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It is time to allow Bangladeshi investors to invest abroad: Dr Moazzem

Published in Dhaka Tribune on Wednesday, 15 November 2017

When will Bangladesh have its own global brand?

Ibrahim Hossain Ovi

Photo: Mahmud Hossain Opu

 

Bangladesh earned $89 million from exporting pharmaceutical goods in the last fiscal year, according to the Export Promotion Bureau

While Bangladesh is the second largest exporter of ready-made garments in the world, the fact remains that most of the products are sold under international brands, leaving Bangladeshi entrepreneurs, and especially Bangladeshi workers, with a very small share of the revenue that these products generate.

Some Bangladeshi companies have tried their luck in the international market, such as Beximco-owned Yellow which has four outlets in Pakistan, but most of it has been on a fairly limited scale. Most Bangladeshi brands selling their products abroad operate as an exporter, and not a multinational company, due to laws that hold back Bangladeshi companies from investing abroad.

And yet, Bangladeshi companies have had significant success as exporters of not just RMG products, but also in pharmaceuticals and leather, while other companies have created a sizeable presence in the local market in steel, jute, beverages etc.

Hafizur Rahman Khan, president of International Business Forum of Bangladesh, said a businessman wants to invest in a foreign country when he has experience in a particular field.

“Bangladeshi entrepreneurs have the experience and the country has lots of products that can take advantage of tax benefits [in foreign countries],” he said.

Malik Mohammed Sayeed, head of marketing of Square Toiletries, said Bangladesh has already reached international standard in packaging and presentation of consumer products.

Currently, we can invest a portion of our profits in marketing. But, if the government allows us to invest the retention amount, it would be a big help for multinational operations

What is needed is a concerted effort and adequate financial backing to build globally recognizable brands, Sayeed added.

He pointed out that non-tariff barriers meant Bangladeshi investors had to start production in the foreign countries into which they were venturing.

Exporter vs multinational company

Trade analysts and stakeholders believe that Bangladesh can build its own brand-name companies with government support and removal of barriers to foreign investment.

PRAN-RFL Group Marketing Director Chowdhury Kamruzzaman said Bangladesh, as a producer of consumer goods, has a strong market presence, particularly in South Asia. His company’s export earning was $231 million last year.

“Although we are selling products to different countries, we are treated as only an exporter,” he told the Dhaka Tribune.

Experts identified lack of innovation in product development, value addition, and government’s policy support as some of the constraints.

Dhaka University’s Department of International Business chairman Professor Rakib Uddin said institutional curriculum is a big problem, but businessmen must invest in human resource development as well as in research and development (R&D) to produce products of international standard.

Digital tools, such as social media platforms, are keys to popularise brands that are already available in the local market, he added.

Khondaker Golam Moazzem, research director of Centre for Policy Dialogue said most Bangladeshi RMG manufacturers were producing goods for foreign brands and retailers. “They do not carry out research on innovation so that they can sell their own brands,” he added.

Going multinational is also a big challenge because local investors are not allowed to invest outside the country. Trade analysts are in favour of allowing investment in foreign countries under a regulatory framework.

Bangladesh Bank’s conservative attitude is holding back businessmen from leveraging significant foreign investment opportunities by establishing multinational companies.

Although the Foreign Exchange Regulation Act of 1947, which governs Bangladeshi investment abroad, was amended in 2015, it only allows limited investment on case-to-case basis.

“It is time to allow Bangladeshi investors to invest abroad,” Khondaker Golam Moazzem, of CPD, told the Dhaka Tribune.

For that, he said, the concerned authority has to consider the track records, including financial transparency and fiscal reports. Submission of financial report to the local authority should be made compulsory.

Dhaka University’s Prof Rakib Uddin noted that it was possible for Bangladeshi companies to go into multinational operations, although the country’s industrialisation is not too old.

“Our businessmen are either first generation or second generation, while their competitors are in their fourth or fifth generations, or even more,” he said.

Rakib said a local brand must ensure that it has a strong market presence in Bangladesh before venturing abroad.

“When a company will open an outlet in a foreign country, people there will want to know about its image and popularity in its home country,” he said.

The opportunity for apparels

Despite being the second largest exporter of RMG products and producing for global brands, the country is yet to build its own clothing brands with name recognition in the international arena.

Bangladesh holds a 6.4% share of the global RMG export market. Of the country’s $34.65 billion export earnings last year, $28.14 billion came from the apparel sector.

Experts say Bangladeshi manufacturers have to invest in research and fashion development, focusing on trendy and innovative designs considering the taste and behaviour of the consumers.

They point out that China is reaping the benefits of its investment in research and innovation in creating brands.

“The biggest challenge is competing in terms of quality and designs, as [established brands] already have a strong foothold in the global markets,” Hadi SA Chowdhury, head of retailing of Yellow, a local clothing brand owned by Beximco, pointed out.

Yellow currently runs four outlets in Pakistan and is considering venturing into Europe and North America. For overseas expansion, Hadi said, it was essential to explore markets and understand the dressing pattern of the regions.

Mostafiz Uddin, managing director of Denim Expert, who is arranging Bangladesh Denim Expo, said Bangladeshi manufacturers needed to showcase their innovative products as well as the industry strength.

“A Bangladeshi manufacturer has to keep in mind that he is going to fight brands like Zara, H&M or Marks and Spencer. The key tool to fight is innovative fashion design and products,” he told the Dhaka Tribune.

He noted that Bangladesh has to have international exposure. It has to arrange fashion shows to showcase product diversification and varieties, as well as participate in international events to learn.

Pharmaceuticals products could take the lead

Bangladesh earned $89 million from exporting pharmaceutical goods in the last fiscal year, according to the Export Promotion Bureau.

“To export pharmaceutical products to EU, a manufacturer has to set up its own office or has to share another company’s office facilities to ensure testing and respond to any queries,” Incepta Pharmaceutical Chairman and Managing Director Abdul Muktadir told the Dhaka Tribune.

The exporters also have to share profit for using offices. As a result, a larger portion of profit is lost.

“Currently, we can invest a portion of our profits in marketing. But, if the government allows us to invest the retention amount, it would be a big help for multinational operations,” said Muktadir.

Exporters are trying to set up offices but it is very slow because of fund crisis as the government is not allowing bulk amount, he pointed out.

As a Least Developed Country, Bangladesh will not need to pay royalty for producing patent drugs till 2032.

Stakeholders believe it is a great opportunity for the country to boost export share in pharma products. Earning from this sector will rise in coming years as around 1,200 products have gotten permission for export.

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