Attracting Investment in Bangladesh—Sectoral Analyses Investment Attracting Public Disclosure Authorized Public Disclosure Authorized DIRECTIONS IN DEVELOPMENT Trade Kathuria and Mezghenni Malouche Attracting Investment in Public Disclosure Authorized Bangladesh—Sectoral Analyses A Diagnostic Trade Integration Study Sanjay Kathuria and Mariem Mezghenni Malouche, Editors Public Disclosure Authorized Attracting Investment in Bangladesh— Sectoral Analyses DIRECTIONS IN DEVELOPMENT Trade Attracting Investment in Bangladesh—Sectoral Analyses A Diagnostic Trade Integration Study Sanjay Kathuria and Mariem Mezghenni Malouche, Editors © 2016 The Government of the People’s Republic of Bangladesh Some rights reserved 1 2 3 4 19 18 17 16 The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The Government of the People’s Republic of Bangladesh and The World Bank do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the Government of the People’s Republic of Bangladesh or The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http:// creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: Kathuria, Sanjay, and Mariem Mezghenni Malouche, eds. 2016. Attracting Investment in Bangladesh—Sectoral Analyses: A Diagnostic Trade Integration Study. Directions in Development. Washington, DC: World Bank. doi:10.1596/978-1-4648-0924-8. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by the Government of the People’s Republic of Bangladesh and/or The World Bank and should not be considered an official translation. The Government of the People’s Republic of Bangladesh and The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by the Government of the People’s Republic of Bangladesh and The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by the Government of the People’s Republic of Bangladesh and The World Bank. Third-party content—The Government of the People’s Republic of Bangladesh and The World Bank do not necessarily own each component of the content contained within the work. The Government of the People’s Republic of Bangladesh and The World Bank therefore do not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to the Government of the People’s Republic of Bangladesh at Director General, WTO Cell, Ministry of Commerce, Bangladesh Secretariat, Dhaka-1000, Bangladesh; phone: +88 02 9545383; fax: +88 02 9545741; email: [email protected]. ISBN (paper): 978-1-4648-0924-8 ISBN (electronic): 978-1-4648-0925-5 DOI: 10.1596/978-1-4648-0924-8 Cover photo: © Mariem Mezghenni Malouche/ World Bank; further permission required for reuse. Cover design: Debra Naylor, Naylor Design, Washington, DC. Library of Congress Cataloging-in-Publication Data has been requested. Attracting Investment in Bangladesh—Sectoral Analyses • http://dx.doi.org/10.1596/978-1-4648-0924-8 Contents Foreword xvii Acknowledgments xix About the Authors xxi Abbreviations xxv Chapter 1 Assessment of the Shipbuilding Sector in Bangladesh: Capabilities and Future Potential 1 Kay Dausendschoen Introduction 1 Sector Profile 2 Market Perspective 4 Capabilities and Competitiveness of the Shipbuilding Industry in Bangladesh 8 Key Success Factors 17 Future Development Potential and Challenges 21 Conclusions 23 Notes 25 References 25 Chapter 2 Light Engineering: Bicycles 27 Atdhe Veliu and Glenn Surabian Introduction 27 Sector Profile: Bicycles and Bicycle Parts 28 The Bicycle Industry in Bangladesh 32 Value Chain Analyses: Bicycles and Bicycle Parts 38 Key Market Drivers and Options for Growth 53 Improving Competitiveness: Policy Options 58 Notes 59 References 61 Chapter 3 Light Manufacturing: Diversified Jute Products 63 Glenn Surabian and Yasuo Konishi Introduction 63 Sector Profile: Production, Consumption, and Exports 63 Attracting Investment in Bangladesh—Sectoral Analyses • http://dx.doi.org/10.1596/978-1-4648-0924-8 v vi Contents New Market Drivers and Opportunities for Growth and Diversification 72 Institutional and Regulatory Environment, Market Structure, and Supply Chain 76 Sector Policy 78 Integrated Value Chain Analysis for Diversified Jute Products 80 Conclusions and Recommendations 87 Annex 3A: Potential Jute Sector Classifications 89 Annex 3B: Potential Diversified Jute Product Classifications 90 Annex 3C: Comparative Profile of the Jute Sector in Bangladesh and India, Annual Data, 2007–10 91 Annex 3D: Support Institutions and Their Activities 92 Notes 94 References 96 Chapter 4 Light Manufacturing: Non-Leather Footwear 97 Glenn Surabian and Yasuo Konishi Introduction 97 Sector Profile 97 Key Market Drivers and Options for Growth 106 Institutional and Regulatory Environment, Market Structure, and Supply Chain 109 Integrated Value Chain Analysis for Non-Leather Footwear 113 Policy Recommendations 121 Annex 4A: Footwear Classifications 122 Annex 4B: Bangladesh Footwear, All Categories, FY2012 124 Notes 126 References 127 Chapter 5 Value Chain Analysis for Polo Shirts 129 Christine Elbert, Nebiyeleul Gessese, and Yasuo Konishi Introduction 129 Sector Profile: The Apparel Industry in Bangladesh 129 Integrated Value Chain Analysis for Polo Shirts 139 Global Apparel and Cotton Markets 147 Conclusions and Recommendations 160 Annex 5A: Bangladesh’s Export Processing Zones: Location, Physical Size, and Utility Infrastructure 165 Annex 5B: Support Institutions and Their Activities 169 Annex 5C: The Value Chain Analysis 170 Annex 5D: Apparel Classifications 172 Attracting Investment in Bangladesh—Sectoral Analyses • http://dx.doi.org/10.1596/978-1-4648-0924-8 Contents vii Annex 5E: Private Sector Mills Capacity 173 Annex 5F: Capacity of Textile and Garment Units in Bangladesh 174 Annex 5G: Productivity of Manufacturing Polo Shirts in Bangladesh 174 Annex 5H: Apparel Sector in China, Ethiopia, and Vietnam 179 Notes 188 References 190 Chapter 6 The Pharmaceutical Sector in Bangladesh 193 Nadeem Rizwan and Sanjay Kathuria Introduction 193 Current Status 194 Export of Pharmaceuticals 196 Trade Policy for Pharmaceuticals 198 Regulatory Framework and Standards 198 TRIPS and Bangladeshi Pharmaceuticals 200 Prospects 202 Policy Options 202 Annex 6A: Action Matrix for Bangladesh’s Pharmaceutical Sector 204 Notes 205 References 206 Chapter 7 Accelerating the Development of IT-Enabled Services 209 Atdhe Veliu and Glenn Surabian Introduction 209 Sector Profile: ITES-BPO 209 Supply Chain 215 Supporting Institutions and Policies 218 Value Chain Analysis: ITES-BPO 223 Conclusions and Recommendations 237 Notes 238 References 240 Chapter 8 Services Waiver for Least-Developed Countries and Market Access for Services Exports from Bangladesh: Opportunities and Challenges 241 Rupa Chanda and Selim Raihan Introduction 241 LDC Services Waiver: Brief Overview 242 Attracting Investment in Bangladesh—Sectoral Analyses • http://dx.doi.org/10.1596/978-1-4648-0924-8 viii Contents Prospects in IT-BPO and Labor Services: Secondary Sources 243 Primary Evidence on Prospects in Selected Services and Modes of Supply 255 Roadmap for Promoting Services Exports from Bangladesh in the Context of the LDC Services Waiver 267 Concluding Thoughts 273 Annex 8A: Services in Bangladesh’s Economy: Trends and Key Features 275 Notes 288 References 289 Appendix Diagnostic Trade Integration Study: Comments by the Ministry of Commerce, Government of Bangladesh 293 Boxes 1.1 Khan Brothers Shipyard 9 1.2 China’s Shipbuilding Industry: Technology Transfer through Joint Ventures 15 1.3 Vietnam’s Shipbuilding Industry: FDI for Quality Improvement 16 1.4 Spotlight on the Republic of Korea: Hyundai Heavy Industries 19 1.5 Trends in Bangladeshi Shipbuilding 21 2.1 The Importance of Lead Times in the Bicycle Industry 36 2.2 SME Bicycle Parts Manufacturer Suffering from Imports from China and India 48 2.3 SME Frame Assembler 52 3.1 Jute Sector Definition 64 3.2 The Green Fashion Industry