North South University

Sangeet Khisa Id# 1010 782 030 Course: INB 355 INS: Aditi Mansur Mahmud (AMd) Sec: 2 Date of submission: July 1, 2012

Country Risk analysis & Problems of Bangladesh

Bangladesh is an independent country since 1971. After a long liberation war of 9 months, Bangladesh has got its independence. Since Bangladesh is an independent country, many foreigners & foreign companies are coming to our country in hope of developing business. But developing a business in a country is not an easy decision. Before investment into a country, a company business organization has to find out the business environment, economy, risks etc. factors. If the country support to their facilities then an organization takes decision to invest into the country. But it is a matter of great sorrow that Bangladesh business environment is full of many problems & risk for foreign investment.

Problems facing Bangladesh

Here are some major problems Bangladesh is facing as a country risk for foreign tradePolitical instability Economy
Market Price Fluctuation

Corruption Bureaucracy Inadequate infrastructure facilities (power, water & gas) Electricity problem Counterfeiting theft Lack of efficient distribution channel Connectivity Problem

Lack of proper Business knowledge Skilled people as laborer Environmental support

Poverty in Bangladesh

Poor law and order situation Population Problem

Kidnapping Terrorist activities

Political instability
Political instability is the most serious problem facing Bangladesh. Here two major political parties 1. The Awami League, 2. the Bangladesh Nationalist Party (BNP) have conflict with each other. Current the Awami League won the legislative elections in December 2008 and is expected to be able to remain in power for its entire term. Tensions between the two traditional parties, the Bangladesh Nationalist Party (BNP) and the Awami League, could emerge once again in the form of public demonstrations. All most the whole they are busy with the conflict with each other rather than improving the countries condition. When the government tries to do something for the country, the opposite party comes to distract their work. It is seen for both two parties & does not a matter whether the Awami League or the Bangladesh Nationalist Party (BNP) is in the power. So for any reason or problem the opposite party tries to find out bad side of the government. As a result they often call out for hartals, strike etc. The political tensions and the tense social climate have affected investment, which has already suffered from deficiencies in terms of governance and particularly persistent problems with corruption.

But any political instability like strike is very harmful for business. They have to close down the business for the whole day long. So it is a serious problem in Bangladesh.

Solution: If the 2 political parties do not co-operate with each other, these problem wont be solved. The political parties should try to improve the condition of Bangladesh rather than passing time in their internal conflict. The parties should be restraining themselves from calling Hartals or strikes as it is harmful for the business.

Economy Problem
Economy plays a very important role in a country. But it is true that Bangladesh has a poor economy. Almost most of the people in Bangladesh live under the poverty line. Their income source is inadequate. Even they do not get sufficient wages. It is such a country where a poor always remains a poor for his/her entire life & a rich person always gets richer day by day. As the income of the poor people is not sufficient, they do not hope of getting richer in their future life. Even they wont be able to save money for the future. Because the cost of living is high than the earnings of the people. Most of the poor people lives on Hand to mouth. Again the annual GDP growth rate of Bangladesh is very low in recent years. Even an American Computer company Apple has the larger GDP growth rate than the Bangladesh. So if the economic condition of a country is poor, how foreign investors try to invest in such country?

Solution: The economy of a country can only control by the government. So the government should try to improve the economic condition of Bangladesh. The income or wages of the employees should be on the line to improving their current situations & living condition. Bangladesh government should try to increase the rate of GDP by using the countries assets & FDI (Foreign Direct Investment) Raise of private sectors & private jobs also can improve the economy of Bangladesh.

Market Price Fluctuation

Market price fluctuation is very common in our country. For any simple in occurrence there is a huge price hike in the market. Bangladesh market is related to various reasons. For example: political influence, time of festivals, hartals etc. Food price changes are often associated with increasing food insecurity and vulnerability for all food purchasers urban consumers, landless laborers, even small farmers and others who are not self-sufficient in food production and depend on the market for part of the year. Price of oil, kerosene, octane, gases etc. also fluctuates. Again some unscrupulous businessmen were seen controlling market price by forming syndicate that hindered normal supply of various commodities. This syndication in the market hampers the economy of a country. There are some laws for prohibiting the market price fluctuation by the government. But these laws are not properly arranged. Even the government

cannot control the market. These are the problems investors are facing in investing in our country.

Solution
The laws should be abided strictly. Government should be more careful about the market price fluctuation. Syndication in the market by the business should be strictly banned. Overall country awareness about this situation.

Corruption
Corruption is the most serious problem in Bangladesh. There are various forms of corruption likeBribery: It is a common problem everywhere in Bangladesh. Corrupted people do not want to do anything without bribery. Without bribery, nothing is either efficient or effective. And when they receive money, they make everything easy.

Nepotism: Nepotism is also a common problem in Bangladesh. Many business people & organizations are involved in this corruption. It is mainly directly giving ones own son or ones relatives business opportunities, which they do not actually deserve to get.

Disguised beneficial ownership: It mainly occurs when someone who has shares in a company but the public has no idea that who is the owner of the company. In very simple terms, the

problem of beneficial ownership and control arises in situations whereby a person uses a corporate entity or individual as a front to obscure his real identity in commercial transactions or holding assets. It is also become common in Bangladesh. In this way corrupted people make huge amount of money. Cronyism: It is also seen in Bangladesh. It refers to a very closely knit association where the outsiders are not allowed to get in. For example: Tea auction in Chittagong where the existing auctioneers issue a license but they do not issue the license. Because they do not want to allow new. Solution: Government should impose strict laws for corruption. The current laws should be abiding by strictly. Punishment rule should be followed. The corrupted people should be warned to stop corruption like bribery, cronyism, nepotism, disguised ownership etc. Social awareness should be raised. Because corruption is a social problem. So it should be stopped rather than tolerate.

Bureaucracy
There are many bureaucratic problems Bangladesh is facing like Red Tape, Deliberate Delay, Cultural habits etc.

Red Tape: It means taking much time in moving a file from one desk to another due to bribery or deliberate delay. If these happen business would be in a problem. Thats why the investors include this as a problem. Deliberate Delay: It is seen almost in every government offices. The officers mainly neglect their works & dont care about others. So they make delay in their work. Cultural habits: It is also regarded as a risk to the foreign investors in Bangladesh. Bangladeshi officers are almost seen neglecting their works. Again they like to have holidays as much they can be able to have. On the other hand, they want the same wages & income. Solution: Red tape, Deliberate delay should be strictly prohibited by conducting laws. People have to change their habits, should not neglect their works & concentrate on the job.

Inadequate infrastructure facilities (water & gas)

Infrastructure is weak in Bangladesh. Weak infrastructure is a disadvantage for doing business; it also means that the area offers substantial prospects for investment. Water & gas are our facilities. These are the assets we do not have to import from the outsides. These are the important factors of production & source of income. Bangladesh is a river based country. We could use water as our income source by manufacturing but it is a matter of great sorrow that we are losing water sources. Since the increase of the huge population, the area of Bangladesh is not increasing. So most of the rivers & canals are filling now with soil. At the same time we are also wasting water by unconsciousness & wrong doing. We are throwing waste materials & waste

things in the river & polluting the water. If we lose water sources & waste water in future we have to import water from outsides for our use & production business. Again gas founded in Bangladesh is not enough to support in the near future. So its also a risk of inadequate gases for future use.

Solution: This problem can be solved by awareness. Everyone should properly use water & gas. Rivers should not be filled & water should not be wasted. We should prevent water pollution.

Electricity Problem: We are now living in 21st century. Electricity plays a major role in a countrys development. Without electricity no work is possible. The country is currently facing 1500 MW of power shortage causing serious dislocation in all spheres of life including production in fields and factories. To maintain with the growth rate of Bangladesh, she will need to add 2000 MW additional energy each year. At 147 KWH Bangladesh has one of the lowest per capita electricity consumption in the South-East Asia. Bangladesh is facing huge load shedding of electricity.

Almost all part of Dhaka having load shedding of electricity everyday at least four to five hours everyday. Or sometimes it lasts for long time.Multiple power cuts for periods totaling six to seven hours occurred in Eskaton Garden, Dhanmondi, Kalabagan, Moghbazar, Khilgaon, Shahjahanpur, Mohammadpur, Banani, Uttara and other places. Not only in Dhaka, but also the whole country is facing this problem. Every summer Bangladesh face huge load shedding problem. So if the if there is disruption in electricity the investors surely consider Bangladesh a risky country for investment.

Solution: Proper use of electricity because indirectly we are wasting our electricity by ourselves by turning on lights, not turns off the fans when they are no use & etc. unnecessary activities. Bangladesh geography wont support Turbine. So people can simply use Solar panels energy for solving electricity problem.

Counterfeiting & Theft

There are many various forms of counterfeiting & theft in regarding the basis of Bangladesh such as: Fraud, White collar theft, Blue collar theft etc. Fraud: Fraud mainly exists in the banking sector. Here in Bangladesh cheque is often bounced. So Bangladesh is considered as a very risky country to foreign investors. White Collar Theft: This is also a serious problem is conducted by educated people. For examples: large business group Apex in Bangladesh false market transaction. Apex & the public bought & sold the shares among themselves for increasing the price & value of the shares but at last they found that they could not sell the shares back to anyone because no was prepared to pay high price. Blue Collar Theft: This theft is mainly conducted by the uneducated people from the ware houses, trucks & vans etc. For examples: the workers or the guards in garments or factories steal some products & sell those products outside for making money.

Solution: Securities should be increased. Government should give strict punishment for the fraud & corruptions.

Lack of efficient distribution channel

Bangladesh has one of the flattest land structures in the world. The geographical structure & the presence of cheaper transportation option (waterway) make the country any supply channel managers dream. But unfortunately the real picture is somewhat different. The businesses lose near 40% of the perishable items due to lack of efficient distribution channel. Lack of supply chain management knowledge, a weak transportation system, and corrupt road authorities are some factors that contribute to make the system inefficient. Here the transportation system is very bad. There is long traffic jam on the road. As a result one has to spend a lot of time in their transportation. Even the roads are not properly constructed. It is almost everywhere seen the damaged roads. Again corruption also takes place in the distribution channel. There are some bad corrupted people like any bad gang leader & his party, bad guys in the area of transportation. They demand money for the transport. So the investors also take this problem as a risk.

Solution: Bangladesh government should try to reduce the traffic & vehicles in the road. Road & highways should be broadened. Roads should be well constructed. Strict laws should be taken by the government against the bad guys.

Connectivity problem
The world has moved on to connect itself to the World Wide Web as 21st century whereas Bangladesh is lagging far behind. Across the world innovative business are emerging using a clicks and mortar business model. As the access to high-speed internet connection becoming cheaper by the day around the world the story is quite different for Bangladesh. Businesses have to pay a handsome amount in fact one of the world steepest fees to get access to the web. The internet is also not available in everywhere of Bangladesh for networking problem. Again the conditions of telecommunications are poor in Bangladesh, it is determined by only 3 telephone lines per 1000 persons, most of them analogue. This is mainly because of the lack of capacity of the state owned telephone company, the Bangladesh telegraph and telephone Board (BTTB).

Solution: Bangladesh government should try to improve the network problem & impose internet services in the offices, educational institutions, organizations. The number of cellular telephone companies has entered the sector, many in operational partnerships with major international corporations. Four satellite stations provide the international communication link. The Government is encouraging private participation to set up card phone systems and public call centers to take telecommunication to the grassroots. Mobile phone companies should expand their facilities in giving internet services.

Lack of proper business knowledge

Lack of proper business knowledge is also a main problem in doing business in Bangladesh. Most of the entrepreneurs of Bangladesh have the lack of business knowledge with their businesses they are working for. They have little institutional knowledge and have little access to training as very few organizations offer quality facility. In absence of know-how relating to general accounting, branding, taxation, law etc the businesses tend to miss the opportunity that the regulatory environment offers. Internet can play a vital role here for knowledge dissemination but the access to the net is not that easy. Without proper business knowledge, no companies will be able to succeed. So everyone related to the business should be well trained & aware of the business plan whether he/she is 3rd class employee or he/she is the business executive of the company.

Solution: Every employee should be well trained. Every employee should be aware of the proper business plan for which company they are working for. Business plan should be well designed & well informed to the employees.

Lack of skilled labor

Bangladesh has a large population. So the business organizations can have a large number of cheap labors. But labors of Bangladesh are not skilled. They have lack or no knowledge about their work. It would make a serious problem for business. Again training institutions are not also sufficient to provide the quality of labor force the business need. Solution: More training institutions should be set up. Make sure the labors are well trained.

Environmental support
Bangladesh geographical environment can be hampered by natural disasters such as earthquakes, tornadoes, floods, storms etc. These disasters disrupt supply chain, damage business & create untold sufferings. Solution: As this is a problem of natural disasters, this problem cannot be solved. Only by awareness & taking necessary steps the damages can be reduced.

Poverty in Bangladesh
As the economy Bangladesh is very poor, most of the people live under the poverty line. They cannot have proper foods, cloths, education & shelter. Again the unemployment rate is also high. As they are economically weak how they will be able to lead their life well? These is a problem foreign investors will face if they invest in Bangladesh because they cannot afford own livings. It will be quite impossible for them to use foreign products.

Solution: Government should ensure proper education for everyone & after education good jobs that satisfy the needs. Unemployment problem should be decreased by making source of employment. For this not only the government, but also the private sectors should create job facilities to solve this problem.

Poor law & order support

Sound law & order situation helps to conduct a business. But Bangladesh laws are very poor & are not supported. Thats why the crime is taking place. Without restricting these crimes & strongly recommending the laws foreign investors wont get interest to invest in Bangladesh. Solution: Existing laws should be strictly supported by the government. More laws should be formed to decrease the crimes.

Population Problem
Population problem is the burning question of Bangladesh. In fact it can be termed as number one problem of the country. Bangladesh is the most densely populated country in the world. It is a small country of 1, 47,570 square kilometers. But it has a population of 15 million; every year more than two million people are being added to our population. The Population of our country is increasing at an alarming rate. The problem is now out of control. It has no come to the position of explosion. As a result Bangladesh is facing many problems such like food, clothing,

education & shelter. If this problem cant be solved the country wont be able to prosper. Because the number of people has become imbalanced than the assets of Bangladesh. Solution Proper family planning: We should aware people about the proper family planning. Like, each family doesnt have more than 2 children whether male/female child. Awareness: They should aware people about the problems they will get having a larger family. They should also aware people that if they have child more than 2 then it would be tough to give them all the rights. Better they should take 1/2 child & give them proper education. Female education: Female education rate should be increased as they are the half total part of our population. If we do not give them education then they do not aware about the family planning, life etc. As a result the whole country would be in the dark. Early marriage is one of the main problems of increasing population. So we should stop it. Raise of education towards the illiterate people: Without proper education no countries are able to improve their condition as well as, foreign investors also do not want to invest in a country where most of the people are illiterate. Using people in a proper way: We should use our population as an asset by providing people proper work.

Kidnapping/Ransom
This problem also has become common in Bangladesh. People are often kidnapped for political issues or for getting huge amount of money as ransom. Recently one of the political leader of Bangladesh Mr. Ilias Ali has been kidnapped for political reasons. Even still he is not founded by the police. Such as many people are also kidnapped & the kidnappers demand a huge amount of money as ransom. In Bangladesh these kidnap activities are very common. Even the police force cannot do anything against this kidnapping. This is referred as a serious problem to the investors.

Solution: Punishment for the kidnapping should be very strict because it is related to ones life. The law & the police activities should be hard & soul.

Terrorist Activities
Terrorist activities are also problems for which foreign investors take it as risk to invest in Bangladesh. This happens by both religious & political terrorist parties. The investors do not get

interest to invest in such countries with strong terrorist activities. In Bangladesh some terrorist groups like JMB, BDR, Shibir groups are seen. For example: JMB did a grenade attack which was conducted by the Bangla Bhai & on the spot many people were died. Again Shibir is also a group of religious group. In the name of religious matter they make serious crimes. So these are the problems by the terrorist groups facing by the investors.

Solution: Strict laws should be forced against these terrorist activities. Punishment of breaking law should very high such as: to hang on rope or more strict punishment should be given. These are some major problems for which the foreign investor are considering Bangladesh as a risky country. Without solving these problems our FDI (Foreign Direct Investment) growth wont be able to increase. But without the growth in FDI, a country wont be able improving its condition. So for proper foreign investment by the investors, these problems should be solved. Thus the economy of the country will rise with the raise of foreign investment.