International Business Assignment Sample
Introduction
The Bangladeshi government launched a series of efforts in the early 1990s to encourage the expansion of the private sector while simultaneously attracting foreign direct investment. The private sector is often regarded as a growth engine, which is widely acknowledged.
Investors in the financial market
Despite the fact that the country is still in the early phases of its transition from an agrarian to an industrial economy, the major political parties are generally supportive of a market-oriented approach to economic development. Foreign businesses are encouraged to establish themselves in the country. According to a recent examination of the country’s FDI policy, the country’s foreign direct investment policy does not require prior approval, and there are no restrictions on equity participation or on the repatriation of revenues and incomes (Robin,2021).
Companies intending to set up a subsidiary
Although investing in a developing country is fraught with problems, Bangladesh has a great deal to offer foreign investors in terms of potential, despite these limitations. Investment from foreign countries has increased from virtually non-existent in the 1980s to more than $300 million in the late 1990s, indicating that there are potential for growth in these areas. Outside investors may be encouraged to consider establishing a presence in Bangladesh by factors such as a growing market, low-cost production facilities, and an abundance of natural resources.
Companies wishing to enter a new market
Bangladesh is among the world’s most populous countries, with a population of approximately 130 million people, making it one of the world’s most populous countries in terms of total population. Consequently, a burgeoning middle class with increased purchasing power and an increasing demand for products and services has emerged as a result of recent relatively robust growth rates. The Gross Domestic Product (GDP) of Bangladesh is more than $170 billion dollars when purchasing power parity is taken into account (Tang,2018).
People wishing to reside in the country
In addition to the possibilities for labor-intensive manufacturing in the country, Bangladesh also has access to the much larger South Asian market, making it a viable location for investment. When asked to describe the most appealing qualities of Bangladesh, both the commercial and public sectors consistently point to the country’s low cost of labor as one of the most compelling characteristics to do business there (Das,2017). Despite being a competitive wage even among other industries in the region, the average hourly wage in textile manufacturing in 1998 was only $0.43, making it a competitive wage even within the region. Currently, there are export-processing zones (EPZs) in both Dhaka and Chittagong, Bangladesh’s two main urban center’s, with plans to establish four further EPZs in the future. The EPZs were created by the government in order to foster the growth of export-oriented businesses. EPZs provide a number of benefits, including facilitation services as well as various fiscal and non-fiscal incentives, to the businesses that use them (Rahman,2019).
Opportunities and Risks
The country of Bangladesh, in addition to having a large population and inexpensive labour costs, also has vast natural gas reserves. According to government estimates, known natural gas reserves range from 10 trillion cubic feet (tcf) to 100 trillion cubic feet (tcf), although private assessments of likely natural gas reserves range from 50 to 100 trillion cubic feet (tcf) (tcf). The resources have piqued the interest of a number of major firms, including Cairn Energy, Shell, and Unocal, among others. In 1998, foreign direct investment (FDI) inflows into the country were dominated by the gas industry, which accounted for more than half of all FDI inflows (Podder,2021).
Investor profitability will be affected by the significant development potential in this country, which are present in every developing country that is transitioning to a more market-based economy. In terms of the quality of Bangladesh’s transportation and communication infrastructure, the inconsistent nature of the country’s energy supply, the complexity and lack of transparency of the country’s bureaucracy, and a scarcity of qualified personnel at all levels, international investors are right to express their concerns. The country’s entire output is negatively affected by torrential rains in other parts of the country, which have a detrimental influence on other parts of the country. In addition to labour challenges, political protests known as hartals, and a lack of progress in adopting beneficial policies, investors in the United States have expressed concern about a number of other issues.
Country Analysis Framework
Economic Factor
The government’s efforts to turn Bangladesh into a market-based economy have, according to some analysts, resulted in some good results. Between 1990 and 1998, the pace of growth in the gross domestic product (GDP) increased by nearly 5 percent. Between 1994 and 1999, export revenue climbed by more than 60%, so contributing to the pace of the economy’s expansion (Nurunnabi,2019).
Pre-made clothes accounts for a disproportionately large proportion of the country’s total exports. Although Bangladesh’s economy suffered some damage as a result of the Asian financial crisis, the country’s economy recovered quickly following the devastating floods that devastated the country in 1998. Despite the fact that poverty has decreased in recent years, there is still much more work to be done in order to combat the disease of poverty.
There are challenges to overcome as well as opportunities to seize.
As a result of the fact that more than half of the country’s population continues to live in extreme poverty, poverty reduction has emerged as the most significant goal of government development initiatives in the country. This goal will only be achieved with stronger economic growth and a thriving private sector, both of which will be necessary components. Infrastructure, education, and technical training must be improved rapidly in order to attract more foreign direct investment, and policies that are generally considered wise must be implemented as soon as feasible and as effectively as possible to maximise the likelihood of success (Roy,2021).
Political factors
To see government leaders admit that the private sector may be a big source of job growth is a welcome development.
A significant injection of foreign direct investment (FDI) has also been made, as well as a significant increase in the number of Bangladeshis who have acquired international education. These worries will have a substantial impact on Bangladesh’s economic transformation and progress in the years to come, according to experts (Salam,2018).
For much of the twentieth century, the Bangladeshi government was heavily involved in the country’s economy, and state-owned businesses (SOEs) dominated the country’s economic landscape. State-owned companies (SOEs) could be found in a variety of industries, including gas, steel, jute, chemicals, and textiles, to name a few examples. The official position of the government has shifted throughout time. Defence, forestry, nuclear energy, and the manufacturing of security codes are the only four industries in which the government is willing to make investments (currency notes). Privatization of the private sector is now a top objective for the administration in a number of other areas as well.
Legal Factors
As head of the newly constituted Privatization Board of Trustees, it has been decided to appoint a well-known businessman to the position (Arefin,2021).
There are six members of Parliament on the board, including two representatives from the major opposition party. The board also includes representatives from labour unions and other interested parties. The privatisation of 62 state-owned enterprises (SOEs) is scheduled to begin in the near future. A total of more than a dozen units are now undergoing the process of privatisation.
An agreement has been reached with a strategic partner for the partial takeover of Biman, India’s national airline. Private-equity firms are excited about foreign direct investment (FDI) (FDI) (FDI). (A thorough list can be found in Chapter III.)
However, the approach moves at a glacial speed in comparison. According to the United Nations, privatisation must be expedited in order to get the support of the private sector and labour unions. As a result, the vast majority of state-owned businesses (SOEs) are experiencing financial difficulties (Shammi,2021).
An investigation into the procedures carried out by the government has resulted in a number of practical changes being implemented in relation to the privatisation process. A company’s entire asset base, including its property, had to be placed up for sale as a single package, and the company had to refrain from reorganising or reducing its staff. The former system imposed these restrictions (Devine,2019).
Social Factor
As a result of these situations, potential buyers got disheartened. In order to comply with new standards, the government must take on the burden of limiting the number of employees, allowing the buyer to begin operations without having to worry about a labour shortage on the job. Depending on the circumstances, it may also be required to separate operating assets such as machinery and inventories from land that is no longer in use. In addition, it is possible for the purchaser to reorganise and improve the company’s working assets in order to increase the company’s economic viability following the purchase (Murshed,2021).
The Cabinet recently approved the first draught of a Privatization Act, which will improve the legal foundation for the privatisation effort. In addition, the Privatization Board has launched a public awareness campaign in order to increase public support for its proposal. For the first time in the region, Bangladesh has a small tax base that is reliant on indirect taxes to pay its government operations, in contrast to many other countries. If you earn more than Tk 100,000 ($1,850) per year, your income will be taxed at one of three income tax rates: 10%, 15%, and 20%. The first TK 50,000 in excess of the tax-free threshold of $100,000 is exempt from tax; the following Tk 125,000 is subject to 18 percent tax; and the balance is subject to 25 percent tax. Salaries paid to foreign technicians are exempt from tax for a period of three years following the date of their arrival in Bangladesh, provided that the salaries are paid under a contract approved by the National Board of Revenue either before or within a year of commencing employment. Someone who works in the realm of industrial art or science is referred to as a “technician. (Kunjumen, 2022)”
Taxation and Revenues
Corporations that are publicly listed pay a corporation tax rate of 35 percent, whereas privately held businesses pay a corporate tax rate of 40 percent, according to the IRS. The region’s corporate tax rates are competitive with those seen in other parts of the country.
In accordance with the Internal Revenue Code, transfers of publicly traded limited company shares are free from federal income taxation. When determining the capital gain, the full purchase price of the assets sold or the fair market value of the assets sold is deducted from the total amount of the capital gain (Asadullah,2019).
If dividend income is received by investors who are not corporations, the income is not subject to taxation. Private limited liability company stockholders, on the other hand, are not entitled for this benefit. The royalties and technical know-how payments earned by international partners, firms, companies, and professionals are exempt from taxation in the countries in which they are received.
Many of the country’s previous sales and excise taxes, as well as other levies, have been replaced by the VAT, which is charged at a single rate of 15 percent and is effective immediately. Current and future developments will see it continuing to embrace a broad range of retail goods and services, and this will be the case for some time to come. Some small businesses that are exempt from VAT are subject to a turnover tax, and certain commodities, such as home-made bidis (cigarettes), are subject to excise taxes.
Economic Policy
Increasingly market-oriented approaches are being used in economic policy, and as a result of this, private sector investment has surpassed public sector investment as the country’s most important source of investment. Except in specific areas such as defence, forestry, nuclear power, and security printing, the government has chosen to avoid from making any new investments in the manufacturing sector moving forward. Modernization and rehabilitation of existing state-owned firms are receiving a significant amount of public investment in order to position them for privatisation. As of now, Bangladesh’s public sector accounts for less than 38 percent of total investment, a figure that is slightly greater than the country’s portion of world gross domestic product, which stands at 18.5 percent.
The relationship between the private sectors of the foreign and local countries is cordial. Despite the fact that they compete in some markets, they have established a mutually advantageous cooperation in many others, including the supply of raw materials, the marketing of commodities, and other aspects of their operations. Subcontracting is a frequent practise in the construction industry.
FDI and Investments
International companies contract with local companies to obtain packaging and product components, and local companies in turn contract with international companies to obtain raw materials (e.g., textiles). A considerable number of local businesses based in the EPZ supply accessories to RMG enterprises owned and operated by foreign investors, and this is particularly true in the EPZ. The leather industry relies on the supply of raw materials from local tanneries in order to produce the raw materials for their finished items.
Since the 1990s, foreign direct investment (FDI) into Bangladesh, as well as other South Asian countries, has increased dramatically. Approximately $4.5 billion in foreign direct investment (FDI) projects were approved and registered in the United States in 1997 and 1998. Bangladesh’s natural gas deposits are the key reason for visiting the country.
Additionally, the potential of putting money into container port infrastructures, airports, hotels, and textile factories made of composite materials has been discussed. Among international investors’ most common home nations are the United States, Japan, Malaysia, Korea, Singapore, India, China, and the United Kingdom, with the United States ranking first among them.
In the United States and other countries, the FICCI (Foreign Investors’ Chamber of Commerce and Industry) is a trade group that represents the interests of foreign investors in business and industry. The organisation has 120 members as of right now.
Technology and Telecommunications
Developing the country’s telecommunications infrastructure is a top priority for the government of Bangladesh. A population of more over 120 million people is served by only slightly more than half a million fixed lines, which is a tiny increase from the previous year. Because the vast majority of these lines are equipped with analogue switches, the call quality on the vast majority of them is poor. Local and international mobile service providers are currently meeting a wide range of urban needs. This is true for both domestic and international mobile service providers. In 1999, seven private companies provided service to a total of 100,000 customers. Using private investment, the city of Dhaka hopes to raise the number of digital lines by 300,000 over the next five years. In terms of both quantity and quality, there is still a substantial unmet demand that must be addressed. A state-owned corporation in Bangladesh, the Bangladesh Telegraph and Telephone Board (BTTB), is likely to be privatised in the not too distant future as a result of the country’s recent liberalisation.
As a key sector in Bangladesh, information technology has been identified as a necessity, requiring the development of the country’s telecommunications infrastructure in order to satisfy the demands of the country’s inhabitants.
It is doubtful that the information technology sector will experience significant expansion unless the telecommunications infrastructure is competitive in terms of cost. Making money in the provision of equipment, in the construction of digital lines, and in the upgrading of existing transmission infrastructure are all viable options.
Business opportunities and growth
Many of them are provided on a time and materials (T&M) basis, which is a convenient option for busy professionals. Leather and textiles are two of the most prominent types of materials used in clothing.
Imported yarn and fabric from other nations is a critical component of Bangladesh’s expanding ready-made-garments (RMG) industry, which accounts for 75 percent of the country’s exports and is developing at an impressive rate. In order to lessen reliance on imported resources, a significant amount of money must be invested in backward linking facilities such as spinning, weaving, knitting, and dyeing. To meet its investment goals by the end of the fifth five-year plan in 2002, when the plan will be finished, the government estimates that it would require $7.7 billion in additional funds from the private sector.
During the 1998-99 fiscal year, it is predicted that domestic and export yarn and fabric demand totalled 531 million kg and 3,722 million meters , respectively, while total output was only 170 million kg and 1,424 million metres, resulting in a supply-demand gap of 384 million kg and 2,298 million metres. In order to achieve output requirements by the year 2002, according to current estimates, Bangladesh may require more than 170 spinning mills (each with 25,000 spindles), 200 weaving mills (each with 200 shuttle less looms), and 200 dyeing and finishing mills in addition to its existing infrastructure.
Conclusion
In order to stimulate investment, a number of textile mills will be auctioned off as part of a package of legislative reforms, which will include the privatisation of certain of these mills. The Ministry of Textile is renovating six institutes of textile engineering and technology, as well as 28 schools of textile vocational education, as part of its ongoing efforts to modernise the sector.
Given the country’s long history and variety of agricultural climate benefits, the World Bank is funding a pilot project to assist in the growth of the silk industry, which is being implemented by the International Development Association (IDA). Silk Foundation, which will be controlled by all parties concerned, will be established to carry out the initiative’s goals and objectives.
According to some estimates, Bangladesh has a considerable export market for hides and skins, accounting for around 1.8 percent of the world’s cow population and 3.7 percent of the world’s goat population. Given the abundance of low-wage labour, the leather sector in general and the footwear industry specifically has tremendous growth potential. The leather products and footwear industries require additional investment to keep up with technological advancements, train employees, and grow their operations.
References
Arefin, S., Roy, S. and Mallik, A., 2021. Do Macroeconomic Factors Defy the Expected Relationship with FDI Inflows in a Developing Country? An Econometric Analysis Based on Bangladesh. International Journal of Economics and Finance.
Asadullah, M.N. and Chakravorty, N.T., 2019. Growth, governance and corruption in Bangladesh: a re-assessment. Third World Quarterly, 40(5), pp.947-965.
Das, S. and Islam, A.R.M., 2021. Assessment of mapping of annual average rainfall in a tropical country like Bangladesh: remotely sensed output vs. kriging estimate. Theoretical and Applied Climatology, 146(1), pp.111-123.
Hossain, B. and Wadood, S.N., 2020. Potential unexplored? Tourism and economic growth of Bangladesh. Journal of Tourismology, 6(1), pp.63-77.
Kunjumen, T., Okech, M., Asamani, J.A., Mohamed, N. and Nuruzzaman, M., 2022. Multi-country case studies on planning RMNCH services using WISN methodology: Bangladesh, Ghana, Kenya, Sultanate of Oman and Papua New Guinea. Human Resources for Health, 19(1), pp.1-13.
Kunjumen, T., Okech, M., Asamani, J.A., Mohamed, N. and Nuruzzaman, M., 2022. Multi-country case studies on planning RMNCH services using WISN methodology: Bangladesh, Ghana, Kenya, Sultanate of Oman and Papua New Guinea. Human Resources for Health, 19(1), pp.1-13.
Mortuza, M.R., Moges, E., Demissie, Y. and Li, H.Y., 2019. Historical and future drought in Bangladesh using copula-based bivariate regional frequency analysis. Theoretical and Applied Climatology, 135(3), pp.855-871.
Murshed, M., Ferdaus, J., Rashid, S., Tanha, M.M. and Islam, M., 2021. The Environmental Kuznets curve hypothesis for deforestation in Bangladesh: An ARDL analysis with multiple structural breaks. Energy, Ecology and Environment, 6(2), pp.111-132.
Nurunnabi, M., Roy, N.K., Hossain, E. and Pota, H.R., 2019. Size optimization and sensitivity analysis of hybrid wind/PV micro-grids-a case study for Bangladesh. IEEE Access, 7, pp.150120-150140.
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Robin, I., Salim, R. and Bloch, H., 2018. Cost efficiency in Bangladesh banking: does financial reform matter?. Applied Economics, 50(8), pp.891-904.
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