Expatriate Investment in Bangladesh

Professor Mahfuz R. Chowdhury

Bangladesh, by all accounts, is considered to have a great potential for foreign investments.

According to the International Herald Tribune and reputable investment bank Morgan Stanley, Bangladesh has the characteristics of becoming an attractive manufacturing center in Asia, and estimate that by 2015 the country's foreign investments would reach 5 billion dollar. Their analysis is primarily based on the current trend in globalization and the comparative advantage that Bangladesh would have in providing key factors, such as cheap labor, essential natural resources, and improved communication link. With this being the situation, it would certainly be more advantageous for Bangladeshi expatriates to invest there since their investments would give them the opportunity to help their native country while also gaining financial benefit for themselves.

To begin with, Bangladesh is a resource-rich country, and has remained so even after hundreds of years of economic exploitation by different foreign powers. The country is clearly blessed with some key natural resources, such as fertile land, rich coal, and plentiful natural gas. It is the major producer of raw jute, tea, and leather. In addition, the country's supply of labor - the main contributor in product manufacture - is not only plentiful, but also considered to be both competent and competitive. All of these are essential ingredients for establishing a strong economic base for the country, and for achieving further growth through trade and commerce.

Industrialization and trade have always played important roles in the economic development of a country. While currently countries like China and India are benefiting immensely from their rapid industrialization and trade, Bangladesh has failed to avail such opportunity even though it possesses all the necessary resources to do so.

The basic responsibility clearly lies with the government of a country to steer it in the right direction. Unfortunately, Bangladesh did not have a responsible government in the past, and so the country's potential has remained elusive. For example, Bangladesh missed a great opening to advance in information technology because the government reportedly rebuffed overtures from the U.S. businesses during the 1980s. Now imagine the situation in Bangladesh if a different course of action had been taken on this by the government!

Supposedly, after 37 years of tumultuous history since its independence, Bangladesh is now ready for change as its leadership seems to be recognizing their past mistakes and appears to be attempting to amend their attitudes, though some of their actions also raise concern. While only time will tell how fast change comes to Bangladesh and in what way, there could be reasons for optimism. True, one could argue that the overall situation in the country is not quite congenial for taking investment risk, yet the trend that is emerging may be irreversible. People are supposedly becoming more conscious about the prevailing situation in the country and are clearly opting for a change.

Presumably, the government is also working to improve law and order in the country, and create better atmosphere for investments. This transition period, though unpredictable, does provide better opportunities in Bangladesh for the potential investors, especially at a time when the world is trying to dig out of the present economic slowdown. Every business requires risk taking. By the time the condition in Bangladesh is perceived to be improved, the market may already be saturated, and the stake would then be higher.

Under the present realignment process, more and more developing countries are picking up the manufacturing tasks. The race is clearly on, and so the expatriates, by coming forward with their varied knowledge, experience, and financial resources, could take advantage of this changing world situation by choosing to invest in Bangladesh. By doing so, they could realize personal gain from their investments, and at the same time help their native country achieve faster economic growth. In fact, because of their close relationship and cultural ties, they stand to achieve even more benefits from their venture in Bangladesh than other foreign investors.

Industrialization in Bangladesh:
Although the role of industrialization is very critical for economic development, instead of progress, Bangladesh experienced substantial drop in many of its existing core industrial base. Take the example of the jute industry, which has been experiencing a steady decline over the years. When petroleum-based synthetic substitute products were introduced in the 1960s, the demand for jute products was somewhat weakened, though it never disappeared. The big irony is that India has been capturing the world jute market that Bangladesh was losing. Now with the high cost of petroleum, the demand for jute products is on the rise again, and the trend is likely to continue. But, looking at the troubled condition of the jute industry in Bangladesh, one would be hard pressed to find hope that the country would be able to take full advantage of the changed circumstances. The World Bank has estimated that Bangladesh has the potential to increase its share of the jute market to 80 per cent of raw jute and 50 per cent of manufactures.

Leather industry is another good example, where Bangladesh could have made a huge inroad, but didn't. There is a big demand for leather products everywhere, including the United States - the biggest market of leather products in the world. It is obvious that Bangladesh has failed to fulfill its true obligation of producing and marketing of quality leather products. Similar arguments may also be made about other key industries, such as tea, cotton or sugar. It is quite amazing to see how, for example, a German company successfully markets fine tea products when the country produces no tea!

Bangladesh fish industry may be seen as one of the exceptions. It has done comparatively well, though it too has fallen short of expectation. The circumstances of the fish industry might be somewhat different, yet the government couldn't escape its basic responsibility in promoting and preserving its fish industry.

Garment Industry:
The garment industry is the only area where Bangladesh could claim considerable success. Today garment export is the main source of foreign exchange earnings for the country after remittances. Its success was not necessarily influenced by government policy but essentially by outside forces. This industry had its origin in the 1970s when the investors of other South East Asian nations ventured to set up garment factories in Bangladesh to work around the export quotas imposed on their native countries by the United States. Later, Bangladeshi entrepreneurs rushed to establish their own companies, some with little or no experience. After a period of adjustments, the industry began to stabilize and started to grow, and has eventually earned the world's respect.

Thus, the stabilization and growth of the garment industry in Bangladesh was achieved largely with the help and intervention of foreign investors who supplied expert technical support for its quality control and had an effective marketing plan. Additionally, the country enjoyed a favorable quota system from the United States for quite a while. But this situation is now changing as other least developing countries gain trade advantage for their manufactured garments from the United States.

To maintain its market share of garments in the United States and elsewhere, Bangladesh must, therefore, continue to be competitive in respect to price, quality, and service. The clear perception is that Bangladeshi entrepreneurs have gained enough experience in garments to stay competitive.

Other Possibilities:
Obviously, Bangladesh has established its skills in the textile sector. It could build on the foundation of this strength. The kind of skills that gave Bangladesh an advantage in textiles could be fairly easily transformed into a bigger advantage in labor intensive industries, such as leather goods, footwear, sports equipment (Pakistan has a stronghold on this currently), carpet weaving (another Pakistani export), handicrafts, and assembly of small electronic components — which may be imported from China or elsewhere and then assembled in Bangladesh — into electronic goods such as TV sets, personal computers, etc. Bangladesh does not have to make any of these goods from beginning to end. Instead, it can merely concentrate on the part of the manufacturing process that requires assembly by semi-skilled hands.

Food processing may also work well for Bangladesh, especially if American companies such as Dole, Del Monte, and Chiquita are made aware of Bangladesh's food production abilities and skilled labor, and if they are welcomed by the government with appropriate incentives.

Additionally, Bangladesh has shown some progress in the manufacture of pharmaceutical products, which definitely has a great prospect in the world. With proper guidance and management the country should be able to expand its market share in the pharmaceutical area rather easily.

Marketing:
Production of quality goods is only half the battle. Marketing is as important as first-rate production and distribution. In fact, marketing may be the biggest hurdle Bangladeshi entrepreneurs would face in the world market. Modern marketing requires both knowledge and skill. The name of the game is obviously competition, and having a plan ready for the competition. If properly equipped with good quality products, competitive price, and superior service, Bangladeshi goods would have no problem in capturing, maintaining, and expanding their market share in the world.

What then Bangladesh mostly needs now are investments and workable plans for manufacturing, marketing, and distribution of competitive products and services. If the expatriates with experiences in these fields come forward to invest here everyone would benefit.

In conclusion, the opportunities for investments in Bangladesh are many. The above are only highlights of great potentials for such ventures. There is no scope of getting into detailed discussion of everything here. This is merely an attempt to address the central issue of how Bangladeshi expatriates could aid their native country to achieve the badly needed economic boost while also realizing financial gains for themselves. Let us hope that the idea catches on among the expatriates and that the government also extends its welcome mats to them.

By: Professor Mahfuz R. Chowdhury

(The author teaches Economics at CW Post Campus of Long Island University, New York. He has published articles on various issues of Bangladesh and economic issues in general, which are posted on numerous web sites)