Investment Climate in South‐ West
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Working Paper 4/2010 Investment Climate Series Investment Climate in South‐ West Region of Bangladesh: A Study of the Manufacturing Sector Mohammed Ziaul Haider, Ph.D. Khan Mehedi Hasan Economic Research Group Working paper No: 4/2010 Investment Climate Series Investment Climate in SouthWest Region of Bangladesh: A Study of the Manufacturing Sector Authors Dr. Mohammed Ziaul Haider1 Khan Mehedi Hasan2 Mentors Sajjad Zohir, Ph.D3 Farook Chowdhury4 ECONOMIC RESEARCH GROUP JUNE 2010 1. Associate Professor, Economics Discipline, Khulna University 2. Assistant Professor, Economics Discipline, Khulna University 3. Director, Economic Research Group 4. Project Manager, BMB Mott MacDonald Published By Economic Research Group (ERG), Dhaka, Bangladesh The papers in this series are published as part of contract under the Small Grants Program, implemented by ERG and BMB Mott MacDonald and supported by the Bangladesh Investment Climate Fund (BICF). BICF is managed by IFC, in partnership with the U.K. Department for International Development and the European Union. Details about the program can be found at http://www.ergonline.org/ifc/index_of_SGAPP.html © Dr. Mohammed Ziaul Haider, Khan Mehedi Hasan This publication may be reproduced, stored or transmitted for research and academic works without prior permission of the publisher or the author(s) but proper acknowledgement must be given. For reproduction of the document for other purpose(s) prior permission must be sought from the publisher. For contacts, write to Executive Director Economic Research Group 9/4 Lalmatia Block D, Dhaka 1207 Email: [email protected] Telephone: 880‐2‐9135966 Fax: 880‐2‐9135966 Title: Investment Climate in SouthWest Region of Bangladesh: A Study of the Manufacturing Sector ERG Working Paper 4/2010 Investment Climate Series Series Editor: Dr. A.K. Enamul Haque Technical Editor: Zahidul Naim Zakaria Research Coordination: Rizwana Subhani The views expressed in this publication are those of the author(s) and do not necessarily represent those of the publisher or the funding agencies. Acknowledgement We would like to acknowledge the International Finance Corporation (IFC) for financing this study, and Bangladesh Investment Climate Fund (BICF) and Economic Research Group (ERG) for their support. We cordially acknowledge Khulna University for granting the permission to conduct the research. We are indebted to Professor Wahiduddin Mahmud, Professor A.K. Enamul Haque, Dr. Sajjad Zohir, Mr. Farook Chowdhury and all other resource persons for their valuable comments and guidelines at various stages of the study. We would also like to express thanks to research assistants and survey personnel for their cooperation. We are indebted to Bangladesh Road Transport Authority (BRTA) - Khulna office, West Zone Power Distribution Company Limited, Palli Biddut Unnoyon, Khulna Development Authority (KDA), Bangladesh Bureau of Statistics (BBS) and some other organizations for providing secondary data which has been used in this research work. We are thankful to the survey respondents (manufacturing firms), who have spent time out of their busy schedules to answer the survey questionnaire. Special thanks goes to Bangladesh Small and Cottage Industries Corporation (BSCIC) authority located at Jessore for helping us get access to information about manufacturing firms in the BSCIC area. We are also thankful to our friends, relatives, colleagues, and concerned others who helped in completing this study successfully. Khulna, Bangladesh Mohammed Ziaul Haider August, 2010 Khan Mehedi Hasan Khulna University, Bangladesh Content Introduction ............................................................................................. 1 1.1 Statement of the Research ............................................................... 1 1.2 Literature Review ............................................................................ 2 1.3 Key Research Questions ................................................................. 7 1.4 Conceptual Framework ................................................................... 9 1.5 Research Methods ......................................................................... 10 1.6 Organization of the Report ............................................................ 14 1.7 Limitation of the Study ................................................................. 15 Overview ................................................................................................ 16 Introduction ......................................................................................... 16 2.1 Study Area at a Glance ................................................................. 16 2.2 Investment Climate of the Study Area .......................................... 19 2.2.1 Physical Infrastructure ........................................................... 20 2.2.2 Electricity ............................................................................... 25 2.2.3 Financial Infrastructure .......................................................... 25 2.2.4 NGOs ..................................................................................... 27 2.3 Manufacturing Sector of the Study Area ...................................... 27 Summary ............................................................................................. 28 General Aspects of Manufacturing firms ........................................... 29 Introduction ......................................................................................... 29 3.1 Product .......................................................................................... 30 3.2 Location of Sample Firms ............................................................. 31 3.3 Firm Age ....................................................................................... 31 3.4 Ownership Pattern ......................................................................... 34 3.5 Sourcing of Raw Materials ........................................................... 36 3.6.1 Firm Size (by Employment) .................................................. 37 3.6.2 Firm Size (by Sales Volume) ................................................. 39 3.7 Seasonality .................................................................................... 41 3.8 Skill Level ..................................................................................... 42 3.9 Business Initiation ......................................................................... 43 3.10 Business Financing ..................................................................... 44 3.11 Export Orientation ...................................................................... 44 Summary ............................................................................................. 45 Product dimension of manufacturing Firms ...................................... 47 Introduction ......................................................................................... 47 4.1 Major Product Groups ................................................................... 47 4.2 Performance of Manufacturing Firms ........................................... 50 4.3 Investment ..................................................................................... 54 4.4 Energy Consumption .................................................................... 55 4.5 Input-Output Market ..................................................................... 57 4.6 Product Price ................................................................................. 60 4.7 Sales Pattern .................................................................................. 61 4.8 Cost Structure ................................................................................ 62 4.9 Performance of Miscellaneous Firms ........................................... 64 4.10 Case Study .................................................................................. 68 Regional Aspects of Manufacturing firms .......................................... 73 Introduction ......................................................................................... 73 5.1 District Wise Performance of Manufacturing Firms ..................... 73 5.2 Raw Material Market .................................................................... 75 5.3 Energy Consumption .................................................................... 76 5.4 Cost Structure ................................................................................ 76 5.5 Investment ..................................................................................... 78 5.6 Input-Output Market ..................................................................... 78 5.7 Sales Pattern .................................................................................. 80 Investment Climate for Manufacturing Firms ................................... 83 Introduction ......................................................................................... 83 6.1 Physical Infrastructure and Firm Performance ............................. 83 6.2 Input Market .................................................................................. 88 6.3 Output Market ............................................................................... 89 6.5 Utility Services .............................................................................. 93 6.6 Miscellaneous Issues ..................................................................... 94 6.7 Multiple Regression Results