Cost of investment is getting cheaper in Bangladesh: JETRO survey Holiday Desk

Japan External Trade Organisation (JETRO) a non-profit organisation under the Ministry of Economy Trade & Industry, Government of Japan. has been working to promote mutual trade and investment between Japan and the rest of the world.
   A press release says that JE'TRO has 73 overseas offices including one in Bangladesh and 36 regional offices in Japan. Since its inception in Bangladesh in the year 1973, JETRO Dhaka has been supporting private sector through its various schemes.
   JETRO conducts research on economic political and societal issues in developing economies to support Japan's expansion of harmonious trade and investment and provision of international economic cooperation focused on developing economies. Study results are disseminated through diverse channels, including publications, lectures and seminars.
   'To inform and provide effective guideline regarding the cost of investment and business to the prospective Japanese investors. JETRO has been conducting surveys in major cities of Asia (attractive from the investors' point of view) on investment related cost comparisons every year. Likewise, this year also JETRO conducted the 17th survey recently.
   A clear comparison based on 32 cost-components has been revealed through this survey. They include wage for workers, salary for engineers, salary of the mid-level managers, legal minimum wages, social security ratio, nominal wage increase rate, cost of one square metre of land area in an Industrial estate, rent for one square metre of office space, telephone installation fee, per minute call charge for a fixed telephone, charge for a mobile phone, per minute call charge for a mobile phone1 internet connection fee, monthly basic fee for using internet, cost of 1 kwh Electricity; cost of 1 m3 of Water, cost of 1m3 of gas; container freights; cost of per liter gasoline and diesel; percentage of corporate tax, percentage of personal income tax, percentage of VAT, percentage tax on interest remitted to Japan, percentage tax on dividend remitted to Japan etc.
   
   Cheaper cost
   When arranging the order of 30 cities according to each of the 32 cost-components, Bangladesh has been indicated as the cheapest place against 9 components (4 components are being exclusive for Bangladesh and the rest being shared with other countries) including Legal minimum wages, social security burden ratio, office rent. Monthly basic charge for using mobile phone, cost of per cubic meter gas for general use, monthly basic charge for business use and general use of Gas, monthly basic charge for general use of water etc.
   Besides, comparing to l6th Survey the relative position of Bangladesh against the components like salary of mid-level manager (working for Japanese investors), legal minimum wage, rate of increase in nominal wage (2003-04). Per square meter monthly rent of industrial estate, telephone installation fee; monthly basic telephone charge and call charge per minute. International call charge (3 min to Japan) mobile phone subscription fee, monthly basic mobile phone charge, cost of' general use of per cubic meter gas, cost of diesel etc. has been improved.
   The survey found that the mean order of al1 the components has switched to 2.44 from 2.49 indicating a very' small elevation which means Dhaka has become a little more cost-competitive from the viewpoint of investment costs. Foreign investments are considered essential for economic development of Bangladesh and therefore, it must be the pre-condition to create a conducive and attractive environment for that purpose. From this viewpoint, it is indeed a merit for Bangladesh that the investment cost has become a little cheaper and such a trend has to be maintained.
   Analysis revealed that cost of investment in Bangladesh is getting cheaper as because of her competition with other countries to reduce the cost which is related to cost- component of investment.
   The survey says, the cost related to the usage of mobile phone (i.e. Monthly basic charge and connection fee for using mobile phone) has gone down because of internal stiff competition among the mobile operators which belong to private sector. Due to the emergence of several new private cell phone operators, the new connection fee for mobile phones has become cheaper and it is anticipated that the call charge and monthly basic charge for mobile phone with ISD facilities will further go down as new operator Warid Telecom of Dhabi Group commenced their operation in Bangladesh recently.
   But, among 32 cost-components mentioned in the survey, many of them are controlled and managed by agencies which are under public sector. Therefore, Government of Bangladesh should remain vigilant in case of any change of cost-components in other countries and has to continue its effort to achieve greater competitive edge by adjusting the cost.
   
   Areas need attention
   The press release says that focus should be given in some areas for further improvement, despite the merits and advantages mentioned hereinabove.
   Comparing to other Asian countries, Bangladesh is less competitive in the areas like cost of industrial estate land (per square meter), monthly basic payment for broadband (512 kbps); Internet service, new connection fee for fixed telephone line, container transportation cost, rate of corporate tax. etc.
   Specially, the monthly basic payment for broadband Internet service in Bangladesh is continuously the highest (i.e. occupying the lowest order of position) in Asia (US$17.34 while Mumbai is only US$ 12.23). According to the new Industrial Policy, the government of Bangladesh has declared ICT as thrust sector which is appreciable and will definitely flourish the sector. Besides, the connectivity to submarine cable will reduce the cost and increase the speed of internet service to the people.
   Regarding telephone service the charge per call in Bangladesh stands around the middle range among the Asian countries, but the new installation fee is quite high.
   Regarding the container transport, the survey has been made for the routes from 30 Asian cities (Chittagong Port in the case of Bangladesh) to the ports of Yokohama and Los Angeles and the result shows that even after offsetting the proportional cost due to geographical longer distance, the cost of transportation from Chittagong Port is higher than that from Mumbai Port. This is due to the fact that large container ships cannot come to Chittagong Port due to its shallow draft and, therefore, transshipment of containers becomes necessary either at Singapore or at Colombo. The cost of container transport is a big element affecting the export competitiveness of a Commodity.
   
   Hidden cost
   According to existing Japanese investors, some hidden costs which are abstract by nature but exist in matters related to legal policy, procedural system and infrastructure, have been playing a vital role in case of elevation of cost of investment. Among the matters, absence of comprehensive one stop service; poor law and order situation; delay in the settlement of L/C payment; sudden changes in Government policies; inadequate infrastructure facilities (Power, water & gas); political instabilities, problem related to Port of Chittagong; political activities like hartal etc need attention of the Government of Bangladesh to reduce the hidden cost of investment.
   Bangladesh is cheaper in terms of some major cost-component as revealed in the survey. In addition to that the average cost of all the components of the survey decreased a little bit comparing to the last survey, which creates a ground to summarise that Bangladesh becomes cheaper in terms of investment cost., but the hidden cost related with the areas mentioned above has also been playing a role in the case of increasing the investment cost. Therefore, in order to remain competitive and also to increase its competitive edge comparing to other countries, Bangladesh should continue its effort to reduce its cost and also take immediate measures to eliminate the hidden cost on priority basis.

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