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FY 1999: Bangladesh |
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT Best Prospects for Non-Agricultural Products Sector rank: 1 Sector name: Oil, Gas, Mineral Exploration/Production Services ITA Industry code: OGS The official estimate of Bangladesh's proven natural gas reserves is 10.7 trillion standard cubic feet (SCF). Subsidiaries of the national petroleum company, Petrobangla, produce an average of 790 million SCF per day, supplying 70% of Bangladesh's commercial energy consumption. A consortium of Cairn Energy (UK), Shell (Dutch), and Halliburton Energy Development (US) has been delivering 60 million cubic feet a day (mmcfd) to Petrobangla as of June 1998; the amount could increase to 160 mmcfd in December 1998. The U.S. firm Occidental Petroleum plans to deliver approximately 100 mmcfd in December 1998 or early 1999. Gas-fired power plants and urea fertilizer plants have placed increasing demands on the gas supply. The total shortfall is estimated at over 180 million SCF per day. An inadequate gas transmission system is considered by experts to be a serious bottleneck to growth. Industry representatives believe Bangladesh possesses significant gas reserves. In order to meet this need for increased investment and expertise in developing known fields and adding to proven reserves, Petrobangla has signed exploration and development contracts with four international oil firms: U.S. firms Occidental Petroleum, United Meridian International, and Okland, along with the Scottish firm Cairn Energy. At least 20 international oil companies have submitted bids for 12 exploration blocks in the country's second bid round. After nearly one year of deliberations, the BDG announced five awards in late July 1998; winners were Enron/Okland, Pangaea/OMV (although OMV since has reportedly left the alliance), Unocal, and Shell/Cairn. Several key blocks, believed to have larger reserves, are yet to be awarded, with U.S. firms, including Chevron, Texaco, Unocal, Mobil, and Union Texas Petroleum, having placed bids. The gas distribution bottleneck is being addressed by projects financed by the World Bank and the Asian Development Bank (ADB). Through their latest initiatives, the Gas Sector Development Stategy and Gas Sector Development Program, the World Bank and ADB are prodding the government toward more private sector participation in gas transmission and development activities. A major project to transport gas from the northeast to the central Ashuganj-Bakhrabad (AB) pipeline was completed in 1997 under the World Bank's Third Gas Infrastructure Development Plan (GIDP). Several other pipelines, including small feeder lines, need to be completed. The BDG is keen to build a new 82 km pipeline from Rashidpur to Ashugonj at a approximate cost of US$ 70 million. Under the GIDP, donors also intend to fund gas dehydration facilities, the drilling of new wells, a SCADA system for gas distribution, and other components to modernize and improve the existing gas pipeline network. The plan will require considerable contract technical assistance, including consulting services in project engineering and construction, supervision and institutional development support in gas network management, and environmental and safety management. Petrobangla and its subsidiaries regularly publish bid notices for piping and facilities construction, and U.S. firms have won such contracts in the past. Sector rank: 2 Sector name: Electrical Power Systems ITA Industry code: ELP Bangladesh currently possesses an installed capacity of 3,018 MW--all except 110 MW government owned and operated--producing an annual generation of 11,500 MKWH. With a population of 127 million, Bangladesh's per capita power generation is only 90 KWH. BDG officials have announced the goal of increasing the country's generation capacity to 4600 MW by the year 2005, which will require an addition of about 3350 MW. Such an ambitious increase will only be possible with private sector participation, and Bangladesh is joining the South Asia-wide shift in favor of private power generation. To attract long-term foreign investment in the power sector, however, the BDG will need to prove its ability to pay for purchased power. It must also have sufficient foreign exchange to make those payments. Lastly, the Government must be seen by the international financial community as an attractive destination for project financing, and must implement a supportive regulatory framework for private power development. A joint venture developed by local companies and the Finnish firm Wartsila and now majority-owned by Coastal Energy of the U.S, began to generate electricity from its 110 MW barge plant in Khulna in September 1998. This is the first private power project to be completed. Three other barge projects of similar size are in the development stage. One of those projects, being developed jointly by U.S companies Ogden, El Paso, with Wartsila, may use OPIC lending and insurance. The U.S. firm AES, which was the low bidder for both Haripur 360 MW and Meghnaghat 450 MW power plants, signed its contract for Haripur in September 1998 (it has 30 months from signing to deliver power), and is engaged in negotiations for Meghnaghat. The Government's Power Cell signed a letter of intent in September 1998 with the British- based, U.S.- owned (Cinergy) firm MPI for a 100 MW Baghabari project. Meanwhile, the Mymensingh 60 MW plant , originally expected to generate electricity by April 1999, now likely will do so in the fall of 1999. The French firm European Gas Turbine is supplying most of the equipment, while the Japanese firm Sumitomo is serving as engineering contractor. Recently the Rural Electrification Board (REB) received several offers from foreign companies, including U.S. companies, for small power (5-10 MW) plants. The REB is in the final stages of selecting its winners. Meanwhile, the BDG has delayed the announcement of pre-qualification notices for the 300 MW Siraganj power project. The Asian Development Bank and the World Bank's IFC are both involved in promoting necessary policy reforms and in financing plant construction. The World Bank's International Finance Corporation (IFC) is supporting both power and gas exploration projects. The electricity tariff was raised twice in FY97, totaling nearly 15%, which made the weighted average national tariff $0.065 per kilowatt hour. This rate is approximately equal to the average delivery cost. The dominant primary energy source is natural gas, which, in the near-term, is in short supply. There is also limited scope for coal-fired power plants; one plant has been planned in the country's northwest region where coal is found. Under the Ninth Power Project, the Asian Development Bank and the World Bank pledged over $197 million for construction of electrical transmission and distribution lines, a national load dispatch center and communication network, engineering services for the West zone combined-cycle power project and the East zone open-cycle peaking power project. This $313 million project should be completed by July 2000. Under the proposed World Bank National Power Development Project, the BDG would build a major National Load Dispatch Center, as well as additional transmission and distribution lines. There is significant scope for providing technical assistance to this project, which could exceed $ 250 million and is expected to begin in early 1999. The ADB's proposed 10th Power Development Project includes provisions for consultancy/feasibility studies. Short-term export prospects are good for transformers, treated wood poles, insulators, surge protectors, line tools, commercial diesel and gas generator sets, and spare parts for U.S. and U.S.-licensed turbines in government-run power plants. Sector rank: 3 Sector name: Telecommunications equipment ITA Industry code: TEL The Bangladesh Telegraph and Telephone Board (BTTB), under the Ministry of Post and Telecommunications, had a monopoly on Bangladesh's telecommunications sector until 1989. At present, there are seven private operators which provide or have permission to provide telecommunications services. Two of these operators have licenses to provide basic telephone service in rural Bangladesh. A lone Analog Mobile Phone Systems-based (AMPS) cellular operator is providing cellular mobile service to subscribers in Dhaka and Chittagong; a U.S. firm has a contract to provide Code Division Multiplex Access (CDMA) equipment to upgrade this service. Three Global System for Mobile-based (GSM) cellular companies received licenses, two of which are operational in Dhaka. Paging and radio trunking telephone service are provided by a single operator in Dhaka, Chittagong, and Khulna. At present, BTTB has approximately 450,000 telephone lines to serve 125 million people. About 60% of these lines use analog switches, mostly from Siemens. The remaining 40% use digital switches from NEC (NEAX), CIT/Alcatel (E-10) and ITALTEL (Linea-UT). A Japanese firm is completing the installation of 67,000 digital lines in Dhaka, while BTTB plans to install another 50,000 such lines by FY98-99. In order to upgrade the existing transmission network to support digital exchanges and private rural operators, BTTB proposed several transmission link upgrade projects including fiber optics, digital spur links and digital microwave links. Due to funding constraints, however, it has been unable to implement these projects, which carry a potential price tag of $152 million. BTTB requested the BDG to arrange funds from donors, while donors, especially the World Bank, have suggested that the projects should be offered to the private sector. A recent Telecommunications Policy also includes long-term plans to privatize BTTB and to install fiber optic and microwave links. The BDG recently announced a plan to increase telephone lines to 1.3 million by the year 2002, and to 1.6 million by 2005. Private operators have installed approximately 70,000 telephone lines in rural and urban Bangladesh, about 90% of which are cellular mobile and radio trunking phones. The sole paging service provider has approximately 8,500 subscribers in Dhaka, Chittagong and Khulna. U.S. companies have done fairly well in supplying the private sector, which dominates the more technically-advanced telecommunications services. A U.S. company is one of the equipment suppliers to the first cellular phone licensee; another U.S. firm is a joint venture partner in a rural telephone service provider. Several U.S. companies are supplying telecommunications services and equipment to the two private rural telecommunications providers. Prospects for selling AMPS- and GSM-based cellular systems from the U.S. are good. Wireless local loop and CDMA-based technology should also be of great interest to private operators. Sector rank: 4 Sector name: Computers/Peripherals and Computer Software ITA Industry code: CPT & CSF The approximate market size for computer hardware, peripherals and software is $17 million and increasing at a 15%-20% rate per year. The U.S. share of this market is about 60 percent. There are approximately 90,000 desktop PCs in Bangladesh, with sales dominated by locally-assembled clones. A large number of computer assemblers import mother boards and other components from Taiwan and South Korea. However, the software and peripherals market is largely dominated by the U.S. brands. Strong customer preference for U.S. computers points to good prospects for increased sales. The June 1998 elimination of duties will boost computer imports, and has already led to a reduction in retail prices of 30% to 40%. Most vendors are targeting small offices and home users. A growing number of computer training schools, including one sponsored by Microsoft, will increase skilled computer personnel. Since the introduction of Internet services in 1997, a growing number of businesses and individuals are buying computers for their communications needs. The central bank, the government-owned commercial banks and private banks are continuing to computerize operations, with annual purchases of computers and related hardware of approximately $5 million. U.S. industry should capture the great majority of this market, given senior bank management's familiarity with and preference for U.S.-made computers. Sector rank: 5 Sector name: Aircraft/Parts and Airport/Ground Support Equipment: ITA Industry code: AIR & APG The primary customers in the aviation sector are the government-owned Biman Bangladesh Airlines and the Civil Aviation Authority of Bangladesh (CAAB), also a government entity. Biman performs its own maintenance (except D Checks) on its four DC-10s, presenting opportunities for sales of spare parts, including engines. Two Airbus A310-300 mid-haul aircraft (with U.S. engines) have been added to Biman's fleet for its Middle East routes. Biman has been planning to buy two and perhaps four long-haul aircraft since FY97, but funding constraints have delayed the addition of the much-needed aircraft. The Bangladesh navy may announce international tenders for two maritime patrol aircraft this year. The CAAB is expanding its airports in Dhaka and Chittagong and anticipates procuring radar, navigational aids, HF and VHF radios, runway lighting, ground support and emergency vehicles, and additional boarding bridges. Global positioning systems (GPS) are a nascent technology in Bangladesh, with only a handful of GPS receivers in the country; both CAAB and the military plan to acquire GPS equipment. The $131 million Chittagong airport expansion project has been started by the Japanese Shimuzu & Marubeni corporation. Several licenses were issued in FY97 and private operators began private domestic airlines, although two have since shut down or postponed their operations. Sector rank: 6 Sector name: Textile Machinery/Equipment ITA Industry code: TXF Bangladesh exports over $ 3 billion worth of garments to Europe, Canada, and the U.S., with about 43% destined for the latter. But Bangladesh produces only 10% of the export-quality cloth used by its garment industry, and government policy encourages development of the textile industry. The market for textile machinery and components is about $ 25 million. However, lack of bank credit has slowed the import of such equipment. This trend is expected to improve in FY98-99. New machinery from Japan, Korea, Britain, Switzerland and Germany presents stiff competition in this market, yet there have been signs of increased interest in new, used and reconditioned equipment from the United States, which often offers better value. Bangladeshi buyers have complained in the past, however, about a lack of information and responsiveness from U.S. vendors of used and reconditioned equipment. Sector rank: 7 Sector name: Architect/Construction/Engineering Services ITA Industry code: ACE U.S. architectural/construction/engineering services, mainly design and supervision consultants, are competitive in Bangladesh. Most donor-funded infrastructure projects require consultant services. The estimated total market for engineering consultant services is over $20 million each year. The U.S. market share is about 40%. While Asian firms are usually more cost-competitive in construction work, the BDG seems to prefer U.S. or European consultants to do project design and supervision. With new road and bridge construction projects in the works, the demand for engineering consultants is likely to increase. Sector rank: 8 Sector name: Agricultural Chemicals (Fertilizer) ITA Industry code: AGC The market for U.S. fertilizer in Bangladesh is currently small, but is expected to grow in the future. Fertilizer imports have seen continuous growth since the Bangladesh government privatized imports and distribution in December 1992. Annual average import of fertilizer is approximately US$ 120 million. Bangladesh mostly imports triple super phosphate, single super phosphate and diammonium phosphate. The U.S. fertilizer market share started to decline in 1991, mainly due to extremely low prices for potash from the Commonwealth of Independent States (C.I.S.) and China. Tunisia, which enjoys shipping cost advantages over the United States, is the main U.S. competitor for triple super phosphate. Bangladesh imports an estimated 70-75% of its potash and 100% of its phosphate requirements, though it is an exporter of urea. U.S. fertilizer sales are likely to increase as C.I.S. fertilizer prices rise to world levels.Best Prospects for Agricultural Products 1. Cotton: The United States is the leading supplier of cotton, providing 45% (worth about $96 million) of the total Bangladesh cotton imports of 129,000 metric tons (MT) in FY98. Bangladeshi textile mills appreciate U.S. cotton for its dependability in quality and timeliness of shipment. Cotton imports in FY98 grew 14.2%, versus 7.6% in the previous year. The sharp growth reflects the return of international prices to favorable lower levels (for the mills) and the rise in demand from Bangladesh's expanding cotton spinning capacities. Assuming international prices remain stable, FY99 imports are forecast at a record 144,000 MT, of which the U.S. share is expected to reach 50%. In the early nineties, export-oriented woven, hosiery and knitwear garments were entirely dependent on imported fabric and yarn. Export bonuses (at a rate of 25%) on locally-manufactured garments played a key role in enhancing the private textile mills' ability to supply yarn and fabric for export garments. According to a Textile Ministry report, 11 out of a total 141 spinning mills now produce export quality yarn. The country currently produces a total of 96.5 million kg yarn out of total demand of 467 million kg (domestic need of 186 million kg plus need for yarn in the export-based RMG and knitwear of 281 million kg). While some 10 percent of export requirements for yarn are met from domestic production, the shortfall in domestic requirements plus the bulk of the export needs are met through bonded imports. However, the domestic industry complains of the leakage of bonded yarn to the local market, which according to industry sources is counterproductive. Most of the bonded yarn comes at a lower price from India (which protects domestic producers by keeping raw cotton prices for domestic mills around 20 percent cheaper than the export price of raw cotton); this yarn wins out over local yarn, especially in the medium count range. As India does not produce short and long staple (cotton), the Bangladesh mills have competitive edges in lower and higher counts. The Bangladesh textile sector has great prospects for growth. According to the BDG's Textile Policy, the country will need an additional 126 spinning mills (25,000 spindles each), 265 weaving mills (10 million meter/year each) and 252 dyeing finishing mills (10 million meter/year each) to meet the demand (domestic and export-oriented) for yarn and fabric in 2005. The textile industry forecasts a five-fold increase in raw cotton imports during the period (1998-2005). 2. Wheat: FY98 wheat imports, on both commercial and concessional terms, are expected to decline to 828,000 mt, down 4 percent from the depressed level of FY97. Better than anticipated domestic production and low domestic prices relative to international prices caused the decline in imports. The total share of U.S. wheat imports accounted for about 16% or 146,250 mt (worth about $29 million). Commercial imports in FY98 are estimated to have been 279,000 mt compared to 326,000 mt in the previous year. The U.S. share of total commercial imports declined sharply in both FY98 and FY97 to less than 10%, down from 91% in FY95, and 61% in FY96. The absence of the U.S. Department of Agriculture's Export Enhancement Program has caused the U.S. to lose its competitive edge to subsidized EU and Australian wheat. The overall lower imports in the last two years were the result of higher international prices and a sharp rise in domestic production. As higher prices tempered demand for flour and wheat products, most millers reduced daily milling volumes and wheat stocks as well. Millers who are normally accustomed to U.S. standards and grades had to adjust to poorly-graded Indian, and less preferred EU and Australian wheat. However, recent lower U.S. wheat prices are now driving imports back up, even without the Export Enhancement Program. In line with the diminishing concessional wheat arrivals in recent years, the U.S. contribution of food aid in terms of wheat has declined sharply (notwithstanding the 700,000 metric tons of wheat the U.S. has pledged to donate to Bangladesh in response to the emergency caused by the 1998 floods). No PL480 Title III wheat has been allocated to Bangladesh since FY97. Title II allocations for CARE-assisted development projects are still available. Also, under special circumstances, the USDA allocated $10 million to Bangladesh to finance a 50,000 MT wheat purchase under a Title I Grant in FY98. Assuming favorable weather conditions and stable per capita food grain (wheat plus rice) consumption, total wheat imports under both commercial and concessional terms are forecast at 4.2 million metric tons in FY99. Although the government claims to support continued private sector wheat (and rice) imports, it apparently plans to hold larger food grain stocks in order to maintain price stability, decrease the ability of the newly emerged private sector trade to determine the price and availability of food grains, and above all to ensure food security in the country. 3. Apples: Bangladesh is a net importer of apples. Supplies come from India (the dominant and cheapest source due to its proximity), Bhutan and Pakistan. U.S. apples represent the gourmet end of the market, with limited suppliers of the Washington Red Delicious and yellow apples. In FY98, U.S. exports of apples increased to 1,200 mt (about 10% of total apple imports), worth about one million dollars. Buyers typically import U.S. apples between April and July, when the Indian supplies dwindle. Though consumers prefer U.S. apples, their higher prices hinder faster growth in the Bangladesh market. Apple consumption has been growing at about 10% a year, and similar growth is expected in years to come.[end of document]
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