International Business in Bangladesh: Analysis of Trade and FDI

This report provides a comprehensive analysis of international business in Bangladesh. It begins with an overview of Bangladesh, discussing its population density and economic development. The report then delves into the political, economic, socio-cultural, and technological influences that shape ...Read More

International Business Across
border

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of Bangladesh.............................................................................................................1
Political, Economic, Socio-cultural and Technological influences and advantages ..................1
National resource and factor endowments that create competitive advantage............................2
Foreign currency and exchange influences ................................................................................3
Bangladesh existing trade policies, systems, barriers and incentives .......................................3
Existing levels of Foreign Direct Investment .............................................................................4
RECOMMENDATION..............................................................................................................4
CONCLUSION................................................................................................................................4

INTRODUCTION
International business is all about trading good and services along with technology or
capital and many other things across the national border. It can be said that international business
is an exchange between multiple nations. In this present report Bangladesh nation has been
chosen for assessment. This report will focus on Foreign currency and exchange influences. In
addition to this, Bangladesh existing trade policies, systems, barriers and incentives will be
covered in detail. Furthermore, National resource and factor endowments that create competitive
advantage will be focused and analysed in brief. Other than this, Political, Economic, Socio-
cultural and Technological advantages will also be described in depth.
MAIN BODY
Overview of Bangladesh
Bangladesh is one of the world's most densely populated nation. This is one of the
country where poverty is deep and people are suffering from it but today Bangladesh has
achieved the success by reducing poverty and its population growth (Deresky, 2017). Bangladesh
got established in the year 1971, after the war in which Pakistan got divided in two parts. The
nation now resides in to a delta of rivers which get empties in the Bay of Bengal. Bangladesh got
its democracy in the year 1990 and has spent 15 years under the rule of Military. Other than this,
International business in Bangladesh when the nation got the license for the same by Director of
Trade organisations. It helped the country in expansion of its business and earning higher
revenue by the same.
Political, Economic, Socio-cultural and Technological influences and advantages
Political factor:
Bangladesh is a nation where there is parliament democracy. In every five years government gets
elected by the people from the different political parties. Government of the country has made
different regulations on taxation policies by applying many taxes like value added tax, income
tax and different direct taxes (Hamilton and Webster, 2018). The country has also made the
equal policy for investor weather they are foreign investor or from the own country. To make the
Foreign direct investments better the government has made different policies for the same. Along
with this, for the business man the import duty on capital machineries has been lowered down
and duty free imports for exporters so that nation can export more and earn by the same.
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The political factor of the country has given various benefits to the people and investors.
Thus, by the same the nation has grown its business die to the less rigid tax and political
structure.
Economic factor:
Economic condition of the nation is measured through its per capita income and GDP of the
country also determines the same. Bangladesh has been ranked as 48th largest economy in the
world which has the GDP of around US$224.889 Billion. In the entire nation the people are
majorly employed in agriculture sector and 50% or around GDP is constituted through service
sector. Still, the nation has major focus on covering the foreign trade in south Asian regions.
Other than this, the GDP of Bangladesh is 0.18% of the economy of the world.
The major benefit to the country is that it is growing its exports and Foreign Direct
investments. It is possible due to the growing economic condition of the nation.
Socio-cultural factor:
Bangladesh is a nation which follows different types of culture and celebrate it by
different ethical things. Other than this, the nation has very impressive education system as the
students are being provided the rights to chose the education language between Bangla and
English (Buckley, Doh and Benischke, 2017). This helps the people as they can choose that what
they want to learn more about. It is interesting to know that Its corporate culture is such that
people gets many benefits in the business and expansion through the same.
Technological factors:
Bangladesh has expanded in great way in its technological factor and has focused majorly
on science sector so that the nation can grow more in the future. The nation has done many
inventions like Bicycle that cleans water and glass that generate electricity. This has expanded
the business as well. As such new inventions are always been liked and exported to other
countries and helps in generating revenue by it. This is a way to gain more revenue and different
other benefits are also gained by the country through the technological factor.
National resource and factor endowments that create competitive advantage
Different factors have a great impact on competitive advantages of the nation. When in
many nations the opportunity cost is declined than it will get the major advantages by the same.
As this competitive factor will be affected by labour cost and capital by way of increased
financial system. The different factors are as follows:
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Labour is one of the factor as this is required in every sector weather it is agriculture or
any other sector. As in Bangladesh there are high number of labours present which means it has
lower opportunity cost for any activity which is labour oriented. So this provides a way for the
earning advantage to the nation. In addition to this, one of the factor is capital which is highly
required for running any business and the same can be said that this factor helps in gaining
competitive advantage to a great extent. This also helps the nation knowing about the different
sectors which are endowments which helps in creating competitive advantage
Foreign currency and exchange influences
The Bangladeshi TAKA is the currency of Bangladesh. Our currency rankings show that
the most popular Bangladesh TAKA exchange rate is the EUR to BDT rate (Penrose, 2017). The
currency code for TAKA is BDT, and the currency symbol is TK.
In trading with different countries exchange rate plays a very significant role in it.
Exchange rate is all about the value of one currency with purpose of conversion with another
country. Thus exchange rate plays an important role in foreign direct investment as it helps in
knowing the risk and uncertainness in foreign investments. In context to Bangladesh, the nation
has 32 authorised banks which are being established for the purpose of exchanging the foreign
investments. In the country the exchange rate is set up or determined by knowing the market and
demand supply factor as per their currencies. The country has left the market forces extremely
free so that any kind of problem or intervention has done by bank will not be desirable. The
exchange rates of the nation is something that defines about its economic development and helps
in earning the advantages by way of Foreign direct Investment in the country.
Bangladesh existing trade policies, systems, barriers and incentives
Trade policies:
An organisation named as World trade organisation is established to keep a check on all
the trade policies of its member countries. Bangladesh is a member of the World trade
organisation where the nation actively participates in every work of the WTO (Tenzer, Terjesen
and Harzing, 2017). The different policies of trade are majorly shared between the Ministry of
commerce and Ministry of finance. Government is majorly focusing on making the system of
policies better.
Different tariff system such as customs tariff is a good source of revenue for government.
All the tariff system of the nation is highly transparent. Bangladesh have 5% tax rate system on
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basic raw materials and 3% on capital machineries. But the major part is that nation has made
Zero percent tariff on commodities like rice, medicines and edible oils. The government has
made policies such that custom duties on agriculture product is more than the industrial goods.
Trade barriers
There are different restrictions in the country for trading system like in case if any
organisation is planning for setting up financial institution than they have to go through a long
and strict process for the same. In addition to this, Approval of bank is required in case of
transfer of control of business from resident to foreign shareholders. Different multinational
companies can give services to the people of Bangladesh but they need to take license for that.
Trade Incentives
Different incentives are given by the government so that foreign investment in the
country can be increased. Exemption is provided to the investors such as 3 years exemption on
income tax to foreign technician employed in any industry. Other than this there is no limit on
foreign equity participation. There are many other incentives which helps the foreign people in
making investment in the country.
Existing levels of Foreign Direct Investment
FDI is the major source for the nation by which employment can be provided to people
and efficiency of the market can also be increased by FDI. To make the foreign direct investment
different nation laws are required to be studied for making such investments (Shenkar, Luo and
Chi, 2014). This will help the investor in knowing that to make investment in the country one
has to go with the laws and process of the country. In context to Bangladesh, economic growth
can be earned by the FDI and nation can expand more of its business and increase its overall
GDP and per capita income. So below are the levels of FDI.
Horizontal FDI: In this the companies carries out all the business at two or more nations. On of
the home country and another in where it is expanding its business by way of investing in
another company of same business. Like, tyre or rubber manufacture in China invests in a tyre
manufacturing company of Bangladesh.
Green field entry: Just like Honda have done in United Kingdom, the investor here is an
investing establishment starting collecting from Scratch (Reuber and et.al., 2018).
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Foreign takeover: Here in this the merger or amalgamation takes place between the two
different companies. This will result in foreign direct investment and it is considered as a entire
change in the company.
RECOMMENDATION
In order to expand the international business, government of Bangladesh should more
focus on its tax laws and making easy process for entry in the nation. As it takes around 20 days
to start a new business in Bangladesh which is a long time for business man so government
should focus on making the process a little easy. Other than this, government should also make
the process little less complex for setting up of financial institution. Furthermore, Bangladesh
should also focus on different sectors other than agriculture sector. So that more business and
investment can be earned by the country through the different sector.
CONCLUSION
From the above report it has been summarised that Exchange rate is all about the value of
one currency with purpose of conversion with another country. Thus exchange rate plays an
important role in foreign direct investment as it helps in knowing the risk and uncertainness in
foreign investments. In addition to this, FDI is the major source for the nation by which
employment can be provided to people and efficiency of the market can also be increased by
FDI. Furthermore, it has been concluded that Bangladesh has also made the different policy for
investor who likes to invest in the nation by way of FDI.
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REFERENCES
Books and Journals
Deresky, H., 2017. International management: Managing across borders and cultures. Pearson
Education India.
Reuber, A.R. And et.al., 2018. International entrepreneurship: The pursuit of entrepreneurial
opportunities across national borders.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Buckley, P.J., Doh, J.P. and Benischke, M.H., 2017. Towards a renaissance in international
business research? Big questions, grand challenges, and the future of IB
scholarship. Journal of International Business Studies, 48(9), pp.1045-1064.
Penrose, E.T., 2017. Foreign Investment and the Growth of the Firm 1. In International
Business (pp. 33-48). Routledge.
Doh, J., Rodrigues, S., Saka-Helmhout, A. and Makhija, M., 2017. International business
responses to institutional voids.
Tenzer, H., Terjesen, S. and Harzing, A.W., 2017. Language in international business: A review
and agenda for future research. Management International Review, 57(6), pp.815-854.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
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