Companies are going global to expand their presence
Companies around the world are going beyond their home markets to achieve economies of scale, source raw materials at low prices, reduce costs and enter new markets. Likewise, many Bangladeshi businesses are expanding overseas to find larger markets for their products and services and fuel their next phase of growth. Their success will depend on how efficiently they manage overseas operations and the regulations Bangladesh has put in place to pave the way for expansion and eliminate any possibility of abuse.
The people of Bangladesh have witnessed a tremendous boost in entrepreneurship over the past two decades.
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Beginning with investments in clothing in the early 1980s and their subsequent success, entrepreneurs gradually pushed their limits to explore international and domestic markets.
Today, local entrepreneurs have a strong presence in the global apparel market thanks to their courage and resilience, placing Bangladesh on the list of the top three apparel exporters in the world.
At the domestic level, several sectors – steel, cement, pharmaceuticals, agro-food and agro-food – have experienced strong emergence over the past two to three decades. And the entrepreneurial expansion dynamic continues.
Today, a growing number of entrepreneurs are looking to international markets to expand by joining the global value chain.
The Bangladesh Bank started allowing local businesses to invest abroad in 2014.
Until last year, it gave the green light to 10 companies to establish subsidiaries or open offices in various countries such as Malaysia, Singapore, Ethiopia and Kenya, according to a central bank document.
It also approved the total investment of $ 52.2 million. The companies then distributed $ 40 million. And at the end of June of this year, the central bank authorized six more companies to invest a total of $ 7.77 million in India, Ireland, the United States, Singapore and Saudi Arabia.
The companies are NASSA Group of Industries, Pran-RFL Group, Bangladesh Steel Re-Rolling Mills (BSRM), Incepta Pharmaceuticals, Renata and MBM Garments Ltd.
Out of the top 10 companies, Akij Jute Mills paid the full $ 20 million for which it had received authorization to its subsidiary, Akij Resources SDN BHD, in Malaysia.
Square Pharmaceuticals has invested $ 10 million to establish a pharmaceutical factory in an export processing zone in Kenya out of an approved amount of $ 16 million. It has not yet started production.
DBL, one of the leading garment exporters, has established a garment factory in Ethiopia, investing $ 5.5 million. It started production on a limited scale but was unable to make a profit, the BB said in a document prepared in mid-2021.
Another large company, MJL Bangladesh Ltd, has invested more than $ 5 million in its subsidiary MJL-AKT Petroleum Company Limited in Myanmar.
MJL-AKT repatriated $ 1.3 million by selling products in June 2019, while another concern, MJL (S) Pte Ltd in Singapore, suffered losses, according to data from the Bangladesh Bank.
Service Engine BPO, a business process outsourcing company, formed a subsidiary, AIIM International EZE, in the United Arab Emirates, by investing $ 5,700. He was able to bring in nearly $ 16,000.
Beximco Limited was granted permission to invest in Sri Lanka, but was unable to make any further progress as the island country’s authorities changed the rule regarding the authorization of foreign investment in pharmaceuticals, an official said. the society.
BSRM invested $ 27,500 until last year to set up a steel plant in Kenya out of an authorized amount of $ 4.87 million.
Tapan Sengupta, deputy general manager of the largest steel maker in Bangladesh, said they recently invested $ 400,000 to buy land to establish a factory.
“We are in the process of setting up the factory,” he said. BSRM opened an office in Hong Kong to facilitate sourcing of raw materials and explore export opportunities.
The BB, in June of this year, allowed BSRM to invest $ 500,000 of its export revenue retention quota to open a subsidiary in Hong Kong.
The quota specifies the amount of export earnings that can be kept by a foreign currency business in an account.
“Our first priority is to invest locally. At the same time, we want to exploit opportunities abroad,” Sengupta added.
Ahsan Khan Chowdhury, chairman and chief executive of the Pran-RFL group, said a factory in neighboring India would allow his company to expand its market.
“We are now exporting our products to a number of Indian states. Now we are in such a position that we have to set up factories in India to expand into South, North and West India. “
“We see a very good prospect. If we can replicate what we have learned there we can be one of the best food companies in India.”
Chowdhury believes that the business sector in Bangladesh should be given the opportunity to invest abroad in order to gain better market access.
“The United States has granted tariff concessions to African countries. If a company wants to invest there for tariff advantages and export to the US market, the authority should allow it.
This will benefit Bangladesh as local businesses will be able to repatriate the profits from investments made abroad.
Khokan Chandra Das, CFO of Renata, said the company wanted to set up a subsidiary to export pharmaceuticals and related products to the European Union.
There is a rule that requires companies to establish a wholly-owned subsidiary in Europe in order to export products to the bloc, he said last month.
Incepta Pharmaceuticals Ltd wants to open a subsidiary in the United States to market drugs.
“The United States is the biggest market for pharmaceuticals. Our competitors are doing well in this market because they have offices there. We need to have an office, ”said Incepta Pharmaceuticals President and CEO Abul Muktadir.
“If we are allowed to freely use our foreign exchange earnings in the export retention quota, we could do much more important things. “
Khondaker Golam Moazzem, research director of the Center for Policy Dialogue, said interest in investing abroad was positive as the competitiveness of local businesses had increased.
In recent decades, especially from 1980, policy liberalization has encouraged private sector-led industrialization, he said. And starting with clothing, industries expanded into other export-oriented sectors and the domestic market.
“Now we see a sense of confidence among the entrepreneurs. They want to go abroad to try to develop the business.”
“It can be said that our entrepreneurs have some level of upgrade and they are ready for global exposure,” he added.
Moazzem, however, calls on the government to ensure transparency throughout the process.
“As we are a country with a small base of foreign exchange reserves, the regulator should monitor whether investments are made transparently and whether profits are repatriated properly.”
A separate policy is needed for overseas investment, he said, adding that now is the time to assess the performance of companies that have already invested overseas.
Atiur Rahman, a former governor of the Bangladesh Bank who oversaw the awarding of a number of investment proposals during his tenure, said Bangladesh entrepreneurs should continue to learn by leading experiences.
“We should keep the window open. But the authority should give permissions on a case-by-case basis. We can explore business prospects in countries where Bangladesh has already gained goodwill.”