CHAPTER 4 DATA FINDINGS

Transcription

1 Inter. Business Management M.B.A. (International) /1 CHAPTER 4 DATA FINDINGS 4.0. Introduction This chapter mainly presents data findings of FDI overview in Bangladesh and its economic growth based on secondary data. And secondary data were collected from various books, journal report, e-books, government website and many other websites Overview of FDI in Bangladesh Foreign Direct Investment in Bangladesh Foreign Direct Investment (FDI) has played a key role in the modernization of the Bangladesh economy for the last 15 years Inflows of Foreign Direct Investment The figure 2 and figure 3 shows that inflows of foreign direct investment in 2006 was $ m, in 2007 was $ m, in 2008 was $ m, in 2009 was m, in 2010 was As of 2011, inflows of foreign direct investment recorded to $ m (Source: Bangladesh Board of Investment). Figure 2: Inflows of Foreign direct investment during Source: World Investment Report 2011 Mr. Md. Mamun Howlader Student ID:

2 Inter. Business Management M.B.A. (International) /2 Figure 3: Inflows of Foreign direct investment during Source: World Investment Report 2011 Private Investment Statistics Table 2: Private Investment Statistics Year Proposed Local Investment Proposed Foreign Total Proposed Investment Growth % Investment Project BDT Project BDT Project BDT * March, 2012 Source: Bangladesh Economicc Review-2011 (Bangla version), Ministry of Finance Mr. Md. Mamun Howlader Student ID:

3 Inter. Business Management M.B.A. (International) /3 Foreign and Joint Venture Investment In the year (February), there were 89 new foreign and joint venture investment projects registered to BOI which amount to $590m. The projects were invested to mainly in the service, engineering, clothing and agriculturall sectors. Figure 4: Sectorwise foreign and joint venture investment during Source: Bangladesh Economicc Review-2011 (Bangla version), Ministry of Finance Table 3: Country wise foreign and joint venture investment during Country Saudi Arabia Australia USA Finland India South Korea Malaysia Netherlands China No. of Projects Proposed Investment (US$ m) Mr. Md. Mamun Howlader Student ID:

4 Inter. Business Management M.B.A. (International) /4 United Kingdom Pakistan Japan Denmark Sri Lanka Canada Taiwan Singapore Turkey Greece Italy Hong Kong Total As of February, 2010 Source: Bangladesh Economicc Review-2011 (Bangla version), Ministry of Finance 4.2. Investment and Trade Bangladesh has attracted substantial amounts of foreign direct last ten years. investment in the 1. Bangladesh's economic and fiscal reforms, improvements in infrastructures and developing industry clusters have been amongst the main local stimuli to FDI. 2. Nevertheless the country continues to compete hard for every investment dollar! 3. Despite the pressuress from other competitive economies Bangladesh remains, in the eyes of many investors, the most cost competitive and industrious location to set up a foreign subsidiary company (Source: Bangladesh Board of Investment). Mr. Md. Mamun Howlader Student ID:

5 Inter. Business Management M.B.A. (International) /5 Figure 5: FDI continues to develop the Bangladesh economy Source: Bangladesh Economicc Review 2011 (Bangla Version) Figure 6: Bangladesh Exports $m (As of March 2011) Source: Bangladesh Economicc Review 2011 (Bangla Version) Investment Climate in Bangladesh Positive Climate Mr. Md. Mamun Howlader Student ID:

6 Inter. Business Management M.B.A. (International) /6 A largely homogeneous society with people living in harmony irrespective of race and religion, Bangladesh is a democratic country enjoying broad bi-partisan political support for private investment. The legal and policy framework for business is conducive to foreign investment. Investment Climate Bangladesh offers an unparalleled investment climate compared to the other South Asian economies. Here are eight key pointers to Bangladesh's investment climate today. 1. Bangladesh is a largely homogeneous society with no major internal or external tensions and a population with great resilience in the face of adversity (e.g. natural calamities). 2. Bangladesh is a liberal democracy. The population of this country irrespective of race or religion have been living in harmony and understanding for thousands of years. 3. Broad non-partisan political support for market oriented reform and the most investor-friendly regulatory regime in South Asia. 4. Trainable, enthusiastic, hardworking and low-cost (even by regional standards) labor force suitable for any labor-intensive industry. 5. The geographic location of the country is ideal for global trade, with very convenient access to international sea and air routes. 6. Bangladesh is endowed with abundant supply of natural gas, water and its soil is very fertile. 7. Although Bengali (Bangla) is the official language, English is generally used as a second language. The majority of the educated population can read, write and speak in English. As a result of low per capita GDP, present domestic consumption is not significant. However, it should always be considered that there exists a middle class with over 10% of the population. As economic growth picks up, the purchasing power will also grow substantially. Bangladeshi products enjoy duty free and quota free access to almost all the developed countries. This access to the global market is further helped by the fact that

7 Inter. Business Management M.B.A. (International) /7 the policy regime of Bangladesh for foreign direct investment is by far the best in South Asia. Most Bangladeshi products enjoy complete duty and quota free access to EU, Canada, Australia and Norway. Though in limited scale, Bangladesh products already found their access with lower duty in the markets of Thailand, India and Pakistan. However, talks are underway with China, Russia, Malaysia and other neighboring countries in this regard. (Source: Board of Investment, Bangladesh Government Website) 4.3. World Economy and Bangladesh The developing world has not been as much affected by the global recession as the developed world. In , the economic growth rate of developed economy was -3.4%, whereas that of emerging and developing economies was 1.7%. Asian countries, including Bangladesh, performed better than others. A few economies of the world (USA, Japan, France, Korea, Germany and UK) started recovering from the second half of The recovery may be more extensive in 2010, but at a slower rate. (Source: Board of Investment, Bangladesh Government Website) Table 4: Economic Growth Rate Economic growth rate (%) Projections Bangladesh Developing Asian economies Emerging economies and developing economies Developing economies World Source: IMF World Economic Outlook, April, 2010 Table 5: Comparative scenario of Economic Growth in selected Asian Countries Economic growth rate (%) Projections

8 Inter. Business Management M.B.A. (International) / Bangladesh Cambodia China India Malaysia Singapore Thailand Vietnam Source: IMF World Economic Outlook, April, Export Processing Zones in Bangladesh Export Processing Zones (EPZs) are export oriented industrial enclaves which provide the infrastructures, the facilities, administrative and support services for a wide variety of enterprises. Bangladesh s highly successful EPZs in Dhaka and Chittagong are now complemented by new EPZ developments and other valuable real estate developments around the country. The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones. The primary objective of an EPZ is to provide special areas where potential investors would find a congenial investment climate, and location free from cumbersome procedures. Businesses from 32 countries have so far invested in the existing zones. There are currently eight zones with others due to open in the next few years. EPZ-Adamjee EPZ-Chittagong EPZ-Comilla EPZ-Dhaka EPZ-Ishwardi EPZ-Karnaphuli EPZ-Mongla

9 Inter. Business Management M.B.A. (International) /9 EPZ-Uttara (Source: Board of Investment, Bangladesh Government Website) Incentives & Facilities Fiscal Incentives 10 years tax holiday for the Industries to be established before 1 st January, 2012 and Industries to set up after 31 st December, 2011 tax holiday period will be: Table 6: Tax Exemption Period and Rate of Tax Exemption Tax exemption period Rate of tax exemption First 02 years (1 st and 2 nd Year) 100% Next 02 years (3 rd and 4 th Year) 50% Next 01 years (5 th Year) 25% Source: BEPZA 2. Duty free import of construction materials 3. Duty free import of machineries, office equipment & spare parts etc. 4. Duty free import and export of raw materials and finished goods 5. Relief from double taxation 6. Exemption from dividend tax 7. GSP facility available 8. Accelerated depreciation on machinery or plant allowed 9. Remittance of royalty, technical and consultancy fees allowed 10. Duty & quota free access to EU, Canada, Norway, Australia etc. Non-Fiscal Incentives % foreign ownership permissible

10 Inter. Business Management M.B.A. (International) /10 2. Enjoy MFN (most favored nation) status 3. No ceiling on foreign and local investment 4. Full repatriation of capital & dividend 5. Foreign Currency loan from abroad under direct automatic route 6. Non-resident Foreign Currency Deposit (NFCD) Account permitted 7. Operation of FC account by 'B' and 'C' type Industries allowed. Facilities 1. No UD, IRC, ERC and renewal of Bond license 2. Work permits issued by BEPZA 3. Secured and protected bonded area 4. Off-Shore banking available 5. Import on Documentary Acceptance (DA) basic allowed 6. Bank of Back L/C 7. Import and Export on CM basis allowed 8. Import from DTA (Domestic Tariff Area) 9. 10% sale to DTA (Domestic Tariff Area) 10. Customs clearance at factory site 11. Simplified sanction procedure 12. Sub-contracting with export oriented Industries inside and outside EPZ allowed 13. Relocation of foreign industries allowed 14. Accords Resident ship and Citizenship 15. One Window same day service and simplified procedure Year wise Investment in EPZ Table 7: Year wise Investment in EPZ Year Current Cumulative

11 Inter. Business Management M.B.A. (International) / , , , (March,12) Growth ( ) 41% Source: BEPZA Overview of EPZ Table 8: Overview of EPZ Name of No. of industries Investment Export (m Employment EPZ Manufacturing Under implementation (m US$) US$) Chittagong , ,55,121 Dhaka , ,985 Comilla ,040 Mongla Uttara ,023 Ishwardi ,407 Adamjee ,163 Karnaphuli ,501 Total , , ,392 Source: Bangladesh Economic Review-2011 (Bangla version), Ministry of Finance FDI Magazine's rankings

12 Inter. Business Management M.B.A. (International) /12 FDI Magazine of The Financial Times in March 2010 conducted a competition entitled Global Ranking Competition of Economics Zones based on the following nine categories of ranking: Best Overall Global Special Economic Zone Best Economic Potential Best Cost Effectiveness Best Facilities Best Transportation Link Best Incentives Best Promotion Best Airport Best Port In the competition out of 700 Economic Zones globally 200 participated in the competition. All the zones were evaluated on a 10 point scale on the basis of some set criteria. Among the top 10 of the two categories Chittagong Export Processing Zone, Bangladesh scored 3rd position in the Best Cost Effectiveness and also 4th position in the Best Economic Potential for (Source: FDI Magazine) 4.5. Government and Policies Bangladesh is a moderate, democratic and homogeneous country. It is a constitutional republic with a multi party parliamentary democracy. Elections are held on the basis of universal suffrage. Government has initiated various supportive policy initiatives to promote socioeconomic development. The key features of the Government industrial policy are indicated here: To expand the production base of the economy by accelerating the level of industrial investment. To promote the private sector to lead the growth of industrial production and investment. To focus the role of the government as the facilitator in creating an enabling environment for expanding private investment and sustained economic growth.

13 Inter. Business Management M.B.A. (International) /13 To permit public undertaking only in those industrial activities where public sector involvement is essential to facilitate the growth of the private sector and / or where there are over riding social concerns to be accommodated and private initiatives absent. To attract foreign direct investment in both export and domestic market oriented industries to make up for the deficient domestic investment resources, and to acquire evolving technology and gain access to export markets. To ensure rapid growth of industrial employment by encouraging investment in labor intensive manufacturing industries including investment in efficient small and cottage industries. To generate female employment in higher skill categories through special emphasis on skill development. To raise industrial productivity and to move progressively to higher value added products through skill and technology upgrading. To enhance operational efficiency in all remaining public manufacturing enterprises through appropriate management restructuring and pursuit of market oriented policies. To diversify and rapidly increase export of manufactures. To ensure a process of industrialization this is environmentally sound and consistent with the resource endowment of the economy. To encourage balanced industrial development throughout the country by introducing suitable measures and incentives. To effectively utilize the existing production capacity. To coordinate all macroeconomic policies. To develop indigenous technology and to expand production based on domestic raw materials and inputs. To rehabilitate and support deserving sick industries. (Source: Bangladesh Board of Investment Government website) Digital Bangladesh The use of information and communication technology has been playing a vital role in the 21st century due to globalization and the government is encouraged to adapting with the coming future. The democratic government has declared the Vision 2021 in the election manifesto which targets establishment of a resourceful and modern

14 Inter. Business Management M.B.A. (International) /14 country by 2021 through effective use of information and communication technology-a "Digital Bangladesh". Digital Bangladesh does not only mean the broad use of computers, perhaps it means the modern philosophy of effective and useful use of technology in terms of implementing the promises in education, health, job placement, poverty reduction etc. Therefore, the government underscores a changing attitude, positive thinking and innovative ideas for the success of Digital Bangladesh. The philosophy of Digital Bangladesh comprises ensuring people s democracy and rights, transparency, accountability, establishing justice and ensuring delivery of government services in each door through maximum use of technology-with the ultimate goal to improve the daily lifestyle of general people. Government s Digital Bangladesh includes all classes of people and does not discriminate people in terms of technology. Hence, government have emphasized on the four elements of Digital Bangladesh Vision which are human resource development, people involvement, civil services and use of information technology in business. (Source: Bangladesh Board of Investment government website) Government Vision 2021 The government is committed to building a country whose citizens are able to live prosperous and happy lives. The year 2021 will mark the golden jubilee of Bangladesh s independence, while the year 2020 will be the hundredth anniversary of the birth of the father of the nation, Bangabandhu Sheikh Mujibur Rahman. We envision a democratic system where people choose their government freely and get services from it without hassle, enjoy freedom from fear and intolerance, live with dignity; where every citizen is assured of social justice, environmental protection, human rights and equal opportunities; and where the rule of law and good governance flourish. We envision a liberal, progressive and democratic welfare State. Simultaneously we envision a Bangladesh which by 2020/2021, will be a middle income country where poverty will be drastically reduced where, our citizens will be able to meet every basic need and where development will be on fast track, with ever-increasing

15 Inter. Business Management M.B.A. (International) /15 rates of inclusive growth. (Source: Bangladesh Board of Investment government website) Bangladesh as we want to see it in Democracy and effective parliament Democracy and strong democratic institutions will be established for holding reliable election at regular intervals, accountability of government and effective Parliament. All necessary steps will be taken for making Parliament effective. 2. Political framework, decentralization of power & people s participation Local government will be given due importance with a view to effecting radical change of the political system. The local government institutions will play a critical role in development programmes. Self-reliant local self-government institutions will be established at upazila and zila levels to ensure representative, responsive and functional governance at the grassroots levels. 3. Good governance through establishing rule of law and avoiding political partisanship Human rights will be established on a strong footing with a view to ensuring the rule of law. Independence of the judiciary will be ensured and the institutions of the state and administration will be freed from partisan influence. The basis of appointments and promotions will be merit, efficiency, seniority, honesty and loyalty to the Republic; political connections will have no relevance. 4. Transformation of political culture Terrorism, corruption and use of religion for politics will be eliminated. Steps appropriate to the time will be taken to establish democratic principles in the political parties, transparency of political funding, civility and tolerance. 5. A society free from corruption The institutions of the State will be made more effective along with an independent and strong Anti-corruption Commission for curbing corruption. Social resistance to corruption will be promoted alongside legal steps. All possible steps will be taken to stop corruption, such as charter of citizens rights, right to information, computerization of official documents, and decentralization of power. Adequate checks at every level of public spending would be built into the financial management system of the government.

16 Inter. Business Management M.B.A. (International) /16 6. Empowerment and equal rights for women The Women s Policy of 1997 will be revived for ensuring equal right and access for women to the state and social space; laws which discriminate against women will be amended and 100 seats will be reserved for women for direct election. 7. Economic development & initiative a) Meeting basic needs: With a view to providing food, clothing, shelter, education and health care to the citizens in accordance with Article 15 of the Constitution, gross domestic product will be raised to 8% by 2013 and 10% by 2021 which will be sustained thereafter. b) Population and labour force: Population in 2021 is estimated at 165m, and labour force at 105m. Programmes will be taken up for employment of at least 85% of the work force. c) Alleviation of poverty: We aim not at reduction of poverty, but removal of poverty, through which we shall try to achieve the Millennium Goals declared by UN by 2015, and by 2017 latest. Beginning in 2021, poverty will be reduced to 15% from 45% now, progressively. Number of poor people will rise from 45 million now to 65m in 2021, and then fall to 25m in Sustainable safety nets will be established for the extreme poor until poverty is removed. d) Food & nutrition: Food deficiency will be removed and self-reliance in food production achieved by 2012, which will enable us to meet the nutrition needs of 85% of the population. e) Health care: By 2021, a minimum daily intake of 2,122 kilo calories of food, elimination of contagious disease, primary health care and sanitation for all will be ensured. Average longevity will be increased to seventy years, and efforts will be made for the reduction of child and maternal mortality. f) Education: Enrolment at the primary level will be increased to 100% net by Elimination of illiteracy by 2014, improvement in the quality of education, creation of a generation educated in science and technology, graduation degree level education

17 Inter. Business Management M.B.A. (International) /17 made free by 2013 and ensuring higher salary for teachers are the other educational goals. g) Industry: A strong foundation for industrialization will be established by Contribution of the industrial sector to national GDP will be doubled. Primacy will be given to agro and labour intensive industries and the highest emphasis will be given to the information technology sector. The investment policy will be geared to implementing a strategy for attracting both domestic and foreign investment. h) Energy security: An energy policy will be adopted tapping all sources of traditional and non-traditional energy to ensure an accelerated rate of economic development and industrialization. A three year crash programme will be taken up to meet the existing crisis. By 2015, electricity production will be increased to 8,000 megawatt. By 2021, demand for electricity is projected to increase to 20,000 megawatt. We will take all possible actions aiming at enhancing our generation capacity. To increase gas production, regular survey of gas resources and work on well development will be undertaken. To meet energy demand, efforts will be undertaken for regional energy security through mutual cooperation in addition to exploring internal sources. i) Infrastructural development: Road, rail, river and air transport and telecommunication systems will be expanded. Construction of bridges and tunnels for Padma and Karnaphuli rivers, connecting Bangladesh with the Asian highway and Asian railway, improvement of port facilities, building of a deep sea port to open up Bangladesh's ports to countries of Asia will be implemented. In Dhaka, construction of a metro tunnel, elevated rail and circular rail to remove traffic jams and to solve public transport problems will be studied forthwith in order to undertake a feasible project. The project will then be implemented on a priority basis. j) Housing: By 2015, housing for all will be ensured. In every union and upazila, growth center centric village housing and in towns housing with modern amenities will be implemented. k) Environment: All measures will be taken to protect Bangladesh, including planned migration abroad, from the adverse effects of climate change and global warming.

18 Inter. Business Management M.B.A. (International) /18 Facing natural calamities, planned reduction of air pollution, prevention of industry and transport related air pollution and disposal of waste in scientific manner will be ensured. Steps will be taken to make Bangladesh an ecologically attractive place through retention of forests and water bodies and prevention of river erosion. l) Water resources: Bangladesh Awami League will take the initiative to formulate a comprehensive regional water policy along with India, Nepal and Bhutan for regional water security. In addition, in keeping with comprehensive water policy, articulated earlier by Bangladesh Awami League, measures will be taken for development of our water resources and their rational use. 8. Bangladesh in the global arena a) Achievements of liberation: Multi-pronged measures will be taken to uphold the glorious history and the fruits of our national independence and liberation, to energize the new generation with the spirit of liberation, struggle, patriotism and love for humanity. Highest priority will be given to the development of an innovative spirit in the younger generations and opportunity will be provided for them to participate in nation building activities. b) Culture: Measures will be taken to remove obstacles in the development of Bengali culture, literature, art, music and sport and to provide all opportunities by the state to enable the younger generations to attain international standards and to contribute to the nation. c) Foreign policy: In international affairs Bangladesh will follow the policy of friendship towards all and malice towards none. (Source: Bangladesh Board of Investment government website) 4.6. Macroeconomic and Economic Scenario Macroeconomic Situation The economy of Bangladesh has successfully tackled the contagion effect of global economic crisis and managed to maintain a sustained growth. According to a provisional estimate, the economy has posted a growth of 6.66 percent in FY against that of 6.07 percent in FY This performance is mainly attributable to the sustained growth in agriculture sector coupled with recovery of growth in industry sector and the satisfactory performance of service sector. During this period, higher growth in revenue mobilization and

19 Inter. Business Management M.B.A. (International) /19 prudent budget management helped maintain macroeconomic stability and discipline in fiscal front. Furthermore, the increasing global demand for goods and services after recovery has helped achieving higher growth in foreign trade, while soaring global food and non-food prices has created inflationary pressure in the country. Alongside adopting various administrative and structural measures, monetary policy instruments have also been used to reduce the inflationary pressure. Moreover, slower growth in remittance inflows and higher import demand due to massive investment in infrastructure sector including the power sector, the current account balance and exchange rate was under pressure during the last quarter of FY However, this situation did not emerge as a big challenge to the macroeconomic stability. The foreign exchange reserve remained steady at above US$ 10 billion during this period. Overseas job replacement and remittance inflows rebounded since January It is expected that, improved infrastructure and streamlined power sector would be conducive to domestic and foreign investment, which will lead the country to the higher growth trajectory. (Source: Ministry of Finance, Finance Division, Bangladesh government website) Global Economic Scenario The world has come out of the recession of stronger than anticipated. However, the recovery is marked by different speeds in different regions of the world. The consolidation of the global recovery continues in two places. In advanced economies, the recovery has been less than expected coupled with huge fiscal imbalances, mounting public debt and increased unemployment. In addition, the sovereign debt crisis in the periphery of euro area has created downside risks in the process of recovery. While the emerging and developing economies have recouped from the slowdown during global downturn, there has been inflationary pressure in these economies, and there were some signs of overheating driven in part by strong capital inflows. Against this backdrop, the World Economic Outlook, October 2011, showed a downward revision of global output in 2011 and 2012 around half a percentage point to 4 percent from April 2011 Outlook. After the 3.1 percent rebound in 2010, the output in advanced economies was expected to grow by 1.6 percent and 1.9 percent in 2011 and 2012 respectively, lower by 0.7 to 0.8 percentage point compared to April 2011 projection. The output growth in emerging and developing economies was expected to grow by 6.4 percent in 2011 and 6.1 percent in 2012, slightly lower than earlier projection. The developing Asia s economies proved their resilience in the face of a tremendous external shock and are expected to grow in the neighborhood of 8 percent in 2011 and 2012.

20 Inter. Business Management M.B.A. (International) /20 Despite global recovery, the inflationary pressure remained subdued in advanced economies due to low levels of capacity utilization, while inflationary pressure was more intense in the emerging and developing economies. Again the recent surges in global oil and food prices were adding further inflationary pressures. Inflation in advanced economies was 1.6 percent in 2010, which was expected to pick up to 2.6 percent in On the other hand, inflation in emerging and developing economies was 6.10 percent in 2010, which was expected to pick up to 7.5 percent in 2011 due to domestic demand and induced foreign capital inflows alongside the price-hike of commodities like oil and food. World trade volume of goods and services, which rebounded by a staggering 12.8 percent in 2010, was expected to slip by 7.5 percent in Exports from the advanced economies grew by 12.3 percent in 2010, while imports also grew by 11.7 percent, which were expected to slip by 6.2 percent and 5.9 percent respectively in Emerging and developing economies showed relatively higher growth in trade volume of goods and services in 2010 and achieved 13.6 percent and 14.9 percent growth respectively in Moreover, the volume of exports and imports would experience less deceleration in 2011 and is expected to grow by 9.4 percent and 11.1 percent respectively in There are still several substantial downside risks in the global economy. Downside risks arose from the possibility of tensions of sovereign debt crisis in the peripheral countries of the euro area spreading to the core of Europe, the continued weakness of the U.S. real estate market, high commodity prices, the tensions in the Middle East pushing oil prices up, overheating emerging market economies and rapid rising of inflationary pressure. (Source: Ministry of Finance, Finance Division, Bangladesh government website) The Global Economic Recession and Bangladesh The impact of the global financial crisis on Bangladesh economy was not observed at the beginning of the crisis. However, some weakening in export and import was observed in the third quarter of FY , which continued through the second quarter of FY During these two fiscal years, exports grew by percent and 4.11 percent respectively, while imports grew by 4.06 percent and 5.53 percent respectively. In the context of negative growth in world trade, these growth rates were satisfactory. With the rebound in global trade, Bangladesh s trade sector is growing significantly. The exports and imports registered a growth over 40 percent in the last fiscal year. The Government provided two incentive

21 Inter. Business Management M.B.A. (International) /21 packages that included policy support and cash incentives for export sector which helped quick turnaround from the recessionary shocks. The slowdown in the growth of remittance reflected the impact of global recession, particularly on the real estate markets in the Middle East, and on industrial labour demand in some South East Asian economies such as Malaysia. However, remittance performance was at satisfactory level registering a growth rate of percent in FY and percent in FY This growth further decelerated in FY to 6.03 percent. It is however to be noted that both remittance and overseas job replacement rebounded since January (Source: Ministry of Finance, Finance Division, Bangladesh government website) Economic Growth The economy had experienced modest fall of GDP growth during the recessionary period. Despite continuous growth in agriculture sector, the sluggish growth in industry sector particularly in the manufacturing sector compared to pre-recession period was responsible for slower GDP growth. The global economic downturn during had some degree of negative impact on Bangladesh economy. The economy had experienced modest fall of GDP growth during the period. The GDP grew at a rate of 6.19 percent in FY and 5.74 percent in FY In the wake of global recovery, the economy of Bangladesh rebounded and recorded 6.07 percent growth in FY According to the provisional estimate of Bangladesh Bureau of Statistics (BBS), GDP has posted a growth rate of 6.66 percent in FY The GDP growth, according to the Medium Term Macroeconomic Framework (MTMF) projection will stand at 7 percent in FY , which is projected to reach 8 percent in FY This performance is mainly attributable to the sustained growth in agriculture sector coupled with recovery of growth in industry sector and the satisfactory performance of service sector. Agriculture recorded sustained growth for the last three consecutive fiscal years responding to favourable weather conditions, continued government support for agriculture inputs and greater access to credit. Industry sector rebounded from the sluggish growth during recession and recorded a robust growth of 8.16 percent, up from 6.49 percent of previous year. Massive initiatives taken by the government in the overall infrastructure sectors including the power helped to improve industrial production. Service sector has maintained satisfactory growth path and recorded 6.63 percent growth, slightly higher than the growth of previous year (6.47 percent). In FY , per capita GNI and per capita

22 Inter. Business Management M.B.A. (International) /22 GDP stood at US$ 818 and US$ 755 respectively, up from US$ 751 and US$ 687 respectively a year earlier. (Source: Ministry of Finance, Finance Division, Bangladesh government website) Gross Domestic Product (GDP) at Current Prices The value of GDP at current market prices reached at TK. 7, 87,495 crore in FY , which was percent higher than the GDP of previous year (Tk.6, 94,324 crore). In FY , the per capita GDP was estimated at TK. 53,236 which was percent higher than the per capita GDP of Tk. 47,536 a year earlier. On the other hand, per capita national income stood at Tk. 57,652 in FY , which was Tk. 51,959 in the previous fiscal year. In dollar terms, per capita GNI and per capita GDP stood at US$ 818 and US$ 755 respectively, which was US$ 751 and US$ 687 respectively a year earlier. Table 9 represents GDP, GNI, per capita GDP and national income and table 10 represents the sectoral GDP at current market prices over the last couple of years. (Source: Ministry of Finance, Finance Division, Bangladesh government website) Table 9: GDP, GNI, Per Capita GDP and GNI at Current Market Prices Item * GDP (In Crore Tk.) GNI (In Crore Tk.) Population (In Crore) Per Capita GDP (In Tk.) Per Capita GNI (In Tk.) Per Capita GDP (In US$) Per Capita GNI (In US$) Source: Bangladesh Bureau of Statistics (BBS) * Provisional

23 Inter. Business Management M.B.A. (International) /23 Table 10: Gross Domestic Product (GDP) at Current Market Prices (In Crore Taka) Sector/Sub-sector * 1. Agriculture and Forestry a. Crops & horticulture b. Animal farming c. Forest and related services 2. Fishing Mining and Quarrying a. Natural gas & crude petroleum b. Other mineral resources 4. Manufacturing a. Large & medium scale b. Small scale Electricity, Gas & Water Supply a. Electricity b. Gas c. Water Construction Wholesale and Retail Trade 8. Hotel and Restaurants

24 Inter. Business Management M.B.A. (International) /24 9. Transport, Storage & Communication a. Land transport b. Water transport c. Air transport d. Support transport services, storage e. Post & telecommunication 10. Financial Intermediations a. Monetary intermediation(bank) b. Insurance c. Other financial intermediation 11. Real Estate, Renting & other Business Activities 12. Public Administration and Defence Education Health and Social Work 15. Community, Social and Personal Services Import Duty GDP at Current Market Price Growth Rate (%) Source: Bangladesh Bureau of Statistics (BBS) * Provisional

25 Inter. Business Management M.B.A. (International) / Fiscal Situation Fiscal performance was stable in FY with a satisfactory rise in revenue receipts accompanied by a substantial rise in overall expenditure. According to provisional estimate, total revenue receipts in FY increased by percent over the previous year outturn. Total revenue receipts as percent to GDP reached percent in FY , up by 0.85 percentage point of GDP compared to the preceding year s revenue earnings. Tax revenues from NBR sources increased by percent to Tk. 79, crore in FY from Tk. 62, crore in FY This growth was mainly driven by the growth in customs duties (28.44 percent), VAT at import level (16.19 percent) and VAT at local level (28.99 percent) and income tax (33.25 percent). Non-NBR sources of tax revenue increased by percent to Tk. 3,230 crore in FY compared to 3.38 percent growth in FY Non-tax revenues decreased by 1.33 percent to Tk. 13,242 crore from Tk.13, 420 crore in FY Likewise, total public expenditure increased by percent over the previous year outturn. As percent of GDP, public expenditure reached percent in FY , up by 1.15 percent of GDP compared to that of the previous year. According to provisional data, the total expenditure under non-development budget increased by percent to Tk.91, 330 crore in FY from Tk.70, 522 crore in FY Moreover, Annual Development Programme (ADP) expenditure increased by percent against percent increase in FY Finally, as per provisional estimate, the budget deficit stood at 4.00 percent of GDP, of which 3.43 percent was financed from domestic sources and the remaining 0.57 percent from external sources. (Source: Ministry of Finance, Finance Division, Bangladesh government website) Capital Markets The capital markets became volatile from the second half of FY During the period, the DSE general index increased by percent from 3, to 6, indicating keen interests showed by the investors in the capital market. By the end of June 2010, the number of BO (Beneficiary Owner) accounts has increased to lakh from

26 Inter. Business Management M.B.A. (International) / lakh at the end of June At the beginning of FY , the capital market showed buoyant. The DSE general index stood at 8, in December 2010, up by percent compared to that of June Similarly, market capitalization stood at 44.1 percent of GDP at that time. However, the overheated capital markets collapsed in January 2011 and were in process of recovery and stabilization during the last quarter of FY Market capitalization and general index of DSE stood at percent of GDP and 5, at the end of FY Following this, the Government commissioned comprehensive investigation by a committee into the causes behind over blowing of prices of stocks in the market leading to eventual collapse of price bubble, with a view to bringing about necessary reforms in regulatory authority and market structure based on findings of the investigation. As per the recommendations of the committee, the Securities and Exchange Commission (SEC) has been restructured to make it capable of establishing control over the stock markets and to regain investors confidence. In order to separate the ownership, management and trading of stock exchange, the process of demutualization in Dhaka and Chittagong Stock Exchanges has begun. To regain investors confidence in the capital market by providing adequate liquidity, a Tk. 5,000 crore open-end mutual fund known as Bangladesh Fund, has been established. In addition, there was an initiative to frame Financial Reporting Act to maintain stability in capital market. Side by side, the Government has been considering a plan to establish a Financial Reporting Council to oversee the audit and accounting standards and their transparency. (Source: Ministry of Finance, Finance Division, Bangladesh government website) GDP, Saving and Investment The global economic downturn during had some degree of negative impact on Bangladesh economy. The economy had experienced modest fall of GDP growth during the period. However in the wake of global recovery the economy rebounded and has posted a growth of 6.66 in FY as compared to 6.07 percent and 5.74 percent growth in FY and FY respectively. This performance is mainly attributable to the sustained growth in agriculture sector coupled with recovery of growth in industry sector and the satisfactory performance of service sector. Agriculture recorded sustained growth for the last three consecutive fiscal years responding to favourable weather conditions, continued government support for agriculture inputs and greater access to credit. Industry sector rebounded from the sluggish growth during recession and recorded a growth of 8.16 percent, up from 6.49 percent of previous year. Service sector has maintained satisfactory growth path

27 Inter. Business Management M.B.A. (International) /27 and recorded 6.63 percent growth, slightly higher than the growth of previous year (6.47 percent). In FY , the contribution of three broad sectors namely - agriculture, industry and service accounted for percent, percent and percent respectively. The relative share of these three sectors was percent, percent and percent respectively a year earlier. On expenditure side, consumption expenditure increased by 0.51 percentage point of GDP to percent of GDP in FY compared to a year earlier. However, domestic savings decelerated from percent of GDP in FY to percent of GDP in FY mainly for increasing consumption expenditure. While due to slower growth in remittance inflow, national savings decelerated from percent of GDP in FY to percent of GDP in FY Moreover, due to improvement in power and higher expending in Annual Development Programme, investment-gdp ratio stood to percent of GDP in FY , up from percent of GDP a year earlier. (Source: Ministry of Finance, Finance Division, Bangladesh government website) 4.7. External Sector Export With the recovery of global economy from recession, Bangladesh s export trade has been performing better. Export recorded a robust growth of percent in FY , as against 4.11 percent during the previous fiscal year. Such growth was contributed mainly by the growth of export of raw jute (82.14 percent), knitwear (46.26 percent), agriculture products (42.39 percent), frozen food (40.45 percent), jute goods (40.37 percent), woven garments (40.23 percent) and leather (31.86 percent). The Government continued the incentives provided by the two stimulus packages declared earlier for supporting export sector. With the aim of promoting export diversification, additional incentives have been provided to the exporters under The New Markets Exploration Assistance Programme. In the mean time, Japan, Korea, South Africa and Turkey have emerged as a new destination of Bangladeshi apparels. Besides, incentive has also been provided to the ship building industry, as a potential sector. Furthermore, the relaxation of the Rules of Origin by EU since January, 2011 has created opportunities for further expansion of RMG exports in the EU region. (Source: Ministry of Finance, Finance Division, Bangladesh government website)

28 Inter. Business Management M.B.A. (International) / Import In FY , imports picked up and grew by percent, as against 5.53 percent during the previous fiscal year as the global economy started to recover and international commodity price increased. In addition, higher-than-expected import of food grains, imports of machinery for newly established power plants and demand for petroleum for running the plants contributed to the sharp rise in import. Based on the settlement of Letters of Credit (LCs) in FY , import payments of food grains stood a record high at US $ million during FY , up by percent as compared to US $ million in the previous year. The import of industrial raw materials increased by percent, while that of capital machinery and machinery for miscellaneous industries increased by percent and percent respectively during the period. The import of petroleum and petroleum products rose by percent during the period. (Source: Ministry of Finance, Finance Division, Bangladesh government website) Balance of Payments Trade balance recorded a deficit of US$ 7,328 million in FY as compared to the deficit of US$ 5,155 million in FY It should be mentioned here that the Government has taken a range of steps to boost up investment in infrastructure sector including the power sector. Consequent upon the import of machinery for new power plants and oil price hike coupled with increased import of oil for power plants, the current account surplus was under pressure. The service account also experienced higher deficit (US$ 2398 million) as a consequence of increased cost of transportation, particularly freight, and travel payments. The income account also recorded deficit (US$1354 million) on account of payments in the form of profits and dividend repatriation. Weak remittance inflows (6.06 percent growth) and widening gap of service (net) has been putting downward pressure on the current account balance. However, the current account recorded a surplus of US$ 995 million (0.9 percent of GDP) in FY The deficit in the capital and financial accounts (US$984 million) was attributable to the decrease in foreign direct investments, medium and long term loan, and trade credits. However, the overall balance of payment (BoP) was in the negative territory in FY after a long period. The deficit recorded in the overall balance of payment stood at US$ 635 million during FY as compared to surplus balance of US$ 2865 million in the previous year. (Source: Ministry of Finance, Finance Division, Bangladesh government website)

29 Inter. Business Management M.B.A. (International) / Foreign Exchange Reserve Due to decline in current account surplus and the deficit in the capital and financial accounts, there was a deficit in the overall balance. The gross official foreign exchange reserves was almost pleatued over the period and stood at US$ 10, million as on June 30, 2011, which was 1.51 percent higher than the amount as on June 30, As on June 30, 2011, the reserve was equivalent to the import payments for about 3.89 months. (Source: Ministry of Finance, Finance Division, Bangladesh government website) 4.8. Sector wise Growth of GDP The estimation of production based GDP comprises 15 sectors. Some sectors are further divided into various sub sectors. All the 15 sectors are grouped into three broad sectors wise agriculture, industry and service. The broad agriculture sector includes two sectors namely, (i) agriculture and forestry and (ii) fishing. The broad industry sector comprises (i) mining and quarrying, (ii) manufacturing, (iii) electricity, gas and water supply and (iv)construction sector. The broad service sector consists of the collective outputs of the, (i) wholesale and retail trade, (ii) hotels and restaurants, (iii) transport, storage and communication, (iv) financial intermediations, (v) real estate renting and business activities, (vi) public administration and defence, (vii) education, (viii) health and social work and (ix) community, social and personal services. Table 11 and figure 7 show the sectoral growth rates of GDP at constant prices since FY (Source: Ministry of Finance, Finance Division, Bangladesh government website) Table 11: Sectoral Growth Rate of GDP at Constant Prices (Base Year: ) (In Percentage) Sector/Sub-sector * 1. Agriculture and Forestry a. Crops & horticulture