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OPPORTUNITIES IN INFRASTRUCTURE SECTOR.

BANGLADESH

By: Capt. Sohail Hasan,

President,

Bangladesh Business Chamber of Singapore

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Very Good Afternoon,

• Introduction of Bangladesh Business

Chamber Singapore

• Website : www.bdcham.com

• Email : info@bdcham.sg

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Basic Economic Facts• GDP: US$ 105.56 billion

• GDP Growth : 6.70%

• Per Capita Income : US$ 818

• Distribution of GDP : Agriculture : 19.95%, Industry : 30.33,Service : 49.72%

• Inflation (CPI): 8.8% (average)

• Total Export: US$ 22.92 billion

• Total Import: US$ 33.65 billion

• Remittance: US$ 11.65 billion

• Current Account Balance: US$ 995 million (as on 30th June)

• Foreign Direct Investment : US$ 913 million ( 2010)

• Foreign Exchange Reserve: US$ 10.91 billion (as on 30th June 2010)

• Exchange rate1 US$=Tk 80.23 (average)

• Major industries: Readymade Garments (woven and knitwear), Textile, Chemical, Sugar, Fertiliser, Cement, Pharmaceuticals, Frozen Food, Jute goods, Leather, Ship Building.

• Major Trading commodities:Export: ready made garments, home textile, jute and jute goods, leather and leather products, chemical products, frozen food (fish and shrimp), tea.

Import: machinery and equipment, chemicals, iron and steel, yarn, textiles, food grain & other foodstuffs, crude petroleum & petroleum products, plastic & rubber article

• Major trading partners: Export: USA, Germany, UK, France, Canada, Italy. Import: China, India, Kuwait, Singapore, Hong Kong, Malaysia.

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Bangladesh economic growth %“…constant unbroken GDP growth….”

0

2

4

6

8

2002 2004 2006 2008 2010

GD

P

GDP

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Trade Growth: Bangladesh

Exports US$mn Import US$mn

75218573

1044212100

1390015600

17600

19700

22500

0

5000

10000

15000

20000

25000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Trade Value

984011870

1330015500

19500

22000

24900

27380

30100

0

5000

10000

15000

20000

25000

30000

35000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Trade Value

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Investment opportunities

Positive investment climate

– Homogeneous, peaceful society.

– Democratic and stable

– Political support for market reform

– Active encouragement of FDI & PPP

Financial incentives

– No ceiling on investment

– Tax holidays.

– No import duty on machinery and spares

– Duty free import of raw materials from domestic tariff area

– Resiendacy permit for foreign personnel

– Capital,profit and dividend repatriation facilities

– Hundred percent foreign equity allowed

– Double taxation avoidance

– Tax exemption on the interest payable on foreign loans and on royalities and technical know how fees.

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Area of Investment

1. Infrastructure -- Transport

– Roads

– Railways

– Water ways

2. Infrastructure – Port, Shipping

3. Infrastructure – Telecommunication

4. Infrastructure – Urban development

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Infrastructure -- Transport

Roads

• Roads & highways in Bangladesh:

- National Highway = 3,478.42 km

- Regional Highway = 4,221.52 km

- Zilla Road = 13,247.79 km

- Total Road Length = 20,947.73 km

• Improving transportation and communication is a major goal of theBangladesh Govt.

• The whole transport sector is very basic.

• Major expansion and a vast programme

of rehabilitation is under process.

• The current trend is an increased use of road transportation.

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Infrastructure -- Transport

Opportunities

• Road network improvement and maintaince.

• Construction of overpass, tunnel, flyover, bridges & bypass.

• Improvement of land road post as national highways.

• Strengthen cross border infrastructure.

• Setting up dry port, ICD’s and associated facilities .

• Strengthen domestic transport sector.

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Infrastructure -- Transport

Railway

• Bangladesh Railway has given emphasis to connect its network with

every District Head Quarter. In order to keep pace with changes in

the domain of transport in this sub-continent.

• BR also has taken some important project like construction of the

missing portion of Double line between Dhaka-Chittagong,

rehabilitation of deplorable tracks, procurement of rolling stocks and

modernization of signaling to cater the need of the honorable

stakeholders. After completion of the undertaken projects, Railway

will be able to present an acceptable railway to the nation.

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Infrastructure -- Transport

Opportunity

• Replacement and up gradation of old signaling andinterlocking system

• Replacement and up gradation of old signaling andinterlocking system.

• Rehabilitation of old Line.

• Construction of Railway line from Khulna to Mongla.

• Procurement of trains for introduction commuter Trains

• Studies for strengthen/reconstruction of existing Bridges.

• Construction of missing links in the rail corridor between

Bangladesh India border

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Infrastructure -- Transport

Water ways

• The Inland Waterways Transport (IWT) sector carries over 50% of all

arterial freight traffic and one quarter of all passenger traffic.

• Bangladesh has about 24,000 km. of rivers, streams and canals that

together cover about 7% of the country's surface

• Out of 24,000 km. of rivers, streams and canals only about 5,968 km. is

navigable by mechanized vessels during monsoon period which shrinks

to about 3,865km.

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Infrastructure -- Transport

Opportunities

• Development and capital dredging. Maintenance dredging

• Modification/modernization of existing inland river ports

• Development harbor facilities of inland transport and providingweather forecasting facilities

• Establishment of landing facilities at different wayside landingstation & costal island.

• Construction of new port including facilities & four harbors.

• Construction of inland container river terminal at Khanpur,Narayangong and few more around Dhaka.

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Infrastructure -- Telecommunication

• Has attract considerable foreign investment.

• Private farms and investors now operate in that sector.

• The Bangladesh Telegraph and Telephone Board, an State

Owned Enterprise (SOE), stopped being a monopoly when

Bangladesh began to liberalize some ten years ago and may be

privatized in the foreseeable future.

• Upgrading telecommunication in important to Bangladesh not only

to meet individual and business demand but because the country

has declared information technology a thrust sector

• Without an adequate and cost-competitive telecom infrastructure,

any serious development of the IT sector will remain unlikely,

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Infrastructure -- Telecommunication

Opportunities

1. Supplying equipment,

2. Installation digital lines,

3. Upgrading the existing transmission network.

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Infrastructure – Port, Shipping

• Chittagong & Mongla sea ports handling 97% of the import export

trade of the country.

• Bangladesh has two main ports -- Chittagong and Mongla -- have

seen a complete lack of development, in terms of container handling

capacity and cargo handling services.

• The government is planning to build the country's third seaport and

a dockyard at Kalapara of the Potuakhali district,

• Deep sea port at Sonadia, Chittagong attracting foreign attention.

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Infrastructure – Port, Shipping

Opportunities

• Construction of port & inland Container terminals

• Maintenance & Capital dredging works to assistmovement of sea-going vessels in the port channel dayand night

• Supply and Installation of Aids to Navigation, container& general cargo handling equipments.

• New business opportunity such as development ofcontainer transport between India and Bangladesh.

• Inclusion of Myanmar & India in the development ofcross border Inland Water Transport

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Infrastructure – Urban development

• Bangladesh, a predominantly rural country is undergoing a

transformation towards urbanization at a remarkable pace.

• Housing is an important growth sector having backward and

forward linkages. Because of ever-increasing demand, the sector

the tremendous potentials.

• A large number of property developers are already active in the

private sector.

• Urbanization is an outcome of both population growth and rural-

urban migration. As urbanization increases, more and more people

are becoming city dwellers.

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Infrastructure – Urban development

Opportunity

- Civil works, Housing, & physical development

- Sanitation

- Solid waste disposal

- Road building & maintaince

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Investment Climate: Key Factors for

Foreign Investors

Strengths

• Largely homogeneous society with no major internal orexternal tensions and a population with great resiliencein the face of adversity (e.g. floor)

• Broad non- partisan political support for market-oriented reform and perhaps the most investor-friendlyregulatory regime in South Asia.,

• Trainable enthusiastic hard working and low- cost (evenby regional standards) labour force.

• Potentially significant market especially with potentialaccess to south asia.

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Investment Climate: Key Factors for Foreign Investors

Opportunities

• Direct (100%) foreign investment or joint venture investment in theExport Processing Zones (EPZs) .

• Portfolio investment by purchasing shares in publicly listedcompanies through the stock exchange.

• Investment in infrastructure projects such as power generation(private power generation policy announced); oil , gas and mineralexploration , telecounication, ports , roads and highways .

• Outright purchase or purchase of shares of state-owned enterprises,which are under process of privatization.

• Investment in private EPZ.

• Natural gas exploration – proven reserves of 11 trillion cubic feetand estimated reserves of up to 50 tcf.

• Fisheries, agro processing, textiles, leather goods and lightmanufacturing generally.

• Health education and other services including software services.

• Multilateral and bilateral financing may be available forinfrastructure projects.

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Investment Climate: Key Factors for Foreign Investors

Opportunities

• Extremely competitive labour costs, perhaps the lowest in Asia.

• Easily trainable workforce of 56 million.

• A large domestic market, with disposable income growing especiallyamong the middle class.

• Strategic location as the bridge between South and East Asia high-growth regions as well as links with other markets e.g. India,Pakistan, Malaysia, Singapore etc.

• Low land and energy costs.

• Good road / bridge/ rail infrastructure, which are being improved; twosea-ports being further developed.

• Enjoys most favored Nations status.

• Legal protection to foreign investment against nationalization andexpropriation.

• Equitable treatment with local investors regarding indemnification,compensation etc.

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Investment Climate: Key Factors for Foreign

Investors

Weaknesses

• Large perceived gap between good policies and weak

implementation (as illustrated for example, by the pace of

privatization).

• Unreliable power supply and poor transport and communication

infrastructure.

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Conclusion

• Bangladesh yesterday won an investment grade with a stableoutlook from the leading credit rating agency Standard & Poor'sfor the third straight year.

• The S&P rated Bangladesh to “BB-” with a stable outlook, theUS-based company said in a statement.

• The company linked the rating to the country's strong growthprospects, adequate external liquidity and donor support.

• "The stable outlook reflects strong growth prospects and ongoingdonor support, which ensures low-cost and long maturity externaldebt that minimises refinancing risk," maintained the statement.

• Bangladesh can have its rating upgraded if it can expandrevenue base and improve administrative and collectionefficiency, observed the firm.