1.

Introduction:
1.1 Origin of the Report:
The term paper Doing Business in Bangladesh has started at the beginning of the semester under the instruction of our course instructor (International trade) Dr. Muhammad Joynul Abediin.

1.2 Objectives:
The broad objective of the term paper is to understand the Business in Bangladesh. The report measured the starting, controlling & managing the business and also identified the Objectives, process and Strategies followed by the company.

1.3 Scope of the Report:

The term paper is a comprehensive study of the Business in Bangladesh. The report focused on all the strategies and objectives business in Bangladesh.

1.4 Methodology:
We collected information for this report mainly from secondary survey. We have used the Internet to collect all the information. All the data were stored into computer. Different tables and graphs were prepared to gain a better view. Microsoft Word and Microsoft Excel were used for this purpose.

1.5 Limitations:
The limitations to prepare this report are as follows:

1. Limitation of time and information was also a big constraint for us. 2. We do not collect all the information.

2. Introduction:
Bangladesh is a combination of competitive market, business-friendly environment and cost structure that can give the best returns. Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. 57.30% of the population is under 25 providing a youthful group for recruitment. The country has consistently developed a skilled workforce catering to investors needs. English is widely spoken, making communication easy. Bangladesh is strategically located next to India, China and ASEAN markets. Bangladesh has proved to be an attractive investment location with its 146.6 million populations and consistent economic growth leading to strong and growing domestic demand. Energy prices in Bangladesh are the most competitive in the region Bangladesh offers the most liberal FDI regime in South Asia, allowing 100% foreign equity with unrestricted exit policy, easy remittance of royalty, and repatriation of profits and incomes. Bangladesh offers export-oriented industrial enclaves with infrastructural facilities and logistical support for foreign investors. Now-a-days there are a lot of Small Business firms are operating in verity of fields. We get our daily necessaries from the grocery shops. One takes food from a restaurant or from a first food shop. Some shops are selling cloths, books, electronics etc. Hair cutting saloon, laundry, automobile and electronic mechanic, travel agent all of them are serving us in different ways. A doctor, engineer or a lawyer give us different consultation services.

3. The Country 3.1Geography/Statistics:

Bangladesh is located in the Southern Asia, bordering the Bay of Bengal with the coastline covering 580 km between Burma & India with the land boundaries 4,246 km where Burma covered 193 km and India covered 4,053 km. The time difference is GMT+6. The Total area is 147,570sq km and the total population is 164,425,491.The climate of the country is focused as tropical; mild winter (October- March); hot, humid summer (March to June); humid, warm rainy monsoon (June to October). Official language is Bangla (Bengali). English is widely used in Government, Business and Universities. Out total population, Muslim 89.6 %, Hindu 9.3 %, Buddhist 0.5%, Christian 0.3% and Other 0.3%.

3.2Economy:
The economic position of the country is GDP/PPP (2011 est.): $100 billion; per capita $664, Real growth rate: 6%, Inflation: 11.3%. The Industries are Textiles, Jute, Garments, Tea Processing, Paper Newsprint, Cement, Chemical Fertilizer, Light Engineering, Sugar, Ceramics and Pharmacy. Natural resources are Gas, Timber and Coal. Arable land covered 55.39% and permanent crops covered 3.08% of total area. Bangladesh exports mainly Ready Made Garments including Knit Wear (75% of exports revenue). Others include: Shrimps, Jute Goods

(including Carpet), Leather Goods and Tea. Bangladesh import mostly Petroleum Product and Oil, Machinery and Parts, Soybean and Palm Oil, Raw Cotton, Iron, Steel and Wheat.

3.3 Currency And Banking:

Currency of the country is Bangladeshi Taka (Tk). The financial system of Bangladesh consists Bangladesh Bank (BB) as the central bank, 4 State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 nonbanking financial institutions. The financial system also embraces insurance companies, stock exchanges and co-operative banks. Bangladesh Bank is both the Governments banker and the bankers bank, a Lender of the Last Resort. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over issue of currency and the banknotes.

3.4 Government/Politics:
The conventional long form is People's Republic of Bangladesh and the conventional short form is Bangladesh. The government type is parliamentary democracy. Capital is Dhaka and the administrative 7 divisions are Barisal, Chittagong, Dhaka, Khulna, Rajshahi, Rangpur and Sylhet. 26 March 1971 is the date of independence and 16 December 1971 is known as Victory Day March 1971 is the date of independence and 16 December 1971 is known as Victory Day commemorates the official creation of the state of

Bangladesh.

3.5 Legal System:

Bangladesh seceded from Pakistan in December 1971. The British-era legislation applied in Pakistan after 1947 and post-partition legislation enacted in Pakistan continued to form the basis of Bangladeshi personal status laws, but legal developments since 1972 have been distinct. Constitution adopted 4 November 1972. Amended in 1977 to remove principle of secularism included in Part II entitled Fundamental Principles of State Policy. After the emergence of Bangladesh in 1971 rigid constitution has been adopted which came into force on 16 December 1972. The basic Bangladesh is the constitution of the People's Republic of

Bangladesh, 1972 as amended from time to time. Till 2010, fifteen amendments to the constitution have been made. All laws of the country subordinate laws made by the elected Sangsad (the legislature consists of 350 members) conforming to the tenets of the Constitution. The laws enacted by the legislature and now in operation regulate almost all spheres of life. Ordinarily executive authorities and statutory corporations cannot make any law, but can make by-laws to the extent authorized by the legislature. Such subordinate legislation is known as rules or regulations. Unless found ultra vires of the parent law, such rules or regulations are enforceable by the court like the laws made by the legislature. Important laws of the country may be classified under some broad heads such as land and property laws, personal laws, commercial labor and industrial laws, election laws, law of crimes, service laws, fiscal laws, press laws and law relating to the remedies.

4. Doing Business in Bangladesh Foreign companies are attracted to working with Bangladesh for the following reasons: Abundance of trainable and hardworking manpower at low wages not expected to increase substantially in the near future.

Attractive payback periods (3-4 years) on new projects leveraging the benefits of low wages in the export markets and relatively high prices for most of the goods/services in the domestic market. Rapidly growing domestic market and potential access to the large South Asian Market.

4.1 Potential Investment Sectors in Bangladesh

Bangladesh, traditionally known for jute and tea exports, has recently attracted attention for readymade garments and leather exports. Bangladeshi businesses are eager to collaborate with foreign partners and the government of Bangladesh has significantly improved conditions for joint ventures in recent years. Bangladesh has been ranked 88 in the World Banks global index for ease of doing business. Local businessmen are particularly receptive to joint ventures in which the foreign partner provides the technology, equipment, expertise and capital if necessary and the local partner provides land, building(s), and local management of the infrastructure and manpower. The Industrial Policy of 1999 ensures equal treatment for local investment, joint venture, and 100% foreign investment. According to the policy, no permission of the government is required to set up a joint venture (JV) project. This could be misleading, however, as licenses, permits, visas, and other authorizations are required from the relevant regulatory and administrative ministries. The joint venture must also register with the Board of Investment (BOI), which enables the enterprise to obtain facilities such as import entitlement for raw materials and spare parts, land, and utility connections.

4.2 Establishing a Business in Bangladesh:

Foreign investors in Bangladesh usually establish a public or a private limited company. The liability of the shareholders of a limited company is restricted to the amount of share capital subscribed by them or held in their name. A minimum of seven shareholders is required to establish a public limited company; there is no upper limit on the number of shareholders it may

have. A private company requires a minimum of two shareholders, and its total number of shareholders may not exceed fifty. Any foreign firm incorporated outside of Bangladesh must be registered in Bangladesh in order to carry out business in case a local company is not established. Business firms are registered under the provisions of the Companies Act of 1994. The registration is done by the Registrar of Joint Stock Companies.

4.3 Business Opportunities in Bangladesh:

Agriculture (including fishing) is the dominant sector in Bangladesh, accounting for 20% of the GDP. The manufacturing sector traditionally based on input from domestically produced agricultural raw materials take up 16% of the GDP. In order to diversify the countrys industrial base the Government of Bangladesh is trying to promote private sector investments into many different sectors.

Some of the industries offering interesting opportunities for worldwide partners are found especially in garments/textiles; IT & IT related services and food products. However, other sectors in growth and/or in need for being upgraded would comprise:

4.4 Special Business Opportunity for Investors:

Bangladesh is best placed in the region for textiles and garments industry due to cheap labor and favorable trade status with the EU. Again, Government incentives for the spinning and weaving industries in the form of cash subsidy of the fabric cost to exporters sourcing fabrics locally. There is huge yarn and fabric demand supply gap in the RMG industries which is presently met by imports. Thus the potential for backward linkage industry is enormous Prospect for a huge textile industry capable to supply over 3 billion yards of fabrics a year to the export oriented garment industry has also been developed by the industry. Presently, about 85%-90% of this demand is met by import from countries like China, India, Hong Kong, Singapore, Thailand, Korea, Indonesia, Taiwan, etc. Fabric requirement is increasing at 20% per annum. This offers a tremendous opportunity for further investment. In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an Open Door Policy to attract foreign investment to Bangladesh. Following this, EPZs have been created to provide complete infrastructural facilities including communication and utility connection where potential investors would find a congenial investment climate, free from cumbersome procedures. The Bangladesh Private Export Processing Act allows establishment in private EPZs entirely through foreign investment or through joint ventures or local initiative.

5. Business tips:
Visitors to Bangladesh should understand that social and business customs are more strongly observed and formal than in Australia. Relationship building is a very important aspect to doing business and is best achieved outside of the workplace, usually during lunch

or dinner. In business circles, a handshake is very common, although men should not shake hands with a woman unless she offers her hand first. Always use the right hand when receiving and/or offering items, such as a business card. A plentiful stock of business cards is essential. Bangladeshis tend to be very free in exchanging cards even at social gatherings. In business situations, men usually wear trousers, a long or short-sleeved shirt. Tie and jackets are worn in more formal situations, such as attending seminars, or visiting government offices. Local women wear a long dress called a 'sari' or a kameez set and foreigners usually wear trousers and a loose blouse for business situations. For informal dinners or functions casual evening dresses or long skirts are usually worn. Avoid wearing shorts or miniskirts. Exchanging gifts is quite common in social circumstances, but less common between business colleagues. However, corporate gifts are widely used. Avoid pointing the soles of your feet at people, or using your feet to point at something.

6. Tariffs and non-tariff barriers: 6.1 Tariffs:

Bangladesh import policy order 2006-2009 places control on the importation of some specific products. The full list is available from Austrade Dhaka. The import of a number of products is the sole reserve of nominated government trading organizations. The import regime consists of: A banned list A restricted list Freely importable items All other permitted imports require a LCA (Letter of Credit Authorization) form to be completed: These allow registered commercial importers to import under letter of credit without the need of an import license. Importers must lodge a 10 per cent -100 per cent (depending on the business relationship with banker) cash margin against covering letters of credit. Import transactions are governed by regulations specified on the Bangladesh

Import Policy Order (IPO) issued by the Chief Controller of Imports and Exports, Ministry of Commerce. Foreign exchange is controlled by the Bangladeshi. Allocation is administered through authorized financial institutions. All imports must be supported by a letter of credit, except for the import of capital machinery and raw materials for industrial use. There is a short list of prohibited goods most second-hand goods are included. Penalties for the smuggling of illegal narcotics are severe. Some engineering products must comply with established technical standards and require an inspection certificate issued by a recognized organization.

6.2 Duty:
In Bangladesh, there has been a successive reduction of duties in recent annual government budgets. The peak rate of basic import duty has fallen from 350 per cent to 30 per cent since the early 1990s. The other applicable charges for opening letter of credit are: Advance income tax three per cent Development surcharge, charged on most imports 3.5 per cent Value-added tax between five and 15 per cent Supplementary duty ranges from 10 per cent to 60 per cent is also applicable on luxury items

Customs duties levied on all imports except generator, IT equipment, raw cotton, textile machinery.

Duty rates include: General input items: 7.5-15 per cent Basic raw materials: 7.5-25 per cent Intermediate and finished product: 25-30 per cent

On items classified as 'luxury', such as 'undesirable' items such as cigarettes, perfume etc., A supplementary duty is levied. Excise duties have been abolished on all items except manually prepared cigarettes, bank accounts, and textiles. Food and medicine used in the poultry and dairy sectors, raw cotton and textile machinery are exempt from VAT. Visitors may bring approximately A$6500 without declaring it. Up to 200 cigarettes may be brought into Bangladesh and a maximum of one liter of alcoholic beverages. Samples in reasonable quantity can be carried here during travel and no tax is required. However, duty is applicable on samples if sent by courier.

6.3 Taxation:
Corporate tax in Bangladesh is as follows:

For industrial firms 35 per cent for public companies and 40 per cent for privately owned companies. For banks and financial institutions 40 per cent.

No distinction is made for the purposes of corporate income tax between foreign owned companies and Bangladeshi-owned companies, although some firms may qualify for a tax holiday in the initial years after entering Bangladesh. A 15 per cent Value Added Tax (VAT) is assessed on the duty-paid value of most imports. Basic necessities are exempt from VAT. A 2.5 per cent infrastructure development surcharge is assessed on the tariff value of most imports. A few selective imports are exempt from this surcharge. A 2.5 per cent Advanced Income Tax is assessed on tariff value of most import.

6.4 Banking and finance:

Major foreign banks in Bangladesh are Standard Chartered Bank, which is largest foreign banking operation in Bangladesh followed by HSBC, Citi na, Bank AlFallah, ICB Islamic Bank, Ceylone Bank. Government banks are, Janata, Agrani, Sonali and Krishi Bank. There are 28 other private local banks operating in Bangladesh.

7. Overview:
What is today known as Bangladesh was established when Bengal separated from India in 1947. It was then named East Pakistan, part of the newly formed nation of Pakistan. Dissatisfaction fueled by political exclusion and ethnic discrimination by the dominant West Pakistan, culminated in the Bangladesh Liberation War in 1971, which the Bengalis won due to the assistance of India, and the subsequent establishment of Bangladesh. The restoration of democracy in 1991 has been followed by relative calm and economic progress. Bangladesh has a rich cultural heritage, which encompasses both old and new traditions, which aid in uniting Bangladeshis across both religious and ethnic divides. It is also the worlds most densely populated non-island nation. Though it is largely Muslim, the country has a sizable number of Hindus and other minorities. Bangladeshi Culture Key Concepts and Values

Identity - Bangladeshi culture assimilated over centuries and is an amalgamation of Hindu, Jainist, Buddhist and Islamic influences. Bangladeshi national identity is embedded in Bengali culture. Symbolically, Bangladeshi identity is centered on the 1971 struggle for independence from Pakistan. During that liberation struggle, the key elements of Bangladeshi identity focused on the importance of the Bengali mother tongue and the distinctiveness of a culture or way of life connected to the floodplains of the region.

Community - Although progress has been made in terms of the advancement of women (the current Prime Minister is female), Bangladeshi society functions along patriarchal lines and major decisions are still made by males. The village or grams a central concept to Bangladeshis, even those who now reside in cities. Bangladeshis bear a strong sense of community and family and kinship form the core of social relations. Social Etiquette - Hierarchy is important in Bangladeshi society and differences in age and status are observed through language conventions. Individuals with higher status are not addressed by personal name; instead, a title or kinship term is used. Placing the right hand over the heart after a handshake is an indication of respect. Men and women do not shake hands with each other. In same-sex conversation, touching is common and individuals may

stand or sit very close. The closer individuals are in terms of status, the closer their spatial interaction is.

Bangladesh is attractive to foreign investors due to its stable political environment, good infrastructure and low labor costs. It is also strategically

located as the gateway to South and East Asian regions. Jute, a natural fiber, is currently Bangladeshs biggest export. It also produces rice, tea, sugar wheat, textiles, fertilizer, pharmaceuticals, ceramic tableware and newsprint. Bangladesh is subject to annual monsoon floods and cyclones, which may negatively impact regular harvesting. Understanding this and other local and cultural implications is essential to successful business in Bangladesh.

8. Problems:
As we got some real life idea now we will try to find out where the problems actually lie. In Bangladesh there are a lot of Small Business firms but all of them cannot succeed in their business. It is very hard to operate and make a business profitable here. It is also not very easy to start a new Small Business firm. In this part we will try to identify the key problems that a Small Business firm faces in its establishment and operating period. The major problem a Small Business firm faces in its establishment period is the problem for capital or sufficient financing problem. The key to a Small Business success rests mostly on the ability of the entrepreneur to raise adequate amount of fund for infrastructural development as well as meeting the day to day working capital needs. One of the first questions any potential entrepreneur must ask is, "How do I get the money"? The type of the business may be anything but the money necessary for finance is must. Without necessary fuel (money) no ship (Small Business firm) can run. Plant or fixed asset, financial needs include purchasing land and buildings, machinery and equipments, furniture, vehicles etc. All of these require a huge amount of money. In a country like Bangladeshi is not very easy to arrange a satisfactory capital to buy all these. As it is about Small Business, there is no chance to raises the capital from share market. Only personal and family funds and personal loan from the friends are major source. But in this way it is very hard to raise a sufficient amount of capital.

As we use to see Bank as a financing agent, it is very normal to think that one can get a loan easily from the bank. But the true story is far from this imagination. It is really a hard job to get a loan from a commercial bank for a Small Business firm. It is almost impossible for an inexperienced entrepreneur to manage a loan from a commercial bank. There are a lot of formalities and paper works need to be completed to get a loan. If anyone wants to apply for a loan he must show some influential guarantor, a certificate of citizenship, character certificate, certificate of previous business experience, a letter of permission for the business from authority etc. with the application paper. Sometimes it is also necessary to make (?) please the associated officials of the bank. All of the work needs to be done before getting the loan. After doing all these no one can assure about the loan to be sanctioned. There are some other inner stories too. Actually banks and other financial institutions are not really interested about giving a loan for a Small Business firm. But they are ready to help the BANKRUPTS. There are some other sources for finance - micro credit by NGO, charitable foundation, bond, Small Business financial bank, trust company, mutual fund etc. From all these except NGO none of them have any good record of financing Small Business. But there are some problems with NGO. Although they claim that they have a very high percentage of returning loan back but its only the one side of the coin. The other side says quite different a story. Sometimes they distribute loan to very much needy entrepreneurs in a high rate of interest. It is also often said that some NGOs practice some unfair way to get their loan back. They create much pressure to refund the loan. Sometimes they take away personal property of the loan receiver on force if he is unable to pay back the loan. A few debtors even got suicide enabling to refund the loan. Lack of necessary raw material is another problem. Everyone need run and run for raw materials. Here we don't have a definite supply chain of raw materials and the producers. Entrepreneurs are ready to pay necessary money for it but there is no instable supply. Sometimes there is nothing found when necessary, sometimes all are very high in price and sometimes adequate raw materials are in the market and it is more than necessary. Another major problem of Small Business development in Bangladeshis lack of necessary government plannings to up this sector. 31 years already have been passed after our independence. But still today we suffer from sufficient planning. Company and Small Business

are very different. So this sector needs a special attention from the government. The procedure of distributing loan is not very easy. Still there is no plan that how many Small Business firms are to be financed each year. Government finished their duty by installing a few training center for potential entrepreneurs. But the central controlling is inadequate. There is nobody to monitor the whole activities. No one to suggest that how many entrepreneurs should be trained for what. Every business needs some power supply and some other public utility services. Electricity, Gas, Water, Telephone etc. are some prerequisites for a business. In Bangladesh only the sufferer know how tough it is to get those connections. You need to pay a handsome amount o bribes to a invisible hand. In case of telephone you might have to wait for more than years to get connected. All these hazards are hampering the Small Business sector in Bangladesh. Political and social instability is another big problem. Whether it is a giant company or a Small Business the success of a business is greatly dependent on the political and social stability of a country. Every business firm is dependent on production or purchasing and selling. This is the blood stream of a Small Business firm. If any of these two is stopped no Small Business can exist. It is possible for a giant company to stop all its operations for a couple of months and then start it again. But a Small Business firm cannot do this. In Bangladesh our political and social climate is not stable at all. There is a condition of pre-war between the ruling party and the opposition. Always they are face to face with each other. Very often they call Hartal and strikes. Such a loss cannot be sustained. In the period of 1991-1996, 173 days of Hartal were been called in total. It was 140 in 1996-2001 sessions. This is almost impossible for a small business firm to continue its operation in such a condition. They cannot sustain this loss. Now a days terrorism is becoming the cancer of Bangladesh. Above discussed political instability is the reason for it. This terrorism is also hampering this Small Business very much. Toll collectors are very daring and create pressure on the businesses to collect illegal tolls. As the Small Businesses already suffer from lack of financing it is similar to death to them when they have to please the toll collectors. There are terrorists and toll collectors all and everywhere in Bangladesh. If one tries to launch a Small Business firm he needs to pay these tolls in a number of places. Otherwise those people may stop its operation and sometimes more. One need to pay for it while buying or constricting a house, purchasing raw materials, transporting to the factory, selling a good; in all places. There are also weekly, monthly or special tolls in any religious

festival one need to pay. Terrorists are becoming daring day by day. In recent times they kidnap entrepreneurs and businessmen if they dont get the money. This condition is a serious obstacle for the development of Small Business in our country. Now lets have a look at some internal management problems of Small Business firms. From any giant company to a cottage shop good management is a must for success. It is a challenging job to manage a Small Business firm here as they need to compete with giant companies. Management people should know all the arts of management. In our country higher study on business management is a new concept. Bachelor degree in business administration is being awarded form IBA for eight years. So a lot of management personnel of Small Business firms are without any formal management study. They are not capable of managing, specially a Small Business firm. They cannot take appropriate decision in the right moment. These under trained people create a lot of problems.

-Cannot identify target market or target customer. -Does not plan. -Believes advertising is an expense not an investment. -Only primary knowledge of pricing policy and strategy. -Cannot identify trading area. -Cannot delegate. -Believes loan would solve every problem.

All these problems are usually created by an unskilled management people. And it is it is more that skilled people are not available in the market.

Another common problem of Small Business development in Bangladesh is problem of distribution of goods. It is natural that a new product needs to go through a strong completion from other similar products. Small Business firms suffer from lack of distribution as they cannot compete with the giants. Another point is about our customers. They are very conservative and very much brand loyal.

These are the major problems that our Small Business firms usually face while operating.

9. Suggestions:
Here we are giving some suggestions that may be helpful to improve the Small Business sector in Bangladesh. As capital is the major problem for Small Business development in Bangladesh special emphasis should be put here. Commercial banks should finance Small Business by giving them loan in low interest and for long term. NGOs are very active in this sector. Their activity should be spending all over the country. Government should make definite plan to boost up this sector. Youth development department should be more activate. Their fund needs to be increased and rules should be more flexible. Special ministry can be made to coordinate all this. Government can give some subsidies to boost up this sector. Taxation rules should be more flexible for Small Business. It should be assured that the Small Business firms will get sufficient raw materials in lower cost. Political and social instability should be maintained. Terrorism must be sustained and keep under control. Red tapism must be abolished. Corrupted officials need to be punished and replaced. It must be assured that the Small Business firms will get public utility service connection without any delay and bribe.

10.Conclusion:
As we discussed all these it is clear that there are a lot of problems that Small Business is facing. It has many positive effect and some drawbacks too. We cannot build some giant corporations like Microsoft or Sony Electronics overnight. But we can launch a Small Business firm easily. We can employ a number of unemployed people in this sector. In todays super markets and Giant Corporations world as Small Business is still alive and transacting thousands of millions of taka each year it can be said that Small Business firm can take a very important role in our economic development. So in my opinion the prospect of Small Business in Bangladesh is very bright.

11.Recommendations:
The operations of the Customs authorities should be made more transparent and Reducing
The Cost Of Doing Business In Bangladesh

As a first step to improving the situation at the port, the ports should be made fully autonomous and decentralized. BOI personnel should be provided training in investment promotion, investment analysis, and management. BOI should have the power to issue all licenses and certificates for Trade, such as, Import/Export Registration certificate, VAT registration, etc. Improvement in billing and revenue collection systems, primarily through

computerization. In all utilities sectors, private investment is needed and should be facilitated through government. Overall, judicial reforms should aim to simplify the rules and procedures so that the general population can understand and comply with the law. The police-population ratio should be increased, their working conditions should be improved and salaries raised. To gain control over the labor situation at the ports, the Dock Worker Management Board should be abolished.