Author Topic: Guidance Overseas Business Risk - Bangladesh  (Read 3152 times)

Maliha Islam

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Guidance Overseas Business Risk - Bangladesh
« on: December 31, 2018, 04:59:54 PM »
Guidance: Overseas Business Risk - Bangladesh

1. Political and Economic
Bangladesh became independent in 1971 following a short but bloody conflict with Pakistan of which it was formerly a part. Bangladesh is a parliamentary democracy with a free market economy. Two main parties - the Awami League and the Bangladesh Nationalist Party (BNP) - dominate local politics. Relations between the two parties are poor and the political system remains confrontational and highly centralised. Democratic institutions, including Parliament and local government, are weak. The current government is led by Prime Minister Sheikh Hasina. Her Awami League-led Grand Alliance won a landslide victory in the general election on 5 January 2014, after the BNP decided not to participate, leaving more than half the seats uncontested. Opposition parties had wanted elections under a neutral interim government. A controversial constitutional amendment, adopted in June 2011, had removed the provision for a temporary caretaker form of government during election periods. As a result of the boycott, Jatiya Party is now the official Opposition, though it also enjoys the unique position of forming part of the governing alliance, including holding ministerial portfolios. The opportunity for a renewed focus on democratic processes presented by the City Corporation elections in Dhaka and Chittagong in April 2015 was lost after the BNP withdrew part way through, citing widespread irregularities. The next general election must take place by January 2019 with the most likely timing being the last quarter of 2018.

The overall strength of economic growth has contributed to a substantial decrease in poverty over the past decade. The Government’s “Vision 2021” aims to eliminate extreme poverty completely and achieve Middle Income Country status by the 50th anniversary of the country’s birth. Balance of payments remains in surplus and foreign currency reserves at $32 billion provide a comfortable 9 month cushion. The Tax/GDP ratio is still very low in global terms at c.10%.

Despite shake in business confidence after the terrorist attack at the Holey Bakery Restaurant in July 2016, economic growth remains strong. Growth of has averaged 6.45% in the last five years and came close to 7% in financial year 16/17.

Bangladesh’s highly competitive ready-made garment (RMG) sector accounts for over 80% of export earnings and around 12% of GDP. Despite fall-out from the disastrous collapse of the Rana Plaza building in April 2013, which left over one thousand workers dead, RMG exports continue to expand. With pressure and support from Western Governments and investors, the Government is working to improve labour conditions and building safety in an industry, the good health of which is important for Bangladesh’s future growth. Whilst significant steps have been taken in this arena – including the $30m Rana Plaza fund, which has now been met in full - there is more to be done. Order books are healthy and Bangladeshi RMG exports, many of which are still items of basic apparel, increased market share in Europe and the US during the economic downturn. Collectively the EU and USA take 90% of the sector’s exports: Bangladeshi RMG manufacturers now have about 13% of the European market.

2. Human Rights
Bangladesh has ratified the core international human rights agreements including the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social, and Cultural Rights (ICESCR), and the Convention on the Rights of the Child (CRC), but implementation and enforcement under domestic law can be weak. Fundamental rights guaranteed under the Constitution include: the right to work; the right to protection and to equal treatment under the law; and equal opportunities for women. Freedom of assembly and freedom of association are guaranteed “subject to any reasonable restrictions imposed by law”. Labour rights are subject to intense scrutiny in the wake of the Rana Plaza tragedy. Trade unions do exist but are subject to a number of restrictions and alleged harassment. . Child labour is prohibited under the Labour Act of 2006 but remains a significant concern, particularly in the informal employment sectors.

Access to justice in Bangladesh can be difficult. Implementation and enforcement of laws can be weak, and the court system faces a significant backlog. Bangladesh retains the death penalty. There are regular allegations of abuse, including extra-judicial killings, physical mistreatment and corruption, against members of the law enforcement agencies. The UK supports a number of programmes to improve access to justice and the ILO’s ‘Decent Work’ agenda.

3. Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Bribery and corruption are entrenched in Bangladesh and, despite the best efforts of the media, civil society and the donor community, pervades many aspects of daily life. Corruption is often cited as a barrier to the effective development of the private sector and poses business risks that require pro-active management in the form of regular due diligence exercises and up-to-date risk strategies. Procurement practices often lack transparency and are usually coupled with a significant bureaucratic burden. These risks require careful management.

Politicians, bureaucrats and law enforcement officials often wield significant discretionary power and notable abuses have been brought to light. Transparency International’s Corruption Perceptions Index for 2016 placed Bangladesh 145 out of 176 countries – compared to 136 in 2013, 144 in 2012 and 120 in 2011. The World Bank’s Ease of Doing Business survey for 2016 shows Bangladesh’s standing at 176 out of 189 countries compared to 130 in 2014.

The Business Anti-Corruption portal provides advice and guidance about corruption in Bangladesh and some basic effective procedures you can establish to protect your company from them.

4. Terrorism Threat
Terrorists are very likely to try to carry out attacks in Bangladesh. The threat extends across the country. There is a risk that future attacks could also target public gatherings.

The last terrorist attack was the murder of Shahzahan Bachchu on 11 June 2018 when he was attacked and killed in the Munshiganj area of Dhaka Division.

Crowded areas and places where foreign nationals are known to gather may be at higher risk of attack. You should minimise your exposure to these areas, consider your movements carefully and follow any specific advice of the local security authorities.

5. Protective Security Advice
Bangladesh is a cash society although the use of credit and debit cards to pay for goods and services is increasing with the main hotels and restaurants accepting most international credit cards. The cloning of credit cards is not as prevalent as in other markets within the region.

6. Intellectual Property
Bangladesh is a member of the World Trade Organisation, a member of the World Intellectual Property Organisation plus a signatory to the Paris Convention. However the Government allocates too few resources to IPR enforcement and its capacity to enforce/police local laws is weak. Books and textbooks for educational purposes are frequently copied and sold for a fraction of the retailers’ recommended price. Toiletries are another area that suffers from this practice. Enforcement is very poor to stop Counterfeit, Look-alike and Parallel import for items like brand shampoo, washing liquids etc. UK publishers and toiletries exporters should therefore be aware of the risk of copyright infringement. We are not aware of any trademark or intellectual property disputes other than copyright infringements from British companies currently doing business in Bangladesh.

7. Organised Crime
We have no evidence to suggest organised crime is affecting or involved in business with foreign companies.

Most crime is against property, opportunistic and can be mitigated with sensible crime prevention measures. Nonetheless robberies, pick pocketing, and purse snatching do occur and there are periodic incidents, notably in Dhaka’s upscale residential suburbs Gulshan and Banani, where resident westerners, although familiar with local conditions, are occasionally the victims of targeted street robbery. You should not carry large amount of money with you or wear open displays of expensive jewellery. We advise against taking ‘‘cycle rickshaws’’, “CNGs” (Tuk-Tuks) or public taxis as a safe mode of transport. On arrival at Hazrat Shahjalal International Airport, we recommend using company transport, if possible, or make prior pick-up arrangements with your hotel. We recommend you use such transport for the duration of your visit.