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Assignment

On
Challenges of Project Management in Bangladesh with Special Reference to
Bangladesh Economy, Performance of ADP, Infrastructural Developments, &
FDI
Course Title: Project Management
Course Code: MGT 507
SUBMITTED TO
Prof. Md. Muinuddin Khan
Chief Advisor
ASA University Bangladesh

SUBMITTED BY
Sumya Yesmin
ID No-14-1-14-0146
Batch-21st
Section-C
Program: M.B.A (R)
Submission Date- 7th September, 2014

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ASA University
Bangladesh

Challenges of Project
Management in Bangladesh
with Special Reference to
Bangladesh Economy,
Performance of ADP,
Infrastructural Developments
& FDI.
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07 September, 2014
To
Prof. Md. Muinuddin Khan
Chief Advisor
ASA University Bangladesh.

Subject: Submission of assignment Challenges of Project Management in Bangladesh with


Special Reference to Bangladesh Economy, Performance of ADP, Infrastructural
Developments & FDI
Sir, Im, the students of the faculty of business (21 st batch) of ASA University Bangladesh, are
pleasure to submit my assignment on Challenges of Project Management in Bangladesh with
Special Reference to Bangladesh Economy, Performance of ADP, Infrastructural
Developments & FDI under Project management (MGT-507) that emphasis on performance
evaluation as a part of my M.B.A. program.
I tried my level best to gather relevant materials for preparing a complete assignment. Without
the sincere and proper guidance from you, it was impossible for me to complete it. For this kind
of greatness, Im grateful to you. This is not free from mistake due to some limitation. I hope you
accept it with gracious consideration.
Thank you.
Sincerely Yours,
Sumya Yesmin
ID# 14-1-14-0146
Section-C
Program-MBA (R)

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Acknowledgement
First of all I would like to thank our course teacher Prof. Md. Muinuddin Khan, Adviser, for
giving us the term paper on the topic Challenges of Project Management in Bangladesh with
Special Reference to Bangladesh Economy, Performance of ADP, Infrastructural
Developments & FDI I had to go through all my taught subjects for this Assignment. It was a
good experience for me to know about the Foreign Direct Investment and its current prospect in
Bangladesh. I have gain much and it will definitely help up me to build up my future career. For
preparing this Report I went to the board of investment of Bangladesh through the help of
internet and collected the recent data on FDI and the Bangladesh Investment Hand Book. We
also collected the information from the website of BOI Bangladesh. We are grateful to all of
them who helped us to preparing this Report.

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Table of Contents

I.INTRODUCTION---------------------------------------------------------------------------------------------------- 9
A.

Background of The Study:------------------------------------------------------------------------------------ 9

B.

Importance Of Project Management In Bangladesh:----------------------------------------------------10

C.

Objective of the study---------------------------------------------------------------------------------------- 11

D.

Methodology-------------------------------------------------------------------------------------------------- 12

E.

Limitation Of The Study------------------------------------------------------------------------------------- 13

II. PROJECT MANAGEMENT IN BANGLADESH------------------------------------------------------------14


A.

Project Definition--------------------------------------------------------------------------------------------- 14

B.

Project Management----------------------------------------------------------------------------------------- 14

C.

Project Characteristics--------------------------------------------------------------------------------------- 15

D.

Project Life Cycle-------------------------------------------------------------------------------------------- 16

E.

Project Management Activities----------------------------------------------------------------------------- 16

F.

Project Cycle-------------------------------------------------------------------------------------------------- 17

G.

Project Cycle Management---------------------------------------------------------------------------------- 17

H.

The Pcm Has 6 Phases--------------------------------------------------------------------------------------- 18

III. Importance of Project Management in Bangladesh-----------------------------------------------------------19


A.

Cost-Effectiveness-------------------------------------------------------------------------------------------- 19

B.

Better Productivity------------------------------------------------------------------------------------------- 19

C.

Minimization Of Risks--------------------------------------------------------------------------------------- 19

D.

Accomplishing Predetermined Goals----------------------------------------------------------------------20

E.

Organizational Change--------------------------------------------------------------------------------------- 20

F.

Cost Savings-------------------------------------------------------------------------------------------------- 20

G.

Economic Development------------------------------------------------------------------------------------- 21

H.

Resource Management--------------------------------------------------------------------------------------- 21

I.

GDP Growth-------------------------------------------------------------------------------------------------- 21

J.

Standard of living-------------------------------------------------------------------------------------------- 22

K.

Optimizing Resource Utilization--------------------------------------------------------------------------- 22

L.

Bangladesh Economy in Brief------------------------------------------------------------------------------ 23

M.

Economic History-------------------------------------------------------------------------------------------- 24

N.

Macro-economic trend--------------------------------------------------------------------------------------- 27
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O.

Economic sectors--------------------------------------------------------------------------------------------- 28

P.

Manufacturing and industry--------------------------------------------------------------------------------- 29

Q.

Textile Sector------------------------------------------------------------------------------------------------- 30

IV. Bangladesh Economy in Brief in the form of SWOT Analysis---------------------------------------------36


A.

Strength of Bangladesh Economy-------------------------------------------------------------------------- 36

B.

Weakness of Bangladesh Economy------------------------------------------------------------------------ 40

C.

Opportunities for Bangladesh Economy------------------------------------------------------------------- 43

D.

Threats for Bangladesh Economy-------------------------------------------------------------------------- 47

V. Challenges project Management in Bangladesh--------------------------------------------------------------- 50


A.

Undefined Goals---------------------------------------------------------------------------------------------- 50

B.

Scope Changes------------------------------------------------------------------------------------------------ 50

C.

Unrealistic deadlines----------------------------------------------------------------------------------------- 51

D.

Resource Deprivation---------------------------------------------------------------------------------------- 51

E.

Lack of Stakeholder Engagement-------------------------------------------------------------------------- 52

F Communication deficit------------------------------------------------------------------------------------------ 52
F.

Resource competition---------------------------------------------------------------------------------------- 52

G.

Uncertain dependencies------------------------------------------------------------------------------------- 53

H.

Failure to manage risk--------------------------------------------------------------------------------------- 53

I.

Insufficient team skills--------------------------------------------------------------------------------------- 53

J.

Customers and end-users are not engaged during the project-------------------------------------------54

K.

Vision and goals not well-defined-------------------------------------------------------------------------- 54

L.

Inadequate Skills for the Project---------------------------------------------------------------------------- 54

M.

Lack of Accountability------------------------------------------------------------------------------------ 55

N.

Improper Risk Management-------------------------------------------------------------------------------- 55

O.

Ambiguous Contingency Plans----------------------------------------------------------------------------- 55

P.

Poor Communication---------------------------------------------------------------------------------------- 56

Q.

Human Element Limitations-------------------------------------------------------------------------------- 56

R.

Software Limitations----------------------------------------------------------------------------------------- 56

S.

IT Limitations------------------------------------------------------------------------------------------------- 57

T.

Vendor and Supplier Limitations--------------------------------------------------------------------------- 57

U.

Green Limitations-------------------------------------------------------------------------------------------- 57

V.

Over-spending------------------------------------------------------------------------------------------------ 57

W.

Losing Focus----------------------------------------------------------------------------------------------- 58
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X.

Timescale Problems------------------------------------------------------------------------------------------ 58

VI. CHALLENGES OF PROJECT MANAGEMENT IN THE FORM OF SWOT ANALYSIS-----------59


A.

Positive Factors (Strengths and Opportunities)-----------------------------------------------------------59

B.

Negative Factors (Weakness and Threats)-----------------------------------------------------------------59

C.

Reasons behind Industrial Sickness & its Remedial measures-----------------------------------------61

D.

Remedial Measures------------------------------------------------------------------------------------------ 64

VII. PERFORMANCE OF ADP------------------------------------------------------------------------------------ 66


A.

Target Corporate Structure & Migration Plan------------------------------------------------------------69

B.

Hold Co Organizational Structure-------------------------------------------------------------------------- 78

C.

Implementation Plan----------------------------------------------------------------------------------------- 81

D.

The Future of BPDB----------------------------------------------------------------------------------------- 83

E.

Power System Reliability in the Corporatized Environment--------------------------------------------85

VIII. Infrastructural Developments in following fields-----------------------------------------------------------90


A.

Roads & Highways------------------------------------------------------------------------------------------- 90

B.

Power Generation-------------------------------------------------------------------------------------------- 91

C.

Industry Development--------------------------------------------------------------------------------------- 91

D.

Manpower Development------------------------------------------------------------------------------------ 93

E.

Education Sector Development----------------------------------------------------------------------------- 94

F.

Development in Agriculture--------------------------------------------------------------------------------- 95

G.

Foreign Trade Development-------------------------------------------------------------------------------- 96

IX. PROGRESS IN THE FIELD OF F.D.I------------------------------------------------------------------------ 98


A.

Present FDI Status-------------------------------------------------------------------------------------------- 98

B.

FDI Inflows by sectors------------------------------------------------------------------------------------- 103

C.

FDI Inflows by countries---------------------------------------------------------------------------------- 106

D.

Sector-wise present scenario of FDI----------------------------------------------------------------------109

E.FDI Flow in BD------------------------------------------------------------------------------------------------- 111


E.

FDI as a Percentage of GDP------------------------------------------------------------------------------- 112

Y. CONCLUSION--------------------------------------------------------------------------------------------------- 116
XI. RECOMMENDATIONS--------------------------------------------------------------------------------------- 117
XII. REFERENCES:------------------------------------------------------------------------------------------------ 119

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Executive Summary
Project Management plays a dominant role in the economy of Bangladesh through accelerating
Gross Domestic Product (GDP), export and domestic investment followed by overall economic
growth. So it is vital for a developing country like Bangladesh to carry out effective measures in
protecting the prospective foreign investors so that they can get a congenial atmosphere to invest
their capital. They should feel that their role in the business arena of Bangladesh is respectfully
valued. In this connection, friendly regulations, simplifying regulatory practices, investment
incentives and removal of inefficient bureaucratic procedures should be ensured.
Bangladesh offers generous opportunities for investment under its liberalized Industrial Policy
and export-oriented, private sector-led growth strategy. All but four sectors (i.e. (1) arms and
ammunition and other defense equipment and machinery, (2) forest plantation and mechanized
extraction within the bounds of reserved forests, (3) production of nuclear energy, and (4)
security printing and mining) are open for private investment in Bangladesh. Private investment
from overseas sources is welcome in all areas of the economy with the exception of only five
industrial sectors (reserved for public sector) as mentioned earlier. In addition, Project
Management strengthens ties with developed countries that may yield cost advantages in the
form of advanced technology transfers and resulting positive externalities. These reasons also
increase the effort of the Government of Bangladesh in trying to make the country an attractive
destination for Project Management which in itself has several advantages. The result has
validated a reinforced incentive to educate and train the population to make Bangladeshs labor
force more competitive through higher national education expenditure. The objective of this
study is to conduct a historical and statistical analysis of the relationship between foreign
investment inflows and sustainable economic growth.

I.INTRODUCTION
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A.

Background of The Study:

Project management is the discipline of planning, organizing, motivating, and controlling


resources to achieve specific goals. A project is a temporary endeavor designed to produce a
unique product, service or result with a defined beginning and end (usually time-constrained,
and often constrained by funding or deliverables), undertaken to meet unique goals and
objectives, typically to bring about beneficial change or added value. The temporary nature of
projects stands in contrast with business as usual (or operations) , which are repetitive, permanent,
or semi-permanent functional activities to produce products or services. In practice, the
management of these two systems is often quite different, and as such requires the development
of distinct technical skills and management strategies.
The primary challenge of project management is to achieve all of the project goals and objectives
while honoring the preconceived constraints. The primary constraints are scope, time, quality
and budget. The secondary and more ambitious challenge is to optimize the allocation of
necessary inputs and integrate them to meet pre-defined objectives.
The primary objective of the report is to gain some practical knowledge use to my theoretical
knowledge that is achieved in classroom because the theoretical learning and practical learning
are totally different. Any academic course of the study has a great value when it has practical
application in the real life. Simply a lot of theoretical knowledge will be little important unless it
is applicable in the practical life. It is also known to all of us that there is no alternative of
practical knowledge and the practical knowledge is much more durable and useful than the
theoretical knowledge This is also a partial requirement of the MBA program. This objective is
basically met by remaining attached with Challenges of Project Management in Bangladesh
with Special Reference to Bangladesh Economy, Performance of ADP, Infrastructural
Developments & FDI and by gaining some real life experiences, so that it adds value to the
knowledge base of me, a MBA graduate.

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B. Importance Of Project Management In Bangladesh:


Importance of Project Management in Bangladesh is given in the below:

Project Management is indispensable for economic development or growth of a country or an

enterprise.
Project Management ensures effective and efficient resources utilization and management.
Project Management leads to GDP growth.
Project Management leads to increase of per capital income and standard of living.
Project Management helps to overcome the problems of time and cost overruns.
Project Management leads to optimum use of available resources.
Project Management should commensurate with national development strategies.
Project Management involves substantial outlay.
Cost of prediction errors very high, which may lead to bankruptcy and threatens the existence

of project.
Project Management increase international competitiveness.
Project Management is the key to cost management of producing goods and services.
Project Management is an essential condition for getting assistance and land.
Project Management impacts have been long term and hence have a temporal spread.
Project Management helps to achieve self-reliance in the country.
Project Management is a base of implementing national development strategies.
Project Management is a precondition of transfer of technology.
It may lead to a balanced growth of agriculture and industry.
It is helpful towards exploration of resources, innovations and researches and discoveries.
It brings not only economic prosperity but also honor and prestige to a nation, because

economic prosperity means economic power.


Economic prosperity of the country will lead to a capacity to render financial assistance to
other poor and least developed countries.

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C. Objective of the study


The major objective of this study is to analysis the trend of Project Management in Bangladesh
and its impact on economic development of the country.
The specific objectives of this report
are

To provide insight about Project Management and Its components


To evaluate the Project Management status in Bangladesh.
To find out the prospects & problems of Project Management in Bangladesh.
To know about the potential benefits of Project Management
To examine the suitability and favorable environment for Project Management
To assess the requirements of building a strong market for Project Management through
enhancing all relative micro and macro-economic factors as a means of speeding real

economic growth.
To identify problems and prospects of Project Management in Bangladesh.

D. Methodology
Data collection method

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Primary sources
I have opportunity to observe the activities of Challenges of Project Management in Bangladesh
that really helpful for me to complete my report. This study is completed with the help of
Teachers, who give me support.
Regarding methods are given below:
Primary data
It includes the fresh or completely new data sources collected for a specified objective.
Observation
Secondary sources
I have explored the following secondary sources to meet the objectives of the report.

Data inventory of Bangladesh Project Management relating to challenges.


Data inventory of Statistically Yearbooks
On-line news archive of newspapers and news agencies home and abroad
Annual Development Plans report
Books and journals at the library of Institute of Business Administration and University Press
Limited

E. Limitation Of The Study

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The present study was not free from limitations. It is important to note that these limitations have
somehow contributed in developing a dazzling and outstanding report. These limitations are
discussed briefly below:

Inadequacy of Data: The interview was the main source of information that was not enough
to complete the assignment and provide the reader a clear idea about the Challenges of

Project Management.
Limitation of Time: The time is not enough to be making an assignment outstanding. It was

one of the main constraints that hindered to cover all aspects of the study.
Lack of Statistical Tools: Various statistical tools had not been used while analyzing the
data, as the very limited knowledge on Statistics and its applications.

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II. PROJECT MANAGEMENT IN


BANGLADESH
A. Project Definition
A project in business and science is typically defined as a collaborative enterprise, frequently
involving research or design that is carefully planned to achieve a particular aim. Projects can be
further defined as temporary rather than permanent social systems that are constituted by teams
within or across organizations to accomplish particular tasks under time constraints.

B. Project Management
In project management a project consists of a temporary endeavor undertaken to create a unique
product, service or result. Another definition is a management environment that is created for the
purpose of delivering one or more business products according to a specified business case.
Project management is the discipline of planning, organizing, motivating, and controlling
resources to achieve specific goals. A project is a temporary endeavor with a defined beginning
and end (usually time-constrained, and often constrained by funding or deliverables), undertaken
to meet unique goals and objectives, typically to bring about beneficial change or added value.
The temporary nature of projects stands in contrast with business as usual (or operations), which
are repetitive, permanent, or semi-permanent functional activities to produce products or
services. In practice, the management of these two systems is often quite different, and as such
requires the development of distinct technical skills and management strategies.
Project management is very important in production of goods and services. Idea generation to
final production of product or service, each step can be categorized as individual projects. Any
project requires a project manager, who leads the project to its logical conclusion. Project
manager is responsible for appointing team members with different background but essential in
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completion of the project. The primary challenge of project management is to achieve all of the
project goals and objectives while honoring the preconceived constraints. The primary
constraints are scope, time, quality and budget. The secondary and more ambitious
challenge is to optimize the allocation of necessary inputs and integrate them to meet pre-defined
objectives.
Project objectives define target status at the end of the project, reaching of which is considered
necessary for the achievement of planned benefits. They can be formulated as SMART criteria:
Specific, Measurable (or at least evaluable) achievement, Achievable (recently Agreed-to or
Acceptable are used regularly as well), Realistic (given the current state of organizational
resources) and Time terminated (bounded). The evaluation (measurement) occurs at the project
closure. However a continuous guard on the project progress should be kept by monitoring and
evaluating. It is also worth noting that SMART is best applied for incremental type innovation
projects. For radical type projects it does not apply as well. Goals for such projects tend to be
broad, qualitative, stretch/unrealistic and success driven.

C. Project Characteristics
A project is not normal day to day activity undertaken by organization rather it is specific, nonroutine activity of varying time frame and impact viability of the business in the long run. A
typical project has following characteristics:

Timeline: A project has a definite timeline with measurable starting and end point.
Resources: A project has limited resource of capital and manpower.
Tools: Special type of tools and techniques are used for project management (Gantt Charts,

etc.)
Team: Project management requires diverse team stretching across departments and
functions.

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D. Project Life Cycle


A typical project is divided into following phases. Each phase of the project has its own
importance and impact on overall success of the project.

Initiation Phase: In this phase of the project, feedback received from customers is analyzed
and brainstorming is done as to develop new product or modify existing product to meet the

new demands.
Project Definition Phase: In this phase of the project efforts are made to define the solution

for the problem posed by customers.


Feasibility Study: In this phase, planning of the project is made and definite milestones are

established.
Project Execution: In this phase all activities and milestones established in the earlier phase

are executed in a timely and orderly manner. This phase utilizes maximum of all resources.
Project Conclusion: This is the last phase of the project. In this phase, final product or
service is handed over to the operations team for commercial production.

E. Project Management Activities


Project management activities are mainly divided into three main categories
Planning, Scheduling and Controlling.
1.
2.

Planning: Planning activities include defining project objective, resource planning, etc.
Scheduling: Scheduling activities include developing detailed milestones and guidelines for

the project. These activities are performed typically before actual initiation of the project.
3. Controlling: Controlling activities include developing budget and finance control points,
measuring of scheduled tasks are performed.

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F. Project Cycle
A project cycle describes the various phases - and their sequencing - that a project must go
through from beginning to end in order to realize its objectives. The precise formulation of the
cycle varies from one agency to another, but the basic components are very similar. A project
cycle enables an agency to track a sequence of actions to develop, implement and evaluate
projects that leads in turn into new projects. The aim is to improve the management of projects
by ensuring that all relevant issues and conditions are taken into account during design and
implementation.

G. Project Cycle Management

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The Project Cycle Management (PCM) is the method employed by international organizations,
UN agencies and non-profit organizations to carry out and manage development projects and
programmers. PCM provides with a consistent approach to all components of the intervention
cycle, ensuring beneficiary-orientation, a comprehensive perspective on interventions (feasibility
and sustainability) and effective monitoring and evaluation. It articulates the different phases of a
project and, being a cyclical course, it allows constantly verifying, monitoring and eventually
reassessing the project logic.

H. The Pcm Has 6 Phases

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III. Importance of Project


Management in Bangladesh
A. Cost-Effectiveness
Project management provides a roadmap for the journey of success. It is the greatest resource
that allows the manager to understand the available resources and the methods to use them with
the demands. Thus, with a plan in hand, it is easy to utilize the resources in the optimum possible
way. Project management, prior to launching a project, identifies the irrelevant costs, reduces
wastage of resources and thus ensures cost-effectiveness in the longer run.

B. Better Productivity
Trustworthy quality of products is a way of retaining the existing clientele and adding to the
same. Project management keeps the quality of products in constant check, thus ensuring better
productivity in terms of quality and quantity. This not only helps the company in earning
goodwill for a lifetime, but also promises customer satisfaction. Several project management

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plans use tools such as six sigma to improve its processes and eliminate the defects, to enhance
their productivity.

C. Minimization Of Risks
Every business is faced with risks of loses due to various reasons. However, with a strategy in
place, gauging the risks is easier and making diversions from the same is easier as well. This
maintains stable work in progress. By planning and analyzing, a project manager can mitigate
risks and be a part of fair business competition. Project management helps in identification of
loopholes and potential threats. Once these are singled out, the management can then take
decisions to change strategies to erase risks that can negatively affect the productivity and
business interests at large.

D. Accomplishing Predetermined Goals


Every organization sketches its goals and objectives, which is the basis of earning profits and
making a way towards growth. Project management is the key tool for achieving predetermined
targets in a structured way. It decides the strategies that will be used to reach the goal in the
fastest way. It is a structured way of getting to your objectives.

E. Organizational Change
Project management is recognized as an effective means to bringing about sudden change within
an organization. "Research indicates that 76 percent of C-level executives across the globe
attribute successful change management initiatives to effective project management," writes
project management consultant Rita Mulcahy in a white paper produced by RMC Project
Management,

Inc.

As a result, executive-level strategic planning within an organization

frequently includes project management as a vehicle for achieving business goals.


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F. Cost Savings
Generally, project teams are working smarter, not harder. Use of the project management
discipline provides cost benefits to companies. The focus on a single goal or limited goals
provides a compelling process for saving both money and time. Its efficient procedures promote
teamwork and communication toward achieving specific, measurable business goals in a short
time period.

G. Economic Development
Project management as a management discipline underpins much economic activity. In industries
as diverse as pharmaceuticals, software and aerospace, projects drive business. And in the public
sector, it is effective project management that translates politicians' promises of new roads,
schools and hospitals into gleaming new constructions that improve everyday life.

H. Resource Management
In organizational studies, resource management is the efficient and effective deployment of an
organization's resources when they are needed. Such resources may include financial resources,
inventory, human skills, production resources, or information technology (IT). In the realm of
project management, processes, techniques and philosophies as to the best approach for
allocating resources have been developed. These include discussions on functional vs. crossfunctional resource allocation as well as processes espoused by organizations like the Project
Management Institute (PMI) through their Project Management Body of Knowledge (PMBOK)
methodology of project management. Resource management is a key element to activity resource
estimating and project human resource management.

Both are essential components of a


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comprehensive project management plan to execute and monitor a project successfully. As is the
case with the larger discipline of project management, there are resource management software
tools available that automate and assist the process of resource allocation to projects and
portfolio resource transparency including supply and demand of resources.

I. GDP Growth
Economic growth is the increase in the amount of the goods and services produced by an
economy over time. It is conventionally measured as the percent rate of increase in real gross
domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted
terms, in order to obviate the distorting effect of inflation on the price of the goods produced. In
economics, "economic growth" or "economic growth theory" typically refers to growth of
potential output, i.e., production at "full employment", which is caused by growth in aggregate
demand or observed output. As an area of study, economic growth is generally distinguished
from development economics. The former is primarily the study of how countries can advance
their economies. The latter is the study of the economic aspects of the development process in
low-income countries.

J. Standard of living
Economic development generally refers to the sustained, concerted actions of policymakers and
communities that promote the standard of living and economic health of a specific area.
Economic development can also be referred to as the quantitative and qualitative changes in the
economy. Such actions can involve multiple areas including development of human capital,
critical infrastructure, regional competitiveness, environmental sustainability, social inclusion,
health, safety, literacy, and other initiatives. Economic development differs from economic
growth. Whereas economic development is a policy intervention endeavor with aims of
economic and social well-being of people, economic growth is a phenomenon of market
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productivity and rise in GDP. Consequently, as economist Amartya Sen points out: economic
growth is one aspect of the process of economic development.

K. Optimizing Resource Utilization


Effective Resource Management increases profitability by optimizing utilization and minimizing
bench time, and generates goodwill and loyalty among your staff that translates to competitive
advantages in recruiting and retaining the best talent.

Quick Arrow provides professional

services organizations with a powerful set of resource management tools that enable project
managers and resource managers to quickly search for and assign the right resources to projects
based on their job roles, skill sets, bill rates, certifications, location, and availability.

L. Bangladesh Economy in Brief


The economy of Bangladesh is a rapidly developing market-based economy. Its per capita
income in 2012 was estimated to be US$2,100 (adjusted by purchasing power parity). According
to the International Monetary Fund, Bangladesh ranked as the 44th largest economy in the world
in 2012 in PPP terms and 57th largest in nominal terms, among the Next Eleven (N-11)
of Goldman Sachs and D-8economies, with a gross domestic product of US$306 billion in PPP
terms and US$153.6 billion in nominal terms. The economy has grown at the rate of 6-7% per
annum over the past few years. More than half of the GDP is generated by the service sector;
while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced
are textiles, jute, fish, vegetables, fruit, leather and leather goods, ceramics, ready-made goods.
Exports
of textiles and garments are
the
largest
source
of
foreign
exchange
earnings. Shipbuilding, pharmaceuticals and consumer goods manufacturing are important
emerging industries, while the jute sector is re-emerging with increasing global demand for green
fibres. Remittances from Bangladeshis working overseas, mainly in the Middle East, are another
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major source of foreign exchange earnings. Other important export sectors include fish and
seafood, ceramics, cement, fertilizer, leather and leather goods, food products, software and IT
services. Bangladesh has also made major strides in its human development index.
The land is devoted mainly to rice and jute cultivation as well as fruits and other produce,
although wheat production has increased in recent years; the country is largely self-sufficient in
rice production. Bangladesh's growth of its agricultural industries is due to its fertile deltaic land
that depends on its six seasons and multiple harvests.
Transportation, communication, water distribution, and energy infrastructure are rapidly
developing. Bangladesh is limited in its reserves of oil, but recently there has been huge
development in gas and coal mining. The service sector has expanded rapidly during last two
decades and the country's industrial base remains very positive. The country's main endowments
include its vast human resource base, rich agricultural land, relatively abundant water, substantial
reserves of natural gas and coal, major seaports at Chittagong and Mongla, and its central
strategic location at the crossroads of the two large burgeoning economic hub groups
of SAARC and ASEAN. According to a 2012 projection by HSBC, Bangladesh will be the
world's 31st largest economy in 2050 when ranked by total gross domestic product (GDP) and
89th when ranked by GDP per capita.

M.Economic History
East Bengal - the eastern segment of Bengal - has been historically an important center of trade
and commerce since at least the first millennium BCE. The Ganges Delta provided advantages of
a mild, almost tropical climate, fertile soil, ample water, and an abundance of fish, wildlife, and
fruit. The standard of living is believed to have been higher compared with other parts of South
Asia. As early as the thirteenth century, the region was developing as an agrarian economy. The
region was a junction on the south west silk route, and commercial centers emerged at several
ancient and historical cities across the region. Under Mughal rule, the region flourished as the
center of the worldwide muslin trade. The British, however, on their arrival in the late eighteenth
century, chose to develop Calcutta, now the capital city of West Bengal, as their commercial and
administrative center in South Asia. The development of East Bengal was thereafter limited to
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agriculture. The administrative infrastructure of the late eighteenth and nineteenth centuries
reinforced

East

Bengal's

function

as

the

primary

agricultural

producerchiefly

of rice, tea, teak, cotton, sugar cane and jute for processors and traders from around Asia and
beyond.
After its independence from Pakistan, Bangladesh followed a socialist economy by nationalizing
all industries, proving to be a critical blunder undertaken by the Awami League government.
Some of the same factors that had made East Bengal a prosperous region became disadvantages
during the nineteenth and twentieth centurys. As life expectancy increased, the limitations of
land and the annual floods increasingly became constraints on economic growth. Traditional
agricultural methods became obstacles to the modernization of agriculture. Geography severely
limited the development and maintenance of a modern transportation and communications
system.
The partition of South Asia and the emergence of India and Pakistan in 1947 severely disrupted
the economic system. The united government of Pakistan expanded the cultivated area and some
irrigation facilities, but the rural population generally became poorer between 1947 and 1971
because improvements did not keep pace with rural population increase. Pakistan's five-year
plans opted for a development strategy based on industrialization, but the major share of the
development budget went to West Pakistan, that is, contemporary Pakistan. The lack of natural
resources meant that East Pakistan was heavily dependent on imports, creating a balance of
payments problem. Without a substantial industrialization program or adequate agrarian
expansion, the economy of East Pakistan steadily declined. Blame was placed by various
observers, but especially those in East Pakistan, on the West Pakistani leaders who not only
dominated the government but also most of the fledgling industries in East Pakistan.
Since Bangladesh followed a socialist economy by nationalizing all industries after its
independence, it underwent a slow growth of producing experienced entrepreneurs, managers,
administrators, engineers, and technicians. There were critical shortages of essential food grains
and other staples because of wartime disruptions. External markets for jute had been lost because
of the instability of supply and the increasing popularity of synthetic substitutes. Foreign
exchange resources were minuscule, and the banking and monetary systems were
unreliable. Although Bangladesh had a large work force, the vast reserves of under trained and
underpaid workers were largely illiterate, unskilled, and underemployed. Commercially
exploitable industrial resources, except for natural gas, were lacking. Inflation, especially for
Page | 26

essential consumer goods, ran between 300 and 400 percent. The war of independence had
crippled the transportation system. Hundreds of road and railroad bridges had been destroyed or
damaged, and rolling stock was inadequate and in poor repair. The new country was still
recovering from a severe cyclone that hit the area in 1970 and causes 250,000 deaths. India came
forward immediately with critically measured economic assistance in the first months after
Bangladesh achieved independence from Pakistan. Between December 1971 and January 1972,
India committed US$232 million in aid to Bangladesh from the politco-economic aid India
received from the USA and USSR. Official amount of disbursement yet undisclosed.
After 1975, Bangladeshi leaders began to turn their attention to developing new industrial
capacity and rehabilitating its economy. The static economic model adopted by these early
leaders, howeverincluding the nationalization of much of the industrial sectorresulted in
inefficiency and economic stagnation. Beginning in late 1975, the government gradually gave
greater scope to private sector participation in the economy, a pattern that has continued. Many
state-owned enterprises have been privatized, like banking, telecommunication, aviation, media,
and jute. Inefficiency in the public sector has been rising however at a gradual pace; external
resistance to developing the country's richest natural resources is mounting; and power sectors
including infrastructure have all contributed to slowing economic growth.
In the mid-1980s, there were encouraging signs of progress. Economic policies aimed at
encouraging private enterprise and investment, privatizing public industries, reinstating
budgetary discipline, and liberalizing the import regime were accelerated. From 1991 to 1993,
the government successfully followed an enhanced structural adjustment facility (ESAF) with
the International Monetary Fund (IMF) but failed to follow through on reforms in large part
because of preoccupation with the government's domestic political troubles. In the late 1990s the
government's economic policies became more entrenched, and some of the early gains were lost,
which was highlighted by a precipitous drop in foreign direct investment in 2000 and 2001. In
June 2003 the IMF approved 3-year, $490-million plan as part of the Poverty Reduction and
Growth Facility (PRGF) for Bangladesh that aimed to support the government's economic
reform program up to 2006. Seventy million dollars was made available immediately. In the
same vein the World Bank approved $536 million in interest-free loans. In the year 2010
Government of India extended a line of credit worth $ 1 billion to counterbalance China's close
relationship with Bangladesh.

Page | 27

Bangladesh historically has run a large trade deficit, financed largely through aid receipts and
remittances from workers overseas. Foreign reserves dropped markedly in 2001 but stabilized in
the USD3 to USD4 billion ranges (or about 3 months' import cover). In January 2007, reserves
stood at $3.74 billion, and then increased to $5.8 billion by January 2008, in November 2009 it
surpassed $10.0 billion, and as of April 2011 it surpassed the US $12 billion according to the
Bank of Bangladesh, the central bank. The dependence on foreign aid and imports has also
decreased gradually since the early 1990s.

N. Macro-economic trend
This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by
the International Monetary Fund with figures in millions of Bangladeshi Taka. However, this
reflects only the formal sector of the economy.

Year Gross Domestic Product

US Dollar Exchange

1980 250,300

Inflation Index Per Capita Income


(2000=100)

(as % of USA)

16.10 Taka

20

1.79

1985 597,318

31.00 Taka

36

1.19

1990 1,054,234

35.79 Taka

58

1.16

1995 1,594,210

40.27 Taka

78

1.12

2000 2,453,160

52.14 Taka

100

0.97

2005 3,913,334

63.92 Taka

126

0.95

Page | 28

2008 5,003,438

68.65 Taka

147

Mean wages were $0.58 per man-hour in 2009.

O. Economic sectors
Agriculture

Map showing the growing areas of major agricultural products.


Main article: Agriculture of Bangladesh
Most Bangladeshis earn their living from agriculture. Although rice and jute are the primary
crops, maize and vegetables are assuming greater importance. Due to the expansion of irrigation
networks, some wheat producers have switched to cultivation of maize which is used mostly as
poultry feed. Tea is grown in the northeast. Because of Bangladesh's fertile soil and normally
ample water supply, rice can be grown and harvested three times a year in many areas. Due to a
number of factors, Bangladesh's labor-intensive agriculture has achieved steady increases in food
grain production despite the often unfavorable weather conditions. These include better flood
Page | 29

control and irrigation, a generally more efficient use of fertilizers, and the establishment of better
distribution and rural credit networks. With 28.8 million metric tons produced in 2005-2006
(JulyJune), rice is Bangladesh's principal crop. By comparison, wheat output in 2005-2006 was
9 million metric tons. Population pressure continues to place a severe burden on productive
capacity, creating a food deficit, especially of wheat. Foreign assistance and commercial imports
fill the gap, but seasonal hunger ("monga") remains a problem. Underemployment remains a
serious problem, and a growing concern for Bangladesh's agricultural sector will be its ability to
absorb additional manpower. Finding alternative sources of employment will continue to be a
daunting problem for future governments, particularly with the increasing numbers of landless
peasants who already account for about half the rural labor force. Due to farmers' vulnerability to
various risks, Bangladesh's poorest face numerous potential limitations on their ability to
enhance agriculture production and their livelihoods. These include an actual and perceived risk
to investing in new agricultural technologies and activities (despite their potential to increase
income), a vulnerability to shocks and stresses and a limited ability to mitigate or cope with these
and limited access to market information.

P. Manufacturing and industry


Many new jobs - mostly for women - have been created by the country's dynamic private readymade garment industry, which grew at double-digit rates through most of the 1990s. By the late
1990s, about 1.5 million people, mostly women, were employed in the garments sector as well as
Leather products specially Footwear (Shoe manufacturing unit). During 2001-2002, export
earnings from ready-made garments reached $3,125 million, representing 52% of Bangladesh's
total exports. Bangladesh has overtaken India in apparel exports in 2009, its exports stood at 2.66
billion US dollar, ahead of India's 2.27 billion US dollar.
Eastern Bengal was known for its fine muslin and silk fabric before the British period. The dyes,
yarn, and cloth were the envy of much of the premier world. Bengali muslin, silk, and brocade
were worn by the aristocracy of Asia and Europe. The introduction of machine-made textiles
from England in the late eighteenth century spelled doom for the costly and time-consuming
hand loom process. Cotton growing died out in East Bengal, and the textile industry became
Page | 30

dependent on imported yarn. Those who had earned their living in the textile industry were
forced to rely more completely on farming. Only the smallest vestiges of a once-thriving cottage
industry survived.
Other industries which have shown very strong growth include the pharmaceutical
industry, shipbuilding

industry, information

technology, leather

industry, steel

industry,

electronics industry and light engineering industry.

Q. Textile Sector
M AIN

ARTICLE :

B ANGLADESH

TEXTILE INDUSTRY

Bangladesh's textile industry, which includes knitwear and ready-made garments along with
specialized textile products, is the nation's number one export earner, accounting for 80% of
Bangladesh's exports of $15.56 billion in 2009. Bangladesh is 2nd in world textile exports, and
China which exported $120.1 billion worth of textiles in 2009. The industry employs nearly 3.5
million workers. Current exports have doubled since 2004. Wages in Bangladesh's textile
industry were the lowest in the world as of 2010. The country was considered the most
formidable rival to China where wages were rapidly rising and currency was appreciating. As of
2012 wages remained low for the 3 million people employed in the industry, but labor unrest was
increasing despite vigorous government action to enforce labor peace. Owners of textile firms
and their political allies were a powerful political influence in Bangladesh.
The urban garment industry has created more than one million formal sector jobs for women,
contributing to the high female labor participation in Bangladesh. While it can be argued that
women working in the garment industry are subjected to unsafe labor conditions and low wages,
Dina M. Siddiqi argues that even though conditions in Bangladesh garment factories are by no
means ideal," they still give women in Bangladesh the opportunity to earn their own wages. As
evidence she points to the fear created by the passage of the 1993 Harkins Bill (Child Labor
Deterrence Bill), which caused factory owners to dismiss an estimated 50,000 children, many of
whom helped support their families, forcing them into a completely unregulated informal sector,
in lower-paying and much less secure occupations such as brick-breaking, domestic service and
rickshaw pulling. Even though the working conditions in garment factories are not ideal, they
Page | 31

tend to financially be more reliable than other occupations and, enhance womens economic
capabilities to spend, save and invest their incomes." Both married and unmarried women send
money back to their families as remittances, but these earned wages have more than just
economic benefits. Many women in the garment industry are marrying later, have lower fertility
rates, and attain higher levels of education, then women employed elsewhere.
After massive labor unrest in 2006 the government formed a Minimum Wage Board including
business and worker representatives which in 2006 set a minimum wage equivalent to
1,662.50taka, $24 a month, up from Tk950. In 2010, following widespread labor protests
involving 100,000 workers in June, 2010, a controversial proposal was being considered by the
Board which would raise the monthly minimum to the equivalent of $50 a month, still far below
worker demands of 5,000 taka, $72, for entry level wages, but unacceptably high according to
textile manufacturers who are asking for a wage below $30. On July 28, 2010 it was announced
that the minimum entry level wage would be increased to 3,000 taka, about $43.
The government also seems to believe some change is necessary. On September 21, 2006 then
ex-Prime Minister Khaleda Zia called on textile firms to ensure the safety of workers by
complying with international labor law at a speech inaugurating the Bangladesh Apparel &
Textile Exposition (BATEXPO).
Investment
The stock market capitalization of the Dhaka Stock Exchange in Bangladesh crossed $10 billion
in November 2007 and the $30 billion mark in 2009, and USD 50 billion in August 2010.
Bangladesh had the best performing stock market in Asia during the recent global recession
between 2007 and 2010, due to relatively low correlations with developed country stock markets.
Major investment in real estate by domestic and foreign-resident Bangladeshis has led to a
massive building boom in Dhaka and Chittagong.
Recent (2011) trends for investing in Bangladesh as Saudi Arabia trying to secure public and
private investment in oil and gas, power and transportation projects, United Arab Emirates
(UAE) is keen to invest in growing shipbuilding industry in Bangladesh encouraged by
comparative cost advantage, Tata, an India-based leading industrial multinational to invest Taka
1500 crore to set up an automobile industry in Bangladesh, World Bank to invest in rural roads
improving quality of live, the Rwandan entrepreneurs are keen to invest in Bangladesh's
pharmaceuticals sector considering its potentiality in international market, Samsung sought to
lease 500 industrial plots from the export zones authority to set up an electronics hub in
Page | 32

Bangladesh with an investment of US$1.25 billion, National Board of Revenue (NBR) is set to
withdraw tax rebate facilities on investment in the capital market by individual taxpayers from
the fiscal 2011-12. In 2011, Japan Bank for International Cooperation ranked Bangladesh as the
15th best investment destination for foreign investors.
2010-11 market crash
Main article: 2011 Bangladesh share market scam
The bullish capital market turned bearish during 2010, with the exchange losing 1,800 points
between December 2010 and January 2011. Millions of investors have been rendered bankrupt as
a result of the market crash. The crash is believed to be caused artificially to benefit a handful of
players at the expense of the big players.
External Trade

Bangladeshi exports in 2006


The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) has predicted
textile exports will rise from US$7.90 billion earned in 2005-06 to US$15 billion by 2011. In
part this optimism stems from how well the sector has fared since the end of textile and clothing
quotas, under the Multifibre Agreement, in early 2005.
According to a United Nations Development Program report "Sewing Thoughts: How to Realize
Human Development Gains in the Post-Quota World" Bangladesh has been able to offset a
decline in European sales by cultivating new markets in the United States.
"[In 2005] we had tremendous growth. The quota-free textile regime has proved to be a big boost
for our factories," said BGMEA president S.M. Fazlul Hoque told reporters, after the sector's 24
per cent growth rate was revealed.
Page | 33

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) president Md Fazlul


Hoque has also struck an optimistic tone. In an interview with United News Bangladesh he
lauded the blistering growth rate, saying "The quality of our products and its competitiveness in
terms of prices helped the sector achieve such... tremendous success."
Knitwear posted the strongest growth of all textile products in 2005-06, surging 35.38 per cent to
US$2.82 billion. On the downside however, the sector's strong growth came amid sharp falls in
prices for textile products on the world market, with growth subsequently dependent upon large
increases in volume.
Bangladesh's quest to boost the quantity of textile trade was also helped by US and EU caps on
Chinese textiles. The US cap restricts growth in imports of Chinese textiles to 12.5 per cent next
year and between 15 and 16 per cent in 2008. The EU deal similarly manages import growth
until 2008.
Bangladesh may continue to benefit from these restrictions over the next two years, however a
climate of falling global textile prices forces wage rates the centre of the nation's efforts to
increase market share.
They offer a range of incentives to potential investors including 10-year tax holidays, duty free
import of capital goods, raw materials and building materials, exemptions on income tax on
salaries paid to foreign nationals for three years and dividend tax exemptions for the period of
the tax holiday.
All goods produced in the zones are able to be exported duty free, in addition to which
Bangladesh benefits from the Generalised System of Preferences in US, European and Japanese
markets and is also endowed with Most Favored Nation status from the United States.
Furthermore, Bangladesh imposes no ceiling on investment in the EPZs and allows full
repatriation of profits.
The formation of labor unions within the EPZs is prohibited as are strikes.
Bangladesh's exports to the U.S. amounted $4.9 billion in 2012.
Bangladesh also has significant jute, leather, shrimp, pharmaceutical, and ceramics industries.
Bangladesh has been a world leader in its efforts to end the use of child labor in garment
factories.

On

July

4,

1995,

the Bangladesh

Garment

Manufacturers

Export

Association, International Labor Organization, and UNICEF signed a memorandum of


understanding on the elimination of child labor in the garment sector. Implementation of this
pioneering agreement began in fall 1995, and by the end of 1999, child labor in the garment trade
virtually had been eliminated. The labor-intensive process of ship breaking for scrap has

Page | 34

developed to the point where it now meets most of Bangladesh's domestic steel needs. Other
industries include sugar, tea, leather goods, newsprint, pharmaceutical, and fertilizer production.
The Bangladesh government continues to court foreign investment, something it has done fairly
successfully in private power generation and gas exploration and production, as well as in other
sectors such as cellular telephony, textiles, and pharmaceuticals. In 1989, the same year it signed
a bilateral investment treaty with the United States, it established a Board of Investment to
simplify approval and start-up procedures for foreign investors, although in practice the board
has done little to increase investment. The government created the Bangladesh Export Processing
Zone Authority to manage the various export processing zones. The agency currently manages
EPZs in Adamjee, Chittagong, Comilla, Dhaka, Ishwardi, Karnaphuli, Mongla, and Uttara. An
EPZ has also been proposed for Sylhet. The government has given the private sector permission
to build and operate competing EPZs-initial construction on a Korean EPZ started in 1999. In
June 1999, the AFL-CIO petitioned the U.S. Government to deny Bangladesh access to U.S.
markets under the Generalized System of Preferences (GSP), citing the country's failure to meet
promises made in 1992 to allow freedom of association in EPZs.
Sylhet is fast becoming a major center of retailing in Bangladesh with many shopping centers
being built by expatriates to serve fellow expatriates visiting Sylhet and the emerging middle
class. Many of these developments hark back to Britain.
Overview of Economy
Bangladesh has made significant strides in its economic sector performance since independence
in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the
area of foreign trade in South Asian region. Despite major impediments to growth like the
inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by
agriculture, inadequate power supplies, and slow implementation of economic reforms,
Bangladesh has made some headway improving the climate for foreign investors and liberalizing
the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration,
better

countrywide

distribution

of

cooking

gas,

and

the

construction

of natural

gas pipelines and power stations. Progress on other economic reforms has been halting because
of opposition from the bureaucracy, public sector unions, and other vested interest groups.
The especially severe floods of 1998 increased the flow of international aid. So far the global
financial crisis has not had a major impact on the economy.
Page | 35

Fiscal Year

Total Export

Total Import

Foreign Remittance Earnings

20072008

$14.11b

$25.205b

$8.9b

20082009

$15.56b

$22.00b+

$9.68b

20092010

$16.7b

~$24b

$10.87b

20102011

$22.93b

$32b

$11.65b

20112012

$24.30b

$35.92b

$12.85b

IV. Bangladesh Economy in Brief


in the form of SWOT Analysis
A. Strength of Bangladesh Economy
I will discuss the strength of Bangladesh Economy by discussing the vital Variables i.e. the
performances vital Economic Sectors. The variables are as follows:

Agriculture

RMG Industry

Textile Industry

Service Sector

Capital Market
Page | 36

Remittances

Agriculture

Bangladesh is an agricultural country. With some three-fifths of the population engaged in


farming. Jute and tea are principal sources of foreign exchange. Major impediments
to growth include frequent cyclones and floods, inefficient state-owned enterprises, inadequate
port facilities, a rapidly growing labor force that cannot be absorbed by agriculture, delays in
exploiting energy resources (natural gas), insufficient power supplies, and slow implementation
of economic reforms. Economic reform is stalled in many instances by political infighting and
corruption at all levels of government.
The quarterly report of Asian Development Bank (ADP) about Bangladesh Economy also
has provided information regarding Bangladesh Agriculture
Despite the government's broad-based support for Agriculture, the growth rate of agriculture in
FY2010 is expected to be lower than in FY2009 because of the effects of weather, and weak
supply response by farmers to lower farm-gate prices after last years harvesting season.
Although the authorities channeled electricity from the cities to rural areas during the boro
season, supply wasnt adequate to meet the full demand for irrigation. Production of staple food
grains, i.e., rice and wheat, is estimated to grow by 5.5% in FY2010 over the 32.2 million Tons
of actual production in FY2009 (Figure 1). Production of rice is estimated to rise by 5.1%, from
31.3 million tons in FY2009 to 32.9 million tons in FY2010. Wheat Production is targeted to
increase by 20.1%, from0.85 million tons in FY2009 to 1.02 million tons in FY2010.Substitution
of cultivated land to no rice crops is expected to increase production of maize, potatoes, and
other crops. Despite the unusually large production of potatoes, the lack of storage facilities
caused a huge loss for farmers. The outputs of fishery, poultry, and livestock sectors, although
growing, are unable to meet rising demand from the growth in population and income.
RMG Industry
The economy of Bangladesh is largely dependent on agriculture. However, in recent years, the
Ready Made Garments (RMG) sector has emerged as the biggest earner of foreign currency.
The RMG sector has experienced an exponential growth since the 1980s. The sector contributes
significantly to the GDP. It also provides employment to around 2 million Bangladeshis. An
Page | 37

overwhelming number of workers in this sector are women. This has affected the social status of
many women coming from low income families.
The United States was the main export destination for Bangladeshi RMG products in the early
1990s followed by the European Union, but the European Union has surpassed the United
States over time. These two destinations generate more than 90 per cent of the total RMG export
earnings of Bangladesh (BGMEA and the Export Promotion Bureau). The shares of other
importers, such as Australia, Canada, China, Japan and the Russian Federation as well as
countries in the Middle East.
The total RMG export earnings of Bangladesh are minimal. This section of the paper focuses on
surface-level competitive performance of the Bangladesh RMG industry in the United States and
the European Union markets only. In addition, the performance of China and India along
with Bangladesh as RMG suppliers to international markets is also considered for comparative
analysis.
According to Export Promotion Bureau (EPB), Bangladesh exported knitwear products
to China worth $3.071 million in fiscal 2007-08 against $0.76 million in the previous fiscal year,
posting a staggering 400 percent growth. In fiscal 2007-08 the country exported woven garments
to China worth $6.691 million against $6.323 million in fiscal 2006-07. The total export
to China from Bangladesh amounted to $106.946 million against the import of around $3.0
billion in fiscal 2007-08.
In 2007, Bangladesh exported cotton T-shirts, singlets and other vests worth $0.79 million
against $0.57 million in 2006. China imported such kind of apparel items worth $976.890
million in 2007 and $926.330 million in 2006 from the rest of the world. It clearly shows
that China itself imports apparel items of a significant amount. Aggressive marketing drive
by Bangladesh can grab a chunk of such import of China, experts say.
Currently Bangladesh enjoys duty concession on exports of 757 products to Chinese market
under Asia Pacific Trade Agreement. Of the 757 products, 22 knitwear items and almost the
same amount of woven items are included in the concession category. As a result, the export of
knitwear and woven products is getting a steady rise to China.
Textile Industry
While agriculture for domestic consumption is Bangladeshs largest employment sector, the
money

gained

from

exporting

textiles is

the

single

greatest

source

of economic
Page | 38

growth in Bangladesh. Exports of textiles, clothing, and ready-made garments accounted for
77% of Bangladeshs total merchandise exports in 2002.Only 5% of textile factories are owned
by foreign investors, with most of the production being controlled by families or Bangladeshi
companies. Textile exports from Bangladesh displays a buoyant performance. Knitwear and
woven garment exports have increased by 41.8%, and 36.2 percent during December 2008
comparatively over the previous years figures. Since Bangladesh exports low end textile
products, their sales are least affected by the economic crisis. Shoppers from the income
declining countries, who prefer to restrict their shopping budget, prefer to buy low end garments
imported from Bangla.

Service Sector
The service sector in Bangladesh is now contributing more than 49 percent to the gross domestic
product (GDP) after reorganization of different sectors under the newly adopted national
accounting system, The Financial Express reported Saturday. The report quoted sources of the
finance and planning ministries as saying the relative contributions of the service and industry
sectors have increased over the years while those of agriculture have declined. The contributions
of the agriculture sector dropped from about 30 percent in the early 1990s to 25.28 percent at
present, but the industry sector commanded 25.69 percent in the last financial year.
Asian Development Bank (ADP) has launched an analysis on Bangladesh Economy. They
described the service sector of Bangladesh in the following way
Performance of the services sector largely depends on the outcomes of the agriculture and
industry sectors. The global economic crisis has impacted growth of the Services sector in a
variety of ways. Contraction in trade and investment activities affected performance of transport
and communication services. Subdued trade and investment activities affected financial services.
Moderation in remittance inflow also dampened demand for services affecting wholesale and
retail trade and Community, social, and personal services. Lack of infrastructure and power
supply has constrained new investment in health care and education services. The
Telecommunications sector is also affected by the slowdown in economic activities, particularly
trade.

Page | 39

Capital Market: Asian Development Bank (ADP) in their quarterly analysis has described
the capital market as follows:
The major stock market indicators rose during FY2010, except for a brief period during midFebruary to mid-April, when the market experienced some instability.
The index rose 118.2% year-on-year in April 2010, reaching 5,654.9 points, because of the
listing of Grameenphone (the country's largest mobile phone company) on the stock exchange in
November 2009, and significant involvement of institutional participants in daily transactions.
The active participation of a large number of retail investors along with the coincidence with
bonus share (cash, stock, right) declaration contributed to the recent rise in the index. Market
capitalization of the Dhaka Stock Exchange rose by 120.7%, from Tk 1,062.4 billion in April
2009 to Tk 2,345.0 billion by the end of April 2010, reflecting the listing of a large number of
companies.
Remittances
From Asian Development Bank (ADP) quarterly report:
Remittance inflows, a major source of foreign exchange income, accounted for 10.9% of GDP in
FY2009. Although lower than export earnings (17.5% of GDP in FY2009), they are much higher
than FDI (1.1%) and official development assistance (1.2%). Being one of the top 10 remittance
recipient countries in the world. Bangladesh has been able to maintain respectable foreign
reserves and meet its international payments obligations because of the robust flow of
remittances. They are considered a more stable source of foreign exchange. The joint World
Bank-IMF low-income country debt sustainability framework now takes into account
remittances in evaluating the ability of countries to repay external obligations and their ability to
receive no concessional borrowing from private creditors. IMF Article IV assessments include
remittance as a variable alongside FDI and portfolio flows.

B. Weakness of Bangladesh Economy

Page | 40

In terms of strengths, there is no doubt Bangladesh is in a good geographic location. It provides


an important link between the economies of South Asia and the dynamic Southeast Asian
region. Bangladesh sits on strategic trade lanes and Chittagong can emerge as a major port to
service the regional economies. Although Bangladesh is a new nation, it represents an old and
flexible civilization. Both its ecology and history point to the people's hidden resilience in the
face of adversities, with capacity to produce unexpected social renewals and economic recovery.
Another source of its strength is the rapid advance made by the nongovernmental organizations
(NGOs) and other grassroots bodies, creating alternative delivery mechanisms and acting as
vocal civic institutions especially for the poor. This is an important source of 'social
entrepreneurialism' and a channel of vibrant development of many elements in society. The
ongoing process of mainstreaming women into development is a strategic strength to bring wider
and deeper social and economic changes. Gains in increasing political and electoral participation
of women, enhancing press freedom, and creating a vibrant civil society are important for
strengthening democratic institutions and consolidating human rights.
The country's vulnerability to natural disasters has significantly declined that used to inhibit
greater investment flow and reduce its productivity and return in the past. Several important
structural changes have taken place, such as agriculture becoming more resilient with the spread
of dry season irrigated crop production and rapid expansion of non-crop agriculture; nonagricultural sectors assuming greater importance; infrastructure and market developments
contributing to greater spatial integration and lower price effect of exogenous shocks; and higher
mitigation capacity in responding to natural disasters.
Bangladesh has a fairly good and expanding stock of both physical and human capital, and with
favorable policies, the upgrading potential of both capital is bright. The remittances from
overseas workers have already become a great source of strength and this can be increased
manifold with right policies. Relative stability of the country's economic fundamentals has
created a fairly good macroeconomic environment. As one can see, all the above elements
represent significant strengths of the Bangladesh economy.
Against this, one can set some obvious weaknesses. One uncomfortable feature is that
Bangladesh is one of the few countries where income poverty is falling slowly even though
economic growth has picked up. Even after three decades, most of the economic sectors

Page | 41

(especially agriculture) are still weak; health and education indicators are low. Infrastructure,
while improving, is still poor especially in electricity, having a per capita use which is among the
lowest in the world. Corruption is certainly high. The economic and administrative cost of
securing business is high as well. A feature of both a weakness and a threat is the rapidly rising
inequality in income and wealth, which neither supports economic efficiency nor social equity.
This is socially destabilizing as underemployed urban masses and a swelling rural landless
people are much more volatile than a well-rooted community of employed non-farm workers and
landed farmers.
The absolute size of the population, despite success in lowering the growth rate, is increasing fast
that creates tremendous pressure on resources as well as on provision of essential services.
Looking forward, what advantages or opportunities does Bangladesh have? In a sense, many of
the weaknesses that can be remedied are opportunities. If agricultural productivity is low,
investments in irrigation, improved agricultural systems, markets, and infrastructure can raise
production and productivity. If foreign direct investment (FDI) is low, then improvements in
governance, infrastructure, and investment climate can attract more investments. A higher
demand for skilled workers can create an incentive for better training and education. Services
sector development including export of skilled manpower is a real possibility. There is a
promising private sector and the dynamism of this sector, especially in information
communication technology (ICT), can be an important opportunity.
Corruption and waste: A great deal of attention has been placed on corruption in Bangladesh.
This is entirely justified since corruption is a serious problem in the country. Much less attention,
however, has been placed on a related but equally serious problem which is the issue of waste.
Waste occurs when an unnecessary and inappropriate investment is made.
One important difference between corruption and waste is that with waste, there may or may not
be a transfer of resources to a corrupt person but there is certainly a loss to everyone! If a highcost factory were built or equipment procured for its proper cost, with nothing added in
improperly padded costs or commissions, it would still create a loss for Bangladesh and its
people. Higher prices have to be paid to cover the costs of the factory or the services of the
equipment, or it is to be shut down. If it is shut down, there is a huge loss. If it operates, the price
of the product or the service would be higher than it need be. Thus nobody benefits.

Page | 42

When waste and corruption are combined, those who profit from a bad project derive benefit but
society still loses. Corruption must be fought, but we must remember that it exists in all societies.
Waste is easier to avoid if there is a serious review of public investments and limited protection,
subsidies, or guarantees to private projects. As there are large losses from bad project selection, a
nation genuinely concerned with growth and stability will try to ensure that public investments
are well chosen.
For selecting appropriate project, an effective review of the economic feasibility of the project is
essential. While this no doubt may involve some extra cost, it is much less costly than the 'free'
feasibility studies provided by potential contractors or financiers who stand to benefit if the
project is built. Such free feasibility studies examine what kind of project should be built rather
than if it is sensible to build the project. These studies are often a rich source of technical data
but a poor and weak guide to underlying economics of the project. Bangladesh must manage to
insulate investment choices from corruption; we should build what should be built at about the
right cost, rather than what should not be built at a wildly inflated cost. We must also avoid
wildly inflated costs even on well-chosen projects.

C. Opportunities for Bangladesh Economy


Despite continuous domestic and international efforts to improve economic and demographic
prospects, Bangladesh remains a developing nation. Its per capita income in 2006 was US$2300
(adjusted by purchasing power parity) compared to the world average of $10,200. Jute was once
the economic engine of the country. Its share of the world export market peaked in the Second
World War and the late 1940s at 80% and even in the early 1970s accounted for 70% of its
export earnings. However, polypropylene products began to substitute for jute products
worldwide and the jute industry started to decline. Bangladesh grows very significant quantities
of rice (chal), tea (Cha) and mustard. Although two-thirds of Bangladeshis are farmers, more
than three quarters of Bangladeshs export earnings come from the garment industry, which
began attracting foreign investors in the 1980s due to cheap labor and low conversion cost. In
2002, the industry exported US$5 billion worth of products. The industry now employs more
than 3 million workers, 90% of whom are women. A large part of foreign currency earnings also
Page | 43

comes from the remittances sent by expatriates living in other countries. Worker in a paddy field
- a common scene throughout Bangladesh. Two thirds of the population works in the agricultural
sector. Obstacles to growth include frequent cyclones and floods, inefficient state-owned
enterprises, mismanaged port facilities, a growth in the labour force that has outpaced jobs,
inefficient use of energy resources (such as natural gas), insufficient power supplies, slow
implementation of economic reforms, political infighting and corruption. According to the World
Bank, "among Bangladeshs most significant obstacles to growth are poor governance and weak
public institutions."
Despite these hurdles, the country has achieved an average annual growth rate of 5% since 1990,
according to the World Bank. Bangladesh has seen expansion of its middle class, and its
consumer industry has also grown. In December 2005, four years after its report on the emerging
"BRIC" economies (Brazil, Russia, India, and China), Goldman Sachs named Bangladesh one of
the

"Next

Eleven,"

along

with

Egypt,

Indonesia,

Pakistan

and

seven

other

countries. Bangladesh has seen a dramatic increase in foreign direct investment. A number of
multinational corporations and local big business houses such as Beximco, Square, Akij Group,
Ispahani, Navana Group, Habib Group, KDS Group and multinationals such as Unocal
Corporation and Chevron, have made major investments, with the natural gas sector being a
priority. In December 2005, the Central Bank of Bangladesh projected GDP growth around
6.5%. One significant contributor to the development of the economy has been the widespread
propagation of micro credit by Muhammad Yunus (awarded the Nobel peace prize in 2006)
through the Grameen Bank. By the late 1990s, Grameen Bank had 2.3 million members, along
with 2.5 million members of other similar organizations.
In order to enhance economic growth, the government set up several export processing zones to
attract foreign investment. These are managed by the Bangladesh Export Processing Zone
Authority. According to the IMF gradation, Bangladesh ranked as the 48th largest economy in
the world in 2007. Although the economy has grown at the rate of 6-7% p.a. over the past few
years Bangladesh remains a over-populated and inefficiently-governed nation with high level of
poverty. While more than half of the GDP belongs to the service sector, nearly two-thirds of
Bangladeshis are employed in the agriculture sector, with rice as the single-most-important
produce. Remittances from Bangladeshis working overseas, mainly in the Middle East and East
Asia, as well as exports of garments are the main source of foreign exchange earnings. Economic
Page | 44

growth is rather endogenous with slow growth in foreign direct investment. Although one of the
world's poorest and most densely populated countries, Bangladesh has made major strides to
meet the food needs of its ever growing population. The land is devoted mainly to rice and jute
cultivation, although wheat production has increased in recent years; the country is largely selfsufficient in rice production. Nonetheless, an estimated 10% to 15% of the population faces
serious nutritional risk, and that food security is at risk for 45% of the population. Bangladesh's
predominantly agricultural economy depends heavily on an erratic monsoonal cycle, with
periodic flooding and drought. Although improving at a very fast rate, infrastructure to support
transportation, communications, power supply and water distribution is poorly
developed. Bangladeshis limited in its reserves of oil, but recently there was huge development
in coal mining. While the service sector has expanded rapidly during last two decades, country's
industrial base remains narrow. The country's main endowments include its vast human resource
base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas
although depleting very fast and may disappear in the next 7-8 years. Since independence in
1971, Bangladesh has received more than $30 billion in grants, aid and loan commitments from
foreign donors, only about $15 billion of which has been disbursed reflecting poor absorption
capacity. Major donors include the World Bank, the Asian Development Bank, the UN
Development Program, the European Commission, the United States, Japan, Saudi Arabia, and
west European countries. Bangladesh historically has run a large trade deficit, financed largely
through aid receipts and remittances from workers overseas. Foreign reserves dropped markedly
in 2001 but stabilized in the USD3 to USD4 billion range (or about 3 months' import cover). In
January 2007, reserves stood at $3.74 billion, and they increased to $5.8 billion by January 2008,
according to the Bank of Bangladesh, the central bank. However, aid-dependence of the country
has systematically been reduced since the beginning of 1990s.
The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) has predicted
textile exports will rise from US$7.90 billion earned in 2005-06 to US$15 billion by 2011. In
part this optimism stems from how well the sector has fared since the end of textile and clothing
quotas, under the Multifibre Agreement, in early 2005.
According to a United Nations Development Program report "Sewing Thoughts: How to Realize
Human Development Gains in the Post-Quota World" Bangladesh has been able to offset a
decline in European sales by cultivating new markets in the United States.
Page | 45

Knitwear posted the strongest growth of all textile products in 2005-06, surging 35.38 per cent to
US$2.82 billion. On the downside however, the sector's strong growth came amid sharp falls in
prices for textile products on the world market, with growth subsequently dependent upon large
increases in volume.
Bangladesh's quest to boost the quantity of textile trade was also helped by US and EU caps on
Chinese textiles. The US cap restricts growth in imports of Chinese textiles to 12.5 per cent next
year and between 15 and 16 per cent in 2008. The EU deal similarly manages import growth
until 2008.
Bangladesh may continue to benefit from these restrictions over the next two years, however a
climate of falling global textile prices forces wage rates the centre of the nation's efforts to
increase market share.
Prior to the Wage Board's announcement of its recommended minimum wage, the rate had
remained unchanged at Tk950 for more than 12 years. Although the government may allow up to
three years for the new wage to be implemented, and inevitably there will be compliance issues
as manufacturers drag their feet, it seems politically untenable for wages to remain at their
current levels given the unprecedented industrial unrest.
In response to the Wage Board's initial draft recommendation of a minimum wage of Tk1, 604 to
be increased to Tk1, 800 after eight months, the BGMEA declared over 50 per cent of factories
would be ruined within three months. While this claim is no doubt an exaggeration, the capacity
of Bangladesh's textile industry to absorb a significant wage hike as margins become tighter is a
key question which hangs over the future of the industry. Bangladesh's textile sector is
concentrated in export processing zones in Dhaka and Chittagong. These zones, which are
administered by the Bangladesh Export Processing Zone Authority, aim to offer "a congenial
investment climate, free from cumbersome procedures" according to Bangladesh Export
Promotion Bureau's website.
They offer a range of incentives to potential investors including 10 year tax holidays, duty free
import of capital goods, raw materials and building materials, exemptions on income tax on
salaries paid to foreign nationals for three years and dividend tax exemptions for the period of
the tax holiday.
All goods produced in the zones are able to be exported duty free, in addition to which
Bangladesh benefits from the Generalized System of Preferences in US, European and Japanese
Page | 46

markets and is also endowed with Most Favored Nation status from the United States.
Furthermore, Bangladesh imposes no ceiling on investment in the EPZs and allows full
repatriation of profits.
The

formation

of

labor

unions

within

the

EPZs

is

prohibited

as

are

strikes.

Bangladesh's exports to the U.S. surpassed $1.9 billion in 1999. Bangladesh also exports
significant amounts of garments and knitwear to the EU market.
Bangladesh also has significant jute, leather, shrimp, pharmaceutical, and ceramics industries.
Bangladesh has been a world leader in its efforts to end the use of child labor in garment
factories. On July 4, 1995, the Bangladesh Garment Manufacturers Export Association,
International Labor Organization, and UNICEF signed a memorandum of understanding on the
elimination of child labor in the garment sector. Implementation of this pioneering agreement
began in fall 1995, and by the end of 1999, child labor in the garment trade virtually had been
eliminated. The labor-intensive process of ship breaking for scrap has developed to the point
where it now meets most of Bangladesh's domestic steel needs. Other industries include sugar,
tea, leather goods, newsprint, pharmaceutical, and fertilizer production.
The Bangladesh government continues to court foreign investment, something it has done fairly
successfully in private power generation and gas exploration and production, as well as in other
sectors such as cellular telephony, textiles, and pharmaceuticals. In 1989, the same year it signed
a bilateral investment treaty with the United States, it established a Board of Investment to
simplify approval and start-up procedures for foreign investors, although in practice the board
has done little to increase investment. The government created the Bangladesh Export Processing
Zone Authority to manage the various export processing zones. The agency currently manages
EPZs in Adamjee, Chittagong, Comilla, Dhaka, Ishwardi, Karnaphuli, Mongla, and Uttara. An
EPZ has also been proposed for Sylhet. The government has given the private sector permission
to build and operate competing EPZs-initial construction on a Korean EPZ started in 1999. In
June 1999, the AFL-CIO petitioned the U.S. Government to deny Bangladesh access
to U.S. markets under the Generalized System of Preferences (GSP), citing the country's failure
to meet promises made in 1992 to allow freedom of association in EPZs. Sylhet is fast becoming
the retail capital of Bangladesh, with many shopping centres being built by expatriates to serve
fellow expatriates visiting Sylhet and the emerging middleclass. Many of these developments
hark back to Britain.
Page | 47

D. Threats for Bangladesh Economy


Ironically enough, opportunities can turn into potential threats. In the past, Bangladesh achieved
a slow progress in poverty reduction. In the future, improper management of development may
accentuate poverty and inequality leading to social instability. The threat is that governance
would become worse and economic decisions would further concentrate wealth, fund capital
flight, and increase social tensions. The efficiency in use of resources, and a political strategy for
stability, equity, and growth is of greater priority in the coming years than it is now. Several other
developments also threaten to undermine the socio-political stability and future economic
progress, such as the challenge to ensuring good governance and stable law and order situation,
reducing corruption and ensuring political stability, and adverse global developments including
terrorism and sharp increase in commodity prices in the global market.
The loss or reduction in garment exports is one such possibility. Building up a real competitive
advantage by lowering port and other transport costs and informal charges and bringing in more
efficiency in garments production is the best and only response. Similarly, any development that
adversely affects the healthy growth of remittances will create a serious threat to economic and
social progress.
It is very hard to improve the quality of education and skills within a short time, just as it is hard
to provide good health services. The failure to enhance the supply of quality education and good
health is likely to create another threat. For the majority with poor education, the prospects for
earning a decent income to move and stay out of poverty are not good. For them, indeed jobs will
remain insecure and low paying. To help the growing number of young workers find decent jobs,
to increase competitiveness, and to improve poverty situation, finding a way to improve critical
services, including quality education and health services, is necessary. Perhaps, at this stage, we
can put these general points together into a comprehensive format as in Table 1 and Table II
various elements; but it is a beginning to visualizing the overall situation.
Other major threats are as follows:

Corruption
Page | 48

Political Unrest

Terrorism

Current Unrest in RMG Sector

The acute clutch of Indian Fiber which is dominating native textiles.

Lack of Govt. proper Initiatives

Vulnerability of Agriculture Sector

Money Laundering

Extremely dependence on donors

Improper Fiscal Management

Unnecessary Complicate Bureaucracy

Gas shortage

Electricity shortage

Trade deficits

No particular principle for fuel management.

Page | 49

V. Challenges project
Management in Bangladesh
Project management is a special process used to plan, operate and monitor projects. Its aim is to
efficiently achieve project goals and objectives or solve a particular problem. It is different from
general management, in part, because of its focus on completing well-defined goals within
specific constraints relative to time, cost and quality. While it is generally deemed an effective
management tool for achieving strategic business goals, it is also noted as having both
advantages and disadvantages. Whether you are a new project manager, or an experienced leader,
project management will continue to reveal itself as part art, part science, and part major
headache! The list below highlights some of the top project management challenges, along with
suggested solution ideas to help overcome those challenges.

A. Undefined Goals
When goals are not clearly identified, it is impossible for the team to meet them. And, since
upper management cannot agree to or support undefined goals, the project in question has little
chance of succeeding. The project manager must ask the right questions to establish and
communicate clear goals from the outset.

B. Scope Changes
Also known as "scope creep," this phenomenon occurs when project management allows the
project's scope to extend beyond its original objectives. Certainly, clients and supervisors will
ask for changes to a project - but a good project manager will evaluate each request and decide
how and if to implement it, while communicating the effects on budget and deadlines to all
stakeholders. Solution: There is no anti-scope-creep spray in our PM utility belts, but as with
many project management challenges, document what is happening or anticipated to happen.

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Communicate what is being requested, the challenges related to these changes, and the alternate
plans, if any, to the project participants (stakeholders, team, management, and others).

C. Unrealistic deadlines
Some would argue that the majority of projects have "schedule slippage" as a standard feature
rather than an anomaly. The challenge of many managers becomes to find alternate approaches to
the tasks and schedules in order to complete a project "on time", or to get approval for slipping
dates out. An "absolute" time-based deadline such as a government election, externally scheduled
event, or public holiday forces a on-time completion (though perhaps not with 100% of desired
deliverables). But, most project timelines do eventually slip due to faulty initial deadlines (and
the assumptions that created them). Solution: Manage the stress of "the immovable rock and the
irresistible force" (i.e. the project deadline and the project issues) with creative planning,
alternatives analysis, and communication of reality to the project participants. Also determine
what deadlines are tied to higher level objectives, or have critical links into schedules of other
projects in the organization's portfolio.

D. Resource Deprivation
In order for a project to be run efficiently and effectively, management must provide sufficient
resources - human, time and money. Project management training shows how to define needs and
obtain approval up front, and helps project managers assign and prioritize resources throughout
the duration of a project.

E. Lack of Stakeholder Engagement

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A disinterested team member, client, CEO or vendor can destroy a project quickly. It's like
having a distracted paddler in a two-person canoe - you might get to the finish line, but not
efficiently or on time. And you'll waste a lot of energy in the process! A skilled project manager
communicates openly and encourages feedback at every step to create greater engagement
among participants.

F Communication deficit
Many project managers and team members do not provide enough information to enough people,
along with the lack of an infrastructure or culture for good communication. Solution: Determine
proper communication flows for project members and develop a checklist of what information
(reports, status, etc.) needs to be conveyed to project participants. The communications checklist
should also have an associated schedule of when each information dissemination should occur.

F. Resource competition
Projects usually compete for resources (people, money, time) against other projects and
initiatives, putting the project manager in the position of being in competition. Solution:
Portfolio Management - ask upper level management to define and set project priority across all
projects. Also realize that some projects seemingly are more important only due to the
importance and political clout of the project manager and these may not be aligned with the
organization's goals and objectives.

G. Uncertain dependencies

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As the project manager and the team determine project dependencies, assessing the risk or
reliability behind these linkages usually involves trusting someone else's assessment. "My
planner didn't think that our area could have a hurricane the day of the wedding, and now we're
out of celebration deposits for the hall and the band, and the cost of a honeymoon in Tahiti!"
Solution: Have several people - use brainstorming sessions - pick at the plan elements and
dependencies, doing "what if?" scenarios. Update the list of project risk items if necessary based
on the results.

H. Failure to manage risk


A project plan has included in it some risks, simply listed, but no further review happens unless
instigated by an event later on. Solution: Once a project team has assessed risks, they can either
(1) act to reduce the chance of the risk occurrence or (2) act or plan towards responding to the
risk occurrence after it happens.

I. Insufficient team skills


The team members for many projects are assigned based on their availability, and some people
assigned may be too proud or simply not knowledgeable enough to tell the manager that they are
not trained for all of their assigned work. Solution: Starting with the project manager role,
document the core set of skills needed to accomplish the expected workload, and honestly
bounce each person's skills against the list or matrix. Using this assessment of the team, guide
the team towards competency with training, cross-training, additional resources, external
advisors, and other methods to close the skills gap.

J. Customers and end-users are not engaged during the project

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Project teams can get wound up in their own world of internal deliverables, deadlines, and
process and the people on the outside do not get to give added input during the critical phases.
Solution: Discuss and provide status updates to all project participants - keep them informed!
Invite (and encourage) stakeholders, customers, end-users, and others to periodic status briefings,
and provide an update to those that did not attend.

K. Vision and goals not well-defined


The goals of the project (and the reasons for doing it), along with the sub-projects or major tasks
involved, are not always clearly defined. Clearly communicating these vague goals to the project
participants becomes an impossible task. Some solutions and ideas to thrash vagueness:
Determine which parts of a project are not understood by the team and other project participants
ask them or note feedback and questions that come up. Check the project documentation as
prepared, and tighten up the stated objectives and goals - an editor has appropriate skills to find
vague terms and phrasing. Each project is, hopefully, tied into to the direction, strategic goals,
and vision for the whole organization, as part of the portfolio of projects for the organization.

L. Inadequate Skills for the Project


A project sometimes requires skills that the project's contributors don't possess. Project
management training can help a project leader determine the needed competencies, assess the
available workers and recommend training, outsourcing or hiring additional staff.

M.Lack of Accountability

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A project manager's leadership qualities really shine when each member of the team takes
responsibility for his or her role in achieving project success. Conversely, a lack of accountability
can bring a project to a complete halt. Finger-pointing and avoiding blame are unproductive - but
all-too-common - features of flawed project management. Learning to direct teams toward a
common goal is an important aspect of project management training. Solution: Determine and
use accountability as part of the project risk profile. These accountability risks will be then
identified and managed in a more visible manner.

N. Improper Risk Management


Learning to deal with and plan for risk is an essential piece of project management training. And
risk tolerance is a desirable project manager trait - because projects rarely go exactly according
to plan. Gathering input, developing trust and knowing which parts of a project are most likely to
veer off course are all aspects of the project manager's job.

O. Ambiguous Contingency Plans


It's important for project managers to know exactly what direction to take in pre-defined "whatif"
scenarios. But if those contingencies are not identified, the entire project can become mired in an
unexpected set of problems. Asking others to identify potential problem areas can lead to a much
smoother and more successful project.

P. Poor Communication

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Project managers provide direction at every step of the project, so each team leader knows what's
expected. Effective communication to everyone involved in the project is crucial to its successful
completion.
Project management training includes an emphasis on written and oral communication skills
Proper communication increases team members' morale by establishing clear expectations
Good project managers keep communication and feedback flowing between upper
management and team leaders.

Q. Human Element Limitations


Your resource management may be at top levels but the human element in any project can harm a
project. While change is inevitable they say, humans are not robots or computers and areas of
denial, disagreement, and stubbornness do happen. Cure human element limitations by open
communication and good listening skills.

R. Software Limitations
Project management software designers may believe if they build it, it will be utilized but thats
not always the case. Not all software will work for every project nor can all software be adapted
immediately to meet project needs no matter what project management methodology you are
using. Speak with designers and offer realistic guides on what you need. Meet often during the
design process to see, feel, and touch the design. While you may not be able to rid software of all
its limitations you can make the process flow smoother if you communicate throughout the
process rather than waiting for the final product.

S. IT Limitations
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How many times do IT personnel blame the software designer and vice versa? That amusing
private war may be relevant to the parties involved, but if the software you need conflicts with
your network and it crashes, your IT department isnt communicating effectively. Some
managers may be guilty of not including IT personnel in stages of software design, wants, and
needs. Correct this project management limitation by understanding why software and IT must
be interconnected at all times.

T. Vendor and Supplier Limitations


The suppliers you utilize can also put limits on project timelines. If they arent getting you what
you requested or are backlogged, your project is at their mercy. Utilize a good vendor selection
process in advance of projects to ensure timely delivery.

U. Green Limitations
Global warming may still be a debate, but the desire for green computing and green offices might
affect your bids for new environment-friendly clients. If you face this problem, read some tips
from Green Project Management to entice your concerned clients.

V.

Over-spending

Projects might also be resource-intensive in terms of its human and financial capital
requirements. One of the key problems arises when project budgets are underestimated, resulting
in revenue shortfalls in essential areas such as staff wages, operating costs, equipment, supplies,
third-party procurement needs and administrative costs.

W.Losing Focus
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Changes in objectives can ease into project plans that might have significant impacts on its
outcomes. This requires project managers to monitor the progress of individual team members
and project groups to ensure that activities and tasks are consistent with original project goals
and objectives. Here, milestones are an effective tool frequently used in project management to
track progress and make sure that original objectives are being observed.

X. Timescale Problems
Project can go over schedule when timescales are not properly estimated or team members do
not use effective time management techniques in managing their project assignments.
Calculating the timescales for milestones, activities and tasks require precise duration estimates
for units of work required to complete a project. This is where time management tools, such as
PERT diagrams and Gantt charts are useful to teams to manage timescales and ensure the project
stays on schedule.
Project leadership is a skill that takes time to develop in a person or organization. Achieving
success requires analyzing setbacks and failures in order to improve. Focusing on each project's
challenges and learning from them will help to build a more capable and successful project
management capability.

VI. CHALLENGES OF PROJECT


MANAGEMENT IN THE FORM OF
SWOT ANALYSIS
A. Positive Factors (Strengths and Opportunities)
Page | 58

1. Growing economy, Scope for Fresh and new projects, need for infrastructural
2.
3.
4.
5.

facilities.
Availability of resources
Abundance of manpower
Urge for Development
Adaptability of manpower vis--vis technologies

B. Negative Factors (Weakness and Threats)


1. Poor & very inadequate technical bases
2. Inadequacy of research & trained manpower
3. Serious brain drain
4. Lack & inadequacy of infra-structural facilities
5. Corruption(resources utilization is only 40% effectively)
6. Very poor project planning
7. Data bank lacking & highly inaccurate
8. Dearth of experienced and & hardworking and honest entrepreneurs.
9. Poor general economic condition & low per capita income.
10. Size of market & buying capabilities
11. Uncongenial legal framework
12. Absence of good governance
13. Unfriendly administrative machinery
14. Irrational fiscal policy
15. Weak and ineffective capital market
16. Inefficient monitoring of banking structure & banking policy
17. Default culture
18. Absence of business ethics
19. Lack of political will
20. High political risk including instability
21. Precarious law and order situation
22. Bangladesh is classified as high risk country
23. Low savings-GDP ratio
24. Majority of the population lives below poverty level
25. Low literacy rate & lack of civic sense, patriotism, and sense of belongingness
26. Unhealthy distribution of income and concentration of most of the wealth of the country
in the hand of several thousands
27. Absence of social values and social justice with its serious erosion.
28. Serious exploitation of society and country by educated people.
29. Inadequacy of physical recourses
30. Growth of population.
31. Wrong conception about religion & week socio-cultural institution of which family is
the weakest
Page | 59

32. Cumbersome custom formalities


33. Very low contribution of service sector
34. Imbalance between direct and indirect tax structure
35. Very loose boarder and smuggling
36. Very wide trade gap that is unfavorable balance of trade & balance of payment position.
(Export earning is about40% import bills).
37. Ineffective balance of growth of agriculture & industrial sector.
38. Initial industrial base was planned on the basis of different geographical dispersion and
market.
39. Inadequacy of basis, heavy and mother industries.
40. Irregular flow of foreign funds.
41. Lack of interdepartmental, inter ministerial coordination & ineffective sectors
42. High frequency of natural calamities and disaster.
43. Serious impacts of ozone unbalancing, warming up of atmosphere, increase of sea level,
probable flood and erosion of landscape.
44. Serious problem of time and cost overruns of project implementation.
45. Lack of motivation in implementation of project with serious snags.
46. Political unrest impedes projects implementation &absence of network analysis or
project scheduling is hardly pursued.
47. Impacts of open market economy & formulation of regional economic blocks.
48. Ineffective & corrupted banking structure.
49. High degree of propensity to incur unproductive expenses out of project funds both in
public and private sector.
50. Trading mentality of entrepreneurs, lack of business farsightedness resulting into interest
towards painstaking industrial projects.
51. High degree of irresponsibility, callousness & indifference on the part of project
managers of public sector project.

C. Reasons behind Industrial Sickness & its Remedial measures


Industrial Sickness
1. Defect in planning Industry is bound to fail due to defect in planning
2. Sometimes inaccurate, misleading, and intentionally distorted data in feasibility study.
Frequently there is no proper market survey regarding demand, formal and informal
supply condition, etc.
3. Lack of reliable accurate data-bank for project management.
Page | 60

4. Lack of demand and supply condition especially informal supply, informal supply or
smuggling or Demand gap = Formal demand Formal Supply (installed capacity +
import).
5. Very low stake by the entrepreneurs tendency to inflate equity.
6. Lavish industrial credit.
7. Inexperience and dishonest entrepreneurs.
8. Faulty bank loan policy.
9. Highly corrupted bank FDI official.
10. Wrong estimation of working capital.
11. Unproductive expenses.
12. Surplus manpower
13. High cost of inputs, in most of the occasions there is an increasing trend of extortion toll
by mustangs and utility officials.
14. Improper import and export policy.
15. Irrational tax structure.
16. Power failure and load shedding.
17. Lack of infrastructure-al facilities.
18. Absence of business ethics credit management difficult and default culture thriving.
19. Inaccurate estimation of demand and market share.
20. Formal and informal supply identification- no estimation about supply through
smuggling.
21. Lack of managerial skill.
22. Lack of seriousness about business.
23. Frequent change in taste and fashion of the people.
24. High cost of borrowed capital- interest rate is comparatively high.
25. Frequent devaluation and change in foreign exchange rate.
26. Serious problem of quality control.
27. Onrush of foreign and imported, smuggled goods with very low selling price.
28. Credit given by dealers, whole sellers and agents and distributors of foreign goods.
29. Even-increasing cost of materials and other inputs.
30. Absence of working capital planning and policies.
31. High cost of input difficulties in managing cost in view of ever increasing cost of
inputs, low labor productivity, high cost of utilities, etc.
32. Serious problem of choice of appropriate technology.
33. Imbalance production process.
34. Installation of second hand machineries.
35. Ineffective maintenance policy.
36. High cost of fund even opportunity cost of its own fund is high.
37. Cumbersome customs and VAT formalities.
38. Lack of awareness about the problems of the industry.
39. Wrong selection of project and often selection by hearsay.
40. Lack of business farsightedness resulting into absence of interest towards pains-taking
industrial projects.
Page | 61

41. Inadequacy of basic heavy and Mather industry.


42. Irregular flow of funds from financing agencies.
43. Strikes and political unrest.
44. Time and cost overrun in implementation of project.
45. Serious impacts of open market economy and formation of regional economic bloc.
46. Reduction and withdrawals of quota system for export of goods or merchandise.
47. Low labor productivity and high labor turnover that is high rate of absenteeism.
48. Inadequacy of experienced and skill manpower for running the factory and its
maintenance.
49. Ineffective banking system.
50. Law and order situation, unfriendly legal system and bureaucracy.
51. Too much interference by the government in business and frequent change in government
policies.
52. Callousness of government and lack of appreciation of industrial problems as well as
seriousness to solve the same along with bureaucracy involved in same.
53. Lack of sense of belongingness, patriotism towards use of local goods and improper
philosophy of life.
54. Lack of backward linkage and supports industries.
55. Lack of experienced technicians and technical base.
56. Labor management relationship in nationalized abandoned and private enterprises.
57. Negative trade-unionism.
58. Attitude off workers and operating towards productivity and well-being of SOEs.
59. Accumulated loss & worn out machineries along with improper handling.
60. Rampant corruption and malpractices in SEOs.

D. Remedial Measures
1. Proper project planning should be ensuring by recruiting proper personnel and applying
proper methodology.
2. Adequate information should be collected along with provision for databank.
3. Market survey and demand analysis vis-a-vis demand and supply forecasts, import
policies and situation, smuggling, WTO regulations, etc.
4. Power supply should be ensuring with reduction in load shedding.
5. Proper industrial credit evaluation should be ensure by making it corruption free and
based on realistic assessment and evolution of the project and their sponsors.
6. Working capital requirements should be properly assessed and made available at lower
cost.
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7. The import and export policies should be rationalized and made friendly to industrial
requirements and development.
8. Proper fiscal policies and tax structure be introduced especially regarding VAT
imposition.
9. Proper and adequate infrastructural facilities should be provided in industrial belts, zones
and parks.
10. Legal reforms should be immediately formulated and implemented.
11. Appropriate technology should be very strictly chosen, cheap and easy counseling for the
same is available.
12. Dependence on supply of raw materials from foreign country including foreign technical
know-how, technology. Etc, be reduced as much as possible.
13. Flow of fund during the construction period should be ensured to complete projects in
time and within stipulated cost.
14. Law & order situation should be improved with improved with greater political stability.
15. Utility services should be easily and at lower cost made available.

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VII. PERFORMANCE OF ADP


Despite economic growth averaging some 5.1% annually over the past 10 years, Bangladesh
continues to face daunting problems in the power sector, notably:

An electrification ratio of less than 40%.


Extensive load shedding. Load shedding sometimes approaches 1,000 MW, equivalent to
about 25% of total de-rated generation capacity in the country.

The electrification ratio can be improved by extending rural electrification, and load shedding
can be reduced by adding and rehabilitating generation capacity, and where necessary, upgrading
transmission and distribution capacity. However, these actions require capital investment, which
is not available in sufficient quantities to make major progress in addressing these problems.
The lack of capital investment is a symptom of more fundamental problems within the sector.
Specifically, tariffs and Government subsidies are inadequate to recover the cost of supply, and
the overall cost of supply itself is high due to excessive losses and other inefficiencies. The
current situation is summarized in Exhibit ES.1.

Through the 1994 Power Sector Reforms in Bangladesh, the 2000 Vision and Policy Statement,
and the 2005 Power Sector Reform Roadmap, the Government of Bangladesh has defined a
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comprehensive approach to addressing these problems. As part of this approach, the Government
has embarked on corporatization of the operating units of the Bangladesh Power Development
Board (BPDB). The Governments corporatization effort aims to expand the autonomy of these
units to operate on commercial and technical grounds while simultaneously introducing
mechanisms to hold these companies accountable for their performance. Experience with
unbundling and corporatization of BPDB operating units has demonstrated positive results such
as lower losses and higher collections.
The corporatization process requires the creation of a new state-owned company in addition to
the existing public body, as shown in Exhibit ES.2. Successful corporatization introduces new
business processes that contribute to better governance, improved performance management and
greater efficiency. Existing business processes need to be reviewed and if appropriate either redesigned or replaced entirely before the newly corporatized entity commences operations. Once
these processes have been established and the new entity legally constituted, assets and liabilities
may be transferred from the legacy entity, contracts assigned, and personnel recruited and/or
transferred. It can then begin commercial operation.

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A holding company is a company that owns other companies. A non-operating holding company
does not directly produce any goods or services for purchase by final consumers but instead
leaves that up to its subsidiaries. This is not a trivial role. An effective non-operating holding
company will actively drive performance in and seek to optimize investment across its
subsidiaries by virtue of its powers as shareholder in those companies. Exhibit ES.3 depicts the
principal functions and issues in a state-owned holding company structure.

This study aims to create the blueprint for corporatization of BPDB as a holding company. This
blueprint covers the organizational, financial, legal, human resource, and information technology
dimensions of the corporatization strategy. The report distinguishes between BPDB and the new
successor holding company, referred to here as Hold Co. While corporatization of BPDB as a
holding company can accelerate and expand the gains achieved through reform efforts, it is not a
panacea. To be effective in the long term, corporatization must go hand-in-hand with tariff
reform. Corporatized entities can improve reliability and increase access only if they are
financially viable.

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A. Target Corporate Structure & Migration Plan


Five options are considered for the medium-term target structure of HoldCo:
1. No holding company, i.e. HoldCo is not established and all operating companies are
owned directly by the Government.
2. An operating holding company, where HoldCo would continue to conduct the generation
and distribution activities currently conducted by BPDB
3. A non-operating holding company that owns the single buyer
4. A non-operating holding company with the single buyer as a separate entity owned directly
by the Government
5. Multiple holding companies, in which a separate Generation Holding Company and
Distribution Holding Company are established.
These options were assessed against seven criteria
1. Financial coordination & optimization. The structure helps ensure that HoldCo can
optimally allocate whatever limited financial resources are available across generation,
transmission and distribution parts of the business, with a long-term commercial view reflecting
the Governments broader policy objectives for the sector.
2. Autonomy. HoldCo helps insulate state-owned power sector operations from Government
interference. The Government will of course remain involved in the sector by virtue of its policymaking and funding roles, but HoldCo can take on commercial management of the sector.
Greater autonomy must of course be accompanied by better performance management to ensure
accountability, and HoldCo can focus on developing and applying performance management
systems while providing operating entities with the latitude and incentives to make the best
possible commercial decisions.

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3. G, T & D Differentiation. A HoldCo structure must balance the unbundling of generation,


transmission and distribution (G, T & D) operations to improve focus on specific elements of the
value chain, with creating synergy between various parts of the business. Unbundling results in
decentralization, where as creating synergy requires some degree of centralized control.
4. HR Availability. Qualified human resources are at a premium in Bangladesh. Any HoldCo
design should minimize the number of personnel required in senior executive positions.
5. Institutionalization of Accountability. Many of the mechanisms to improve sector
performance could be implemented on an ad hoc basis by Government. However, unless such
mechanisms were enshrined in law, continued application would depend upon the disposition of
the Secretary (Power) and other senior Government officials who happen to be in power at any
given time. While such a law is unlikely, the design of HoldCo can help to institutionalize
mechanisms to drive sector performance rather than relying on the personal vision and
effectiveness of Government officials who change frequently. Perhaps the single most important
mechanism is a system to impose accountability. The Articles and Memorandum of Association
for HoldCo can stipulate the performance monitoring and associate functions to drive
accountability across the entities it owns.
6. Simplicity. Any structural design that is adopted should avoid duplication of function, and
minimize complexity to facilitate implementation.
7. Compliance with laws, policies and contracts. Finally, any HoldCo structure must comply
with prevailing laws and policies, and accommodate existing contractual arrangements with
other parties such as IPPs.
The first three criteria above represent impediments to improved sector performance explicitly
identified in the 2000 Vision & Policy Statement. The last four represent other practical
considerations.
Based on analysis of the five options against the seven criteria, the non-operating holding
company with separate single buyer (Option 4) was identified as the most promising option, as
summarized in Exhibit ES.4. Under this option the generation, transmission and distribution
operations previously owned or conducted by BPDB are transferred to HoldCo as subsidiary
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companies once they meet certain conditions. The residual BPDB continues separately as the
single buyer. (Residual BPDB refers to BPDB after establishment of HoldCo and
corporatization of its remaining generation and distribution operations as HoldCo subsidiaries).
A principal benefit of this approach as opposed to creation of a single buyer subsidiary owned by
HoldCo, or transfer of the single buyer function to HoldCo, is that assignment of PPAs is not on
the critical path for operationalization of HoldCo. As single buyer, BPDB serves as counterparty
to all power purchase agreements (PPAs) with independent power producers (IPPs). Assigning
these PPAs to HoldCo or a new subsidiary would take substantial time and effort, and likely
delay the start of HoldCo operations and resulting benefits. The residual BPDB could
nonetheless be corporatized later as a Single Buyer Company as soon as the PPAs are assigned
and Presidential Order 59 (PO 59) is amended to allow transfer of the system planning function
to a successor company. The non-operating holding company is also highly flexible and could be
readily adapted to meet changes as the sector evolves. Examples of further evolution include the
complete separation of generation from transmission and distribution, or the transfer of other
power sector entities currently not under BPDB, such as DESCO, to HoldCo. Therefore,
establishing HoldCo as a non-operating holding company with the separate single buyer serves
as an achievable interim target and if successful provides a platform for addressing further
changes in the power supply industry.

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Two migration options were considered to reach this target structure from the existing BPDB
structure.
Migration Option 1: First create HoldCo as an operating holding company and transfer all
people, assets, liabilities and contracts into it from BDPB, then transfer operations into
subsidiaries and separate the Single Buyer. This makes the Operating Holding Company
(Target Option 2 above) a transitional stage to reach the target of a Non-Operating Holding
Company with the Single Buyer separate (Target Option 4 above).
Migration Option 2: First create HoldCo as a non-operating holding company, and then
transfer BPDB operations as they are corporatized to become subsidiaries of HoldCo.
Residual BPDB remains the Single Buyer, which can later be corporatized once PPAs are
assigned. Both approaches result in a residual BPDB and a separate HoldCo.

Four criteria were identified as a basis for selecting between these two migration options:
1. Speed. The migration path should minimize dependencies on outside events, such as
assignment of PPAs, amendment of PO 59, etc.
2. Effectiveness. The migration path should contribute to the development of a commercial
culture within the new entity.
3. Stakeholder Perceptions. The migration path should demonstrate quick wins that can
contribute to broad support for the restructuring effort.
4. Operational Risk. The migration path should minimize the likelihood of service
disruptions.
Based on analysis of the two options against these four criteria, establishing a non operating
holding company from the outset (Migration Option 2) was identified as the most promising
option. Exhibit ES.5 summarizes the evaluation of the two migration options, with green shading
indicating reasons why an option meets a criterion, yellow indicating uncertainty whether the
option would meet the criterion, and red indicating reasons the option does not fit the criterion.

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Exhibit ES.6 shows the proposed migration from the current to the target corporate structure.

Exhibit ES.6: Proposed Migration to the Target HoldCo Structure


Stage 0: Current State Ownership Structure
_ BPDB is a statutory corporation under MPEMR
_ DESA is in process of being corporatized as the Dhaka Power Distribution Company Ltd.
(DPDC)
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Stage 1: Create New Holding Company


A new holding company (HoldCo) is established under the Companies Act 1994 as a nonoperating holding company.
HoldCo will be established with clean opening balance sheets, new conditions of service, as well
as systems and processes that promote commercial discipline and enable efficient and effective
function as a holding company.

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Stage 2: Transfer Existing BPDB Subsidiaries


Existing BPDB subsidiaries are transferred to HoldCo when each is ready and transfer
prerequisites are met.

Stage 3: Create New Subsidiaries


Existing core business operations of BPDB (distribution, single buyer, generation) will be
corporatized as subsidiaries of HoldCo as they are ready.
Non-core BPDB businesses will be either (i) spun-off (ii) incorporated into subsidiaries or (iii)
corporatized as separate subsidiaries of HoldCo, e.g. a Services Company.

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Stage 4: Holding Company Complete


Once all operations of BPDB have been migrated to the new entities or otherwise disposed of,
the residual BPDB will continue to function as the single buyer.

ES.3 Principal HoldCo Roles & Functions


HoldCo will be a non-operating holding company. Its Articles and Memorandum of Association
developed under this study preclude direct involvement in generation, transmission or
distribution. Its principal functions will be to drive performance in and seek to optimize the
allocation of capital investment across its subsidiaries by virtue of its powers as shareholder. This
latter function is particularly important given the constrained availability of funds for capital
investment in the Bangladesh power sector.
HoldCo will perform these two functions through the following activities:
Financial Planning entails review and understanding of the least-cost system plan prepared by
the Single Buyer (BPDB), determining the availability of capital funding for the investments
identified in the plan, and then allocating the available funds across the subsidiaries taking into
account the dependency between various investments (e.g. distribution extension first requires
new transmission and generation), and the individual contribution of these potential investments
towards the Governments policy objectives for the sector, as reflected in HoldCos performance
contract.

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Performance Management. HoldCo will enter into a performance contract with the Government
that transparently documents the measurable targets HoldCo is expected to achieve. These targets
should align directly with the Governments policy objectives for the sector. It will also specify
the resources Government commits to HoldCo in order to fulfill these responsibilities (e.g.
capital funding and baseline tariff levels). The provisions of the Government-HoldCo
performance contract will cascade down to individual HoldCo-Subsidiary performance contracts,
and ultimately to individual employees throughout the Group (i.e. HoldCo and its subsidiaries
together). Performance against targets will be monitored, reported and rewarded through an
integrated performance management system covering all levels of the Group (building up from
individual employee to HoldCo itself as a corporate entity). HoldCo will take remedial actions as
appropriate to improve weak performance in subsidiaries, including provision of technical advice
to subsidiaries and, if necessary, replacement of subsidiary management.
Each performance contract will reflect powers and restrictions stipulated in the relevant Articles
and Memoranda of Association. Each will define the measurable targets for the entity, consistent
with the authority it has been granted and the resources it will receive. It will also define how
performance against these targets is to be measured and reported, and the rewards (or sanctions)
that will accompany achievement (or failure). Employee performance management will follow
an analogous process and rely on similar documentation.
Exhibit ES.7 shows the corresponding HoldCo value chain.

Exhibit ES.8 shows how HoldCo will implement these functions with respect to
Government and its Subsidiary Companies (SubCos). HoldCo will have a business orientation,
not an engineering orientation. It will not be directly involved in the physical production or
delivery of electricity, but will hold its operating subsidiaries accountable for their annual
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performance. These roles are institutionalized through the Articles and Memorandum of
Association for HoldCo.

Exhibit ES.9 enumerates HoldCos core functions as well as subsidiary support functions.

B. Hold Co Organizational Structure


HoldCo should be organized internally around the work that it does. Exhibit ES.10 identifies the
principal organizational units that will execute the various elements of its value chain. Based on
this, Exhibit ES.11 depicts the proposed high-level organizational structure of HoldCo. In
addition to these structural units, there will be various ad hoc teams that are constituted to
perform work of a temporary or intermittent nature (e.g. annual preparation or updating of the
Government-HoldCo performance contract). It is anticipated that HoldCo will require only 50 to
100 professional personnel.
An alternative organizational structure was proposed by BPDB personnel and is reviewed in this
report. Key features and associated concerns for that proposal include:

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It splits performance monitoring into two departments, one for generation & transmission, the
other for distribution. This could impede consistency of metrics, measurements and rewards, and,
of greatest concern, could result in these departments attempting to control the subsidiaries they
monitor. HoldCo is to impose accountability on its autonomous subsidiaries, not control them,
and the risk of control increases by structuring HoldCo to mirror the operations of unbundled
SubCos rather than providing an overarching performance monitoring function.

It establishes O&M and Commercial divisions within each performance monitoring

department, but these are operating functions. HoldCo is not involved in operations.
It separates IT from performance monitoring, but the principal function of IT in HoldCo

is to facilitate performance monitoring.


It moves system planning review out of the financial planning department. This means
there is no single unit responsible for preparation of the financial plan, which integrates
system planning considerations (the least-cost plan) with funding constraints (which
determine feasibility).

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C. Implementation Plan
Establishing HoldCo entails the following major steps:
1. Incorporation of HoldCo and provision of capital. This can occur as soon as the Government
approves the Articles and Memorandum of Association and subscribes the funds for initial
capitalization of the company. It can probably occur within 2 months of the Governments
decision to proceed with HoldCo.
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2. Appointment of directors. The signatories to the Articles of Association (AoA) automatically


become the first Board of Directors. However, this is only a temporary step until a new board can
be established following the process outlined in the AoA. The Government may initiate this
process by appointing a selection panel following the provisions of the AoA even if the AoA has
not yet been executed. This is the initial critical path task in the establishment of HoldCo. It is
expected that the real Board can be established within 3 to 5 months of the Governments
decision to proceed with HoldCo.
3. Appointment of managing director (chief executive officer). This will be conducted by the
Board of Directors. The process should be complete within 3 to 4 months of the Board taking up
its duties.
4. Acquisition of premises and initial assets. This can be performed under the supervision of the
managing director, in parallel with the employment of staff.
5. Employment of staff. A cascading recruitment process is envisioned in which each level of
management vets the level of management below it. It is expected that Vice Presidents will be
appointed within 4 to 6 months of the Board taking up its duties. Employment of staff should be
complete within 7 to 12 months of the Board taking up its duties, and will follow open
recruitment. As staff join, they can further define and document the new business processes to be
performed in their respective areas.
6. Acquisition of shares in power companies. This may happen after a critical mass of personnel
have been hired, most likely 5 to 8 months after the Board takes up its duties. The transfer of
former BPDB subsidiaries to or the spin-off of remaining BPDB generation and distribution
operations as subsidiaries of
Hold Co should be contingent upon the subsidiary achieving the following conditions:

Profitability of the company is at or near the level projected in the FRRP.


The companys debt service and trade purchase payments are up to date
The ability to provide financial information in the detail necessary for consolidation in

Group financial statements has been established


An adequate and effective management structure exists.

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Overall, the establishment and operationalization of HoldCo will require some 10 to 17 months
from the time the Government decides to proceed. This is consistent with the start date of 30
June 2009 assumed in the financial projections.

D. The Future of BPDB


Out of the 13,649 employees reported for BPDB in 2007, 10,561 will be transferred to
corporatized generation and distribution subsidiaries. Of the remaining 3,088 BPDB employees,
2,232 will be transferred to a Support Services company. Of the remaining 856 employees, all of
whom are from the BPDB Head Office, it is estimated that 268 will also be transferred to
subsidiaries. The remaining 588 personnel in the BPDB Head Office will be responsible for the
preparing remaining BPDB operations for corporatization and performing the single buyer
function. Over time, as operations are corporatized, BPDB will be left with only the single buyer
function.
The single buyer function currently employees about 238 personnel. Consequently, there could
be as many as 351 excess personnel once corporatization of operating units is complete.
However, it is not clear how much natural attrition will have occurred by that time, either
through retirement or successful application to HoldCo. In any case, this number of employees
can be maintained without compromising the financial viability of the HoldCo concept. Creation
of HoldCo as proposed does not result in loss of employment or redundancy. This is consistent
with Government policy that no one will lose his or her job as a result of power sector reform.
(Given the limited number of employees involved and problems with recent Voluntary
Retirement Schemes in Bangladesh, creation of a VRS to facilitate corporatization of BPDB is
not recommended). As noted above, BPDB should continue to serve as the single buyer until the
PPAs are assigned to a corporatized successor, at which point all personnel should transferred on
an as-is, where-is basis to the newly corporatized single buyer company.
The single buyer typically performs the following functions:

System planning. It forecasts demand growth and determines the least cost generation
and transmission capacity additions to meet that growth. In the new funding mechanism
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proposed for the sector, BPDB will prepare its system plan as it does now, but then

forward it to HoldCo for review and funding analysis.


Procurement. It procures new generation, typically on a competitive basis, to meet

expected demand.
Contracting. It contracts with generators and distributors for the purchase and sale of

bulk power. PPAs will have to be developed for each of the new
Settlement. It settles (i.e. invoices distributors and pays generators) monthly for bulk
power transactions.

BPDB currently conducts all of these functions except for procurement. While it participates in
the procurement process for new independent power producers (IPPs) Power Cell leads this
process on behalf of the Government of Bangladesh. BPDB employees participate with the
Power Cell team for procurement and contracting.
Like HoldCo, the residual BPDB will not have an operating role for the physical delivery of
power. It will fulfill purely planning and commercial functions. Though it may participate in
monthly system operation coordination meetings with generators and PGCB, dispatch should
remain solely under PGCBs National Load Dispatch Center (NLDC). The purpose of the
monthly coordination meetings will be to share information on the monthly load forecast, plant
operating costs, system constraints and scheduled maintenance so that the NLDC can establish a
supply curve against which merit order dispatch can be conducted. The BPDB single buyer can
contribute information on expected variable costs per the PPAs it holds, as well as take note of
forecast plant availability.
BPDBs current structure should therefore be retained initially. As remaining operations of
BPDB are corporatized, those branches of the organization will move to the subsidiaries. By the
time the corporatization of subsidiaries is complete and BPDB performs only the single buyer
function, all of the organizational units under Member Distribution and Member Generation will
have been spun off to new operating companies along with all training, engineering, and logistics
units to the Support Services company. (Organizational units under Member Transmission have
already been spun off). The remaining organizational units under Administration and Finance
will also slim down as personnel and in some cases, entire units, move to the new subsidiaries.
Ultimately, BPDB as the single buyer will have on the order of 200 personnel and an
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organizational structure along the lines of that shown in Exhibit ES.11. The functions of each
department would be much the same as in the existing BPDB.

E. Power System Reliability in the Corporatized Environment


Reliability of power supply remains a major concern for the Government and other stakeholders.
These stakeholders seek to understand how corporatization (in particular the establishment of
HoldCo and focusing of BPDB as single buyer) can contribute to improved power system
reliability.
Reliability depends directly on two sets of activities: system control and operations, which are
conducted on the short-term time scale of real time, hours, days and weeks, and planning
procurement, construction and commissioning, which occurs over the longer term time scale of
months and years.

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This report presents several recommendations regarding planning and procurement that are
intended to enhance system reliability in addition to other benefits. These recommendations
include:

Improved performance management among operating companies, supporting timely

implementation of investment plans


Creation of a financial planning function under HoldCo to optimize allocation of

available capex funding (Chapters 3 and 8)


In the longer term, introduction of new modalities for sector funding (Appendix K)

System control and operations, on the other hand, are not directly performed or affected by
HoldCo or the residual BPDB functioning as single buyer. These entities provide commercial
functions, not technical functions. They are not responsible for physical operation of the system.
More generally, corporatization is about long-term management of the power sector, not shortterm operational control of the grid system. Both are necessary for a successful sector, and they
should be mutually reinforcing.
As noted above, system operations should be the responsibility of PGCB (which includes the
NLDC). To perform this role, generators and distributors must follow the instructions of the
NLDC. Certainly implementation of Automatic Generation Control (AGC), transmission
SCADA and distribution automation systems can help centralize system control and ensure
compliance with instructions. However, such technology is not essential for effective NLDC
control. The fundamental requirement is that generators and distributors comply with NLDC
instructions regardless of how those are delivered.
Normally the specifics of such compliance would be documented in a grid code, which
ultimately would be enforced by a regulator. Although PGCB has developed a grid code, it has
not been fully introduced and the BERC is not yet in a position to formally adopt the code and
compel compliance.
These observations and suggestions are consistent with the findings of the Fact Finding
Committee convened by Power Division to investigate the grid failures resulting Cyclone Sidr on
16 November 2007. That report concluded that there were both technical as well as managerial
reasons for the duration and extent of the system outages resulting from Cyclone Sidr. Technical
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causes included unreliability of telecommunications facilities, poor operator controls and


displays, absence of AGC and inadequate number of self-startin units. (These inadequacies could
perhaps be addressed through optimal capex allocation as envisioned under HoldCo). Managerial
causes include lack of responsiveness by some generators to NLDC instructions, imprecise or
unheeded load allocation commands to/by distributors, as well as poor internal processes and
controls within NLDC itself (including absence of contingency plans and emergency training).
Therefore, until a grid code is formally adopted and enforced by the regulator, the Minister of
Power, Energy and Mineral Resources, or the Secretary (Power) as appropriate, should establish
a grid system operations committee, chaired by the head of system operation.
The instruction establishing this committee should:

Identify members of the committee as the heads of the all generators (including IPPs),

distributors, and the single buyer (BPDB).


Establish the sole authority of NLDC to control the real-time operation of the system,

accountable for operational reliability.


Mandate that that all entities connected to the transmission system must take timely
action on instructions issued by the head of system operation regarding real-time

operation of the system


Compel members of the committee to participate in monthly system coordination
meetings chaired by NLDC, and provide information requested by NLDC for planning

system operations.
Provide for NLDC to report member compliance to the Government authority issuing
the instruction, and outline penalties for non-compliance System operation is but one
element of the electricity value chain.

Exhibit ES.12 depicts the complete value chain.

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Ultimately, reliability of power supply depends upon execution of each element of this value
chain. The table in Exhibit ES.13 shows how responsibilities for performance of each
element of the chain may be allocated across the power sector entities described in this
report. The exhibit also indicates the document(s) that govern the execution of each element
of the chain. Not all of these documents have been prepared, but eventually the sector will
require the development of and adherence to these documents to guide each of the sector
entities in fulfilling its role.

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VIII. Infrastructural Developments


in following fields
A. Roads & Highways

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B. Power Generation

C. Industry Development

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D. Manpower Development

E. Education Sector Development

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F. Development in Agriculture
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G. Foreign Trade Development


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IX. PROGRESS IN THE FIELD OF


F.D.I
A. Present FDI Status
Bangladesh has attracted USD 913 million foreign direct investments (FDI) in 2010
calendar year, a leap by 30 per cent. This upgrades the country's position to 114 from 119 out
of 141 nations in the World Investment Report (WIR). During this period the telecom sector
received USD 360 million FDI, the manufacturing sector received USD 238 million in
investment from abroad, USD 145 million in the textile and clothing sector, while leather and
leather products got USD 46 million. (The financial Express, 27 July, 2011)
As a developing country, Bangladesh needs Foreign Direct Investment (FDI) for its ongoing
development process. Since independence, Bangladesh is trying to be a suitable country for
FDI. In order to accelerate economic growth, Bangladesh opened her economy in the late
1980s to reap the benefits of FDI. In 1989 the government set up Board of Investment (BOI).
The primary objective of which is aimed at attracting and facilitating investment from abroad
(Mondal 2003). The government also lifted restrictions on capital and profit repatriation
gradually and opened up almost all industrial sectors for foreigners to invest either
independently or jointly with the local partners. Further, the government also introduced
various financial and non-financial incentives like tax exemptions for power generations,
import duty exemptions for export processing industries, tax holiday schemes for undertaking
investment in priority sectors and low development areas, zero duty rate for the import of
capital machinery and spare parts for 100 percent export oriented industries, almost no
restrictions on the entry and exit mode, and reduction of bureaucratic hassles in getting
faster approvals of foreign projects. Together with all these incentives followed by a low
labor cost structure, Bangladesh has been an attractive destination for FDI in the South Asian
region since the late 1980s.

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The trend of Inflow of FDI in Bangladesh has increased over the 1980s as compared to earlier
periods and this same momentum continues in 1990s as well. The total inflow of FDI has been
increasing over the years. During the period of 1977-2010, total inflows of FDI were
USD 8927.9 million, among which the total inflows of FDI during 2006-2010 was USD
4158.63 million. In 1977, this inflow was USD 7 million and in 2008, annual FDI
reached to USD 1086.31 million. Unfortunately, there was a declination in inflows of FDI
in 2010 which was USD 913.32 million (Source: Survey Report, Statistics Department,
Bangladesh Bank). Figure 3.1 illustrates the trend of FDI inflows in Bangladesh during 19962010.

Figure 3.1: FDI Inflows in USD in Bangladesh during 19962010


Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment.
The figure 3.1 shows an inconsistent proceeding of FDI inflows during the period. In 1999 there
was a sudden decline in the FDI and the falling trend continued for many reasons again in 2001,
2002 and 2003. Serious political unrest during the period discouraged foreign investment and it
took quite some time to regain the confidence of foreign investors. There were also some other
factors that force this declination in the inflows. After that, there was very good news for
Bangladesh. The FDI inflow was on the steady rise from 2003 to 2005. It rose to US$ 1086.3
million in 2008 but slumped to US$ 700.16 in 2009 and again increased to $913.32.

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FDI Inflows by Components:

Figure 3.2.1: FDI Inflows (in million USD) by components in Bangladesh during 1996-2010
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment.

Figure 3.2.2 FDI Inflows, in million USD by components in 1996

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Figure 3.2.3 FDI Inflows, in million USD by components in


2010
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct
Investment in Bangladesh (1971-2010), Board of Investment.
FDI in Bangladesh consists of three components: Equity capital, Reinvested Earnings and
Intra- company loans. These components have fluctuated considerably in the last two decades.
In the early year of 1996, the total FDI inflow was only 210 million USD where reinvested
earnings were the bigger portion. This trend continued up to 1998. Then there is a sudden
decline in terms of total inflow as well as component wise inflow of FDI. Beside a slight
increase in 2000, this declining trend continues up to 2003. After then total inflow continues to
rise with some ups and downs. The portion of equity capital continues to have a bigger part in
the total FDI inflows. In 2008 the total inflows was 1100 million USD which is the highest
ever.

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The shifting of component wise FDI inflow in Bangladesh is clearly in the figure 3.2.2 and 3.2.3.
In present years, the major share of FDI inflow in Bangladesh come in equity capital form. In
1996 the share of equity capital in total FDI was 30 percent which increases to 57 percent in
2010. In 1996 share of reinvested earnings was 53 percent which decreased to 40 percent in
2010. On the other hand, share of intra-company loan was 17 percent which then decreased to 3
percent in 2010. This shows that the net transfer of resources from abroad into Bangladesh is
fairly negligible. The contribution of FDI is very little in case of transfer of 'hardware'
technology.
FDI Inflows by Areas (EPZ and non EPZ):

Figure 3.3.1: FDI Inflows (in million USD) by area (EPZ and non EPZ) in Bangladesh during
1996-2010
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct
Investment in Bangladesh (1971-2010), Board of Investment
Figure 3.3.1 reveals that despite the initial increase and steady continuation, FDI inflows in NonEPZ areas was in declining trend during the period of 2001-2003. In 2004 it increased to 800
million USD and this trend continued up to 2005.The FDI inflows in Non-EPZ areas in 2010
recorded to USD 795.15 million which is 87 percent of total inflows whereas in the beginning of
this period (in 1996) it was USD 189.3 million which is 82 percent of total inflows. In the EPZ
areas, the FDI inflows were always in a steady direction.

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B. FDI Inflows by sectors


Sector-wise analysis of FDI reveals the fact that a shift has been made by the foreign investors in
their investment in Bangladesh (Annex Table-3.4). The table shows the trend of FDI towards
power and energy, manufacturing and telecommunications, whereas the neglected sectors were
agricultural, Services and trade and commerce. In 2005, the main focus of investment was in the
manufacturing sector. The success in textiles through the ready-made garments (RMG) industry
was a vital part of this investment. The pie chart shows the shift of FDI in the sectors in
Bangladesh. The pie chart draws a clear picture how the dimensions of FDI inflows have
changed in recent years. The reduction in FDI shares of manufacturing demonstrates that its
stronghold position for foreign investment is in declining state. On the other hand, telecom sector
is gaining prominence during present years. In 2008 the telecommunications sector overtook
manufacturing sector as the leading recipient of FDI. Due to increased privatization efforts by the
government, telecom has emerged as one of the fastest growing sectors in the Bangladesh
economy. Much of this can be explained by the increased competition between large private
corporations that have magnified efforts to attract FDI and attain better and latest technology to
optimize the profits. In addition to that, the energy sector draws lower amount of FDI, which is
explained by the countrys natural gas reserves. Another factor is the countrys difficulty in
electricity generation. The lack of production capacity forces the government to frequently load
shedding power. It imposes blackouts in areas of low power usage to meet the needs of areas of
higher power usage. The governments lacking of the capital and liquidity of building powergrids and expanding the countrys electric capacity opens the door of much scope for foreign
investment.

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Figure 3.4.1: FDI Inflows (in million USD) by sectors in Bangladesh during 19962010.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment

in

Bangladesh

(1971-2010),

Board

of

Investment.

Figure 3.4.2: FDI Inflows (in million USD) by sectors in Bangladesh during 1996-2000.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
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Investment in Bangladesh (1971-2010), Board of Investment.

Figure 3.4.3: FDI Inflows (in million USD) by sectors in Bangladesh during 2001-2005.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment.

Figure 3.4.4: FDI Inflows (in million USD) by sectors in Bangladesh during 20062010.
Source: Survey Report, Statistics Department of Bangladesh Bank and
Foreign Direct
Investment in Bangladesh (1971-2010), Board of Investment.
In the figure 3.4.3 and 3.4.4, it is clearly shown that the percentage of investment in various
sectors has changed quite a lot. The percentage of telecommunication investment was 2%
in 1996-2000 was only 2%, which increases to 21% during 2001-2005 and finally it topped to
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43% during 2006-2010. On the other hand, the portion of investment in the gas & petroleum
sector has declined gradually during the year of 1996 to 2010. It was 28% in 1996-2000, 18%
in 2001-2005 and only 13% in 2006-2010. It is also a matter of great concern that the
investment in energy sector has decreased from 12% to only 3%, which is very alarming. The
government should take a close look in this matter and take necessary steps to identify the
causing factors and to rectify those to improve our present energy sector conditions.

C. FDI Inflows by countries


The country-wise FDI inflows in Bangladesh from top 10 investing countries during 1996-2010
are presented in figure 3.5.1.

Figure 3.5.1: FDI Inflows (in million USD) by countries during 19962010.
Source: Board of Investment, Bangladesh.
The figure 3.5.1 shows that United Kingdom has gained the top most position among the top 10
investing countries in Bangladesh during 1996-2010 in investing in various sectors of economy.
Out of total FDI inflows from the top 10 investing countries during this period, 17.4% was
from United Kingdom, 13% from USA, 8% from Egypt, 7.7% from South Korea, 6.4% from
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Netherlands, 6.2% from Singapore, 5.6% from Hong Kong, 5.2% UAE, 4.8% from Japan,
3.5% from Malaysia, 3.2% from Australia, 2.1% from Denmark, 2.1% from Switzerland.

Figure 3.5.2: FDI Inflows (in million USD) by countries during 19962000.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment.

Figure 3.5.3: FDI Inflows (in million USD) by countries during 2001 2005.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment.

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Figure 3.5.4: FDI Inflows (in million USD) by countries during 2006-2010.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign
Direct
Investment in Bangladesh (1971-2010), Board of Investment
Figures 3.5.3-3.5.5 showed how the ever changing nature of FDI inflows over the year. From
the figures, it is clearly seen that developed country was highest investor during 19962005 but during 2006-2010 Middle East stood in the highest position. It revealed that there is a
shift in investment regime. It reveals the importance for Bangladesh to maintain a continuous
favorable business relation with developed countries for increasing their share of FDI in
Bangladesh. The Asian countries should get more attention in terms of creating necessary
investment climate. It is also important to continue warm relationship with Middle East
countries as their significant share of FDI in recent years. Furthermore, Bangladesh must not
lose the faith of ADB and IFC for FDI. They have a remarkable ranking in investing
Bangladesh.

D. Sector-wise present scenario of FDI

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Agriculture & Fishing


In our country the most preferable sector is agriculture which is mostly elaborated in the
national budget and others. Though this sector is the most preferable FDI contribution is not
very strong in this sector. In the year of 2005 the contribution of FDI in agriculture is 1.7 and
in the year of 2006 is 1.3. The contribution of agriculture in 2006 is 0.16% through the total
FDI.
Power, Gas, Petroleum
Now the world most important sector is Petroleum, Gas and Power. So the whole world
movement accelerated into this sector, which present example is Iraq Invasion. Our country has
the natural resources of Gas but we are poor in power and petroleum. We are dependent
on OPEC countries and our power development achievement is very low in size. As a
result we cant provide enough contribution to our poor people. As a result we expect a bulky
contribution on this sector. So we get 208.3 in 2005 out of 845.3 and 208.2 in 2006 out of
792.5. In 2006 it was 26.3% through the FDI contribution.
Manufacturing sector
Traditionally the FDI contributions devoted to this sector expecting the huge profit and enlarge
business facilities. So every country wants to contribute this sector in case of FDI decision. In
Bangladesh this sector has the magnitude contribution in total FDI. In the year of 2005
this sector contribution 219.3 out of 845.3 million $US and in the year of 2006 contribution is
104.9 out of 792.5 million $US. The percentage contribution of 2006 is 13.2%
Trade and Commerce
In this sector Bangladesh has more involvement in banking sector, because banking sector is
the most prominent and profitable sector through the whole trade and commerce. So the FDI
contribution in 2005 on trade and commerce sector is 130.5 where banking sector get this
contribution 117.8 out of total 845.3 contribution of FDI. In the year of 2006 the contribution
of trade and commerce is 130.2 where the banking sector contribution is 117.7 out of total
contribution of FDI 792.5 in 2006.
Transport, Storage and Communication

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In Bangladesh this sector gets the more precedence in case of FDI contribution. Our country
gets the highest contribution in this sector through the whole contribution of FDI. In the year of
2005 the contribution was 279.9 out of 845.3 million $US where full contribution goes to the
telecommunication sector, in the year of 2006 the contribution was 347 million $US out of
792.5 million $US where almost the full contribution diverted to telecommunication sector.
Service
Recently most uttered and renowned word is service. So everyone wants to get more benefit by
using this word through the whole world. Bangladesh is not except of this trend. So Bangladesh
except the FDI contribution in this sector. In the year of 2005 the contribution was 3 and in the
year of 2006 it was 0.2 million $US out of 845 million $US and 792.5 $US respectively.

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E.FDI Flow in BD

There is no regular trend in the flow of FDI (Figure 1). The flowof FDI increased at a staggering
rate of 64.45, 47.16 and 182.86percent in FY 1997-98, FY 2000-01 and FY 2004-05respectively
than that of FY 1996-97, FY 1999-00 and FY 2003-04. The flow of FDI totals at USD 603.3
million, USD 563.93million and USD 803.78 million in FY 1997-98, FY 2001-02 andFY 200405 respectively. After FY 2004-05, the flow of FDIdeclined in the next three fiscal years. The
country received anincreased amount of USD 960 .59 million in FY 2008-09 butwitnessed a fall
in FDI inflow in next fiscal years.
Figure 1: Flow of Foreign Direct Investment

It is to be noted here that FDI inflow to Bangladesh has traditionally been lower, even compared
with other South Asian countries. Considering FY 1996-97 as the base year, the statistics reveals
that FY 2011-12 might be a net FDI receipt of USD 806.52 million. If the current trend of FDI
inflow persists, the country might receive USD 888.96 million of FDI in FY 2014-15 and growth
rate of FDI might be only 3.19 percent. There was a significant jump from FY 2003-04 to FY
2004-05 but after that, the incremental growth rate is neither significant nor adequate.

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E.

FDI as a Percentage of GDP

Although the amount of FDI is increasing over the years, FDI as a percentage of GDP is
following a declining trend after FY 2004-05. FDI as a percentage of GDP increased to 1.33
percent in FY 2004-05 while GDP and FDI flow were Tk. 3707.0 billion and Tk. 49.34 billion
respectively. Then FDI as a percentage of GDP declined until FY 2007-08 and the scenario
changed only in FY 2008-09. The growth of FDI in FY 2008-09 was 24.96 percent higher than
that of previous fiscal year and FDI as percentage of GDP increased to 1.07 percent.
After FY 2008-09, FDI as a percentage of GDP started to decline sharply. In FY 2010-11, the
amount of FDI and GDP were Tk. 55.45 billion and Tk. 7874.95 billion respectively against Tk.
63.16 billion and Tk. 6943.24 billion of FY 2009-10. The share of FDI in GDP in FY 2010-11
was only 0.70 percent, which is 21 percentage points less than that of the previous fiscal year.
Figure 2: FDI as a Percentage of GDP (in crore Taka)

Source: Author's calculation based on Bangladesh Bank, Bangladesh Bureau of Statistics, 2012

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If the current trend continues, the inflow of FDI in the current fiscal year might reach at Tk.
60.06 billion and the share of FDI in GDP might be only 0.67 percent, which is 3 percentage
points less than that of the previous fiscal year. Under the business as usual scenario, FDI in FY
2014-15 might increase to Tk. 70.33 billion while FDI as percent of GDP might stand at only
0.66 percent.
FDI as percentage of total investment was 5.43 in FY 2004-05 while the contribution of FDI in
total investment was USD 49.34 million. The share of FDI in total investment in FY 2008-09
increased after continuous declining in three successive fiscal years. In FY 2008-09, the share of
FDI in GDP was 1.07 percent. Global economic recession had an adverse effect on the flow of
FDI in the country. The share of FDI in total investment was 4.41, 3.73 and 2.85 percent in FY
2008-09, FY 2009-10 and FY 2010-11 respectively. If the current trend of FDI inflow persists,
the share of FDI in total investment might stand at 2.94 percent in FY 2011-12 and 3.03 percent
in FY 2014-15.
Figure 3: FDI as a Percentage of Total Investment

Source: Authors calculation based on Bangladesh Bank, 2012


Total investment and MTMF Projection
The gap between actual flow of total investment and the target ofthe government articulated in
the Medium Term MacroeconomicFramework (MTMF) is on the rise and might grow sharply in
theupcoming years.

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In FY 2010-11, the current flow of investment was Tk.1947.86billion than that of the MTMF
projection of Tk. 2059.96 billion indicating a gap of Tk. 112.10 billion. If the current
trend prevails, the gap might increase further in FY 2014- 15 and under the business as usual
scenario, the flow of investment might stand at Tk. 2474.02 billion against the MTMF
projection of Tk. 4141.31 billion. The gap between total investment and MTMF projection in FY
2014-15 might increase to Tk. 1667.29billion.

Figure 5: Growth rate of GDP and FDI

Source: Authors calculation based on Bangladesh Bank and Ministry of Finance, 2012
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There is no specific relation between the growth of FDI and GDP growth. FDI plays a negligible
role in the growth of Bangladesh economy. In the FY 2004-05, the growth rate of FDI touched its
highest amount, which was 182.86 percent. It occurred because of the higher inflow of FDI in
power gas and petroleum, manufacturing, transport, storage and telecommunication. In that time,
GDP growth rate was 5.96 percent.

Page | 113

Page | 114

Y.

CONCLUSION

There is no doubt that globalization has resulted in large increase in Project Management.
Greater inflow of Project Management has bolstered deeper integration of World economies.
Though there are some serious potential drawbacks of Project Management, developing
countries are not in a position to turn back from Project Management. But, what they can and
should do is to try to minimize its negative effects. They should look at ways to make Project
Management more meaningful. The proponents of Project Management argue that Project
Management brings prosperity to the recipient countries through technological transfer,
increasing volume of exports, reducing the volume of imports, enhancing job opportunities,
and

increasing government revenue. Despite these merits of Project Management, opponents

argue that it increases dependency of the recipient countries which makes them vulnerable to the
footloose nature of Project Management. If we analyze the Project Management in Bangladesh,
most of the Project Management has gone to the energy sector. Comparatively Project
Management in manufacturing sector is not high. The Positive thing is that over the years our
volume of exports is increasing though the global economy is in tremendous disaster because of
share market fall and some other factors. On the other, day by day import volume of our country
is also in an increasing trend while increasing the budget deficit of the government.

XI. RECOMMENDATIONS
Page | 115

Bangladesh needs to maintain some effective steps.

The administrative system of the country should be reformed through appropriate and

effective measures.
The bureaucracy needs to be reorganized. The control of bureaucracy should be minimized.
Government should look into the law and order situation to ensure business friendly
environment. A social consciousness is much more needed to ensure the rule of law and

reduce the various effects of corruption.


Both the government and private sector should be taken much more priority in this sector.

They need to come ahead in investing in developing the infrastructure.


Appropriate policy measures are needed to be developed so that private sector can run
smoothly. If both public and the private sector work together in the same view of
implementing economic reforms, Bangladesh will surely upgrade her position. Similarly, the
further simplified custom clearance procedures can be very helpful in improving the present
situation. In order to stimulate domestic and foreign investments, the privatization program

can be initiated at large scale.


It is important for a developing country like Bangladesh to modernize the laws relating to

business and investment. It should be done focusing on international practices.


The development of new industrial parks can play a very important role in attracting foreign

investment in Bangladesh.
The government may consider setting up new EPZs to encourage export oriented

investors.
Necessary steps should be taken to improve the image of the country abroad.
An investment promotion agency needs to provide functions such as investment

generation and policy advocacy.


Bangladesh needs to strengthen economic and commercial diplomacy in attracting FDI in by

rapid globalization and increasing competition.


Bilateral relations with potential investor countries should be improved.
Bangladesh should take effective steps in accelerating reform measures for banks, other

financial institutions and capital market.


A good governance and political stability should be ensured. Corporate governance will play
a key role in enhancing the investment climate of Bangladesh. So we should implement

corporate governance strongly in financial sector.


The rate of corporate taxes is 40% for non-listed companies. It is one of the highest in Asia.

This rate should be favorable for investors.


Different ministries and organization needs to work in an integrated manner to
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successfully address issues regarding sectors.


In future, the prospect of the Bangladesh economy would be affirmative if initiatives can be
taken to consolidate the proposed reforms. Recently Bangladesh has taken steps to simplify
various processes to encourage increased Project Management. The government, total financial
sector and foreign investors must work together to achieve the goal of making Bangladesh a
progressive economy by the end of this decade.

XII. REFERENCES:

http://www.investopedia.com/terms/f/fdi.asp

http://www.boi.gov.bd/index.php/investment-climate-info/fdi-in-bangladesh

http://www.fdiintelligence.com/

http://www.pmbf.ait.ac.th/www/images/pmbfdoc/research/report_afsanarahman.pdf
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http://www.biliabd.org/article%20intl/Vol-07/Kazi%20Mahmudur%20Rahman.pdf

http://assignmentbasket.blogspot.com/

http://www.thedailystar.net/beta2/news/quick-rental-power-helps-fuel-gdp-growth-study/

http://www.thefinancialexpress-

bd.com/index.php?ref=MjBfMDVfMjRfMTNfMV8xXzE3MDQzMA==

http://www.natunbarta.com/english/national/2013/08/12/7710

http://www.thefinancialexpressbd.com/index.php?ref=MjBfMDVfMjdfMTNfMV82XzE

3MDc1Ng==

http://www.daily-sun.com/details_yes_19-05-2011_PM-opens-two-rental-power-plants-

today_224_1_10_1_18.html

http://powerplants.einnews.com/country/bangladesh

http://www.fe-bd.com/index.php?ref=MjBfMTFfMTZfMTJfMV8yXzE1MDE2MA==

http://www.energybangla.com/category/51.html

http://en.wikipedia.org/wiki/Foreign_direct_investment

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, July

2011,

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Peoples Republic of Bangladesh.

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Bangladesh

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Bangladesh.

Power Cell. 2006. Bangladesh Power Sector Data Bank.

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Modelling and

Forecasting

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Economics, Trade and Development (IPEDR), Vol. 7, IACSIT Press, Singapore

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Dhaka,

Bangladesh.

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Towards Revamping Power and Energy Sector: A Road

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