed.<br />

29


APPENDICES<br />

30


Appendix Appendix Appendix 1 1 – Solving the Power Power Crisis – Short Term Measures & Long Long Term Solu<strong>tio</strong>ns<br />

“Bang<strong>la</strong>de<strong>sh</strong> is now in the midst of a serious power<br />

crisis…Power gene<strong>ra</strong><strong>tio</strong>n has failed to keep pace with<br />

demand, and, in the <strong>la</strong>st two years, increasing <strong>sh</strong>ortages of<br />

natu<strong>ra</strong>l gas, the primary fuel used in power gene<strong>ra</strong><strong>tio</strong>n, have<br />

added to the sector’s problems”. (Xian Zhu, World Bank<br />

Country Director for Bang<strong>la</strong>de<strong>sh</strong>)<br />

“Bang<strong>la</strong>de<strong>sh</strong> has a severe <strong>sh</strong>ortage of gene<strong>ra</strong><strong>tio</strong>n at peak<br />

periods…Like many other developing countries with <strong>la</strong>rge<br />

popu<strong>la</strong><strong>tio</strong>ns and high household demand, Bang<strong>la</strong>de<strong>sh</strong> has a<br />

“peaky” load curve, with d<strong>ra</strong>matic upswings in demand<br />

during the <strong>la</strong>te afternoon and evening period, followed by a<br />

<strong>ra</strong>pid drop after 11:00 pm.” (A<strong>la</strong>n Townsend, Senior Energy<br />

Specialist)<br />

In addi<strong>tio</strong>n, the sector is financially weak, access to capital is<br />

severely const<strong>ra</strong>ined, and prices do not cover costs - all<br />

factors that have hampered the power sector’s ability to meet<br />

growing demand for electricity.<br />

According to the World Bank, Bang<strong>la</strong>de<strong>sh</strong>i firms lose more<br />

value to electricity outages and surges than any other<br />

compa<strong>ra</strong>tor country in the region. The number of days when<br />

electrical outages occur is triple that of any other country,<br />

evidencing severe <strong>sh</strong>ortcomings in gene<strong>ra</strong><strong>tio</strong>n capacity,<br />

t<strong>ra</strong>nsmission, and distribu<strong>tio</strong>n of power. The country has<br />

been <strong>sh</strong>own to lose on ave<strong>ra</strong>ge 2% of na<strong>tio</strong>nal growth growth growth due due to<br />

to<br />

power power sector sector problems.<br />

problems.<br />

90.0%<br />

80.0%<br />

70.0%<br />

60.0%<br />

50.0%<br />

40.0%<br />

30.0%<br />

20.0%<br />

10.0%<br />

0.0%<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Low income<br />

Lower middle income<br />

Electricity a major obstacle (% of firms agree)<br />

South Asia<br />

China<br />

India<br />

Major Major reasons reasons for for the the current current power power power crisis<br />

crisis<br />

Bang<strong>la</strong>de<strong>sh</strong> has been undergoing a severe power crisis -<br />

the demand for around 5,500MW of electricity is clearly not<br />

met by an ave<strong>ra</strong>ge supply of only 3,500MW. This <strong>sh</strong>ortage<br />

of supply resulted in service disrup<strong>tio</strong>ns and b<strong>la</strong>ckouts on<br />

364 days in 2007. In 2007, peak demand stood at<br />

4,500MW, and while total theoretical gene<strong>ra</strong><strong>tio</strong>n capacity<br />

was 4,385 MW, ave<strong>ra</strong>ge maximum peak gene<strong>ra</strong><strong>tio</strong>n was<br />

only 3,717 MW.<br />

Only 43% of the popu<strong>la</strong><strong>tio</strong>n has access to electricity in the<br />

country while the cove<strong>ra</strong>ge in ru<strong>ra</strong>l areas is much less. Per<br />

Kenya<br />

Pakistan<br />

Philippines<br />

Sri Lanka<br />

Thai<strong>la</strong>nd<br />

Vietnam<br />

capita consump<strong>tio</strong>n of energy is only 165 kwh which is the<br />

lowest in the region.<br />

Key factors contributing to the power crisis include:<br />

• Many power p<strong>la</strong>nts are idle due to the gas <strong>sh</strong>ortage<br />

(88% of total electricity gene<strong>ra</strong><strong>tio</strong>n comes from natu<strong>ra</strong>l<br />

gas). At present, Bang<strong>la</strong>de<strong>sh</strong> is producing around<br />

1,800mn cubic feet (mmcft) of gas a day, while the<br />

demand is for around 2,000mmcft. It is assumed that at<br />

least 500MW of power cannot be gene<strong>ra</strong>ted due to the<br />

gas <strong>sh</strong>ortage. Despite all the optimistic projec<strong>tio</strong>ns<br />

made by experts about Bang<strong>la</strong>de<strong>sh</strong> sitting on a vast<br />

reservoir of gas, it could be argued that previous<br />

governments did not take enough initiatives to resolve<br />

the dispute on maritime boundary with India and<br />

Myanmar, and develop new fields. Petrobang<strong>la</strong> offered<br />

its off<strong>sh</strong>ore bidding round in March this year, while the<br />

previous auc<strong>tio</strong>n was in 1997.<br />

• Another factor contributing to the power crisis is the<br />

<strong>la</strong>ck of political and environmental consensus to tap<br />

Bang<strong>la</strong>de<strong>sh</strong>'s coal resources, and using that for power<br />

gene<strong>ra</strong><strong>tio</strong>n.<br />

• A <strong>la</strong>ck of t<strong>ra</strong>nsparency in power gene<strong>ra</strong><strong>tio</strong>n<br />

procurement and tendering in the past was a major<br />

problem. In 2007, the 450MW Si<strong>ra</strong>jgonj power p<strong>la</strong>nt,<br />

along with seven rental power p<strong>la</strong>nts and ten small<br />

power p<strong>la</strong>nts were re-tendered. The 100MW Sylhet<br />

power p<strong>la</strong>nt was first tendered in 2002, and its fourth<br />

tender was received in July 2007. The de<strong>la</strong>y in the<br />

evalua<strong>tio</strong>n process of the tender was also a reason for<br />

excessive de<strong>la</strong>y for the power p<strong>la</strong>nts to become<br />

ope<strong>ra</strong><strong>tio</strong>nal.<br />

• Lack of proper p<strong>la</strong>nning, forecasting of demand and<br />

implementa<strong>tio</strong>n of p<strong>la</strong>ns are major problems in the<br />

power sector. A big power p<strong>la</strong>nt needs around 3 years,<br />

including the tendering process, to start its ope<strong>ra</strong><strong>tio</strong>ns.<br />

Therefore, the p<strong>la</strong>nning division <strong>sh</strong>ould have at least a<br />

15 years st<strong>ra</strong>tegic p<strong>la</strong>n to ensure uninterrupted power<br />

supply. Also, the implementa<strong>tio</strong>n of the p<strong>la</strong>n <strong>sh</strong>ould be<br />

regu<strong>la</strong>rly monitored.<br />

• Lack of efficient and timely co-ordina<strong>tio</strong>n between<br />

different government agencies de<strong>la</strong>ys the<br />

implementa<strong>tio</strong>n of projects. In energy sector projects,<br />

numerous government agencies are involved, including<br />

the Ministry of Power, energy and mine<strong>ra</strong>l resources,<br />

gas distribu<strong>tio</strong>n companies, Bang<strong>la</strong>de<strong>sh</strong> Power<br />

Development Board, Power Grid Company of<br />

Bang<strong>la</strong>de<strong>sh</strong> (PGCB), cabinet purchase committee etc.<br />

Often, after a power p<strong>la</strong>nt tender is invited, much <strong>la</strong>ter it<br />

is realized that there is not an adequate gas supply for<br />

that p<strong>la</strong>n. Due to the <strong>la</strong>ck of coordina<strong>tio</strong>n between the<br />

aforemen<strong>tio</strong>ned agencies, it is often the case that a<br />

power p<strong>la</strong>nt tender is invited and <strong>la</strong>ter it is realized that<br />

there is not adequate gas supply for that p<strong>la</strong>nt.<br />

31


• Corrup<strong>tio</strong>n is another const<strong>ra</strong>int in the energy sector.<br />

According to T<strong>ra</strong>nsparency Interna<strong>tio</strong>nal Bang<strong>la</strong>de<strong>sh</strong><br />

(TIB), due to mismanagement, corrup<strong>tio</strong>n and<br />

irregu<strong>la</strong>rities in the sector, the country endured a loss of<br />

BDT 106.26bn in fiscal year 2006. Corrup<strong>tio</strong>n in the<br />

sector sometimes fails to att<strong>ra</strong>ct adequate private /<br />

foreign investors.<br />

• High system loss is another challenge for the power<br />

sector. However, the situa<strong>tio</strong>n is improving as system<br />

loss is now around 20% compared to 28.5% in 2001.<br />

The inefficient t<strong>ra</strong>nsmission and distribu<strong>tio</strong>n system of<br />

state owned companies is the main factor behind this<br />

high system loss. A reduc<strong>tio</strong>n of 1% system loss can<br />

save around 45MW of power, which can at least reduce<br />

the frequency of b<strong>la</strong>ck-outs.<br />

• In 2007, there were a total of 64 power p<strong>la</strong>nt units in<br />

Bang<strong>la</strong>de<strong>sh</strong>. Out of them, 18 units are more than 30<br />

years old, 25 units are between 15 to 30 years old, and<br />

the remaining 21 are less than 15 years old. These old<br />

power p<strong>la</strong>nts consume more fuel compared to its<br />

capacity and most of the time cannot run to thier <strong>ra</strong>ted<br />

capacity. Addi<strong>tio</strong>nally, technical glitches occur more<br />

frequently resulting in partial or full <strong>sh</strong>ut down of the<br />

p<strong>la</strong>nt, and also makes the maintenance cost higher.<br />

• According to the Second Bang<strong>la</strong>de<strong>sh</strong> Investment<br />

Climate Report from the World Bank, “Power Power Power<br />

unreliability unreliability has has caused caused caused a a veritable veritable boom boom boom in in gene<strong>ra</strong>tor gene<strong>ra</strong>tor<br />

gene<strong>ra</strong>tor<br />

sales sales in in the the the past past three three years. years. The median firm owns a<br />

gene<strong>ra</strong>tor, though the median small firm does not<br />

(28.2% of small firms, 61.9% of medium firms and<br />

91.4% of <strong>la</strong>rge firms own a gene<strong>ra</strong>tor). Over three<br />

quarters of garments and chemicals / pharmaceutical<br />

companies have one, though less than half in other<br />

industries do. Firms estimate they have to rely on their<br />

own gene<strong>ra</strong>tors for about 28% of the electricity<br />

consumed. Gene<strong>ra</strong>tors represent a conside<strong>ra</strong>ble<br />

investment, at 5.3% of a firm’s total fixed assets at book<br />

value on ave<strong>ra</strong>ge. The total power capacity of captive<br />

gene<strong>ra</strong><strong>tio</strong>n is reported to be around 2,000 MW, or about<br />

half of the public electricity produc<strong>tio</strong>n in the country. In<br />

an industry with economies of scale, this is inefficient.”<br />

Short Short Term Term P<strong>la</strong>n<br />

P<strong>la</strong>n<br />

• More Rental Power P<strong>la</strong>nts (RPP) need to be installed to<br />

overcome the <strong>sh</strong>ort term power crisis. In RPP, project<br />

developers are allowed to install second hand engines,<br />

thus <strong>sh</strong>ortening the project implementa<strong>tio</strong>n time, which<br />

is currently 120 days as set by the government. RPPs<br />

are usually costlier as the cont<strong>ra</strong>ct period for these<br />

projects are three years. The government needs to<br />

att<strong>ra</strong>ct more local / foreign investors to increase the<br />

competi<strong>tio</strong>n in the tendering process which will<br />

eventually reduce the tariff. Along with that, the<br />

government needs to closely supervise the<br />

implementa<strong>tio</strong>n of the project to ensure timely<br />

commencement of power gene<strong>ra</strong><strong>tio</strong>n.<br />

• The Coal Policy needs to be finalized as early as<br />

possible. The first d<strong>ra</strong>ft of the policy was publi<strong>sh</strong>ed by<br />

the government on December, 2005. Since then, the<br />

d<strong>ra</strong>ft policy has undergone many revisions on the basis<br />

of discussions with various stakeholders and experts<br />

and still has not been finalized. To develop the coal<br />

sector efficiently, a well thought out coal policy is<br />

mandatory.<br />

• The government <strong>sh</strong>ould implement the merchant power<br />

policy immediately. Merchant power p<strong>la</strong>nts can be<br />

installed in a <strong>sh</strong>orter period of time as there is no<br />

tendering process. In this type of power p<strong>la</strong>nt, the<br />

government does not ensure any fuel supply, power<br />

purchase, <strong>la</strong>nd lease or any other agreements with<br />

private companies. After identifying prospective<br />

demand in a particu<strong>la</strong>r area, the investor can set up the<br />

power p<strong>la</strong>nt and can start selling power to the local<br />

consumers. It could be argued that merchant power<br />

p<strong>la</strong>nts can enable the investors to monopolize the<br />

power sector and negatively affect the consumers, but<br />

the government can ensure competi<strong>tio</strong>n in the long run<br />

by adding more power in the na<strong>tio</strong>nal power grid.<br />

• The government can set up some small coal fired<br />

power p<strong>la</strong>nts and can import coal from India on a<br />

tempo<strong>ra</strong>ry basis before developing our own coal mines.<br />

• The government <strong>sh</strong>ould adopt a more efficient and<br />

faster procurement and tendering process for quicker<br />

implementa<strong>tio</strong>n of any project. Though it is believed<br />

that there is a negative corre<strong>la</strong><strong>tio</strong>n between a faster<br />

tendering process and t<strong>ra</strong>nsparency, we think it is<br />

possible to <strong>sh</strong>orten the existing tendering process<br />

without hampering t<strong>ra</strong>nsparency.<br />

• Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ould prioritize on reducing the system<br />

loss in the power sector. From 1994 to 2005, BDT<br />

189.30bn was lost through distribu<strong>tio</strong>n leakage and<br />

pilfe<strong>ra</strong>ge. A reduc<strong>tio</strong>n of 1% system loss can save<br />

around 45 MW of power.<br />

• All the old and inefficient power p<strong>la</strong>nts <strong>sh</strong>ould be<br />

rep<strong>la</strong>ced immediately to ensure better utiliza<strong>tio</strong>n of<br />

primary fuel and smooth ope<strong>ra</strong><strong>tio</strong>n.<br />

32


Long Long Term Term P<strong>la</strong>n<br />

P<strong>la</strong>n<br />

• Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ould develop its coal mines as soon as<br />

possible and <strong>sh</strong>ould set up adequate coal fired power<br />

p<strong>la</strong>nts to reduce its dependency on natu<strong>ra</strong>l gas for power<br />

gene<strong>ra</strong><strong>tio</strong>n. Five good quality, low sulphur coal deposits,<br />

with proven reserves of more than 2.5bn MT and<br />

probable of around 3.3bn MT, have been discovered in<br />

Bang<strong>la</strong>de<strong>sh</strong>. We assume that new power p<strong>la</strong>nts with<br />

capacity of 5,000 MW could be developed using<br />

domestic coal that can gene<strong>ra</strong>te power for up to 66 to 90<br />

years.<br />

• The government needs to focus on new gas field<br />

explo<strong>ra</strong><strong>tio</strong>ns to fuel the existing gas based power p<strong>la</strong>nts.<br />

The recove<strong>ra</strong>ble proven remaining reserve of gas is<br />

around 8.1 TCF which will start depleting after 2012. The<br />

maritime boundary dispute with India and Myanmar is a<br />

major barrier to off<strong>sh</strong>ore gas explo<strong>ra</strong><strong>tio</strong>n, and <strong>sh</strong>ould be<br />

resolved as soon as possible.<br />

• Bang<strong>la</strong>de<strong>sh</strong> cannot gene<strong>ra</strong>te power from its own<br />

domestic fuel forever. Many countries like Japan and<br />

Singapore do not have any significant oil, gas or other<br />

natu<strong>ra</strong>l resources, but nonetheless, have not been facing<br />

a power crisis like Bang<strong>la</strong>de<strong>sh</strong>. The government <strong>sh</strong>ould<br />

have a clear st<strong>ra</strong>tegy for importing the oil/coal/gas that<br />

they need, coupled with efficient <strong>la</strong>rge-scale gene<strong>ra</strong><strong>tio</strong>n.<br />

Along with that, the government <strong>sh</strong>ould focus on<br />

establi<strong>sh</strong>ing more crude oil refinery p<strong>la</strong>nts to reduce the<br />

imported fuel cost. The country’s sole crude oil refinery,<br />

government owned Eastern Refinery Limited, is meeting<br />

only 40% of the country’s liquid fuel requirement, while<br />

the rest is imported. Processing cost of crude oil at the<br />

refinery is 70% cheaper than that in Singapore or other<br />

neighboring countries.<br />

• Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ould emphasize on regional energy<br />

integ<strong>ra</strong><strong>tio</strong>n with the neighboring countries, mainly with<br />

India. The mutual benefits for linking the Indian and<br />

Bang<strong>la</strong>de<strong>sh</strong>i power grids to facilitate cross-border power<br />

exchanges are conside<strong>ra</strong>ble. Various parts of Tripu<strong>ra</strong>,<br />

Mizo<strong>ra</strong>m, and other northeastern Indian states could be<br />

served more economically by power imports from<br />

eastern Bang<strong>la</strong>de<strong>sh</strong>. In turn, western Bang<strong>la</strong>de<strong>sh</strong> has<br />

only around 950MW of installed capacity, well below<br />

actual demand. Instead of adding new gene<strong>ra</strong><strong>tio</strong>n<br />

capacity locally to meet this demand, western<br />

Bang<strong>la</strong>de<strong>sh</strong> could be better served by importing power<br />

from India. Nepal and Bhutan have <strong>la</strong>rge potentials for<br />

gene<strong>ra</strong>ting hydropower, much beyond their foreseeable<br />

domestic demand. Nepal is estimated to have<br />

economically developable potential of about 43,000MW<br />

and Bhutan of about 16,000MW. Only about 1% of the<br />

potential hydropower of Nepal and Bhutan has been<br />

developed so far. In the <strong>ra</strong>iny season Nepal and Bhutan<br />

have sizable excess capacity whereas the demand in<br />

Bang<strong>la</strong>de<strong>sh</strong> is higher. The two countries are thus in an<br />

excellent posi<strong>tio</strong>n to contribute to the energy needs of<br />

the entire region by developing these hydropower<br />

resources for their own use, as well as for exports to<br />

India, and onwards to Bang<strong>la</strong>de<strong>sh</strong> through the proposed<br />

power grid.<br />

• Nuclear power p<strong>la</strong>nts <strong>sh</strong>ould be installed in the country<br />

in order to achieve long term energy security. The supply<br />

chain for a nuclear power p<strong>la</strong>nt is <strong>sh</strong>orter than gas, coal<br />

or liquid fuel based power p<strong>la</strong>nts. Nuclear power p<strong>la</strong>nts<br />

require multi-billion dol<strong>la</strong>r investments for construc<strong>tio</strong>n<br />

and maintenance though the fuel required for such<br />

p<strong>la</strong>nts is very cheap compared to costly fossil fuel or<br />

natu<strong>ra</strong>l gas required by conven<strong>tio</strong>nal power p<strong>la</strong>nts.<br />

Power Power Power sector sector sector structu<strong>ra</strong>l structu<strong>ra</strong>l reform:<br />

reform:<br />

The industry structure of the power gene<strong>ra</strong><strong>tio</strong>n t<strong>ra</strong>nsmission<br />

and distribu<strong>tio</strong>n system <strong>sh</strong>ould be clearly defined to ensure<br />

commercially sustainable ope<strong>ra</strong><strong>tio</strong>n and development of the<br />

Power sector.<br />

Gene<strong>ra</strong><strong>tio</strong>n: Gene<strong>ra</strong><strong>tio</strong>n: Power gene<strong>ra</strong><strong>tio</strong>n utilities must be public limited<br />

companies under the provisions of Companies Act 1994 with<br />

GOB and private sector participa<strong>tio</strong>n (both local and foreign).<br />

Existing public sector institu<strong>tio</strong>ns <strong>sh</strong>ould be t<strong>ra</strong>nsformed into<br />

public limited companies with 51% <strong>sh</strong>ares being retained by<br />

the Government.<br />

BPDB <strong>sh</strong>ould privatize its power gene<strong>ra</strong><strong>tio</strong>n utilities to<br />

provide for joint ventures with Bang<strong>la</strong>de<strong>sh</strong> private sector, non<br />

resident Bang<strong>la</strong>de<strong>sh</strong>is and foreign investors including<br />

existing IPPs<br />

Renova<strong>tio</strong>n Renova<strong>tio</strong>n and and Moderniza<strong>tio</strong>n: Moderniza<strong>tio</strong>n: All existing gene<strong>ra</strong><strong>tio</strong>n<br />

capacities performing below acceptable limits must also be<br />

brought to optimum standards by renova<strong>tio</strong>n and<br />

moderniza<strong>tio</strong>n with the <strong>la</strong>test machinery, equipments and<br />

technology with the participa<strong>tio</strong>n of the Private sector. The<br />

inope<strong>ra</strong>tive power gene<strong>ra</strong><strong>tio</strong>n units must also be converted<br />

likewise into joint venture projects with Bang<strong>la</strong>de<strong>sh</strong> private<br />

sector and foreign investor participa<strong>tio</strong>n<br />

BPDB may take up, with the funds obtained by selling 49% of<br />

its existing <strong>sh</strong>ares and GoB alloca<strong>tio</strong>ns, <strong>sh</strong>ort and long term<br />

power gene<strong>ra</strong><strong>tio</strong>n prog<strong>ra</strong>mmes through joint ventures with<br />

the Bang<strong>la</strong>de<strong>sh</strong> private sector and foreign investor<br />

participa<strong>tio</strong>n with at least 51% <strong>sh</strong>ares remaining with BPDB.<br />

Coal Coal Coal based based Power Power Sta<strong>tio</strong>n: Sta<strong>tio</strong>n: Public and Private sector, local<br />

and foreign joint venture undertakings having commercial<br />

presence as a registered publicly listed limited company in<br />

Bang<strong>la</strong>de<strong>sh</strong>, <strong>sh</strong>ould only be eligible to invest in coal mine<br />

based Power Sta<strong>tio</strong>ns in col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n with the Public sector.<br />

Power Power Power Tariff: Tariff: Tariff: BPDB has to incur losses for purchasing<br />

power at much higher costs from gene<strong>ra</strong>ting utilities and<br />

selling electricity also to power distribu<strong>tio</strong>n agencies like<br />

Dhaka Power Distribu<strong>tio</strong>n Company, Dhaka Electric Supply<br />

Company and Ru<strong>ra</strong>l Electrifica<strong>tio</strong>n Board and finally to<br />

consumers at a lower tariff.<br />

33


Appendix Appendix 2 2 - Non Non-power Non<br />

power Inf<strong>ra</strong>structure<br />

Inf<strong>ra</strong>structure<br />

Non Non-Energy Non Energy Inf<strong>ra</strong>structure: Inf<strong>ra</strong>structure: key key issues issues<br />

issues<br />

• The roads and highways sector has seen significant<br />

underinvestment for a long time. The total alloca<strong>tio</strong>n from<br />

annual budget has been merely 2% of the GDP, whereas<br />

a proper road t<strong>ra</strong>nsport development requires at least<br />

double this. Maintenance expenditure has been half of<br />

what is required. There has been no addi<strong>tio</strong>n of highways<br />

(both na<strong>tio</strong>nal and regional) for the <strong>la</strong>st three years. Only<br />

39% of the Bang<strong>la</strong>de<strong>sh</strong>’s <strong>la</strong>rge ru<strong>ra</strong>l people have access<br />

to an all-season road.<br />

• Participa<strong>tio</strong>n of the private sector is still insignificant in the<br />

development and maintenance of new roads, highways<br />

and bridges. PSP in roads sector mostly comes in the<br />

form of hiring a cont<strong>ra</strong>ctor for toll collec<strong>tio</strong>n and deliver all<br />

the money to the government.<br />

• With more than a 10mn popu<strong>la</strong><strong>tio</strong>n, Dhaka city is already<br />

one of the most densely popu<strong>la</strong>ted cities in the world and<br />

it is projected to have a popu<strong>la</strong><strong>tio</strong>n of more than 20mn in<br />

the next 10 years. According to Dhaka City Corpo<strong>ra</strong><strong>tio</strong>n<br />

officials, the total road length in the city is 2,300 km, of<br />

which 200 km are main thoroughfares; 110 km secondary<br />

roads, 152 km feeder roads and the rest are narrow <strong>la</strong>nes<br />

and by-<strong>la</strong>nes (The Daily Star, January 18, 2004). The<br />

roads of Dhaka city occupy only 8% (2,230 km) of the<br />

total surface area whereas according to interna<strong>tio</strong>nal<br />

standards, at least 25% is required to facilitate a smooth<br />

t<strong>ra</strong>nsport system. The width of the city roads vary from<br />

6m to 40m, though some of the roads are found to be less<br />

than 6m in width in the old town. Millions of commuters<br />

use the public and private t<strong>ra</strong>nsporta<strong>tio</strong>n systems every<br />

day. Even with lot more bus services running in the city<br />

than just a couple of years before, long waiting lines in<br />

the bus sta<strong>tio</strong>ns and frequent t<strong>ra</strong>ffic jams are very much<br />

regu<strong>la</strong>r and daily phenomena in this city. To get rid of this,<br />

instal<strong>la</strong><strong>tio</strong>n of alternative <strong>ra</strong>pid t<strong>ra</strong>nsport systems has<br />

become unavoidable.<br />

• A preliminary estimate of vehicu<strong>la</strong>r trip demand on the<br />

city’s 18 major bus routes <strong>sh</strong>owed a demand <strong>ra</strong>nge of<br />

150,000 to 350,000 per day, with peak hour per direc<strong>tio</strong>n<br />

demand in the <strong>ra</strong>nge of 4,500 to 9,000 per hour. This sort<br />

of demand can be comfortably handled by any modern<br />

BRT system. Also, considering the affordability of<br />

residents and government financial const<strong>ra</strong>ints, BRT<br />

could be an ideal choice for Dhaka.<br />

• The government in its second PRSP has p<strong>la</strong>nned to<br />

construct an elevated expressway in the capital and a<br />

Dhaka-Chittagong expressway by 2011 in a bid to ease<br />

t<strong>ra</strong>ffic conges<strong>tio</strong>n in the capital and to speed up<br />

communica<strong>tio</strong>n with the port city. The government also<br />

p<strong>la</strong>ns to upg<strong>ra</strong>de Dhaka-Chittagong, Dhaka-Khulna,<br />

Dhaka-Sylhet, and Dhaka-Tangail highways to four <strong>la</strong>nes,<br />

and to construct the already p<strong>la</strong>nned Padma Bridge by<br />

2011. The second PRSP also includes a p<strong>la</strong>n to construct<br />

a ring road around the capital and a flyover across<br />

P<strong>ra</strong>gati Sa<strong>ra</strong>ni in Gul<strong>sh</strong>an area.<br />

• There has been significant interest from interna<strong>tio</strong>nal<br />

investors and corpo<strong>ra</strong>tes to participate in the proposed<br />

Dhaka-Chittagong Second Highway. For example, the<br />

Thai<strong>la</strong>nd government has previously <strong>sh</strong>own interest to<br />

provide technical and financial help for this project.<br />

Azimat Consortium – a consortium of six Ma<strong>la</strong>ysian<br />

private sector investment firms – submitted an unsolicited<br />

offer to construct the Dhaka-Chittagong highway in July,<br />

2006 at a total cost of BDT 58.24bn (USD 850mn) under<br />

a build-own-ope<strong>ra</strong>te-and-t<strong>ra</strong>nsfer (BOOT) scheme.<br />

• The DCSH project would require about 2,500 acres of<br />

<strong>la</strong>nd for building the highway, and other facilities such as<br />

two bridges on the Meghna and Sita<strong>la</strong>khya, around a<br />

dozen flyovers, service sta<strong>tio</strong>ns, parking lots, rest rooms,<br />

recrea<strong>tio</strong>n facilities, restau<strong>ra</strong>nts, p<strong>ra</strong>yer rooms, CNG and<br />

petrol fillings sta<strong>tio</strong>ns at reasonable intervals along the<br />

way. One of the main purposes of the project is to<br />

increase the Chittagong Port’s activities by ensuring quick<br />

supply and delivery of both export and import cargoes.<br />

However, the acquisi<strong>tio</strong>n of private <strong>la</strong>nd in any <strong>la</strong>rge<br />

inf<strong>ra</strong>structure project has always become a problem<br />

involving substantial litiga<strong>tio</strong>n invariably causing de<strong>la</strong>ys in<br />

its implementa<strong>tio</strong>n.<br />

• The Thai government had also <strong>sh</strong>own interest to <strong>sh</strong>are<br />

technical expertise and finance the Dhaka elevated<br />

expressway, but Bang<strong>la</strong>de<strong>sh</strong> government response has<br />

so far been lukewarm. The Thai proposal was for<br />

Bangkok-based Italy-Thai Development Public Company<br />

Limited (ITDPCL) to construct the elevated expressway,<br />

but the Bang<strong>la</strong>de<strong>sh</strong> government wanted a local company<br />

to construct it. It was estimated to cost USD 500mn.<br />

• Instead of going for a BOOT system, the government may<br />

opt for public-private partner<strong>sh</strong>ip (PPP) for the<br />

construc<strong>tio</strong>n of the USD 500mn Dhaka Elevated<br />

Expressway (DEE) to ease the capital city’s severe t<strong>ra</strong>ffic<br />

problem. Officials of the Communica<strong>tio</strong>n ministry have<br />

reportedly suggested that the ministry feels public-private<br />

partner<strong>sh</strong>ip could be the best op<strong>tio</strong>n for the proposed<br />

DEE. According to the proposal, the government would<br />

take 49 per cent while the st<strong>ra</strong>tegic partner from the<br />

private sector would contribute 51 per cent of the project<br />

cost.<br />

• River communica<strong>tio</strong>n is the cheapest mode of t<strong>ra</strong>nsport,<br />

and was once the mainstay of the country’s economy.<br />

While it is still occupying an important posi<strong>tio</strong>n in<br />

t<strong>ra</strong>nsporting people, the cargo carrying capacity of the<br />

river c<strong>ra</strong>fts has not increased and no attempt was made<br />

to modernise the river cargo carrying system in the <strong>la</strong>st<br />

couple of decades.<br />

34


• The <strong>ra</strong>ilway network condi<strong>tio</strong>n has deterio<strong>ra</strong>ted and its<br />

cargo carrying capacity has also waned. In cont<strong>ra</strong>st, with<br />

the development of road network in the country, trucks<br />

have emerged as the most dependable, widely used<br />

speedy mode of carrying cargo from one p<strong>la</strong>ce to<br />

another.<br />

• Bang<strong>la</strong>de<strong>sh</strong> has only two gateway ports, the Chittagong<br />

Port Authority (CPA) and the Mong<strong>la</strong> Port Authority<br />

(MPA). In 2006 these two ports together handled about<br />

29.37mn tonnes of cargo, Chittagong, the <strong>la</strong>rger of the<br />

two ports, handles more than 91 % of total cargo handled,<br />

representing approximately 1mn twenty-foot equivalent<br />

units (TEUs). By 2017 forecasts project that this container<br />

t<strong>ra</strong>ffic will increase by 300 %, to an amount well in excess<br />

of the port’s capacity.<br />

• Due to the upside down V <strong>sh</strong>ape of the Bay of Bengal and<br />

being posi<strong>tio</strong>ned at the apex, Bang<strong>la</strong>de<strong>sh</strong> has a better<br />

opportunity to set up a Deep Sea Port, which might be<br />

used by Bang<strong>la</strong>de<strong>sh</strong>, India, Nepal , Bhutan, and China.<br />

What Bang<strong>la</strong>de<strong>sh</strong> needs to do at the moment, is to take<br />

the lead ahead of India. Otherwise it may lose the<br />

opportunity. A deep seaport means:<br />

� Handling more cargo for the region and support<br />

the export and import.<br />

� Get foreign-currency revenue from the<br />

neighbors by providing T<strong>ra</strong>nsit Services.<br />

� Create new jobs and industries along the East<br />

Coast.<br />

� Develop the communica<strong>tio</strong>n on the East Coast<br />

Belt.<br />

� Find alternatives for Chittagong and Mong<strong>la</strong><br />

Port.<br />

� Reduce the affect of political and <strong>la</strong>bor unrest.<br />

� Ultimate development of the South East<br />

Region.<br />

• The present caretaker government in its early months<br />

took the initiative to explore the possibility of deep sea<br />

port. Japan’s Pacific consultants Interna<strong>tio</strong>nal (PCI) was<br />

appointed to do this preliminary investiga<strong>tio</strong>n. The first<br />

phase of the feasibility study of the deep-sea port was<br />

completed in early 2007. The second phase, the technofeasibility<br />

study, has been started in July this year. Pacific<br />

Consultant Interna<strong>tio</strong>nal (PCI) had made<br />

recommenda<strong>tio</strong>n on suitable sites for the proposed giant<br />

port during its first-year study and will submit reports on<br />

conceptual design of the port, project app<strong>ra</strong>isal and<br />

management model and services in this second phase of<br />

the report. They are supposed to complete the report by<br />

the next one year. As per provisional estimate, the mega<br />

project to be constructed in three phases will cost the<br />

country around BDT 420bn (USD 6bn).<br />

• Recently United A<strong>ra</strong>b Emi<strong>ra</strong>tes-based RAK Investment<br />

Authority (RAKIA) has <strong>sh</strong>own interest to invest USD 2-<br />

3bn in the proposed deep sea port.<br />

Short Short Term Term P<strong>la</strong>n<br />

P<strong>la</strong>n<br />

• To ease the t<strong>ra</strong>ffic conges<strong>tio</strong>n in the mega city of Dhaka,<br />

government <strong>sh</strong>ould initiate Bus Rapid T<strong>ra</strong>nsit on a Public-<br />

Private Participa<strong>tio</strong>n basis. This will ease the financial<br />

pressure from the government, and add long term viability<br />

into the system.<br />

• A thorough and comprehensive research on the t<strong>ra</strong>ffic<br />

movement in Dhaka city by professional and independent<br />

t<strong>ra</strong>ffic (t<strong>ra</strong>nsporta<strong>tio</strong>n) experts to find out viable solu<strong>tio</strong>ns<br />

to the consistent problems of t<strong>ra</strong>ffic conges<strong>tio</strong>n.<br />

• An expressway <strong>sh</strong>ould be built between Dhaka and<br />

Chittagong, the two major commercial hubs of the<br />

country. The project <strong>sh</strong>ould be initiated in the <strong>sh</strong>ortest<br />

possible time.<br />

• Taking effective measures to modernize the Chittagong<br />

Sea Port in order to increase its capacity.<br />

• Carefully assessing the viability and potential business<br />

opportunities of the deep sea port. Starting to approach<br />

different possible sources of fund, and also encou<strong>ra</strong>ging<br />

public private partner<strong>sh</strong>ips for the project. Global port<br />

ope<strong>ra</strong>tor giants might get interested in the project if other<br />

complementary policies, like goods t<strong>ra</strong>nsit to the<br />

neighboring countries, oil pipeline from the deep sea port<br />

to the neighboring countries, come with it.<br />

• Taking proactive measures to get connected with the<br />

Asian Highway Network (AHN). Bureauc<strong>ra</strong>tic procedures<br />

<strong>sh</strong>ould be started in the earliest possible time.<br />

Long Long Long Term Term P<strong>la</strong>n<br />

P<strong>la</strong>n<br />

The 30+ <strong>ra</strong>ilway crossings within Dhaka are a major<br />

cause of t<strong>ra</strong>ffic. An immediate priority would be to build<br />

enough overpasses/tunnels at these <strong>ra</strong>ilway intersec<strong>tio</strong>ns<br />

so that the regu<strong>la</strong>r flow of road t<strong>ra</strong>ffic remains<br />

uninterrupted.<br />

• Upg<strong>ra</strong>ding the existing highways linking Dhaka,<br />

•<br />

Chittagong, Sylhet, Raj<strong>sh</strong>ahi, and other key points of the<br />

country into four <strong>la</strong>nes, and undertaking necessary policy<br />

measures to keep these major highways of the country<br />

smooth and of interna<strong>tio</strong>nal standards. To ensure this<br />

along with a smooth t<strong>ra</strong>nsporta<strong>tio</strong>n network in the country,<br />

government has to allocate more budgetary fund in the<br />

communica<strong>tio</strong>n sector and ensure proper utiliza<strong>tio</strong>n of<br />

that fund.<br />

Undertaking different measures to make Bang<strong>la</strong>de<strong>sh</strong><br />

Railway a profitable organiza<strong>tio</strong>n, and at the same time,<br />

providing the country with a low-cost and reliable<br />

alternative t<strong>ra</strong>nsporta<strong>tio</strong>n mode.<br />

• Finding out an effective technique to keep the rivers and<br />

canals navigable throughout the year, and ensure more<br />

participa<strong>tio</strong>n of the private sector in water t<strong>ra</strong>nsport.<br />

• Taking necessary steps to revitalize the Mong<strong>la</strong> Port to<br />

take the pressure away from Chittagong Port and to give<br />

the t<strong>ra</strong>ders of the country a viable alternative.<br />

• Proactively seeking ways to incorpo<strong>ra</strong>te the private sector<br />

in building the inf<strong>ra</strong>structure of this country through<br />

Public-Private Partner<strong>sh</strong>ips, Build-ope<strong>ra</strong>te-t<strong>ra</strong>nsfer, Buildown-ope<strong>ra</strong>te,<br />

and other suitable mechanisms. For a long<br />

time, private sector has been comp<strong>la</strong>ining on the lengthy<br />

bureauc<strong>ra</strong>tic procedure and incessant proc<strong>ra</strong>stina<strong>tio</strong>n<br />

from the government. Taking initiatives to g<strong>ra</strong>nt t<strong>ra</strong>nsit to<br />

our neighboring countries - India, Nepal, and Myanmar -<br />

and constructing link roads with them, so that the country<br />

can earn foreign currency from t<strong>ra</strong>nsporta<strong>tio</strong>n, t<strong>ra</strong>nsit<br />

fees, and other auxiliary industries.<br />

35


Appendix Appendix 3 3 – Educat Educa<strong>tio</strong>n, Educat<br />

ion, Voca<strong>tio</strong>nal/Skills Voca<strong>tio</strong>nal/Skills T<strong>ra</strong>ining, T<strong>ra</strong>ining, Manpower Manpower Exports<br />

Exports<br />

The World Bank noted in their October 2008 Second<br />

Investment Climate Report that A quarter of urban firms<br />

report an acute <strong>sh</strong>ortage <strong>sh</strong>ortage of <strong>la</strong>bor skills, across <strong>la</strong>rge and<br />

and<br />

small small firms firms alike alike (26.1% and 23.1%, respectively), and<br />

dispropor<strong>tio</strong>nately so in Dhaka and certain successful<br />

industries such as garments (up to 37%). The high propor<strong>tio</strong>n<br />

of tempo<strong>ra</strong>ry workers (15%) does not help either, as it<br />

renders outside or on the job t<strong>ra</strong>ining unprofitable for most<br />

non-metropolitan employers.<br />

35.0%<br />

30.0%<br />

25.0%<br />

20.0%<br />

15.0%<br />

10.0%<br />

5.0%<br />

0.0%<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Skills / educa<strong>tio</strong>n of workers a major obstacle (% firms agree)<br />

Low income<br />

Lower middle income<br />

South Asia<br />

The World Bank Survey noted that Skills <strong>sh</strong>ortage and<br />

mismatch mismatch mismatch issues, issues, percepti percep<strong>tio</strong>ns percepti ons for for low low low skills skills skills of of mig<strong>ra</strong>nt<br />

mig<strong>ra</strong>nt<br />

workers, workers, and and inadequate inadequate levels levels of of t<strong>ra</strong>ining t<strong>ra</strong>ining can can be be linked linked to<br />

to<br />

<strong>sh</strong>ortcomings <strong>sh</strong>ortcomings <strong>sh</strong>ortcomings in in the the the country’s country’s secondary secondary and and higher higher level<br />

level<br />

educa<strong>tio</strong>n educa<strong>tio</strong>n and and voca<strong>tio</strong>nal voca<strong>tio</strong>nal system. system. Of employees involved in<br />

produc<strong>tio</strong>n in metropolitan enterprises, 19.6% have no<br />

educa<strong>tio</strong>n (the propor<strong>tio</strong>n is almost half for leather and other<br />

manufacturing sectors, and is 30% for small firms versus 4%<br />

for <strong>la</strong>rge). Employees with secondary educa<strong>tio</strong>n or above<br />

constitute 25.4%, with 9% in leather and 80.6% in chemicals<br />

/pharmaceuticals. Small firms have 18.3% of employees with<br />

secondary educa<strong>tio</strong>n versus 33.5% for <strong>la</strong>rge firms. T<strong>ra</strong>ining<br />

‘in-house’ and in voca<strong>tio</strong>nal schools are the predominant<br />

sources of t<strong>ra</strong>ining.<br />

While data from Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ows that t<strong>ra</strong>ining has a<br />

positive impact on productivity and worker wages, only 16.2<br />

% of manufacturing establi<strong>sh</strong>ments in Bang<strong>la</strong>de<strong>sh</strong> provided<br />

their employees with in-service formal t<strong>ra</strong>ining in 2005/6.<br />

T<strong>ra</strong>ining was negligible in metropolitan areas outside of<br />

Dhaka and Chittagong, and small metropolitan firms did not<br />

engage in any t<strong>ra</strong>ining. Garments, light engineering (electric /<br />

electronics / machinery), and pharmaceuticals / chemicals<br />

sectors provided re<strong>la</strong>tively more t<strong>ra</strong>ining to their workers,<br />

while there was virtually no t<strong>ra</strong>ining in leather and other<br />

manufacturing. About 13% of firms report external t<strong>ra</strong>ining,<br />

sourced from voca<strong>tio</strong>nal schools (31%) and private sector<br />

partner firms (26%). 1 About 33% of the hired workers in nonmetropolitan<br />

enterprises had received some t<strong>ra</strong>ining before<br />

joining the enterprises and 20% received on-the job t<strong>ra</strong>ining<br />

from their employer.<br />

1 World Bank (2007i).<br />

China<br />

India<br />

Kenya<br />

Pakistan<br />

Philippines<br />

Sri Lanka<br />

Thai<strong>la</strong>nd<br />

Vietnam<br />

The Bang<strong>la</strong>de<strong>sh</strong> manpower export industry, worth USD<br />

10bn+ a year, has helped in att<strong>ra</strong>cting significant remittance<br />

inflows into the country. In a country with GDP USD 80bn,<br />

remittances are a significant contributor.<br />

The positive macroeconomic impacts attained through higher<br />

remittance inflows are significant – firstly, a <strong>la</strong>rger flow of<br />

remittances, i.e. a greater avai<strong>la</strong>bility of foreign exchange<br />

resources, enhances the ability of the economy to import<br />

more essential <strong>ra</strong>w materials or universal intermediates that<br />

are crucial for the produc<strong>tio</strong>n economy.<br />

The second impact is the augmenta<strong>tio</strong>n of the domestic<br />

saving <strong>ra</strong>tes that remittances provide, adding to the potential<br />

flow of investable resources in the economy. In low-income<br />

economies the added resources for investment made<br />

avai<strong>la</strong>ble without curtailing current consump<strong>tio</strong>n is<br />

undoubtedly useful. In terms of micro economic impacts of<br />

greater remittance inflows, the most obvious is the<br />

immediate rise in disposable income of the households<br />

receiving the remittance. The ext<strong>ra</strong> income in the family<br />

could be used for seve<strong>ra</strong>l purposes, <strong>ra</strong>nging from making<br />

essential consump<strong>tio</strong>n to setting up and financing micro<br />

businesses, or acquiring assets such as <strong>la</strong>nd.<br />

Each of these uses of financial resources obtained through<br />

remittances clearly has positive effects on the local<br />

economy. Any increase in consump<strong>tio</strong>n expenditure induces<br />

a rise in aggregate demand that in turn, induces addi<strong>tio</strong>nal<br />

produc<strong>tio</strong>n and employment.<br />

Hence the ove<strong>ra</strong>rching implica<strong>tio</strong>ns of interna<strong>tio</strong>nal mig<strong>ra</strong><strong>tio</strong>n<br />

can be seen in areas of poverty allevia<strong>tio</strong>n and income<br />

inequality, productivity in ru<strong>ra</strong>l agricultu<strong>ra</strong>l and<br />

nonagricultu<strong>ra</strong>l activities including investments and social<br />

sector spending such as schooling and healthcare. The<br />

effects could be directly on the remittance receiving family as<br />

well as indirectly through induced effects on the local region.<br />

Thus, growth of the manpower industry is essential in<br />

bolstering economic growth, and the government needs to<br />

take initiatives in strengthening the sector.<br />

The flow of remittances into the country is determined<br />

through seve<strong>ra</strong>l factors - the stock of the mig<strong>ra</strong>nt popu<strong>la</strong><strong>tio</strong>n,<br />

the nature and size of demand for the Bang<strong>la</strong>de<strong>sh</strong>i mig<strong>ra</strong>nt<br />

workers in the overseas markets, the breadth and depth of<br />

manpower supply pool of Bang<strong>la</strong>de<strong>sh</strong>, competi<strong>tio</strong>n from the<br />

mig<strong>ra</strong>nts from other countries, na<strong>tio</strong>nal <strong>la</strong>bour <strong>la</strong>ws and<br />

economic condi<strong>tio</strong>n and income potential in the host<br />

countries, job credential issues that downg<strong>ra</strong>de mig<strong>ra</strong>nt<br />

wages, the mig<strong>ra</strong>nts’ propensity to remit, and the efficiency of<br />

the remitting channels. Bang<strong>la</strong>de<strong>sh</strong> could respond to these<br />

issues by expanding the capacity of specialised t<strong>ra</strong>ining at<br />

the secondary and tertiary level, upg<strong>ra</strong>ding the quality of its<br />

prepa<strong>ra</strong>tory educa<strong>tio</strong>n augmented by special skills’ t<strong>ra</strong>ining<br />

and certifica<strong>tio</strong>n, proper accredita<strong>tio</strong>n of workers’ academic<br />

and work experience, identifying new <strong>la</strong>bour markets,<br />

negotiating with the host governments for long term supply<br />

cont<strong>ra</strong>cts, professionalizing the manpower export industry,<br />

36


and improving the inf<strong>ra</strong>structure and the efficiency of the<br />

official remittances channels.<br />

St<strong>ra</strong>tegies St<strong>ra</strong>tegies needed needed to to make make the the manpower manpower sector sector more<br />

more<br />

profitable profitable<br />

profitable<br />

By 2015 revenues in the manpower sector could reach USD<br />

30bn if Bang<strong>la</strong>de<strong>sh</strong> can capitalize on the opportunity.<br />

Through focused and targeted t<strong>ra</strong>ining and investment in HR<br />

consultancies we believe it could achieve this goal.<br />

1. 1. Investing Investing in in human human capital capital and and setting setting up up voca<strong>tio</strong>nal voca<strong>tio</strong>nal<br />

voca<strong>tio</strong>nal<br />

t<strong>ra</strong>ining t<strong>ra</strong>ining institu<strong>tio</strong>ns: institu<strong>tio</strong>ns: To capture market <strong>sh</strong>are of the growing<br />

manpower industry, Bang<strong>la</strong>de<strong>sh</strong> has to invest in human<br />

capital through educa<strong>tio</strong>n and t<strong>ra</strong>ining. Most Bang<strong>la</strong>de<strong>sh</strong>i<br />

mig<strong>ra</strong>nts are young, male, unskilled, aged between 15-30<br />

years and poorly educated. Only 10-20% are certified<br />

voca<strong>tio</strong>nally t<strong>ra</strong>ined and less than 10% gene<strong>ra</strong>l college<br />

g<strong>ra</strong>duates are exportable. T<strong>ra</strong>ining has become a necessity<br />

with the structu<strong>ra</strong>l <strong>sh</strong>ift towards activities demanding higher<br />

skill and the emergence of automa<strong>tio</strong>n. With the current<br />

deficiency in voca<strong>tio</strong>nal t<strong>ra</strong>ining, the government needs to<br />

work in partner<strong>sh</strong>ip with the private sector in setting up<br />

institu<strong>tio</strong>ns serving targeted <strong>la</strong>bor pool such as electricians,<br />

fabricators, carpenters and garment ope<strong>ra</strong>tors, who can<br />

create more profitable manpower which can be a more<br />

luc<strong>ra</strong>tive export.<br />

Current situa<strong>tio</strong>n of voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns in<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

A total of 2,728 technical voca<strong>tio</strong>nal educa<strong>tio</strong>nal institutes<br />

offer educa<strong>tio</strong>n to 192,360 students. The job-oriented<br />

technical-voca<strong>tio</strong>nal educa<strong>tio</strong>n (TVE) prog<strong>ra</strong>ms offered are<br />

g<strong>ra</strong>phic arts, g<strong>la</strong>ss and ce<strong>ra</strong>mic, surveying, IT, commercial,<br />

textile, business management etc.<br />

While enrollment in voca<strong>tio</strong>nal institu<strong>tio</strong>ns is quite small it has<br />

doubled since 1997, mainly fueled by growth in the private<br />

sector. T<strong>ra</strong>ining capacity in the voca<strong>tio</strong>nal educa<strong>tio</strong>n and<br />

t<strong>ra</strong>ining system has doubled to over 240,000 since 2000.<br />

Private providers tend to focus on t<strong>ra</strong>ining in computer and<br />

<strong>la</strong>nguage courses.<br />

Source: Bang<strong>la</strong>de<strong>sh</strong> Educa<strong>tio</strong>nal Statistics, 2006, BANBEIS<br />

Formal technical educa<strong>tio</strong>n in Bang<strong>la</strong>de<strong>sh</strong> is offered in three<br />

tiers, with degree level engineering courses at the top,<br />

diploma level technician courses at the middle and certificate<br />

level c<strong>ra</strong>ft courses at the bottom. Degree level engineering<br />

courses (g<strong>ra</strong>des XIII-XVI) are offered at the Bang<strong>la</strong>de<strong>sh</strong><br />

University of Engineering and Technology (BUET) and four<br />

Bang<strong>la</strong>de<strong>sh</strong> Institutes of Technology (BITs) located at<br />

Dhaka, Chittagong, Raj<strong>sh</strong>ahi and Khulna. The middle level<br />

courses (G<strong>ra</strong>de XI-XIII) are offered in 134 polytechnic<br />

institutes, three mono-technic institutes. Certificate c<strong>ra</strong>ft<br />

courses are offered in 51 Voca<strong>tio</strong>nal T<strong>ra</strong>ining Institutes and<br />

12 Technical T<strong>ra</strong>ining Centres (TTCs) including the Institute<br />

of Marine Technology.<br />

Till the year 2000, only 20 public polytechnic institutes<br />

existed in the country and the private institutes came into<br />

view in 2001. By 2005, a total of 97 polytechnic institutes<br />

were establi<strong>sh</strong>ed under private management and the number<br />

for public rose to only 37. These institutes provide diploma in<br />

different t<strong>ra</strong>des such as civil, mechanical, electrical etc.<br />

The Voca<strong>tio</strong>nal Technical Institutes (VTIs) and commercial<br />

institutes are managed by the government. There is no<br />

private VTIs or commercial institutes. The number of VTIs<br />

grew from 51 in 1990 to only 64 in 2005 providing educa<strong>tio</strong>n<br />

to 8,548 students. The total enrollment in the 16 commercial<br />

institutes was 3,683 in 2005.<br />

The growth of Technical T<strong>ra</strong>ining Centres (TTCs) is small<br />

and did not increase in the <strong>la</strong>st 8 years. The 13 all public<br />

TTCs have a total of 4,867 students. The TTCs and<br />

Bang<strong>la</strong>de<strong>sh</strong> Institute of Marine Technology annually produce<br />

7,000 skilled technicians on different t<strong>ra</strong>des, mainly for<br />

overseas employment.<br />

Non-government agencies also provide non-accredited<br />

t<strong>ra</strong>ining, though there are no estimates of the size and scope<br />

of ope<strong>ra</strong><strong>tio</strong>ns na<strong>tio</strong>nwide. Seve<strong>ra</strong>l NGOs and private<br />

providers provide basic skills and t<strong>ra</strong>ining groups such as<br />

youth, the under privileged and the ru<strong>ra</strong>l popu<strong>la</strong><strong>tio</strong>n. These<br />

provide <strong>sh</strong>ort term t<strong>ra</strong>ining (<strong>ra</strong>nging from 4-6 months) in<br />

income gene<strong>ra</strong>ting activities such as tailoring/sewing,<br />

embroidery for women and electrical, TV, <strong>ra</strong>dio mechanical<br />

and carpentry for men.<br />

The Polytechnic and Mono-technic Institutes are under the<br />

administ<strong>ra</strong>tive control of the Directo<strong>ra</strong>te of Technical<br />

Educa<strong>tio</strong>n (DTE) while the academic control is exercised by<br />

the Bang<strong>la</strong>de<strong>sh</strong> Technical Educa<strong>tio</strong>n Board (BTEB). The<br />

total annual enrolment capacity in diploma prog<strong>ra</strong>ms is about<br />

5,268. The VTIs are under the administ<strong>ra</strong>tive control of the<br />

Directo<strong>ra</strong>te of Technical Educa<strong>tio</strong>n (DTE) and the TTCs are<br />

under the Bureau of Manpower, Employment and T<strong>ra</strong>ining<br />

(BMET).<br />

Lack of co-ordina<strong>tio</strong>n between institu<strong>tio</strong>ns in the public and<br />

private sectors, under-utiliza<strong>tio</strong>n of the existing facilities, high<br />

dropout <strong>ra</strong>tes of VTIs and TTCs, <strong>la</strong>ck of linkage between<br />

t<strong>ra</strong>ining institu<strong>tio</strong>ns and <strong>la</strong>bour market, low female<br />

participa<strong>tio</strong>n and unemployment are still the main challenge<br />

for the skill development system.<br />

Enrollment in TVE institutes remains low as few students<br />

choose the system. Out of eight million students enrolled in<br />

secondary schools, less than 250,000 are enrolled in<br />

voca<strong>tio</strong>nal educa<strong>tio</strong>n. CAGR in number of students remained<br />

10% per year since 1980.<br />

37


Workers with voca<strong>tio</strong>nal technical skills are in great supply.<br />

The 2002-2003 Labor Force Survey estimated only 58,000<br />

people who are t<strong>ra</strong>ined with voca<strong>tio</strong>nal technical skills. The<br />

system continues to produce g<strong>ra</strong>duates for old marginal<br />

t<strong>ra</strong>des (e.g. typists), who have no market demand, while<br />

skilled <strong>la</strong>bors for newer t<strong>ra</strong>des (e.g. computer ope<strong>ra</strong>tors) are<br />

still scanty. Hence, it <strong>sh</strong>ould be a priority for the government<br />

to improve the standards of voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns,<br />

and simultaneously att<strong>ra</strong>ct people (perhaps by subsidizing<br />

the t<strong>ra</strong>ining costs) from the <strong>la</strong>bor force to join the institu<strong>tio</strong>ns.<br />

Outlook<br />

The presence of high skilled <strong>la</strong>bor in Bang<strong>la</strong>de<strong>sh</strong>’s man<br />

power export basket is still re<strong>la</strong>tively very small. To improve<br />

the skill mix the following st<strong>ra</strong>tegies need to be implemented:<br />

-Send as many Bang<strong>la</strong>de<strong>sh</strong>i students as possible to various<br />

voca<strong>tio</strong>nal, technical and professional schools abroad.<br />

- Encou<strong>ra</strong>ge and facilitate already mig<strong>ra</strong>ted Bang<strong>la</strong>de<strong>sh</strong>is to<br />

seek admission in foreign t<strong>ra</strong>ining schools / colleges /<br />

universities for acquiring new skills.<br />

-Set up interna<strong>tio</strong>nally accredited t<strong>ra</strong>ining facilities in<br />

Bang<strong>la</strong>de<strong>sh</strong>, and t<strong>ra</strong>in manpower locally before exporting to<br />

host countries.<br />

2. 2. Reforming Reforming the the the recruitment recruitment agency agency sector: sector: The<br />

identifica<strong>tio</strong>n, screening and regu<strong>la</strong><strong>tio</strong>n of recruitment<br />

agencies in Bang<strong>la</strong>de<strong>sh</strong> and at destina<strong>tio</strong>n loca<strong>tio</strong>ns is a<br />

priority. The sector suffers from a poor local and interna<strong>tio</strong>nal<br />

image with a reputa<strong>tio</strong>n of charging excessive fees,<br />

di<strong>sh</strong>onesty and inappropriate cont<strong>ra</strong>ct negotia<strong>tio</strong>n. The<br />

Bang<strong>la</strong>de<strong>sh</strong> Associa<strong>tio</strong>n of Interna<strong>tio</strong>nal Recruiting Agencies<br />

(BAIRA), an associa<strong>tio</strong>n of 700 member agencies, <strong>sh</strong>ould<br />

ensure better monitoring. A computer databank can p<strong>la</strong>y a<br />

vital role here, compelling the agent to recruit from listed<br />

workers. Tying the agent’s commission to sa<strong>la</strong>ry negotiated<br />

will align their interest with that of the employees.<br />

3. 3. Policy Policy Policy level level re<strong>la</strong>ti re<strong>la</strong><strong>tio</strong>n<strong>sh</strong>ip re<strong>la</strong>ti on<strong>sh</strong>ip building: Another essential<br />

objective is building trust through a superior b<strong>ra</strong>nd image.<br />

St<strong>ra</strong>tegic ties and re<strong>la</strong><strong>tio</strong>n<strong>sh</strong>ips with countries where<br />

mig<strong>ra</strong>nts go to work <strong>sh</strong>ould be developed. T<strong>ra</strong>de attaché<br />

have to proactively promote Bang<strong>la</strong>de<strong>sh</strong>. A combined<br />

marketing effort both from private and public sector<br />

<strong>sh</strong>owcasing the substantial manpower resources needs to be<br />

formu<strong>la</strong>ted and executed. Particu<strong>la</strong>rly, what could help in<br />

b<strong>ra</strong>nd building is the involvement of some leading and highly<br />

reputed NGOs like BRAC and G<strong>ra</strong>meen Bank in the supply<br />

and demand side of the manpower business.<br />

4. 4. Increase Increase Penet<strong>ra</strong><strong>tio</strong>n Penet<strong>ra</strong><strong>tio</strong>n and and Capture Capture Greater Greater Share Share of of the<br />

the<br />

Labour Labour Market Market in in Destina<strong>tio</strong>n Destina<strong>tio</strong>n Countries: Countries: Bang<strong>la</strong>de<strong>sh</strong><br />

receives most of its remittances from the Middle East, the<br />

USA and the UK. The top five countries contribute 86 per<br />

cent of total remittances.<br />

The figure below <strong>sh</strong>ows that the export of mig<strong>ra</strong>nt workers<br />

from Bang<strong>la</strong>de<strong>sh</strong> is limited to only a few countries among the<br />

most att<strong>ra</strong>ctive destina<strong>tio</strong>ns. It is also evident from the figure<br />

that among the top remitting countries it is only in the UK, the<br />

US and a few Middle Eastern countries like Saudi A<strong>ra</strong>bia,<br />

Kuwait, Bah<strong>ra</strong>in and Oman that Bang<strong>la</strong>de<strong>sh</strong> has a<br />

reasonable <strong>sh</strong>are of the total remittances. Even in these<br />

countries there is a substantial scope for further penet<strong>ra</strong><strong>tio</strong>n.<br />

The presence of Bang<strong>la</strong>de<strong>sh</strong>is in other remitting countries is<br />

not very significant. The demand for <strong>la</strong>bour in all these<br />

markets is significantly <strong>la</strong>rge and would grow in the future.<br />

Therefore, a concerted effort has to be made to increase its<br />

<strong>sh</strong>are and credibility in these markets by leve<strong>ra</strong>ging its<br />

already establi<strong>sh</strong>ed base.<br />

Share of BD in total remittances outflow from select countries<br />

Shortage Shortage of of skilled skilled skilled <strong>la</strong>bor <strong>la</strong>bor <strong>la</strong>bor – a major major impediment to economic<br />

growth growth<br />

growth<br />

Lack of skilled <strong>la</strong>bor has been identified as one of the key<br />

const<strong>ra</strong>ints to Bang<strong>la</strong>de<strong>sh</strong>’s Investment Climate by the<br />

Bang<strong>la</strong>de<strong>sh</strong> Second Investment Climate Assessment report,<br />

publi<strong>sh</strong>ed by the World Bank. According to the report, a<br />

quarter of metropolitan firms report an acute <strong>sh</strong>ortage of<br />

skilled <strong>la</strong>bor, across both <strong>la</strong>rge and small firms (26.1% and<br />

23.1%, respectively).This <strong>sh</strong>ortage of skills in the workforce<br />

is a direct consequence of the <strong>sh</strong>ortcomings in the country’s<br />

secondary and higher level educa<strong>tio</strong>n and voca<strong>tio</strong>nal system.<br />

Among employees who are involved in produc<strong>tio</strong>n in<br />

metropolitan enterprises, 19.6% have no educa<strong>tio</strong>n.<br />

Employees with secondary educa<strong>tio</strong>n or above constitute<br />

25.4%, with 9% in leather and 80.6% in chemicals/<br />

pharmaceuticals. Main sources of t<strong>ra</strong>ining include in-house<br />

t<strong>ra</strong>ining and voca<strong>tio</strong>nal schools. While it is evident that<br />

t<strong>ra</strong>ining has a positive impact on productivity and worker<br />

wages, only 16.2% of manufacturing establi<strong>sh</strong>ments have<br />

provided their employees with in-service formal t<strong>ra</strong>ining in<br />

2005/2006.<br />

In addressing <strong>la</strong>bor skills <strong>sh</strong>ortages and mismatches, in the<br />

<strong>sh</strong>ort term immediate measures need to be taken to improve<br />

the country’s voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns - both in terms of<br />

quality and number of students enrolled; however, equally<br />

important is the long term focus on tertiary and higher<br />

educa<strong>tio</strong>n, which is needed to enhance the ove<strong>ra</strong>ll quality of<br />

the workforce in Bang<strong>la</strong>de<strong>sh</strong>. The BGMEA institute of<br />

38


Fa<strong>sh</strong>ion and Technology is a promising initiative undertaken<br />

by the Bang<strong>la</strong>de<strong>sh</strong> Garments Manufacturers and Exporters<br />

Associa<strong>tio</strong>n (BGMEA). Initiatives such as this <strong>sh</strong>ould be<br />

encou<strong>ra</strong>ged. Particu<strong>la</strong>r emphasis <strong>sh</strong>ould be given to ICT and<br />

engineering skills.<br />

IT IT T<strong>ra</strong>ining T<strong>ra</strong>ining institutes<br />

institutes<br />

With over 3,000 local enterprises ope<strong>ra</strong>ting in hardware,<br />

software and ISP segments, the size of Bang<strong>la</strong>de<strong>sh</strong> ICT<br />

industry stands at USD 160 million in 2006. According to the<br />

Bang<strong>la</strong>de<strong>sh</strong> Computer Council, the number of IT<br />

professionals is 25,200 (2006), with growth of 12.50% over<br />

the previous year. Software exports have been growing in<br />

recent years (113% growth in FY 2005-2006) which will<br />

require more IT g<strong>ra</strong>duates in the future.<br />

The avai<strong>la</strong>ble workforce is still not adequate to meet the<br />

industry demand. Each year, various institu<strong>tio</strong>ns produce<br />

about 2,000 IT g<strong>ra</strong>duates. In addi<strong>tio</strong>n to that, a huge number<br />

of non-IT g<strong>ra</strong>duates are working in the sector. According to<br />

BASIS, each year the industry faces a <strong>sh</strong>ortage of about<br />

1,800 to 2,800 professionals. After seve<strong>ra</strong>l years of fast<br />

growth, the IT applica<strong>tio</strong>n market in Bang<strong>la</strong>de<strong>sh</strong>'s educa<strong>tio</strong>n<br />

sector has notably slowed down now. CAGR for the number<br />

of IT professionals is -10.75%.<br />

In addi<strong>tio</strong>n to the public and private colleges and universities<br />

providing IT educa<strong>tio</strong>n, there are almost 150 Diploma/<br />

voca<strong>tio</strong>nal institu<strong>tio</strong>ns in the country. The 20 government and<br />

87 private polytechnic institutes in the country offer diploma<br />

courses on engineering subjects. There are more than 1,000<br />

private and public sector computer-t<strong>ra</strong>ining institutes offering<br />

IT skills development at various levels.<br />

T<strong>ra</strong>ining facilities in Bang<strong>la</strong>de<strong>sh</strong> for the ICT industry are<br />

inadequate. Especially, the types of t<strong>ra</strong>ining provided are not<br />

in line with the industry requirements. Most of the t<strong>ra</strong>ining<br />

institu<strong>tio</strong>ns provide t<strong>ra</strong>ining in basic computer skills. Few<br />

specific institu<strong>tio</strong>ns provide an advanced level of t<strong>ra</strong>ining<br />

courses. However, they <strong>la</strong>ck the relevance to the actual<br />

needs of the software companies.<br />

Some institutes are providing diploma/certificate courses in<br />

col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n with UK and US. The main p<strong>la</strong>yers in t<strong>ra</strong>ining<br />

institutes include Daffodil Institute of IT, Bhuiyan Institute of<br />

Technology, Base Limited, New Horizons, Aptech Computer<br />

Educa<strong>tio</strong>n, NIIT etc. Most of these institutes provide t<strong>ra</strong>ining<br />

on Microsoft Office suite along with some certified prog<strong>ra</strong>ms<br />

by O<strong>ra</strong>cle, Microsoft, Linux, Cisco etc. However, these<br />

institutes do not provide adequate t<strong>ra</strong>ining or have any<br />

certificate courses in prog<strong>ra</strong>mming <strong>la</strong>nguages.<br />

However, there is still an acute <strong>sh</strong>ortage of professionals<br />

with prog<strong>ra</strong>mming <strong>la</strong>nguage skills. The premier engineering<br />

university, Bang<strong>la</strong>de<strong>sh</strong> University of Engineering and<br />

Technology (BUET) has a seat capacity of only 120 students<br />

per year and produces about 200 g<strong>ra</strong>duate and post<br />

g<strong>ra</strong>duates in computer science.<br />

With competitive advantage in wage <strong>ra</strong>te and easily t<strong>ra</strong>inable<br />

workforce, Bang<strong>la</strong>de<strong>sh</strong> can certainly have an IT industry<br />

simi<strong>la</strong>r to the size of India, China and other emerging<br />

economies.<br />

39


Appendix Appendix Appendix 4 4 – Strengthening the SME SME sector<br />

SMEs have long been considered as the principal driving<br />

force of Bang<strong>la</strong>de<strong>sh</strong>’s economy. Along with stimu<strong>la</strong>ting<br />

private owner<strong>sh</strong>ip and entrepreneurial skills, SMEs are<br />

flexible and can adapt quickly to changing market demand<br />

and supply situa<strong>tio</strong>ns, gene<strong>ra</strong>te employment, help diversify<br />

economic activity, and make a significant contribu<strong>tio</strong>n to<br />

exports and t<strong>ra</strong>de. Although in Bang<strong>la</strong>de<strong>sh</strong> the SME<br />

Founda<strong>tio</strong>n (a state owned entity that provides funding for<br />

SMEs), and IFC-SEDF’s efforts for creating awareness<br />

among the banks/NBFIs to be more focused on SMEs are<br />

<strong>la</strong>udable, the sector still needs greater support from both<br />

financial institu<strong>tio</strong>ns and the government. Especially at a time<br />

such as now, when the burden of the global financial crisis is<br />

starting to weigh heavily upon Bang<strong>la</strong>de<strong>sh</strong> in terms of<br />

declining export orders and remittance inflow, boosting the<br />

SME sector, the economy’s thrust sector is absolutely<br />

impe<strong>ra</strong>tive.<br />

A <strong>la</strong>ck of support for SMEs can be noted in a press release –<br />

the country’s promising light engineering sector, which has<br />

developed in recent years from an informal cottage status,<br />

still faces conside<strong>ra</strong>ble impediments. According to a press<br />

release by Daily Star, the president of Bang<strong>la</strong>de<strong>sh</strong><br />

Engineering Industry Owners' Associa<strong>tio</strong>n (BEIOA) identified<br />

the <strong>la</strong>ck of finance and investment to be the <strong>la</strong>rgest obstacle<br />

to growth, and emphasized the need for the government to<br />

take measures to start disbursing SME loans at flexible<br />

interest <strong>ra</strong>tes apart from the bank loans. Other problems<br />

highlighted by experts in the sector included, difficult tax and<br />

VAT policies which <strong>ra</strong>ises the cost of produc<strong>tio</strong>n, making the<br />

products less competitive than the imported items. Given the<br />

country’s compa<strong>ra</strong>tive advantage in <strong>la</strong>bor, the light<br />

engineering sector clearly has the potential to compete with<br />

China and Thai<strong>la</strong>nd. However, coupled with the<br />

aforemen<strong>tio</strong>ned problems, <strong>sh</strong>ortage of skilled and t<strong>ra</strong>ined<br />

workers has also been hindering growth in the sector.<br />

Along with delineating the importance and presence of SMEs<br />

in Bang<strong>la</strong>de<strong>sh</strong>, this report highlights the const<strong>ra</strong>ints faced by<br />

the enterprises and offers a number of recommenda<strong>tio</strong>ns for<br />

bolstering growth in the sector.<br />

Importance Importance of of SMEs SMEs SMEs in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

A major policy weakness for SMEs is that there is no uniform<br />

defini<strong>tio</strong>n of SMEs that is acceptable at policy and<br />

ope<strong>ra</strong><strong>tio</strong>nal level. The <strong>la</strong>ck of a standard defini<strong>tio</strong>n has been<br />

a conten<strong>tio</strong>us issue for entrepreneurs when accessing<br />

finance. Hence, different organiza<strong>tio</strong>ns have, in the past,<br />

defined it according to their objectives and conveniences.<br />

This defini<strong>tio</strong>nal ambiguity creates difficulties in case of<br />

identifica<strong>tio</strong>n of SMEs, extent of their activity, formu<strong>la</strong><strong>tio</strong>n and<br />

implementa<strong>tio</strong>n of policy in target oriented approach.<br />

However, although there is no common worldwide defini<strong>tio</strong>n<br />

of SMEs, gene<strong>ra</strong>lly capital investment and number of<br />

workers employed are the two major criteria of defini<strong>tio</strong>ns of<br />

SME.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bank’s defini<strong>tio</strong>n of SMEs in Bang<strong>la</strong>de<strong>sh</strong> has<br />

been more inclusive with a lower thre<strong>sh</strong>old of assistance<br />

eligibility, while the Industrial Policy of 2005 sets a much<br />

higher thre<strong>sh</strong>old of assistance eligibility making it difficult for<br />

re<strong>la</strong>tively small entrepreneurs to have access to SME<br />

development funds or loan. Under the Industrial Policy,<br />

manufacturing and non-manufacturing units are defined<br />

sepa<strong>ra</strong>tely in terms of their employment and size of asset.<br />

“Small industries under manufacturing sector are defined as<br />

those which have fixed assets below BDT 15mn. Under<br />

nonmanufacturing sector small industries were defined as<br />

those which employ less than 25 workers. Medium industries<br />

under manufacturing sector were defined as those which<br />

have fixed assets worth between BDT 15mn and BDT 10mn.<br />

Medium industry in the non-manufacturing sector is meant to<br />

include those industries employing 25 to 100 workers.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bank defines small enterprises of having no<br />

more than 60 workers with total assets between BDT 50,000<br />

and BDT 10mn (for manufacturing) and no more than 20<br />

workers with total assets between BDT 50,000 and BDT 5mn<br />

(for t<strong>ra</strong>ding) and no more than 30 workers with total assets<br />

between BDT 50,000 and BDT 3mn (for services). In cont<strong>ra</strong>st<br />

to the usual exercise, Bang<strong>la</strong>de<strong>sh</strong> Bank affixes medium<br />

scale enterprises with <strong>la</strong>rge scale one.”<br />

SMEs t<strong>ra</strong>di<strong>tio</strong>nally consisted of sub-sectors such as food,<br />

textiles, light engineering, wood, care and bamboo products.<br />

However, SME-re<strong>la</strong>ted activities have g<strong>ra</strong>dually expanded in<br />

various other areas, such as medium scale ope<strong>ra</strong><strong>tio</strong>n of jute,<br />

textile, paper, steel, cement, chemicals, fertilizer and<br />

pharmaceuticals; besides garments, garments backward<br />

linkage industries (accessories), hand ope<strong>ra</strong>ted welding,<br />

food processing and food linked industries, leather, ce<strong>ra</strong>mic,<br />

automobiles, light engineering, basic metal engineering,<br />

small scale chemical industries, and many more.<br />

In Bang<strong>la</strong>de<strong>sh</strong> Small and Medium-sized Enterprises (SMEs)<br />

have been p<strong>la</strong>ying a vital role in terms of economic growth,<br />

employment gene<strong>ra</strong><strong>tio</strong>n, and industrializa<strong>tio</strong>n (e.g. through<br />

entrepreneur<strong>sh</strong>ip development). There are about 264 SME's<br />

in the 8 Export Processing Zones in the country; these SMEs<br />

are major contributors to the country’s ove<strong>ra</strong>ll GDP growth.<br />

SMEs have created greater opportunities for direct or indirect<br />

employment in the country. In a country like Bang<strong>la</strong>de<strong>sh</strong>,<br />

SMEs have the potential of simultaneously fighting poverty<br />

and accele<strong>ra</strong>ting economic growth. Furthermore, SMEs<br />

development in agriculture and non-agriculture sector in<br />

Bang<strong>la</strong>de<strong>sh</strong> is st<strong>ra</strong>tegic for employment gene<strong>ra</strong><strong>tio</strong>n and ru<strong>ra</strong>l<br />

development.<br />

Empirical evidence suggests that SMEs are crucial in<br />

reducing poverty, as they create <strong>la</strong>rge scale, low-cost<br />

employment opportunities, use locally avai<strong>la</strong>ble inputs and<br />

technologies, mobilize small and scattered private savings,<br />

develop entrepreneur<strong>sh</strong>ip, and correct the regional<br />

imba<strong>la</strong>nce in development that exists in developing<br />

countries. According to economists, the flow of disbursement<br />

of public industrial loan in Bang<strong>la</strong>de<strong>sh</strong> in fiscal year 2008<br />

increased to 35.20% and the recovery <strong>ra</strong>te of loans has also<br />

increased to 25.24%. Economists also added that if the<br />

present industrial policy is implemented properly, then the<br />

contribu<strong>tio</strong>n of the industrial sector, especially SME's, to the<br />

na<strong>tio</strong>nal economy would be 30 to 35%, and resultantly<br />

employment would increase by 35%. However, as discussed<br />

<strong>la</strong>ter, despite all these potentials, SMEs still face major<br />

40


const<strong>ra</strong>ints in growth, mainly due to financial issues and <strong>la</strong>ck<br />

of capital.<br />

SME SME SME Financing<br />

Financing<br />

Government Government Initiatives<br />

Initiatives<br />

In the past, the government attempted to provide SMEs with<br />

access to finance by targeted lending; Banks were instructed<br />

by the government to keep aside a certain <strong>sh</strong>are (for ex. 5%)<br />

of their loan portfolios for small and cottage industry<br />

financing. In 1988 the Bank of Small and Cottage Industries<br />

(BASIC) was set up with the objective of financing small and<br />

cottage industries. Afterwards, seve<strong>ra</strong>l commercial banks<br />

have come forward with special packages for SME<br />

development. One such initiative is the ‘gharoa’ project of<br />

the Janata Bank Limited.<br />

The SME founda<strong>tio</strong>n, a state owned entity founded in 2006,<br />

is another creditable initiative for bolstering growth in the<br />

SME sector. In 2004 the Asian Development Bank (ADB)<br />

g<strong>ra</strong>nted the government USD 50mn to support the SME<br />

sector, out of which USD 30mn was sanc<strong>tio</strong>ned as SME<br />

loans, and USD 5mn was kept for entrepreneurs’ t<strong>ra</strong>ining.<br />

Earlier Bang<strong>la</strong>de<strong>sh</strong> Bank managed the g<strong>ra</strong>nt, but recently the<br />

government decided to hand it over to the SME founda<strong>tio</strong>n.<br />

The founda<strong>tio</strong>n has allocated BDT 2bn for disbursement<br />

through banks for fiscal year 2009. The loans will be given at<br />

below 10% <strong>ra</strong>te of interest, and out of the total amount of<br />

loans, small entrepreneurs will get 80% while the rest of the<br />

20% will be given to medium entrepreneurs, with a priority<br />

given to women entrepreneurs. The founda<strong>tio</strong>n is in the<br />

process of ar<strong>ra</strong>nging regional campaign conferences for<br />

SME entrepreneurs in Dhaka, Chittagong and Raj<strong>sh</strong>ahi, and<br />

has set up an SME advisory service centre to ope<strong>ra</strong>te the<br />

SME enterprises and provide informa<strong>tio</strong>n to the SME<br />

entrepreneurs. An SME product disp<strong>la</strong>y centre is also to be<br />

set up, in order to help SMEs advertise their products.<br />

In 2004, Bang<strong>la</strong>de<strong>sh</strong> Bank introduced the refinance scheme<br />

for SMEs, as a part of its initiatives to overcome the financial<br />

const<strong>ra</strong>ints facing the SME sector and encou<strong>ra</strong>ge the banks<br />

and other financial institu<strong>tio</strong>ns to provide credit facilities to<br />

this sector. For the refinance scheme BB used mainly three<br />

sources of funds: BDT. 100 million from BB's own resources,<br />

USD 20 million from IDA under the Enterprise Growth and<br />

Bank Moderniza<strong>tio</strong>n Project (EGBMP), and Taka 30 million<br />

from ADB. Under the BB’s refinance scheme for the small<br />

enterprise sector, any industry/business entity which has a<br />

maximum total fixed investment up to BDT. 10 million is<br />

considered as a small enterprise. Nearly BDT.5,341 million<br />

were refinanced to 13 banks and 19 financial institu<strong>tio</strong>ns by<br />

BB till August 2007, of which BDT 2,742 million (51 %) were<br />

disbursed to the banks and BDT 2,599 million (49 %) to the<br />

financial institu<strong>tio</strong>ns. Among the banks, three banks (BRAC,<br />

Eastern, and Dhaka) together availed more than half of the<br />

refinance facility. Among the financial institu<strong>tio</strong>ns, MIDAS,<br />

Utta<strong>ra</strong> Finance, and United Leasing were in the leading<br />

posi<strong>tio</strong>n, together accounting for 45% of the total.<br />

Interna<strong>tio</strong>nal Interna<strong>tio</strong>nal agencies<br />

agencies<br />

World Bank Group’s SME finance activities through fiscal<br />

years 1997 to 2003 included – The World Bank - USD 5<br />

billion approvals in SME assistance, of which-USD 3 billion in<br />

credit lines and TA to financial institu<strong>tio</strong>ns; The Interna<strong>tio</strong>nal<br />

Finance Corpo<strong>ra</strong><strong>tio</strong>n (IFC) -Investment approvals USD 3.9<br />

billion, of which -85% went through financial intermediaries<br />

involved in SME finance-Technical Assistance; MIGA –<br />

Gua<strong>ra</strong>nteed USD 1.1 billion in SME investments MIGA.<br />

Equity Equity and and Entrepreneur<strong>sh</strong>ip Entrepreneur<strong>sh</strong>ip Fund Fund (EEF (EEF) (EEF<br />

Equity and Entrepreneur<strong>sh</strong>ip Fund (EEF), whose<br />

management has recently been t<strong>ra</strong>nsferred to the Investment<br />

Corpo<strong>ra</strong><strong>tio</strong>n of Bang<strong>la</strong>de<strong>sh</strong> (ICB) from Bang<strong>la</strong>de<strong>sh</strong> Bank, is<br />

an equity fund that makes investments in ventures mainly in<br />

the areas of Agricultu<strong>ra</strong>l and the IT sector. Under the Equity<br />

Entrepreneur<strong>sh</strong>ip Fund (EEF), the government has allocated<br />

BDT 1000mn for the development of agro-based and<br />

software industries. Most of the EEF fund has been targeted<br />

to agro-based industries, while software industries received a<br />

re<strong>la</strong>tively small <strong>sh</strong>are of the total disbursement of this fund.<br />

Commercial Commercial Commercial Banks Banks<br />

Banks<br />

According to a study conducted by SEDF in 2006, SMEs<br />

have limited access to bank financing. The study <strong>sh</strong>ows that<br />

about two-thirds of the SMEs did not approach banks for<br />

working capital loans and that it takes about two months on<br />

ave<strong>ra</strong>ge to have a loan sanc<strong>tio</strong>ned. To improve the situa<strong>tio</strong>n,<br />

seve<strong>ra</strong>l commercial banks have taken initiatives in creating<br />

special packages for the development of SMEs. Currently,<br />

two banks are leading in this area: the BASIC Bank in the<br />

public sector and the BRAC Bank Limited which is a private<br />

commercial bank. Besides these two, seve<strong>ra</strong>l other financial<br />

institu<strong>tio</strong>ns have opened special units to expand SME credit<br />

portfolio recognizing the sector as a new area of potential<br />

business. As <strong>sh</strong>own in the table below, private commercial<br />

banks (PCBs) have disbursed the highest amount of loans to<br />

both small and medium enterprises as of June 2006. In both<br />

cases, the <strong>la</strong>rgest amount of funds has been channeled to<br />

the t<strong>ra</strong>ding sector. There is no participa<strong>tio</strong>n of foreign<br />

commercial banks (FCBs) in small enterprise financing and<br />

very little involvement in medium enterprise financing.<br />

The table below includes figures for loans and advances by<br />

selected commercial banks. The table <strong>sh</strong>ows that while the<br />

banks get funds at the Bank Rate (5%), their lending <strong>ra</strong>tes to<br />

the SMEs are re<strong>la</strong>tively high.<br />

41


Equity Equity Financi Financing Financi ng<br />

The only institu<strong>tio</strong>n that provides equity financing to SMEs is<br />

Venture Investment Partners Bang<strong>la</strong>de<strong>sh</strong> (VIPB). VIPB<br />

targets mainly SMEs who <strong>la</strong>ck sufficient col<strong>la</strong>te<strong>ra</strong>l to att<strong>ra</strong>ct<br />

finance from conven<strong>tio</strong>nal sources such as banks and<br />

leasing companies. Yet, these firms often have very high<br />

growth potential, which can gene<strong>ra</strong>te luc<strong>ra</strong>tive returns to both<br />

the investors and the entrepreneurs.<br />

VIPB provides various direct equity and quasi-equity funding<br />

schemes, <strong>ra</strong>nging from as low as BDT 300,000 and above to<br />

SMEs. The advisory arm of VIPB provides different types of<br />

business and technical assistance to help the clients meet<br />

the financial and business objectives.<br />

The The main main challenges challenges faced faced by by SMEs SMEs in in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

In gene<strong>ra</strong>l, SMEs face different const<strong>ra</strong>ints in different areas<br />

such as legal, administ<strong>ra</strong>tive, regu<strong>la</strong>tory, financial,<br />

technological, inf<strong>ra</strong>structu<strong>ra</strong>l, human resources etc. Broadly<br />

categorized, areas that need strengthening in order for SMEs<br />

to thrive are: financial support schemes, technology and<br />

t<strong>ra</strong>ining, and marketing and inf<strong>ra</strong>structure.<br />

Financial Financial Const<strong>ra</strong>ints<br />

Const<strong>ra</strong>ints<br />

The biggest impediment for small and medium enterprises is<br />

the <strong>la</strong>ck of sufficient capital needed to ope<strong>ra</strong>te the business.<br />

Most businesses often have to start with their own savings or<br />

by borrowing from friends and re<strong>la</strong>tives, while bank financing<br />

comes after that. Banks are extremely reluctant to lend to<br />

small scale entrepreneurs who do not have any startup<br />

equity, despite the enterprises’ sound business models and<br />

luc<strong>ra</strong>tive business p<strong>la</strong>ns. It becomes very difficult for SMEs to<br />

<strong>ra</strong>ise fixed and working capital from commercial banks, as<br />

they are not willing to give small size loans due to the high<br />

monitoring and supervision costs. The banks consider SMEs<br />

to be high risk borrowers because of their low capitaliza<strong>tio</strong>n,<br />

insufficient assets, and high mortality <strong>ra</strong>tes. Hence, SMEs<br />

are usually charged very high interest <strong>ra</strong>tes by the banks – in<br />

secured credit t<strong>ra</strong>nsac<strong>tio</strong>ns, interest <strong>ra</strong>tes vary from 15%<br />

(subsidized in cases defined by Bang<strong>la</strong>de<strong>sh</strong> Bank policies) to<br />

22% or more. Furthermore, without some form of col<strong>la</strong>te<strong>ra</strong>l it<br />

is often difficult to get the loan - Real estate security, required<br />

in nearly every case, is normally taken in the amount of<br />

200% of the loan amount. In terms of procedu<strong>ra</strong>l aspects,<br />

banking method of selecting a potential project based on<br />

project evalua<strong>tio</strong>n and requirement for undocumented ext<strong>ra</strong><br />

payments to bank officials often become difficult for the small<br />

entrepreneurs to comply with.<br />

Other financial const<strong>ra</strong>ints include the fact that a significant<br />

<strong>sh</strong>are of SME loans, being 80%, is kept for t<strong>ra</strong>ding purposes,<br />

instead of manufacturing and service industries. Hence, the<br />

purpose of supporting economic development might not be<br />

fully served.<br />

Non Non-financial Non financial Const<strong>ra</strong>ints<br />

Const<strong>ra</strong>ints<br />

Apart from access to finance, regu<strong>la</strong>tory, technological and<br />

human resource const<strong>ra</strong>ints also impede growth of SMEs. In<br />

case of getting t<strong>ra</strong>de licenses for ope<strong>ra</strong>ting business, the<br />

entrepreneurs face unnecessary de<strong>la</strong>ys and have to make<br />

undocumented payments. Simi<strong>la</strong>rly, registering the firms to<br />

the concerned office often requires a long time and unofficial<br />

payments. In case of getting clea<strong>ra</strong>nce from the department<br />

of environment, the entrepreneurs face long de<strong>la</strong>ys. The<br />

process of regist<strong>ra</strong><strong>tio</strong>n with BSCIC or BEPZA, although not<br />

mandatory, also needs to be made easy and simple.<br />

The <strong>la</strong>ck of avai<strong>la</strong>bility of modern technology is also a major<br />

const<strong>ra</strong>int. Furthermore, quality products cannot be produced<br />

due to the usage of old machineries as advanced<br />

machineries are costly, and due to <strong>la</strong>ck of innova<strong>tio</strong>n. Not<br />

much investment has been made in the research and<br />

development of products, methods, techniques etc.<br />

Power is another major issue - the <strong>la</strong>ck of uninterrupted and<br />

quality power supply for industrial units causes a great loss<br />

of productivity.<br />

SMEs often comp<strong>la</strong>in about poor backward and forward<br />

linkages. In addi<strong>tio</strong>n to poor inf<strong>ra</strong>structure and t<strong>ra</strong>nsporta<strong>tio</strong>n,<br />

the distribu<strong>tio</strong>n channel is not well developed in the country<br />

and it makes the ove<strong>ra</strong>ll cost of produc<strong>tio</strong>n high. Also, <strong>ra</strong>wmaterials<br />

are often not avai<strong>la</strong>ble in the local market.<br />

Last but not the least, is the <strong>sh</strong>ortage of skilled <strong>la</strong>bor –<br />

workers avai<strong>la</strong>ble for manufacturing and management<br />

activities are not well qualified and low skilled. Public-private<br />

linkage in terms of development of skilled professionals,<br />

developing product quality, improving management system is<br />

absent.<br />

Conclusion Conclusion and and Recommenda<strong>tio</strong>ns<br />

Recommenda<strong>tio</strong>ns<br />

• First and foremost, for the sustainable development of<br />

SMEs, a standard defini<strong>tio</strong>n of SME needs to be<br />

establi<strong>sh</strong>ed by the government, in accordance with<br />

different stakeholders including donor agencies, NGOs,<br />

and private sector entrepreneurs.<br />

• The government needs to protect the small enterprises<br />

by re<strong>la</strong>xing the tax and VAT policies aimed towards<br />

them, so that they can yield profits by keeping their cost<br />

of produc<strong>tio</strong>n low.<br />

• Lack of finance is one of the major const<strong>ra</strong>ints – as<br />

commercial banks are inherently skeptical of lending to<br />

42


the SMEs due to the high risks and monitoring costs<br />

associated with lending to them, the government <strong>sh</strong>ould<br />

compensate by using g<strong>ra</strong>nts, perhaps in coordina<strong>tio</strong>n<br />

with donor agencies, as a major instrument for providing<br />

financial support for a limited period of time to selected<br />

SMEs which have good potential and wide linkages.<br />

• Banking Institu<strong>tio</strong>ns <strong>sh</strong>ould immediately start solving the<br />

problem of de<strong>la</strong>yed payments to SMEs. A Network of<br />

Factoring Services must be set up at home and abroad<br />

ope<strong>ra</strong>ted through banks.<br />

• In the case of providing refinance facilities to banks and<br />

financial institu<strong>tio</strong>ns, the government <strong>sh</strong>ould issue<br />

appropriate directives re<strong>la</strong>ted to col<strong>la</strong>te<strong>ra</strong>l requirements<br />

and interest <strong>ra</strong>tes that are consistent with SME<br />

cha<strong>ra</strong>cteristics. Furthermore, banks <strong>sh</strong>ould be required<br />

to make the loan applica<strong>tio</strong>n and acquiring procedure<br />

much less tedious and cumbersome. Also, the lead SME<br />

financing institu<strong>tio</strong>ns, such as BASIC Bank, <strong>sh</strong>ould<br />

extend their cove<strong>ra</strong>ge in ru<strong>ra</strong>l areas targeting different<br />

potential SMEs.<br />

• More SME development funds, such as the fund<br />

currently managed by the SME Founda<strong>tio</strong>n, may be<br />

created to subsidize projects of potential entrepreneurs.<br />

The funds could be disbursed through banks and<br />

financial institu<strong>tio</strong>ns, and could be distributed through<br />

targeted support schemes, such as the women<br />

entrepreneur fund.<br />

• Currently VIPB is the only institu<strong>tio</strong>nal equity financing<br />

for SMEs in Bang<strong>la</strong>de<strong>sh</strong>. More venture capital<br />

investments <strong>sh</strong>ould be encou<strong>ra</strong>ged so that the small<br />

enterprises can gain access to equity; also private fund<br />

managers could provide management consultancy and<br />

advisory services to the enterprises whose funds they<br />

manage – services could include, pre-investment<br />

counseling, technical informa<strong>tio</strong>n services, accounting<br />

services, preparing feasibility studies, economic cost<br />

benefit analysis of project implementa<strong>tio</strong>n, and<br />

work<strong>sh</strong>ops to enhance entrepreneurial skills.<br />

• The government <strong>sh</strong>ould keep aside funding for R&D<br />

projects in order to improve product quality of SMEs, in<br />

col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n with top <strong>ra</strong>nked technical universities in the<br />

country. To address the problems of skilled <strong>la</strong>bor<br />

<strong>sh</strong>ortages, it <strong>sh</strong>ould be ensured that the teaching<br />

curriculum of the numerous poly-technic institutes and<br />

voca<strong>tio</strong>nal t<strong>ra</strong>ining institu<strong>tio</strong>ns comply with market<br />

demands.<br />

• The government <strong>sh</strong>ould facilitate the expansion of the<br />

SMEs by upg<strong>ra</strong>ding their productivity and value-added<br />

capabilities through enabling fiscal and tariff measures,<br />

facilitating effective backward linkage produc<strong>tio</strong>n chain<br />

under sub-contacting ar<strong>ra</strong>ngements, and the g<strong>ra</strong>nting of<br />

incentives and benefits to gene<strong>ra</strong>te much needed<br />

employment and alleviate poverty.<br />

• To provide greater support to SMEs in the middle of the<br />

global financial turmoil each Commercial banks and<br />

non-banking financial institu<strong>tio</strong>ns (NBFIs) must provide a<br />

mandated <strong>sh</strong>are of their respective ove<strong>ra</strong>ll disbursed<br />

loans to SMEs without asking for any col<strong>la</strong>te<strong>ra</strong>l at a<br />

simple single digit <strong>ra</strong>te of interest.<br />

• Purchase and Price Preference Policy: These facilities<br />

<strong>sh</strong>ould include tender documents free of cost, exemp<strong>tio</strong>n<br />

from earnest money and security deposit and 15% price<br />

preference in Government purchases – from SME units.<br />

• Sub-cont<strong>ra</strong>cting ar<strong>ra</strong>ngements: SMEF/BSCIC <strong>sh</strong>ould, to<br />

ensure efficient and cost effective produc<strong>tio</strong>n<br />

management, undertake to enhance complementarity in<br />

produc<strong>tio</strong>n prog<strong>ra</strong>mmes of <strong>la</strong>rge, medium and small<br />

industrial sectors through sub-cont<strong>ra</strong>cting ar<strong>ra</strong>ngements<br />

with small scale ancil<strong>la</strong>ry units.<br />

• Marketing and exports: In spite of the vast domestic<br />

market, marketing remains a problematic area for SMEs.<br />

Mass consump<strong>tio</strong>n products are pre-dominantly being<br />

marketed by the big and organized sector. The SME<br />

sectors <strong>sh</strong>ould be enabled to have a significant <strong>sh</strong>are of<br />

such markets. SMEF/BSCIC/EPB <strong>sh</strong>ould encou<strong>ra</strong>ge,<br />

promote and facilitate duty free marketing of SME<br />

products under b<strong>ra</strong>nd names in the regional and global<br />

markets.<br />

• Ru<strong>ra</strong>l non-farm SME: Government must recognize the<br />

need to enhance the spread of ru<strong>ra</strong>l and cottage<br />

industries towards stepping up non-farm employment<br />

opportunities.<br />

• Self-employment prog<strong>ra</strong>mme with the objective of<br />

establi<strong>sh</strong>ing a <strong>la</strong>rge number of micro-enterprises in ru<strong>ra</strong>l<br />

areas with expanded micro-credit scheme without<br />

asking for any col<strong>la</strong>te<strong>ra</strong>l at a simple single digit <strong>ra</strong>te of<br />

interest.<br />

• To encou<strong>ra</strong>ge and facilitate investments government<br />

<strong>sh</strong>ould immediately announce a Green Channel taxincentives<br />

package providing for tax free investment<br />

opportunity in prioritized sectors without asking for any<br />

exp<strong>la</strong>na<strong>tio</strong>n.<br />

43


Appendix Appendix 5 5 – Improving Access to Domestic Finance<br />

According the World Bank Second Investment Climate<br />

Report, access to finance is tight. More than 40% of firms<br />

na<strong>tio</strong>nwide agree that access to finance is a major or severe<br />

obstacle to business, a higher percentage than the ave<strong>ra</strong>ge<br />

for low and lower-income countries, and the highest in the<br />

region after Pakistan.<br />

80.0%<br />

70.0%<br />

60.0%<br />

50.0%<br />

40.0%<br />

30.0%<br />

20.0%<br />

10.0%<br />

0.0%<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Low income<br />

Lower middle income<br />

Finance is a major obstacle (% of firms agree)<br />

South Asia<br />

China<br />

India<br />

In In In non non-metropolitan non metropolitan metropolitan areas, areas, areas, only only 6% 6% of of enterprises enterprises has<br />

has<br />

access access to to formal formal finance. finance. 3% had borrowed from banks (in<br />

the prior three years) and 4% from NGOs/MFIs. Access to<br />

formal finance for <strong>la</strong>rger non-metropolitan enterprises (those<br />

with ten or more workers) is compa<strong>ra</strong>ble to that of smaller<br />

metropolitan firms with 32% reporting having a bank loan<br />

and 3% with NGO/MFI loans. But formal finance for nonmetropolitan<br />

microenterprises is extremely limited. A mere<br />

2% of microenterprises had bank loans and slightly higher<br />

numbers received loans from NGOs/MFIs (4%). Firms that<br />

reported having bank loans were equally likely to have a loan<br />

from a private bank or a government commercial bank.<br />

G<strong>ra</strong>meen Bank and BRAC were the main sources of NGO/<br />

MFI finance and account for 59% and 41% of all NGO/MFI<br />

loans received, respectively.<br />

Medium Medium and and long long-term long term credit credit is is scarce. scarce. In metropolitan<br />

areas, 69% of lending has a maturity of less than three<br />

years. A little less than half of the loans have maturities of<br />

one year. The ave<strong>ra</strong>ge loan term for bank loans in nonmetropolitan<br />

areas was 17 months, with 75% of loans with a<br />

maturity of one year. 70% of NGO/MFI loans also had a one<br />

year maturity. More than a third (38%) of non-metropolitan<br />

enterprises reported having access to supplier credit, but<br />

this is also very <strong>sh</strong>ort term finance with 80% of firms<br />

reporting repayment periods of three weeks or less. As a<br />

result, long term financing is typically procured through<br />

accumu<strong>la</strong>ted earnings, and firms tend to under-invest – we<br />

note a <strong>sh</strong>arp decline in capital stock for metropolitan<br />

enterprises in key sectors of about 5% (9% in leather).<br />

Some companies roll over existing loans, which can be<br />

destabilizing to the financial system. Leve<strong>ra</strong>ge is very low in<br />

Bang<strong>la</strong>de<strong>sh</strong> by interna<strong>tio</strong>nal standards – leve<strong>ra</strong>ge in the<br />

metropolitan services sector is 19.7% (3.4% for services<br />

other than retail), among small firms – 27.5% (versus 37.4%<br />

for <strong>la</strong>rge firms).<br />

Credit Credit informa<strong>tio</strong>n informa<strong>tio</strong>n informa<strong>tio</strong>n in in the the country country is is inadequate inadequate inadequate and and unreliable<br />

unreliable<br />

so so banks banks have have to to rely rely on on col<strong>la</strong>te<strong>ra</strong>l col<strong>la</strong>te<strong>ra</strong>l to to provide provide security security for for the<br />

the<br />

loans. loans. A credit informa<strong>tio</strong>n bureau is ope<strong>ra</strong>ted by the cent<strong>ra</strong>l<br />

bank containing current loan informa<strong>tio</strong>n for all borrowers of<br />

Kenya<br />

Pakistan<br />

Philippines<br />

Sri Lanka<br />

Thai<strong>la</strong>nd<br />

Vietnam<br />

financial institu<strong>tio</strong>ns regu<strong>la</strong>ted by the Bang<strong>la</strong>de<strong>sh</strong> Bank. The<br />

system is not computerized, It only contains informa<strong>tio</strong>n<br />

about current loans above BDT. 50,000 (and not the full<br />

banking history of the borrower), and does not have a unique<br />

identifier for borrowers. This reduces the effectiveness of the<br />

system particu<strong>la</strong>rly hurting smaller firms who cannot build up<br />

reputa<strong>tio</strong>n-based credit. It also hurts the banking industry<br />

because they cannot screen customers with poor banking<br />

history.<br />

As As the the World World Bank Bank Repo Report Repo Repo rt notes, small firms are credit-<br />

<strong>ra</strong><strong>tio</strong>ned, <strong>ra</strong><strong>tio</strong>ned, so so are are <strong>la</strong>ndless <strong>la</strong>ndless firms. firms. As a result, most loans<br />

require col<strong>la</strong>te<strong>ra</strong>l (91.4% of the metropolitan firms reported<br />

they needed col<strong>la</strong>te<strong>ra</strong>l for their most recent loan and 80% of<br />

non-metropolitan firms applying for bank loans reported<br />

having to provide col<strong>la</strong>te<strong>ra</strong>l). The col<strong>la</strong>te<strong>ra</strong>l used is mostly<br />

<strong>la</strong>nd, to the tune of 148.1% of the value of the loan for<br />

metropolitan firms (median 140%). 2 The ave<strong>ra</strong>ge value of<br />

col<strong>la</strong>te<strong>ra</strong>l required for non-metropolitan firms was 40% of the<br />

loan value. For every size, a significantly higher propor<strong>tio</strong>n of<br />

firms which own <strong>la</strong>nd have loans. For metropolitan firms,<br />

machinery is also used as col<strong>la</strong>te<strong>ra</strong>l, typically in addi<strong>tio</strong>n to<br />

<strong>la</strong>nd. 3 The <strong>la</strong>ck of a func<strong>tio</strong>nal system of registered movable<br />

property other than for public limited companies is<br />

const<strong>ra</strong>ining the use of movable col<strong>la</strong>te<strong>ra</strong>l. 4 Accounts<br />

receivable are very infrequently used (3.1% of the cases). It<br />

was frequent that owners of metropolitan firms were also<br />

required to put up a personal asset security – the owner’s<br />

<strong>la</strong>nd and houses (45% of loans had that), in the event of <strong>la</strong>ck<br />

(or insufficient value) of company assets for col<strong>la</strong>te<strong>ra</strong>l.<br />

Personal assets were more frequently used in other<br />

manufacturing and services as well as in gene<strong>ra</strong>l for smaller<br />

firms. In non-metropolitan areas 83% of bank loans required<br />

a co-signer.<br />

While While Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> has has has been been acknowledged acknowledged as as a a global<br />

global<br />

pioneer pioneer in in in microfinance microfinance borrowing borrowing from from NGOs/MFIs NGOs/MFIs is is very<br />

very<br />

costly costly and and loan loan amounts amounts are are small small. small The WB noted that 64%<br />

of small enterprises that received a loan (in the prior three<br />

years) relied on NGO/MFI loans as opposed to 10% of <strong>la</strong>rge<br />

enterprises. 5 Enterprise borrowing from NGO/MFIs had a<br />

median loan size of 10,000 BDT with an ave<strong>ra</strong>ge annual<br />

interest <strong>ra</strong>te of 15%. But firms that borrowed from<br />

NGO/MFIs reported needing to have <strong>la</strong>rge compulsory<br />

savings (the median amount of savings was almost 20% of<br />

the loan size). Since interest for NGO/MFI loans is not<br />

2 20% of the loans were financed with col<strong>la</strong>te<strong>ra</strong>l greater than or<br />

equal to 200% and 5% required col<strong>la</strong>te<strong>ra</strong>l more than 250%. 14% of<br />

the loans were approved with less than 100% col<strong>la</strong>te<strong>ra</strong>l. Almost twothirds<br />

of those were col<strong>la</strong>te<strong>ra</strong>l-free.<br />

3 Just 6.7% of loans were approved with only machinery and<br />

equipment put up as col<strong>la</strong>te<strong>ra</strong>l, emphasizing the importance that<br />

financial institu<strong>tio</strong>ns attach to <strong>la</strong>nd.<br />

4 The crea<strong>tio</strong>n of security interests over movable assets is complex,<br />

lengthy, and re<strong>la</strong>tively expensive. The priority of security interests<br />

over movable assets (that is, the public demonst<strong>ra</strong><strong>tio</strong>n of the<br />

existence of such interests and the establi<strong>sh</strong>ment of their priority) is<br />

unclear. Disclosure of security interests func<strong>tio</strong>ns poorly.<br />

Enforcement is slow and expensive.<br />

5 By comparison, 90% of borrowing of <strong>la</strong>rger firms (with ten or more<br />

workers) comprised of bank loans.<br />

44


applied on a declining basis, loans from these institu<strong>tio</strong>ns<br />

end up being much costlier than bank loans. 6 The higher cost<br />

of borrowing from NGO/MFIs provides an exp<strong>la</strong>na<strong>tio</strong>n for the<br />

percep<strong>tio</strong>ns among many non-metropolitan entrepreneurs<br />

that interest <strong>ra</strong>tes are high.<br />

The World Bank Doing Business (2007) reports that a typical<br />

small business loan requires up to 29 steps, nine meetings<br />

with the bank and over 50 different documents totaling 200<br />

pages. Typical requirements for a loan is to get the financial<br />

statements audited (only 24% of small metropolitan firms and<br />

less than one % of non-metropolitan firms do that routinely),<br />

register the col<strong>la</strong>te<strong>ra</strong>l, hold 6-7 meetings with the bank. Small<br />

firms in particu<strong>la</strong>r find loan applica<strong>tio</strong>ns complex, col<strong>la</strong>te<strong>ra</strong>l<br />

unattainable and loan approval unlikely. Smaller firms are<br />

less likely to have personal contacts in the banks and thus<br />

they are subject to more scrutiny.<br />

6 The median loan size for bank loans obtained by non-metropolitan<br />

enterprises was BDT 930,000 at an ave<strong>ra</strong>ge interest <strong>ra</strong>te of 13%.<br />

Loan sizes varied conside<strong>ra</strong>bly with small firms having median loans<br />

of BDT. 280,000 compared to a median loan of BDT 2.6 million for<br />

firms with ten or more workers.<br />

45


Appendix Appendix 6 6 – Asian Asian Regional Regional Integ<strong>ra</strong><strong>tio</strong>n: Integ<strong>ra</strong><strong>tio</strong>n: Bang<strong>la</strong>de<strong>sh</strong>’s Bang<strong>la</strong>de<strong>sh</strong>’s Untapped Untapped Opportunity<br />

Opportunit<br />

Greater Greater integ<strong>ra</strong><strong>tio</strong>n integ<strong>ra</strong><strong>tio</strong>n with with the the rest rest of of Asia: Asia: one one of of the the great<br />

great<br />

untapped untapped opportunities<br />

opportunities<br />

Bang<strong>la</strong>de<strong>sh</strong> emerged from the 1971 War of Independence a<br />

free na<strong>tio</strong>n, but one whose economy and inf<strong>ra</strong>structure was<br />

<strong>sh</strong>attered. It was notably described by US Secretary of State<br />

Henry Kissinger as “an interna<strong>tio</strong>nal basket case”. It’s<br />

achievements over the past 37 years has been impressive,<br />

most notably in its emergence as a major global textile and<br />

RMG exporter. More broadly, the low vo<strong>la</strong>tility and<br />

consistency of growth in the past decade, despite political<br />

instability and natu<strong>ra</strong>l disasters is a testament to a dynamic<br />

and entrepreneurial private sector. While many of the low<br />

income countries of the world achieved little or no growth<br />

during the 80’s and the 90’s decades, Bang<strong>la</strong>de<strong>sh</strong><br />

experienced per capita GDP growth of more than 2.5% or<br />

more per annum. Per capita income, since independence,<br />

has risen more than three-fold, and income poverty has been<br />

reduced by almost half.<br />

Goldman Sachs in 2005, introduced the concept of the Next<br />

Eleven (N-11) and included Bang<strong>la</strong>de<strong>sh</strong> in that list. Their<br />

goal was to “identify those countries that could potentially<br />

have a BRIC-like impact in rivaling the G7”. JP Morgan also<br />

introduced the concept of the “Frontier five” and included<br />

Bang<strong>la</strong>de<strong>sh</strong> in that list. In their 2007 report (“Ho Chi Minh t<strong>ra</strong>il<br />

to Mexico”, JP Morgan Research, 04 April 2007) they<br />

commented that, “It is the demog<strong>ra</strong>phics of Bang<strong>la</strong>de<strong>sh</strong> that<br />

justifies its inclusion in the JPMorgan Frontier Five. The<br />

country <strong>ra</strong>nks fourth in growth in economically active<br />

popu<strong>la</strong><strong>tio</strong>n.”<br />

The growing number of global investment banks focusing on<br />

the opportunities in Bang<strong>la</strong>de<strong>sh</strong> clearly suggests increasing<br />

potential to step up both FDI and foreign portfolio flows. But<br />

t<strong>ra</strong>ns<strong>la</strong>ting this rising interest by the foreign investor<br />

community into substantial capital inflows will require a<br />

focused st<strong>ra</strong>tegy to create both a broad <strong>ra</strong>nge of concrete<br />

investment opportunities/proposals along with a supportive<br />

regu<strong>la</strong>tory environment.<br />

We see the prospects for Bang<strong>la</strong>de<strong>sh</strong> to accele<strong>ra</strong>te its<br />

growth <strong>ra</strong>te to 7%+ on a consistent basis over the next 10<br />

years which <strong>sh</strong>ould take it towards a goal of becoming a<br />

Middle Income Country (MIC). Bang<strong>la</strong>de<strong>sh</strong> has three key<br />

att<strong>ra</strong>c<strong>tio</strong>ns for global investors and multina<strong>tio</strong>nals: i) a <strong>la</strong>rge<br />

base of low-cost <strong>la</strong>bour, ii) a <strong>la</strong>rge domestic market of 150mn<br />

people, and iii) nearly 3bn people in the Asian region that it<br />

has market access to. We believe it is credible for<br />

Bang<strong>la</strong>de<strong>sh</strong> to emu<strong>la</strong>te Vietnam’s FDI performance of a<br />

tenfold increase over seven years. Assuming FDI of USD<br />

700mn in 2008, this suggests Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ould aim for FDI<br />

of USD 7bn by 2015.<br />

In this report we explore the third of the aforemen<strong>tio</strong>ned<br />

“macro opportunities”, namely a more effective Asian<br />

integ<strong>ra</strong><strong>tio</strong>n st<strong>ra</strong>tegy, which Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>ould adopt in order<br />

to achieve a faster growth t<strong>ra</strong>jectory.<br />

A A st<strong>ra</strong>tegy st<strong>ra</strong>tegy for for Asian Asian regional regional integ<strong>ra</strong><strong>tio</strong>n<br />

integ<strong>ra</strong><strong>tio</strong>n<br />

Below we outline five mains areas for developing<br />

Bang<strong>la</strong>de<strong>sh</strong>’s economic and commercial opportunities with<br />

the rest of Asia:<br />

1) Increasing Increasing int<strong>ra</strong> int<strong>ra</strong>-regional int<strong>ra</strong> regional t<strong>ra</strong>de t<strong>ra</strong>de and moving away from a<br />

reliance on EU and US export markets. While<br />

Bang<strong>la</strong>de<strong>sh</strong> has become a more open economy when<br />

defined by the rising <strong>sh</strong>are of exports+imports as a % of<br />

GDP, the standout feature is just how little of the<br />

country’s exports goes to Asia - 3% goes to the South<br />

Asian Associa<strong>tio</strong>n of Regional Coope<strong>ra</strong><strong>tio</strong>n (SAARC)<br />

versus 55% to the EU and 28% to NAFTA countries.<br />

2) Asia Asia as as a a source source of of of FDI FDI and and portfolio portfolio capital capital. capital How can<br />

Bang<strong>la</strong>de<strong>sh</strong> benefit from the massive reserve growth in<br />

the region? Asian cent<strong>ra</strong>l banks have, along with the oil<br />

surplus countries, been the fastest accumu<strong>la</strong>tors of FX<br />

reserves in recent years. China has more than $ 1.5 tr,<br />

Japan more than $ 1tr and Korea, Taiwan, Singapore<br />

and India in excess of $ 300bn each.<br />

46


In addi<strong>tio</strong>n, Asian countries have very high savings <strong>ra</strong>tes and<br />

in the case of Japan, excess funds in domestic pensions.<br />

How does Bang<strong>la</strong>de<strong>sh</strong> posi<strong>tio</strong>n itself to capture a greater<br />

propor<strong>tio</strong>n of these flows.<br />

Net Private Capital Flows to Emerging Economies<br />

billions of U.S. dol<strong>la</strong>rs percent of GDP<br />

3) Low Low cost cost Manufacturing Manufacturing hub. hub. hub. Can Bang<strong>la</strong>de<strong>sh</strong> benefit<br />

from spillover demand and the desire of companies to<br />

diversify their produc<strong>tio</strong>n away from other countries in<br />

Asia, especially India?<br />

4) Regional Regional Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure st<strong>ra</strong>tegy. st<strong>ra</strong>tegy. There is consensus that<br />

a key growth “enabler” for Bang<strong>la</strong>de<strong>sh</strong> and indeed many<br />

other countries in the region is to increase investment in<br />

inf<strong>ra</strong>structure and remove the bottlenecks to economic<br />

development from power and t<strong>ra</strong>nsport. How can<br />

Bang<strong>la</strong>de<strong>sh</strong> integ<strong>ra</strong>te with neighboring countries, and<br />

especially India, in overcoming the energy crisis and<br />

leve<strong>ra</strong>ge its loca<strong>tio</strong>n to integ<strong>ra</strong>te into regional<br />

t<strong>ra</strong>nsporta<strong>tio</strong>n networks.<br />

5) Economic Economic Economic lessons lessons from from Asia’s Asia’s economic economic success<br />

success<br />

stories: stories: stories: The fact that Bang<strong>la</strong>de<strong>sh</strong> is <strong>la</strong>gging in the<br />

economic development chain provides the country with<br />

the opportunity to learn from the experiences of other<br />

countries both in this region and in the emerging markets<br />

(EM) more broadly.<br />

Regional Regional inf<strong>ra</strong>structure inf<strong>ra</strong>structure trends<br />

trends<br />

The region is locked into a set of common problems which<br />

can only be resolved through regional coope<strong>ra</strong><strong>tio</strong>n. For<br />

example, most of Nepal's rivers flow into Uttar P<strong>ra</strong>de<strong>sh</strong> and<br />

Bihar in India. Indeed the tributaries in Nepal which feed the<br />

Ganges join up in Uttar P<strong>ra</strong>de<strong>sh</strong> and Bihar before entering<br />

West Bengal and Bang<strong>la</strong>de<strong>sh</strong>. Therefore, in harnessing the<br />

waters of the Ganges, India needs Nepal's active<br />

participa<strong>tio</strong>n while any prog<strong>ra</strong>m of water management by<br />

Bang<strong>la</strong>de<strong>sh</strong> whether for flood control or irriga<strong>tio</strong>n will not be<br />

feasible at all without the ultimate col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n of the upper<br />

riparian states of India and Nepal. On the other hand with<br />

proper p<strong>la</strong>nning and investment the water resources of the<br />

region could well be used for the gene<strong>ra</strong><strong>tio</strong>n of electricity<br />

which could meet the energy needs of the entire South Asia<br />

region.<br />

Another important potential resource in the region comes<br />

from the huge reserve of coal in Assam, Bihar, Orissa and<br />

West Bengal. There is also a <strong>la</strong>rge reserve of natu<strong>ra</strong>l gas in<br />

Bang<strong>la</strong>de<strong>sh</strong> and the north-eastern part of India.<br />

Fifty years ago the t<strong>ra</strong>nsport networks of South Asia were<br />

one of the most integ<strong>ra</strong>ted in the developing world, but these<br />

were disrupted following the parti<strong>tio</strong>n of the region into seven<br />

independent states. At present, highways, waterways and<br />

<strong>ra</strong>il links which t<strong>ra</strong>verse each country are unable to service<br />

the region as they stop at na<strong>tio</strong>nal borders. The rebuilding of<br />

this physical inf<strong>ra</strong>structure has been const<strong>ra</strong>ined by security<br />

driven apprehensions which the countries found impelling<br />

enough to sacrifice mutual economic benefits.<br />

In this process of rebuilding the t<strong>ra</strong>nsport inf<strong>ra</strong>structure of the<br />

eastern region of South Asia, Bang<strong>la</strong>de<strong>sh</strong> emerges as the<br />

hub around which reconstruc<strong>tio</strong>n of <strong>la</strong>nd links could take<br />

p<strong>la</strong>ce. Bang<strong>la</strong>de<strong>sh</strong> was once a major highway linking<br />

main<strong>la</strong>nd India with both North Bengal and North-East India.<br />

The development of the <strong>la</strong>nd alignments, which would<br />

provide the North East of India access to the sea through the<br />

Bay of Bengal and integ<strong>ra</strong>te its market with Bang<strong>la</strong>de<strong>sh</strong><br />

could establi<strong>sh</strong> this undeveloped region as a staging post for<br />

economic links within South Asia and with <strong>la</strong>nd locked South<br />

West China. The Chittagong port could be built up as the<br />

nodal point for handling the t<strong>ra</strong>de of the region.<br />

The Rakhine state of western Myanmar bordering<br />

Bang<strong>la</strong>de<strong>sh</strong> has a single patch of bamboo forest stretching<br />

over 7000 sq km producing 2.2 million tons of single specie<br />

of bamboo equivalent to 800,000 MT of pulp which could<br />

support the paper industries in Bang<strong>la</strong>de<strong>sh</strong>. Marine<br />

resources on the Myanmar side of the border could be<br />

collectivity developed and processed on the Bang<strong>la</strong>de<strong>sh</strong> side<br />

of the border where facilities exist for fi<strong>sh</strong> processing. The<br />

vast limestone deposit in Rakhine state can provide <strong>ra</strong>w<br />

materials for joint venture cement clinkers factory in Myanmar<br />

with a ready market in Bang<strong>la</strong>de<strong>sh</strong>.<br />

Road Road Network<br />

Network<br />

Although there are doubts about the quality of roads, each<br />

square kilometre (km) of area is now served by one km of<br />

road in Bang<strong>la</strong>de<strong>sh</strong> and India. Roads in Bang<strong>la</strong>de<strong>sh</strong> and<br />

India have grown in prominence as a means for moving<br />

people and goods. India has an extensive 3.3 million km road<br />

network, making it one of the <strong>la</strong>rgest road networks in the<br />

world. Na<strong>tio</strong>nal highways are the prime arterial routes,<br />

spanning about 58,112 km throughout India (2% of country’s<br />

total road lengths) and catering to about 40% of total freight.<br />

To mitigate the demand of rising road freight, the Indian<br />

government has been implementing its ambi<strong>tio</strong>us 13,146 km<br />

Na<strong>tio</strong>nal Highway Development Project (NHDP) for the <strong>la</strong>st<br />

few years.<br />

For South Asia the crucial t<strong>ra</strong>nsport links to be developed<br />

would be along the alignment of Asia Highway (AH). The AH<br />

network is a component of the Asian Land T<strong>ra</strong>nsporta<strong>tio</strong>n<br />

Inf<strong>ra</strong>structure (ALTID) project developed by ESCAP which<br />

also comprises the T<strong>ra</strong>ns Asian Railway (TAR) project<br />

including measures for the facilita<strong>tio</strong>n of <strong>la</strong>nd t<strong>ra</strong>nsporta<strong>tio</strong>n.<br />

The route criteria for ALTID project include capital to capital<br />

links, connec<strong>tio</strong>n to main industrial and agricultu<strong>ra</strong>l centres<br />

as well as growth zones, connec<strong>tio</strong>n to major sea and river<br />

ports and connec<strong>tio</strong>n to major in<strong>la</strong>nd container terminals arid<br />

depots.<br />

In recent years China has upg<strong>ra</strong>ded the old Burma road<br />

between Kunming and Myanmar as part of its associa<strong>tio</strong>n<br />

with the AH. The link between Kunming and the Bay of<br />

47


Bengal is 5,800 kilometers <strong>sh</strong>orter than Yunan's link with the<br />

nearest Chinese port at Shanghai or China's pacific coast.<br />

The Jamuna bridge in Bang<strong>la</strong>de<strong>sh</strong> would make it possible for<br />

the AH to provide uninterrupted t<strong>ra</strong>vel between Bang<strong>la</strong>de<strong>sh</strong><br />

and Ca<strong>la</strong>is routed through India, Pakistan and then either<br />

into Cent<strong>ra</strong>l Asia or through West Asia into Europe. At the<br />

same time the bridge could establi<strong>sh</strong> links between Nepal<br />

and Bhutan through an unbroken <strong>la</strong>nd route to the port of<br />

Chittagong which may emerge as a far cheaper alternate<br />

route to Kolkata/Haldia in India for Nepal and Bhutan. For a<br />

long time, India has denied t<strong>ra</strong>nsit facilities to Nepal and<br />

Bhutan for sending their goods overseas through<br />

Bang<strong>la</strong>de<strong>sh</strong> while Bang<strong>la</strong>de<strong>sh</strong> has denied India t<strong>ra</strong>nsit for<br />

the movement of its goods to and from North-East India. If<br />

these barriers are removed it would enable India to send<br />

goods to its north-eastern part at a f<strong>ra</strong>c<strong>tio</strong>n of the present<br />

costs while Bang<strong>la</strong>de<strong>sh</strong> exports can penet<strong>ra</strong>te deeper into<br />

the Nepalese and Indian North-Eastern as well as the<br />

main<strong>la</strong>nd markets. Bang<strong>la</strong>de<strong>sh</strong> could also benefit from<br />

substantial freight and port charges from Chittagong and<br />

Mong<strong>la</strong> ports providing access to Indian and Nepalese<br />

exports. India and Nepal may also participate in the capacity<br />

and inf<strong>ra</strong>structure development of Chittagong and Mong<strong>la</strong><br />

ports. It is estimated that this integ<strong>ra</strong><strong>tio</strong>n of the t<strong>ra</strong>nsport<br />

network alone would increase int<strong>ra</strong> SAARC t<strong>ra</strong>de three<br />

times.<br />

Western Myanmar, bordering Bang<strong>la</strong>de<strong>sh</strong>, is sepa<strong>ra</strong>ted from<br />

the rest of Myanmar by the A<strong>ra</strong>kan Mountain <strong>ra</strong>nge. The<br />

hinter<strong>la</strong>nd of the Chittagong port, therefore, could well be<br />

stretched up to the foot of the A<strong>ra</strong>kan Yoma. The road which<br />

once linked Chittagong and Akyab is now called A<strong>ra</strong>kan<br />

road. Rehabilita<strong>tio</strong>n of this road will help reestabli<strong>sh</strong> the old<br />

surface link between Ghumdhum on the Bang<strong>la</strong>de<strong>sh</strong> side &<br />

Tumbro on the Myanmar side, the t<strong>ra</strong>di<strong>tio</strong>nal t<strong>ra</strong>de route<br />

which could eventually be connected with the AH that links<br />

up with South East Asia. On the other hand the proposal to<br />

build a bridge over the Palk St<strong>ra</strong>it stretching 27 km between<br />

Ta<strong>la</strong>imenhar in Sri Lanka and Dhanuskodi, Tamil Nadu in<br />

India, will complete the connec<strong>tio</strong>n of the BIMSTEC region.<br />

In order to ensure productive and sustainable coope<strong>ra</strong><strong>tio</strong>n in<br />

the t<strong>ra</strong>nsport sector the member countries will have to ensure<br />

appropriate institu<strong>tio</strong>nal ar<strong>ra</strong>ngement for customs clea<strong>ra</strong>nce,<br />

border crossing, documenta<strong>tio</strong>n, payment mechanism,<br />

financial services, cost <strong>sh</strong>aring ar<strong>ra</strong>ngements, pricing, t<strong>ra</strong>ffic<br />

discipline, safety and dispute settlement procedures.<br />

Rail Rail Network Network<br />

Network<br />

The <strong>ra</strong>ilway network in South Asia is one of the <strong>la</strong>rgest<br />

<strong>ra</strong>ilway systems in the world. It has an extensive network that<br />

is spread over 75,002 km, of which about 70% is broad<br />

gauge network. At present, about 30% of freight and 20% of<br />

passenger t<strong>ra</strong>ffic are carried by <strong>ra</strong>ilways in India whereas the<br />

same for the road sector are 70% and 80%, respectively.<br />

There is growing modal imba<strong>la</strong>nce between <strong>ra</strong>ilways and<br />

roadways in India (World Bank, 2002). India has a stable<br />

broad gauge <strong>ra</strong>ilway network whereas that of Bang<strong>la</strong>de<strong>sh</strong> is<br />

mise<strong>ra</strong>bly poor, f<strong>ra</strong>gmented, and unstable. Bang<strong>la</strong>de<strong>sh</strong>, with<br />

a total 2,734 km of <strong>ra</strong>ilway network, has only 901 km of<br />

broad gauge t<strong>ra</strong>ck (only 33% of the total network), making it<br />

the least developed <strong>ra</strong>ilway system in this region (CPD,<br />

2003). Indian Railways is running losses primarily because of<br />

cross-subsidiza<strong>tio</strong>n and high nonperforming assets. The<br />

losses incurred on passenger services are cross-subsidized<br />

by profits earned through freight services and earnings from<br />

higher c<strong>la</strong>sses of passenger t<strong>ra</strong>vel. In addi<strong>tio</strong>n, cross<br />

subsidiza<strong>tio</strong>n exists within the freight services since certain<br />

commodities such as salt, fruits, vegetables, etc. are being<br />

carried at a much lower cost of ope<strong>ra</strong><strong>tio</strong>ns (Government of<br />

India, 2003).<br />

Overview Overview of of Over<strong>la</strong>nd Over<strong>la</strong>nd T<strong>ra</strong>de T<strong>ra</strong>de<br />

T<strong>ra</strong>de<br />

Even though India and Bang<strong>la</strong>de<strong>sh</strong> <strong>sh</strong>are a long interna<strong>tio</strong>nal<br />

border and depend on t<strong>ra</strong>nsport inf<strong>ra</strong>structure in a major way<br />

for their two-way t<strong>ra</strong>de, wide and strong interlinking between<br />

the two countries, particu<strong>la</strong>rly in the <strong>ra</strong>ilway sector, is clearly<br />

absent. Pet<strong>ra</strong>pole in West Bengal alone handles over 35% of<br />

India’s exports to Bang<strong>la</strong>de<strong>sh</strong> (2003–2004). Even though a<br />

major por<strong>tio</strong>n of India’s merchandise exports to Bang<strong>la</strong>de<strong>sh</strong><br />

through the sea passes through the Jawahar<strong>la</strong>l Nehru port,<br />

exports passing the Vizag and Kakinada ports have<br />

conside<strong>ra</strong>bly increased recently.<br />

Land Land Border Border Routes<br />

Routes<br />

Land (border) routes are gene<strong>ra</strong>lly convenient and popu<strong>la</strong>r<br />

for t<strong>ra</strong>ding between neighboring countries. This is particu<strong>la</strong>rly<br />

so for countries <strong>sh</strong>aring a long border, as in the case of India<br />

and Bang<strong>la</strong>de<strong>sh</strong>. The border between India and Bang<strong>la</strong>de<strong>sh</strong><br />

is basically porous. At present, there are officially 35 <strong>la</strong>nd<br />

customs sta<strong>tio</strong>ns (LCSs) through which India’s t<strong>ra</strong>de with<br />

Bang<strong>la</strong>de<strong>sh</strong> is carried out. Among these 35 LCSs, Pet<strong>ra</strong>pole<br />

(in West Bengal) in the road sector and Gede (in West<br />

Bengal) in the <strong>ra</strong>ilway sector are the two noted ones, which<br />

together <strong>sh</strong>are over 70% of the India–Bang<strong>la</strong>de<strong>sh</strong> border<br />

t<strong>ra</strong>de. However, there are six recognized over<strong>la</strong>nd border<br />

routes (roads) between India’s North Eastern Region (NER)<br />

and Bang<strong>la</strong>de<strong>sh</strong>. Dawki in Megha<strong>la</strong>ya is the oldest LCS and<br />

mainly t<strong>ra</strong>ffics coal from the NER to Bang<strong>la</strong>de<strong>sh</strong>. In 2004–<br />

2005, India exported $12.30 million worth of goods to<br />

Bang<strong>la</strong>de<strong>sh</strong> through Dwaki, whereas the import from<br />

Bang<strong>la</strong>de<strong>sh</strong> through Dwaki was negligible. However, a few<br />

more LCSs in the NER, such as Borso<strong>ra</strong> and Shel<strong>la</strong> Bazar<br />

(both in Megha<strong>la</strong>ya) and Sutakandi and Ghasuapa<strong>ra</strong> (both in<br />

Assam), are increasingly handling India’s over<strong>la</strong>nd exports to<br />

Bang<strong>la</strong>de<strong>sh</strong> through the NER.<br />

Regional Regional energy energy coope<strong>ra</strong><strong>tio</strong>n<br />

coope<strong>ra</strong><strong>tio</strong>n<br />

Bang<strong>la</strong>de<strong>sh</strong>’s power-supply situa<strong>tio</strong>n is yet to improve as<br />

seve<strong>ra</strong>l more power p<strong>la</strong>nts were <strong>sh</strong>ut down by the Power<br />

Development Board (PDB) for gas supply <strong>sh</strong>ortages that<br />

badly affected life and business. According to reports<br />

publi<strong>sh</strong>ed in the media <strong>la</strong>st week, the PDB had to reduce<br />

produc<strong>tio</strong>n by 728 megawatts due to <strong>sh</strong>ort supply of gas.<br />

Actually, the PDB gene<strong>ra</strong>ted 3,500MWs-plus against a<br />

demand for 4,400MWs.<br />

However, experts believe, the demand is for more than<br />

4,700MWs, but PDB officially does not admit the actual<br />

demand. The PDB had to go for load <strong>sh</strong>edding of more than<br />

1,000MWs to manage the mismatch between demand and<br />

supply. This year, urban areas are experiencing re<strong>la</strong>tively<br />

more power <strong>sh</strong>ortages as the government is pursuing a<br />

policy to give priority to ru<strong>ra</strong>l areas to support farming<br />

activities to make up for the crop losses caused by back-toback<br />

natu<strong>ra</strong>l disasters.<br />

48


Against the backdrop of persistent power crisis across<br />

Bang<strong>la</strong>de<strong>sh</strong>, it is again good news that crea<strong>tio</strong>n of an energy<br />

ring is being discussed to connect all SAARC membercountries<br />

to minimize the acute power <strong>sh</strong>ortage faced by<br />

them. It may consist of t<strong>ra</strong>nsna<strong>tio</strong>nal lines for t<strong>ra</strong>de in<br />

electricity, gas and oil. A meeting of the SAARC energy<br />

ministers held in New Delhi recently discussed the project<br />

threadbare and vowed to work towards improving the<br />

scenario to begin energy t<strong>ra</strong>ding between the member<br />

countries.<br />

The SAARC Energy Centre, which is now under<br />

conside<strong>ra</strong><strong>tio</strong>n for being set up, is expected to act as a<br />

catalyst for economic growth and development in the South<br />

Asian region. It will concent<strong>ra</strong>te on the <strong>sh</strong>aring of informa<strong>tio</strong>n,<br />

technological expertise and hardware. All SAARC members<br />

identified facilitating and promoting t<strong>ra</strong>de in energy in South<br />

Asia as one of the key areas for co-ope<strong>ra</strong><strong>tio</strong>n. As such, in<br />

view of the potential for regional co-ope<strong>ra</strong><strong>tio</strong>n, an energy ring<br />

has been conceptualised in the SAARC. India already has<br />

grid interconnec<strong>tio</strong>ns with Nepal and Bhutan and technical<br />

studies were being carried out to explore the feasibility of<br />

simi<strong>la</strong>r t<strong>ra</strong>nsmission links with Sri Lanka and Bang<strong>la</strong>de<strong>sh</strong>.<br />

All member countries would benefit from Nepal's efforts at<br />

fuel conserva<strong>tio</strong>n, like battery powered rick<strong>sh</strong>aws and so<strong>la</strong>r<br />

water heaters as well as Bang<strong>la</strong>de<strong>sh</strong>'s promo<strong>tio</strong>n of ru<strong>ra</strong>l<br />

coope<strong>ra</strong>tives for electricity gene<strong>ra</strong><strong>tio</strong>n and distribu<strong>tio</strong>n. The<br />

SAARC is also seeking the coope<strong>ra</strong><strong>tio</strong>n of the Associa<strong>tio</strong>n of<br />

South East Asian Na<strong>tio</strong>ns (ASEAN) to learn from their<br />

experience and coope<strong>ra</strong>te with them in various energyre<strong>la</strong>ted<br />

projects. Energy experts of all SAARC countries<br />

submitted proposals to finalize the terms of reference to<br />

appoint consultants for developing p<strong>la</strong>ns to establi<strong>sh</strong> grid<br />

sta<strong>tio</strong>ns connecting the member states.<br />

Nepal and Bhutan gene<strong>ra</strong>te 40,000 megawatts of<br />

hydroelectricity which can be exported to other SAARC<br />

countries through common grid sta<strong>tio</strong>ns. India is currently<br />

benefiting from the hydroelectricity gene<strong>ra</strong>ted by Nepal and<br />

Bhutan under bi<strong>la</strong>te<strong>ra</strong>l agreements and wants to maintain<br />

this privilege. The SAARC would form an electric power<br />

regu<strong>la</strong>tory body to deal with the energy t<strong>ra</strong>de in the region.<br />

Under the terms of reference, a group of experts would work<br />

out sector/fuel wise op<strong>tio</strong>ns, benefits and const<strong>ra</strong>ints of<br />

energy t<strong>ra</strong>de among eight member-countries of SAARC --<br />

Afghanistan, Bang<strong>la</strong>de<strong>sh</strong>, Bhutan, India, Pakistan, Nepal, Sri<br />

Lanka and the Maldives. Besides, a study will be carried out<br />

that would also examine the interna<strong>tio</strong>nal best p<strong>ra</strong>ctices in<br />

t<strong>ra</strong>de and their relevance to the region and analyse various<br />

technological, financial and commercial op<strong>tio</strong>ns to promote<br />

energy t<strong>ra</strong>de in SAARC.<br />

Co-ope<strong>ra</strong><strong>tio</strong>n in the energy sector, including the idea of an<br />

energy ring, has been identified as a key issue in the face of<br />

growing energy demand and the concerns about energy<br />

security by the working group on energy of SAARC<br />

countries. Experts have stressed the need for co-ope<strong>ra</strong><strong>tio</strong>n<br />

among the SAARC countries in energy sector for optimal<br />

utiliza<strong>tio</strong>n of energy resources in the region. Projects<br />

concerning coope<strong>ra</strong><strong>tio</strong>n in energy t<strong>ra</strong>de, independent power<br />

producers, efficiency standards, fuel efficiency for road<br />

t<strong>ra</strong>nsport, CNG, ru<strong>ra</strong>l electrifica<strong>tio</strong>n, micro-hydro electric and<br />

wind energy p<strong>la</strong>nts have thus been under discussions.<br />

There is a <strong>la</strong>rge potential for energy t<strong>ra</strong>de, especially hydro<br />

electricity among SAARC countries. As such, all in the<br />

SAARC want to introduce energy t<strong>ra</strong>de in the region. In<br />

1998, South Asian Regional Initiatives (SARI), a forum of<br />

Bang<strong>la</strong>de<strong>sh</strong>, Bhutan, Nepal and India, had proposed crea<strong>tio</strong>n<br />

of an 80,000 megawatt (MW) power reserve to ensure a<br />

dependable supply of electricity to member-na<strong>tio</strong>ns. But it<br />

failed to implement as India wanted bi<strong>la</strong>te<strong>ra</strong>l agreements with<br />

countries.<br />

Recently, the government of Bang<strong>la</strong>de<strong>sh</strong> had decided to<br />

initiate talks with India on interconnecting the na<strong>tio</strong>nal power<br />

grid of Bang<strong>la</strong>de<strong>sh</strong> with the north-eastern power grid in India<br />

based on the feasibility study of the USAID, Asian<br />

Development Bank (ADB) and SARI-Energy co-ope<strong>ra</strong><strong>tio</strong>n.<br />

Bang<strong>la</strong>de<strong>sh</strong> could bring 200 MW of electricity from Tripu<strong>ra</strong> or<br />

Assam, where India has hydroelectric p<strong>la</strong>nts.<br />

The recent power crisis has not befallen the na<strong>tio</strong>n all of a<br />

sudden, but it is the natu<strong>ra</strong>l consequence of years of<br />

negligence. The crisis has exposed the avarice and<br />

weakness of the past governments. Such a situa<strong>tio</strong>n is<br />

bound to happen when <strong>la</strong>ck of competence is complemented<br />

by greed for money. However, the present caretaker<br />

government appeared firm to eliminate controversial power<br />

projects, if they are found unnecessary. It is also expediting<br />

the implementa<strong>tio</strong>n of small and rental power p<strong>la</strong>nt projects<br />

to increase power gene<strong>ra</strong><strong>tio</strong>n. Other measures are in the<br />

offing. But time is fast running out for the present caretaker<br />

government.<br />

Conclusions: Conclusions: Conclusions: An An effective Asia policy even more important<br />

for for Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> to to unlock unlock its its economic economic potential<br />

potential<br />

Implica<strong>tio</strong>ns for Bang<strong>la</strong>de<strong>sh</strong> of the global turmoil are that<br />

regional integ<strong>ra</strong><strong>tio</strong>n has increased in importance. As the<br />

developed world moves into recession, the overreliance of<br />

Bang<strong>la</strong>de<strong>sh</strong>’s exports on the US and Europe will leave the<br />

economy increasingly vulne<strong>ra</strong>ble to the prospective<br />

deleve<strong>ra</strong>ging process that will see both regions likely remain<br />

in recession well into 2009. To the extent that recovery does<br />

not come to the developed world until 2010, the need to<br />

integ<strong>ra</strong>te more effectively with the SAARC countries and<br />

especially India will become an even more pressing policy<br />

impe<strong>ra</strong>tive for any newly elected government.<br />

Bang<strong>la</strong>de<strong>sh</strong> has achieved significantly greater t<strong>ra</strong>de<br />

openness over the past 15 years and impressive growth in<br />

Textile and RMG exports. The resilience of its garments<br />

exports to the current economic downturn is a credit to the<br />

adaptability of Bang<strong>la</strong>de<strong>sh</strong>i corpo<strong>ra</strong>tes. Nonetheless,<br />

Bang<strong>la</strong>de<strong>sh</strong> is foregoing a major economic opportunity in not<br />

pursuing greater regional integ<strong>ra</strong><strong>tio</strong>n. Exports to SAARC<br />

countries accounts for around 3% of exports while those to<br />

ASEAN are only slightly greater. Regional inf<strong>ra</strong>structure<br />

initiatives have also seen extremely limited success. We<br />

would highlight the following key priorities for the next<br />

Government in terms of regional integ<strong>ra</strong><strong>tio</strong>n:<br />

1) Achieving Achieving a a a Free Free T<strong>ra</strong>de T<strong>ra</strong>de Zone Zone in in Spirit Spirit not not just just <strong>la</strong>w: <strong>la</strong>w: Although<br />

the proposed SAFTA initiative is to be welcomed, int<strong>ra</strong>-<br />

SAARC tariffs <strong>sh</strong>ould g<strong>ra</strong>dually be eliminated to create a<br />

genuine free-t<strong>ra</strong>de zone much along the lines of EU or<br />

NAFTA. Importantly, policymakers need to focus on the fact<br />

49


that Bang<strong>la</strong>de<strong>sh</strong>i exports have very often faced various types<br />

of non tariff barriers in India.<br />

2) T<strong>ra</strong>de T<strong>ra</strong>de Complementarities/Diversifica<strong>tio</strong>n: Complementarities/Diversifica<strong>tio</strong>n: Evidence of t<strong>ra</strong>de<br />

complementarity in South Asian economies is weak, which<br />

has made the crea<strong>tio</strong>n of an FTA a weak proposi<strong>tio</strong>n. The<br />

<strong>la</strong>ck of complementarity is reflected in a strong penchant of<br />

the <strong>la</strong>rger South Asian economies towards t<strong>ra</strong>ding with the<br />

<strong>la</strong>rge developed economies of NAFTA and the EU. In the<br />

case of Bang<strong>la</strong>de<strong>sh</strong>, almost 80% of exports are from<br />

garments. Until we see greater diversifica<strong>tio</strong>n in exports,<br />

Bang<strong>la</strong>de<strong>sh</strong> will continue to suffer a major t<strong>ra</strong>de deficit with<br />

India. Because of de<strong>la</strong>ys in deciding on seve<strong>ra</strong>l <strong>la</strong>rge FDI<br />

proposals, Bang<strong>la</strong>de<strong>sh</strong> is losing an opportunity to diversify<br />

its industrial base into promising new areas. Bang<strong>la</strong>de<strong>sh</strong> has<br />

significant potential in seve<strong>ra</strong>l export-oriented industries,<br />

including pharmaceuticals, leather goods, frozen foods,<br />

<strong>sh</strong>ipbuilding, and informa<strong>tio</strong>n technology-enabled services<br />

(ITES). With adequate private sector investment and<br />

regu<strong>la</strong>tory support, these sectors could contribute to export<br />

diversifica<strong>tio</strong>n.<br />

3) Overcoming Overcoming Overcoming Political Political Mistrust Mistrust and and Historical Historical bi<strong>la</strong>te<strong>ra</strong>l<br />

bi<strong>la</strong>te<strong>ra</strong>l<br />

“baggage “baggage”: “baggage Despite the economic stakes, political preconceived<br />

fears are preventing governments in the region, in<br />

some instances, from encou<strong>ra</strong>ging FDI movement between<br />

contiguous or physically adjacent countries. Bi<strong>la</strong>te<strong>ra</strong>l<br />

re<strong>la</strong><strong>tio</strong>ns there are unfortunately defined by mistrust and<br />

antagonism. Tense re<strong>la</strong><strong>tio</strong>n<strong>sh</strong>ips, mired in narrow<br />

na<strong>tio</strong>nalism, have discou<strong>ra</strong>ged active involvement of<br />

companies. Regional agreements thus could not go far in<br />

overcoming these political fears. Political f<strong>ra</strong>gility makes it<br />

difficult for governments to take initiative where opposi<strong>tio</strong>n<br />

parties can exploit na<strong>tio</strong>nalist and protec<strong>tio</strong>nist rhetoric. The<br />

governments, private sector, academia, professionals and<br />

social sector organiza<strong>tio</strong>ns have to work together to deliver<br />

greater regional integ<strong>ra</strong><strong>tio</strong>n.<br />

4) Regional Regional power: power: Against the backdrop of persistent power<br />

crisis across Bang<strong>la</strong>de<strong>sh</strong>, it is again good news that the<br />

crea<strong>tio</strong>n of an energy ring is being discussed to connect all<br />

SAARC member-countries to minimise the acute power<br />

<strong>sh</strong>ortage faced by them. It may consist of t<strong>ra</strong>nsna<strong>tio</strong>nal lines<br />

for t<strong>ra</strong>de in electricity, gas and oil. India has offered to link<br />

Bang<strong>la</strong>de<strong>sh</strong> to its electricity grid and sell it power to help it<br />

overcome persistent <strong>sh</strong>ortages in peak demand periods. At<br />

the recent DCCI 50 th Anniversary conference, Indian State<br />

Minister for Power, HE Jai Ram Rame<strong>sh</strong> stated that<br />

Bang<strong>la</strong>de<strong>sh</strong> could buy electricity from p<strong>la</strong>nts in Tripu<strong>ra</strong>,<br />

where gene<strong>ra</strong><strong>tio</strong>n capacity exceeds demand, and other<br />

north-eastern Indian states bordering Bang<strong>la</strong>de<strong>sh</strong>.<br />

"India is ready to pen a deal with Bang<strong>la</strong>de<strong>sh</strong> to sell up to<br />

1,000 MW of electricity,"<br />

5) Regional Regional t<strong>ra</strong>nsport: t<strong>ra</strong>nsport: providing the North East of India sea<br />

access through the Bay of Bengal and integ<strong>ra</strong>te its market<br />

with Bang<strong>la</strong>de<strong>sh</strong> could establi<strong>sh</strong> this undeveloped region as<br />

a staging post for economic links within South Asia and with<br />

<strong>la</strong>nd locked South West China. The Chittagong port could be<br />

built up as the nodal point for handling the t<strong>ra</strong>de of the<br />

region. Regional t<strong>ra</strong>nsport: for Bang<strong>la</strong>de<strong>sh</strong>, it is critical to<br />

integ<strong>ra</strong>te with both India and China into Asia Highway (AH).<br />

For example in recent years China has upg<strong>ra</strong>ded the old<br />

Burma road between Kunming and Myanmar as part of its<br />

associa<strong>tio</strong>n with the AH. The link between Kunming and the<br />

Bay of Bengal is 5800 kilometers <strong>sh</strong>orter than Yunan's link<br />

with the nearest Chinese port at Shanghai or China's pacific<br />

coast. The Jamuna bridge in Bang<strong>la</strong>de<strong>sh</strong> could become a<br />

critical link in the AH.<br />

6) Water Water Resources: Resources: Inter-governmental task force needs to be<br />

streamlined and empowered to ensure comprehensive<br />

development of water resources in Ganges-B<strong>ra</strong>hmaput<strong>ra</strong>-<br />

Meghna river basin for flood management, irriga<strong>tio</strong>n, water<br />

t<strong>ra</strong>nsport and gene<strong>ra</strong><strong>tio</strong>n of electricity.<br />

7) SAARC SAARC FDI: FDI: There needs to be greater focused efforts to<br />

encou<strong>ra</strong>ge more int<strong>ra</strong>-SAARC FDI. This could be through<br />

enhancing the effectiveness of FDI institu<strong>tio</strong>ns such as<br />

Investment Promo<strong>tio</strong>n Boards to coordinate with each<br />

between regional and interna<strong>tio</strong>nal institu<strong>tio</strong>ns, Also more<br />

frequent inte<strong>ra</strong>c<strong>tio</strong>n between Bang<strong>la</strong>de<strong>sh</strong> and Indian companies<br />

either directly or through t<strong>ra</strong>de chambers.<br />

8) ASEAN ASEAN FDI: FDI: Bang<strong>la</strong>de<strong>sh</strong> also needs to more effectively<br />

target the EM surplus capital countries such as China,<br />

Singapore, Korea and Taiwan among others as the<br />

competi<strong>tio</strong>n for growth capital and FDI becomes even more<br />

intense in light of the global financial crisis of 2008.<br />

The prospects for China to increasingly become the growth<br />

engine of the global economy has been much documented<br />

but Bang<strong>la</strong>de<strong>sh</strong>’s economic st<strong>ra</strong>tegy needs to <strong>sh</strong>ift to reflect<br />

this reba<strong>la</strong>ncing of global growth. We need an effective<br />

B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> st<strong>ra</strong>tegy with a rejuvenated Board of<br />

Investment that is given a <strong>la</strong>rger budget and greater<br />

resources.<br />

An effective Asia integ<strong>ra</strong><strong>tio</strong>n st<strong>ra</strong>tegy and especially deeper<br />

economic re<strong>la</strong><strong>tio</strong>ns with India, is a critical element, we<br />

believe, for Bang<strong>la</strong>de<strong>sh</strong> to move towards the 8% growth<br />

t<strong>ra</strong>jectory that will help it achieve Middle Income Country<br />

status by 2015 and a <strong>ra</strong>pid reduc<strong>tio</strong>n in the level of poverty.<br />

This will require not only a <strong>sh</strong>ift towards a greater political<br />

willingness for both India and Bang<strong>la</strong>de<strong>sh</strong> to put aside past<br />

differences and seek mutually beneficial outcomes but also a<br />

targeted st<strong>ra</strong>tegy by the Bang<strong>la</strong>de<strong>sh</strong> government and the<br />

corpo<strong>ra</strong>te sector to seek t<strong>ra</strong>de and industrial diversifica<strong>tio</strong>n<br />

away from Textiles/Garments and Manpower towards<br />

broader <strong>ra</strong>nge of produc<strong>tio</strong>n that will offer a <strong>ra</strong>nge of goods<br />

that will be att<strong>ra</strong>ctive to Indian Importers and hence<br />

significantly reduce the bi<strong>la</strong>te<strong>ra</strong>l t<strong>ra</strong>de ba<strong>la</strong>nce. We conclude<br />

by noting that more effective regional integ<strong>ra</strong><strong>tio</strong>n is one of<br />

Bang<strong>la</strong>de<strong>sh</strong>’s untapped economic opportunities that will, if<br />

executed effectively, p<strong>la</strong>y a critical role in helping<br />

Bang<strong>la</strong>de<strong>sh</strong> become the next Asian Tiger.<br />

SAFTA SAFTA Customs Customs T<strong>ra</strong>de Facilita<strong>tio</strong>n Facilita<strong>tio</strong>n<br />

1. 1. To To eliminate eliminate barriers barriers to to t<strong>ra</strong>de t<strong>ra</strong>de and and facilitating facilitating the the cross-<br />

cross<br />

border border movement movement of of goods goods between between the the territories territories of of the<br />

the<br />

Cont<strong>ra</strong>cting Cont<strong>ra</strong>cting States, States, SAFTA SAFTA Agreement Agreement provides provides for, for, among<br />

among<br />

others, others, the the following following Customs Customs T<strong>ra</strong>de T<strong>ra</strong>de Facilita<strong>tio</strong>n Facilita<strong>tio</strong>n measures:<br />

measures:<br />

SAFTA SAFTA Article Article 3: 1. The Objectives of this Agreement are to<br />

promote and enhance mutual t<strong>ra</strong>de and economic<br />

coope<strong>ra</strong><strong>tio</strong>n among Cont<strong>ra</strong>cting States by, inter-alia:<br />

(e) SAFTA <strong>sh</strong>all entail adop<strong>tio</strong>n of t<strong>ra</strong>de facilita<strong>tio</strong>n and other<br />

measures, and the progressive harmoniza<strong>tio</strong>n of legis<strong>la</strong><strong>tio</strong>ns<br />

by the Cont<strong>ra</strong>cting States in the relevant areas; and<br />

50


(f) The special needs of the Least Developed Cont<strong>ra</strong>cting<br />

States <strong>sh</strong>all be clearly recognized by adopting concrete<br />

preferential measures in their favour on a non-reciprocal<br />

basis.<br />

SAF SAFTA SAF TA Article 7: 6. Notwithstanding the provisions contained<br />

in pa<strong>ra</strong>g<strong>ra</strong>ph 1 of this Article, the Non-Least Developed<br />

Cont<strong>ra</strong>cting States <strong>sh</strong>all reduce their tariff to 0-5% for the<br />

products of Least Developed Cont<strong>ra</strong>cting States within a<br />

timef<strong>ra</strong>me of three years beginning from the date of coming<br />

into force of the Agreement.<br />

SAFTA SAFTA Article Article Article 8: 8: Cont<strong>ra</strong>cting States agree to consider, in<br />

addi<strong>tio</strong>n to the measures set out in Article 7, the adop<strong>tio</strong>n of<br />

t<strong>ra</strong>de facilita<strong>tio</strong>n and other measures to support and<br />

complement SAFTA for mutual benefit. These may include,<br />

among others: -<br />

a) harmoniza<strong>tio</strong>n of standards, reciprocal recogni<strong>tio</strong>n of tests<br />

and accredita<strong>tio</strong>n of testing <strong>la</strong>bo<strong>ra</strong>tories of Cont<strong>ra</strong>cting States<br />

and certifica<strong>tio</strong>n of products;<br />

b) simplifica<strong>tio</strong>n and harmoniza<strong>tio</strong>n of customs clea<strong>ra</strong>nce<br />

procedure;<br />

c) harmoniza<strong>tio</strong>n of na<strong>tio</strong>nal customs c<strong>la</strong>ssifica<strong>tio</strong>n based on<br />

HS coding system;<br />

d) Customs coope<strong>ra</strong><strong>tio</strong>n to resolve dispute at customs entry<br />

points;<br />

e) simplifica<strong>tio</strong>n and harmoniza<strong>tio</strong>n of import licensing and<br />

regist<strong>ra</strong><strong>tio</strong>n procedures;<br />

f) simplifica<strong>tio</strong>n of banking procedures for import financing;<br />

g) t<strong>ra</strong>nsit facilities for efficient int<strong>ra</strong>-SAARC t<strong>ra</strong>de, especially<br />

for the <strong>la</strong>nd-locked Cont<strong>ra</strong>cting States;<br />

2. 2. SAFTA SAFTA Customs Customs Ac<strong>tio</strong>n Ac<strong>tio</strong>n P<strong>la</strong>n: P<strong>la</strong>n: Accordingly in 1996, , a<br />

Group on Customs Coope<strong>ra</strong><strong>tio</strong>n was set up and entrusted<br />

with a mandate, inter-alia, to harmonize customs rules and<br />

regu<strong>la</strong><strong>tio</strong>ns; to simplify documenta<strong>tio</strong>n and procedu<strong>ra</strong>l<br />

requirements; to upg<strong>ra</strong>de inf<strong>ra</strong>structure facilities; and to<br />

provide t<strong>ra</strong>ining facilities. A Customs Ac<strong>tio</strong>n P<strong>la</strong>n has been<br />

agreed upon but yet to be implemented.<br />

The The key key elements elements of of the the Customs Customs Ac<strong>tio</strong>n Ac<strong>tio</strong>n P<strong>la</strong>n P<strong>la</strong>n P<strong>la</strong>n are are: are I. Uniform<br />

Applica<strong>tio</strong>n, Harmoniza<strong>tio</strong>n and Simplifica<strong>tio</strong>n of Customs<br />

Procedures and P<strong>ra</strong>ctices. The following activities are<br />

identified, among others, for being pursued to achieve this<br />

objective:<br />

(a) Progressive implementa<strong>tio</strong>n of the provisions of the<br />

Interna<strong>tio</strong>nal Conven<strong>tio</strong>n on the Simplifica<strong>tio</strong>n and<br />

Harmoniza<strong>tio</strong>n of Customs Procedures (KYOTO<br />

Conven<strong>tio</strong>n), taking cognizance of the review being<br />

undertaken by the World Customs Organiza<strong>tio</strong>n.<br />

(b) Developing a coordinated approach to the development<br />

of key Customs procedures and p<strong>ra</strong>ctices with a view to<br />

harmonize them across the member<strong>sh</strong>ip, in particu<strong>la</strong>r<br />

re<strong>la</strong>ting to:<br />

i. use of standard forms for Customs dec<strong>la</strong><strong>ra</strong><strong>tio</strong>ns re<strong>la</strong>ting to<br />

import, export, t<strong>ra</strong>nsit and other important formalities;<br />

ii. introduc<strong>tio</strong>n of simplified procedures for Customs<br />

clea<strong>ra</strong>nce or t<strong>ra</strong>nsit movement of exempted goods,<br />

peri<strong>sh</strong>able goods and other goods requiring such clea<strong>ra</strong>nce<br />

or movement;<br />

iii. ar<strong>ra</strong>ngements for undertaking of Customs formalities at<br />

juxtaposed Customs offices in areas connected by <strong>la</strong>nd<br />

routes or in any other appropriate manner.<br />

(c) Exchange informa<strong>tio</strong>n and, wherever requested, assist in<br />

the implementa<strong>tio</strong>n of simplified procedures including<br />

automated Customs clea<strong>ra</strong>nce procedures and electronic<br />

data interchange.<br />

I. Effective Implementa<strong>tio</strong>n of the WTO Agreement on<br />

Valua<strong>tio</strong>n<br />

II. Uniform Applica<strong>tio</strong>n, Updating and Promo<strong>tio</strong>n of the<br />

Harmonized System<br />

3. 3. 3. SAARC Summit Commitments: T<strong>ra</strong>de facilita<strong>tio</strong>n<br />

commitments made in the 13 th, 14 th 15th SAARC Summit<br />

must be implemented without any further de<strong>la</strong>y in right<br />

earnest within a p<strong>la</strong>nned time f<strong>ra</strong>me.<br />

13 th SAARC Summit Dec<strong>la</strong><strong>ra</strong><strong>tio</strong>n Pa<strong>ra</strong>g<strong>ra</strong>ph Pa<strong>ra</strong>g<strong>ra</strong>ph P. 17. The<br />

Heads of State or Government welcomed the signing of the<br />

following Agreements during the Thirteenth SAARC Summit:<br />

• The Agreement on Mutual Administ<strong>ra</strong>tive Assistance in<br />

Customs Matters<br />

• The Agreement on the Establi<strong>sh</strong>ment of SAARC<br />

Arbit<strong>ra</strong><strong>tio</strong>n Council.<br />

• The Limited Agreement on Avoidance of Double<br />

Taxa<strong>tio</strong>n and Mutual Administ<strong>ra</strong>tive Assistance in Tax<br />

Matters.<br />

14 th SAARC Summit Dec<strong>la</strong><strong>ra</strong><strong>tio</strong>n Pa<strong>ra</strong>g<strong>ra</strong>ph Pa<strong>ra</strong>g<strong>ra</strong>ph 16. The Heads<br />

of State or Government underlined the importance of<br />

implementing t<strong>ra</strong>de facilita<strong>tio</strong>n measures, especially<br />

standardiza<strong>tio</strong>n of basic customs nomenc<strong>la</strong>ture,<br />

documenta<strong>tio</strong>n and clearing procedures. They directed that a<br />

comprehensive agreement on harmonizing customs<br />

procedures be finalized.<br />

Fifteenth Fifteenth SAARC SAARC SAARC Summit Summit Dec<strong>la</strong><strong>ra</strong><strong>tio</strong>n Dec<strong>la</strong><strong>ra</strong><strong>tio</strong>n Pa<strong>ra</strong>g<strong>ra</strong>ph Pa<strong>ra</strong>g<strong>ra</strong>ph 27: The<br />

Heads of State or Government underlined the need for taking<br />

concrete measures to improve t<strong>ra</strong>de facilita<strong>tio</strong>n in terms of<br />

the mutual recogni<strong>tio</strong>n of standards, the adop<strong>tio</strong>n of common<br />

tariff nomenc<strong>la</strong>tures, and the harmoniza<strong>tio</strong>n of customs<br />

procedures. They directed the relevant SAARC bodies to<br />

expedite their work in these areas. They also recognized the<br />

importance of development of communica<strong>tio</strong>n system and<br />

t<strong>ra</strong>nsport inf<strong>ra</strong>structure and t<strong>ra</strong>nsit facilities especially for the<br />

<strong>la</strong>ndlocked countries to promote int<strong>ra</strong>-SAARC t<strong>ra</strong>de.<br />

Customs Customs T<strong>ra</strong>de T<strong>ra</strong>de Fa Facilita<strong>tio</strong>n:<br />

Fa Fa cilita<strong>tio</strong>n: The following T<strong>ra</strong>de Facilita<strong>tio</strong>n<br />

measures <strong>sh</strong>ould be implemented to ensure enabling t<strong>ra</strong>de<br />

policy and governance for smooth and speedy movement of<br />

goods across the borders.<br />

i) Harmoniza<strong>tio</strong>n of cross-border t<strong>ra</strong>de regu<strong>la</strong><strong>tio</strong>ns and<br />

documents by an end date.<br />

ii) A SAARC Harmonized Tariff Nomenc<strong>la</strong>ture at 8 digit<br />

level <strong>sh</strong>ould be created based on the Harmonized<br />

Commodity Descrip<strong>tio</strong>n and Coding Systems (HS) of the<br />

World Customs Organiza<strong>tio</strong>n by an end date<br />

iii) Online publica<strong>tio</strong>n of relevant t<strong>ra</strong>de regu<strong>la</strong><strong>tio</strong>ns and<br />

procedures, including fees and charges, in the local<br />

<strong>la</strong>nguage and in Engli<strong>sh</strong>. by an end date [31-12 -08]<br />

iv) Simplifica<strong>tio</strong>n of Customs procedures aimed at cutting<br />

the time taken and cost of t<strong>ra</strong>nsac<strong>tio</strong>ns at each customs<br />

51


point. Regional customs ac<strong>tio</strong>n p<strong>la</strong>n <strong>sh</strong>ould be<br />

implemented by an end date.[31-12-08]<br />

v) An effective appeal procedure for Customs and other<br />

Agencies rulings must be in p<strong>la</strong>ce before an end date<br />

[31-12-08].<br />

vi) T<strong>ra</strong>nsport and communica<strong>tio</strong>ns inf<strong>ra</strong>structures, port and<br />

warehousing facilities must be developed to benchmark<br />

levels within a time f<strong>ra</strong>me.<br />

vii) Bang<strong>la</strong>de<strong>sh</strong> and LDCs must ask for immediate<br />

compliance of Articles V, VIII and X of the GATT 1994<br />

by the non LDCs and notify their Tariff schedules, NTBs<br />

and regu<strong>la</strong><strong>tio</strong>ns on Rules of origin, <strong>la</strong>beling<br />

requirements, Customs clea<strong>ra</strong>nce and Appeal<br />

procedures to SAARC Secretariat by an end date [ 31-<br />

12-08].<br />

4. 4. Customs Customs Clea<strong>ra</strong>nce: Clea<strong>ra</strong>nce: The p<strong>ra</strong>ctice of Indian Customs to<br />

determine the Assessable Value of the product imported<br />

from Bang<strong>la</strong>de<strong>sh</strong> by fixing 35% abatement on Retail Sales<br />

Price and or on the basis of pre-fixed Tariff Value is in<br />

vio<strong>la</strong><strong>tio</strong>n of t<strong>ra</strong>nsac<strong>tio</strong>n value as prescribed in WTO Customs<br />

Valua<strong>tio</strong>n Agreement.<br />

Exporter has no business in fixing and printing Retail Sales<br />

Price of the exported product to be sold in the importing<br />

country. This is simply an internal taxa<strong>tio</strong>n measure and<br />

<strong>sh</strong>ould be dealt with accordingly at the local marketing level.<br />

5. 5. Customs Customs Valua<strong>tio</strong>n: Valua<strong>tio</strong>n: Customs Valua<strong>tio</strong>n must not be used<br />

for protective purposes or as barrier to t<strong>ra</strong>de. The<br />

GATT/WTO Valua<strong>tio</strong>n Agreement <strong>sh</strong>ould be implemented on<br />

an accele<strong>ra</strong>ted schedule, and that a common interpreta<strong>tio</strong>n<br />

of the GATT/WTO Valua<strong>tio</strong>n Agreement <strong>sh</strong>ould be adopted<br />

to ensure uniformity and standardized implementa<strong>tio</strong>n of the<br />

Agreement.<br />

6. 6. Informa<strong>tio</strong>n Informa<strong>tio</strong>n Exchange: Exchange: Member States must ensure<br />

exchange of vital informa<strong>tio</strong>n on the preven<strong>tio</strong>n and<br />

repression of smuggling, t<strong>ra</strong>fficking of narcotics and<br />

psychotropic substances, and other customs f<strong>ra</strong>uds.<br />

7. 7. 7. Passports Passports and and visas visas for for truckers: truckers: The district magist<strong>ra</strong>te of<br />

North-24 Parganas in West Bengal has recently issued an<br />

order making it mandatory for truckers driving into Benapole<br />

in Bang<strong>la</strong>de<strong>sh</strong> to hold passports and visas. If they do not<br />

have proper documents, they will be denied entry into<br />

Bang<strong>la</strong>de<strong>sh</strong> from January 2007.<br />

FICCI: FICCI: Indian trucks arrive at Benapole from all over India<br />

and passports for every one of them may not be a viable<br />

op<strong>tio</strong>n. The order is ‘imp<strong>ra</strong>ctical to implement’ and will surely<br />

lead to <strong>sh</strong>ortage of drivers resulting in t<strong>ra</strong>nsport cost hike and<br />

de<strong>la</strong>y bringing Indo-Bang<strong>la</strong>de<strong>sh</strong> t<strong>ra</strong>de to a grinding halt. As<br />

an alternative, the FICCI has proposed use of smart cards<br />

[FBCCI [FBCCI-- [FBCCI [FBCCI--<br />

--Instant -- Instant Visa/ T<strong>ra</strong>vel card with attested photog<strong>ra</strong>ph]<br />

with with electronic electronic machines machines installed installed at at zero zero point point which which could<br />

could<br />

register register their their their to to-and to and and-from and from movement movement movement in into in to Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> and<br />

check check any any any unauthorized unauthorized crossing crossing of of the the border.<br />

border.<br />

8. 8. Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong>-India<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

India India-Nepal<br />

India Nepal Nepal-Bhutan Nepal Bhutan Bhutan T<strong>ra</strong>nsit: T<strong>ra</strong>nsit: T<strong>ra</strong>nsit: The<br />

Bang<strong>la</strong>bandha–Fulbari <strong>la</strong>nd route is particu<strong>la</strong>rly important for<br />

facilitating t<strong>ra</strong>de with Nepal, Bhutan and North-Eastern<br />

States of India.<br />

Nepali vehicles are not allowed to enter Bang<strong>la</strong>de<strong>sh</strong>, and the<br />

consignments need to be t<strong>ra</strong>ns<strong>sh</strong>ipped to Indian trucks at a<br />

border point, which is some 400 meters ahead of the <strong>la</strong>nd<br />

port. The Indian truckers demand abnormally high charges<br />

adding to the cost of Bang<strong>la</strong>de<strong>sh</strong>i exports to the <strong>la</strong>ndlocked<br />

Hima<strong>la</strong>yan kingdom. India allows only two-hour t<strong>ra</strong>nsit time<br />

for movement of trucks through the 52-Km corridor of Indian<br />

t<strong>ra</strong>nsit point from Bang<strong>la</strong>bandh <strong>la</strong>nd port to the Nepalese<br />

border.<br />

India must be urged to extend the t<strong>ra</strong>nsit time up to at least 8<br />

hours from two hours, and ensure Bang<strong>la</strong>de<strong>sh</strong>i and Nepali<br />

vehicles the right of t<strong>ra</strong>nsit and t<strong>ra</strong>ns-<strong>sh</strong>ipment to facilitate<br />

t<strong>ra</strong>de in the <strong>la</strong>nd locked region.<br />

52


Appendix Appendix 7 – Agriculture sector of Bang<strong>la</strong>de<strong>sh</strong><br />

Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l GDP<br />

GDP<br />

Agricultu<strong>ra</strong>l sector GDP growth is estimated to be 3.47% for<br />

2008, out of which crop and horticulture GDP growth is<br />

expected to be 3.44%, animal farming GDP growth 2.41%<br />

and fi<strong>sh</strong>ing GDP growth 4.11%.<br />

Export Export earnings<br />

earnings<br />

• Bang<strong>la</strong>de<strong>sh</strong> earned USD 165.06mn from <strong>ra</strong>w jute<br />

exports during FY 2007-08 which is 12.17% higher than<br />

FY 2006-07.<br />

• Total exports earnings from Jute goods are USD<br />

313.47mn during FY 2007-08 which is 1.3% lower than<br />

FY 2006-07.<br />

• Tea export earned USD 14.89mn in FY 2007-08 which is<br />

114.55% higher than FY 2006-07, while frozen foods<br />

earned USD 534.07mn in FY 2007-08, 1.86% higher<br />

than that of FY 2006-07.<br />

• Other agricultu<strong>ra</strong>l products including fruits, vegetables<br />

and tobacco earned USD 91.5mn in FY 2007-08,<br />

56.25% higher than that of FY 2006-07.<br />

Identified Identified as as a a priority priority sector<br />

sector<br />

The government has identified five priority sectors and<br />

f<strong>ra</strong>med a set of st<strong>ra</strong>tegies for them in order to diversify<br />

exports. Within these, the first two priority sectors are<br />

horticulture and agro-processed foods.<br />

Opportunities Opportunities in in in the the agricultu<strong>ra</strong>l agricultu<strong>ra</strong>l agricultu<strong>ra</strong>l sector<br />

sector<br />

The The USD USD 8bn 8bn future future agro agro market market of of Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> could<br />

provide provide promising promising opportunities, opportunities, as as most most of of these these products<br />

products<br />

are are <strong>la</strong>bor <strong>la</strong>bor intensive.<br />

intensive.<br />

Shifting composi<strong>tio</strong>n of domestic food demand away from<br />

food g<strong>ra</strong>ins and towards high value agro products, including<br />

fruit, vegetables, fi<strong>sh</strong>, meat, and dairy products, can be<br />

viewed as a <strong>la</strong>rge opportunity for agro-businesses in<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Widespread Widespread <strong>sh</strong>ifts <strong>sh</strong>ifts in in domestic domestic food food demand demand in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

are are providing providing significant significant new new opportunities opportunities for for high-value high<br />

value<br />

agriculture agriculture and and re<strong>la</strong>ted re<strong>la</strong>ted agro agro-business.<br />

agro business.<br />

Sustained economic growth, rising disposable income, <strong>ra</strong>pid<br />

urbaniza<strong>tio</strong>n are the major catalysts for the widespread <strong>sh</strong>ifts<br />

in consumers’ food demand in Bang<strong>la</strong>de<strong>sh</strong>. Currently,<br />

consumers are buying more high-value food items such as<br />

fi<strong>sh</strong>, meat, fruits, vegetables, and processed foods. IFC<br />

estimated that by 2020 Bang<strong>la</strong>de<strong>sh</strong> may need an addi<strong>tio</strong>nal<br />

6.5mn MT of vegetables, 0.7mn MT of spices, 1.6mn MT of<br />

fruits, 1.9mn MT of fi<strong>sh</strong>, 1.4mn MT of meat and eggs and<br />

2.6mn MT of dairy products to meet the domestic demand. At<br />

2005 prices, this huge demand can be valued at about USD<br />

8bn and stands for a farm-gate value of about USD 5bn.<br />

There There is is a a significant significant gap gap between between domestic domestic demand demand and<br />

and<br />

domestic domestic domestic supply supply of of different different different crops crops and and inputs.<br />

inputs.<br />

95% of all agricultu<strong>ra</strong>l seeds are imported. So, <strong>la</strong>rge scale<br />

investments could expand on the success of the small<br />

domestic producers. For example, setting up fertilizer p<strong>la</strong>nts<br />

with a produc<strong>tio</strong>n capacity of 500,000 MT per year would<br />

require an investment of USD 450mn-500mn. Rapidly<br />

increasing consump<strong>tio</strong>n and demand for pulses cannot be<br />

met by the current domestic supply. Canada, Aust<strong>ra</strong>lia, and<br />

F<strong>ra</strong>nce are the key exporters of the domestic pulse<br />

consump<strong>tio</strong>n in Bang<strong>la</strong>de<strong>sh</strong>. Businesses can implement<br />

<strong>la</strong>rge scale produc<strong>tio</strong>n of pulses and use higher end<br />

technology to compete with Canadian, Aust<strong>ra</strong>lian, and<br />

French exporters in the domestic market.<br />

Lack Lack of of cold cold sto<strong>ra</strong>ge sto<strong>ra</strong>ge or or a a func<strong>tio</strong>ning func<strong>tio</strong>ning cold cold chain chain provides<br />

provides<br />

opportunities opportunities for for a a countrywide countrywide chain chain of of such such facilities.<br />

facilities.<br />

This will help export-oriented high value added agriculture<br />

businesses to grow. According to Xian Zhu, World Bank<br />

Country Director in Bang<strong>la</strong>de<strong>sh</strong>, “high-value agricultu<strong>ra</strong>l<br />

products tend to be highly peri<strong>sh</strong>able, and there are many<br />

risks associated with marketing these commodities.<br />

Appropriate policies and investments in key inf<strong>ra</strong>structure are<br />

needed to make it viable for farmers to switch to these<br />

commodities and increase produc<strong>tio</strong>n.” For example, every<br />

year potato farmers risk <strong>la</strong>rge quantities of potatoes going to<br />

waste due to inadequate sto<strong>ra</strong>ge facilities. In 2007, there was<br />

a bumper harvest of potatoes, most of which farmers sold to<br />

intermediaries at a 25% discount due to insufficient cold<br />

sto<strong>ra</strong>ge facilities.<br />

Along Along with with domestic domestic factors, factors, global global developments developments have have also<br />

also<br />

created created a a huge huge agro agro-export agro export export market.<br />

market.<br />

Growing global demand for high value agricultu<strong>ra</strong>l products<br />

including crop, livestock, fi<strong>sh</strong>eries, and forest products, rising<br />

cost structures in agriculture and fi<strong>sh</strong>eries in industrialized<br />

countries, and t<strong>ra</strong>de libe<strong>ra</strong>liza<strong>tio</strong>n have opened new markets<br />

for export from Bang<strong>la</strong>de<strong>sh</strong>. Products of high value<br />

agriculture accounted for about 5% of total export earnings<br />

for Bang<strong>la</strong>de<strong>sh</strong> in 2004.<br />

Exporting Exporting organic organic food food could could be be a a profitable profitable op<strong>tio</strong>n op<strong>tio</strong>n for for the<br />

the<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> agriculture agriculture sector. sector.<br />

sector.<br />

The global market for organic food and drink reached USD<br />

23bn in 2002. Increasing demand in North America helped<br />

fuel the 10.1% increase, as North America overtook Europe<br />

as the <strong>la</strong>rgest market for organic food and drink. Continued<br />

growth is predicted as organic foods customers are less<br />

price-sensitive and remain loyal if offered quality products.<br />

Organic certifica<strong>tio</strong>n and <strong>la</strong>beling are needed to tap the<br />

market effectively.<br />

Growing Growing demand demand for for for Ha<strong>la</strong>l Ha<strong>la</strong>l food food globally globally presents<br />

presents<br />

opportunities opportunities for for exports.<br />

exports.<br />

The global market for Ha<strong>la</strong>l food is estimated at USD150bn-<br />

USD 500bn. The estimate for the industry growth <strong>ra</strong>te <strong>ra</strong>nges<br />

between 10-20%. Given such demand, the <strong>la</strong>rgest retailers<br />

in Europe such as Tesco are g<strong>ra</strong>dually increasing their<br />

stocks of Ha<strong>la</strong>l foods.<br />

Ha<strong>la</strong>l meat processing presents a luc<strong>ra</strong>tive business<br />

opportunity. The f<strong>ra</strong>gmented meat processing activities in the<br />

country can be organized and scaled up to bring about<br />

conside<strong>ra</strong>ble economies of scale. Bengal Meat Processing<br />

Industries is a pioneer in meat processing for export. It has<br />

been reported that the company is seeking joint venture<br />

partners for further expansion.<br />

Global Global market market market trends trends for for eco eco-friendly eco friendly friendly products products favor<br />

favor<br />

investments investments in in jute jute and and jute jute-re<strong>la</strong>ted jute re<strong>la</strong>ted industries.<br />

industries.<br />

53


Globally, people are leaning towards the use of substitutes<br />

for wood as <strong>ra</strong>w materials for paper. Pulp for making paper<br />

can be made from natu<strong>ra</strong>l fibres like jute. Also, <strong>la</strong>rge markets<br />

like China are looking for alternatives to p<strong>la</strong>stics, the use of<br />

which will be banned by mid 2008. Jute bags are an<br />

alternative. According to a Nielsen Global Food Packaging<br />

Survey, nearly one in two global consumers would give up all<br />

forms of packaging provided for convenience purposes if it<br />

would benefit the environment, which includes packaging<br />

designed for easy stacking/storing at home (49%); packaging<br />

that can be used for cooking, or doubling as a re-sea<strong>la</strong>ble<br />

container (48%); and packaging designed for easy t<strong>ra</strong>nsport<br />

(47%).<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> has has developed developed a a unique unique variety variety of of jute jute seed seed that<br />

that<br />

is is expected expected to to double double the the current current per per acre acre yield yield of of crop crop. crop<br />

The seed named “O-9897” will give a significant boost to<br />

setting up of jute businesses successfully. The following<br />

specific areas can be explored extensively: jute handlooms,<br />

non-woven and industrial applica<strong>tio</strong>ns, jute rigid packaging,<br />

jute reinforced p<strong>la</strong>stic, composite jute, deco<strong>ra</strong>tive jute<br />

products, jute based fabrics, upholstery, b<strong>la</strong>nkets and other<br />

home textiles, jute blended yarns, fine blended yarns using<br />

jute/ cotton, and jute based handic<strong>ra</strong>fts.<br />

With With With the the growing growing demand demand for for high high-value high value agricultu<strong>ra</strong>l<br />

agricultu<strong>ra</strong>l<br />

products, products, Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> has has significant significant significant opportunities opportunities for<br />

greater greater ru<strong>ra</strong>l ru<strong>ra</strong>l employment employment and and incomes.<br />

incomes.<br />

As these high value products are also highly peri<strong>sh</strong>able and<br />

demands more sophisticated quality control technologies and<br />

marketing system, a st<strong>ra</strong>tegic approach is needed to take<br />

advantage of customary opportunities. Bang<strong>la</strong>de<strong>sh</strong> needs<br />

improved efforts towards such commodities those it can<br />

produce competitively. Linkages between the small-holders<br />

and high-value marketers need to be improved to ensure<br />

they cater for these growing opportunities.<br />

Const<strong>ra</strong>ints Const<strong>ra</strong>ints in in in agro agro-investment agro investment climate<br />

climate<br />

Const<strong>ra</strong>ints Const<strong>ra</strong>ints Const<strong>ra</strong>ints reported reported by by firms firms in in the the agro agro-processing agro processing industry<br />

industry<br />

are are broadly broadly simi<strong>la</strong>r simi<strong>la</strong>r to to those those reported reported by by other other manufacturing<br />

manufacturing<br />

firms firms in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong>.<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

But the re<strong>la</strong>tive priorities do vary when compared to the<br />

<strong>ra</strong>nking of investment climate const<strong>ra</strong>ints of neighboring<br />

countries. Unreliable electricity topped the list of const<strong>ra</strong>ints<br />

in Bang<strong>la</strong>de<strong>sh</strong> across sectors and over time (in all seven<br />

rounds of surveys from 2002 to the end of 2005).<br />

Macroeconomic instability and the cost of financing were<br />

second and third. Tax administ<strong>ra</strong><strong>tio</strong>n was fourth for agroprocessing<br />

firms, while seventh ove<strong>ra</strong>ll. The <strong>la</strong>ck of skills was<br />

fifth (fourth ove<strong>ra</strong>ll), while corrup<strong>tio</strong>n was fifth ove<strong>ra</strong>ll (and<br />

sixth for agro-processing).<br />

Top Top five five investment investment climate climate Const<strong>ra</strong>ints Const<strong>ra</strong>ints in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

identified identified by by by agro agro-processing agro agro processing processing firms firms<br />

firms<br />

Ob Objective Ob Objective<br />

jective measures measures underscore underscore why why these these issues issues are are seen<br />

seen<br />

as as problems.<br />

problems.<br />

Firms report over 100 days with power outages on ave<strong>ra</strong>ge,<br />

with many reporting almost daily outages. The ave<strong>ra</strong>ge rose<br />

to 140 days for agro-processing firms in 2005. An ave<strong>ra</strong>ge<br />

3.5% of output was lost due to electricity outages. While such<br />

losses are extremely <strong>la</strong>rge (more than three times those in<br />

Thai<strong>la</strong>nd and double those in Vietnam), they are still about<br />

half of those reported in India. What is worrying, however, is<br />

that the situa<strong>tio</strong>n has not improved over time; if anything it<br />

has worsened recently. 62% of managers reported that the<br />

frequency and du<strong>ra</strong><strong>tio</strong>n of outages were higher in the end of<br />

2005 than in the previous period. More than 70 % said their<br />

revenues were down as a result.<br />

Another Another worrying worrying const<strong>ra</strong>int const<strong>ra</strong>int is is the the increasing increasing <strong>sh</strong>ortage <strong>sh</strong>ortage of<br />

skilled skilled workers.<br />

workers.<br />

This const<strong>ra</strong>int <strong>sh</strong>owed the <strong>la</strong>rgest deterio<strong>ra</strong><strong>tio</strong>n ove<strong>ra</strong>ll and<br />

was the fifth <strong>la</strong>rgest const<strong>ra</strong>int for agro-processing firms.<br />

When asked which type of worker was hardest to recruit,<br />

"skilled workers" were identified by over three-quarters of<br />

firms—well above “Managers" or "professional staff." The<br />

increasing <strong>sh</strong>ortage is reflected by the greater time needed<br />

to hire skilled workers. Their wages have increased at almost<br />

double the <strong>ra</strong>te of increases for unskilled workers.<br />

Electricity Electricity is is the the const<strong>ra</strong>int const<strong>ra</strong>int that that most most consistently consistently tops tops the the list<br />

list<br />

across across countries, countries, <strong>ra</strong>nking <strong>ra</strong>nking first first in in Bang<strong>la</strong>de<strong>sh</strong>, Bang<strong>la</strong>de<strong>sh</strong>, second second in in India<br />

India<br />

and and Thai<strong>la</strong>nd, Thai<strong>la</strong>nd, and and fourth fourth in in the the Philippines Philippines and and Vietnam Vietnam. Vietnam<br />

Concerns about skills are <strong>sh</strong>ared by firms in Thai<strong>la</strong>nd and to<br />

some extent Vietnam, but not by firms in India or the<br />

Philippines. Indian firms comp<strong>la</strong>in re<strong>la</strong>tively more about<br />

corrup<strong>tio</strong>n and <strong>la</strong>bor regu<strong>la</strong><strong>tio</strong>ns. Given the stringent<br />

restric<strong>tio</strong>ns in India surrounding worker protec<strong>tio</strong>n and the<br />

reserved list (the list of activities restricted to small<br />

enterprises), this result is not so surprising. More<br />

objective measures of corrup<strong>tio</strong>n (the incidence and size of<br />

bribes, for example) are no higher in India, but they are not<br />

seen as such an issue in Bang<strong>la</strong>de<strong>sh</strong>. T<strong>ra</strong>nsporta<strong>tio</strong>n, a key<br />

dimension of inf<strong>ra</strong>structure for manufacturing firms,<br />

particu<strong>la</strong>rly for sectors sensitive to delivery times, appears to<br />

be a significant const<strong>ra</strong>int in only Vietnam. However, it<br />

<strong>sh</strong>ould be noted that most of the surveys sampled firms in<br />

major cities, including the Bang<strong>la</strong>de<strong>sh</strong> survey, in which most<br />

of the sample is from the greater Dhaka-Chittagong area.<br />

Causes Causes Causes of of of low low crop crop crop yield yield yield in in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Scarcity Scarcity of of good good quality quality quality seed<br />

seed<br />

The Bang<strong>la</strong>de<strong>sh</strong> seed market is very <strong>la</strong>rge, USD 436mn, but<br />

only 5% of the entire demand can be fulfilled by the<br />

government sector. In Bang<strong>la</strong>de<strong>sh</strong> the seed industry is<br />

dominated by the government sector, hence the role of<br />

private sector in the seed industry is minor. Most of the<br />

farmers use their own seeds which they have been using for<br />

past gene<strong>ra</strong><strong>tio</strong>ns. But once a seed is used for seve<strong>ra</strong>l years,<br />

it loses its productivity.<br />

Largest Largest improvements improvements in in the the investment investment<br />

investment<br />

climate climate in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Electricity Telecommunica<strong>tio</strong>ns<br />

Microeconomic stability Access to finance<br />

Cost of financing Crime, theft and disorder<br />

Tax administ<strong>ra</strong><strong>tio</strong>n T<strong>ra</strong>nsporta<strong>tio</strong>n<br />

Skills/educa<strong>tio</strong>n of avai<strong>la</strong>ble workers Customs and t<strong>ra</strong>de regu<strong>la</strong><strong>tio</strong>n<br />

Source: The World Bank<br />

54


Unavai<strong>la</strong>bility Unavai<strong>la</strong>bility Unavai<strong>la</strong>bility of of fertilizer fertilizer during during cultiva<strong>tio</strong>n<br />

cultiva<strong>tio</strong>n<br />

Bang<strong>la</strong>de<strong>sh</strong> fertilizer produc<strong>tio</strong>n is const<strong>ra</strong>ined by gas and<br />

power <strong>sh</strong>ortages. Moreover, farmers sometimes have to<br />

negotiate hard with the middlemen and government for the<br />

fertilizer. This unavai<strong>la</strong>bility of fertilizer is caused by a<br />

demand-supply gap. The produc<strong>tio</strong>n is less than the demand.<br />

Secondly, there is no efficient supply chain management<br />

system in the country for distributing fertilizers. Even though<br />

sometimes farmers demand is met by providing adequate<br />

fertilizers, they do not get it in a timely manner.<br />

Inappropriate Inappropriate use use of of fertilizer<br />

fertilizer<br />

Modern applica<strong>tio</strong>ns of fertilizers are very important to get<br />

high crop yield. The farmers do not have the technology to<br />

ascertain the requirement of fertilizer in their fields. This is<br />

why they have to apply fertilizers based on their estima<strong>tio</strong>n.<br />

This inappropriate usage of fertilizer is always injurious to the<br />

crops and thus reduces crop productivity.<br />

Inefficient Inefficient Inefficient water water water management management management system<br />

system<br />

Although irriga<strong>tio</strong>n water is avai<strong>la</strong>ble in most areas, there is<br />

<strong>la</strong>ck of efficient water management. Affluent farmers set up<br />

their own water pumps and use them for their own use, while<br />

the marginal farmers rent these machines at a high cost.<br />

Previously, BADC had water supply machines to help the<br />

marginal farmers which are now almost nonexistent.<br />

Moreover, p<strong>la</strong>ces, which are highly dependent on the river<br />

water, are very affected during the dry season. Altogether<br />

these factors reduce the crop yields every year.<br />

Excess Excess use use use of of of pesticides pesticides<br />

pesticides<br />

Most of the farmers have very less educa<strong>tio</strong>n on ba<strong>la</strong>nced<br />

applica<strong>tio</strong>n of fertilizer and the harmful effects of it. This is<br />

why most of the times they <strong>ra</strong>ther apply more than enough<br />

pesticides that hampers the crop productivity.<br />

What What can can can be be done done to to improve improve crop crop yield?<br />

yield?<br />

Different country experiences <strong>sh</strong>ow that the ave<strong>ra</strong>ge paddy<br />

yields tend to be re<strong>la</strong>tively high in those countries/regions<br />

where the seed rep<strong>la</strong>cement <strong>ra</strong>te is high. In Andh<strong>ra</strong> P<strong>ra</strong>de<strong>sh</strong><br />

of India where the rice seed industry is highly developed,<br />

farmers procure 46 per cent of the seed from the market<br />

every season. In Vietnam, 60 per cent of the farmers change<br />

their seeds with Modern Varieties (MVs) every year/season.<br />

Most of the rice farmers in Thai<strong>la</strong>nd change their varieties<br />

(seeds) every three to five years. Farmer participatory<br />

experiments carried out in the Philippines and Bang<strong>la</strong>de<strong>sh</strong><br />

<strong>sh</strong>ow that good quality seed can increase rice yield by 8 to<br />

10%. An efficient seed delivery system with active<br />

participa<strong>tio</strong>n of private and public sectors, and farmers’<br />

organiza<strong>tio</strong>ns can contribute to further increase in<br />

productivity in the crop sector of Bang<strong>la</strong>de<strong>sh</strong>. Improved<br />

fertilizer assessment kit will help to reduce this inefficiency.<br />

More More p<strong>la</strong>yers p<strong>la</strong>yers in in the the produc<strong>tio</strong>n produc<strong>tio</strong>n or or import import of of better better quality<br />

quality<br />

agricultu<strong>ra</strong>l agricultu<strong>ra</strong>l agricultu<strong>ra</strong>l inputs<br />

inputs<br />

Unfortunately in Bang<strong>la</strong>de<strong>sh</strong> there are few big p<strong>la</strong>yers in the<br />

agricultu<strong>ra</strong>l input import and produc<strong>tio</strong>n market. The entire<br />

market is still untapped. There must be a strong private<br />

sector for the produc<strong>tio</strong>n and import of agricultu<strong>ra</strong>l<br />

commodities. Moreover, they will have to assess the<br />

requirement of inputs in each part of the country and take<br />

steps accordingly to ensure timely supply of agricultu<strong>ra</strong>l<br />

inputs to the farmers.<br />

Efficient Efficient credit credit disbursement disbursement system<br />

system<br />

Sometimes, especially in case of marginal farmers, the<br />

agricultu<strong>ra</strong>l inputs are avai<strong>la</strong>ble to the farmers but the<br />

farmers cannot buy these. They do not have enough money<br />

to buy or the price is too high to buy. An efficient agricultu<strong>ra</strong>l<br />

credit disbursement system is required to solve this problem.<br />

Creating Creating awareness awareness on on proper proper usage usage of of fertilizers fertilizers and<br />

and<br />

pesticides<br />

pesticides<br />

The government has to create awareness among the farmers<br />

on proper use of fertilizer and pesticides. The farmers are<br />

igno<strong>ra</strong>nt on the requirement of these inputs and hence the<br />

ideas on these inputs will enhance proper applica<strong>tio</strong>n of<br />

these inputs which will ultimately improve the productivity of<br />

<strong>la</strong>nd.<br />

Proper Proper water water supply supply management<br />

management<br />

The government <strong>sh</strong>ould opt for a policy to ensure water<br />

supply in areas where scarcity of water restricts the<br />

productivity of crops. A thorough survey around the drought<br />

prone areas will help. Then proper and adequate water<br />

supply will be possible.<br />

Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l credit credit credit disbursemen<br />

disbursement<br />

disbursemen<br />

Disbursement of agricultu<strong>ra</strong>l credit during July-September,<br />

2008 stood higher at BDT 14.9bn compared to BDT 12.12bn<br />

during July-September, 2007. Recovery of agricultu<strong>ra</strong>l credit<br />

during July-September, 2008 was BDT 13.25bn compared to<br />

BDT 13.03bn during July-September, 2007. The posi<strong>tio</strong>n of<br />

overdue agricultu<strong>ra</strong>l credit as percentage of total outstanding<br />

improved, decreasing from 42.77 at the end of September,<br />

2007 to 35.55 at the end of September, 2008.<br />

Sources Sources of of Agricultu<strong>ra</strong>l Agricultu<strong>ra</strong>l Finance Finance in in Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> from from both<br />

both<br />

SME’s SME’s SME’s and and small small farmers’ farmers’ perspective<br />

perspective<br />

State owned banks are still the main sources of finance in<br />

the agriculture sector. Specialized banks such as BKB<br />

(Bang<strong>la</strong>de<strong>sh</strong> Kri<strong>sh</strong>i Bank) and RAKUB (Raj<strong>sh</strong>ahi Kri<strong>sh</strong>i<br />

Unnayan Bank), NCBs (Na<strong>tio</strong>nalized Commercial Banks)<br />

and BRDB (Bang<strong>la</strong>de<strong>sh</strong> Ru<strong>ra</strong>l Development Board) are<br />

dominant p<strong>la</strong>yers in the area of agricultu<strong>ra</strong>l credit. BKB had<br />

the <strong>la</strong>rgest <strong>sh</strong>are like in previous years in annual<br />

disbursement of agricultu<strong>ra</strong>l loan. In FY07 BKB alone<br />

disbursed around 51.86% of the total disbursement followed<br />

by NCBs at 19.42%.<br />

Private sector banks' lending to agricultu<strong>ra</strong>l sector in FY07<br />

increased significantly to BDT 11.17bn from BDT 3.34bn in<br />

FY06. The contribu<strong>tio</strong>n of the private sector banks in<br />

agricultu<strong>ra</strong>l lending, however, still remained modest<br />

compared to agricultu<strong>ra</strong>l loan disbursement of BDT 52.93bn<br />

by the NCBs and specialized lenders. In addi<strong>tio</strong>n to risk and<br />

uncertainties associated with the agricultu<strong>ra</strong>l and ru<strong>ra</strong>l<br />

finance, the <strong>sh</strong>ortage of required manpower, high cost of<br />

undertaking intensive supervision and monitoring and <strong>la</strong>ck of<br />

informa<strong>tio</strong>n or wrong informa<strong>tio</strong>n about customers/borrowers<br />

may have discou<strong>ra</strong>ged private commercial and foreign banks<br />

to dispense agricultu<strong>ra</strong>l/ru<strong>ra</strong>l credit.<br />

As there are ample opportunities of investment in agro based<br />

sector, these banks, particu<strong>la</strong>rly private banks, <strong>sh</strong>ould<br />

include the sector in their portfolios by removing the<br />

aforemen<strong>tio</strong>ned bottlenecks. The burden of unrealized <strong>la</strong>rge<br />

amounts of agricultu<strong>ra</strong>l loan is responsible for acute <strong>sh</strong>ortage<br />

of resource bases of the NCBs and specialized banks which<br />

construed obstacles in their policies of the recycling of<br />

55


esources for this sector. These banks <strong>sh</strong>ould therefore,<br />

gear-up a recovery drive to minimize their resource gap not<br />

only for extending more support to the agricultu<strong>ra</strong>l sector, but<br />

also to remove the policies of resorting to refinance from the<br />

cent<strong>ra</strong>l bank in this regard.<br />

Microcredit Microcredit Ope<strong>ra</strong><strong>tio</strong>ns Ope<strong>ra</strong><strong>tio</strong>ns of of NGOs NGOs and and the the G<strong>ra</strong>meen G<strong>ra</strong>meen Bank;<br />

Bank;<br />

focus focus is is is more more on on ru<strong>ra</strong>l ru<strong>ra</strong>l development<br />

development<br />

Originating from Bang<strong>la</strong>de<strong>sh</strong>, microcredit turned into<br />

microfinance has evolved as a very effective instrument of<br />

agricultu<strong>ra</strong>l growth and helped significantly in the<br />

improvement of the quality of life of the ru<strong>ra</strong>l poor throughout<br />

the world. Microcredit prog<strong>ra</strong>mmes have proven to be<br />

effective for agro growth, as they address the problems at<br />

the g<strong>ra</strong>ssroots level. In Bang<strong>la</strong>de<strong>sh</strong>, Microcredit Prog<strong>ra</strong>mmes<br />

(MCPs) are implemented by various formal institu<strong>tio</strong>ns<br />

(na<strong>tio</strong>nalized commercial banks and specialized banks),<br />

specialized government organiza<strong>tio</strong>ns and Non<br />

Governmental Organiza<strong>tio</strong>ns (NGOs). The total cove<strong>ra</strong>ge of<br />

MCP is approximately 30.09mn borrowers while about 90%<br />

of the clients of this sector are female. Microcredit is<br />

increasingly gaining credibility in the mainstream finance<br />

industry.<br />

Like earlier years microcredit ope<strong>ra</strong><strong>tio</strong>ns grew significantly in<br />

FY07 with efficient recycling of lending resources, higher<br />

disbursement and recovery, though the MFIs are now facing<br />

a number of problems, such as, absence of /or little<br />

accountability of their ope<strong>ra</strong><strong>tio</strong>n, no linkage among the<br />

stakeholders / providers of microcredit, re<strong>la</strong>tively higher<br />

interest <strong>ra</strong>te for microcredit etc. Microcredit of G<strong>ra</strong>meen Bank<br />

and NGOs like; BRAC, ASA and Pro<strong>sh</strong>ika (the three big<br />

NGOs-MFIs) have cove<strong>ra</strong>ge across the country. These three<br />

organiza<strong>tio</strong>ns and G<strong>ra</strong>meen Bank together occupy more than<br />

80% of the total market <strong>sh</strong>are of microcredit both in terms of<br />

cove<strong>ra</strong>ge and disbursements.<br />

Microcredit Microcredit disbursements disbursements of of G<strong>ra</strong>meen G<strong>ra</strong>meen Bank Bank and and <strong>la</strong>rge<br />

<strong>la</strong>rge<br />

NGOs<br />

NGOs<br />

Source: G<strong>ra</strong>meen Bank and respective NGOs<br />

Policy Policy priorities priorities and and recommenda<strong>tio</strong>ns<br />

Reducing Reducing the the cost cost of of doing doing business business and and eliminating eliminating the<br />

the<br />

obstruc<strong>tio</strong>n obstruc<strong>tio</strong>n obstruc<strong>tio</strong>n to to agro agro-business agro business growth<br />

growth<br />

• Eliminating Eliminating policy policy dist<strong>ra</strong>c<strong>tio</strong>n dist<strong>ra</strong>c<strong>tio</strong>n and and pursuing pursuing policy<br />

policy<br />

opportunities<br />

opportunities<br />

opportunities<br />

� Urgent atten<strong>tio</strong>n is needed to strengthen food safety<br />

legis<strong>la</strong><strong>tio</strong>n and enacting <strong>la</strong>ws and regu<strong>la</strong><strong>tio</strong>ns for<br />

quality control for all types of agro-inputs, including<br />

feed, chemicals and medicine. As many existing<br />

policies are outdated (mostly re<strong>la</strong>ted to food safety)<br />

and others are absent (re<strong>la</strong>ted to consumer<br />

protec<strong>tio</strong>n and ensuring the quality of animal feed<br />

and other inputs), these distorted policies allow the<br />

private sector to pursue unprincipled p<strong>ra</strong>ctices and<br />

ultimately slow the growth of high value agriculture<br />

and re<strong>la</strong>ted agro-business.<br />

� Many of the current incentives provided to the<br />

agriculture sector to foster agro-business growth<br />

are actually stifling growth; they are distorting the<br />

produc<strong>tio</strong>n environment while ignoring underlying<br />

problems affecting competitiveness. Seve<strong>ra</strong>l cases<br />

confirmed that many positive policy interven<strong>tio</strong>ns to<br />

promote agro growth no longer appear to have<br />

desired impact and must be reconsidered. For<br />

example, due to the Specific Inducement Price<br />

(SIP) g<strong>ra</strong>nted by Biman Bang<strong>la</strong>de<strong>sh</strong> that gives it a<br />

price advantage over other carriers, agro-exporters<br />

are not encou<strong>ra</strong>ged to pursue more conven<strong>tio</strong>nal<br />

avenues for acquiring competitive advantage.<br />

� Further reforms in rules and regu<strong>la</strong><strong>tio</strong>ns that<br />

const<strong>ra</strong>in the ease of doing business in Bang<strong>la</strong>de<strong>sh</strong><br />

will also promote the growth and competiveness of<br />

agro-business.<br />

• Agro Agro-inf<strong>ra</strong>structure<br />

Agro inf<strong>ra</strong>structure development<br />

development<br />

� Consistent electricity outages are <strong>ra</strong>nked as one of<br />

the most serious const<strong>ra</strong>ints for the agro-food<br />

processing businessmen.<br />

� The development of efficient and competitive<br />

market inf<strong>ra</strong>structure is also essential for promoting<br />

agro-growth. Out of 16,476 markets in Bang<strong>la</strong>de<strong>sh</strong>.<br />

2,050 are designated as growth centers and 392<br />

are ‘notified’ markets (Agrico Ltd., 2004). So, many<br />

of these markets need to be improved through<br />

proper inf<strong>ra</strong>structure building to cope with highly<br />

peri<strong>sh</strong>able fruit, vegetable, fi<strong>sh</strong> and animal<br />

products. Day to day market ope<strong>ra</strong><strong>tio</strong>ns, fee<br />

collec<strong>tio</strong>n and inf<strong>ra</strong>structure development are split<br />

among different entities. Gene<strong>ra</strong>lly there is no<br />

re<strong>la</strong><strong>tio</strong>n<strong>sh</strong>ip between fee collec<strong>tio</strong>n and services<br />

provided to t<strong>ra</strong>ders.<br />

• Encou<strong>ra</strong>ging Encou<strong>ra</strong>ging good good gover governance<br />

gover nance<br />

� Informal and illegal tolls levied against fre<strong>sh</strong> agro<br />

produce <strong>sh</strong>ipments increase the cost of doing agrobusiness.<br />

The added costs of such tolls are<br />

ultimately <strong>sh</strong>ared by the final consumer as well as<br />

the farmers. These informal payments reduce<br />

farmers’ incomes and consumer’s welfare. Routine<br />

handling of export <strong>sh</strong>ipments through the port of<br />

Chittagong and Zia Interna<strong>tio</strong>nal Airport can reduce<br />

such informal payments.<br />

Promoting Promoting knowledge knowledge management management for for agro agro-business<br />

agro business<br />

• High High priority priority commodities commodities deserve deserve ttechnology<br />

tt<br />

echnology<br />

gene<strong>ra</strong><strong>tio</strong>n, gene<strong>ra</strong><strong>tio</strong>n, adapta<strong>tio</strong>n adapta<strong>tio</strong>n adapta<strong>tio</strong>n and and propaga<strong>tio</strong>n<br />

propaga<strong>tio</strong>n<br />

� Investment is needed to build the knowledge base that<br />

will better enable the private sector to participate and<br />

compete in high-value agriculture and re<strong>la</strong>ted agrobusiness.<br />

Between 1997/98 and 2004/05,<br />

56


expenditures for agricultu<strong>ra</strong>l research as a <strong>sh</strong>are of<br />

total agricultu<strong>ra</strong>l GDP <strong>ra</strong>nged from 0.2% to 0.34%.<br />

This level of expenditure is conside<strong>ra</strong>bly lower than it<br />

is in other developing countries as a whole, which<br />

ave<strong>ra</strong>ged 0.62% of agricultu<strong>ra</strong>l GDP, and significantly<br />

lower than expenditure on agricultu<strong>ra</strong>l research in<br />

developed countries, which ave<strong>ra</strong>ged 2.8% of<br />

agricultu<strong>ra</strong>l GDP.<br />

� Research for high-value agro commodities like<br />

horticultu<strong>ra</strong>l crops, fi<strong>sh</strong>eries and livestock <strong>sh</strong>ould<br />

receive greater atten<strong>tio</strong>n. The Horticultu<strong>ra</strong>l Research<br />

Center conducts limited research on fruit vegetable<br />

crops, and the Post Harvest Technology Division of<br />

Bang<strong>la</strong>de<strong>sh</strong> Agricultu<strong>ra</strong>l Research Institute<br />

investigates issues in fruit and vegetable processing<br />

(World Bank 2005b). Moreover, research in the<br />

fi<strong>sh</strong>eries and the livestock sector has not fared any<br />

better. BFRI has done some work on breeding and<br />

genetics, feed and nutri<strong>tio</strong>n, integ<strong>ra</strong>ted fi<strong>sh</strong> farming,<br />

disease and health management, and socio-economic<br />

aspects of aquaculture, and BLRI is responsible for<br />

livestock research to increase produc<strong>tio</strong>n.<br />

• Seve<strong>ra</strong>l Seve<strong>ra</strong>l areas areas are are identified identified where where the the research research could could be<br />

be<br />

beneficial:<br />

beneficial:<br />

� Fruits and vegetables processing, where research is<br />

needed to assist with processing techniques,<br />

equipment applica<strong>tio</strong>n and manufacture, and new<br />

product development.<br />

� Aquaculture, where research is needed to reduce<br />

genetic deg<strong>ra</strong>da<strong>tio</strong>n in carp stocks. The DOF and<br />

BFRI have extensive facilities; the universities<br />

(including BAU) and BFRI have strengths in genetics<br />

and technical know-how; and the private sector would<br />

bring an element of commercial drive to the prog<strong>ra</strong>m<br />

and possibly partial financing.<br />

� The poultry industry, where there is demand for more<br />

research on produc<strong>tio</strong>n methods and technologies,<br />

nutri<strong>tio</strong>n, processing and bio-security. A partner<strong>sh</strong>ip<br />

between public research institu<strong>tio</strong>ns and the private<br />

sector would yield mutual benefits.<br />

� The high-value rice industry, where closer<br />

coordina<strong>tio</strong>n between p<strong>la</strong>nt breeders and those<br />

involved in t<strong>ra</strong>de, specially the rice milling industry, is<br />

needed to develop improved varieties of t<strong>ra</strong>di<strong>tio</strong>nal<br />

fine rice with such cha<strong>ra</strong>cteristics as pa<strong>la</strong>tability,<br />

aroma, higher milling out-turn, and lower cost of<br />

produc<strong>tio</strong>n.<br />

Taking Taking a a proactive proactive stance stance towards towards food food safety safety and and quality<br />

quality<br />

management<br />

management<br />

• Improving Improving the the regu<strong>la</strong>tory regu<strong>la</strong>tory environment<br />

environment<br />

� Establi<strong>sh</strong>ing appropriate food safety regu<strong>la</strong><strong>tio</strong>ns and<br />

ensuring compliance with the regu<strong>la</strong><strong>tio</strong>ns is of critical<br />

importance for consumer welfare as well as<br />

�<br />

maintaining and expanding t<strong>ra</strong>de in high-value<br />

agricultu<strong>ra</strong>l products.<br />

In 2003, FAO reviewed food control system in<br />

Bang<strong>la</strong>de<strong>sh</strong> and recommended (1) formu<strong>la</strong>ting a<br />

comprehensive food safety policy; (2) streamlining<br />

and improving coordina<strong>tio</strong>n among the various<br />

ministries and agencies involved in food control; (3)<br />

enacting the Consumer Protec<strong>tio</strong>n Act and Feed<br />

Act; (4) harmonizing the provisions/standards in<br />

various <strong>la</strong>ws/rules; (5) establi<strong>sh</strong>ing and issuing<br />

guidelines on GAP and GMP for all foods, including<br />

fruits and vegetables; and (6) developing and<br />

enacting a comprehensive <strong>la</strong>beling <strong>la</strong>w with<br />

appropriate provisions for <strong>la</strong>beling local and<br />

imported packaged food in conformity with CODEX.<br />

• Improving Improving compliance compliance with with sanitary sanitary and and phytosanitary<br />

phytosanitary<br />

standards.<br />

standards.<br />

� Growing evidences indicate that for well-prepared<br />

countries and suppliers, rising standards represent<br />

an opportunity to modernize export supply and<br />

regu<strong>la</strong>tory systems and adopt safer and more<br />

sustainable p<strong>ra</strong>ctices. Consignments from such<br />

countries are subject to compa<strong>ra</strong>tively less<br />

�<br />

inspec<strong>tio</strong>n by t<strong>ra</strong>ding partners. Good reputa<strong>tio</strong>ns<br />

gained through demonst<strong>ra</strong>ted compliance yield<br />

lower t<strong>ra</strong>nsac<strong>tio</strong>n costs for farmers and exporters.<br />

The future competiveness in luc<strong>ra</strong>tive export<br />

markets depends on making urgently needed<br />

improvements<br />

inf<strong>ra</strong>structure.<br />

in <strong>la</strong>bo<strong>ra</strong>tory and testing<br />

Developing Developing market market market connec<strong>tio</strong>ns<br />

connec<strong>tio</strong>ns<br />

• Encou<strong>ra</strong>ging Encou<strong>ra</strong>ging Encou<strong>ra</strong>ging cont cont<strong>ra</strong>ct cont <strong>ra</strong>ct farming<br />

farming<br />

� Cont<strong>ra</strong>ct farming is expanding <strong>ra</strong>pidly in<br />

Bang<strong>la</strong>de<strong>sh</strong>, which now has many examples of<br />

successful cont<strong>ra</strong>ct farming ar<strong>ra</strong>ngements. The<br />

vertical coordina<strong>tio</strong>n between producers and<br />

purchasers becomes valuable for high-value<br />

agriculture products because of the high t<strong>ra</strong>nsac<strong>tio</strong>n<br />

cost and risk involved.<br />

� Cont<strong>ra</strong>ct farming also offers small-scale producers<br />

a chance to remain involved in high-value<br />

agriculture. Cont<strong>ra</strong>ct farming can reduce the<br />

number of intermediaries, wastage, t<strong>ra</strong>nsac<strong>tio</strong>n<br />

costs, and market risks.<br />

� Enforceability of cont<strong>ra</strong>cts remains a challenge in<br />

Bang<strong>la</strong>de<strong>sh</strong>, where breach of cont<strong>ra</strong>ct is common<br />

among producers and purchasers alike. Other<br />

countries have devised legal and regu<strong>la</strong>tory<br />

mechanism to address cont<strong>ra</strong>ct enforceability<br />

issues.<br />

Strengt Strengthening Strengt hening institu<strong>tio</strong>ns institu<strong>tio</strong>ns and and organiza<strong>tio</strong>ns<br />

organiza<strong>tio</strong>ns<br />

• Strong commodity, industry and professional based<br />

associa<strong>tio</strong>ns are essential. For example, there are<br />

needs for a Na<strong>tio</strong>nal Dairy Coordina<strong>tio</strong>n Committee, a<br />

Na<strong>tio</strong>nal Poultry Coordina<strong>tio</strong>n Committee, an en<strong>la</strong>rged<br />

and strengthened fede<strong>ra</strong>ted t<strong>ra</strong>de body for the highvalue<br />

rice industry and t<strong>ra</strong>de and stronger capacity<br />

within BFVAPEA.<br />

• Long term technical support through NGOs and other<br />

agencies would help to build and strengthen producers<br />

organiza<strong>tio</strong>n.<br />

57


Appendix Appendix Appendix 8 – Technology<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Techno Technology Techno Techno logy Sector Sector Opportunities<br />

Opportunities<br />

The emergence of India over the past 15 years as a global<br />

technology and outsourcing powerhouse has inevitably<br />

fuelled enthusiasm from governments in the rest of Asia to<br />

follow in establi<strong>sh</strong>ing vib<strong>ra</strong>nt ICT sectors that might simi<strong>la</strong>rly<br />

t<strong>ra</strong>nsform their economies. As Coward (2002) has noted,<br />

“India is inspi<strong>ra</strong><strong>tio</strong>n and proof that a developing country can<br />

make it in the “new economy,” potentially offering a route to<br />

leapfrog stages of development by skipping the industrial<br />

age and joining the knowledge age.” Clearly China remains<br />

the high tech EM manufacturing champion. But with the<br />

excep<strong>tio</strong>n of the Philippines in outsourcing and selective<br />

successes more recently by Vietnam, very few Asian<br />

economies have succeeded in replicating the Indian success<br />

story.<br />

Bang<strong>la</strong>de<strong>sh</strong> has been no different to many of its Asian<br />

neighbours in repeated attempts to kick-start a vib<strong>ra</strong>nt IT<br />

export sector. Back in June 1997, the Government of<br />

Bang<strong>la</strong>de<strong>sh</strong> (GOB) appointed a Committee headed by<br />

Professor JR Choudhury of BUET, to formu<strong>la</strong>te a st<strong>ra</strong>tegy on<br />

accele<strong>ra</strong>ting software exports. The Committee submitted its<br />

report, which contained 45 recommenda<strong>tio</strong>ns, in September<br />

1997. In October 2002 the Government of Bang<strong>la</strong>de<strong>sh</strong><br />

issued its Na<strong>tio</strong>nal Informa<strong>tio</strong>n and Communica<strong>tio</strong>n<br />

Technology (ICT) Policy stating the importance of this sector<br />

referring to the designa<strong>tio</strong>n g<strong>ra</strong>nted by the Prime Minister as<br />

a thrust sector.<br />

But the subsequent growth in the IT sector remained modest<br />

as evidenced by current net software exports of around $<br />

30mn.<br />

Key Key Key Const<strong>ra</strong>ints Const<strong>ra</strong>ints for for Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> IT IT Sector Sector Growth<br />

Growth<br />

We believe there have been five major const<strong>ra</strong>ints in the<br />

growth of a sizeable ICT/ITES industry in Bang<strong>la</strong>de<strong>sh</strong>:<br />

1) Insufficient Insufficient EE-HR:<br />

E HR: A <strong>la</strong>ck of IT <strong>la</strong>bour supply with the<br />

requisite critical mass of technical skills. While the<br />

limited number of engineers and computer scientists<br />

g<strong>ra</strong>duating from Bang<strong>la</strong>de<strong>sh</strong>i universities is modest<br />

re<strong>la</strong>tive to India, perhaps a bigger const<strong>ra</strong>int is the<br />

<strong>sh</strong>ortage of voca<strong>tio</strong>nal t<strong>ra</strong>ining institutes to supply<br />

workers with the requisite technical and IT<br />

2)<br />

knowledge.<br />

High High Internet Internet Costs: Costs: The de<strong>la</strong>yed acquisi<strong>tio</strong>n of a<br />

submarine fibre optic cable re<strong>la</strong>tive to other<br />

countries in the region was believed to be the<br />

primary factor behind one of the highest broadband<br />

costs in the region. But even after the introduc<strong>tio</strong>n of<br />

the cable in 2006, internet costs in Bang<strong>la</strong>de<strong>sh</strong> have<br />

been slow to decline.<br />

3) Poor Poor Poor Country Country Image: Image: B<strong>ra</strong>nd Bang<strong>la</strong>de<strong>sh</strong> is<br />

associated with political instability, corrup<strong>tio</strong>n,<br />

4)<br />

natu<strong>ra</strong>l disasters and poverty. Foreign corpo<strong>ra</strong>tes do<br />

not natu<strong>ra</strong>lly associate the country as one that is a<br />

serious tech destina<strong>tio</strong>n.<br />

Lack Lack of of credible credible domestic domestic tech tech p<strong>la</strong>yer: p<strong>la</strong>yer: p<strong>la</strong>yer: there are too<br />

many small companies (more than 300 companies<br />

in a $ 30mn export sector) and none with the scale<br />

or critical mass to meet the demands of major global<br />

multina<strong>tio</strong>nal outsourcing cont<strong>ra</strong>cts.<br />

5) Ineffective Ineffective Marketing/Distribu<strong>tio</strong>n:<br />

Marketing/Distribu<strong>tio</strong>n: Marketing/Distribu<strong>tio</strong>n: Weak sales<br />

effort/front end in key client markets such as in<br />

Silicon Valley. In 2003, Bang<strong>la</strong>de<strong>sh</strong>, with the<br />

support of the World Bank, set up an off<strong>sh</strong>ore<br />

marketing office in Santa C<strong>la</strong><strong>ra</strong>, California with the<br />

help of the Bay Area Chapter of the American<br />

Associa<strong>tio</strong>n of Bang<strong>la</strong>de<strong>sh</strong>i Engineers and<br />

Architects (AABEA). After two years of efforts from<br />

Bang<strong>la</strong>de<strong>sh</strong>i IT entrepreneurs, government and<br />

AABEA members and nearly a million dol<strong>la</strong>rs in<br />

state funding, the project closed without realizing its<br />

objectives of <strong>la</strong>unching Bang<strong>la</strong>de<strong>sh</strong> as an effective<br />

outsourcing destina<strong>tio</strong>n.<br />

Lack Lack of of execu<strong>tio</strong>n execu<strong>tio</strong>n of of country country country st<strong>ra</strong>tegy<br />

st<strong>ra</strong>tegy<br />

There have been multiple Bang<strong>la</strong>de<strong>sh</strong> IT Policy papers<br />

originated by both multi<strong>la</strong>te<strong>ra</strong>l organiza<strong>tio</strong>ns as well as the<br />

Government ever since the Prof JR Choudhury Committee<br />

in 1997. The more notable reports with the right na<strong>tio</strong>nal<br />

st<strong>ra</strong>tegy have included, JOBS/IRIS (2002), USAID (2005),<br />

Katalyst (2005), Danida(2006). Despite that fact, as the table<br />

below from the World Economic Forum/INSEAD Network<br />

Readiness Ranking illust<strong>ra</strong>tes most clearly, Bang<strong>la</strong>de<strong>sh</strong>’s IT<br />

inf<strong>ra</strong>structure investment and reforms have been<br />

disappointing. Indeed, the <strong>la</strong>test 2008 survey <strong>sh</strong>ows<br />

Bang<strong>la</strong>de<strong>sh</strong> slipping to 124 out of 127 countries <strong>ra</strong>nked.<br />

6) But we take this “rear-view” mirror snap<strong>sh</strong>ot of the<br />

const<strong>ra</strong>ints for the Bang<strong>la</strong>de<strong>sh</strong> Technology sector<br />

as an indica<strong>tio</strong>n of future potential in terms of how<br />

much net software exports could grow from their<br />

current levels of around $ 30mn with the necessary<br />

investments in a second submarine cable as well as<br />

effective t<strong>ra</strong>ining, marketing and distribu<strong>tio</strong>n.<br />

Fig Fig 01: 01: Strengths Strengths and and weaknesses weaknesses weaknesses of of Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> IT IT from<br />

WEF/INSEAD WEF/INSEAD WEF/INSEAD 2008 2008 Network Network Readiness Readiness Report<br />

Report<br />

Weaknesses Weaknesses (10 (10 worst worst worst <strong>ra</strong>nkings <strong>ra</strong>nkings out out out of of of 127 127 127 countries)<br />

countries)<br />

Intellectual property protec<strong>tio</strong>n 127<br />

Avai<strong>la</strong>bility of government online services 126<br />

Avai<strong>la</strong>bility of new telephone lines 125<br />

Internet users* 125<br />

Local avai<strong>la</strong>bility of research and t<strong>ra</strong>ining services 125<br />

Presence of ICT in government offices 124<br />

Extent of staff t<strong>ra</strong>ining 123<br />

Internet access in schools 121<br />

Laws re<strong>la</strong>ting to ICT 121<br />

University-industry research col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n 120<br />

58


Strengths Strengths (10 (10 best best <strong>ra</strong>nking <strong>ra</strong>nking out out of of of 127 127 countries)<br />

countries)<br />

Extent and effect of taxa<strong>tio</strong>n 37<br />

Number of procedures required to start a business* 44<br />

Total tax <strong>ra</strong>te* 49<br />

Freedom of the press 60<br />

Intensity of local competi<strong>tio</strong>n 69<br />

E-participa<strong>tio</strong>n index* 69<br />

Avai<strong>la</strong>bility of scientists and engineers 72<br />

State of cluster development 73<br />

Quality of competi<strong>tio</strong>n in the ISP sector 75<br />

Utility patents* 86<br />

The table above also from the WEF/INSEAD report breaks<br />

down the ove<strong>ra</strong>ll 124 th p<strong>la</strong>ce <strong>ra</strong>nking by sector and<br />

Bang<strong>la</strong>de<strong>sh</strong> does have some positives in terms of avai<strong>la</strong>bility<br />

of scientists and engineers as well as ease of creating a<br />

business and local taxa<strong>tio</strong>n <strong>ra</strong>tes.<br />

However, we believe that these const<strong>ra</strong>ints are not<br />

insurmountable and that a focused ICT st<strong>ra</strong>tegy can succeed<br />

in establi<strong>sh</strong>ing a more significant domestic technology sector.<br />

While we accept that geog<strong>ra</strong>phic proximity to India remains<br />

an insufficient condi<strong>tio</strong>n for a competitive Bang<strong>la</strong>de<strong>sh</strong> ICT<br />

sector , we believe a number of factors argue that it may be<br />

poised for a significant accele<strong>ra</strong><strong>tio</strong>n in growth.<br />

As Nasscom (2006 noted): “The search for greater economic<br />

benefits achieved through off<strong>sh</strong>ore outsourcing is<br />

encou<strong>ra</strong>ging firms to explore alternate low-cost sourcing<br />

destina<strong>tio</strong>ns. Further, recognising the foreign investment<br />

potential represented by the industry, the governments in<br />

these low-cost destina<strong>tio</strong>ns are <strong>la</strong>ying special emphasis on<br />

nurturing IT-ITeS in their countries… the potential of these<br />

alternate destina<strong>tio</strong>ns <strong>sh</strong>ould not be ignored…"<br />

St<strong>ra</strong>tegy St<strong>ra</strong>tegy St<strong>ra</strong>tegy and and Opportunities<br />

Opportunities<br />

It is reasonable for any potential investor to ques<strong>tio</strong>n given<br />

the <strong>la</strong>ck of progress in IT reflects an intrinsic inability for<br />

Bang<strong>la</strong>de<strong>sh</strong> to compete in tech/outsourcing space. Is a<br />

sizeable ICT industry mission impossible? But we believe<br />

that a number of changes in the global competitive<br />

<strong>la</strong>ndscape argues that this is not just a “thrust sector” in<br />

name but is genuinely at a tipping point with the prospects<br />

for explosive growth.<br />

Firstly, Bang<strong>la</strong>de<strong>sh</strong> can benefit from the <strong>ra</strong>pid increase in<br />

wage costs in India's IT sector coupled with the apprecia<strong>tio</strong>n<br />

of the Indian Rupee versus the USD has reduced India's<br />

compa<strong>ra</strong>tive cost advantage. Secondly there is a growing<br />

<strong>sh</strong>ortage of skilled <strong>la</strong>bour in cities like Bangalore along with<br />

increased worker turnover/problems with staff reten<strong>tio</strong>n. The<br />

absence of a developed tech sector in Bang<strong>la</strong>de<strong>sh</strong> clearly<br />

reduces the competi<strong>tio</strong>n for highly skilled workers by<br />

technology companies growing there.<br />

Secondly Bang<strong>la</strong>de<strong>sh</strong> can benefit from the increasing<br />

concern among leading companies about over-reliance on<br />

India and to diversify their outsourcing requirements. In the<br />

same way that Vietnam benefitted from an “China+one<br />

st<strong>ra</strong>tegy”, other Asian countries can posi<strong>tio</strong>n themselves as<br />

“India+one” technology providers.<br />

Thirdly, by developing its IT talent pool and breadth of<br />

capabilities, Bang<strong>la</strong>de<strong>sh</strong> can posi<strong>tio</strong>n itself to benefit from<br />

“secondary outsourcing” from Indian companies that need<br />

an addi<strong>tio</strong>nal <strong>la</strong>bour supply. Also from Indian IT companies<br />

looking to expand into a <strong>ra</strong>pidly growing domestic market of<br />

150 mn people.<br />

Finally, and perhaps most significantly, it is our view that<br />

Bang<strong>la</strong>de<strong>sh</strong> has barely tapped the intellectual and<br />

commercial capital of the re<strong>la</strong>tively <strong>la</strong>rge numbers of NRBs<br />

working in the technology sector in the US. We have little<br />

doubt that the Bang<strong>la</strong>de<strong>sh</strong>i diaspo<strong>ra</strong> can have the same<br />

t<strong>ra</strong>nsforma<strong>tio</strong>nal impact on the domestic IT sector that NRIs<br />

had on India in the 1990s. A number are keen to use their<br />

accumu<strong>la</strong>ted knowledge and business experience to start up<br />

more new tech ventures within Bang<strong>la</strong>de<strong>sh</strong>. Others remain<br />

in the US and use their contacts and credible interface with<br />

global tech companies to partner with Bang<strong>la</strong>de<strong>sh</strong>i<br />

corpo<strong>ra</strong>tes to both market, source deals and project<br />

managers. What is needed is an effective interface and<br />

p<strong>la</strong>tform for such NRBs to engage in the Bang<strong>la</strong>de<strong>sh</strong><br />

technology space.<br />

The problems for Bang<strong>la</strong>de<strong>sh</strong> have not been that<br />

Government does not know the appropriate steps to create<br />

the right enabling environment for a multi-billion dol<strong>la</strong>r<br />

IT/Outsourcing sector. Rather it has been a <strong>la</strong>ck of<br />

execu<strong>tio</strong>n, prioritiza<strong>tio</strong>n and focus. But focused investment<br />

on a second submarine cable as an aggressive st<strong>ra</strong>tegy to<br />

s<strong>la</strong><strong>sh</strong> internet costs is critical. As an intermediate step to<br />

cheap broadband access for the na<strong>tio</strong>n via Wimax<br />

technology that could t<strong>ra</strong>nsform e-learning and egovernance,<br />

the government needs to establi<strong>sh</strong> a number of<br />

regional technology parks that offer not just cheap<br />

telecommunica<strong>tio</strong>ns but <strong>sh</strong>ared marketing and management<br />

support, a tech expertise/t<strong>ra</strong>ining centre and also genuine<br />

business incubators. NRBs can return and create new tech<br />

business in partner<strong>sh</strong>ip with existing local tech companies.<br />

But in addi<strong>tio</strong>n, in the spirit of the <strong>la</strong>test t<strong>ra</strong>nsna<strong>tio</strong>nal<br />

thinking on leve<strong>ra</strong>ging diaspo<strong>ra</strong>, NRBs in US tech space<br />

<strong>sh</strong>ould set up marketing front ends with the right<br />

compensa<strong>tio</strong>n and incentives to market specific Bang<strong>la</strong>de<strong>sh</strong><br />

outsourcing/ITES capabilities. Providing both greater<br />

cont<strong>ra</strong>ctual confidence for US and European companies as<br />

well as better project management and feedback on<br />

customer requirements along with knowledge and<br />

technology t<strong>ra</strong>nsfers is another role these “t<strong>ra</strong>nsna<strong>tio</strong>nal”<br />

NRBs can provide.<br />

There is nothing inevitable about Bang<strong>la</strong>de<strong>sh</strong>’s emergence<br />

as a major technology destina<strong>tio</strong>n in Asia. But we remain of<br />

the view that with the necessary reforms in terms of a<br />

focused voca<strong>tio</strong>nal t<strong>ra</strong>ining prog<strong>ra</strong>mme for IT workers, lower<br />

internet costs and more effective leve<strong>ra</strong>ge of the tech<br />

diaspo<strong>ra</strong> could see net software and ITES export revenues<br />

move from around $ 30mn currently to in excess of $ 1bn on<br />

a 5 year time horizon. In fulfilling such expecta<strong>tio</strong>ns, we<br />

believe there will be significant and att<strong>ra</strong>ctive FDI and<br />

investment opportunities for global corpo<strong>ra</strong>tes and investors.<br />

59


Appendix Appendix 9 – Re Ready Re<br />

ady Made Made Garments Garments (RMG)<br />

(RMG)<br />

The The The current current scenario:<br />

scenario:<br />

Bang<strong>la</strong>de<strong>sh</strong> takes pride in its RMG sector, which earned<br />

USD 9.98bn from July 2007 to May 2008, making up 78.98%<br />

of the country’s total exports. The sector expects to earn over<br />

USD 11bn in exports in fiscal year 2008.<br />

In addi<strong>tio</strong>n to employing 4.5mn workers, of which 80% are<br />

women, the RMG sector has a 45% value addi<strong>tio</strong>n, and<br />

contributed 13.6% to GDP in fiscal year 2008. Moreover, the<br />

sector grew by 15.8% in FY 08.<br />

Figure Figure 1. . Knit Knit Knit and and Woven Woven exports exports over over the the years<br />

years<br />

The The Challenge:<br />

Challenge:<br />

Source: BGMEA and BKMEA<br />

In spite of the global meltdown, entrepreneurs belonging to<br />

the readymade garments sector remain optimistic about<br />

exports in the sector. As global stock markets continue to<br />

c<strong>ra</strong><strong>sh</strong> and consumer spending declines, retailers are<br />

posi<strong>tio</strong>ning themselves to source from competitive markets.<br />

Therefore, having a compa<strong>ra</strong>tive advantage of cheap <strong>la</strong>bor,<br />

Bang<strong>la</strong>de<strong>sh</strong> is expected to benefit from the <strong>sh</strong>ift in business,<br />

if not directly from growth factors. In order to cope with<br />

possible adverse affects on the industry, Bang<strong>la</strong>de<strong>sh</strong> Bank<br />

has suggested forming a safety net for RMG workers, along<br />

with addi<strong>tio</strong>nal facilities for exporters such as providing pre<br />

and post-<strong>sh</strong>ipment credits for longer periods and allowing<br />

rescheduling of loans. However, BB has been cau<strong>tio</strong>us about<br />

maintaining a stable BDT-USD exchange <strong>ra</strong>te, and does not<br />

yet see a compelling reason to depreciate the exchange <strong>ra</strong>te<br />

to a major extent.<br />

However, historically, the sector has been faced with multiple<br />

challenges. Strikes impeded growth in the export sector a<br />

few years back; <strong>la</strong>bor unrest destabilized the sector for a few<br />

seasons and till date, in spite of the port func<strong>tio</strong>ning with<br />

more efficiency and improved customs, the sector needs to<br />

meet the ultimate level of expecta<strong>tio</strong>n from the buyer’s end.<br />

Starting from R&D, and a complete control over sourcing <strong>ra</strong>w<br />

materials, buyers’ requirements include a competitive CM<br />

(cutting and making) margin, adequate loyalty to technical,<br />

social and security compliance requirements, and the<br />

<strong>sh</strong>ortest lead time in orders. Meanwhile, producers/exporters<br />

continue to g<strong>ra</strong>pple with cost-cutting measures in order to<br />

stay competitive and produce more value added products.<br />

Recommenda<strong>tio</strong>ns:<br />

Recommenda<strong>tio</strong>ns:<br />

Recommenda<strong>tio</strong>ns:<br />

In order to retain competitiveness, the private sector needs to<br />

col<strong>la</strong>bo<strong>ra</strong>te with the public sector to secure:<br />

-new markets through coordinated marketing and sales<br />

efforts<br />

-uninterrupted access to power and other inputs re<strong>la</strong>ted to<br />

produc<strong>tio</strong>n<br />

-high value added business with a g<strong>ra</strong>dual prepa<strong>ra</strong><strong>tio</strong>n to<br />

enhance skills, technology and capacity<br />

-FDI/JV and long term loans for backward and forward<br />

linkage industries for woven products, as only about 35% of<br />

the woven fabric is produced locally, whereas knit sector<br />

receives ca<strong>sh</strong> incentives.<br />

-implementa<strong>tio</strong>n of cent<strong>ra</strong>l bonded warehouse as per<br />

BGMEA sugges<strong>tio</strong>n in order to cope with <strong>sh</strong>orter lead time<br />

requirements<br />

-workers’ t<strong>ra</strong>ining for improving skills for successful ope<strong>ra</strong><strong>tio</strong>n<br />

of the industry is crucial.<br />

-active participa<strong>tio</strong>n in multi<strong>la</strong>te<strong>ra</strong>l and regional p<strong>la</strong>tforms for<br />

duty free market access in EU, US and the rest of the globe.<br />

- a defined Code of Conduct for Freight Forwarders<br />

-public sector support for the rehabilita<strong>tio</strong>n of sick industry<br />

-Garments vil<strong>la</strong>ge in order to encou<strong>ra</strong>ge industrial clusters.<br />

-a pa<strong>ra</strong>digm <strong>sh</strong>ift in the current country concept or image of<br />

Bang<strong>la</strong>de<strong>sh</strong> being a produc<strong>tio</strong>n loca<strong>tio</strong>n for basic products<br />

-implementa<strong>tio</strong>n of <strong>ra</strong>te of exchange to be effective for import<br />

as per WTO customs provisions, and to be fixed by the<br />

competent authorities of the country of importa<strong>tio</strong>n and the<br />

<strong>ra</strong>te of exchange, during exporta<strong>tio</strong>n to be provided by each<br />

Member considering competitiveness and other economic<br />

factors.<br />

-active engagement of the entrepreneurs in the produc<strong>tio</strong>n<br />

facility in order to minimize the worker-owner tension in order<br />

to introduce a smooth and efficient produc<strong>tio</strong>n process<br />

Figure Figure Figure 2. 2. Chief Chief RMG RMG export export export items<br />

items<br />

MAIN MAIN APPAREL APPAREL APPAREL ITEMS ITEMS EXPORTED EXPORTED FROM<br />

FROM<br />

BANGLADESH BANGLADESH BANGLADESH (USD (USD mil millions) mil lions)<br />

FISCAL<br />

FISCAL<br />

YEAR<br />

YEAR<br />

SHIRTS SHIRTS<br />

TROU TROU-<br />

SERS<br />

SERS<br />

JACKETS JACKETS TEES<br />

TEES<br />

SWEA SWEA-<br />

TERS<br />

TERS<br />

TOTAL<br />

TOTAL<br />

2000 -01 1073.6 656.3 573.7 597.4 476.9 3378.0<br />

2001-02 871.2 636.6 412.3 546.3 517.8 2984.3<br />

2002-03 1019.9 643.7 464.5 642.6 578.4 3349.0<br />

2003-04 17116.6 1334.9 364.8<br />

2004-05 1053.3 1667.7 430.3<br />

2005-06 1056.7 2165.3 389.5<br />

2006-07 943.4 2201.3 1005.1<br />

1062.<br />

1<br />

1349.<br />

7<br />

1781.<br />

5<br />

2208.<br />

9<br />

616.3 4494.6<br />

893.1 5394.2<br />

1044.0 6437.0<br />

1248.1 7606.8<br />

Source: Export Promo<strong>tio</strong>n Bureau, compiled by BGMEA<br />

Figure Figure Figure 3. 3. BD BD BD Clothing Clothing Exports Exports 2007<br />

2007<br />

Source: Export Promo<strong>tio</strong>n Bureau<br />

60


Appendix Appendix 10 10 – Bang<strong>la</strong>de<strong>sh</strong> Better Better Business Forum Forum Working Group Pending Pending<br />

Decisions<br />

Decisions<br />

P<strong>la</strong>ce greater emphasis on effective implementa<strong>tio</strong>n of the<br />

249 BBBF recommenda<strong>tio</strong>ns, of which 39 are long term in<br />

nature. Consider expanding BBBF with addi<strong>tio</strong>nal<br />

professionals and at the local district/division levels, and<br />

forming industry-based working groups. Outstanding or<br />

pending recommenda<strong>tio</strong>ns are outlined below.<br />

Business Business Finance Finance Working Working Group<br />

Group<br />

• A Discount House may be establi<strong>sh</strong>ed to ensure liquidity<br />

of bonds and debentures and facilitate investor exit. In<br />

the interim, ICB and SEC can carry out this role.<br />

• The ICB-run Discount House may also provide<br />

discounting services against the receivables of<br />

companies, thus increasing ca<strong>sh</strong> flow and ar<strong>ra</strong>nging<br />

ope<strong>ra</strong>ting capital.<br />

• EEF <strong>sh</strong>ould be restructured with<br />

assessment/distribu<strong>tio</strong>n/recovery through selected<br />

Banks/Fls/ Venture Capital Companies (Management<br />

Companies) with due terms, condi<strong>tio</strong>ns and performance<br />

criteria (Distribu<strong>tio</strong>n, Focus, Products, Risk<br />

Management, Evalua<strong>tio</strong>n).<br />

Inf<strong>ra</strong>structure Development Company Limited <strong>sh</strong>ould be<br />

restructured based on market-driven checks-andba<strong>la</strong>nce<br />

to meet objectives, privatiza<strong>tio</strong>n with private<br />

sector mgmt.<br />

• Financial incentives to Users for Broadband data service<br />

in small towns and vil<strong>la</strong>ges.<br />

• Banks and FIs are gene<strong>ra</strong>lly unable to meet agriculture<br />

loan targets due to <strong>sh</strong>ortage of funds; BB can increase<br />

the refinance funds for these banks so that they can<br />

continue the loans to farmers<br />

• Bang<strong>la</strong>de<strong>sh</strong> Bank can introduce guidelines re<strong>la</strong>ting to<br />

refinancing of private banks at low interest <strong>ra</strong>tes for the<br />

purpose of giving agriculture loans.<br />

• Revolving Crop Credit distributing processes <strong>sh</strong>ould be<br />

used to increase the impact of loans.<br />

• An Area Approach process may be used to increase<br />

cove<strong>ra</strong>ge of loans<br />

• Sharecroppers <strong>sh</strong>ould be provided with low interest<br />

loans.<br />

• Fi<strong>sh</strong>ermen <strong>sh</strong>ould be provided with low interest loans<br />

• NGO Linkages <strong>sh</strong>ould be improved further<br />

• Agriculture or crop insu<strong>ra</strong>nce can be initiated to reduce<br />

risks associated with agriculture loans<br />

• Provide funds to fruit, flower and vegetable produc<strong>tio</strong>n<br />

through <strong>sh</strong>ort term horticulture financing.<br />

• Provide loans for the establi<strong>sh</strong>ment of linkage industries<br />

in the livestock sector<br />

• Increase the cove<strong>ra</strong>ge of agriculture loans by using the<br />

ID issued by the Agriculture Extension Department<br />

• Strengthen the role of the Agriculture Loan Distribu<strong>tio</strong>n<br />

Committees<br />

• Correct the credit norms to increase the cove<strong>ra</strong>ge of<br />

loans.<br />

• Establi<strong>sh</strong> logical and appropriate targets for agriculture<br />

loan distribu<strong>tio</strong>n<br />

• The Securities and Exchange Commission must p<strong>la</strong>y a<br />

role in ensuring interna<strong>tio</strong>nal quality accounting<br />

p<strong>ra</strong>ctices by carefully examining annual, financial year<br />

and other accounts of listed companies<br />

• Use professional promo<strong>tio</strong>n and communica<strong>tio</strong>n firms<br />

(PR firms) to communicate in North America, EU etc.<br />

regarding Better Business Climate in BD through<br />

Reforms, reorganiza<strong>tio</strong>ns, restructurings along with<br />

Recommenda<strong>tio</strong>ns from BBBF.<br />

• Through discussions with all banks, distribu<strong>tio</strong>n of<br />

agriculture loans may be made compulsory. The banks<br />

will be responsible for setting logical and implementable<br />

targets for these loans.<br />

Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure Working Working Group Group<br />

Group<br />

• 6th & 7th units of Kaptai Hydro Power P<strong>la</strong>nt could be<br />

made ope<strong>ra</strong><strong>tio</strong>nal by setting a turbine. Immediately<br />

proposal <strong>sh</strong>ould be submitted to the ECNEC. During the<br />

monsoon the p<strong>la</strong>nt will help to provide addi<strong>tio</strong>nal power.<br />

• Gho<strong>ra</strong><strong>sh</strong>al Power P<strong>la</strong>nt is the oldest and one of the<br />

major power p<strong>la</strong>nt, but most inefficient. Now government<br />

is thinking for bringing Gho<strong>ra</strong><strong>sh</strong>al and A<strong>sh</strong>ugong power<br />

p<strong>la</strong>nt to be ope<strong>ra</strong>ted under merchant power t<strong>ra</strong>ding<br />

system. If it is possible to bring these<br />

• Na<strong>tio</strong>nal Electricity Marketing Company (NEMCO)<br />

concept <strong>sh</strong>ould also be considered for introducing Open<br />

Access Grid System.<br />

• Na<strong>tio</strong>nal Grid <strong>sh</strong>ould be made more secured by<br />

introducing Hi-tech ope<strong>ra</strong><strong>tio</strong>nal system.<br />

• Import of coal <strong>sh</strong>ould be made avai<strong>la</strong>ble with required<br />

inf<strong>ra</strong>structure so that coal-based power p<strong>la</strong>nt can be<br />

establi<strong>sh</strong>ed.<br />

• Imported furnace oil could be used as a substitute of<br />

coal and gas in the power p<strong>la</strong>nt.<br />

• Use of LNG can be made avai<strong>la</strong>ble at the remote area<br />

asa an alternative of the energy resources.<br />

• Extensive Off<strong>sh</strong>ore Explo<strong>ra</strong><strong>tio</strong>n <strong>sh</strong>ould be undertaken in<br />

the Bay of Bengal. Moreover other drilling sites/areas<br />

need to be identified for explo<strong>ra</strong><strong>tio</strong>n work. As per<br />

estimate our current gas reserve will <strong>la</strong>st upto 2019;<br />

therefore we need to d<strong>ra</strong>w up an aggressive p<strong>la</strong>n for gas<br />

explo<strong>ra</strong><strong>tio</strong>n.<br />

• All efforts may be made with the government of<br />

Myanmar for the import of gas. Since our gas reserves<br />

are limited, we <strong>sh</strong>ould formu<strong>la</strong>te various op<strong>tio</strong>ns to make<br />

gas avai<strong>la</strong>ble as our prime energy source. Therefore, as<br />

a first op<strong>tio</strong>n, we <strong>sh</strong>ould seek ar<strong>ra</strong>ngement of gas from<br />

Myanmar at competitive price.<br />

• Develop coal mines and <strong>sh</strong>ift power gene<strong>ra</strong><strong>tio</strong>n<br />

dependency from gas to coal<br />

• Increase ability to negotiate leasing of coal mines and<br />

gas fields<br />

• Capacity building in negotiating and administ<strong>ra</strong>ting <strong>la</strong>rge<br />

inf<strong>ra</strong>structure project cont<strong>ra</strong>cts <strong>sh</strong>ould also be taken up<br />

seriously<br />

• Preparing the Coal Sector Master P<strong>la</strong>n<br />

• Use of efficient motors, boilers, machines and<br />

gene<strong>ra</strong>tors<br />

• Introduce holiday staggering for power and gas<br />

simultaneously for industrial area<br />

• BPDB <strong>sh</strong>ould be privatized<br />

61


• Like DESCO, create seve<strong>ra</strong>l zones for power<br />

distribu<strong>tio</strong>n. These zones may be treated as west zone,<br />

south zone, north zone etc<br />

• So<strong>la</strong>r effective g<strong>la</strong>ss windows to reduce air condi<strong>tio</strong>ning<br />

load<br />

• Use mass-t<strong>ra</strong>nsit system minimizing personalized<br />

t<strong>ra</strong>nsport mode<br />

• Energy efficient housing and building can also be looked<br />

at. Specifica<strong>tio</strong>ns for highrise buildings may be made so<br />

as to substitute g<strong>la</strong>ss by so<strong>la</strong>r panel to make them<br />

energy efficient following policies like China<br />

• Use of Compact Fluorescent Lamps (CFL) instead of<br />

incandescent bulb<br />

• Use of wind energy <strong>sh</strong>ould also be encou<strong>ra</strong>ged in<br />

coastal areas<br />

• Establi<strong>sh</strong> a cent<strong>ra</strong>l e-Governance center for effective<br />

implementa<strong>tio</strong>n of e-commerce/digital business and<br />

allow credit card t<strong>ra</strong>nsac<strong>tio</strong>n for e-commerce<br />

• Gas line may be extended to West Zone for ba<strong>la</strong>nced<br />

economic development across the country, we need to<br />

make the avai<strong>la</strong>bility of gas to the western part of<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

• Crea<strong>tio</strong>n of Coal Bang<strong>la</strong><br />

• Setting up educa<strong>tio</strong>nal t<strong>ra</strong>ining and research institutes<br />

on coal<br />

• Specifica<strong>tio</strong>n for high rise building may be made as to<br />

substitute g<strong>la</strong>ss by So<strong>la</strong>r panel to make them power and<br />

energy efficient following policies like china<br />

• The government <strong>sh</strong>ould give incentives for the use of<br />

alternative renewable energy. Though it might seem that<br />

the government would lose lot of revenue in the <strong>sh</strong>ort<br />

term, actually on the other hand the government would<br />

be saving a huge amount of money in terms of<br />

subsidies, savings on energy costs and pressure on the<br />

na<strong>tio</strong>nal grid. The savings of grid power from diverted<br />

energy can thus be utilized to support productive<br />

industrial requirements.<br />

• Public awareness through advertisement campaign<br />

<strong>sh</strong>ould be created in various media on how to save<br />

energy (electricity and gas) and help conserve na<strong>tio</strong>nal<br />

resource<br />

• Establi<strong>sh</strong> Atomic Power P<strong>la</strong>nt considering future<br />

demand of power in the country.<br />

• Each of the existing distribu<strong>tio</strong>n assets and marketing<br />

units of BPDB, DESA, and DESCO etc <strong>sh</strong>ould be<br />

converted into public limited companies under the<br />

Companies Act 1994 with 55% <strong>sh</strong>are remaining with the<br />

GoB, 35% for Bang<strong>la</strong>de<strong>sh</strong> private sector, non-resident<br />

Bang<strong>la</strong>de<strong>sh</strong>is and foreign investor and 10% for the<br />

officials and workers of the respective utilities. Provided<br />

that BPDB as the single power purchaser and sole<br />

supplier of power to the distribu<strong>tio</strong>n companies <strong>sh</strong>all not<br />

have any <strong>sh</strong>are in any of the Distribu<strong>tio</strong>n Companies.<br />

• Introduc<strong>tio</strong>n of Pre-paid meter for all residential and<br />

commercial organiza<strong>tio</strong>n to reduce system loss.<br />

• Make use of so<strong>la</strong>r power for ancil<strong>la</strong>ry power<br />

requirements like street lights, garden lights, security<br />

lights, t<strong>ra</strong>ffic signals, and to meet essential power needs<br />

of the remote instal<strong>la</strong><strong>tio</strong>ns, schools, post offices, thanas<br />

etc to reduce dependency and pressure on the na<strong>tio</strong>nal<br />

grid.<br />

• A long term 5-10 year road-map on having 2000MW<br />

coal based power p<strong>la</strong>nts in the country <strong>sh</strong>ould be<br />

undertaken.<br />

• Government <strong>sh</strong>ould take immediate step to finalize coal<br />

policy<br />

• The use of so<strong>la</strong>r and other alternative power like wind,<br />

bio-mass will contribute to the reduc<strong>tio</strong>n of global<br />

warming syndrome and enable the government of the<br />

country to maximize its benefits from incentives on clean<br />

energy and carbon t<strong>ra</strong>de.<br />

• Strengthening the Government Institu<strong>tio</strong>ns such as<br />

BMD, GSB with funds, manpower, skills, t<strong>ra</strong>ining,<br />

knowledge and awareness of its role<br />

• Undertake a Coal Zone study<br />

• The following power sta<strong>tio</strong>ns can be added to the<br />

na<strong>tio</strong>nal grid within 6 months: Kumargaon (50MW),<br />

Fenchuganj (50 MW), Shahgibazar (50 MW), Bho<strong>la</strong><br />

(34.5 MW), Khulna (40 MW), A<strong>sh</strong>uganj (50 MW), Bog<strong>ra</strong><br />

(20 MW) and Bhe<strong>ra</strong>ma<strong>ra</strong> (20 MW) - Total 314.5 MW.<br />

• On midterm basis, the following power sta<strong>tio</strong>ns can be<br />

added to the na<strong>tio</strong>nal grid within 1-2 year: Si<strong>ra</strong>jgonj (150<br />

MW), Khulna (150 MW), Sikal Baha (150 MW), Bibiana<br />

(150 MW), Siddirganj (240 MW), Ba<strong>ra</strong> Pukuria (125 MW)<br />

- Total 965 MW<br />

• Crea<strong>tio</strong>n of Coal Sector Development Committee<br />

• Development of coal re<strong>la</strong>ted inf<strong>ra</strong>structure<br />

• Preparing the legal f<strong>ra</strong>mework for coal sector<br />

developments with respect to safety p<strong>ra</strong>ctices, mining<br />

rules & regu<strong>la</strong><strong>tio</strong>ns, institu<strong>tio</strong>nal developments etc<br />

• Phulbari, Kha<strong>la</strong>spor, and Dighipa<strong>ra</strong> Coal Mines need to<br />

be stressed immediately for safeguarding the na<strong>tio</strong>nal<br />

interest<br />

• Local manufacturing of so<strong>la</strong>r panel <strong>sh</strong>ould be<br />

encou<strong>ra</strong>ged which will help save foreign currency.<br />

Currently so<strong>la</strong>r panels are being imported from India<br />

• The government can also use so<strong>la</strong>r power to offset <strong>sh</strong>ort<br />

term peak requirements and save itself from huge<br />

investments for capacity building to meet the needs in<br />

the <strong>sh</strong>ort term<br />

• Energy audits of factories, industrial process and<br />

commercial buildings are essential<br />

• Immediately activate Bang<strong>la</strong>de<strong>sh</strong> Energy Regu<strong>la</strong>tory<br />

Commission (BERC) to undertake energy ba<strong>la</strong>nce and<br />

energy audit of the entire country<br />

• Formu<strong>la</strong>te Energy Efficiency Act immediately<br />

• Office timing can be made from 7.30 am to 3.30 pm in<br />

p<strong>la</strong>ce of current one<br />

• LED (Light Emitting Diode) Lighting can also be used for<br />

saving energy. LED lighting systems can be<br />

implemented for street lights immediately<br />

• Government can take measures for supplying BSTI<br />

approved Energy Saving Lamps (Made in Bang<strong>la</strong>de<strong>sh</strong>)<br />

to PBS members at a subsidized cost or long time<br />

payback process<br />

• Energy efficient appliances <strong>sh</strong>ould be encou<strong>ra</strong>ged<br />

• Na<strong>tio</strong>n-wide campaign <strong>sh</strong>ould be undertaken to make<br />

users /consumers understand the need to save energy<br />

be it electricity or gas<br />

• The inope<strong>ra</strong>tive power gene<strong>ra</strong><strong>tio</strong>n units must be<br />

converted into joint venture projects with private sector<br />

and foreign investor participa<strong>tio</strong>n with atleast 51%<br />

<strong>sh</strong>ares remaining with BPDB/GoB to resume ope<strong>ra</strong><strong>tio</strong>n<br />

as new gene<strong>ra</strong><strong>tio</strong>n undertaking<br />

• Currently units of about 900MW are under repair work.<br />

Immediately 300-400MW of power can be made<br />

avai<strong>la</strong>ble to the Na<strong>tio</strong>nal Grid by fast-paced repair work<br />

62


• 90MW Fenchuganj Power P<strong>la</strong>nt is gene<strong>ra</strong>ting 30MW<br />

power to the Na<strong>tio</strong>nal Grid. Immediate steps <strong>sh</strong>ould be<br />

undertaken to gene<strong>ra</strong>te the remaining 60MW<br />

• Expedite the process for new power p<strong>la</strong>nts under IPP<br />

and rental power p<strong>la</strong>nt for 10-50MW in order to increase<br />

produc<strong>tio</strong>n capability within 6-9 months. These IPP and<br />

rental power p<strong>la</strong>nts <strong>sh</strong>ould gene<strong>ra</strong>te 300-400 MW of<br />

power to the Na<strong>tio</strong>nal Grid. The present government has<br />

already approved the policy for establi<strong>sh</strong>ing 10-50MW<br />

power p<strong>la</strong>nts. This <strong>sh</strong>ould be implemented.<br />

• 450 megawatt combined cycle power p<strong>la</strong>nt at<br />

Bhe<strong>ra</strong>ma<strong>ra</strong>, approved by the government in 2000 may<br />

be implemented immediately<br />

• Tender requirements for 100-450 MW Power p<strong>la</strong>nst<br />

<strong>sh</strong>ould be more flexible to local companies as some of<br />

current tender requirements are too rigid for local<br />

companies. The tender requirements <strong>sh</strong>ould be made<br />

flexible to local companies to help them have a fair<br />

chance to win.<br />

• Create a competitive environment for the private sector<br />

in power projects<br />

• Single party exposure may be extended to 35% funded<br />

and 35% non funded capital of bank in order to allow<br />

addi<strong>tio</strong>nal funding in the power sector<br />

• Banks and financial institu<strong>tio</strong>ns <strong>sh</strong>ould be encou<strong>ra</strong>ged to<br />

offer discounted interest <strong>ra</strong>tes for power sector projects<br />

• NRBs <strong>sh</strong>ould be encou<strong>ra</strong>ged to invest in the power<br />

sector, like NRBs invest in the civil avia<strong>tio</strong>n sector<br />

• Part of the country's Foreign Currency Reserve <strong>sh</strong>ould<br />

be allocated for use in the Power Sector<br />

• The Securities Exchange Commission (SEC) <strong>sh</strong>ould<br />

make ar<strong>ra</strong>ngements to encou<strong>ra</strong>ge investors to <strong>ra</strong>ise<br />

money from the capital markets. For big projects there<br />

<strong>sh</strong>ould also be provision off load minimum 25% equity to<br />

Gene<strong>ra</strong>l Public within 7 years of ope<strong>ra</strong><strong>tio</strong>n<br />

• Government <strong>sh</strong>ould give a condi<strong>tio</strong>n that foreign<br />

investors must take local equity partners with minimum<br />

<strong>sh</strong>are of 35% in power sector<br />

• Captive power p<strong>la</strong>nts (CPP) need to be connected to<br />

Na<strong>tio</strong>nal Grid. Immediate technical proposal <strong>sh</strong>ould be<br />

made avai<strong>la</strong>ble in order for the CPPs to be connected to<br />

the na<strong>tio</strong>nal grid. This would allow instant power supply<br />

to the na<strong>tio</strong>nal grid and reduce load<br />

• Tax on CPP <strong>sh</strong>ould be withd<strong>ra</strong>wn. The government has<br />

introduced 10% tax on CPP which <strong>sh</strong>ould be withd<strong>ra</strong>wn<br />

to encou<strong>ra</strong>ge investors for CPP.<br />

• The license fee for CPP of Tk 5 <strong>la</strong>c imposed by<br />

Bang<strong>la</strong>de<strong>sh</strong> Energy Regu<strong>la</strong>tory Commission (BERC)<br />

<strong>sh</strong>ould be withd<strong>ra</strong>wn since captive power is being set up<br />

due to PDBs failure to provide continuous power as per<br />

demand of the industrial users.<br />

• Captive power wheeling is allowed in the present SPP<br />

policy, except that grid access through the BPDBs 33KV<br />

system is not certain and needs to be ensured by the<br />

regu<strong>la</strong>tory agencies.<br />

• Clustered Industrial and SME zones, Market<br />

Complexes, Housing Estates and other bulk consumers<br />

of power <strong>sh</strong>ould be encou<strong>ra</strong>ged to set up co-gene<strong>ra</strong><strong>tio</strong>n<br />

and captive power p<strong>la</strong>nts by ensuring: i. Low interest<br />

(


• To promote in public interest, gene<strong>ra</strong><strong>tio</strong>n of electricity<br />

based on renewable sources of energy the sector must<br />

be exempted from all duties and reducing the capital<br />

cost of projects based on non-conven<strong>tio</strong>nal and<br />

renewable sources of energy.<br />

• On long term basis the following power sta<strong>tio</strong>ns can be<br />

added to the na<strong>tio</strong>nal grid within 4-5 years: Meghna<br />

Ghat (450 MW), Si<strong>ra</strong>jgonj (450 MW), Khulna (210 MW)<br />

and Bibiana (450 MW) - Total 1560 MW<br />

• Compulsory use of Captive Power P<strong>la</strong>nt for 10-storied or<br />

high stored residential building and commercial building<br />

• Regional agreement like SASEC, SARRI, SAFTA efforts<br />

can be exploited<br />

Macro Macro-Economic Macro Economic Policy Policy Policy Working Working Group<br />

Group<br />

• Restructure BBS to improve data collec<strong>tio</strong>n, analysis<br />

and presenta<strong>tio</strong>n<br />

• Tax exemp<strong>tio</strong>n of Non-farm and commercial agroindustries<br />

<strong>sh</strong>ould be reviewed<br />

• In order to strengthen the current tax regime, the<br />

cove<strong>ra</strong>ge of direct taxes <strong>sh</strong>ould be increased<br />

• Allow public limited companies to plough back profits<br />

Business Business Business Entry Entry and and Ope<strong>ra</strong><strong>tio</strong>ns Ope<strong>ra</strong><strong>tio</strong>ns Working Working Group<br />

Group<br />

• Approval of all returns filing within a maximum of one<br />

year<br />

64


Appendix Appendix 11 11 – Climate Change<br />

The Government of Bang<strong>la</strong>de<strong>sh</strong> (GOB) with the support of<br />

the major donor agencies, has outlined a comprehensive<br />

st<strong>ra</strong>tegy on tackling climate change that culminated in a<br />

conference sponsored by DFID in the UK in September 2008<br />

along with a detailed report “Bang<strong>la</strong>de<strong>sh</strong> Climate Change<br />

St<strong>ra</strong>tegy and Ac<strong>tio</strong>n P<strong>la</strong>n” (BCCSAP 2008). The effort has<br />

been spear-headed by a climate change cell set up within the<br />

Ministry of Environment and Forests. We summarize some of<br />

the highlights of the report and in particu<strong>la</strong>r the climate<br />

change ac<strong>tio</strong>n p<strong>la</strong>n prog<strong>ra</strong>mmes. The <strong>la</strong>tter offer a clear road<br />

map as to how Bang<strong>la</strong>de<strong>sh</strong> can evolve a st<strong>ra</strong>tegy of both<br />

adapta<strong>tio</strong>n and mitiga<strong>tio</strong>n of climate change.<br />

But the greater involvement of the private sector is critical if<br />

Bang<strong>la</strong>de<strong>sh</strong> is to prepare itself for both the challenges and<br />

opportunities of climate change. Re<strong>la</strong>tively few companies in<br />

Bang<strong>la</strong>de<strong>sh</strong> have yet considered both the impact of climate<br />

change on their existing activities, and perhaps as<br />

importantly, the new commercial opportunities that will<br />

emerge both domestically and globally. We need a mindset<br />

<strong>sh</strong>ift in the corpo<strong>ra</strong>te sector to understand that those<br />

companies that adapt to the profound impact of climate<br />

change will gain major competitive advantage versus those<br />

that don’t. New export markets will also open that currently<br />

don’t exist as a result of the battle against global warming.<br />

Public-Private Partner<strong>sh</strong>ips (PPPs) has become a new buzz<br />

ph<strong>ra</strong>se with respect to tacking Bang<strong>la</strong>de<strong>sh</strong>’s inf<strong>ra</strong>structure<br />

crisis but we also need to ensure more PPPs in tacking<br />

climate change. The growth in Cleantech funds has been<br />

<strong>ra</strong>pid but this is clearly just the beginning. Over coming<br />

years, tens, but more likely hundreds of billions of dol<strong>la</strong>rs of<br />

investment funds will be focused on the<br />

“ Green Revolu<strong>tio</strong>n “. How can Bang<strong>la</strong>de<strong>sh</strong> att<strong>ra</strong>ct such<br />

funding given the particu<strong>la</strong>r vulne<strong>ra</strong>bility of its economy to<br />

climate change? Clearly greater awareness in terms of<br />

energy conserva<strong>tio</strong>n in the household sector is important.<br />

There has also been a <strong>ra</strong>pidly growing volume of research on<br />

the private sector implica<strong>tio</strong>ns of climate change, most<br />

notably by management consultancy firm McKinsey and Co,<br />

as well as a number of investment banks. It is critical that the<br />

private sector engage more fully and see the battle against<br />

climate change not as a burden or a form of taxa<strong>tio</strong>n but<br />

<strong>ra</strong>ther the major economic opportunity of our gene<strong>ra</strong><strong>tio</strong>n. We<br />

hope this report can p<strong>la</strong>y a role in increasing that awareness.<br />

Impact Impact of of Climate Climate Climate Change Change on on Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Climate change will exacerbate many of the current<br />

problems and natu<strong>ra</strong>l hazards the country faces. It is<br />

expected to result in:<br />

Increasingly Increasingly frequent frequent and and severe severe tropical tropical cyclones cyclones with<br />

higher wind speeds and storm surges leading to more<br />

damage in the coastal region<br />

Heavier Heavier and and more more more er<strong>ra</strong>tic er<strong>ra</strong>tic <strong>ra</strong>infall <strong>ra</strong>infall in the Ganges-<br />

B<strong>ra</strong>hmaput<strong>ra</strong>-Meghna system, including Bang<strong>la</strong>de<strong>sh</strong>, during<br />

the monsoon resulting in:<br />

• Higher Higher river river flows flows flows - causing over-topping and breaching<br />

of embankments and widespread flooding in ru<strong>ra</strong>l and<br />

urban areas<br />

• River River bank bank bank erosion erosion - resulting in loss of homes and<br />

agricultu<strong>ra</strong>l <strong>la</strong>nd to the rivers;<br />

• Increased Increased sedimen sedimenta<strong>tio</strong>n<br />

sedimen sedimenta<strong>tio</strong>n<br />

ta<strong>tio</strong>n - in riverbeds leading to<br />

d<strong>ra</strong>inage conges<strong>tio</strong>n and water logging;<br />

Melting Melting of of of the the Hima<strong>la</strong>yan Hima<strong>la</strong>yan Hima<strong>la</strong>yan g<strong>la</strong>ciers g<strong>la</strong>ciers - leading to higher river<br />

flows in the warmer months of the year, followed by lower<br />

river flows and increased saline intrusion after the g<strong>la</strong>ciers<br />

have <strong>sh</strong>runk or disappeared;<br />

Lower Lower and and and more more er<strong>ra</strong>tic er<strong>ra</strong>tic <strong>ra</strong>infall <strong>ra</strong>infall - resulting in increasing<br />

droughts, especially in drier northern and western regions of<br />

the country;<br />

Sea Sea level level rises rises - leading to submergence of lowlying coastal<br />

areas and saline water intrusion up coastal rivers and into<br />

groundwater aquifers, reducing fre<strong>sh</strong>water avai<strong>la</strong>bility;<br />

damage to the Sundarbans mangrove forest, a World<br />

Heritage site with rich biodiversity; and d<strong>ra</strong>inage conges<strong>tio</strong>n<br />

inside coastal polders, which will adversely affect agriculture;<br />

Warmer Warmer and and more more more Humid Humid Humid Weather Weather - leading to increased<br />

prevalence of disease and disease vectors.<br />

Each of these changes is likely to seriously affect agriculture<br />

(crops, livestock and fi<strong>sh</strong>eries). Although agriculture now<br />

accounts for only 20% of GDP, over 60% of people depend<br />

on agriculture directly or indirectly for their livelihoods. The<br />

higher tempe<strong>ra</strong>tures and changing <strong>ra</strong>infall patterns, coupled<br />

with increased flooding, rising salinity in the coastal belt and<br />

droughts are likely to reduce crop yields and crop produc<strong>tio</strong>n.<br />

IPCC estimates that, by 2050, rice produc<strong>tio</strong>n in Bang<strong>la</strong>de<strong>sh</strong><br />

could decline by 8% and wheat by 32% (against a base year<br />

of 1990).<br />

Shortage of safe drinking water is likely to become more<br />

pronounced, especially in the coastal belt and in droughtprone<br />

areas in the north-west of the country. This will impose<br />

hard<strong>sh</strong>ip on women and children, who are responsible for<br />

collecting drinking water for their families. Increasingly saline<br />

drinking water may also result in health hazards, especially<br />

for pregnant women. Climate change is likely to adversely<br />

affect women more than men.<br />

Increased river bank erosion and saline water intrusion in<br />

coastal areas are likely to disp<strong>la</strong>ce hundreds of thousands of<br />

people who will be forced to mig<strong>ra</strong>te, often to slums in Dhaka<br />

and other big cities. If sea level rise is higher than currently<br />

expected and coastal polders are not strengthened and/or<br />

new ones built, six to eight million people could be disp<strong>la</strong>ced<br />

by 2050 and would have to be resettled.<br />

All of these changes threaten the food security, livelihoods<br />

and health of the poor. People living on river is<strong>la</strong>nds ( ) and<br />

along the coastline (e.g. fi<strong>sh</strong>ing families), are among the<br />

poorest people in the country. They will be seriously affected,<br />

as will others who lose their <strong>la</strong>nd to river erosion. Extremely<br />

poor households throughout the country, including many<br />

female-headed households, will suffer most from climate<br />

change.<br />

Climate change is likely to increase the incidence of waterborne<br />

and air-borne diseases. Bacteria, pa<strong>ra</strong>sites and<br />

disease vectors breed faster in warmer and wetter condi<strong>tio</strong>ns<br />

and where there is poor d<strong>ra</strong>inage and sanita<strong>tio</strong>n. In view of<br />

this, it will be important to implement public health measures<br />

65


(immunisa<strong>tio</strong>n; improved d<strong>ra</strong>inage, sanita<strong>tio</strong>n and hygiene) to<br />

reduce the spread of these diseases and to improve access<br />

to health services for those communities likely to be worst<br />

affected by climate change. Unless these steps are taken,<br />

the health of many of the poorest and most vulne<strong>ra</strong>ble<br />

people will deterio<strong>ra</strong>te. Acute illness is known to be one of<br />

the main triggers driving people into extreme poverty and<br />

destitu<strong>tio</strong>n in Bang<strong>la</strong>de<strong>sh</strong>.<br />

Bang<strong>la</strong>de<strong>sh</strong> has one of the highest popu<strong>la</strong><strong>tio</strong>n densities of<br />

any country in the world. By 2050, the popu<strong>la</strong><strong>tio</strong>n will have<br />

grown from approximately 150 million, in 2008, to more than<br />

200 million, with almost half of the people living in cities and<br />

towns. Dhaka will have become a mega city with a<br />

popu<strong>la</strong><strong>tio</strong>n of over 40 million. The impact of higher and more<br />

intense <strong>ra</strong>infall will be felt in urban areas, where d<strong>ra</strong>inage is<br />

already a serious problem and sewers frequently back-up in<br />

the monsoon season. The poor, who live in slums and<br />

informal settlements, often in low-lying parts of cities, will be<br />

worst affected. With <strong>ra</strong>pid and unp<strong>la</strong>nned urbanisa<strong>tio</strong>n in<br />

Bang<strong>la</strong>de<strong>sh</strong>, this is going to become an even more urgent<br />

and pressing problem.<br />

Att<strong>ra</strong>cting Att<strong>ra</strong>cting Cleantech Cleantech funds funds funds to to Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

The <strong>ra</strong>pid growth in global cleantech funds has been<br />

followed by the emergence of Asian-focused cleantech that<br />

will be specifically focused on funding emerging opportunities<br />

in the region. Bang<strong>la</strong>de<strong>sh</strong> policymakers and the private<br />

sector need to work together to develop a series of specific<br />

investment opportunities along with effective marketing of<br />

these projects to global/regional cleantech funds. This will<br />

not only bring in addi<strong>tio</strong>nal funding to help Bang<strong>la</strong>de<strong>sh</strong> battle<br />

climate change but also critically bring the country muchneeded<br />

technical expertise that is commercially focused that<br />

will be an important complement to the technical expertise<br />

that exists within the public sector, whether it is the Climate<br />

Change Cell within the Department of Environment or<br />

technical assistance supported by the donor agencies.<br />

Implica<strong>tio</strong>ns for Corpo<strong>ra</strong>te St<strong>ra</strong>tegy:<br />

A growing number of corpo<strong>ra</strong>tes within Bang<strong>la</strong>de<strong>sh</strong> are<br />

seeking to globalize in terms of new exports markets, product<br />

diversifica<strong>tio</strong>n and even overseas produc<strong>tio</strong>n loca<strong>tio</strong>ns.<br />

However, those companies that most effectively posi<strong>tio</strong>n<br />

themselves to adapt to the challenge of climate change are<br />

likely to become market leaders in the future. Opportunities<br />

exist in terms of mitiga<strong>tio</strong>n and adapta<strong>tio</strong>n on a number of<br />

fronts – some examples might be<br />

- Large RMG and Textile manufacturers to tap multi<strong>la</strong>te<strong>ra</strong>l<br />

expertise and in some cases funding to move to more<br />

cost effective produc<strong>tio</strong>n to reduce energy costs. Ecofriendly<br />

products such as manufactured from natu<strong>ra</strong>l<br />

materials like jute are likely to become a more significant<br />

target market,<br />

- In the Building sector, REHAB members who <strong>sh</strong>ift<br />

towards more environmentally efficient buildings. There<br />

has already been some initiatives from IDCOL to<br />

sponsor roof-based so<strong>la</strong>r water heating systems. But<br />

Builders also need to encou<strong>ra</strong>ge the instal<strong>la</strong><strong>tio</strong>n of more<br />

energy efficient air condi<strong>tio</strong>ning systems. Builders also<br />

need to focus on more effective insu<strong>la</strong><strong>tio</strong>n of building to<br />

reduce the energy taken for cooling.<br />

- There will significant opportunities for Bang<strong>la</strong>de<strong>sh</strong> in<br />

light engineering focused on supplying <strong>ra</strong>pidly emerging<br />

alternative energy technologies in the developed world.<br />

- Agro-focused firms such as ACI and P<strong>ra</strong>n <strong>sh</strong>ould be well<br />

posi<strong>tio</strong>ned to receive addi<strong>tio</strong>nal funding to develop more<br />

- intensive/higher productivity organised farming. Also to<br />

spear head Jatropha and other produc<strong>tio</strong>n.<br />

- More companies need to follow the lead of Rahimafrooz<br />

in so<strong>la</strong>r panel distribu<strong>tio</strong>n and establi<strong>sh</strong> climate change<br />

focused subsidiaries in their businesses to posi<strong>tio</strong>n for<br />

<strong>ra</strong>pidly growing mitiga<strong>tio</strong>n and adapta<strong>tio</strong>n opportunities.<br />

Alternative Alternative Energy Energy Opportunities Opportunities Opportunities in in Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong><br />

So<strong>la</strong>r So<strong>la</strong>r Power<br />

Power<br />

Of Of Of all all the the the rrenewable<br />

r renewable<br />

enewable technologies (except (except for for hydro) hydro)<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> has has made made the the greatest greatest progress progress in in so<strong>la</strong>r so<strong>la</strong>r energy.<br />

energy.<br />

In 2007, about 75% of power gene<strong>ra</strong><strong>tio</strong>n from renewable<br />

sources was from so<strong>la</strong>r energy. From currently installed<br />

capacity, more than 8MW electricity can be gene<strong>ra</strong>ted every<br />

year.<br />

So<strong>la</strong>r So<strong>la</strong>r energy energy gene<strong>ra</strong><strong>tio</strong>n gene<strong>ra</strong><strong>tio</strong>n in in Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> is is achieved achieved by by the<br />

the<br />

use use of of PVs, PVs, mostly mostly in in the the form form of of Small Small Home Home Systems<br />

Systems<br />

(SHS) (SHS). (SHS) These SHSs are installed in ru<strong>ra</strong>l areas of<br />

Bang<strong>la</strong>de<strong>sh</strong>, which do not have access to conven<strong>tio</strong>nal gridconnected<br />

electricity. No commercial applica<strong>tio</strong>ns of so<strong>la</strong>r<br />

thermal technologies have started yet. The only so<strong>la</strong>r<br />

thermal initiative undertaken so far is a project titled<br />

“Demonst<strong>ra</strong><strong>tio</strong>n of So<strong>la</strong>r Heating System in Bang<strong>la</strong>de<strong>sh</strong>”<br />

supported by United Na<strong>tio</strong>ns Development Prog<strong>ra</strong>mme<br />

(UNDP).<br />

F ig u re 2 : S o <strong>la</strong> r P V : E xis tin g W o rld C a p a c ity , 1 9 9 5 - 2 0 0 7<br />

10<br />

O ff G rid<br />

G rid C on ne c te d<br />

Thousands<br />

8<br />

s<br />

GW<br />

12<br />

6<br />

4<br />

2<br />

0<br />

19 95 19 97 1 99 9 2 00 1 20 03 2 00 5 2 00 7<br />

S ou rc e : R en ew a ble E ne rgy G lo ba l S ta tus 2 00 7<br />

Renewable Renewable Energy Energy & & Environmental Environmental Informa<strong>tio</strong>n Informa<strong>tio</strong>n Network<br />

Network<br />

(REEIN) (REEIN) reported reported that that as as of of May May 18 18 2008, 2008, 198,842 198,842 SHS’s<br />

SHS’s<br />

have have been been installed installed. installed A number of non-government<br />

organiza<strong>tio</strong>ns are selling the so<strong>la</strong>r PVs, performing<br />

instal<strong>la</strong><strong>tio</strong>ns, and providing all sorts of after sales services.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> is is located located at at a a very very suitable suitable geog<strong>ra</strong>phic<br />

geog<strong>ra</strong>phic<br />

loca<strong>tio</strong>n loca<strong>tio</strong>n to to gene<strong>ra</strong>te gene<strong>ra</strong>te a a huge huge huge amount amount amount of of power. power. The So<strong>la</strong>r<br />

and Wind Energy Resources Assessment Project –<br />

Bang<strong>la</strong>de<strong>sh</strong> (SWERA) states that ‘the total yearly amount<br />

of so<strong>la</strong>r <strong>ra</strong>dia<strong>tio</strong>n arriving over the surface of Bang<strong>la</strong>de<strong>sh</strong> is<br />

at least 2.4×1014 kWh while the present electricity<br />

gene<strong>ra</strong><strong>tio</strong>n is 2.0×1010 kWh. Hence the so<strong>la</strong>r <strong>ra</strong>dia<strong>tio</strong>n<br />

avai<strong>la</strong>ble is 10,000 times the current electricity gene<strong>ra</strong><strong>tio</strong>n”.<br />

Such estimates lead to the conclusions that even if the<br />

country uses 1/1000 of the entire surface of the country (at<br />

66


even 10% efficiency), it can gene<strong>ra</strong>te the same amount of<br />

electricity as produced by all the conven<strong>tio</strong>nal resources.<br />

The The World World Bank Bank (WB) (WB) estimates estimates that that there there are are about about 4. 4.8 4. 8<br />

million million million people people people in in off off-grid off grid grid loca<strong>tio</strong>ns loca<strong>tio</strong>ns who who have have the the need need need for<br />

for<br />

SHS. SHS. SHS. However, only about 5% of the off-grid household<br />

demand has been fulfilled. Government of Bang<strong>la</strong>de<strong>sh</strong> has<br />

p<strong>la</strong>nned to increase the number of SHS to one million, but<br />

such an increase will only serve a small <strong>sh</strong>are of the<br />

untapped market. Huge market expansion possibility exists<br />

in terms of installing SHSs. Another potential direc<strong>tio</strong>n of<br />

SHS expansion could be the instal<strong>la</strong><strong>tio</strong>n of these systems in<br />

urban areas as a backup during power outages.<br />

Stand Stand-alone Stand Stand alone so<strong>la</strong>r so<strong>la</strong>r PV PV systems systems are are <strong>la</strong>rger <strong>la</strong>rger <strong>la</strong>rger than than the the SHS’s<br />

SHS’s<br />

already already installed installed installed in in off off-grid off grid loca<strong>tio</strong>ns loca<strong>tio</strong>ns in in Bang<strong>la</strong>de<strong>sh</strong>. Bang<strong>la</strong>de<strong>sh</strong>. For<br />

example, hospitals, handloom units, ru<strong>ra</strong>l markets and<br />

commercial centers have been identified by SWERA-<br />

Bang<strong>la</strong>de<strong>sh</strong> project to be very suitable targets for so<strong>la</strong>r PV<br />

systems. There are 1,383 hospitals and about 212,481<br />

handloom units. A World Bank report also suggests that<br />

“there are the nearly 10,000 ru<strong>ra</strong>l markets and commercial<br />

centers in the country which are excellent markets for<br />

cent<strong>ra</strong>lized so<strong>la</strong>r photovoltaic p<strong>la</strong>nts.<br />

PV PV Manufacturing: Manufacturing: Produc<strong>tio</strong>n of so<strong>la</strong>r PV increased to 2.5<br />

GW in 2006 from 1.8 GW in 2005. The demand of so<strong>la</strong>r PV<br />

modules is likely to increase as there is a global emphasis<br />

on clean energy. The demand of so<strong>la</strong>r modules is also<br />

esca<strong>la</strong>ting in Bang<strong>la</strong>de<strong>sh</strong>. And if Bang<strong>la</strong>de<strong>sh</strong> has to fulfill<br />

the target of installing 1,000,000 SHS’s, the country will<br />

require huge number of modules. To this end, establi<strong>sh</strong>ing<br />

a So<strong>la</strong>r Module Manufacturing facility can meet the na<strong>tio</strong>nal<br />

demand of so<strong>la</strong>r modules and create opportunity of export.<br />

Jatropha<br />

Jatropha<br />

Jatropha Jatropha is is estimated estimated to to have have tremendous tremendous growth growth worldwide.<br />

worldwide.<br />

Jatropha World suggests that by 2010, about 5 million<br />

hectares of <strong>la</strong>nd will be cultivated with Jatropha. Each year<br />

for the next 5-7 years, approximately 1.5 to 2mn hectares of<br />

Jatropha will be p<strong>la</strong>nted. As this trend continues, by 2015,<br />

approximately 13 million hectares will be p<strong>la</strong>nted with<br />

Jatropha. Also, every year about USD 1bn investments will<br />

be made in Jatropha projects.<br />

Jatropha Jatropha Jatropha cultiva<strong>tio</strong>n cultiva<strong>tio</strong>n can can provide provide a a a two two-pronged two pronged solu<strong>tio</strong>n solu<strong>tio</strong>n for<br />

for<br />

Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong>. Bang<strong>la</strong>de<strong>sh</strong><br />

Bang<strong>la</strong>de<strong>sh</strong> The northern part of the country, particu<strong>la</strong>rly<br />

Rongpur, has faced a crisis for many years as no crop can be<br />

cultivated there during the summer due to the <strong>la</strong>ck of <strong>ra</strong>infall.<br />

As Jatropha can be produced in fallow <strong>la</strong>nd and requires<br />

minimum <strong>ra</strong>infall, the cultiva<strong>tio</strong>n of jatropha can solve the<br />

agricultu<strong>ra</strong>l challenges of the area.<br />

Following India’s initiatives, Bang<strong>la</strong>de<strong>sh</strong> can utilize the fallow<br />

<strong>la</strong>nds beside its highways, an estimated 2,854km of <strong>ra</strong>ilway<br />

lines, and 745 km of <strong>sh</strong>ore line to cultivate jatropha.<br />

Cultiva<strong>tio</strong>n of jatropha in fallow <strong>la</strong>nds will also ensure less<br />

<strong>la</strong>nd erosion and resistance against cyclones and floods.<br />

Ample opportunities exist for Bang<strong>la</strong>de<strong>sh</strong> to explore and<br />

exploit bio-fuel energy resources, not only to fulfill its own<br />

demands, but also to export to other developing na<strong>tio</strong>ns. In<br />

fact, a mere 0.7mn 0.7mn hectors can can produce more than than enough<br />

diesel diesel fuel fuel and and petroleum petroleum to to fulfill fulfill Bang<strong>la</strong>de<strong>sh</strong>’s Bang<strong>la</strong>de<strong>sh</strong>’s demand demand, demand and<br />

will create significant earning and saving potential through<br />

exports.<br />

Carbon Carbon T<strong>ra</strong>ding<br />

T<strong>ra</strong>ding<br />

Undoubtedly, renewable energy is the most promising and<br />

att<strong>ra</strong>ctive sector for investment of carbon funds, But other<br />

sectors like readymade garments, brick manufacturing, CNG<br />

vehicles, cement, pulp and paper manufacturing also have<br />

promising potential for gene<strong>ra</strong>ting carbon financing.<br />

By investing in efficient and effective technologies across<br />

different sectors <strong>ra</strong>nging from energy gene<strong>ra</strong><strong>tio</strong>n to brick<br />

manufacturing, Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> can can reduce reduce reduce emission emission emission of of 2000<br />

2000<br />

mtCO mtCO2e mtCO e per per per year year. year<br />

Despite the overwhelming potential, Bang<strong>la</strong>de<strong>sh</strong> has<br />

achieved very little in comparison to India and China. While<br />

these two neighbors have registered for more than 300<br />

projects under the CDM mechanism, Bang<strong>la</strong>de<strong>sh</strong> has only<br />

two projects; the use of <strong>la</strong>ndfill gas, and organic waste<br />

management in Dhaka. Two more projects, the instal<strong>la</strong><strong>tio</strong>n of<br />

so<strong>la</strong>r home systems and the improvement of brick<br />

manufacturing technologies, are waiting for regist<strong>ra</strong><strong>tio</strong>n.<br />

Bang<strong>la</strong>de<strong>sh</strong> can replicate the success of India with ease, as<br />

the geog<strong>ra</strong>phy and climate of Bang<strong>la</strong>de<strong>sh</strong> matches that of<br />

India to a <strong>la</strong>rge extent.<br />

Establi<strong>sh</strong>ing treatment p<strong>la</strong>nt for Ready Made Garments<br />

(RMG) firms will lead to reduc<strong>tio</strong>n of carbon emission. Given<br />

that RMG is one of the most profitable industries in the<br />

country, investment opportunity in such a sector will yield<br />

profitable returns. With government support, RMG firms can<br />

also ask for disposal charges from the countries they are<br />

exporting to.<br />

Using compressed natu<strong>ra</strong>l gas or bio-diesel for energy<br />

gene<strong>ra</strong><strong>tio</strong>n will reduce carbon emission, and is entitled to<br />

receive carbon credit.<br />

We believe that the following initiatives are likely to gene<strong>ra</strong>te<br />

revenue as CDM registered projects:<br />

• Promote the use of CFL <strong>la</strong>mps instead of<br />

incandescent light bulbs<br />

• Use of bio-diesel<br />

• Inclusion of ETP p<strong>la</strong>nts in garments industry<br />

• Foresta<strong>tio</strong>n<br />

67


Appendix Appendix 12 12 – Addi<strong>tio</strong>nal Policy Recommenda<strong>tio</strong>ns for the Government<br />

1. Improve Improve ADP ADP implementa<strong>tio</strong>n implementa<strong>tio</strong>n <strong>ra</strong>te <strong>ra</strong>te by by capacity capacity building<br />

building<br />

initiative initiative for for all all implementa<strong>tio</strong>n implementa<strong>tio</strong>n units units of of concerned<br />

concerned<br />

corpo<strong>ra</strong><strong>tio</strong>ns/departments, corpo<strong>ra</strong><strong>tio</strong>ns/departments, and and the the Implementa<strong>tio</strong>n<br />

Implementa<strong>tio</strong>n<br />

Monitoring Monitoring and and Evalua<strong>tio</strong>n Evalua<strong>tio</strong>n Divisi Division Divisi on (1MED) (1MED) of of the<br />

the<br />

P<strong>la</strong>nning P<strong>la</strong>nning Ministry Ministry for for enhanced enhanced domestic domestic and and foreign<br />

foreign<br />

resource resource mobiliza<strong>tio</strong>n. mobiliza<strong>tio</strong>n. The Ministries <strong>sh</strong>ould have<br />

professional units to monitor and evaluate the status of<br />

project implementa<strong>tio</strong>n on a regu<strong>la</strong>r basis. In FY 2007-<br />

08, the ADP implementa<strong>tio</strong>n <strong>ra</strong>te was 82%. Improve the<br />

speed and efficiency of the Economic Re<strong>la</strong><strong>tio</strong>ns Division<br />

(ERD) under the P<strong>la</strong>nning Ministry to efficiently manage<br />

donor funding as part of the Annual Development<br />

Prog<strong>ra</strong>mme (ADP). Given the recent announcement of<br />

the Finance Adviser that World Bank funding for<br />

development projects under IDA credit is uncertain<br />

beyond 2008 as a result of a <strong>la</strong>ck of completed project<br />

proposals indicates the inadequacies of the P<strong>la</strong>nning<br />

Ministry and the urgency with which its capacity needs to<br />

be enhanced.<br />

2. Introduce Introduce an an institu<strong>tio</strong>nalized institu<strong>tio</strong>nalized Fiscal Fiscal policy policy rest<strong>ra</strong>int<br />

rest<strong>ra</strong>int<br />

mechanism mechanism mechanism through through through parliamentary parliamentary committee committee committee on on fiscal fiscal<br />

fiscal<br />

policy policy for for every every na<strong>tio</strong>nal na<strong>tio</strong>nal budget, budget, in in order order to to limit limit fiscal<br />

fiscal<br />

profligacy. profligacy. Such parliamentary committees must coopt/associate<br />

non-member professional economists of<br />

repute in performing their tasks. For the FY09 the main<br />

forms of p<strong>la</strong>nned fiscal stimulus are increase in<br />

agricultu<strong>ra</strong>l subsidies; increase in <strong>ra</strong>tes and the<br />

expansion of cove<strong>ra</strong>ge of different safety net<br />

prog<strong>ra</strong>mmes aimed at offsetting the adverse impact of<br />

global price hikes in essential items. These are expected<br />

to increase the budget deficit to 5.0 percent of GDP in<br />

FY09. However, budget deficit as a percentage of GDP<br />

is likely to fall back to 4.4 percent of GDP in FY10 and to<br />

4.0 percent of GDP in FY11. In recent years, low cost<br />

concessional financing to Bang<strong>la</strong>de<strong>sh</strong> has been<br />

declining which was combined with the increase in the<br />

budget deficit resulting in increase in <strong>sh</strong>ort-term costly<br />

domestic borrowing. Therefore, the cost of financing is<br />

forecasted to increase <strong>sh</strong>arply in FY09. Domestic<br />

borrowing is expected to increase at the <strong>ra</strong>te of 23<br />

percent from Taka 101 billion in FY07 to Taka 124 billion<br />

in FY08. For FY09 budget domestic borrowing is<br />

expected to increase by 37 percent to Taka 170 billion.<br />

Managing this borrowing with an objective to minimise<br />

its cost will be a major challenge for the Government. In<br />

terms of the structure of domestic borrowings,<br />

government in gene<strong>ra</strong>l borrows <strong>la</strong>rger por<strong>tio</strong>n from the<br />

banking sector. This is expected to remain on ave<strong>ra</strong>ge<br />

82 percent of domestic borrowing during the period<br />

FY08-11. This will <strong>ra</strong>nge from 1.7 to 2.2 percent of GDP<br />

during the period FY08-11. Non-bank borrowing is<br />

expected to be declining as <strong>sh</strong>are of GDP during the<br />

coming years.<br />

3. Expand Expand Expand the the the Medium Medium TTerm<br />

T erm Budgetary F<strong>ra</strong>mework<br />

F<strong>ra</strong>mework<br />

(MTBF) (MTBF) of of the the Ministry Ministry of of Finance Finance on on an an expedited expedited basis<br />

basis<br />

to to cover cover all all all 42 42 Ministries Ministries for for for the the upcoming upcoming upcoming FY2009 FY2009-10 FY2009 10 10<br />

budget. budget. To complement this roll-out, the process of<br />

performance monitoring needs to be strengthened<br />

across government at both the cent<strong>ra</strong>l and line ministry<br />

level. It is also essential that integ<strong>ra</strong><strong>tio</strong>n and<br />

col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n at all levels of government, supports<br />

budget prepa<strong>ra</strong><strong>tio</strong>n, implementa<strong>tio</strong>n, monitoring and<br />

evalua<strong>tio</strong>n. A total of 16 ministries now prepare their<br />

annual budgets under the MTBF approach. Together<br />

these 16 ministries (Ministries of Educa<strong>tio</strong>n; Primary and<br />

Mass Educa<strong>tio</strong>n; Social Welfare; Women and Children's<br />

Affairs; Agriculture; Fi<strong>sh</strong>eries and Livestock; Health and<br />

Family Welfare; Local Government Division; Ru<strong>ra</strong>l<br />

Development and Coope<strong>ra</strong>tives; Water Resources;<br />

Communica<strong>tio</strong>ns; Food and Disaster Management;<br />

Environment and Forest; Science and ICT; Land; and<br />

Shipping) account for about 58 percent of total<br />

prog<strong>ra</strong>mme spending (total budgetary expenditure less<br />

spending on interest and other non-sector assigned<br />

items such as net out<strong>la</strong>y on food account ope<strong>ra</strong><strong>tio</strong>ns, net<br />

lending, and structu<strong>ra</strong>l adjustment expenditure) and<br />

around 49 percent of total spending.<br />

4. Reduce Reduce tax tax tax policy policy distor<strong>tio</strong>ns, distor<strong>tio</strong>ns, enhance enhance revenue<br />

revenue<br />

collec<strong>tio</strong>n, collec<strong>tio</strong>n, eliminate eliminate inco incoherent inco herent aspects aspects of of tax tax policy,<br />

policy,<br />

and and streamline streamline the the the tax tax tax process process by by by enhancing enhancing the<br />

the<br />

institu<strong>tio</strong>nal institu<strong>tio</strong>nal capacity capacity of of the the Na<strong>tio</strong>nal Na<strong>tio</strong>nal Board Board of of Revenue<br />

Revenue<br />

(NBR) (NBR) under under under the the Internal Internal Resources Resources Resources Division Division of of the<br />

the<br />

Ministry Ministry of of Finance. Finance. Customs, Excise, and protective<br />

duties need to be made consistent with the<br />

government's economic priorities. The effective <strong>ra</strong>te of<br />

protec<strong>tio</strong>n <strong>sh</strong>ould be managed carefully considering the<br />

probable impact on secto<strong>ra</strong>l unemployment, valueadded,<br />

growth, and inter-secto<strong>ra</strong>l t<strong>ra</strong>nsmission<br />

mechanisms and dependencies. A complete<br />

moderniza<strong>tio</strong>n of the tax system is needed to underpin<br />

much-needed increases in revenue. Recent<br />

improvements in administ<strong>ra</strong><strong>tio</strong>n are welcome but need to<br />

be accompanied by accele<strong>ra</strong>ted efforts to modernize the<br />

legal f<strong>ra</strong>mework. In terms of revenue administ<strong>ra</strong><strong>tio</strong>n<br />

reforms, the institu<strong>tio</strong>nal f<strong>ra</strong>mework for sepa<strong>ra</strong>ting tax<br />

policy from administ<strong>ra</strong><strong>tio</strong>n needs to be made effective,<br />

and the two Large Taxpayer Units (LTUs) need to work<br />

in a coordinated manner. In the VAT area, ac<strong>tio</strong>ns focus<br />

on improving case selec<strong>tio</strong>n and efficiency of audit and<br />

simplifying regist<strong>ra</strong><strong>tio</strong>n procedures. In customs, the<br />

authorities intend to continue reducing the number of<br />

zero-<strong>ra</strong>ted commodities and incorpo<strong>ra</strong>ting duty<br />

exemp<strong>tio</strong>ns into the customs <strong>la</strong>w. Further reform of the<br />

unified LTUs, which are the backbone of revenue<br />

collec<strong>tio</strong>ns, focuses on streamlining audits and<br />

expanding the cove<strong>ra</strong>ge beyond Dhaka. Spreading the<br />

unified taxpayer identifica<strong>tio</strong>n number beyond <strong>la</strong>rge<br />

taxpayers is a crucial measure to improve enforcement<br />

as is improving the func<strong>tio</strong>ning of the disputes and<br />

appeals procedure and more rigorously applying<br />

penalties for non payment.<br />

5. The The The government government government <strong>sh</strong>ould <strong>sh</strong>ould actively actively pursue pursue our our t<strong>ra</strong>ding<br />

t<strong>ra</strong>ding<br />

partners, partners, particu<strong>la</strong>rly particu<strong>la</strong>rly India, India, to to eliminate eliminate non non-tariff non tariff<br />

barriers barriers for for Bang<strong>la</strong>de<strong>sh</strong>i Bang<strong>la</strong>de<strong>sh</strong>i goods. goods. Simi<strong>la</strong>rly, NTBs <strong>sh</strong>ould<br />

also be minimized in the case of imports into<br />

Bang<strong>la</strong>de<strong>sh</strong>. Int<strong>ra</strong>regional t<strong>ra</strong>de in South Asia is less<br />

than 2 percent of GDP, compared to more than 20<br />

percent for East Asia.<br />

68


6. Make Make the the Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> Bureau Bureau of of Statistics Statistics independent,<br />

independent,<br />

reporting reporting to to a a parliamentary standing committee of<br />

Finance, Finance, so so that that accu<strong>ra</strong>te accu<strong>ra</strong>te economic economic data data (inf<strong>la</strong><strong>tio</strong>n,<br />

(inf<strong>la</strong><strong>tio</strong>n,<br />

unemployment, unemployment, GDP GDP growth, growth, etc.) etc.) is is reported. reported. reported. Currently,<br />

the BBS reports to the P<strong>la</strong>nning Ministry, and thus is<br />

influenced by the ministry and const<strong>ra</strong>ined from<br />

releasing the actual economic statistics. In addi<strong>tio</strong>n, the<br />

BBS is const<strong>ra</strong>ined for both financial, human, and<br />

knowledge resources even after the World Bank<br />

capacity building project that was undertaken. The BBS'<br />

socio-economic data collec<strong>tio</strong>n, analysis, and<br />

dissemina<strong>tio</strong>n capacity needs to be enhanced<br />

significantly so that accu<strong>ra</strong>te and objective data on<br />

inf<strong>la</strong><strong>tio</strong>n, unemployment, growth, and other socioeconomic<br />

metrics are released on a quarterly basis to<br />

guide economic management. Some improvements<br />

have been made, notably in streamlining public sector<br />

cove<strong>ra</strong>ge in the fiscal accounts and on-going work on a<br />

new CPI consump<strong>tio</strong>n basket. Key priorities going<br />

forward are strengthening ba<strong>la</strong>nce of payment statistics<br />

through improving the consistency of t<strong>ra</strong>de data and<br />

developing interna<strong>tio</strong>nal investment statistics, improving<br />

the source data for na<strong>tio</strong>nal accounts statistics and<br />

introducing more frequent and timely dissemina<strong>tio</strong>n<br />

p<strong>ra</strong>ctices, and moving toward GFSM2001 standards for<br />

fiscal statistics. Legis<strong>la</strong><strong>tio</strong>n <strong>sh</strong>ould be enacted to define<br />

the role of the Bang<strong>la</strong>de<strong>sh</strong> Bureau of Statistics (BBS)<br />

and to provide it with sufficient powers to fulfill its<br />

mandate. Inter-agency coope<strong>ra</strong><strong>tio</strong>n <strong>sh</strong>ould be improved,<br />

particu<strong>la</strong>rly for gene<strong>ra</strong>ting consistent data on bank<br />

financing of the government and debt. Advance<br />

calendars for the release of data <strong>sh</strong>ould be establi<strong>sh</strong>ed,<br />

disseminated, and observed. The BBS <strong>sh</strong>ould also use<br />

its website to disseminate data and metadata to ensure<br />

simultaneous data release to all users. A Technical<br />

Assistance Project on Capacity Building of the<br />

Bang<strong>la</strong>de<strong>sh</strong> Bureau of Statistics (BBS) has started<br />

ope<strong>ra</strong><strong>tio</strong>n from April 2008 to meet the crucial need for<br />

current statistical data to monitor poverty levels and the<br />

welfare of households. This is being implemented by the<br />

World Bank funded EMTAP Project.<br />

7. Embark Embark upon upon a a new new Financial Financial Sector Sector Adjustment Adjustment Project<br />

Project<br />

(FSAP) (FSAP) to to qualitatively qualitatively enhance enhance the the financial financial sector<br />

sector<br />

policy policy regime, regime, and and improve improve the the depth, depth, stability,<br />

stability,<br />

resilience, resilience, t<strong>ra</strong>nsparency t<strong>ra</strong>nsparency and and integ<strong>ra</strong><strong>tio</strong>n/coordina<strong>tio</strong>n<br />

integ<strong>ra</strong><strong>tio</strong>n/coordina<strong>tio</strong>n<br />

between between between capital capital capital market, market, market, mon money mon mon ey market, market, market, banking, banking, banking, and<br />

and<br />

insu<strong>ra</strong>nce insu<strong>ra</strong>nce sectors. sectors. The f<strong>ra</strong>gmented nature of financial<br />

sector governance and regu<strong>la</strong>tory f<strong>ra</strong>mework in the<br />

country needs immediate correc<strong>tio</strong>ns. Since the FSAP is<br />

more comprehensive than the t<strong>ra</strong>di<strong>tio</strong>nal financial sector<br />

restructuring initiatives undertaken in the past, its<br />

implementa<strong>tio</strong>n is recommended on an urgent basis.<br />

Further financial sector development is needed to allow<br />

Bang<strong>la</strong>de<strong>sh</strong> to achieve its growth potential. Key priorities<br />

include strengthening the foreign exchange and<br />

government debt markets, and improving the financial<br />

posi<strong>tio</strong>n of the state-owned banks. A deep and liquid<br />

financial sector provides resources to support private<br />

sector growth and improves the environment for<br />

monetary policy. The financial sector in Bang<strong>la</strong>de<strong>sh</strong><br />

remains dominated by banks, and private banks are<br />

growing <strong>ra</strong>pidly as they expand their loan portfolios and<br />

<strong>ra</strong>ise capital to be Basel II compliant in 2009. Banking<br />

sector soundness needs to improve further since the risk<br />

weighted capital adequacy <strong>ra</strong><strong>tio</strong> as well as the gross<br />

non-performing loans <strong>ra</strong><strong>tio</strong>s have failed to <strong>sh</strong>ow<br />

appreciable improvement in the <strong>la</strong>st three years.<br />

Financial sector deepening requires the development of<br />

an active secondary market in government paper, which<br />

will also assist in monetary policy implementa<strong>tio</strong>n.<br />

However, the ope<strong>ra</strong><strong>tio</strong>n of the primary dealer system for<br />

government securities needs to be improved before an<br />

active secondary market can develop. The key<br />

const<strong>ra</strong>ining factor is the authorities' inflexibility on<br />

interest <strong>ra</strong>tes that undermines the auc<strong>tio</strong>n process and<br />

results in substantial devolvement of securities onto the<br />

primary dealers.<br />

8. Update Update all all major major economic economic policies policies of of the the government<br />

government<br />

so so that that they they reflect reflect the the current current global global economic economic and<br />

and<br />

business business environment, environment, are are internally internally internally consistent consistent, consistent consistent ,<br />

coordinated coordinated and and forward forward-looking.<br />

forward looking. Many of these policies<br />

are deficient in fundamental ways. These include the<br />

PRSP II (2008), Industrial Policy (1995, Ministry of<br />

Industries), Import Policy (2006-09, Ministry of<br />

Commerce), Export Policy (2006-09, Ministry of<br />

Commerce), SME policy (2005, Ministry of Industries),<br />

Investment Board Act (1989, Board of Investment),<br />

Consumers Right Protec<strong>tio</strong>n Ordinance (2008, Ministry<br />

of Commerce), and other re<strong>la</strong>ted economic policies. The<br />

Import and Export policies that are currently effective<br />

(2006-09) do not provide adequate treatment of the<br />

Service Sector, and therefore need to be urgently<br />

updated. The 13 year-old Industrial Policy is currently<br />

being updated by the Ministry of Industries, but public<br />

consulta<strong>tio</strong>ns have been <strong>la</strong>rgely absent in the process of<br />

the update. The d<strong>ra</strong>ft of the new Industrial Policy must<br />

take into conside<strong>ra</strong><strong>tio</strong>n of the new "alloca<strong>tio</strong>n of<br />

business" required of the Ministry of Industries. For<br />

example, there is no men<strong>tio</strong>n of "Industrial Clusters" in<br />

the Industrial Policy, 2005.<br />

69


Appendix ppendix 13 – 52 52 Recommenda<strong>tio</strong>ns Recommenda<strong>tio</strong>ns from from the the Nov Nov 15 15 2008 2008 FBCCI FBCCI business<br />

business<br />

conference conference on on the the collective collective economic economic agenda<br />

agenda<br />

The constitu<strong>tio</strong>n of Bang<strong>la</strong>de<strong>sh</strong> has entrusted the<br />

government and relevant authorities to undertake p<strong>la</strong>nned<br />

economic development of the country.<br />

1. The primary duty of the state will be to steer p<strong>la</strong>nned<br />

economic growth through increasing productivity and uplifting<br />

the standard of life of its citizens. The state <strong>sh</strong>ould ensure<br />

the following rights of its citizens:<br />

a) Establi<strong>sh</strong> the rights of food, clothing, <strong>sh</strong>elter, educa<strong>tio</strong>n<br />

and health.<br />

b) Employment rights, i.e., ensuring proper employment<br />

with fair wages<br />

c) Reasonable rest, entertainment and vaca<strong>tio</strong>n rights<br />

d) Rights of social security, i.e., the right to receive aid from<br />

government in case of unemployment due to disability,<br />

diseases, old age or any other uncontrol<strong>la</strong>ble<br />

circumstances<br />

The difference in standard of living in the cities and ru<strong>ra</strong>l<br />

areas <strong>sh</strong>ould be minimized g<strong>ra</strong>dually. In order to do that<br />

revolu<strong>tio</strong>n in agriculture, ru<strong>ra</strong>l electrifica<strong>tio</strong>n, cottage<br />

industries and other industries <strong>sh</strong>ould be encou<strong>ra</strong>ged. The<br />

state <strong>sh</strong>ould work to increase the penet<strong>ra</strong><strong>tio</strong>n of educa<strong>tio</strong>n,<br />

t<strong>ra</strong>nsport facilities and healthcare in the ru<strong>ra</strong>l areas of<br />

Bang<strong>la</strong>de<strong>sh</strong>.<br />

Future Future Government’s Government’s Economic Economic Activities:<br />

Activities:<br />

Energy:<br />

Energy:<br />

• The government <strong>sh</strong>ould dec<strong>la</strong>re next 5 years’ p<strong>la</strong>n of<br />

ac<strong>tio</strong>n of BAPEX. Should set up at least 6 explo<strong>ra</strong><strong>tio</strong>n<br />

wells every year.<br />

• Should start the work of at least 1 explo<strong>ra</strong><strong>tio</strong>n well in the<br />

1 st 100 days.<br />

• If needed, energy bond or levies <strong>sh</strong>ould be charged to<br />

<strong>ra</strong>ise funds<br />

Electricity:<br />

Electricity:<br />

• Renova<strong>tio</strong>n of all electricity gene<strong>ra</strong><strong>tio</strong>n p<strong>la</strong>nts <strong>sh</strong>ould be<br />

started under public-private partner<strong>sh</strong>ip ar<strong>ra</strong>ngements<br />

• Project for coal based electricity gene<strong>ra</strong><strong>tio</strong>n of at least<br />

2000 MW <strong>sh</strong>ould be initiated. Power Development<br />

Board <strong>sh</strong>ould be the sole buyer of the electricity<br />

gene<strong>ra</strong>ted and will be responsible to supply electricity to<br />

consumers through distributors.<br />

• To meet emergency needs, projects of rental power<br />

p<strong>la</strong>nt of 500 MW <strong>sh</strong>ould be implemented to meet<br />

demand in the upcoming summer season.<br />

Coal:<br />

Coal:<br />

• The new government <strong>sh</strong>ould finalize the Coal Policy, if<br />

not finalized by the Interim government.<br />

• The government <strong>sh</strong>ould initiate discussions to<br />

•<br />

rehabilitate people living in the coal mine areas<br />

The government <strong>sh</strong>ould ensure optimal level of coal<br />

produc<strong>tio</strong>n after considering the rehabilita<strong>tio</strong>n and<br />

environmental issues.<br />

Foreign Foreign and and NRB NRB Invest Investments:<br />

Invest ments:<br />

• Restructuring BOI. Launching “Investment Bang<strong>la</strong>de<strong>sh</strong>”<br />

campaign.<br />

• Forming an “NRB Council” with all secretarial facilities.<br />

Embassies and Councilor offices <strong>sh</strong>ould be turned in to<br />

Secretariats. NRB Forums <strong>sh</strong>ould be created in USA,<br />

the Middle East and the EU countries. These forums will<br />

initiate and implement projects re<strong>la</strong>ting to NRB<br />

investments, e<strong>ra</strong>dica<strong>tio</strong>n of investment complicacies for<br />

NRBs, increasing flow of remittances, Bang<strong>la</strong>de<strong>sh</strong><br />

country b<strong>ra</strong>nd building and expansion of t<strong>ra</strong>de in goods<br />

and services.<br />

BB form at least 3 remittance investment benefit<br />

package to ensure flow of remittance in productive<br />

ventures. NRB account opening in banks <strong>sh</strong>ould be<br />

encou<strong>ra</strong>ged.<br />

Monetary Monetary Monetary Management Management and and Banking Banking Facilities: Facilities:<br />

Facilities:<br />

• The new government <strong>sh</strong>ould reduce banking charges by<br />

30% in the first 100 days.<br />

• Bank interest <strong>ra</strong>te, primarily on working capital loans and<br />

other loans for the manufacturing industry, <strong>sh</strong>ould be<br />

lowered by 2%.<br />

• The credit spread <strong>sh</strong>ould be lowered to 4%<br />

• Spread on foreign currency exchange <strong>sh</strong>ould be<br />

lowered to 1%<br />

• Considering the na<strong>tio</strong>nal competitiveness, foreign<br />

•<br />

exchange <strong>ra</strong>tes on remittance and export <strong>sh</strong>ould be<br />

increased<br />

The government can fix the current exchange <strong>ra</strong>te of<br />

dol<strong>la</strong>r following article 9 of the WTO Customs Valua<strong>tio</strong>n<br />

Agreement.<br />

• The policies re<strong>la</strong>ting to foreign currency loans and<br />

foreign funds in private investments <strong>sh</strong>ould be re<strong>la</strong>xed.<br />

• The new government <strong>sh</strong>ould form a “Financial Crisis<br />

Management Taskforce”. The forum will take prompt<br />

ac<strong>tio</strong>ns to minimize the risks arising from the global<br />

financial meltdown on the export and banking sector of<br />

the country. The BBBF could be assigned with the task.<br />

• Bang<strong>la</strong>de<strong>sh</strong> exports only 30% to the US and the rest<br />

70% to other countries including the EU. So,<br />

dependence on dol<strong>la</strong>r for interna<strong>tio</strong>nal t<strong>ra</strong>de <strong>sh</strong>ould be<br />

reduced and payments in other currencies like pounds,<br />

yen and sterling <strong>sh</strong>ould be initiated.<br />

Physical Physical Inf<strong>ra</strong>structure Inf<strong>ra</strong>structure for for for the the the Industrial Industrial Sector:<br />

Sector:<br />

• The government <strong>sh</strong>ould dec<strong>la</strong>re “special economic<br />

zones” for thrust sectors like RMG, <strong>sh</strong>ip building, p<strong>la</strong>stic<br />

goods, leather goods, IT, agro-products and light<br />

engineering.<br />

T<strong>ra</strong>nsporta<strong>tio</strong>n T<strong>ra</strong>nsporta<strong>tio</strong>n Inf<strong>ra</strong>structure:<br />

Inf<strong>ra</strong>structure:<br />

• The Dhaka-Chittagong Highway has been halted in<br />

Doudkandi for legal complica<strong>tio</strong>ns. Construc<strong>tio</strong>n work of<br />

the highway <strong>sh</strong>ould be resumed within 30 days.<br />

• The project on Dhaka-Chittagong “Four Lane Express<br />

Way” <strong>sh</strong>ould be implemented.<br />

• To reduce the jams and blockades in the roads and<br />

highways, decisions regarding the establi<strong>sh</strong>ment of<br />

‘Elevated Express Way’ network <strong>sh</strong>ould be finalized<br />

through a private-[public partner<strong>sh</strong>ip. In no way, we can<br />

waste time in this regard.<br />

70


Sea and river t<strong>ra</strong>nsporta<strong>tio</strong>n<br />

• Within 100 days, a ‘Na<strong>tio</strong>nal Sea and River<br />

Inf<strong>ra</strong>structure Development Council’ <strong>sh</strong>ould be<br />

establi<strong>sh</strong>ed. This council <strong>sh</strong>ould quickly take and<br />

implement necessary steps to improve the sea and river<br />

inf<strong>ra</strong>structure to create and easy and cheap rout for the<br />

t<strong>ra</strong>nsporta<strong>tio</strong>n of agricultu<strong>ra</strong>l and industrial products.<br />

Ports<br />

• Every industry and ports <strong>sh</strong>ould be made free from<br />

hartals and blockades. We are requesting every political<br />

party to announce this initiative in their pre-elec<strong>tio</strong>n<br />

memo<strong>ra</strong>ndum and advertisements before elec<strong>tio</strong>n.<br />

• Government <strong>sh</strong>ould provide surety that the current<br />

productivity and discipline of ports can never decrease.<br />

Government <strong>sh</strong>ould also provide necessary services to<br />

the ports.<br />

• Decision regarding the establi<strong>sh</strong>ment of Deep Sea Port<br />

<strong>sh</strong>ould be finalized.<br />

• Necessary steps <strong>sh</strong>ould be taken to utilize full capacity<br />

of the Mong<strong>la</strong> port.<br />

Voca<strong>tio</strong>nal Voca<strong>tio</strong>nal educa<strong>tio</strong>n educa<strong>tio</strong>n and and proficiency proficiency in in Engli<strong>sh</strong> Engli<strong>sh</strong> <strong>la</strong>nguage:<br />

<strong>la</strong>nguage:<br />

• To improve the skills of the human resource, the work<br />

p<strong>la</strong>n and policies advised by the BBBF through Na<strong>tio</strong>nal<br />

Skill Development council <strong>sh</strong>ould be implemented.<br />

• Government <strong>sh</strong>ould encou<strong>ra</strong>ge the popu<strong>la</strong><strong>tio</strong>n by<br />

announcing Engli<strong>sh</strong> as ‘Second Working Language’. To<br />

increase and encou<strong>ra</strong>ge the interna<strong>tio</strong>nal business<br />

communica<strong>tio</strong>n, Engli<strong>sh</strong> <strong>la</strong>nguage t<strong>ra</strong>ining re<strong>la</strong>ted work<br />

p<strong>la</strong>n <strong>sh</strong>ould be implemented.<br />

• As per the advice of BBBF, government <strong>sh</strong>ould establi<strong>sh</strong><br />

a USD 100mn or BDT 700 crore development fund. (<strong>la</strong>st<br />

year remittances and exports accounted for USD 22bn.<br />

Every year s simple por<strong>tio</strong>n of this income can be<br />

attributed to the development of <strong>la</strong>bor skills.)<br />

• At the beginning point, government <strong>sh</strong>ould establi<strong>sh</strong><br />

voca<strong>tio</strong>nal t<strong>ra</strong>ining institutes in 50 untapped, but<br />

popu<strong>la</strong>ted Union Pari<strong>sh</strong>ods (Union Councils)<br />

Combined Combined export export diversifica<strong>tio</strong>n diversifica<strong>tio</strong>n and and value value added added scheme: scheme:<br />

scheme:<br />

• Within 100 days government need to formu<strong>la</strong>te a<br />

combined export diversifica<strong>tio</strong>n and value added<br />

scheme.<br />

• This initiative <strong>sh</strong>ould be implemented in col<strong>la</strong>bo<strong>ra</strong><strong>tio</strong>n<br />

with EPB, Export development council, banks,<br />

industries and export re<strong>la</strong>ted agencies and councils.<br />

In this regard, the following subjects may get priority-<br />

1. Examining the market<br />

2. Establi<strong>sh</strong>ing <strong>sh</strong>ow-room/warehouse, interna<strong>tio</strong>nal<br />

departmental store<br />

3. Sales promo<strong>tio</strong>n and publicity campaign<br />

4. B<strong>ra</strong>nd promo<strong>tio</strong>n<br />

5. Financial support to the importers to spend on<br />

business re<strong>la</strong>ted legal affairs<br />

6. Establi<strong>sh</strong>ing and modernizing testing <strong>la</strong>bo<strong>ra</strong>tories<br />

to maintain the interna<strong>tio</strong>nal quality of goods<br />

7. For each export sector, R&D improvement fund<br />

<strong>sh</strong>ould be created.<br />

Services export<br />

• A special export development council <strong>sh</strong>ould be<br />

establi<strong>sh</strong>ed to strengthen the services export. The<br />

council <strong>sh</strong>ould consist of EPB, banks, Chamber of<br />

commerce, Bang<strong>la</strong>de<strong>sh</strong>i embassies in foreign countries,<br />

business entities etc.<br />

B<strong>ra</strong>nding B<strong>ra</strong>nding Bang<strong>la</strong>de<strong>sh</strong>:<br />

Bang<strong>la</strong>de<strong>sh</strong>:<br />

• Specialized work p<strong>la</strong>n <strong>sh</strong>ould be made for B<strong>ra</strong>nding<br />

Bang<strong>la</strong>de<strong>sh</strong>. NRBs <strong>sh</strong>ould be included in this work p<strong>la</strong>n.<br />

Food Food security security and and and agricultu<strong>ra</strong>l agricultu<strong>ra</strong>l development:<br />

development:<br />

• To ensure the food security newly elected government<br />

<strong>sh</strong>ould announce one year and five years work p<strong>la</strong>ns.<br />

• Policies <strong>sh</strong>ould be taken and work p<strong>la</strong>n <strong>sh</strong>ould be<br />

announced to provide subsidies along with other<br />

incentives regarding fertilizer, power and seeds for<br />

farmers.<br />

• To develop the agriculture sector and improve the R&D,<br />

a huge fund <strong>sh</strong>ould be establi<strong>sh</strong>ed<br />

• Within first 100 days newly elected government <strong>sh</strong>ould<br />

start building database for produc<strong>tio</strong>n capacity, demand,<br />

supply, export, import regarding agriculture, industrial<br />

and service sectors.<br />

• At the beginning, government <strong>sh</strong>ould establi<strong>sh</strong> t<strong>ra</strong>ining<br />

and data centers in 50 unions for farmers. SME<br />

entrepreneurs and job seekers. In these computerbased<br />

centers, produc<strong>tio</strong>n and marketing re<strong>la</strong>ted data<br />

and t<strong>ra</strong>ining <strong>sh</strong>ould be provided. These centers can seek<br />

help from the Union Councils (pari<strong>sh</strong>ods) to collect,<br />

gather and distribute the agricultu<strong>ra</strong>l data.<br />

Conserva<strong>tio</strong>ns Conserva<strong>tio</strong>ns and and development development of of Labor Labor rights:<br />

rights:<br />

To preserve the <strong>la</strong>bor rights and increase the <strong>la</strong>bor<br />

productivity, <strong>ra</strong><strong>tio</strong>ning system, housing, healthcare, primary<br />

educa<strong>tio</strong>n <strong>sh</strong>ould be ensured. To do this government and<br />

private agencies along with the donor agencies <strong>sh</strong>ould come<br />

forward.<br />

Women Women development:<br />

development:<br />

• A ‘Women Business Council’ <strong>sh</strong>ould be establi<strong>sh</strong>ed<br />

which will consist of Women-re<strong>la</strong>ted ministry, commerce<br />

ministry, other women-re<strong>la</strong>ted business agencies etc.<br />

this council will provide financing, t<strong>ra</strong>ining to increase<br />

productivity, consulting, produc<strong>tio</strong>n and marketing<br />

re<strong>la</strong>ted informa<strong>tio</strong>n to the women entrepreneurs.<br />

Informa<strong>tio</strong>n Informa<strong>tio</strong>n technology:<br />

technology:<br />

technology:<br />

• D<strong>ra</strong>ft for IT p<strong>la</strong>nning is on hold which this <strong>sh</strong>ould be<br />

finalized and implemented soon.<br />

• To develop the IT sector, the Bandwidth charge <strong>sh</strong>ould<br />

be made halved.<br />

• Computer lite<strong>ra</strong>cy has been made compulsory in the<br />

schools. A proper syl<strong>la</strong>bus in this regard <strong>sh</strong>ould be<br />

prepared and implemented.<br />

• To reach the gene<strong>ra</strong>l people and ensure the IT usage,<br />

each ministry <strong>sh</strong>ould come up with at least one ‘service’.<br />

• Major obstacles in the way of E-commerce and Mcommerce<br />

<strong>sh</strong>ould be removed and rules and regu<strong>la</strong><strong>tio</strong>ns<br />

regarding the Online E-payment gateway <strong>sh</strong>ould be<br />

corrected.<br />

Regu<strong>la</strong>tory Regu<strong>la</strong>tory Reforms Reforms Commission Commission (RRC): (RRC):<br />

(RRC):<br />

• Every advices and requests <strong>sh</strong>ould be implemented<br />

implied by the RRC.<br />

Security Security and and exchange exchange commission:<br />

commission:<br />

commission:<br />

71


• To develop the stock exchanges, productivity and skills<br />

of SEC <strong>sh</strong>ould be improved through developing human<br />

resources and inf<strong>ra</strong>structure<br />

SME:<br />

SME:<br />

• SME sector is very important for employment gene<strong>ra</strong><strong>tio</strong>n<br />

and economic development. The packages implied by<br />

the Bang<strong>la</strong>de<strong>sh</strong> Better Business Forum to help the SME<br />

sector <strong>sh</strong>ould be implemented soon.<br />

Poverty Poverty reduc<strong>tio</strong>n:<br />

reduc<strong>tio</strong>n:<br />

• Every economic activity of Bang<strong>la</strong>de<strong>sh</strong> is aimed towards<br />

the poverty reduc<strong>tio</strong>n. Within 100 days newly elected<br />

government <strong>sh</strong>ould prepare and announce the poverty<br />

reduc<strong>tio</strong>n work p<strong>la</strong>n. Efforts <strong>sh</strong>ould be made to<br />

implement the PRSP-2 through open discussion and<br />

agreement.<br />

Three Three specific specific humble humble requests requests from from the the business business society:<br />

society:<br />

• Take necessary steps to formu<strong>la</strong>te <strong>la</strong>ws and legis<strong>la</strong><strong>tio</strong>ns<br />

through pre-elec<strong>tio</strong>n discussion to stop hartals and<br />

blockades.<br />

• Take necessary steps to formu<strong>la</strong>te <strong>la</strong>ws and legis<strong>la</strong><strong>tio</strong>ns<br />

to stop using children in hartals, blockades and<br />

picketing.<br />

• Every opposi<strong>tio</strong>n party <strong>sh</strong>ould make ‘Shadow<br />

government’. Due to this, politics and politicians can<br />

gain gene<strong>ra</strong>l people’s confidence and belief.<br />

72


Appendix Appendix 14 14 14 – Coping with the Global Financial Crisis<br />

The Global economy continues to head towards<br />

recession. JP Morgan has forecast that in 2009. Global<br />

growth will be -0.4% versus 1.9% in 2008 and 3.5% in<br />

2007. The developed economies are expected to<br />

cont<strong>ra</strong>ct with growth of -1.4% and Emerging Markets<br />

(EM) at +3.3% China is forecast to slow from 11.9% in<br />

2008 to 8.1% while India is expected to slow from 9% in<br />

2008 to 6.1% in 2009.<br />

Bang<strong>la</strong>de<strong>sh</strong> Bank (BB) has forecast that GDP growth in<br />

BD will only slow to 6.2% in FY 2008/09. Key ques<strong>tio</strong>ns<br />

are: Is Bang<strong>la</strong>de<strong>sh</strong>’s current economic resilience likely<br />

to be sustained? Are policymakers, both Bang<strong>la</strong>de<strong>sh</strong><br />

Bank (BB) and the Government adopting the appropriate<br />

monetary and fiscal st<strong>ra</strong>tegy to mitigate against a further<br />

spillover between the global meltdown and Bang<strong>la</strong>de<strong>sh</strong>?<br />

In terms of the Macro prospects going forward and<br />

policy choices avai<strong>la</strong>ble, even if there is a modest<br />

slowing in growth, Bang<strong>la</strong>de<strong>sh</strong> Bank and the<br />

Government have policy op<strong>tio</strong>ns avai<strong>la</strong>ble: Key issues<br />

include:<br />

1. Inf<strong>la</strong><strong>tio</strong>n: Inf<strong>la</strong><strong>tio</strong>n: We believe inf<strong>la</strong><strong>tio</strong>nary pressures will be<br />

significantly more mode<strong>ra</strong>te than BB is currently<br />

forecasting. With def<strong>la</strong><strong>tio</strong>n a real prospect in a<br />

number of economies around the world, and broad<br />

based commodity price declines persisting, lower<br />

inf<strong>la</strong><strong>tio</strong>n will be the dominant global trend (though<br />

relief at mode<strong>ra</strong>ting inf<strong>la</strong><strong>tio</strong>n appears to be turning<br />

into panic on def<strong>la</strong><strong>tio</strong>n as evidenced by the recent<br />

Bank of Eng<strong>la</strong>nd 1.5% <strong>ra</strong>te cut). With food 60%+ of<br />

the CPI basket, and energy prices set by the<br />

government and buffered from Global levels,<br />

Bang<strong>la</strong>de<strong>sh</strong> may see a smaller decline in inf<strong>la</strong><strong>tio</strong>n<br />

than other countries. But price pressures <strong>sh</strong>ould no<br />

longer be a policy const<strong>ra</strong>int.<br />

2. Monetary Monetary Policy: Policy: Although credit growth, especially<br />

private sector bank lending, remains strong, it is<br />

encou<strong>ra</strong>ging that BB is vigi<strong>la</strong>nt to the need for<br />

emergency liquidity injec<strong>tio</strong>ns. While premature<br />

monetary easing would run risks of perpetuating<br />

asset price bubbles within Bang<strong>la</strong>de<strong>sh</strong>, the trends in<br />

other economies underline the need to be willing to<br />

lower interest <strong>ra</strong>tes if there is clear evidence of a<br />

<strong>ra</strong>pid slowdown.<br />

3. 3. Exchange Exchange Rates: Rates: Rates: In the PAU report, it is clear that<br />

BB feels that the recent apprecia<strong>tio</strong>n in the BDT<br />

versus the currencies of some of its major t<strong>ra</strong>ding<br />

partners, most notably EUR and GBP, is merely a<br />

correc<strong>tio</strong>n of an undervalued posi<strong>tio</strong>n. They<br />

highlight that the Real Effective Exchange Rate<br />

differential to the nominal exchange <strong>ra</strong>te is still in<br />

Bang<strong>la</strong>de<strong>sh</strong>’s favour. They emphasise the need to<br />

keep inf<strong>la</strong><strong>tio</strong>n in check. But Bang<strong>la</strong>de<strong>sh</strong>’s main<br />

t<strong>ra</strong>de competitors, especially in RMG, Jute, Leather<br />

goods and frozen foods have all seen significant<br />

deprecia<strong>tio</strong>n in their exchange <strong>ra</strong>tes versus the<br />

USD (most notable India and Pakistan). As a result,<br />

Bang<strong>la</strong>de<strong>sh</strong> has lost competitiveness by holding the<br />

BDT- USD peg re<strong>la</strong>tively stable. This argues, in our<br />

view, for a modest controlled deprecia<strong>tio</strong>n of the<br />

BDT versus the USD. One can see it as an<br />

insu<strong>ra</strong>nce policy for future economic<br />

weakness/declining t<strong>ra</strong>de competitiveness. The<br />

government <strong>sh</strong>ould consider VAT or other tax<br />

reduc<strong>tio</strong>ns to help importers offset rising costs if the<br />

BDT is depreciated.<br />

4. 4. Fiscal Fiscal Policy: Policy: The sugges<strong>tio</strong>n from BB that fiscal<br />

policy <strong>sh</strong>ould incorpo<strong>ra</strong>te some scope for measures<br />

to tackle the impact of the global crisis through<br />

targeted support for certain sectors under pressure<br />

has significant merits. For example, the jute sector<br />

could one potential recipient of tempo<strong>ra</strong>ry subsidies<br />

to offset substantial loss of progress versus India.<br />

Ove<strong>ra</strong>ll, the stance of fiscal policy does appear to<br />

allow addi<strong>tio</strong>nal easing measures to be taken if<br />

needed.<br />

Addi<strong>tio</strong>nal Addi<strong>tio</strong>nal Addi<strong>tio</strong>nal Specific Specific Measures Measures Measures Recommended Recommended by by FBCCI<br />

FBCCI<br />

1. 1. 1. GoB/WB/IMF <strong>sh</strong>ould assist Bang<strong>la</strong>de<strong>sh</strong> exporters and<br />

manufacturers with adequate financial back up package<br />

against the adverse consequences of the falling commodity<br />

price and credit repayment capacities and also by ensuring<br />

single digit interest credit flow to them.<br />

1.1 A GFC mitiga<strong>tio</strong>n fund [15,000 crore] <strong>sh</strong>ould immediately<br />

be created for the purpose with g<strong>ra</strong>nts from the donour<br />

agencies. [The The US US Congress Congress approved approved an an aid aid package package worth<br />

$25 $25 billion billion in in September September to to help help the the auto auto industry industry invest invest in<br />

in<br />

new new gene<strong>ra</strong><strong>tio</strong>n gene<strong>ra</strong><strong>tio</strong>n car car technology technology and and is is under under pressure pressure to to set<br />

set<br />

aside aside another another $25 $25 billion billion to help the the three major US<br />

automakers automakers - Gene<strong>ra</strong>l Motors, Ford and and Chrysler - survive survive<br />

the the <strong>sh</strong>arpest <strong>sh</strong>arpest market market downturn downturn in in decades.] decades.]<br />

decades.]<br />

1.2 The vulne<strong>ra</strong>ble sectors <strong>sh</strong>ould be identified and secto<strong>ra</strong>l<br />

mitiga<strong>tio</strong>n st<strong>ra</strong>tegies <strong>sh</strong>ould be formu<strong>la</strong>ted and a prudent<br />

rescue package <strong>sh</strong>ould be developed in consulta<strong>tio</strong>n with<br />

FBCCI and Secto<strong>ra</strong>l representatives. The rescue package<br />

may include, among others, interest freeze, rescheduling of<br />

loans, continua<strong>tio</strong>n of credit flow at single digit interest <strong>ra</strong>te,<br />

ipso-fecto applica<strong>tio</strong>n of BBBF prescrip<strong>tio</strong>ns and issuing<br />

sovereign gua<strong>ra</strong>ntee.<br />

1.3 The debt servicing obliga<strong>tio</strong>n of many LDCs have<br />

compelled them to use limited resources to finance debt repayments<br />

and this, in turn, prevents them from financing<br />

t<strong>ra</strong>de, produc<strong>tio</strong>n, inf<strong>ra</strong>structure and capacity building<br />

activities for development.<br />

The The amount amount payable payable as as debt debt service service by by Bang<strong>la</strong>de<strong>sh</strong> Bang<strong>la</strong>de<strong>sh</strong> and<br />

and<br />

other other LDCs LDCs <strong>sh</strong>ould <strong>sh</strong>ould therefore therefore be be converted converted into into annual annual g<strong>ra</strong>nt<br />

g<strong>ra</strong>nt<br />

for for the the the development development of of t<strong>ra</strong>de t<strong>ra</strong>de-re<strong>la</strong>ted t<strong>ra</strong>de t<strong>ra</strong>de re<strong>la</strong>ted capacity capacity and<br />

and<br />

inf<strong>ra</strong>structure, inf<strong>ra</strong>structure, private private sector sector developmen<br />

development developmen<br />

development<br />

t and and institu<strong>tio</strong>n<br />

institu<strong>tio</strong>n<br />

building building to to help help expand expand and and diversify diversify export export base base and and t<strong>ra</strong>de<br />

t<strong>ra</strong>de<br />

facilita<strong>tio</strong>n facilita<strong>tio</strong>n services.<br />

services.<br />

73


Appendix Appendix 15 15 – Executive Summary of Bang<strong>la</strong>de<strong>sh</strong> 22<br />

2<br />

nd NSAPR (Oct (Oct 2008)<br />

Bang<strong>la</strong>de<strong>sh</strong> has always p<strong>la</strong>ced poverty reduc<strong>tio</strong>n at the<br />

forefront of its development st<strong>ra</strong>tegy. The Second Na<strong>tio</strong>nal<br />

St<strong>ra</strong>tegy for Accele<strong>ra</strong>ted Poverty Reduc<strong>tio</strong>n (NSAPR),<br />

embodies policies and st<strong>ra</strong>tegies for achieving accele<strong>ra</strong>ted<br />

poverty reduc<strong>tio</strong>n during FY09-FY11. Recent development<br />

experience of the country with its emerging strengths as well<br />

as vulne<strong>ra</strong>bilities and its resilient people underpin the<br />

st<strong>ra</strong>tegies. NSAPR II strives to accele<strong>ra</strong>te poverty reduc<strong>tio</strong>n<br />

through private sector development, concerted and<br />

supportive government efforts, and effective participa<strong>tio</strong>n of<br />

NGOs and the civil society in a corrup<strong>tio</strong>n free democ<strong>ra</strong>tic<br />

society. The commitment of the Bang<strong>la</strong>de<strong>sh</strong> to the<br />

Millennium Development Goals (MDGs), the South Asian<br />

Development Goals (SDGs) and other interna<strong>tio</strong>nal<br />

agreements relevant to economic and social development<br />

were duly considered in formu<strong>la</strong>ting the st<strong>ra</strong>tegies. The<br />

st<strong>ra</strong>tegies also sought to strike a ba<strong>la</strong>nce between the <strong>sh</strong>ortterm<br />

exigencies and the medium and long-term development<br />

of the economy.<br />

1. 1. Past Past Achievements Achievements in in Poverty Poverty Reduc<strong>tio</strong>n Reduc<strong>tio</strong>n<br />

Reduc<strong>tio</strong>n<br />

The incidence of poverty has been declining in Bang<strong>la</strong>de<strong>sh</strong><br />

over time, with a <strong>sh</strong>arp decline occurring between 2000 and<br />

2005. The na<strong>tio</strong>nal head count <strong>ra</strong>te of poverty declined from<br />

56.6 percent in 1991 to 48.9 percent in 2000, and further to<br />

40 percent in 2005. This t<strong>ra</strong>ns<strong>la</strong>tes into an annual ave<strong>ra</strong>ge<br />

<strong>ra</strong>te of decline of 1.9 percent during the period 1991 - 2000,<br />

and 4.6 percent during the 2000 - 05 period. During the<br />

same period the incidence of ru<strong>ra</strong>l poverty declined at the<br />

<strong>ra</strong>te of 1.6 percent and 4.3 percent respectively. The <strong>ra</strong>te of<br />

urban poverty reduc<strong>tio</strong>n has been higher in both periods- 2.5<br />

percent during 1991 - 2000 period and 4.9 percent during<br />

the 2000 -05 period. Increase in returns to occupa<strong>tio</strong>n,<br />

increase in remittances and a re<strong>la</strong>tively <strong>la</strong>rge decline in<br />

family size have contributed to the <strong>la</strong>rger fall in urban<br />

poverty.<br />

2.Maintaining 2.Maintaining Stable Stable Macroeconoin<br />

Macroeconoinic Macroeconoin<br />

Macroeconoin ic Environment Environment for for Pro-<br />

Pro<br />

poor poor Growth Growth<br />

Growth<br />

The government is committed to maintaining a stable<br />

macroeconomic environment as a st<strong>ra</strong>tegy for achieving<br />

higher economic growth and accele<strong>ra</strong>ted poverty reduc<strong>tio</strong>n.<br />

The key focus of the policies for maintaining macroeconomic<br />

stability will include: (i) improving productivity by enhancing<br />

the contribu<strong>tio</strong>n of total factor productivity to growth; (ii)<br />

lowering the level and variability of inf<strong>la</strong><strong>tio</strong>n; (iii) harmonising<br />

the fiscal, monetary and exchange <strong>ra</strong>te policies; (iv)<br />

enhancing supervision and surveil<strong>la</strong>nce of the financial<br />

system; (v) containing fiscal and current account deficits at<br />

sustainable levels; (vi) maintaining the stability of the real<br />

exchange <strong>ra</strong>te and reducing the interest <strong>ra</strong>te spread to<br />

encou<strong>ra</strong>ge private investment; and (vii) maintaining foreign<br />

exchange reserves at least for three months of import<br />

payments and <strong>sh</strong>ort-term debt payments. Further, the<br />

institu<strong>tio</strong>ns required for a stable democ<strong>ra</strong>cy which<br />

encou<strong>ra</strong>ges political competi<strong>tio</strong>n but forbids political<br />

hostilities having a negative impact on output and<br />

employment will be strengthened.<br />

Achieving accele<strong>ra</strong>ted economic growth for poverty<br />

reduc<strong>tio</strong>n will depend on seve<strong>ra</strong>l approaches: (i) increased<br />

accumu<strong>la</strong><strong>tio</strong>n of capital, enhanced supply of effective <strong>la</strong>bour<br />

and improvement in total factor productivity, with greater<br />

emphasis on the <strong>la</strong>st one; (ii) promoting the growth of<br />

sectors like agriculture, SMEs and services focusing on the<br />

pro-poor segments of the sectors; and (iii) promoting the<br />

growth of ru<strong>ra</strong>l towns and the meso-economy.<br />

A st<strong>ra</strong>tegy to <strong>ra</strong>ise the investment <strong>ra</strong>te for building higher<br />

capital stock will be complemented by a savings policy to<br />

mobilise domestic resources to finance investment.<br />

Financial products with varying liquidity, risks and returns<br />

will be developed to provide a <strong>ra</strong>nge of op<strong>tio</strong>ns for the<br />

savings of people with different degrees of liquidity<br />

preference and risk-averseness. Corpo<strong>ra</strong>te saving will be<br />

encou<strong>ra</strong>ged by offering favou<strong>ra</strong>ble treatment to retained<br />

earnings which are invested.<br />

Public savings will be increased by enhancing government<br />

revenue and <strong>ra</strong><strong>tio</strong>nalising and prioritizing government<br />

expenditure. Future drives for revenue collec<strong>tio</strong>n will be<br />

oriented to the expansion of the tax base, curbing tax<br />

evasion, checking leakage in the tax collec<strong>tio</strong>n system, more<br />

t<strong>ra</strong>nsparency in the tax collec<strong>tio</strong>n system and diffusion of tax<br />

rules. There will be online facilities of tax payment so that<br />

taxpayers can avoid any hassle with the tax officials.<br />

The tax base will be broadened by bringing agriculture and<br />

the informal sector under the tax net and the administ<strong>ra</strong><strong>tio</strong>n<br />

of <strong>la</strong>nd tax will be handed over to the tax collec<strong>tio</strong>n<br />

department. The exemp<strong>tio</strong>n regime will also be critically<br />

examined. This applies to all types of direct and indirect<br />

taxes. But the real broadening of the tax-base will consist in<br />

expanding tax administ<strong>ra</strong><strong>tio</strong>n to areas hitherto untouched but<br />

already taxable under <strong>la</strong>w. This will require strengthening the<br />

tax administ<strong>ra</strong><strong>tio</strong>n thorough reforms. In order to increase<br />

non-tax revenue, the core state-owned enterprises like the<br />

post offices and the regist<strong>ra</strong><strong>tio</strong>n departments will be<br />

reformed and their fees and charges will be <strong>ra</strong>ised to reflect<br />

long-term price movements.<br />

Official Official Official Development Development assistance assistance assistance (ODA): (ODA): ODA with less<br />

condi<strong>tio</strong>nally, g<strong>ra</strong>nts and concessionary loans will be sought.<br />

Aid effectiveness will be improved through alignment of aid<br />

with na<strong>tio</strong>nal priorities, systems and procedures, increased<br />

accountability, eliminating duplica<strong>tio</strong>n of efforts and<br />

harmonising policies and procedures of development<br />

partners, and better monitoring of aid utiliza<strong>tio</strong>n.<br />

Monetary Monetary Monetary Policy: Policy: Policy: Bang<strong>la</strong>de<strong>sh</strong> Bank will continue to pursue<br />

a prudent monetary policy to maintain reasonable price<br />

stability and promote sustainable higher growth of the<br />

economy, to maintain adequate flow of credit with the banks<br />

keeping a reasonable spread and to maintain a competitive<br />

exchange <strong>ra</strong>te. The role of NGO-MFIs as financial<br />

institu<strong>tio</strong>ns will be strengthened through the efficient<br />

func<strong>tio</strong>ning of the Micro-credit Regu<strong>la</strong>tory Authority. The<br />

growth performance of the economy will be improved, with<br />

emphasis on agricultu<strong>ra</strong>l growth, and monetary policy will be<br />

geared to maintain a ba<strong>la</strong>nce between reducing the inf<strong>la</strong><strong>tio</strong>n<br />

<strong>ra</strong>te and suppoiting higher growth.<br />

Promoting Promoting Foreign Foreign Direct Direct Investment Investment (FDI): (FDI): FDI has<br />

p<strong>la</strong>yed a critical role in the early phase of the RMG industry<br />

and has been important for the development of the mine<strong>ra</strong>ls<br />

and energy sectors and recently the telecommunica<strong>tio</strong>ns<br />

74


sector. Bang<strong>la</strong>de<strong>sh</strong> has a very libe<strong>ra</strong>l foreign direct<br />

investment regime. There are no restric<strong>tio</strong>ns on foreign<br />

equity participa<strong>tio</strong>n or on the repatria<strong>tio</strong>n of profits and<br />

income. No prior approval is required for foreign investment.<br />

In spite of the libe<strong>ra</strong>l investment regime, the annual flow of<br />

FDI has been small- less than US $ 540 million during 2000-<br />

07. FDI will be att<strong>ra</strong>cted by addressing the image problem of<br />

the country and coming up with well-advertised business<br />

support services aimed at reducing the cost of doing<br />

business. An essential element of FDI policy will be to<br />

att<strong>ra</strong>ct foreign investment, particu<strong>la</strong>rly from those countries<br />

that have extended preferential market access to<br />

Bang<strong>la</strong>de<strong>sh</strong>'s exports.<br />

External External Sector Sector Management: Management: There has been sustained<br />

robust growth of export earnings and remittances by<br />

overseas workers. The external sector policy will be geared<br />

to sustain the export growth achieved in the recent past<br />

through diversifica<strong>tio</strong>n of exports and enhancing the existing<br />

exports, to enhance remittance flows, and ensure a steady<br />

flow of imports required to attain the targeted growth <strong>ra</strong>te of<br />

the economy and to satisfy consumer demand. External<br />

sector management will focus on appropriate<br />

macroeconomic and t<strong>ra</strong>de policies, and secto<strong>ra</strong>l policies for<br />

removing supply-side const<strong>ra</strong>ints, demand-side problems,<br />

<strong>ra</strong><strong>tio</strong>naliza<strong>tio</strong>n of export incentives and leve<strong>ra</strong>ging regional<br />

t<strong>ra</strong>ding ar<strong>ra</strong>ngements. Bang<strong>la</strong>de<strong>sh</strong> Bank seeks to maintain<br />

re<strong>la</strong>tive exchange <strong>ra</strong>te stability to ensure the<br />

competitiveness of t<strong>ra</strong>dable sectors and mitigate the<br />

excessive fluctua<strong>tio</strong>n of <strong>ra</strong>tes unre<strong>la</strong>ted to economic<br />

fundamentals and build up foreign exchange reserves to<br />

cu<strong>sh</strong>ion adverse external <strong>sh</strong>ocks.<br />

3. 3. Promoting Promoting Decent Decent Employment<br />

Employment<br />

The <strong>la</strong>bour force is estimated to grow to 58.3 million by<br />

2011, resulting in an incremental <strong>la</strong>bour force of 5.4 million<br />

during 2009-11. Including the current backlog of 1.9 million<br />

unemployed, 7.3 million addi<strong>tio</strong>nal jobs will have to be<br />

created during 2009-11, requiring an employment growth<br />

<strong>ra</strong>te of 4.7 percent. The employment issue is much more<br />

challenging if one considers the case for productive<br />

employment for the underemployed <strong>la</strong>bour force. The<br />

incremental employment during 2009-11 period is projected<br />

to be 5.3 million. Seve<strong>ra</strong>l approaches will be adopted to<br />

ease the employment problem: (i) introducing policies for<br />

making growth more employment-friendly. (ii) increasing<br />

overseas mig<strong>ra</strong><strong>tio</strong>n of workers, and (II) undertaking special<br />

schemes for job crea<strong>tio</strong>n (especially through micro-credit)<br />

and employment-based safety nets through public works<br />

prog<strong>ra</strong>mmes.<br />

Overseas employment has greatly contributed to the<br />

absorp<strong>tio</strong>n of the increasing <strong>la</strong>bour force in the country. The<br />

annual flow of mig<strong>ra</strong>nt workers has increased from 6,087 in<br />

1976 to 8,21,223 in 2007, with a 17.1 percent trend <strong>ra</strong>te of<br />

growth.<br />

The government will introduce a gua<strong>ra</strong>nteed employment<br />

prog<strong>ra</strong>mme in the FY2008-09 for the ru<strong>ra</strong>l people during the<br />

lean season. The main aim of this new prog<strong>ra</strong>mme is to<br />

gua<strong>ra</strong>ntee 100 days of work in a year. If the government<br />

fails to provide work, it will compensate- the persons during<br />

the lean season with ca<strong>sh</strong>.<br />

4. 4. 4. Improving Improving the the Environm Environment Environm Environm ent for Private Private Sector<br />

Development Development (PSD)<br />

(PSD)<br />

The private sector acts as the engine of growth in a market<br />

economy. The government has introduced a broad <strong>ra</strong>nge of<br />

policy and institu<strong>tio</strong>nal changes having a positive impact on<br />

private sector development. Enhanced efforts will be made<br />

to support the private sector-led development during the<br />

NSAPR II. It will maintain macroeconomic stability to provide<br />

a conducive environment for private investment. Other<br />

measures for private sector development will focus on<br />

removing inf<strong>ra</strong>structu<strong>ra</strong>l const<strong>ra</strong>ints, creating a deeper and<br />

more efficient financial sector, developing best p<strong>ra</strong>ctices for<br />

microfinance, developing the capital market, addressing<br />

skills <strong>sh</strong>ortages in the <strong>la</strong>bour market, promoting regu<strong>la</strong>tory<br />

t<strong>ra</strong>nsparency, improving access to <strong>la</strong>nd for private<br />

enterprises, promoting development of economic zones,<br />

technology development, women entrepreneurs hip<br />

development, promoting corpo<strong>ra</strong>te social responsibility,<br />

promoting public-private dialogue and enactment of a<br />

competi<strong>tio</strong>n <strong>la</strong>w. The Regu<strong>la</strong>tory Reforms Commission<br />

(RRC) will work to streamline and upg<strong>ra</strong>de the regu<strong>la</strong>tory<br />

and legal f<strong>ra</strong>mework that governs business and investment.<br />

The Better Business Forum (BBF) comprising senior<br />

representatives of the public and private sectors will provide<br />

systematic feedback to the private sector.<br />

5. 5. Land Land Land Use Use Policy Policy and and Management<br />

Management<br />

Land use policy will ensure the best possible use of <strong>la</strong>nd<br />

resources and delivery of <strong>la</strong>nd re<strong>la</strong>ted services to the people<br />

through modernized and efficient <strong>la</strong>nd administ<strong>ra</strong><strong>tio</strong>n. The<br />

future st<strong>ra</strong>tegies to overcome <strong>la</strong>nd policy and management<br />

problems will be mainly concerned with <strong>la</strong>nd administ<strong>ra</strong>tive<br />

reform i.e. updating and simplifying <strong>la</strong>ws re<strong>la</strong>ting to <strong>la</strong>nd-use<br />

management. This will lead to pro-poor governance and<br />

ultimately to poverty reduc<strong>tio</strong>n. The st<strong>ra</strong>tegies are: (a)<br />

moderniza<strong>tio</strong>n of the <strong>la</strong>nd records and <strong>la</strong>nd management<br />

system, (b) allotment of agricultu<strong>ra</strong>l Khas <strong>la</strong>nd to <strong>la</strong>ndless<br />

and assetless people to improve their living condi<strong>tio</strong>ns, (c)<br />

ensuring p<strong>la</strong>nned use of <strong>la</strong>nd through enforcement of the<br />

provisions of the existing <strong>la</strong>ws and promulga<strong>tio</strong>n of new<br />

<strong>la</strong>ws, ( c) ensuring proper management of Jalmahal,<br />

Balumahal and other Sai<strong>ra</strong>t mahals for poverty reduc<strong>tio</strong>n,<br />

(d) protec<strong>tio</strong>n and conserva<strong>tio</strong>n of wet <strong>la</strong>nds, hilly areas,^tea<br />

gardens, and rubber gardens, and (e) taking measures to<br />

help accre<strong>tio</strong>n of coastal <strong>la</strong>nd.<br />

6. 6. Agriculture Agriculture Agriculture and and Forestry Forestry<br />

Forestry<br />

Produc<strong>tio</strong>n of all major crops - rice, jute, pulses, oilseed,<br />

and sugarcane- increased steadily during the first NSAPR<br />

period. Other sub-sectors i.e., fi<strong>sh</strong>eries, livestock, and<br />

poultry also enjoyed substantial growth during the same<br />

period. However, higher growth is required in these sectors<br />

to enhance their pro-poor impact and to meet the growing<br />

demand.<br />

The challenges of improved performance in the agricultu<strong>ra</strong>l<br />

sector will be addressed through a set of policies<br />

and st<strong>ra</strong>tegies in the NSAPR II period. In the crop sub-sector<br />

the st<strong>ra</strong>tegies will focus on productivity gains, diversifica<strong>tio</strong>n<br />

to high value crops, pro-market input distribu<strong>tio</strong>n,<br />

biotechnology research and development, technology<br />

gene<strong>ra</strong><strong>tio</strong>n and dissemina<strong>tio</strong>n, strengthening of NARS<br />

institutes, demand-driven agricultu<strong>ra</strong>l extension, revamping<br />

the agricultu<strong>ra</strong>l marketing system, agro-processing activities,<br />

creating employment opportunities, especially for women,<br />

increasing cropping intensity through diversifica<strong>tio</strong>n to high<br />

75


value crops, creating enabling agri-business development<br />

services and market opportunities both for domestic and<br />

interna<strong>tio</strong>nal markets, promoting small and medium<br />

enterprises, export promo<strong>tio</strong>n and development of AEZbased<br />

technology, climate change adaptive technology,<br />

extension of irriga<strong>tio</strong>n, flood protec<strong>tio</strong>n and d<strong>ra</strong>inage<br />

cove<strong>ra</strong>ge, and agricultu<strong>ra</strong>l subsidy.<br />

In the fi<strong>sh</strong>eries sub-sector the st<strong>ra</strong>tegies will address the<br />

issues concerning increasing productivity, small-scale pond<br />

carp polyculture, small-scale cage culture, stocking beels<br />

and oxbow <strong>la</strong>kes, rice-p<strong>ra</strong>wn culture, pen culture, <strong>sh</strong>rimp<br />

(bagda and golda) produc<strong>tio</strong>n, fi<strong>sh</strong>eries research and<br />

extension, management of jalmahal, increasing productivity<br />

in marine and b<strong>ra</strong>cki<strong>sh</strong> water fi<strong>sh</strong>eries, quality control,<br />

human resource development, and meeting the increasing<br />

demand of fi<strong>sh</strong> farmers for informa<strong>tio</strong>n on aquaculture and<br />

fi<strong>sh</strong>eries management.<br />

In the livestock sub-sector the issues re<strong>la</strong>ted to livestock and<br />

poultry husbandry, cost-effective quality feed supply,<br />

research and extension support, and closely supervised<br />

services, women's employment in the livestock sub-sector,<br />

disease incidence, and export of livestock products will<br />

receive atten<strong>tio</strong>n.<br />

In the forestry sub-sector the st<strong>ra</strong>tegies will aim at<br />

biodiversity conserva<strong>tio</strong>n, wildlife protec<strong>tio</strong>n, access of the<br />

poor to public commons, afforesta<strong>tio</strong>n and tree p<strong>la</strong>nta<strong>tio</strong>n,<br />

and soil and water conserva<strong>tio</strong>n. In addi<strong>tio</strong>n, they will focus<br />

on social awareness and capacity building, <strong>sh</strong>ifting<br />

cultiva<strong>tio</strong>n, deforesta<strong>tio</strong>n, and climate change.<br />

7. 7. 7. Water Water Resources Resources Development Development Development and and and Management<br />

Management<br />

The vision for the water resources sector is acquisi<strong>tio</strong>n of<br />

water resources, optimizing various uses, and managing<br />

water resources for poverty reduc<strong>tio</strong>n and sustainable<br />

development for securing the lives and properties of the<br />

people, especially the poor from water-re<strong>la</strong>ted disasters.<br />

Participatory p<strong>la</strong>nning and implementa<strong>tio</strong>n of water sector<br />

prog<strong>ra</strong>mmes/projects will be a continuing process.<br />

8. 8. 8. Urban Urban Development<br />

Development<br />

Bang<strong>la</strong>de<strong>sh</strong> is experiencing <strong>ra</strong>pid urbaniza<strong>tio</strong>n, the<br />

propor<strong>tio</strong>n of urban popu<strong>la</strong><strong>tio</strong>n reaching 24.6 percent in<br />

2006. Urbaniza<strong>tio</strong>n has incidental growth promo<strong>tio</strong>n and<br />

poverty reduc<strong>tio</strong>n potential but puts heavy pressure on the<br />

development of utilities to meet demand for a <strong>ra</strong>pidly growing<br />

urban popu<strong>la</strong><strong>tio</strong>n. The urbaniza<strong>tio</strong>n policy would encompass<br />

spatial, economic, social, cultu<strong>ra</strong>l, aesthetic and<br />

environmental aspects of urban life directed towards<br />

achieving an urban society free from hunger and poverty with<br />

ample access to educa<strong>tio</strong>n, health, <strong>sh</strong>elter, and basic<br />

services and a secure and liveable environment at home and<br />

workp<strong>la</strong>ce. It will be a society sensitive to women, children<br />

and the aged.<br />

9. 9. Small Small Small and and and Medium Medium Enterprises Enterprises Enterprises (SMEs) (SMEs) Development<br />

Development<br />

The vision of the SME development is to turn it into a more<br />

dynamic sector to be able to p<strong>la</strong>y a pivotal role in achieving<br />

the na<strong>tio</strong>nal goal of accele<strong>ra</strong>ted pro-poor growth, sustained<br />

poverty reduc<strong>tio</strong>n and faster <strong>ra</strong>te of economic development<br />

and social progress during the NSAPR II period and beyond.<br />

The government will, through its policy support to the SMEs,<br />

p<strong>la</strong>y the role of a facilitator to provide them a level p<strong>la</strong>ying<br />

field. The sector suffers from a multiple const<strong>ra</strong>ints and<br />

challenges. Lack of access to finance, inf<strong>ra</strong>structu<strong>ra</strong>l<br />

bottlenecks (especially unreliable access to power), low<br />

levels of technological competence, difficulty in market<br />

access and regu<strong>la</strong>tory barriers are cited by the SME<br />

entrepreneurs as binding const<strong>ra</strong>ints. The intensity of these<br />

common ope<strong>ra</strong><strong>tio</strong>nal impediments tends to hurt the smallest<br />

of the SMEs the most.<br />

The policies and st<strong>ra</strong>tegies for promoting SMEs growth and<br />

competitiveness in the coming years will be formu<strong>la</strong>ted to<br />

address the issues re<strong>la</strong>ted to access to finance focusing on a<br />

comprehensive and inclusive credit policy, human resources<br />

development focusing on fostering the entrepreneurial spirit,<br />

technology and product quality and standards,<br />

subcont<strong>ra</strong>cting/ ancil<strong>la</strong>risa<strong>tio</strong>n, produc<strong>tio</strong>n networking,<br />

access to markets, gender sensitivity, regional spread, and<br />

policy coordina<strong>tio</strong>n and coope<strong>ra</strong><strong>tio</strong>n for policy<br />

implementa<strong>tio</strong>n.<br />

10. 10. Power Power and and Energy<br />

Energy<br />

The vision of the power sector is to provide access to<br />

affordable and reliable electricity to all citizens of Bang<strong>la</strong>de<strong>sh</strong><br />

by 2020. The main goal is to provide quality and reliable<br />

power at affordable prices to the people of Bang<strong>la</strong>de<strong>sh</strong> for<br />

the desired economic, social and human development of the<br />

country through system expansion with a prudent least cost<br />

p<strong>la</strong>n, efficiency improvement through institu<strong>tio</strong>nal and<br />

structu<strong>ra</strong>l reform and establi<strong>sh</strong>ment of commercial<br />

ar<strong>ra</strong>ngements among the sector entities.<br />

Non-renewable energy comprising gas and coal will p<strong>la</strong>y a<br />

critical role in achieving the goals of NSAPR II. Realiza<strong>tio</strong>n of<br />

the growth targets envisaged in the NSAPR will require more<br />

than 10 percent annual growth in energy. The major<br />

challenge of the sector will be to meet country's energy<br />

requirements in keeping with its increasing demand.<br />

The existing Na<strong>tio</strong>nal Energy Policy (NEP) is being updated<br />

to provide guidelines for achieving energy security for the<br />

country. An ac<strong>tio</strong>n p<strong>la</strong>n will be worked out to improve the<br />

ope<strong>ra</strong><strong>tio</strong>nal and financial performance of Petrobang<strong>la</strong><br />

umbrel<strong>la</strong>. Also Gas Act will be enacted providing ac<strong>tio</strong>n-p<strong>la</strong>ns<br />

for proper accountability. The policy for public-private<br />

partner<strong>sh</strong>ip for ope<strong>ra</strong>ting companies of Petrobang<strong>la</strong> will be<br />

formu<strong>la</strong>ted so that both domestic and foreign entrepreneurs<br />

may participate.<br />

The Na<strong>tio</strong>nal Coal Policy is being formu<strong>la</strong>.tecl foi<br />

concomitant development of coal to meet the growing energy<br />

demand. Bang<strong>la</strong>de<strong>sh</strong> will have to focus on the exploita<strong>tio</strong>n of<br />

huge coal reserve immediately, especially for power<br />

gene<strong>ra</strong><strong>tio</strong>n, leaving gas for fertilizer, CNG, commercial and<br />

industrial usage. Power Sector Master P<strong>la</strong>n (PSMP) which is<br />

fully based on gas-fired power p<strong>la</strong>nts must be revised and<br />

made realistic.<br />

The major st<strong>ra</strong>tegies to meet the demand for petroleum<br />

products will include increasing the LPG bottling capacity<br />

and increasing the refining capacity, expansion of the<br />

sto<strong>ra</strong>ge capacity of petroleum products, improvement of the<br />

distribu<strong>tio</strong>n system by putting a second oil instal<strong>la</strong><strong>tio</strong>n, and<br />

enhancement of the capability to handle <strong>la</strong>rge vessels to<br />

reduce losses in import ope<strong>ra</strong><strong>tio</strong>ns.<br />

76


Renewable Renewable Energy; Energy; The main goal is to develop,<br />

disseminate, promote and extend the renewable energy<br />

technology to the ru<strong>ra</strong>l people to meet their energy needs<br />

for lighting and cooking purposes by using sustainable and<br />

inexhaustible environment friendly renewable energy<br />

sources. St<strong>ra</strong>tegic ac<strong>tio</strong>ns will include providing institu<strong>tio</strong>nal<br />

support including procurement and t<strong>ra</strong>ining to the<br />

employees participating in the RE prog<strong>ra</strong>mmes, exemp<strong>tio</strong>ns<br />

of all duties and taxes on imported so<strong>la</strong>r panels, giving<br />

assistance to NGOs for enhancing their RE prog<strong>ra</strong>mmes,<br />

particu<strong>la</strong>rly so<strong>la</strong>r power and bio-gas p<strong>la</strong>nt prog<strong>ra</strong>mmes,<br />

encou<strong>ra</strong>ging local entrepreneurs to setup assembly p<strong>la</strong>nts<br />

to make so<strong>la</strong>r panels locally with imported so<strong>la</strong>r cells.<br />

11. 11. T<strong>ra</strong>nsport T<strong>ra</strong>nsport Roads: Roads: The road sub-sector has expanded<br />

significantly, with profound effects on growth and poverty<br />

reduc<strong>tio</strong>n. The st<strong>ra</strong>tegies in this sub-sector will address a<br />

wide <strong>ra</strong>nge of issues. An integ<strong>ra</strong>ted Na<strong>tio</strong>nal T<strong>ra</strong>nsport Policy<br />

will be formu<strong>la</strong>ted and a Road Master P<strong>la</strong>n will be adopted<br />

for developing the country's road network. A Na<strong>tio</strong>nal<br />

Highway Authority to facilitate public and private participa<strong>tio</strong>n<br />

in road sector development and a Road Fund Authority to<br />

enhance implementa<strong>tio</strong>n of the maintenance prog<strong>ra</strong>mme will<br />

be establi<strong>sh</strong>ed. The institu<strong>tio</strong>nal capability of RHD will be<br />

strengthened further.<br />

Projects will be chosen with a focus on pro-poor growth and<br />

gender equity. A legal and financial f<strong>ra</strong>mework will be<br />

created to encou<strong>ra</strong>ge private investment in road sector<br />

development. Social impact study, particu<strong>la</strong>rly for district/zi<strong>la</strong><br />

road schemes and projects will be conducted. Asian<br />

Highway Routes will be completed according to interna<strong>tio</strong>nal<br />

standards. The resourceful coastal areas will be brought<br />

under the road network system. Regional ba<strong>la</strong>nce will be<br />

establi<strong>sh</strong>ed in the road sector development prog<strong>ra</strong>mme.<br />

Construc<strong>tio</strong>n of missing links, particu<strong>la</strong>rly on na<strong>tio</strong>nal and<br />

regional highway networks will be expedited. The<br />

development of Dhaka city roads will be emphasized. The<br />

various aspects of road safety will be addressed properly.<br />

Railway: Railway: The main goal of Bang<strong>la</strong>de<strong>sh</strong> Railway is to sustain<br />

its growth momentum to contribute to the development<br />

efforts of the country through providing wider connectivity<br />

and mass t<strong>ra</strong>nsporta<strong>tio</strong>n facilities at a compa<strong>ra</strong>tively cheap<br />

price. The st<strong>ra</strong>tegic op<strong>tio</strong>ns include the prepa<strong>ra</strong><strong>tio</strong>n of a<br />

master p<strong>la</strong>n for the development of Bang<strong>la</strong>de<strong>sh</strong> Railway<br />

(BR), undertaking projects for double-t<strong>ra</strong>cking to enhance<br />

the line capacity of the Dhaka-Chittagong Corridor,<br />

undertaking rehabilita<strong>tio</strong>n projects, and the implementa<strong>tio</strong>n<br />

of a prog<strong>ra</strong>mme of organiza<strong>tio</strong>nal and policy reforms. A<br />

sepa<strong>ra</strong>te Railway Division will be establi<strong>sh</strong>ed under the<br />

Ministry of Communica<strong>tio</strong>n for developing <strong>ra</strong>il t<strong>ra</strong>nsport<br />

services as a modern and cheap mode of t<strong>ra</strong>nsporta<strong>tio</strong>n.<br />

Waterway: Waterway: The main goal of water t<strong>ra</strong>nsport is to ensure<br />

the smooth and safe naviga<strong>tio</strong>n of cargo and passenger<br />

vessels. In order to overcome the current and emerging<br />

problems prog<strong>ra</strong>mmes will be undertaken for dredging<br />

important waterways and river routes and the construc<strong>tio</strong>n of<br />

an in<strong>la</strong>nd river container terminal. Besides, the IWTA will<br />

make provision for providing facilities at different <strong>la</strong>nding<br />

ports, <strong>la</strong>nding facilities in the coastal area, and pontoons at<br />

wayside <strong>la</strong>ndings.<br />

Ports: Ports: The main goal is to enhance efficiency and<br />

productivity against pre-set indicators through improving the<br />

quality of services and facilities to the port users and<br />

stakeholders at competitive prices and to upg<strong>ra</strong>de<br />

Chittagong Port to a world-c<strong>la</strong>ss port. Before the state of<br />

emergency dec<strong>la</strong>red in 2007, the inefficiency, costliness,<br />

insecurity and re<strong>la</strong>ted issues made Chittagong Port one of<br />

the more insecure and inefficient as well as costly ports of<br />

the world. The port activities have got momentum and many<br />

irregu<strong>la</strong>rities have been duly addressed and eliminated<br />

since January 2007 with the introduc<strong>tio</strong>n of recent reform<br />

initiatives for enhancing the productivity and efficiency of the<br />

Port.<br />

12. 12. 12. Post Post and and Telecommunica<strong>tio</strong>n: Telecommunica<strong>tio</strong>n: The main goal of<br />

development of the post and telecommunica<strong>tio</strong>n<br />

inf<strong>ra</strong>structure is to improve the quality of services. The<br />

concerned st<strong>ra</strong>tegies for the development of postal services<br />

include the introduc<strong>tio</strong>n of an ICT-based postal network to<br />

keep it connected with customers, qualitative change in<br />

postal services, and continuous improvement of products,<br />

work process reengineering, creating a business<br />

development cell and providing quality sendees to the<br />

people. The st<strong>ra</strong>tegies to solve the problems are extending<br />

the ICT facility, empowering ru<strong>ra</strong>l people, minimizing the<br />

digital gap and extending the digital telephone facilities at<br />

Upazi<strong>la</strong> Growth Centres.<br />

13. 13. Food Food Security: Security: Food security emb<strong>ra</strong>ces both physical<br />

and economic access to sufficient, safe and nutri<strong>tio</strong>us food<br />

to meet dietary needs. Food security is ensured through five<br />

major food t<strong>ra</strong>nsfer prog<strong>ra</strong>mmes, namely, VGD, FFW, VGF,<br />

TR, and GR. Main problems of access to food re<strong>la</strong>te to <strong>la</strong>ck<br />

of purchasing power and seasonal <strong>sh</strong>ortage of food. Certain<br />

limita<strong>tio</strong>ns with respect to food security include food aid<br />

from different sources going to the same households,<br />

dispropor<strong>tio</strong>nate distribu<strong>tio</strong>n of food to different areas,<br />

alloca<strong>tio</strong>n of more VGD cards to areas where poverty is<br />

less, and ineffectiveness of the food procurement and<br />

distribu<strong>tio</strong>n system.<br />

14. 14. 14. Promoting Promoting Good Good Good Governance<br />

Governance<br />

Good governance is one of the essential precondi<strong>tio</strong>ns of<br />

socio-economic development and poverty reduc<strong>tio</strong>n.<br />

Corrup<strong>tio</strong>n is often both a cause and an effect of weak<br />

governance. Improving governance and reducing corrup<strong>tio</strong>n<br />

are crucial to helping poor people escape poverty and to<br />

achieve the MDGs.<br />

The vision of the Government of Bang<strong>la</strong>de<strong>sh</strong> in terms of<br />

good governance is to ensure effective parliamentary<br />

process, <strong>la</strong>w and order, pro-people public services, an<br />

improved legal and judicial system, and to strengthen local<br />

government and establi<strong>sh</strong> a corrup<strong>tio</strong>n-free society with<br />

social justice.<br />

15. 15. 15. Caring Caring Caring for for for the the Environment Environment and and Tackling Tackling Climate<br />

Climate<br />

Change Change for for Sustainable Sustainable Development<br />

Development<br />

Development<br />

In the midst of widespread poverty and natu<strong>ra</strong>l resource<br />

deple<strong>tio</strong>n in the country, the government strives to produce<br />

a proper mix of pro-environment and pro-development<br />

policies. The environmental challenges are in the forms of<br />

water and air pollu<strong>tio</strong>n, <strong>la</strong>nd deg<strong>ra</strong>da<strong>tio</strong>n, extreme<br />

deg<strong>ra</strong>da<strong>tio</strong>n of terrestrial and aquatic ecosystems,<br />

unsustainable agricultu<strong>ra</strong>l p<strong>ra</strong>ctices and unp<strong>la</strong>nned urban<br />

growth. There is the further challenge of overcoming weak<br />

environmental governance. In this area the vision is to<br />

achieve poverty-free environmental sustainability in<br />

Bang<strong>la</strong>de<strong>sh</strong>. The aims is to meet the needs of current and<br />

future gene<strong>ra</strong><strong>tio</strong>ns by ensuring environment-friendly<br />

77


development, allowing common people access to public<br />

<strong>la</strong>nds and resources and checking the various kinds of<br />

pollu<strong>tio</strong>n that harm the poor dispropor<strong>tio</strong>nately, particu<strong>la</strong>rly<br />

poor women and children. Climate change has<br />

compounded the problems of environmental deg<strong>ra</strong>da<strong>tio</strong>n.<br />

Appropriate measures will be taken to adapt and mitigate to<br />

climate change. Environment and climate change issues<br />

will be mainstreamed in the development process.<br />

16. 16. 16. Enhancing Enhancing Productivi Productivity Productivi ty and and Efficiency Efficiency through through Science<br />

Science<br />

and and Technology<br />

Technology<br />

Technology<br />

The major goal of the science and technology policy is to<br />

make Bang<strong>la</strong>de<strong>sh</strong> a poverty-free, prosperous country<br />

through the applica<strong>tio</strong>n of science and technology. The<br />

quality7 of life of people of the disadvantaged st<strong>ra</strong>ta will be<br />

improved through enhancing quality of educa<strong>tio</strong>n and<br />

healthcare by innovative applica<strong>tio</strong>n of ICT, enhancing<br />

productivity in the agriculture through the applica<strong>tio</strong>n of<br />

biotechnology and inspiring the crea<strong>tio</strong>n of jobs through<br />

technological growth induced by a more reliable avai<strong>la</strong>bility<br />

of power through the promo<strong>tio</strong>n and applica<strong>tio</strong>n of atomic<br />

energy. Development of modern biotechnology will be<br />

promoted on the areas of bio-fuel, biomedical and<br />

agricultu<strong>ra</strong>l research.<br />

17. 17. Indicative Costs Costs of AAchieving<br />

A<br />

chieving Goals Goals and Targets Set<br />

Out Out in in NSAPR NSAPR II II<br />

II<br />

In assessing the resource requirement for NSAPR II<br />

implementa<strong>tio</strong>n, a macro/micro approach was taken. At the<br />

macro level, expenditure projec<strong>tio</strong>n from the medium-term<br />

budgetary f<strong>ra</strong>mework was taken into conside<strong>ra</strong><strong>tio</strong>n. At the<br />

micro level, the cost of implementing the activities to<br />

achieve the desired goals and targets in each thematic area<br />

was taken into conside<strong>ra</strong><strong>tio</strong>n. These indicative costs were<br />

identified in consulta<strong>tio</strong>n with the relevant stakeholders in<br />

the concerned ministries on the basis of unit costs. Effort<br />

was made to avoid over<strong>la</strong>ps and not to overestimate<br />

implementa<strong>tio</strong>n needs. The total need for resources during<br />

FY09-FY11 to achieve the goals and targets recommended<br />

in 18 thematic areas comes to Tk. 2567.99 billion at FY08<br />

prices. The total government expenditure including nondiscre<strong>tio</strong>nary<br />

expenditures is estimated at Tk.3190.44 billion<br />

at FY08 prices. The maximum value of domestic resources<br />

that can be mobilised during the NSAPR II implementa<strong>tio</strong>n<br />

period from revenue collec<strong>tio</strong>n and domestic borrowing<br />

(sustainable level of borrowing is considered as 2 percent of<br />

GDP) is estimated at Tk.2559.50 billion resulting in a<br />

resource gap of Tk.630.94 billion at FY08 prices or US$9.01<br />

billion.<br />

18. 18. Strengthening Strengthening Imple Implementa<strong>tio</strong>n Imple Imple menta<strong>tio</strong>n Monitoring Monitoring and<br />

and<br />

Evalua<strong>tio</strong>n<br />

Evalua<strong>tio</strong>n<br />

The implementa<strong>tio</strong>n ar<strong>ra</strong>ngements and monitoring and<br />

evalua<strong>tio</strong>n mechanism of NSAPR II has been clearly<br />

articu<strong>la</strong>ted. The major responsibility for the implementa<strong>tio</strong>n<br />

of the st<strong>ra</strong>tegy lies with the concerned ministries and their<br />

agencies comprising different thematic groups as well as<br />

other ministries and agencies responsible for the<br />

implementa<strong>tio</strong>n of the crosscutting issues. Other actors that<br />

will p<strong>la</strong>y an active role in the implementa<strong>tio</strong>n include the<br />

private sector, civil society organiza<strong>tio</strong>ns (CSOs), NGOs,<br />

and regu<strong>la</strong>tory commissions. The development partners will<br />

p<strong>la</strong>y a supportive role in the implementa<strong>tio</strong>n of the NSAPR<br />

II.<br />

The institu<strong>tio</strong>nal f<strong>ra</strong>mework for monitoring and evalua<strong>tio</strong>n<br />

(M&E) has been kept mostly simi<strong>la</strong>r as proposed in the first<br />

NSAPR. A list of indicators has been developed for<br />

monitoring. For carrying out M&E effectively a set of<br />

capacity building issues will be addressed:<br />

• Capacity of BBS will be strengthened to enable it to<br />

conduct surveys, census and special surveys to produce<br />

quality data. The timing of these activities needs to match<br />

that of prepa<strong>ra</strong><strong>tio</strong>n as well as monitoring and evalua<strong>tio</strong>n of<br />

NSAPR II;<br />

• Capacity-building of NPFP will be addressed to enable<br />

it to guide the working groups and coordinate their activities<br />

and carry out the analytical work;<br />

• The p<strong>la</strong>nning wings/units in the ministries will be<br />

strengthened with adequate manpower having appropriate<br />

skills; and<br />

• A gene<strong>ra</strong>l awareness of the process of implementa<strong>tio</strong>n,<br />

and monitoring and evalua<strong>tio</strong>n of NSAPR II will be created<br />

among all public officials through work<strong>sh</strong>ops and t<strong>ra</strong>ining<br />

prog<strong>ra</strong>mmes.<br />

Monitoring and evalua<strong>tio</strong>n will not be limited to the<br />

government system only. NGOs, CBOs, research<br />

organiza<strong>tio</strong>ns and academic institu<strong>tio</strong>ns will be encou<strong>ra</strong>ged<br />

to undertake monitoring through the gene<strong>ra</strong><strong>tio</strong>n of relevant<br />

data.<br />

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