Country Risk: Bangladesh

Official Name: People’s Republic of Bangladesh

Internet Domain: .bd
International Dialing Code: +880

Table of Contents

Government

Formerly East Pakistan, Bangladesh only came into being as a separate country in 1971, when the two parts of Pakistan split after a bitter civil war. Bangladesh spent 15 years under military rule, with democracy restored in 1990. The Bangladesh National Party and Awami League alternated in power between 1991 and 2013, with the exception of a military-backed, emergency caretaker regime that suspended parliamentary elections planned for January 2007 in an effort to reform the political system and root out corruption. That government returned the country to fully democratic rule in December 2008 with the election of the AL and Prime Minister Sheikh HASINA. In January 2014, the incumbent AL won the national election by an overwhelming majority after the BNP boycotted, extending HASINA’s term as prime minister. With the help of international development assistance, Bangladesh has made great progress in food security since independence, and the economy has grown at an average of about 6 percent over the last two decades.

Legal System

Mixed legal system of mostly English common law and Islamic law.

People

• Population: 159,453,001 (2018 estimate)
• Population growth rate: 1.02% (2018 estimate)
• Languages: Bangla 98.8% (official, also known as Bengali), Other 1.2%
• Literacy: 72.9% (2017)
• Ethnic Makeup: Bengali 98%, tribal groups & non-Bengali Muslims 1.1%
• Religions: Muslim 89.1%, Hindu 10%, other 0.9% (includes Buddhist, Christian)

Economy

Bangladesh’s economy has grown roughly 6% per year since 1996 despite political instability, poor infrastructure, corruption, insufficient power supplies, slow implementation of economic reforms, and the 2008-09 global financial crisis and recession. Although more than half of GDP is generated through the service sector, almost half of Bangladeshis are employed in the agriculture sector with rice as the single-most-important product. Garment exports, the backbone of Bangladesh’s industrial sector, accounted for more than 80% of total exports and surpassed $18 billion in 2014. The sector has remained resilient in recent years amidst a series of factory accidents that have killed over 1,000 workers and crippling strikes that shut down virtually all economic activity. Steady garment export growth combined with remittances from overseas Bangladeshis – which totaled $14 billion and 8% of GDP in 2014 – are the largest contributors to Bangladesh’s current account surplus and rising foreign exchange holdings.

Leading Markets (2017): Germany 12.9%, US 12.2%, UK 8.7%, Spain 5.3%, France 5.1%, Italy 4.1%

Leading Exports – Commodities: Garments, jute and jute goods, leather, frozen fish and seafood

Leading Suppliers (2017): China 21.9%, India 15.3%, Singapore 5.7%

Leading Imports – Commodities: Machinery and equipment, chemicals, iron and steel, textiles, foodstuffs, petroleum products, cement

Top Industries: Cotton textiles, jute, garments, tea processing, paper newsprint, cement, chemical fertilizer, light engineering, sugar

Comparative Economic Indicators – 2018

* 2017 estimate

Credit and Collections

Overseas Press & Consultants (OP&C) Evaluation:

• Collection Experience: Fair-Good
• Exchange Delays: 3 months
• Preferred Credit Terms: Unconfirmed letter of credit
• Minimum Credit Terms: Unconfirmed letter of credit

Risk Assessment

Coface Country Risk Rating: C – An unsteady political and economic environment is likely to affect further an already poor payment record.

Credendo Political Risk Rating: 3.5 “Lower side of 50:50 risk
Credendo Commercial Risk Rating: B ” Moderate risk

Business Climate

Growth remained robust during the 2014 fiscal year but the political and social unrest surrounding the legislative elections in January 2014 depressed domestic demand. Since January 5, 2015, the opposition has been calling for a transport blockade, which is again disrupting activity. Transport costs have risen, transfers of goods have slowed and investor confidence has been hit, as have order books. Nevertheless, the authorities have put units in place responsible for protecting the transport of products and oil. Moreover, several public infrastructure projects have been delayed because of the social unrest and private investment will remain constrained by uncertainties about the social and political stability. While exports were not affected by the social atmosphere in 2014, they were nonetheless affected by the adjustments taking place in the textile sector, which represents 80% of the country’s exports. Following the collapse of the Rana Plazza building in April 2013, safety standards have been improved and many factories have been renovated. Meanwhile, the minimum wage was increased by 77% following the strikes in 2013. Additionally, private consumption, the main component of GDP, is likely to suffer from the violence surrounding the blockades. However, expatriate remittances will continue to sustain consumption as will the agricultural sector which employs half of the labor force.

Transparency of Regulatory System: Starting from a position of extreme over-regulation, the trend has been a gradual decrease of governmental obstruction of private business. However, policy and regulations are often not clear, consistent, or publicized. And, in practice, government laws and regulations and their implementation do not reduce distortions or impediments to investment, but create them. Generally, the civil service, businesses, professionals, trade unions and political parties have vested interests in a system in which confidentiality is used as an excuse for lack of transparency, and in which patron-client relationships are the norm.

Intellectual Property Rights (IPR): The government is progressing slowly in bringing its intellectual property rights laws into compliance with the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Bangladesh is a member of the World Intellectual Property Organization (WIPO). However, the government allocates too few resources to IPR enforcement, and thus prevention and punishment of IPR violations is very low in proportion to the number of infringements.

Conversion and Transfer Policies: The Bangladesh Bank, the central bank of Bangladesh, does not fix the exchange rate of the taka against foreign currencies. Individual banks set their own buying and selling rates for foreign currency based on supply and demand. The taka is almost fully convertible for current account transactions, such as import trade and travel needs, but not for capital account transactions, such as investing or currency speculation. The Foreign Investment Act of 1980 guarantees the right of repatriation of invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees. In practice, foreign firms are able to repatriate funds without much difficulty, provided the appropriate documentation is in order.

Legal System and Dispute Resolution: A fundamental impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain. The judicial system does not provide for interest to be charged in tort judgments, and thus there is no penalty for delaying proceedings. While the Supreme Court and High Court (appellate level courts) are independent, the lower courts are part of the executive branch of government. It is widely acknowledged that in the lower courts, where cases are first brought, corruption is a serious problem. In addition, the ability of the Bangladeshi judicial system to enforce awards, whether domestic or foreign, is weak.

Corruption: Corruption at all levels in the bureaucracy is rampant, and should be taken into account by foreign investors considering doing business in Bangladesh. Transparency International ranks Bangladesh a 2.0 in the Corruption Perception Index (CPI), putting it at 162nd out of 179 countries measured. The CPI Score relates to perceptions of the degree of corruption as seen by business people and country analysts, and ranges between 10 (highly clean) and 0 (highly corrupt).

Economic Freedom: According to the 2019 assessment of the Index of Economic Freedom, Bangladesh’s economy is 55.6% free, ranking it as the world’s 121st freest economy. Bangladesh is ranked 27th out of 43 countries in the Asia”Pacific region.

Political Violence: Incidents of politically directed damage to foreign projects or installations have occurred, although violence targeted against business concerns generally has been isolated and criminal, rather than political, in nature.

Source: COFACE Country Ratings

Business and Cultural Practices

Business Cards: Include your university degrees, as education is highly valued by Bengalis. Always present your business card with your right hand, and treat those given to you with respect. Study them, comment on them, and keep them.

Business Attire: For men, tropical-weight suits or shirt and tie are generally recommended. Suits are a necessity when calling on Bengali officials. Women should wear trousers or long skirts and avoid anything revealing.

Names and Titles: Businessmen should be addressed by the term “Bahadur” (“Sir”), while women may be addressed as “Begum” (“Madam”). This may be used with or without the surname. Wait until your counterpart moves to a first name basis before you do so.

Meeting and Greeting: Men greet each other with a handshake upon arriving and leaving. Foreign men should nod to a Bangladeshi woman unless she extends her hand. Many people comment on the lack of smiles in Bangladesh. This has nothing to do with unfriendliness but rather is related to the fact that a serious face is believed to demonstrate maturity.

Conversation: Bengalis are indirect communicators. They tend to communicate in long, rich and contextualized sentences which only make sense when properly understood in relation to body language. Bengalis stand close when speaking to someone of the same gender and touch is common. However, when speaking with a woman, the distance is increased out of respect.

Gifts: In Bangladesh, the importance of a gift is in the thought rather than the value. Part of the reason lies in the fact that gifts should be generally reciprocated and it would be considered rude to offer someone a gift that is difficult to reciprocate. Remember, Bangladesh is primarily a Muslim country, so do not give alcohol or products containing non-halal meat. Gifts are given with two hands. It is considered bad form to open gifts in front of the giver.

Meetings and Negotiations: Meeting structures are not very linear in Bangladesh. There may be an agenda and a starting time, but they only serve as guidelines. Communication is formal and follows a hierarchical structure. Deference to the most senior person in the group is expected. This is especially true when dealing with government officials. One should never let their level of professionalism slip as casual behavior may be misinterpreted as a lack of respect.

Acceptable Public Conduct: Women should not be specifically photographed without permission.

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Bangladesh. For further information, contact [email protected].

This report represents a compilation of information from a wide variety of reputable sources.

Economic Indicators: Variety of sources including the CIA World Factbook, COFACE Country Ratings, Economist Country Briefings, Federation of International Trade Associations (FITA) Country Profiles.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Historical Exchange Rates: OANDA.com The Currency Site.