Bangladesh is a unitary and sovereign Republic known as The Peoples Republic of Bangladesh. It appeared on the world map as an independent and sovereign state on December 16, 1971 following the victory at the war of liberation from March 25 to December 16, 1971. The area was under Muslim rule for five and a half centuries and passed into British rule in 1757 A.D. The country is bounded by India on the west, the north, and the north-east and Burma on the south east and the Bay of Bengal on the south. The area of the country is 143,999 sq. km. Bangladesh enjoys generally a sub-tropical monsoon climate. About 14% of the land area is forest. The present population is about 120 million and GDP is $ 24 billion (1993). The total civilian labor force of the county is 51.2 million of which 31.1 million are male and 20.1 million are female. Dhaka is the capital and the largest metropolitan city of the country. Agriculture is the main occupation of the people employing 61.3% of the labor force. This sector directly contributes around 46% to the gross domestic products. Bangladesh has got one of the fertile lands of the world but due to paucity of capital and implementation of new inputs and techniques its yield per acre is one of the lowest in the world. 75% of the export earnings comes from raw-jute and jute goods. At present, a democratic government is in power and a parliamentary form of government is existed in the constitution of the country.

1.1 : Economic Environment

Bangladesh has suffered the stigma of a disaster -prone drought-ridden country for many years having a developing economy. In 1973 inflation hit a high of 67% and rarely fell below 10% until 1991. Since then it has dropped steadily to about 2% (though it is expected to rise to 3% last year (1994) due to a poor rice harvest, creating an increased demand for imported rice). Export earnings have risen by Taka 40 billion (US $ 1 billion) in the past three years to US $ 2.7 billion. Gold and foreign currency resources have more than tripled to about US $ 3 billion. In the past 20 years Bangladesh’s annual rate of GDP growth has been among the lowest in the region, averaging about 4%. It has the world’s highest population density and one of the lowest per capita income ($220) . One of concern is Bangladesh’s low domestic savings rate. Last year it reached only 7.5% and investment rates have also been sluggish, averaging about 12% of GDP. The government plans to make the taka fully convertible on the capital account over the next year or two (1996, 1997). In recent years it has been stable , depreciating by only about 2% between 1993 to 1994. Agriculture and related industries still underpin the economy, providing 30% of GDP followed by transport and communication (12%) and manufacturing (11%). The leading crops are jute, tea, and rice. But the jute sector has been hit by rising production costs and falling international prices (as a result of competition from synthetic fibres) , and owes the banks about tk. 40 billion. The chemical and fertilizer have been performing better than the jute sector. But the biggest export earners are the ready-made garments produced by private foreign and domestic companies. Last year, garments contributed US $ 1.5 billion or over 50% of the total exports, though the export growth rose just 6.3% against 20% in 1993. The public sector industries remain a burden on the exchequer. In the 11 years to 1993/94 the losses from state-owned enterprises have reached almost Tk. 90 billion.

1.2 : Political and Legal Environment

Bangladesh has a democratic form of government. The principles of absolute trust and faith in The almighty Allah, nationalism, democracy and social justice constitute the fundamental principles of the state policy. The president is the head of the state and the Prime Minister is the head of the government . The Prime Minister is assisted by a council of ministers. From the very beginning of the country the sky of the politics had always been cloudy. After 9 years regime of military government , a general election was held in 1991 under a neutral care-taker government. The Bangladesh nationalist party came in power. To boost the economy the government introduced monetary and fiscal measures aimed at increasing private investment. It liberalized interest rates, introduced new monetary investments, discontinued direct credit and subsidized refinancing facilities, reduces corporate income tax and introduced the value-added tax (VAT), which last year represented 37% of the total tax revenue. As a result, real GDP rose for the fourth successive year to 4.6% in the 12 months to June 1994. The second election was held under a care-taker government in 1996 and the Bangladesh awamileeg came in power.

1.3 : Technological Environment

There is a paramount importance of technology as it is rooted in the process of social evolution. Now a days, it is appeared as a key resource for corporate profitability and sustainable growth of a country. It also carries importance in the free market economy which enables the firms to fulfill the customers demands and to face competitors. Professor Sharif’s study shows that technological competitiveness can only face the international economic competition nowadays. But sometimes the use of technology may not be possible by the producers due to the poor financial health of the companies. It is also notable that if the economy of the country is underdeveloped the potentialities of the business remain unused. The economy of Bangladesh is, in fact, underdeveloped . Now, it is developing because of the introduction of new industrial policy of open market economy. There is a small number of companies which are now using modern technology for production. Such as Bexmico group, Apex tennary group, Transcom and multinational companies like Karnafuli Fertilizer Co (KAFCO), Nestle. Bata, Philips etc. Now, with the help of these foreign companies some technology is transferring to Bangladesh and using by the indigenous companies.

1.4 : Social and Cultural Environment

Bangladesh occupies the highest density of the world. The literacy rate is now about 34% for population 5 years and above. The country-wide intensive family planning measure is aimed at reducing the growth rate of population. It is a country of Muslims, Hindus, Buddhists and Christens. Bangladesh occupies an important position among the South Asian Region in education and culture. There are 12 national and 11 private universities in Bangladesh. Muslim and Hindu cultures are dominant in the country. Sometimes cultures are creating barriers in practicing business. As for example. fishing, saloon and leather business are not yet developed due to this problem. Some drugs are also prohibited by the religions. There are some traditional or cultural issues prevailing in Bangladesh which influence the business practices to some extent. These are as follows : · Personal questions should not be asked unless the other individual is a friend or close associate. · When eating or accepting things, use the right hands since the left hand so considered unclean. · Public displays of affection are considered unimportant, is one should refrain from backslapping or touching others. · The “salam “ & “ namastee “ gesture can be used to greet people. · Bargaining for goods and services is most common. · Bangladeshis are very much tolerant of outsiders and understand that many of them are unfamiliar with local customs . So, making an effort to be polite and courteous is sufficient.

2.1 : Introduction

Although Bangladesh is predominantly an agricultural country but a large number of large scale industries based on both indigenous and imported raw materials have been set up. Due to the privatization policy more and more private and foreign industries are established now a days. Because Bangladesh has got a large consumer market. The government of the country already established an Export Processing Zone (EPZ) for encouraging the foreign investment. As a result, foreign industries are now established and consequently it is reducing unemployment problem of the country. The Bangladesh government attempts to encourage export growth through measures such as ensuring duty free status for some imported inputs including capital, machinery’s and providing easy access to financing for exporters.

2.2 : Indigenous Practices

There is a lot of indigenous firms and industries in Bangladesh. Among them jute and cotton textile, paper and newspaper, sugar, cement, chemicals, fertilizers and tennaries are important. Other notable industries are engineering and ship building , iron and steel including re-rolling mills, oil refinery, paints, colors and varnishes, electric cables and wires, electric lamps, fluorescent tube lights, other electrical goods and accessories , matches, cigarettes etc. Among the cottage industries , hand looms, carpet-making , shoe-making , coir, bamboo and cane products, earthenware, brass and bell metal products, bidi and cheroots, small tools and implements, ornaments etc are important. Let us see some leading business sectors in the following paragraphs :

2.2.1 : Agriculture based Business

In Bangladesh crop production dominates, accounting for 71% of agricultural output and 24% of GDP. Bangladesh supplies 80% of the world’s raw jute and 45% of its jute goods, earning export revenues of Tk. 4.9 billion and 11.4 billion respectively in financial year 1993-94. The private sector jute mills are more profitable than the govt-owned ones. Beximco, one of Bangladesh’s largest companies which has a stake in the jute industry.

2.2.2 : Garments Business

The ready-made garments (RMG) industry is the most successful manufacturer in Bangladesh. Total RMG export rose from 11% to 52% between 1982 to 1993, and in the year to June 1994 they were worth about Tk. 53 billion ($1.3 billion). RMG industry has benefited in recent years due to the emergence of young entrepreneurs, cheap labor, favorable national and institutional policies, quota-free access to the European Union and relatively generous quotas in the US. Beximco knitting, Beximco textiles and Beximco Denims are leading in this sector.

2.2.3 : Leather Business

The leather goods produced in Bangladesh contribute about 7% to exports. Two company run by the Apex Tannery group cater only for the export market, producing raw hides and good skins and finished products for buyers in Japan and Europe. Bangladesh produces between 2% and 3% of the worlds leather, and most of the livestock base for production is domestic. It has about 200 tanneries, mostly in the state-owned sector.

2.2.4 : Frozen food Industries

Beximco fisheries, the first company to farm shrimp commercially, produced 700 tonnes in 1995. In last year the exports of shrimp were $ 211 million. There are some other private FFI also in the country. Among them Bangladesh sea food, Gagi sea food are mentionable.

2.2.5 : Other Business

Recently a consortium called Marubeni-Arbrya-Essar-Comceaft proposed a joint venture with the A.K.Khan group to set up a $ 150 million cold-rolled steel mill in Bangladesh. The Bangladesh firm Transcom recently set up a joint venture with Japanese firms Sumitomo and NEC crop called Summitcom, which is being set up as a repair and service facility for the growing telecommunications and computer software market. Transcom, which has a joint venture with the Swiss Company Nestle to manufacture milk based products. Bangladesh’s largest and most successful firms are in pharmaceuticals and they include Beximco and Square pharmaceuticals. They are allied with some of the world’s leading pharmaceutical groups such as Glaxo, johnson & Johnson and Roche and their products are exported world-wide.

2.3 : Foreign and Multinational Industries

Due to the political unsuitability, foreign industries were not interested to invest money in Bangladesh. But now situation has already been changed. When the government comes in power wants to encourage and welcome foreign companies and foreign investment. Accordingly, in 1991, the then government established EPZ to encourage in invest for foreign companies. At EPZ special arrangement is done by reducing tax rate and creating relevant facilities. As a result, some Japanese and US companies established industries (One garments factory and four sophisticated textile industries) in that zone. Moreover, there are some joint ventures companies in Bangladesh like KAFCO which are working well and earning profit as well. Moreover, government prefers foreign investments in projects requiring sophisticated technology, use of local capital outlays in the export generating and import substitution sector. KAFCO is the largest multinational joint venture in Bangladesh. The $ 510 million fertilizer plant is expected to produce about 575 million tonnes of urea and 166 million tonnes of ammonia a year for export worth $ 130 million. The following list shows the amount of foreign investment allocated to some of these sectors : o Composite textile mills $ 212 million from Malaysia o Pharmaceuticals $ 52 million from Malaysia o Polyester staple fibre $ 71 million from Japan o Textile, weaving, dying and finishing $ 38 million from UK/Germany o Cement manufacturing $ 15 million from South korea o Textile knitting and finishing $ 10 million from Hong kong. o and Motor vehicle assembly $ 8 million from South Korea.

3.1 : Definition of Foreign and MNC

When a company cross the boundary of its country it can be called as MNC. The activities of MNC that are devised and carried out across national borders to satisfy the objectives of individuals and organization.

3.2 : Global Competitive Advantages of MNC in Bangladesh

Bangladesh can assure some competitive advantages in International Business. This advantages enables a company produce at lower cost and yields higher profit. The competitive advantages are as follows : o A large number of cheap labor . So that labor intensive project can be implemented in Bangladesh easily. o A large potential market. About 120 million people forms a big consumer and industrial market. o A weak competitive situation is prevailing in Bangladesh. o Service sector like telephone is in a competitive advantageous position. o Some sort of low cost raw materials are available like jute, fish, leather etc in Bangladesh. o Recently introduced government regulations for the foreign investors. It allows to foreigners to have 100% ownership of businesses and promises foreign investors equal treatment with domestic capital. The government also allows foreign firms to obtain working capital loans in taka from local banks.

3.3 : Negligible Barriers of MNC’s in Bangladesh

There are also some barriers in doing business in Bangladesh for MNC are as follows : o Bangladeshis are very much pious in their religions. Sometimes it can prohibit to produce some special types of products. o As cited first that Bangladesh is a flood affected area. Flood comes regularly in the year as well as sometimes natural calamities destroy many things and create a huge loss for the country. o In Bangladesh, there is a probability to come new and potential competitors with new technology. o The cultural issues are sometimes also barriers for MNC. But it is negligible.

3.4 : Suggestions for International Companies for Doing Business in Bangladesh.

There are some cultural and religious problems in Bangladesh and it may impact on doing business. Following are some suggestions for doing business in Bangladesh: · At present, the government policy is favorable to MNC for increasing foreign investment. · Joint ventures or fully subsidiaries companies can be established . · MNC can business in garments, fish processing, tourism and some electronics sectors where the competition is not begun yet. · Of course, religious and cultural aspects should be considered for doing business in Bangladesh. · Most potential and profitable sector is hotel and tourism sector. Because Bangladesh has got the largest sea beach of the world as well as the finest mangrove forest named The Sundarbans and other tourist spots in the port city Chittagong.

Conclusions:

It can be observed from the above discussions that there are some potentialities in doing business with Bangladesh. Despite the negligible problems I think there is an ample scope for the MNC to start business in Bangladesh. Present globalization process as well as the favorable government policy will be helpful to the MNC in this regard.

References:

1. “Bangladesh - A New Confidence “,Asia Money, May 1995

2. Statistical Yearbook of Bangladesh, Bureau of Statistics, 1993

3. Hodgetts, M,R & Luthans, Fred, International Management, 2nd Edition, McGraw-Hill Inc. 1994

4. Czinkota, Ronkainen and Moffett, International Business, 4th Edition, The Dryden Press, New York (CRM), 1996

5. Professor Nawaz Sharif, Technology Strategy in Developing Countries : evolving from comparative to competitive advantage, International Technology Management, Vol. X, No.X, 1997

6. Internet Data on Bangladesh.

Note : This is absolutely a personal effort to write something on business practices and the potentialities in Bangladesh with the help of mentioned sources of information. If you have any comment please let me know.

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