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Lankan firms encouraged to explore opportunities in Bangladesh

2018-08-23 00:00:09
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Panel discussion in progress (from left): NDB Capital Managing Director Kanti Kumar Saha, LTL Group General Manager Offshore operations Gamini Sarath, Laugfs Gas PLC Chairman W.K.H. Wegapitiya, Bangladesh Investment Development Authority Executive Chairman Kazi Aminul Islam, High Commissioner of Bangladesh to Sri Lanka Riaz Hamidullah and NDB Investment Bank Vice President and Corporate Advisory Head Nilendra Weerasinghe

 

Sri Lankan firms are encouraged to explore opportunities in Bangladesh’s growing 160 million market for long-term growth prospects, which has also been termed as next China, due to the low cost and high return in manufacturing, as Sri Lanka’s little over 21 million market becomes saturated.


Addressing an investor forum organised by NDB Investment Bank, titled ‘Ayubowan Bangladesh’, at Shangri-La Hotel in Colombo last Thursday, Bangladesh Investment Development Authority (BIDA) Executive Chairman Kazi M. Aminul Islam invited Sri Lankan firms to venture into Bangladesh’s growth sectors by taking advantage of its liberalised investor regime, combined with low production costs and attractive incentive schemes. 


Islam also acknowledged Sri Lanka’s contribution, which helped Bangladesh to transform from a low-income country to a middle-income country, in addition to Sri Lanka being one of the few countries to recognise Bangladesh in 1972, following the Bangladesh Liberation War.   


“Bangladesh began as a poor country, humble beginnings with just US $ 129 per capita income after obtaining independence. Today we have crossed US $ 1,754 per capita income and reduced poverty. The country has moved from a low-income to a middle-income status. Throughout this whole journey, the only country that has been with us is Sri Lanka,” he said.

From left: Laugfs Gas PLC Chairman W.K.H. Wegapitiya and NDB Capital Holdings CEO/Director Vajira Kulatilaka 
Pix by Nisal Baduge

 


Bangladesh’s economy and growth sectors 
Bangladesh is currently the 44th largest economy with a gross domestic product (GDP) of US $ 285 billion and the country’s economy has been growing at 6-7 percent during the last decade, while the estimated 40 percent of its economy still remains in the informal sector. 


The country has a rapidly growing middle class, who is driving urbanisation and by 2030, the country expects 48 percent of its population to be resided in urban areas, from the current 17 percent, which would drive the demand in housing, consumer retail, education, etc. 


NDB Capital Managing Director Kanti Kumar Saha said that apart from the conventional opportunities of apparel, there are new emerging sectors, such as IT, maritime services, tourism, power and pharmaceuticals, emerging in Bangladesh for investments. 

 


LTL’s growing role in Bangladesh’s power sector
Islam said that Sri Lankan firms had realised the potential of Bangladesh as early as in 1980s and entered Bangladesh well ahead of others.


LTL Group Offshore Operations General Manager Gamini Sarath shared that LTL decided to enter Bangladesh’s power sector in 2010, realising the potential, where 50 percent of its population was living without power and lacking a strong private sector and as Sri Lanka’s power sector nears saturation. 


He revealed that LTL is en route to commission its third power plant in Bangladesh and 40 percent of LTL’s revenues would be generated from Bangladesh by the end of this year.

 


Low-cost and high-return manufacturing destination in Asia 
Bangladesh’s electricity generation capacity has increased since 2009, from + 3,362 MW to 15,953 MW by August 2018.


Despite the rising income levels, Bangladesh’s utility costs and labour remain to be one of the lowest in Asia, making Bangladesh an ideal location for manufacturing. 


According to BIDA Director Ariful Hoque, the electricity rate for general use is US $ 0.09 per kWh in Dhaka, which is lower than most Asian cities such as Beijing, Bangkok and Mumbai, while Bangladesh has one of the lowest legal minimum wage, lowest manager’s salary and lowest workers’ wages in the Asia. The Japan External Trade Organisation recognised Bangladesh as a low-cost and high-return manufacturing destination in Asia.

 


Bangladesh’s liberalised investor regime
Elaborating Bangladesh’s liberalised investor regime, Hoque emphasised that almost all industrial sectors are open for foreign investors, except for arms and ammunitions, nuclear power, security printing and minting, afforestation and mechanize extraction within the boundary of reserved forest.
He also assured that the equal treatments for both local and foreign investments and that all investments are secured by law against nationalization and expropriation.


In addition, Bangladesh allows 100 percent foreign equity along with unrestricted exit, while the country has also enabled all modes of investments: foreign direct investment, joint ventures, partnerships, public-private partnerships, non-equity modes such as technology transfers, licensing franchising, contracting, etc. and foreign lending. 


Bangladesh has also signed bilateral investment treaties with 31 countries and double taxation treaties with 28 countries, including Sri Lanka, while Bangladesh is also a signatory to the ICSID, UNCITRAL, OPIC, MIGA, WAIPA, WIPO and WTO.


Aiming to boost exports, Bangladesh has also set up 79 economic zones (EZs) in 36,000 hectares; the government has planned to set up further 100 EZs in the next 15 years to earn additional US $ 40 billion in exports, while creating 10 million employment opportunities.   

 


Opportunities for Sri Lankan companies
Hoque outlined the opportunities for Sri Lankan companies to venture into infrastructure, manufacturing, competitive services, education and skills sectors in Bangladesh.


Specifying the opportunities for local firms in Bangladesh, NDB Investment Bank Vice President and Corporate Advisory Head Nilendra Weerasinghe emphasised that acquisitions/partnership opportunities in financial services, joint ventures in food processing, green field investments in manufacturing of steel and related products, acquisition/partnership opportunities in education, green field/acquisition opportunities in hospitality, joint venture partnerships in apparel, particularly lingerie, partnership/green field opportunities in pharmaceutical (herbal products) and green field investments in IT/information technology-enabled service sectors are the leading growth sectors. 

 


Regulatory environment and incentive schemes for investors 
Speaking of the regulatory environment in Bangladesh, Laugfs Holdings Chairman W.K.H. Wegapitiya said that the Bangladeshi bureaucracy is very supportive to assist foreign investors in contrast to Sri Lankan bureaucracy and noted the Bangladeshi bureaucracy also remains agile to industry needs. 
“The Bangladeshi bureaucracy is very supportive. We have competent bureaucrats but they are not welcoming. The Bangladeshi officials are very friendly and even if they can’t immediately help you, they will still listen,” he said. 


Sarath noted that the Bangladesh bureaucrats sometimes go out of their way to assist investors, As an example, he pointed out that even loan approvals were supported by the authorities.


Meanwhile, Hoque emphasised that Bangladesh offers investors with attractive incentive schemes to investors and financial incentives such as cash incentives, Export Development Fund, Equity Entrepreneurship Fund and accelerated depreciation in lieu of tax holidays.


In addition, he said that Bangladesh’s immigration laws are liberalised to attract talent and to accommodate investors, which includes quick immigration, skilled work permits, permanent residency and citizenship.

 


Proposed FTA between Bangladesh and Sri Lanka 
Laugfs Holdings Limited Chairman W.K.H. Wegapitiya, who remains critical of the Sri Lanka-Singapore FTA and the proposed ETCA and FTA with China, backed the proposed FTA with Bangladesh.


“Sri Lanka can be used as a springboard for energy, logistics, power and maritime sectors to build an economic bridge between the two countries,” he said.


He asserted that Bangladesh stands out in the region due to its “give and take policy” when compared to other countries such as India.


“Looking at the regional opportunities in the Bay of Bengal, Bangladesh is an exception. When you look at India, they don’t believe in the give and take policy,” he said.


Wegapitiya further stated that many Sri Lankan entrepreneurs have not been successful in entering the Indian market, in contrast to the Bangladesh market, where a large number of Sri Lankan firms has become successful, including Laugfs.


He noted that Laugfs gas already captured 9 percent of Bangladesh’s LPG market, reaching 33 million households during last few years.


The Bangladesh-Sri Lanka FTA negotiations are expected to commence, following the submission of the ongoing joint feasibility study by the end of this month.

 


Sri Lankan firms in Bangladesh 
Bangladesh High Commissioner Riaz Hamidullah highlighted the success of Sri Lankan companies in Bangladesh. 


“Do you know that Kumarika is the largest selling hair oil in Dhaka now, that Hayleys grows jalapeños and gherkins for the Japanese market in Bangladesh and top apparel companies in Sri Lanka and Bangladesh are seeking a convergence in taking the industry forward?” he added. 


In addition, LTL Group planned to list its subsidiary Raj Lanka Power Company Limited in the Dhaka Stock Exchange next year, with plans to diversify into other businesses such as transmission lines, substations, as well as other non-related areas such as water and construction infrastructure.


Sri Lankan firms including NDB Capital Holdings, Laugfs Gas PLC, Commercial Bank, Brandix, Hirdaramani Group, Kelani Cables, LTL, Ceylon Biscuits Limited, HNB, Hemas and Macksons Paints have already invested in various sectors in Bangladesh, such as consumer retail, financial services, energy, apparel, etc. 


According to BIDA, Sri Lankan companies have invested over US $ 250 million in Bangladesh as of last year and 30-40,000 Sri Lankan professionals and technicians currently resides in Bangladesh. 
Bangladesh plans to become a developed nation with almost US $ 3 trillion GDP by 2041 and the country’s population is expected to rise to 200 million by 2041 from 160 million.


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