study the political, legal and economic system of bangladesh

Jiangxi, PR China

International Masters in International Business (IMIB)School of International Trade & Economics (SITE)

Course Title: International Business

Presentation On:

Study the Political, Legal andEconomic system of Bangladesh.

Date: 29 March 2016

Presented To: Prof. JUN Deng

Presented By:• Saeed Ullah 31540046• Md Ameer Hossen 31540049• Mohammad Tawhidur Rahman 31540051• Rizwana Edris Jyoti 31540053• Jamshed Alam 31540057

EmergingEmerging BangladeshBangladesh

Are you missing the OPPORTUNITY !

1. Full Name : People's Republic of Bangladesh

2. President : Md. Abdul Hamid

3. Prime Minister : Sheikh Hasina

4. Chief Justice : SK Sinha

5. Finance Minister : AMA Muhith

6. Central Bank Governor : Fazle Kabir

7. Capital City : Dhaka

8. Local Currency : Taka (৳) (BDT)

9. Exchange Rate (৳/ $) : 78.4/ 1

10. GDP/ capita (nominal) : $ 1,314 (2015)

11. Average GDP Growth : 6.5%

12. Time zone : GMT +6

13. Area : Total 147,570 km2

14. Population : 169 million (2015)

15. Language: Bengali + English

Short overview of BANGLADESH

Geographic Position

The geographical location of Bangladesh is a preponderant fact that influences the decision makers in making foreign policy. Geopolitical location of Bangladesh gives it both strength and weakness from different perspectives. As it is by location landlocked by India it keeps Bangladesh in a disadvantage but a little land boundary with Myanmar and its entrance in sea Bay of Bangle give an advantage to its external orientation.

• India's need of corridor through Bangladesh and enhancing global importance of the south Asian region comes as a hope to Bangladesh. Also courtiers like Nepal, Bhutan, China, USA and even Japan and Australia are showing their interest over the geopolitical location of Bangladesh. Nepal and Bhutan being land locked and not having sea access very much interested to use Bangladesh sea ports to foster their foreign trade.

• As China has competing relationship with India always seeks opportunities to contain India geostratagically, where Bangladesh becomes one of the perfect positions to her intention. Though USA has its biggest naval base in Andaman Nicober islands its intend to use Chittagong Sea ports to strengthen its strategic position in the south Asia considering the importance of the region in World politics. Japan and Australia also for their national interest maintain good relations with Bangladesh.

Geo-Political Importance

Geo-Strategic Position

Export Import of Bangladesh

Exports $ 30.77 billion (2014-15)

Export goods

textiles, leather goods, processed and frozen food, jute, jute products

Main Export partners

United States 14.3%

Germany 13.6%

United Kingdom 7.9%

France 5.2%

Spain 4.3%

Italy 4.1%

Imports $ 40.69 billion (2014-15)

Import goods

cotton, petroleum, machinery and equipment, palm oil, foodstuffs, iron and steel, automobiles

Main Import partners

China 18.8%

India 14.8%

Singapore 5.8%

Malaysia 4.2%

Foreign Credit Rating BB- (stable)

Political System in Bangladesh

Electoral system and form of government:• Bangladesh practices multi-party democracy influenced by the

British parliamentary system. Executive power is in the hands of the prime minister, who is the head of the cabinet.

• The president is the constitutional head of state and is elected for a 5-year term by the parliament.

• All adult citizens (18 years old and over) are eligible to vote, including women and ethnic minorities.

• In Bangladesh, parliament is called Jatiya Sangsad. Parliamentary elections take place every five years. It is a unicameral legislature consisting of 350 members of which 300 Members from 300 territorial constituencies on the basis of adult Franchise. The remaining 50 seats are reserved for women who are elected by the parliamentarians.

Political Institutions of Bangladesh

Political Parties of Bangladesh

Major political parties: • Bangladesh Awami League (BAL)

• Bangladesh Nationalist Party (BNP)

• Jatiya Party

• Bangladesh Jamaat-e-Islami (this party is appeared to be ban for its role against Bangladesh’s Independence, in the period of liberation war in 1971)

Politics of alliance: • The politics of Bangladesh is dominated by mainstream two large parties,

Bangladesh Awami League and Bangladesh Nationalist Party (BNP). However, though the center-left Awami League and center-right BNP dominated Bangladesh politics for a long time, currently both are heading coalitions of like-minded parties with the AL leading the secular and liberal elements while BNP is rallying the right-of-centre parties.

Policy & steps of current government

• The ruling Government’s “Vision 2021” aims to eliminate extreme poverty completely and achieve Middle Income Country status by the start of the next decade.

• Currently different infrastructural development works are going on to ensure smooth connectivity all over the Bangladesh and with neighboring countries.

• The government declared few Special Economic Zones to attract more foreign investment. They allotted a large part of that special zone for Chinese investment.

• All political parties are united in their views towards the foreign investment. There is no barrier to invest in Bangladesh. So Bangladesh is open and safe zone to invest for international companies. Now Bangladesh is one of most preferable country to the foreign investors because of low wage.

Legal System in Bangladesh

• Bangladesh has a mixed legal system of mostly English common law and Islamic law. However, unlike other common law jurisdictions, Bangladesh’s Supreme Court has the power to not only interpret laws made by the Parliament, but to also declare them null and void and to enforce fundamental rights of the citizens.

• The Judiciary of Bangladesh acts through—(1) The Superior Judiciary having Appellate, Revision & Original Jurisdiction &(2) Sub-Ordinate Judiciary having Original Jurisdiction

Courts of Bangladesh

The Supreme Court:• The Supreme Court is the highest court of law in Bangladesh, other

Courts and Tribunals are subordinate to it. This is also the office of the Chief Justice, Appellate Division Justices, and High Court Division Justices of Bangladesh.

The High Court Division:• The HCD shall have appellate jurisdiction from the lower Courts.

HCD can also exercise the power of original jurisdiction in certain cases.

The Appellate Division:• Appeal to the Appellate Division from the judgment, decrees, order

and sentences made by the High Court Division are to be filed directly for certain reasons.

Courts of Bangladesh

The Subordinate Courts and Tribunals:• There are a wide variety of subordinate courts and tribunals. The

subordinate courts in Bangladesh can be divided in two broad classes, namely, civil courts and criminal courts. Certain tribunals are termed as administrative tribunals, Nari-o-Shishu Nirjaton Daman Tribunals, Special Tribunals, International crimes tribunal etc.

Legal System for Business

Legal system for business development:• Following the political turmoil in 2013, law and order is

restored, helping to facilitate business and economic growth. The Rana Plaza tragedy forced the government to introduce certain compliance requirements in the garments sector by enacting the Labor (Amendment) Act 2013. A new Companies Act is being finalized to replace the Companies Act 1994. The draft proposes certain treatments in line with the Organization for Economic Co-operation and Development (OECD) compliance framework.


Private sector investment is prohibited for certain sectors including:1. Arms and ammunition 2. Defense equipment 3. Forest plantation 4. Extraction of reserved forests5. Nuclear energy 6. Security printing7. Minting.

There is no restriction on foreign investment except in sectors controlled by administrative licensing processes. These include:

1. Banking 2. Finance 3. Insurance4. Merchant banking and brokerage 5.

Telecommunication6. Aviation 7. Broadcasting

To acquire a stake in local companies, foreign investors require prior approval from the Bangladesh Bank, if control of the business is transferred from local to foreign shareholders.


Open for all:• There is no general restriction on doing business with certain countries or

jurisdictions. However, the Chief Controller of Import and Export (CCIE) amends the import and export policies, addendums and Statutory Regulatory Orders (SROs) regularly, to prohibit or impose limits on import and export of certain commodities from or to certain countries for certain periods of time.

Investor rights protected:• Foreign investor rights are protected under the Foreign Private Investment

(Promotion and Protection) Act 1980.The Bangladesh Bank has outlined relevant procedures and formalities for all inward and outward remittance in its Guidelines for Foreign Exchange Transactions (GFET). Any transaction that has not been outlined in the GFET must obtain approval from the Bangladesh Bank.


Incentives available for investors:In Bangladesh different types of incentives for foreign investors are available. In some cases local export oriented industries also get incentive opportunities. These include-

• Duty free import of capital machinery and spares, bonded warehousing for businesses exporting 80% or more of goods or services.

• 90% loans against letters of credit and funds for export promotion;• Cash incentives and export subsidies are granted on the free on board value

(this includes inland freight, export duty and other expenses, but not ocean freight, insurance and consular fees) in the form of drawbacks and rebates on import and excise duties paid on direct inputs and so on;

• For 100% export oriented industries, no import duty is charged on raw materials.

Incentives to foreign investors. These include:• 100% foreign ownership and repatriation of invested capital, profit, and

dividends;• Double taxation can be avoided;• Private sector power generation companies are tax exempted for 15 years;• New investors are granted six month multiple entry visas.


Customs duties:Imports are taxed at the following rates (subject to certain exemptions):

• Capital machinery : 3%.• Basic raw materials : 7%.• Intermediate raw materials and semi-finished products

: 12%.• Finished products : 25%.

Exports are in general duty exempt.

Economy System (Base) Comprised of three broad fragmented sectors

• Formal Sector - The formal sector includes all regulated institutions like Banks, Non-Bank financial institutions (FIs), Insurance companies, Capital Market Intermediaries like Brokerage houses, bourgeois Banks etc.; micro Finance institutions (MFIs).

• Semi-Formal Sector - The Semi formal sector includes those institutions which are regulated otherwise but don't fall into the jurisdiction of financial organization, Insurance Authority, Securities and Exchange Commission or any other enacted financial regulator. This sector is principally pictured by specialised financial institutions like House Building Finance Corporation (HBFC), Palli destiny Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental Organizations (NGOs and separate government programs.

• Informal Sector - The informal sector comprises of the institutions which are free and fully unregulated.

The sectors are categorized with their regulations.

Financial System of Bangladesh

Free Market Economy in Bangladesh

• The economic system of Bangladesh after liberation was neither capitalist nor socialist. Recently dramatic changes were made in the economic system of the country. Policies were made to liberalize the economy where 100% foreign direct investment and same treatment for both local and foreign investors were granted.

Bangladesh is classified as

• Emerging market: According to IMF Bangladesh is in the 2nd Position.• Next Eleven: having a high potential of becoming, along with the BRICs,

among the world's largest economies in the 21st century.• EAGLE (Emerging and growth-leading economies) Member: The

EAGLE economies are expected to lead global growth in the next 10 years, and to provide important opportunities for investors.

• 3G countries or Global Growth Generating countries: 11 countries which have been identified as sources of growth potential and of profitable investment opportunities.

• SAARC founding member.• Has the second most pro-capitalist population in the developing world.• Increasingly led by export-oriented industrialization.• Has the potential to emerge as a regional economic and logistics hub.

Doing business 2015

• Doing Business 2015 covers regulations measured from June 2013 through June 2014 in 189 economies. The report marks the 12th edition of the Doing Business series.

• For the first time this year, Doing Business collected data for 2 cities in 11 economies with more than 100 million inhabitants.

• The economies are: Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States.

• The added city enables a sub national comparison and benchmarking against other large cities.

• Differences between cities are more common in indicators measuring the steps, time and cost to complete a standardized transaction where local agencies play a larger role, finds the report.

GDP & GDP Growth Rate

It shows that after the financial crisis in 2009-2010 the GDP growth rate steadily increased per year and estimation is that if the political stability and economical build up prevails the strong domestic demand base, gradually improving investment climate, moderate single digit inflation and export-oriented economy are expected to raise and gross GDP growth to 6.3 percent in FY 2015-2016.

Source: World Bank & Bangladesh Bank

Economic Growth & Stability

Employment

Primary : AgricultureSecondary : IndustryTertiary : Service

Unemployment Rate : 4.3 % (2013)

Agriculture, Industry and Services contribution to GDP

Declining trend in contribution of Agricultural sector to GDP though Agriculture could be one of the most potential earning sectors as Bangladesh is known as an agriculture based country. Income inequality is rising as major work force is working in agricultural sector (48%, 2010). Industrial and Service sector is increasing at a very low rate. Rise of service sector can attribute to income generated from RMG export, workers’ remittances and crop production.

Source: World Bank

Overall Trade Scenario

Source: World bank

Chronic Deficit in Trade Balance – More imports of Bangladesh is one of the most significant factors responsible for unfavorable trade balance. But economists now look at this positively despite the growing trade deficit.Because Import of capital machinery and raw materials are on the rise. “More import means there are more investments in the country”. This will have a positive impact in industrialization and on the economy as a whole.In recent the imports influence the domestic production very little because of importing more capital goods than consumer goods.

Focus on RMG- The Biggest Trading Sector• The readymade garment sector is the golden goose for Bangladesh. The country

has emerged as the 2nd largest exporter of readymade garment products trailing just behind China.

• It is the biggest earner of foreign currency.

• Bangladesh's exports industry alone comprised USD 31.2 billion in FY 2014-15, 81.69% of which was made up by ready-made garments.

• The RMG sector has experienced an exponential growth since the 1980s. The sector contributing significantly to the GDP.

• It also provides employment to around 4.2 million Bangladeshis, mainly women from low income families.

Pen Picture of Bangladesh RMG Export

Bangladesh Export by Major Products (2013-14)

Remittance Scenario

Source: Bangladesh Bank

Remittance Scenario Cont’d

• Generally, Bangladesh is considered a trade deficit country but statistics show current account balance during FY 2005-06 to 2010-11 remained positive due to high remittance inflow, which in turn indicates that remittances play a significant role in Bangladesh economy.

• Our way of earning foreign currency is limited. In state, in recent times, it is recorded that our reserve is at maximum level where remittance is one of the largest contributing sectors.

• Bangladesh is the 8th largest remittance earning country.

• Along with the readymade garment (RMG) sector and non-farm activities in the agricultural sector, remittances have been identified as one of the three key factors that have been responsible for reducing the overall incidence of poverty in Bangladesh

• Remittance is the second largest sector of foreign exchange earnings after garments sector.

FDI Scenario

Source: Bangladesh Bank

Closing of FY 2014-15 (Gain and Loss)

Gain - Bangladesh’s FY2015 has closed with a number of macroeconomic advantages including

Loss - Some of the fault lines of the elapsing fiscal year included

Lower Inflation Unachieved revenue targets

Declining Interest Rate Low flow of foreign assistance

Stable Exchange Rate Sluggish exports to the US market

Manageable fiscal deficit, positive balance of payment and augmented foreign exchange reserves.

Failure to ensure incentive price to the rice farmers

The low level of global commodity prices including that of oil has also provided some respite in terms of resources needed to meet subsidy demands.

Acceleration in private investment remained an illusive target. Efforts to bridge the infrastructure gap did not experience much discernible success.

Bangladesh in Regional and Bilateral Trade

1. Asia Pacific Trade Agreement (APTA) 2. BIMSTEC Trade Negotiating Committee (TNC) meeting 3. SAARC Preferential Trading Arrangement (SAPTA) 4. The Agreement on South Asian Free Trade Area (SAFTA) 5. SAARC Framework Agreement on Trade in Services (SAFAS) 6. Bilateral FTA with India, Pakistan and Sri Lanka 7. Standing Committee for Economic and Trade Cooperation (COMCEC) 8. Standing Committee for Economic and Trade Cooperation (COMCEC) 9. Trade Preferential System Among the OIC Members (TPS-OIC) 10. Preferential Trade Agreement (PTA) among D-8 Countries (D-8) 11. Bangladesh Foreign Trade Institute (BFTI) 12. International Trade Centre (ITC) 13. International Trade Centre (ITC) 14. United Nations Conference on Trade and Development (UNCTAD) 15. United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) 16. Canadian International Development Agency (CIDA) 17. European Commission (EC)

The future is OursThe future is Ours

In 2030, BANGLADESH will become30th largest economy of the world.

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study the political, legal and economic system of bangladesh

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