* Exchange rates of BDT against the USD for the last 5 years.

Fluctuations (if
any). Factors those are responsible for the fluctuations or lack thereof of the
BDT against the USD.

Exchange Rates of BDT
against the USD (last 5 years)

Starting off with 1
st
January 2009 and until October 2010, we have found that the exchange rate
of Bangladesh against the USD have remained promisingly stable. The rate has been seen to be
in between the intervals of 68.00-69.00. In the month of October, BDT first raise to 70 Tk per
USD.
Next, 2011, the year, can be said to have the major fluctuation ever in the history of Bangladeshi
currency against the USD. The early 2011(January) rate was around 70, which finally stood up to
81.82 (as of 30
th
December 2011). And that accounts for an increase of over 10 Tk per dollar. In
other words, people who were holding dollars for profit received over 10Tk per dollar as
earnings, which can be said as a very higher yield.

Taking the effects from the previous year 2011, the year, 2012, had always over Tk. 80 per USD.
That is, in the year 2012, the dollar was seen to soar up higher relative to past 4years history. In
January 2012, the rate was 84 per USD, which remained almost the same for some days and
eventually falls to 79 at the last month of 2012, December.
The factors those are responsible for the fluctuations or lack thereof of the BDT against the USD
Differentials in Inflation
As a general rule, a country with a consistently lower inflation rate exhibits a rising
currency value, as its purchasing power increases relative to other currencies.

Differentials in Interest Rates
Interest rates, inflation and exchange rates are all highly correlated. By manipulating
interest rates, central banks exert influence over both inflation and exchange rates, and
changing interest rates impact inflation and currency values. Higher interest rates offer
lenders in an economy a higher return relative to other countries. Therefore, higher
interest rates attract foreign capital and cause the exchange rate to rise. The impact of
higher interest rates is mitigated, however, if inflation in the country is much higher than
in others, or if additional factors serve to drive the currency down. The opposite
relationship exists for decreasing interest rates

Current-Account Deficits
The current account is the balance of trade between a country and its trading partners,
reflecting all payments between countries for goods, services, interest and dividends. A
deficit in the current account shows the country is spending more on foreign trade than it
is earning, and that it is borrowing capital from foreign sources to make up the deficit. In
other words, the country requires more foreign currency than it receives through sales of
exports, and it supplies more of its own currency than foreigners demand for its products.
The excess demand for foreign currency lowers the country's exchange rate until
domestic goods and services are cheap enough for foreigners, and foreign assets are too
expensive to generate sales for domestic interests.

Public Debt
Countries will engage in large-scale deficit financing to pay for public sector projects and
governmental funding. While such activity stimulates the domestic economy, nations
with large public deficits and debts are less attractive to foreign investors. A large debt
encourages inflation, and if inflation is high, the debt will be serviced and ultimately paid
off with cheaper real dollars in the future.

Terms of Trade
A ratio comparing export prices to import prices, the terms of trade are related to current
accounts and the balance of payments. If the price of a country's export rises by a greater
rate than that of its imports, its terms of trade have favorably improved. Increasing terms
of trade shows the greater demand for the country's exports. This, in turn, results in
raising revenues from exports, which provides increased demand for the country's
currency (and an increase in the currency's value). If the price of exports rises by a
smaller rate than that of its imports, the currency's value will decrease in relation to its
trading partners.

Political Stability and Economic Performance
Foreign investors inevitably seek out stable countries with strong economic performance
in which to invest their capital. A country with such positive attributes will draw
investment funds away from other countries perceived to have more political and
economic risk. Political turmoil, for example, can cause a loss of confidence in a
currency and a movement of capital to the currencies of the more stable countries.


* The inflation rate, the interest rates and the income levels in Bangladesh for
the last 5 years. The trend in inflation rates, interest rates & income levels.
Theories of IRP, PPP and IFE and their impact on BD currency.

Inflation in Bangladesh
Inflation is defined as a sustained increase in the general level of prices for goods and services. It
is measured as an annual percentage increase. In Bangladesh, it fluctuates not too much. After a
short spell of benign trend in terms of lower inflation and prices during 2008 and 2009,
Bangladesh has again started to feel the pinch of high inflation. Since the second quarter of
FY2009-10, inflation started
rising and the uptrend continued
throughout FY2009-10 and
FY2010-11. During the first five
months of FY2011-12 there has
not been any change in the
direction of inflationary
movement. The 12-month point-
to-point consumer price index
(CPI) inflation has reached as high as 11.58 per cent in November 2011 compared to 7.54 per
cent in November 2010. As in most years, food inflation was higher than general inflation
reaching 12.47 per cent in November 2011 as opposed to 9.8 per cent in November 2010. In
2011 the inflation was about 8.56. But it increases too much in 2012. At 2012 the inflation rate
was 9.78. At one point of time it was above 10. In 2013 the rate was decreased and rate was 7.88.
In 2014 January the rate was 7.40. From 2012 to 2013 the inflation rate doesn't fluctuate too
much and this is a good sign for any country.
A widely discussed plausible cause of high inflation in Bangladesh is the impact of global price
hike. As a food and petroleum importing country, Bangladesh has to bear the brunt of global
price hike of these items. Since the beginning of the current decade and up to 2008 global prices
of fuel and food followed an increasing trend which got transmitted into the country's domestic
economy. There has been some respite from high inflationary pressure towards the end of 2008
and 2009 due to the global meltdown and the resultant price fall of major commodities in the
global market. With the turnaround of the global economy from the recession towards the end of
2009 and beginning of 2010, inflation started to shoot up. This trend was also observed in
Bangladesh.
In a move to control diversions and unproductive use of funds Bangladesh Bank has been using
its monetary policy tools more frequently in recent times than before. The Cash Reserve Ratio
(CRR) and Statutory Liquidity Ratio (SLR) were increased twice, and rates of repo and reverse
repo rose thrice in the last fiscal year. To discourage loans to unproductive sectors and to control
inflation, Bangladesh Bank has also withdrawn the lending cap for most sectors. Increased
borrowing by the government from domestic sources has contributed to continuing high
inflationary trend notwithstanding the reduction in money supply.
In the end, monetary policy will have to be implemented in tandem with effective fiscal
management to reduce the inflationary pressure, ensure food security and achieve economic
growth



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Interest rate:
Interest rate is a rate which is charged or paid for the use of money. An interest rate is
often expressed as an annual percentage of the principal. The benchmark interest rate in
Bangladesh was last recorded at 7.25 percent. Interest Rate in Bangladesh is reported by the
Bangladesh Bank. Interest Rate in Bangladesh averaged 7.25 Percent from 2009 until 2014,
reaching an all time high of 8.75 Percent in September of 2009 and a record low of 4.50 Percent
in October of 2010. In Bangladesh, interest rates decisions are taken by the Bangladesh Bank.
The Bangladesh Bank controls two policy interest rates: the repo rate (repurchase rate), which it
uses to inject money into the banking system, and the reverse repo rate. From 2012 and 2013
was moderately constants rate.

Income levels:
Personal Income in Bangladesh increased to 31079.56 BDT THO in 2013 from 29606.81
BDT THO in 2012. Disposable Personal Income in Bangladesh averaged 18543.01 BDT THO
from 2010 until 2013, reaching an all time high of 31079.56 BDT THO in 2013 and a record low
of 6808 BDT THO in 2010.







Interest rate parity (IRP)
If covered interest arbitrage is no longer feasible, and the equilibrium state achieved is referred to
as interest rate parity (IRP).
End-value of a $1 investment in covered interest arbitrage = (1/S) (1+i
F
) F
= (1/S) (1+i
F
) [S (1+p)]
= (1+i
F
) (1+p)
(Where p is the forward premium)
Equating the two and rearranging terms:

P =
(1+i
H
) -1
(1+i
F
)
Forward premium
=
(1 + home interest rate) -1
(1 + foreign interest rate)

This is the method that is used to calculate interest rate parity (IRP). Market forces cause the
forward rate to differ from the spot rate by an amount that is sufficient to offset the interest rate
differential between the two currencies. Then, covered interest arbitrage is no longer feasible,
and the equilibrium state achieved is referred to as interest rate parity (IRP). When IRP exists,
the rate of return achieved from covered interest arbitrage should equal the rate of return
available in the home country. Interest rate parity (IRP) basically influences the interest rate and
interest rate is related to inflation rate. Thus it makes a great effect on exchange rate of two
currencies.





Purchasing power parity (PPP)
The theory of purchasing power parity (PPP) attempts to quantify this inflation - exchange rate
relationship.
Home countrys price index (P
h
) = Foreign countrys price index (P
f
)
When inflation occurs, the exchange rate will adjust to maintain PPP:
P
f
(1 + I
f
) (1 + e
f
) = P
h
(1 + I
h
)
Where, I
h
= inflation rate in the home country
I
f
= inflation rate in the foreign country
e
f
= % change in the value of the foreign currency

Since P
h
= P
f
, solving for e
f
gives:

ef

=
(1 + I
h
)
1

(1 + I
f
)
If I
h
> I
f
, e
f
> 0 (foreign currency appreciates)
If I
h
< I
f
, e
f
< 0 (foreign currency depreciates)
When one countrys inflation rate rises relative to that of another country, decreased exports and
increased imports depress the countrys currency. The theory of purchasing power parity (PPP)
attempts to quantify this inflation - exchange rate relationship. There are two forms of
purchasing power parity (PPP): (1) The absolute form of PPP, or the law of one price, suggests
that similar products in different countries should be equally priced when measured in the same
currency. (2) The relative form of PPP accounts for market imperfections like transportation
costs, tariffs Empirical studies indicate that the relationship between inflation differentials and
exchange rates is not perfect even in the long run. However, the use of inflation differentials to
forecast long-run movements in exchange rates is supported. It also influences tariffs, and
quotas. It states that the rate of price changes should be similar. So we can see that PPP will
influence the inflation rate of both home and foreign countries. It also affects the critical issues
like tax, tariffs, quota and also the transportation cost of a country as well as the MNCs.

International Fisher effect (IFE)
According to the Fisher effect, nominal risk-free interest rates contain a real rate of return and an
anticipated inflation.
According to the IFE, E(r
f
), the expected effective return on a foreign money market investment,
should equal r
h
, the effective return on a domestic investment.
r
f
= (1 + i
f
) (1 + e
f
) 1
Where, i
f
= interest rate in the foreign country
e
f
= % change in the foreign currencys value
r
h
= i
h
= interest rate in the home country
Now,
r
f
= r
h

(1 + i
f
) (1 + e
f
) 1 = i
h

Solving for e
f
:
ef

=
(1 + i
h
) _
1

(1 + i
f
)
If i
h
> i
f
, e
f
> 0 (foreign currency appreciates)
If i
h
< i
f
, e
f
< 0 (foreign currency depreciates)

The above process shows the method of using fisher effect. In the Fisher effect, nominal risk-free
interest rates contain a real rate of return and an anticipated inflation. If the same real return is
required, differentials in interest rates may be due to differentials in expected inflation. The
international Fisher effect (IFE) theory suggests that currencies with higher interest rates will
depreciate because the higher rates reflect higher expected inflation. Hence, investors hoping to
capitalize on a higher foreign interest rate should earn a return no better than what they would
have earned domestically. Thus the real interest rate and nominal interest rate are influenced by
the fisher effect in order to influence the currency as well as the exchange rate.

Bangladesh, an emerging country of the South Asian Region, switched its currency management
from fixed rate system to free floating system in January 2003. Since then the local currency
Bangladesh Taka (BDT) is freely traded in currency markets. Therefore, an academic interest is
arisen to see how a free floating system is working for a developing economy like Bangladesh.
Although BDT has been made freely convertible to any currency, the exchange rate with other
currencies maintains links with the exchange between BDT and USD. This is because
Bangladesh maintains its total foreign reserves and settles all international transactions in USD.
As a matter of fact that the effect of interest and inflation rates on the exchange rate movements
are opposite to the expectation of IFE and PPP theories. This may indicate that liberalization of
economy with unrestricted flow of funds may have its potential negative impacts for the
developing countries like Bangladesh where demand for foreign currencies is always high due to
more import payments relative to exports earning. This may be possible because Bangladesh
economy yet to be fully integrated with the global financial system, with required structural
changes to allow free flow of foreign and local currencies in response to the changes in the
interest rate and inflation differentials.
Although three major economic variables, e.g., interest rate, inflation rate, and balance of
payment play major role in determining the exchange rate between Bangladesh Taka and US
dollar, though the effects of interest and inflation is not consistent with the IFE and PPP theories.









Bangladesh Banks transactions with Ads
Branches of foreign firms/companies including foreign banks, insurance companies and financial
institutions are free to remit their post-tax profits to their head offices through banks authorized
to deal in foreign exchange (Authorized Dealers) without prior approval of Bangladesh Bank.
Bangladesh Bank's purchases and sales from and to the ADs are in US Dollar only, on spot basis.
All such transactions with Bangladesh Bank are required to be in multiples of US$ 10, 000,
subject to a minimum of US$ 50,000. ADs are free to quote their own rates, ready and forward,
for transactions in the interbank market and with their customers.
2.
(a) The Central Banks of Bangladesh, India, Iran, Nepal, Pakistan, Sri Lanka, Bhutan and
Myanmar have an Agreement to settle current transactions between these countries through the
Asian Clearing Union (ACU) mechanism. All such payments to the ACU member countries
excepting those covered by loan/ credit agreements are accordingly settled through the Asian
Clearing Union (ACU) mechanism in Asian Monetary Unit (AMU, also called ACU
dollar)which is defined as equivalent to the US dollar.
(b) The ACU Agreement referred to above provides for settlement of the following types
of payments:
(i) Payments from residents in the territory of one participating country to residents in the
territory of another participating country.
(ii) Payments for current international transactions as defined by the Articles of Agreement of the
International Monetary Fund.
(iii) Payments permitted by the country in which the payer resides.
(c) ADs shall maintain nostro accounts in ACU dollars with their correspondent banks in ACU
member countries for the purpose of settlements through ACU. Similarly ACU dollar accounts
may be opened by the ADs in their books in the names of their correspondents in ACU
member countries. Ads may pay interest on the balance of Nostro A/C (ACU Dollar) as per
mutual negotiation.
(d) An AD needing to fund its ACU dollar nostro account with a correspondent bank in an ACU
member country shall do so through Bangladesh Bank against surrender of the required
amounting US dollar, or of equivalent taka at Bangladesh Bank's selling rate. Bangladesh Bank
will advise the central bank of the concerned ACU member country to make the amount
available to the transferee bank in that country. After making the payment, the central bank of
the recipient ACU member country shall advise the GM of the ACU secretariat to credit its
account by debit to Bangladesh Bank's account.
CH 3 5
(e) For repatriating funds from an ACU dollar nostro account with a correspondent bank in an
ACU member country an AD shall advise the correspondent bank to route the payment through
the central bank of that country, which will advise Bangladesh Bank to make the amount
available to the recipient AD. Bangladesh Bank on receipt of the advise, shall make the fund
available to the recipient AD (either in US dollar or in equivalent taka. at BB's buying rate, at the
AD's option) and shall advise the GM of the ACU secretariat to credit its account by debit to the
account of the central bank of the transferor ACU member country.

3.
(a) Bangladesh Bank operates a foreign currency clearing system enabling the AD banks to settle
their mutual claims in US dollar, Pound Sterling, Euro and Japanese Yen arising from
inter bank transactions; to economize the time and cost involved in settlements through
correspondents abroad. Under this arrangement, AD banks maintain clearing accounts with the
BB in US dollar, pound sterling, Euro and Japanese yen. Apart from the purpose of settlement
with other ADs, these accounts may also be used for transfers to and from correspondents
abroad.
(b) Settlement of the balances lying in each of the clearing accounts take place at the end of each
month. The Bangladesh Bank charges interest on the debit balance in an account on
daily product basis and debit the bank's account at the end of each month and pays interest on the
amount of credit balance at the rates prescribed from time to time.
(c) Operation of the clearing system is centralized in the International Department of Bangladesh
Bank, Head Office, Dhaka; but the ADs in other centers may transfer funds to other banks
through their head/main office in Dhaka.


After the Independence, Bangladesh adopted a policy of nationalisation of all large and medium
industries. So, there was no new inflow of FDI in the country until 1977. Subsequent
governments experimented with various industrial policies, but because of very uncertain
political situation in the country, the FDI flows remained negligible until 1993. Only 220 FDI
units were registered in Bangladesh between 1977 and 1993, but subsequently, FDI has
experienced a fairly high annual growth. The number of FDI units registered in the country
during the period from July 1996 to May 1999 was 425. The expected volume of total
investments in these enterprises accounted for Tk 288.8 billion. These would create employment
for more than 94,000 persons. Sectors that now attract FDI are readymade garments, textiles and
fabrics, chemicals, paper and paper products, equipment and spares, printing, packaging, plastic
products, metal industries, food processing, electrical goods, pharmaceuticals etc. Of late, oil
and natural gas, electricity, telecommunication, cement, hotels and restaurants, and hospitals and
clinics have become sectors favoured by many foreign investors. The choice of FDI in initial
years was limited in low investment, quick yield projects, while recent years show some
diversification in lines of high-tech, capital intensive projects as well as of preferential
distribution within the traditional sectors and sub-sectors. The share of agriculture, construction,
storage and communication, however, remains historically low and account for less than 3% of
the total FDI. Despite a continuous increase in the number of FDI projects registered with the
BOI over the last few years, the net FDI flows into the country remained low and in 2005, the
figure accounted for around 1.3% of the countys GDP. In 2007-08, the BOI recorded 143
proposals of FDI projects with a total FDI of Tk 54.33 billion, while the corresponding figures
for 1995-96 were 127 and Tk 62.61 billion.
The industrial policy of the government provides extensive incentives and facilities to attract FDI
in Bangladesh. These include tax holidays, concession in import duty on machinery, repatriation
of profits dividends, invested capital and capital gain, and salaries of foreign personnel and
exemption of tax on these incomes, exemption of export oriented industries from paying local
taxes, up to 90% financing of the L/C value of export products. The government has liberalised
the trade regime and significantly reduced non-tariff restrictions. Foreign investors in
Bangladesh have access to domestic capital markets for working capital in the form of loans
from commercial banks and development financial institutions. They also have access to the
services of the countrys stock exchanges. Export-oriented industries of the thrust sector (toys,
luggage and fashion articles, leather goods, diamond cutting and polishing, stationery
goods, silk cloth, gift items, cut and artificial flowers and orchid, vegetable processing, and
engineering consultancy services) are provided cash incentives, venture capital, and other
facilities. The establishment of export processing zones (EPZ) proved to be an effective step in
attracting FDI in Bangladesh and government permission to allow creation of private EPZs in the
country has been a welcome decision.
Problems that have restricted FDI potentials in the country include excessive bureaucratic
interference, alleged irregularities in processing papers, lack of commitment on the part of local
investors, inordinate delays in selecting projects for feasibility studies, and frequent changes in
policies on import duties for raw materials, machinery and equipment. Overlapping
administrative procedures and absence of a transparent system of formalities often confuse not
only investors proposing projects, but also staff and personnel assigned for discharging
procedural responsibilities. Frequent transfers of top and mid level officials in various ministries,
directorates and departments affect continuity and prevent timely implementation of strategic,
procedural, and even routine duties. Many foreign companies feel disturbed and ultimately are
discouraged by disruptions in the production processes in the country because of frequent power
failures, poor infrastructure support, and labour and political unrest. An additional problem is the
lack of professional personnel, i.e., the technical, managerial and innovative skills in the country
needed to efficiently handle entrepreneurial function including risk taking, planning and
coordination and control.
Bangladesh has an advantage in labour costs, which can be converted into an exportable product,
but the advantage has many difficulties. The factories in the country have to deal with constraints
beyond their control, such as, power failures, poor communications or increased transaction costs
and cumbersome procedures in customs in many government offices. The political instability,
including frequent hartals is a real hazard. The World Bank and IFC document named Doing
Business 2009 ranked Bangladesh 110th in the list of a total of 181 assessed in terms of ease of
doing business. The document however, ranked the country 18th according to the index
protecting investors and 59th in availability of loan funds, which make the country relatively
attractive for FDI. The situation is expected to improve if the political commitment of the
government to promote and protect FDI in the country can be increased and the policy
environment can be changed from one that is regulatory to one that is supportive/complementary
in nature.

7.1 Barriers of FDI in Bangladesh:
Barriers restricts the flourishment of something. There are quite a few barriers in case
of FDIgrowth in Bangladesh.
7.1.1 Policy legislation and implementation
In this context, the extent of the administrative barriers is quite longwinded and inter-
related.Poor policy design and implementation, competitive weakness, structural impediments,
lowquality of infrastructure and skills, weak institutions, poor governance and administrative
hasslesrepresent the administrative barriers that discourage potential FDI. But the main
drawbacks inthe bureaucratic system are inefficiency and corruption, turning the whole
administrativefunctionaries into a harassing experience.Administrative barriers are also
translated in different forms and vary from sector to sector. InBangladesh, we are used to face
barriers in different regulatory bodies in the form of their policy,


legislation and functions. National Board of Revenue (NBR) and Board of Investment
(theInvestment Promotion Agency) are two important agencies directly related with FDI
operations.
7.1.2 Cost of inefficiency is high indeed
The governance and management of the government entities has been largely
inefficient,ineffective and unresponsive. The cost of economy of inefficient services of state-
owned entitiesin energy, telecommunication, ports, railways and other public utilities and
banking, in terms ofincreased cost of doing business has been high indeed. Power outages and
voltage fluctuations,shortage of gas supply particularly due to limited network, limited telephone
services, inadequateurban water supply, and the high incidental and transaction costs associated
with these serviceshave imposed considerable costs on entrepreneurs. In fact, the activities of the
public sectorutility service providers have been inward looking and have not worked well,
while the rationale
for public provision has been weak or missing in many areas. And much of the shor
tfall in their performance can be linked to ineffective and inefficient management and
unresponsivegovernance.
7.1.3 Corruption is a disguised form of taxation
Reasons for the extensiveness of official corruption can be numerous. Many of these are
culturalor sociological, but the more important ones are organization-related and economic
policy-related in nature. Corruption thrives in an environment of pervasive bureaucratic and
regulatorycontrols. Extensive discretionary powers in the hands of the officials and weakness in
the legalframework also induce corruption. Though corruption afflicts different sections of the
society indiverse ways, its costs fall heavily on the investors, entrepreneurs as well as the
businesscommunity. For them, corruption is a disguised form of taxation. When regulations and
controlsare pervasive, and effective means of obtaining redress through legal or
administrative procedures are absent, businessmen end up bribing officials to overcome them.
Many companiesregard bribery as just one of the costs of doing business and show these
payments as legitimate business expenses.
7.1.4 Policy discrepancy
Bangladesh offers generous opportunities for investment under its liberalized Industrial
Policyand export-oriented, private sector-led growth strategy and the relevant policies are
attractive in paper. But, there are several policy discrepancies that are quite enough to discourage
FDI.


7.1.5 Differential treatment
Although existing regulations provide for equal treatment of domestic and foreign
investors,certain discriminatory rules continue with regard to foreign investment.
Sanctioningrequirements for particular categories of foreign investment, restrictions against
capacity
expansion, special regulations for suppliers credit an
d pay-as-you-earn-schemes are some of theareas of differential treatment.
7.1.6 One stop service of BOI
In Bangladesh, the Board of Investment (BOI) has created a cell to provide all types of
servicesand assistance to private investments including FDI. But, offering one stop service to the
existingand prospective investors in real terms is yet to materialize. The officials of several state-
ownedutility service providers, working for BOI one stop service, are less capable and less
powered to provide necessary service.
7.1.7 Lawsuits
There are many lawsuits by taxpayers against the government and majority of which
thegovernment loses. But, due to cumbersome legal procedure such lawsuits become
inconvenientfor the businessmen.
7.1.8 Hassles in implementation
The major quandary of administrative barriers lies in the gap between investment and
traderelated policies, and lack of co-ordination between various government agencies in
theimplementation process. As a result, investors face hassles and the cost of doing business
goesup.
7.1.9 Registration complexity
The procedure for registration with the sponsoring agency has been an annoyance
toentrepreneurs and does not serve any useful purpose. With regard to registration with the
Inspectorate of Factories and Establishments the rules governing t
he role of the inspector seemto provide ample discretionary power and put industries in a
disadvantaged situation.
7.1.10 Lack of coordination among state entities
There is a serious lack of co-ordination between the policy implementing agencies of thego
vernment and because of this investors suffering goes up. This induces lot of hassles in the

implementation process and creates barriers for the investors in getting due incentives offered
bythe government and ultimately discourages foreign investors to proceed on.
7.1.11 Fiscal policy changes
Any change in the fiscal change after passage of Finance Act seriously disturbs any
business plan and discourages FDI in particular. In Bangladesh, quite often policies are changed
throughissuance of Statutory Regulatory Orders (SROs).
7.1.12 Lengthy customs processing
It takes something like 25 signatures to release a consignment from customs. And it takes
morethan the stipulated time to release a consignment supervised by an authorized PSI firm
evenwhen the consignment is not selected for physical inspection.
7.1.13 Infrastructure
Also linked with administrative barriers the level of infrastructure development is another
factorthat affects the level of foreign investment and it can be hardly claimed that South
Asiancountries have reached a level of infrastructure development that will satisfy foreign
investors.Again this administrative and bureaucratic inefficiency failed to increase proper
infrastructuresupport.
7.1.14 Power supply
Bangladesh has one of the lowest per capita consumption of power and coverage
ofelectrification among developing countries. System losses in the power sector have
oftenexceeded 40 per cent of gross generation. Involvement of the government in the power
sector hascreated an overlapping and confusing situation regarding responsibilities. In fact,
inadequate andinefficient power supply continues to impose a high cost on the economy. The
extensive load-shedding from time to time, particularly during peak hours, has disrupted
industrial production
thus affecting the countrys external competitiveness.

7.1.15 Expensive port
The cost of inefficient cargo handling at the Port has been particularly high, thus affecting
theexternal competitiveness of the economy. There are numerous wo
rkers unions at the port, all of
which are crucial for handling cargo. In case that one of these associations decides to call astrike,
the whole system comes to a standstill.There are, of course, the hidden unofficial costs for
clearing cargo, be it for import, be it forexports. In fact the port happens to be one of the most
expensive ports (container wise) in the

world, singularly due to these unofficial payments, to which the authorities concerned are
comfortably oblivious, evidently to their benefits.Another factor is the inefficiency and
bureaucratic logjam, which increases the lead-time forshipments. Hence, even if a foreign client
is interested in ordering from Bangladesh, thecompany is compelled to procure the products from
elsewhere if it is quite urgent. Not only dothe entrepreneurs lose, the government also loses its
due tariffs and levies from the port.


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