Impact of globalization on different sectors of Bangladesh

Impact of globalization on different sectors of Bangladesh...

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Unformatted text preview: The Impact of Globalization on Different Sectors of Bangladesh Bangladesh Globalization of Economy Globalization Globalization of economy means integrating the economy with rest of the world. Reduction of import duties thereby facilitating the movement towards open economy. Removal of non tariff restrictions on trade like export control & import licensing. Encouraging FDI & FPI Allowing companies to raise capital abroad & encouraging domestic firms to grow beyond national boundaries. Encouraging Privatization & trade liberalization. BTTB was corporatised into BTTCL. Bangladesh is the pioneer among LDCs, opening its mobile phone sector for private and foreign investment in 1989. Pacific Telecom launched the country's first mobile phone service. Subsequently, three more mobile phone licenses were issued, in 1996, 2004 and 2005. The liberalisation of the mobile phone sector of Bangladesh was a unilateral one. No LDC has liberalised the sector before making formal commitment in the WTO. Liberalisation of the sector greatly enhanced tele­density of the country. In March, the total tele­density (fixed + mobile phone) stood at 16%, which was only 0.30 in 1998 and 0.85 in 2005. Telecom Telecom Insurance The growth of the insurance industry during last 18 years, is quite impressive due to operation of private sector insurance companies. Some developing countries like Pakistan, India, and Thailand the number of insured out of every 1000 is 100, 150 and 70 respectively. But this number is not yet more than 10 in Bangladesh. Insurance premium as a percentage of GDP is around 14 per cent for Japan, 13 per cent for South Africa, 12 per cent for South Korea, 9.0 per cent for UK and 2.0 per cent in India while for Bangladesh it is less than 0.1 per cent. It is presumed that globalization will The domestic insurance industry may break down in the face of entry of large well­organized foreign competitors in the field. If uncontrolled, large funds as the form of profit will travel out of the country. When many developing countries during the last decade adopted the policy of merger and acquisition in order to reduce the number of companies and, thus, to build up strong companies to face mega foreign insurers, the situation in Bangladesh is quite different. increase domestic capacity, instill healthy competition with the advent of foreign giant insurance companies and provide better customer value and preferences. The mega players in the international market will bring forth better training facilities. This may benefit the local players to update their existing training portfolios Financial Sector Reform Financial Aimed at entrusting additional powers to the central bank Interest rates were liberalised; introducing new bills activated open market operation. Attempts were made to improve governance in the financial sector. The second phase was began at the beginning of the present decade and reform initiatives attempted to improve legal aspects, corporate governance, loan recovery, exchange and interest rates management, NCB's functions, risk management and efficiency of the Bangladesh Bank. Audit Committees were mandated for all banks with clear guidelines and TORs and Early Warning System (EWS) was introduced. To strengthen the banking operation, minimum capital requirement was raised from Tk. 400 million to 2000million BB is implementing a project 'Remittance and Payments Partnership (RPP)' with fund from DFID, through which Automated Clearing House (ACH) will be installed and migrants' remittance fund will be speedily handed over to the recipients. Bangladesh is a major compliant of international agreement on financial vigilance. Bangladesh enacted the Prevention of Money Laundering Act 2002, a major legislative development to combat financial terrorism Bangladesh is a signatory of the UN Convention to fight financial corruption. Shipbuilding Industry On at least two instances, Danish shipping interests recently have placed substantial orders with Bangladeshi shipyards. One case is the co­operation between Ananda Shipyard in Meghna Ghat and a Danish ship consortium – CS & Partnere A/S. The second order landed by a Bangladeshi shipyard was when Western Marine in Chittagong signed a contract for the building of up to 5 multipurpose vessels The two orders have positioned these shipyards as serious players in the international shipbuilding industry in strong competition with Chinese and Vietnamese shipbuilders. In order to live up to the highest international standards for ship design and to obtain international accreditation from bureaus such as“Germanisher Lloyd” and “Norske Veritas” it will be important for the ship yards to be able to import the various fittings and components necessary for the ships to reach an international standard. Pharmaceuticals Government plans to declare “Pharmaceuticals” as the product of the year (2008) in a bid to boost its export further. Bangladesh pharmaceuticals industry is the largest among the LDCs and growing with 50% annually. Pharmaceuticals export rose to USD 17.64 million in the first five months of FY07­08 while it was USD 11.86 million during the same period of FY06­07. Among the 49 LDCs, Bangladesh is the only country that is nearly self­sufficient in pharmaceuticals. This industry now caters 96% of the country’s pharmaceuticals needs. the per capita expenditure on medicine is only about US$ 4 per year. This is one of the lowest not only in the world but also in the sub continent. The top 20 companies however account for 80% of the total market. The top 20 companies however account for 80% of the total market. Since the Drug (Control) Ordinance 1982, which favored local pharma companies, most multinational pharmaceutical companies have actually either left or sold out their interests in Bangladesh (i.e. Organon). At present only 4 multinational companies are operating in this sector. Bangladesh has been exempted from TRIPS by WTO until 2016. As such, there is no protection for patented products against local manufacturers. • Pharmaceuticals from Bangladesh now being exported to 68 countries in Asia, Africa and Europe. All major companies are complied with WHO GMP guidelines and capable to face competition from developing countries in exports due to strict quality compliance. The pharmaceuticals sector has a large opportunity to export more to the LDCs including those of Asia, Africa and Central and Latin America that were yet unexplored by the Bangladeshi companies. The local pharmaceutical companies exported medicines of US $ 28.12 million with a growth of 47 per cent in the last fiscal year 2006­'07. But almost 85 per cent of the total required raw materials are imported • • Some leading pharmaceuticals companies are producing world­class products that are acceptable in the global market there is huge potential to set­up manufacturing plants for Active Pharmaceutical Ingredients (API) or bulk drugs and the companies can be benefited by producing API for patented products. There is large potential for export market expansion from 2006 till 2016. Agro Agro Status of Agriculture •Agriculture contributes 22% of GDP •Avg. agriculture growth rate was 6.2% and Industry 5.7% (1999­2001) •60% population (140 million) dependent on agriculture •Near self sufficient in food grain production (27 million tons) •Shift from cereal to non­cereal and non­crop production and processing •Government priority towards agribusiness Shrimp and Fish: Shrimp and Fish: •Fisheries accounts for 5% of GDP •Foreign exchange earning valued at USD $ 550 mn (shrimp contributes 90%) • Bangladesh is the third largest producer of fresh water fish •Growing demand for fresh water fish in the overseas ethnic markets •Prospects for growth through joint venture initiatives, particularly in the frozen and processing sectors Poultry : •Poultry contributes about 2% in GDP •More than 5 mn people engaged in poultry sector •Poultry industry is growing at 10% per year •With the growth of maize production( now about 1 mn ton),expansion of the feed industry is promising •Present demand for balanced poultry feed is 700,000 tons/year and supply 300,000 tons/year •Emerging markets have already attracted foreign investments in the poultry feed and medicine. Leather: Leather: •The 3rd largest export sector •Annual export earnings of about $ 250 million; the sector provides employment to more that 60,000 people. •Production of about 200 million (sq ft) of hides • Inadequate supply of quality raw materials •Potential losses of USD $50 million due to poor quality of hides •Need for organized slaughter houses Aromatic Rice •Global market for aromatic and glutinous rice at 7 mn tons •Bangladesh produces 450,000 tons of aromatic rice •Growing demand for Bangladeshi aromatic rice in local & andexport markets in the Middle East, EU and North America •Ensure long term export authorization to attract investors Agro Processing: •Production of vegetables 1.8 million tons, fruits amounts to 1.4million tons and potato 2.0 million tons per year •Growing demand for processed food in local markets­Agro processing industries have been emerging •Scope for processed, frozen & fresh exports •Joint venture partnerships are in operation for processed foods and frozen vegetable exports •Huge demand (856,000 tons) and supply (36,000 tons) gaps •Informal seed sector supply 94%; formal sector 6% (BADC 4%and private sector 2%). •Present market is about USD $ 100 million •A few joint venture initiatives are on going with hybrid rice seed production. Milk & Milk Products: Milk & Milk Products: •Milk production stands at about 2 million tons per year •Present production meets only 17% of the total demand •There is also a growing demand for fresh milk, milk based drinks and products, domestically as well as North­East India. •Several private sector companies are in operation •Grameen Bank started joint venture with DANON Constraints: •Lack of quality control mechanisms and standardization of products •Inadequate port facility •Inadequate air freight space for export of perishables • Inadequate air space for fresh product export •Major challenge for the agribusiness sector of Bangladesh especially for the export market would be compliance to the SPS requirements • Threat to small farmers due to WTO ...
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This note was uploaded on 04/22/2011 for the course BBA BUS 203 taught by Professor Kakter during the Spring '11 term at BRAC University.

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