Outcome of US-Bangladesh Partnership Dialogue Private Sector Forum Organized by DHAKA CHAMBER OF COMMERCE & INDUSTRY (DCCI) Prepared jointly by: DCCI and BUILD Venue: DCCI Premises, 65-66, Motijheel C/A, Dhaka-1000 May 26, 2013 US-Bangladesh Partnership Dialogue: Private Sector Forum 1
Session on Trade and Investment Opportunities and Challenges of Trade and Investment for Bangladesh Chief Guest: Dr. Tawfiq- e- Elahi Chowdhury, BB, Energy Adviser to the Hon ble Prime Minister Co-Chairs: Mr. Jose Fernandez, Assistant Secretary for Economic and Business Affairs, USA Mr. Md. Sabur Khan, President, DCCI Keynote Paper Presenter: Prof. Mamun Rashid, Vice Chairman, Financial Excellence Limited Discussant: Dr. Mostofa Abid Khan, Member, Bangladesh Tariff Commission Session on Energy Sector Energy Security and Prioritization for Bangladesh, Prospects, Opportunities/Challenges for Energy Sector Investment Chief Guest Dr. Tawfiq- e- Elahi Chowdhury, BB, Energy Adviser to the Hon ble Prime Minister Co-Chairs Dr. Robert Ichord, Deputy Assistant Secretary for Energy Transformation, USA Mr. M. Riaz Hamidullah, Director General (Economic Affairs), Ministry of Foreign Affairs, Bangladesh Keynote Paper Presenter: Prof. Dr. M. Tamim, BUET Discussants: Dr. Ijaz Hossain, Professor, BUET Mr. Geoffrey Strong, President, Chevron Bangladesh Session on Labor Rights Best Practices and Benefits from Improving Labor Rights Co-Chairs: Ms. Karen Hanrahan, Deputy Assistant Secretary for Democracy, Human Rights and Labor, USA Mr. Asif Ibrahim, Former President, DCCI Keynote Paper Presenter: Dr. Wajed- ul Islam Khan, General Secretary, Bangladesh Trade Union Centre (BTUC) Discussants: Mr. Roy Ramesh Chandra, General Secretary, Jatiya Sramik League Session on Regional Integration Bangladesh s Role in Indo-Pacific Economic Corridor and Connectivity Co-Chairs Mr. Pratyush Kumar, Vice President, Boeing Mr. Abul Kasem Khan, Former President, DCCI Keynote Paper Presenter: Dr. Md. Helal Uddin, Asstt. Prof. Dept. of Economics, Dhaka University Discussants: Dr. Mozibur Rahamn, CEO, BFTI 2
Summary Outcome Inaugural Session and presentation on Trade and Investment Opportunities and Challenges for Bangladesh 1. The Dialogue commenced with a small inauguration at the DCCI Auditorium where Dr. Tawfiq e - Elahi Chowdhury, BB, Energy Advisor to the Hon ble Prime Minister was Chief Guest while Mr. Jose Fernandez, Assistant Secretary for Economic and Business Affairs, USA and Mr. Md. Sabur Khan, President DCCI were present as Co-Chairs. A Presentation on Opportunities and Challenges of Trade and Investment for Bangladesh was made by Prof. Mamun Rashid, Vice Chairman, Financial Excellence Limited, Dhaka. 2. President DCCI acknowledged the support and cooperation of US in economic development of the country referring export of Bangladesh to US which represents about 21% of the total export of BD in 2011-12, wherein RMG contributes about 90%. He acknowledged the amount of FDI and import from USA which have also been increasing gradually. He said that US-Bangladesh relationship can be developed to accomplish the following issues: Help Bangladesh to achieve its national goal of transforming the country to a Middle Income Status from LDC status through diversified and innovative economy; Build capacity in the rule of laws and regulatory issues including work place health and safety; Enhance job creation by more American investment in power, gas & energy and communication system to build our national infrastructure. He then highlighted some of the investment incentives in Bangladesh and mentioned the GSP facilities received by Bangladesh. He informed that in order to generate employment in the country through creating entrepreneurs, the Chamber has taken various initiatives. The Chamber has set a vision to create 2000 new young entrepreneurs and will arrange a mega conference namely DCCI Entrepreneurship and Innovation Expo 2013 with these young entrepreneurs. He hoped it will help Government to meet the vision of creating 61.5 million employments by 2015. 3
To support the business community at home and abroad, Dhaka Chamber of Commerce and Industry (DCCI) has established DCCI Helpdesk at its own premises. As a part of its continuous commitment, DCCI provides this exclusive Help Desk to all of its members and the business community from home and abroad as first point of contact. All information and services regarding trade, commerce and investment will be provided from this desk. DCCI is looking forward to help business entrepreneurs by its Help Desk as a one stop centre. The business entrepreneurs from USA can also enjoy the services of DCCI Help Desk as a first point of contact. He then informed that DCCI and US Embassy in Bangladesh are going to jointly establish an American Business Corner at DCCI under DCCI Help Desk which will be a repository of literature, data, and catalogues to promote US-Bangladesh business ties further. Finally he sought all out cooperation from USA in achieving the national goals set by the government. He also on behalf of the private sector sought for duty free access to US market for all products including RMG. 3. Prof. Mamun Rashid, Vice Chairman, Financial Excellence Limited in his presentation highlighted the trade and investment opportunities prevailing in Bangladesh. He mentioned that Bangladesh has been maintaining a consistent 6 percent economic growth coupled with rapid export and remittance growth for the last decades. The country has emerged as one of the promising countries in the world. The way it has coped with the global financial crisis is impressive, and it is increasingly benefiting from economic relations with the nearby giant economies of India and China. In addition, it offers a largely potential domestic market with a population of around 160 million and a growing middle class. He informed the meeting about some of the outlook on Bangladesh by International Community. About bilateral relations with USA, he said that USA is the most important & single largest trading partner of Bangladesh with about a quarter of its exports being destined for USA. Bangladesh was the 57th largest trading partner of USA, 78th largest importer and 46th largest exporter of USA in 2011. Recently Bangladesh has been graduated to 2nd largest apparel exporter to USA market. US assistance began to flow for the rehabilitation of Bangladesh and the first direct assistance from the USA totaled $ 122.2 million in 1972. He showed statistics that Woven Garments, Knitwear, Home Textile, Frozen Food and Cap- these five products contribute to 96.8 percent of total export to USA from Bangladesh. Export and Import between Bangladesh and USA increased by 370% & 367% respectively during 2002-03 4
to 2011-12. Bangladeshi private sector is taking over from public sector gradually. He cited some reasons why Bangladesh should be chosen for investment as like: Geographical location, Policy Reforms, Demographic Dividend, Strong Local Market and Growth, Low Cost of Energy, Proven Export Competitiveness, Competitive Incentives, Export Processing Zones, Special Economic Zones etc. He also mentioned the investment incentives prevailing in the country and showed a list of potential investing sectors of Bangladesh. Private investment in Bangladesh is facilitated by a host of agencies: Board of Investment (BOI), Domestic and FDI (outside EPZs), Bangladesh Export Processing Zones Authority (BEPZA), Domestic and FDI (only in EPZs), Privatization Commission, Sectoral regulatory bodies like BTRC, BERC, Line Ministries and Agencies, etc. At last he explained about requirements for NRBs & Foreign Investors to invest in Bangladesh and some incentives to invest in Bangladesh capital market. He concluded through mentioning the challenges like: Weak infrastructure, Poor governance, Bureaucracy, Policy continuity, Labour Standards, Productivity etc. 4. Mr. Jose Fernandez in his brief speech laid importance on establishing the Bangladeshi Brand as the top Brand, he emphasized the need for infrastructural development and at the same time gave weight on the labour rights, safety and security, he assured that US would like to be the partner of Bangladesh in this respect. He further emphasized that without the participation of the private sector one can not do anything and they should also be well aware about the safety and security issues. There are huge investment opportunities in Bangladesh in the field of energy and infrastructure sector, he added. The points emerged in the session are as follows: 1. Bangladesh has been showing resilience with consistent 6% growth coupled with rapid export and remittance growth. 2. Bangladesh has been graduated to 2 nd largest apparel exporter to US market. Export to US in 2011-12 was $5.4b against import of $705million. Major export comprised of textile and Apparel. Growth rate of Bangladesh is impressive in comparison with World and Asian countries. 3. Private sector is the main driving engine and private sector over takes from public sector. Bangladesh can be an attractive destination for foreign investors including USA because of its geographic location-both vertical and horizontal along with many promising advantages. 5
4. BD-US trade could have increased much in line with other global players who have extended duty free access to Bangladesh. Average import duty for Bangladesh is the 2 nd highest at 15.23% after Vietnam. Revenue collected from the import duty imposed on Bangladeshi products is very nominal, only 3.5% of the total revenue collected by US. In order to increase bilateral trade between Bangladesh and US Duty Free (DF) access for Bangladeshi products to US has to be ensured. 5. If USA extends this facility to Bangladesh, a significant amount of employment can be created in this sector which can contribute for poverty reduction. 6. Bangladesh would also require policy and regulatory reforms in order to encourage import from other countries, VOIP deregulation is another aspect for encouraging investment. Working Session 01: Energy Security: Prioritization for Bangladesh, Prospects, Opportunities and Challenges for the Energy Sector Investment Dr. Tawfiq- e- Elahi Chowdhury, BB, Energy Adviser to the Hon ble Prime Minister was the chief guest. Dr. Robert Ichord, Assistant Secretary for Energy Transformation, USA and Mr. M. Riaz Hamidullah, Director General (Economic Affairs), Ministry of Foreign Affairs were present as Co-Chairs of the session. A Presentation on Energy Security and Prioritization for Bangladesh, Prospects, Opportunities/Challenge for Energy Sector Investment was given by Prof. Dr. M. Tamim, BUET. There were some designated discussed contributed in the session. Prof. Dr. M. Tamim, BUET in his presentation highlighted some Policy Adaptation Factors like: Financial, Economical, Socio-political, Technology, Environmental, International and regional issues, National interest and priorities etc. Recommendations for Bangladesh Energy Sector by the paper presenter 1. Financially and economically, the best option for power sector development will be from local gas. More investment should be done in fertilizer factories to increase efficiency and gas should be supplied to fertilizer sector on a priority basis. 2. CNG holds a neutral position in terms of opportunity cost but huge environmental benefit says that gas supply to CNG should continue. 3. Additional gas supply to domestic sector should be frozen and large scale promotion of LPG with cross subsidy from household gas should be promoted. 6
4. More efficient grid power can replace existing captive power generation resulting in substantial incremental benefit. Money invested in captive and the conversion cost must be carefully weighed before phasing out captive gas supply. 5. Investment in industry is stalled due to shortage of energy supply. Economic development can only be supported by industrial sector growth. Gas should be supplied to industry on a top priority basis. 6. New investment opportunities in energy sector are in oil and gas exploration & production, coal mining, power generation, T&D (power/gas), LPG (household/transport), fertilizer factories. 7. Encourage foreign investment in exploration of new gas fields. 8. Use our own coal first for electricity production and then consider importing coal. By Dr. Robert Ichord, Deputy Assistant Secretary of Energy Transformation, USA Undertaking a comprehensive energy pricing study through its newly created energy regulator; Explore more opportunities to finance projects to improve end-user energy efficiency to address low efficiency in power plants. For domestic resources, think more about supply and demand sides Examine all recommendations given in this dialogue By Mr. Geoffrey Strong, President, Chevron Bangladesh The government should release more acreage for exploration, including onshore, to harness the capabilities of the private sector. Improve the fiscal terms of the PSC to enable the huge investments that will be required to find develop more gas resources including; Increasing the gas price to reflect today s cost of doing business. Allowing PSC contractors to sell their share of the gas to third parties at market prices. 7
By Dr. Towfiq-e-Elahi Chowdhury, BB, Energy Advisor to the Hon able Prime Minister Government should focus more on coal based power plant beside others Should have balance while using the energy resources Enhance safety and energy in workplace Better energy efficiency can improve by following building code Nuclear power plant could be another option for improving energy situation. Support more research and development to solve our energy problem Facilitate the availability of subsidized credit lines and other economic incentives Encouraged investors to set up new plants in the southern zone of the country Insisted that if necessary, new port can be established Train several stakeholders with regard to the benefits of adopting cleaner technologies. Requested US investors to provide technical help to teach how to improve energy efficiency, specially how to set energy efficient building code By Ijaz Hossain, Professor, BUET Issues related with competitiveness is very important Cost for changing energy source should be considered Scaling up solar system Create enabling environment for US companies to invest in BD Working with farmers to improve productivity through training and capacity building Market stakeholders to promote clean energy by introducing waste to energy technologies There should be consistency & continuation in Govt Energy Policy Energy Regulatory Commission has not been able to contribute in anything other than reviewing oil & gas prices Working Session 02: Labour Rights: Best Practices and Benefits from Improving Labour Rights The session was co-chaired by Ms Karen Hanrahan, Deputy Assistant Secretary for Democracy, Human Rights & Labour and Mr Asif Ibrahim, Former President, DCCI. Mr Ibrahim inaugurated the session which was followed by a brief speech of Ms Hanrahan. She started the session with a condolence for the departed souls of the Rana Plaza tragedy. It s time to work 8
together for the buyer, the private sector, the government to understand the problem - she added in her introductory speech. The related issues to the problem according to her are the freedom of association, global supply chain, corporate governance both for the private and the public sectors to ensure a sustainable working condition in the country. Dr Wajedul Islam Khan of Bangladesh Trade Union Center (BTUC) presented the key note paper on Labour Rights in Bangladesh: present status and way forward where he discussed the ILO convention, the constitutional right of the labours, the gaps in the Bangladesh Labour Act 2006, Access to Justice, Wage fixation, Social Safety Net (SSN) Scheme, Labour Inspection System, Occupational health and safety condition, the statistics of the recently tragedies in the Bangladesh. He prescribed the following issues to way forward: Amend the labour law to ensure total safety, workers freedom of association, right to represent, access to justice and social welfare. Strengthen the labour inspection department with sufficient human resources and equipment. Establish labour inspection office in all industrial belts. Set up sufficient labour courts. Introduce minimum wage board Constitute safe committee in all the factories Initiate national safety plan Uphold & protect trade union rights Strengthen the bipartite and tripartite structure Ensure social security for all Mindset to accept that labourer is the integral part of development Mr Roy Ramesh Chandra, former General Secretary, Jatiya Sramik League had a discussion after the presentation where he gave emphasis to include the informal labour sector in the agriculture sector, migrant worker and above all the manufacturing worker. He particularly gave emphasis on the decent wage, right to organize and social safety net along with a multi-stake holder initiative through an accord of the MNCs (Multi national companies). He got a positive response from the stakeholders but unfortunately, he stated that some of the US conglomerates, specially GAP, Walmart are yet to sign the accord. The issues he stated in brief that: The MNCs cannot deny their responsibilities (as the principal employer) As the buyers are not paying the fair wage the wage structure can be compared with the slave trading. 9
Unethical buying practice by the buyer, such as a tendency to cancel order by short notice. He wanted to communicate the following messages to the US government: The buyers need a long term relationship with the manufacturer GSP facilities are rightly needed by the developing countries as the withdrawal will affect the labour as the manufacturers will not be affected by such initiative as most of them have a second home in the US or Canada. The former Ambassador to the US, urged the buyer not to leave the country as this initiative will have a negative impact in the economy. He also pointed out the politicization of the labour union and cited the example of the jute sector of Bangladesh which he believed, was destroyed due to the interference of undue politics whereas, Mr Roy reputed his claim by saying that nothing is out of politics. There are responsible manufacturers in the RMG industry who took the great initiative to take the industry to its current position. Therefore, one or two bad example is not the whole story; the success story should also properly be highlighted. BGMEA can t play a sole role to improve the whole environment. Categorizing the factories into tier 1-2-3 according to their working conditions, introduction of the gratuity funds for the employees came up as recommendations. The GAP representative narrated their internal compliance procedure initiated in October 2012 to maintain the governance in the manufacturing sectors, such as, negotiation on comprehensive fire safety measures along with by ensuring the right price at the right time to the global retailers. Ms Hanrahan concluded the session by stating that a comprehensive policy is needed where all will work together but by assuming individual responsibility. He also asked for a leadership role for each stakeholder with its own responsibility to go forward with common objective to avoid further accidents. Working Session 3.0: US- Bangladesh Partnership Dialogue- Regional Integration The Session was Chaired by Mr. Pratyush Kumar, VP, Boeing and Mr. Abul Kasem Khan, Former President, DCCI. Keynote Presentation: Dr. Md. Helal Uddin, Asstt. Prof. Dept. of Economics, Dhaka University Bangladesh s Role in Indo-Pacific Economic Corridor and Connectivity The key deliberations of this session circled around discussions on regional integration for further economic growth. The speakers of the sessions emphasized on the fact that achieving long term and sustainable connectivity between the different regions for the expansion of the world economy. 10
Mr. Abul Kasem highlighted that, SAARC is not successful due to several reasons. SAARC is only trading 5% of the current trade, where as it is 22% in ASEAN and 55% in EU. He believes Indo-Pacific Economic Corridor will work as a major catalyst for the growing economy. Referring importance of regional integration, he said Indo-Pacific population would be around 5.2b by 2050, region could be the driver of economic development of the 21 century. Mr. Pratyush Kumar highlighted that, the potential of this region is huge and the countries should focus on economic trade and balance. He gave more emphasis on the faith of the people to develop a proper regional integration. He suggested developing proper railway traffic to connect the countries, which will save time and money around 20%. Indo-Pacific Economic Corridor could be the new Silk Route to unleash potentials of this region, he added. Outcome: Dr. Md. Helal Uddin, Asstt. Prof. Dept. of Economics, Dhaka University in his presentation showed the connectivity of different region, and the future aspect of the India- China relationship. He suggested having a proper land connectivity, which will utilize time to attract the investors. He also delivered a good explanation on the importance of the Bangladesh location for the world economy. If the connection occurs there will be global gain. Bangladesh needs to bargain to get the global partnership. If Bangladesh can use the deep seaport properly it can be a global gateway for the entire economy. Connectivity has got different dimensions, it can be in the fields of transport, road, railway, water, electricity, energy and many more, depending on the need of the country s demand and supply situation, the connectivity issues has to be devised based on the priority of the country. An economic benefit of Connectivity is important not only for the movement of trade in goods but also for the services sector. If our partners are benefited we will also be benefited through increasing connectivity. Regional integration and connectivity should be based on economic agenda not political consideration only. Physical connectivity is important; private sector should come forward so that efficiency in the connectivity can be ensured for the benefits of the whole community towards an inclusive growth. 11
We would get import at a cheaper rate through connectivity. This region can be a common market if duty free access has been provided Deep Sea Port if can be established in Bangladesh can contribute a lot for economic connectivity; the cost of doing business can be reduced at least to a half of the present level. This can be a golden duck for the country. US investors can come forward for the Deep Sea Port in Chittagong. Non Tariff Barriers are much more deepening than the tariff barriers, more P2P contact and communication is important to address the situation. The most important investment will be railway connection; China is now linking up with different region like Mongolia, Europe through railway. If Bangladesh can connect with that railway connectivity our distance with different region will be reduced. If India connects their northern part with Bangladesh, they can save at least 5 billion dollar. SASEC supported by ADB has also been working for establishing link between South Asian countries. We can explore these benefits. Great reforms will be required if there is a great connectivity. FDI is one of the priorities for regional integration India-China trade balance is destroying the regions integration. India will never be in a position to trade more with China due to location and political unrest. Communication is not the only barrier; political instability is also one of the main concerns for having disorder integration. Required logistics to support import, oil refinery, Social network, approval of Pay Pall are some areas where concentration is required. Proper and faster way to communicate with the world. ICT and digital connectivity is important, if any economy wants to expand. Basic trust and confidence level needs to be established. Government machinery should work further to see how all these things can be put together and recognize the importance of all the connectivity elements and should focus on one thing first. Changes in the attitude of the local entrepreneurs, relation between two important SAARC countries has been changed, how these can be continued by engaging each other. To build more confidence the business community is doing a great job which is making Bangladesh in the edge of a new dawn, they should be more active. After globalization things have been changed, importance on connectivity increased manifold for economic integration. We need to connect both within the country and outside the country. Dhaka- Chittagong Economic corridor is one of our priorities. Bangladesh can be the China+1 country if all supports are extended. 12