Investment-related cost comparisons: the status of Bangladesh
Thursday, 3 December 2009
JETRO
Japan External Trade Organisation (JETRO), the official trade and investment promotion agency of the Government of Japan, has been conducting surveys regularly on investment-related cost comparisons in major cities of Asia with the objective to provide effective guideline to the Japanese investors to choose right investment destination and to render necessary support to the policy makers of Bangladesh for upgrading investment climate of this country to attract more foreign direct investment.
Likewise, this year JETRO conducted the 19th survey in January 2009. Bangladesh was found lowest only in one cost component. The cost-components considered in this survey include (in broad categories): wages, land price and office rent, telecommunication expenses, charges for utilities, transportation and taxation. According to the 19th survey, it is found that Bangladesh is losing her competitiveness compared to the other countries (considered under the survey) since she has witnessed either an upward acceleration or a stagnant situation in cost of many components of investment. It is worthwhile to mention here that the mean order of all the cost components during the 19th survey have switched to 2.60 from 2.45 of the 18th survey, indicating a rise in cost of investment in Bangladesh compared to the last year.
This year it is observed that Bangladesh is competitive only in seven cost components, mainly representing the communications (mobile usage charges) and utilities (charge for water and gas), among the 34 cost components. Especially, in case of cost related to per cubic meter general use of gas, it is found that cost in Bangladesh is the lowest among the countries under the survey. However, in case of other six components, including mobile phone charge (monthly and per minute call), water rate-general and business use (monthly) and gas rate -- general and business use (monthly), the survey found that cost in Bangladesh, along with some other countries, is the lowest.
Comparative wages analysis data gathered from various countries under this survey portrays a picture that contradict existing beliefs among the quarters concerned that Bangladesh is a good place to invest as the country has abundant supply of human resources who are competitive in terms of wage. The report found that cost related to wages for both the manufacturing and non-manufacturing sectors in Myanmar were the lowest among all the countries. In many cases it has been found that Bangladesh is the second lowest to Myanmar. If the condition in Myanmar's internal political situation improves then she has a chance to attract huge investment from the countries which are still interested in Bangladesh.
However, Bangladesh, unbelievably, is less competitive in case of broadband internet connections as the survey revealed. Bangladesh is the highest expensive country in case of monthly broadband connection fee and the 7th highest in initial broadband internet connection fee.
Though Bangladesh is found competitive in cost related to utilities such as per unit electricity, gas and water, some other countries were also found equally lowest compared to Dhaka in cost related to monthly uses of water and gas which ultimately indicate some message for Bangladesh for further downward adjustment in these fields. Moreover, monthly charge for electricity is found much higher in Bangladesh compared to other countries. Dhaka is the 6th highest city in relation to cost of monthly electricity charge for business uses.
Regarding the cost related to transportation, survey has been made for the routes from 30 Asian cities to the ports of Yokohama, Japan and Los Angeles, USA. The cost of container transportation is a big element affecting the export competitiveness of a commodity. Like last year, cost for transporting container to Yokohama Port has been found to be highest if the transportation took place from Chittagong Port. Moreover, Bangladesh was also found to be the third highest expensive country for container transportation from Chittagong Port to Los Angeles.
Under the cost related to taxation, it is found that the maximum corporate tax for non-listed companies in Bangladesh is 37.5%, the second highest among all the countries which took part in the survey which witnessed downward adjustment from 40% during the last FY 09 budget. However, Bangladesh is found not less competitive in cost related to personal income tax.
In order to find suitable investment destination, Japanese investors have recently been visualising a map, considering Bangladesh's neighbour, India and ASEAN as a single country. Unfortunately, Bangladesh is missing in that map. It seems that Bangladesh is so busy with the internal issues that she almost hasn't noticed the on-going development in her neighbour. Therefore, the recognition of the advantages and disadvantages and necessary measures will help Bangladesh to solve the internal issues which make her less competitive.
Immediate attention should be given to the cost components that are still remaining less competitive. The trend analysis of the data of the last five years' surveys, including the current one, suggests that the price of industrial estate, broadband internet fee, container transportation cost and corporate income tax remain constantly far below the level of competitiveness compared to other countries.
Moreover, hidden cost, arrogant attitudes of the quarters concerned, lack of appreciation of business realities and non-existence of comprehensive One-Stop-Service become a matter of deep frustration among the investors. Especially, no symptom has so far been seen, in spite of appeal through the earlier surveys, to assess the level of satisfaction of existing investors and taking action based on the outcome of the evaluation.
The necessity of FDI is undeniable for the economic development and employment generation for Bangladesh. Therefore, Bangladesh needs to check constantly the steps concerning minimisation of investment cost that have been and will be taken by her competitors and update herself accordingly to remain competitive. However, this continuous up-gradation should not only be confined to reducing cost components for trade and investment, but also in the foresightedness in the field of on-going developments in the country/region which will decide whether Bangladesh is potential or less potential in the eyes of prospective investors.
This survey was conducted by Japan External Trade Organisation (JETRO) in January 21, 2009 and released in June, 2009
Japan External Trade Organisation (JETRO), the official trade and investment promotion agency of the Government of Japan, has been conducting surveys regularly on investment-related cost comparisons in major cities of Asia with the objective to provide effective guideline to the Japanese investors to choose right investment destination and to render necessary support to the policy makers of Bangladesh for upgrading investment climate of this country to attract more foreign direct investment.
Likewise, this year JETRO conducted the 19th survey in January 2009. Bangladesh was found lowest only in one cost component. The cost-components considered in this survey include (in broad categories): wages, land price and office rent, telecommunication expenses, charges for utilities, transportation and taxation. According to the 19th survey, it is found that Bangladesh is losing her competitiveness compared to the other countries (considered under the survey) since she has witnessed either an upward acceleration or a stagnant situation in cost of many components of investment. It is worthwhile to mention here that the mean order of all the cost components during the 19th survey have switched to 2.60 from 2.45 of the 18th survey, indicating a rise in cost of investment in Bangladesh compared to the last year.
This year it is observed that Bangladesh is competitive only in seven cost components, mainly representing the communications (mobile usage charges) and utilities (charge for water and gas), among the 34 cost components. Especially, in case of cost related to per cubic meter general use of gas, it is found that cost in Bangladesh is the lowest among the countries under the survey. However, in case of other six components, including mobile phone charge (monthly and per minute call), water rate-general and business use (monthly) and gas rate -- general and business use (monthly), the survey found that cost in Bangladesh, along with some other countries, is the lowest.
Comparative wages analysis data gathered from various countries under this survey portrays a picture that contradict existing beliefs among the quarters concerned that Bangladesh is a good place to invest as the country has abundant supply of human resources who are competitive in terms of wage. The report found that cost related to wages for both the manufacturing and non-manufacturing sectors in Myanmar were the lowest among all the countries. In many cases it has been found that Bangladesh is the second lowest to Myanmar. If the condition in Myanmar's internal political situation improves then she has a chance to attract huge investment from the countries which are still interested in Bangladesh.
However, Bangladesh, unbelievably, is less competitive in case of broadband internet connections as the survey revealed. Bangladesh is the highest expensive country in case of monthly broadband connection fee and the 7th highest in initial broadband internet connection fee.
Though Bangladesh is found competitive in cost related to utilities such as per unit electricity, gas and water, some other countries were also found equally lowest compared to Dhaka in cost related to monthly uses of water and gas which ultimately indicate some message for Bangladesh for further downward adjustment in these fields. Moreover, monthly charge for electricity is found much higher in Bangladesh compared to other countries. Dhaka is the 6th highest city in relation to cost of monthly electricity charge for business uses.
Regarding the cost related to transportation, survey has been made for the routes from 30 Asian cities to the ports of Yokohama, Japan and Los Angeles, USA. The cost of container transportation is a big element affecting the export competitiveness of a commodity. Like last year, cost for transporting container to Yokohama Port has been found to be highest if the transportation took place from Chittagong Port. Moreover, Bangladesh was also found to be the third highest expensive country for container transportation from Chittagong Port to Los Angeles.
Under the cost related to taxation, it is found that the maximum corporate tax for non-listed companies in Bangladesh is 37.5%, the second highest among all the countries which took part in the survey which witnessed downward adjustment from 40% during the last FY 09 budget. However, Bangladesh is found not less competitive in cost related to personal income tax.
In order to find suitable investment destination, Japanese investors have recently been visualising a map, considering Bangladesh's neighbour, India and ASEAN as a single country. Unfortunately, Bangladesh is missing in that map. It seems that Bangladesh is so busy with the internal issues that she almost hasn't noticed the on-going development in her neighbour. Therefore, the recognition of the advantages and disadvantages and necessary measures will help Bangladesh to solve the internal issues which make her less competitive.
Immediate attention should be given to the cost components that are still remaining less competitive. The trend analysis of the data of the last five years' surveys, including the current one, suggests that the price of industrial estate, broadband internet fee, container transportation cost and corporate income tax remain constantly far below the level of competitiveness compared to other countries.
Moreover, hidden cost, arrogant attitudes of the quarters concerned, lack of appreciation of business realities and non-existence of comprehensive One-Stop-Service become a matter of deep frustration among the investors. Especially, no symptom has so far been seen, in spite of appeal through the earlier surveys, to assess the level of satisfaction of existing investors and taking action based on the outcome of the evaluation.
The necessity of FDI is undeniable for the economic development and employment generation for Bangladesh. Therefore, Bangladesh needs to check constantly the steps concerning minimisation of investment cost that have been and will be taken by her competitors and update herself accordingly to remain competitive. However, this continuous up-gradation should not only be confined to reducing cost components for trade and investment, but also in the foresightedness in the field of on-going developments in the country/region which will decide whether Bangladesh is potential or less potential in the eyes of prospective investors.
This survey was conducted by Japan External Trade Organisation (JETRO) in January 21, 2009 and released in June, 2009