Bangladesh

Originally published: Jan-28-2008

Official Name: People's Republic of Bangladesh

Internet Domain: .bdInternational Dialing Code: +880

Table of Contents

Government

Formerly East Pakistan, Bangladesh only came into being as a separate country in 1971, when the two parts of Pakistan split after a bitter civil war. Bangladesh spent 15 years under military rule, with democracy restored in 1990. The country is currently run by a military-backed regime that overthrew the elected government in January 2007. The generals have promised to hold elections by the end of 2008.

Legal System

Based on English common law; has not accepted compulsory ICJ (International Court of Justice) jurisdiction.

People

• Population: 150,448,339 (2007 estimate)
• Population growth rate: 2.056% (2007 estimate)
• Languages: Bangla (official, also known as Bengali), English
• Literacy: 43.1%
• Ethnic Makeup: Bengali 98%, tribal groups, non-Bengali Muslims
• Religions: Muslim 83%, Hindu 16%, other 1%

Economy

Bangladesh, situated between India and Burma, is one of the world's most densely populated countries. Its people are crammed into a delta of rivers that empties into the Bay of Bengal. Despite sustained domestic and international efforts to improve economic and demographic prospects, Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Major impediments to growth include frequent natural disasters (primarily cyclones and floods), inefficient state-owned enterprises, inadequate port facilities, a rapidly growing labor force that cannot be absorbed by agriculture, delays in exploiting energy resources (natural gas), insufficient power supplies, and slow implementation of economic reforms.

Poverty is deep and widespread. Almost half of the population lives on less than one dollar a day and nearly two-thirds of Bengalis are employed in the agriculture sector. The IMF (International Monetary Fund) and World Bank predict GDP growth over the next 5 years will be about 6.0%, well short of the 8%-9% that they feel is needed to lift Bangladesh out of its severe poverty.

There is some hope, however. Bangladesh has reduced population growth and improved health and education. And, the country has made major strides to meet the food needs of its increasing population, through increased domestic production. Many new jobs -- 1.8 million, mostly for women -- have been created by the country's private readymade garment industry. And the labor-intensive process of shipbreaking for scrap has developed to the point where it now meets most of Bangladesh's domestic steel needs.

The country's main endowments include its vast human resource base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas.

Currency: Taka (BDT)

• BDT per USD: 69.902 (1/18/08)
• BDT per EUR: 102.483 (1/18/08)

Leading Markets (2006): US 25%, Germany 12.6%, UK 9.8%, France 4.9%

Leading Exports-commodities: garments, jute and jute goods, leather, frozen fish and seafood

Leading Suppliers (2006): China 17.7%, India 12.5%, Kuwait 7.9%, Singapore 5.5%, Hong Kong 4.1%

Leading Imports-commodities: machinery and equipment, chemicals, iron and steel, textiles, foodstuffs, petroleum products, cement

Top Industries: cotton textiles, jute, garments, tea processing, paper newsprint, cement, chemical fertilizer, light engineering, sugar

Economic Indicators

*PPP=purchasing power parity
(f) forecast

Comparative Economic Indicators - 2006

* 2007 estimate
** 2008 average to date

Credit and Collections

Overseas Press & Consultants (OP&C) Evaluation:

• Collection Experience: Fair-Good
• Exchange Delays: 3 months
• Preferred Credit Terms: Unconfirmed letter of credit
• Minimum Credit Terms: Unconfirmed letter of credit

ABC-Amega’s collection experience in Bangladesh:

BRUCE HOPCUS, Senior International Account Executive, has been handling a number of claims against debtors in Bangladesh primarily for some ABC-Amega’s international clients. He states, “Collecting in Bangladesh is very difficult in my experience. Natural disasters have devastated the region, making it impossible for many businesses to pay their debts. In addition, corruption slows the collection process to almost a standstill in many cases. The present military government has formed a regulatory commission to help streamline and upgrade the framework that governs business and investments. That, along with the advent of a Better-Business Forum will, hopefully, eventually restore some investment confidence. In the meantime, though, I wouldn’t recommend selling on credit to any Bengali company unless you have a very stable long-term arrangement. Otherwise, insist on cash in advance or make sure your investment is insured.”

Risk Assessment

Coface Country Risk Rating: B - An unsteady political and economic environment is likely to affect further an already poor payment record.

Ducroire Delcredere Political Risk Rating: 3 – Lower side of 50:50 risk
Ducroire Delcredere Commercial Risk Rating: C – High risk

Business Climate

Foreign investors in a broad range of sectors are increasingly frustrated with the politics of confrontation, the level of corruption, and the slow pace of reform. While investors view favorably recent steps by the interim government to address corruption, governance, and infrastructure issues, most believe it is too early to assess the long-term impact of these developments.

According to a survey by the International Finance Corporation (IFC) and the World Bank, Bangladesh slid 18 steps to the 107th position among 178 countries in terms of ease of doing business. In 2006 the country ranked 88th in the same survey. The survey, Doing Business-2008, also indicates that Bangladesh fell behind in nine of ten indicators, improving only in cross-border trading.

Transparency of Regulatory System: Starting from a position of extreme over-regulation, the trend since 1989 has been a gradual decrease of governmental obstruction of private business. However, policy and regulations are often not clear, consistent, or publicized. And, in practice, government laws and regulations and their implementation do not reduce distortions or impediments to investment, but create them. Generally, the civil service, businesses, professionals, trade unions and political parties have vested interests in a system in which confidentiality is used as an excuse for lack of transparency, and in which patron-client relationships are the norm.

Intellectual Property Rights (IPR): The government is progressing slowly in bringing its intellectual property rights laws into compliance with the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Bangladesh is a member of the World Intellectual Property Organization (WIPO), and acceded to the Paris Convention on Intellectual Property in 1991. However, the government allocates too few resources to IPR enforcement, and thus prevention and punishment of IPR violations is very low in proportion to the number of infringements.

Conversion and Transfer Policies: The Bangladesh Bank, the central bank of Bangladesh, does not fix the exchange rate of the taka against foreign currencies. Individual banks set their own buying and selling rates for foreign currency based on supply and demand. The taka is almost fully convertible for current account transactions, such as import trade and travel needs, but not for capital account transactions, such as investing or currency speculation. The Foreign Investment Act of 1980 guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees. In practice, foreign firms are able to repatriate funds without much difficulty, provided the appropriate documentation is in order.

Legal System and Dispute Resolution: A fundamental impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, and thus there is no penalty for delaying proceedings. While the Supreme Court and High Court (appellate level courts) are independent, the lower courts are part of the executive branch of government. It is widely acknowledged that in the lower courts, where cases are first brought, corruption is a serious problem. In addition, the ability of the Bangladeshi judicial system to enforce awards, whether domestic or foreign, is weak.

Corruption: Corruption at all levels in the bureaucracy is rampant, and should be taken into account by foreign investors considering doing business in Bangladesh. Transparency International ranks Bangladesh a 2.0 in the Corruption Perception Index (CPI), putting it at 162nd out of 179 countries measured. The CPI Score relates to perceptions of the degree of corruption as seen by business people and country analysts, and ranges between 10 (highly clean) and 0 (highly corrupt).

Economic Freedom: According to the 2008 assessment of the Index of Economic Freedom, Bangladesh's economy is 44.9% free, ranking it as the world's 149th freest economy. Its overall score is 3.1 percentage points lower than last year -- one of the biggest declines in the world. Bangladesh is ranked 27th out of 30 countries in the Asia–Pacific region.

Political Violence: Incidents of politically directed damage to foreign projects or installations have occurred, although violence targeted against business concerns generally has been isolated and criminal, rather than political, in nature.

For more detailed information on these topics, visit the 2007 Investment Climate Statement – Bangladesh, of the U.S. Department of State.

Business and Cultural Practices

Business Cards: Include your university degrees, as education is highly valued by Bengalis. Always present your business card with your right hand, and treat those given to you with respect. Study them, comment on them, and keep them.

Business Attire: For men, tropical-weight suits or shirt and tie are generally recommended. Suits are a necessity when calling on Bengali officials. Women should wear trousers or long skirts and avoid anything revealing.

Names and Titles: Businessmen should be addressed by the term "Bahadur" ("Sir"), while women may be addressed as "Begum" ("Madam"). This may be used with or without the surname. Wait until your counterpart moves to a first name basis before you do so.

Meeting and Greeting: Men greet each other with a handshake upon arriving and leaving. Foreign men should nod to a Bangladeshi woman unless she extends her hand. Many people comment on the lack of smiles in Bangladesh. This has nothing to do with unfriendliness but rather is related to the fact that a serious face is believed to demonstrate maturity.

Conversation: Bengalis are indirect communicators. They tend to communicate in long, rich and contextualized sentences which only make sense when properly understood in relation to body language. Bengalis stand close when speaking to someone of the same gender and touch is common. However, when speaking with a woman, the distance is increased out of respect.

Gifts: In Bangladesh, the importance of a gift is in the thought rather than the value. Part of the reason lies in the fact that gifts should be generally reciprocated and it would be considered rude to offer someone a gift that is difficult to reciprocate. Remember, Bangladesh is primarily a Muslim country, so do not give alcohol or products containing non-halal meat. Gifts are given with two hands. It is considered bad form to open gifts in front of the giver.

Meetings and Negotiations: Meeting structures are not very linear in Bangladesh. There may be an agenda and a starting time, but they only serve as guidelines. Communication is formal and follows a hierarchical structure. Deference to the most senior person in the group is expected. This is especially true when dealing with government officials. One should never let their level of professionalism slip as casual behavior may be misinterpreted as a lack of respect.

Acceptable Public Conduct: Women should not be specifically photographed without permission.

Sources for further information on doing business in Bangladesh

A Guide to Doing Business in Bangladesh, 2006, Lex Mundi (PDF)

American Chamber of Commerce in Bangladesh

Bangladesh Embassy in Washington, DC

Business Info Bangladesh

Dhaka Chamber of Commerce & Industry

Doing Business in Bangladesh, A Country Commercial Guide for U.S. Companies, 2006, U.S. & Foreign Commercial Service and U.S. Department of State (PDF)

Embassy of the United States in Dhaka, Bangladesh

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Bangladesh. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Economic Indicators: Variety of sources including the CIA World Factbook, COFACE Country Ratings, Economist Country Briefings, Federation of International Trade Associations (FITA) Country Profiles.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," December 2007.

Historical Exchange Rates: OANDA.com The Currency Site.