Lecture # 10

Chapter # 06 (International Business, Institutions and Terms)

₪ What is meant by international trade?

International trade is referred to as the exchange or trade of goods and services between different nations. It is the
exchange of goods and services among nations of the world. All countries need goods and services to satisfy
their people. This kind of trade contributes and increases the world economy.

₪ International Trade Types

Cross border trade can take place via three different routes:
1. Import: flowing into a country from abroad; primarily, when a country is incapable of producing products
domestically, goods are imported.
2. Export: flowing out of a country and sold overseas; when a country produces surplus goods or services of
international quality, it can sell these outside its geographical boundaries. Such international selling of
products is termed export trade.
3. Entrepot: It is a combination of export and import trade and is also known as Re-export i.e. it is a blend of
import and export. Country A buys goods or services from country B and sells them to country C after
adding some value to the goods.

₪ Reasons for International Trade

(1) Production: It is not possible for every single country to produce equally at a cheap cost. That is why
international trade is taken into account.

(2) Factors of production: Factors of production include labour, capital, and raw material for producing goods
and services that are available at different rates in different countries.

(3) Cost of production: Each country finds it advantageous to produce only those goods and services that can
be produced efficiently. The rest of the activities are assigned to other countries at a lower cost.

(4) Resource distribution: Many times, companies face problems due to the limitation of natural resources.
There is an unequal distribution of the resources in the country.

₪ Reasons for Import and Export

Goods and services are imported due to the following reasons:
1. Low price
2. Superior quality
 3. Lack of availability in the domestic market
4. Excessive demand
5. Low supply
Similarly, goods are exported due to the following reasons:
1. Higher value in the international market
2. International quality
3. Excess production in the domestic market
4. Increasing demand in the global market.
Often, companies set up their production units outside their geographical boundaries to avail cheap
labor, natural resources unavailable domestically, and lower cost of production.

₪ Barriers of International Trade

Barriers to international trade are as follows:
– Natural obstacles like language, distance, etc.
– Tariff barriers—import duty, export duty, or anti-dumping duty.
– Non-tariff barriers—embargoes, government restrictions on imports, and import quotas.

₪ Why Governments Favor Trade Barriers / Reasons for Trade Barriers

 Protects Domestic Jobs from Cheap International Labor i.e. domestic employment
 Low foreign wages.
 Protect Newly Developing Industries i.e infant industry
 Protect unfair trade
 Protect national security
 Prevent ―Dumping‖ Practices
 An Increase in Revenue
 VERs – or Voluntary Export Restraints. ...
 Regulatory Trade Barriers
 Anti-Dumping Duty
 The Subsidy

₪ Non-Tariff Trade Barriers

** Import Quotas
a legal limit on the imported quantity of a good that is produced abroad and can be sold in domestic
markets.
 ** Export Subsidies
Government payments made to domestic firms to encourage exports.
It is closely related to subsidies is dumping, i.e. a firm or industry sells products on the world
market at prices below the cost of production.

₪ The Growth in World Trade

Year 1947: saw the creation of the GATT (General Agreement on Tariffs and Trade) as an attempt to
reduce such barriers to trade as quotas, subsidies, tariffs and taxes.

In 1997, GATT was replaced by the WTO (World Trade Organization); Its mandate expanded to
include intellectual property rights and foreign investment.

₪ WTO: What They Do?

• Implementation and monitoring trade
• Dispute settlement
• Building trade capacity
• Investment and Trade
• Trade Policy Reviews

₪ Types of Tariffs
** Import and Export Tariffs
a tax levied on imports or exports of a country
** Transit Tariffs
a tax levied on goods passing through the country
** Specific Duty
a tariff based on the number of items being imported
** Ad valorem Duty
a tariff based on a percentage of the value of imported goods. It is a tax levied on the
difference between a commodity‘s price before taxes and its cost of production.
** Compound Duty
a tariff consisting of both a specific and ad valorem duty.

₪ How can we reduce barriers to international trade?

Regional agreements are one way to reduce the trade barriers. Other measures such as the reduction of
non-tariff barriers, and rationalization and harmonization of regulations, also aim to facilitate trade.
A common barrier to trade is a government subsidy to a particular domestic industry. Subsidies make
those goods cheaper to produce than in foreign markets. This results in a lower domestic price. Both
tariffs and subsidies raise the price of foreign goods relative to domestic goods, which reduces imports.
₪ Free and Fair Trade
Free trade emphasizes the need for less borders, restrictions, and tariffs on goods and services passing
through countries and continents. Meanwhile, fair trade involves ensuring that the workers behind these
goods and services are treated fairly and that human rights are maintained throughout the supply chain.
With the differences highlighted above, fair trade is better than free trade. This is because fair trade
aims at producing a product without the exploitation of both labor and the environment. Free trade,
however, aims at generating more profit regardless of the production methods.
One example of free trade is the agreement between the United States, Mexico, and Canada, known as
the North American Free Trade Agreement (NAFTA). NAFTA was established January 1, 1994,
between the United States, Mexico, and Canada.
Fair trade can provide producer support and expertise in deepening gender equality. For workers
employed on Fair trade certified plantations, investment of the Fair trade Premium into education,
better housing, better schools and medical facilities is highly valued.

Chapter # 07
Chapter # 07 (Trade Associations & Institutions for Furtherance of Business in Bangladesh)

₪ Trade Associations and Institutions / Governmental Support Services for Furtherance of Business in
Bangladesh
The following institutions extend industrial support services to the industries under the public and private
sectors:

Non-govt. level:-
Chamber of Commerce & Industry; Business organizations; Share market
Capital market; Trade fair & exhibition; Trade mission

Govt. level:-

BCSIR (Bangladesh Centre for Scientific and Industrial Research);

BITAC (Bangladesh Industrial Technical Assistance Centre);
BIM (Bangladesh institute of management);
BSTI (Bangladesh Standard and Testing Institute);
BIDS (Bangladesh Institute of Development Studies);
NPO (National Productivity Organization);
BSEC (Bangladesh Securities and Exchange Commission);
 EPB (Export promotion bureau);
BB (Bangladesh Bank / Bangladesh Biman);
BDBL (Bangladesh Development Bank Limited);
ICB (Investment Corporation of Bangladesh);
BSCIS (Bangladesh Small and Cottage Industries Corporation);
BSC (Bangladesh Shipping Corporation);
BFIDC (Bangladesh Forest Industries Development Corporation);

Some International Trade Agreements:

ASEAN : Association of Southeast Asian Nations
APEC : Asia-Pacific Economic Cooperation
GATT : General Agreement on Tariffs and Trade
WTO : World Trade Organization
EU : European Union
NAFTA : North American Free Trade Agreement
CAFTA : Central America Free Trade Agreement
OPEC : Organization of the Petroleum Exporting Countries
SAFTA : South Asian Free Trade Area

₪ Federation of Bangladesh Chamber of Commerce & Industry (FBCCI)

FBCCI is the apex organization of all the organizations for trade, commerce and industry in Bangladesh. This
organization was established in 1973 under the Trade Organization Ordinance 1961 and the Companies Act.1913
(now Companies Act. 1994). The important functions of the organization are the protection of the interest of the
businessmen, preparation of statistics, measurement of performance and trend of business, attempts for
harmonious support from the government. FBCCI is a regular member of the International Chamber of
Commerce (ICC), Islamic Chamber of Commerce, Industry and Commodity Exchange (ICCICE), SAARC
Chamber of Commerce and Industry (SCCI) and of some other international or regional bodies. The functions of
FBCCI are-

 To coordinate and promote the interest of its federation units

 To aid accumulation of investment, development of trade, commerce, industry and other sectors
 To act as the bridge of its members with governmental bodies
 To provide the information to its member organizations
 To conduct research to growth of trade and industry
 To coordinate and maintain close relation with overseas chamber of commerce and industrial
associations

₪ Dhaka Chamber of Commerce and Industry (DCCI)

DCCI is a member organization of FBCCI. This is the representative body of businessmen and industrialists of
Dhaka to think about their welfare and interest and also to defend them to the government policies. It is the
 largest and most active chamber of the country, established in 1958 and was incorporated under the companies
act 1913 as a limited company in 1959. It serves as a model of non-profit, service-oriented organization. It has
four classes of membership: General, Associate, Town Association and Trade Group. The main functions of
DCCI are-

 To help the members in implementing the govt. policies

 To represent in different committees relating to trade, commerce, industry etc.
 To provide necessary information to the members
 To publish significant information, circular, statistical data as Fortnightly Bulletin, DCCI Monthly Review
 To conduct research and undertake different activities like seminar, training, workshops to develop the
business environment and to prepare effective policies.
 To prepare Economic Policy Papers (EPPs) for conducting policy advocacy
 To take necessary action in entrepreneurship development etc.

₪ The Chittagong Chamber of Commerce & Industry (CCCI)

The Chittagong Chamber of Commerce & Industry (CCCI), established in 1959, is a pioneer Chamber in the
country. Like other Chambers, it consists of firms, companies and corporate bodies engaged in trade, commerce,
industry, agriculture, manufacturing etc. The Chamber represents the prime maritime port city and commercial
capital of the country, endowed with country's biggest industrial base and highest business activities. The basic
objective of Chittagong Chamber is to promote and protect the trade, commerce & industry of Bangladesh in
general and those of Chittagong in particular, and also to enable the government and other authorities to perform
these functions by rendering assistance, information and advice.

₪ Metropolitan Chamber of Commerce & Industry

Metropolitan Chamber of Commerce & Industry, Dhaka (MCCI), established in 1904, is the oldest and most
representative trade organization of Bangladesh. Membership roll of Metropolitan Chamber of Commerce and
Industry, Dhaka (MCCI) encompasses leading commercial and large industrial organizations of the country,
including public sector corporations and local as well as multinational companies. Presently, almost all major
enterprises of the manufacturing and service sector are among its members. The Chamber provides a wide range
of professional services to its members.

₪ Export Promotion Bureau (EPB)

Export Promotion Bureau (EPB) is a national export promotion agency, acts as a semi autonomous body under the
Ministry of Commerce. Its main function is to promote export trade, improves plan and policies to the private
sector.
 It is administered by a Board of Management (BOM) comprising members from both public and private sectors.
The main functions of EPB are- Promote marketing of Bangladeshi products abroad; Identify non-traditional
products for export; Allows all sorts of export benefits; Suggest quality improvement of exportable products;
Arrange and participate in seminars, exhibitions, fair etc.

.
₪ Bangladesh Garment Manufacturers and Exporters Association (BGMEA)
Bangladesh Garment Manufacturers and Exporters Association or BGMEA is a nationwide trade organization of
garments manufacturers in Bangladesh and is located in the capital city of Dhaka. It plays a pivotal role in the
country's earning sector of foreign trades.
It is one of the largest trade associations in the country representing the readymade garment industry, particularly
the woven garments, knitwear and sweater sub-sectors with equal importance. Starting its journey in 1983 today
BGMEA takes care of an industry that is at the backbone of Bangladesh‘s economy. Since the inception,
BGMEA is dedicated to promote and facilitate the apparel industry through policy advocacy to the government,
services to members, ensuring workers‘ rights and social compliance at factories. BGMEA collaborates with
local and international stakeholders, including brands and development partners to pave the way for development
of Bangladesh apparel industry. Currently, BGMEA has around four thousand registered garment factories.
Ensuring green & clean production and conserving the nature & its resources are one of the most priority areas of
work for BGMEA. BGMEA has been making relentless efforts to motivate, guide and support its members to
become more responsive toward the environment through energy efficient production, sustainable use of natural
resources and green building. BGMEA has been running several programs with partners like IFC, SEDF to assist
the member factories toward energy efficient and cleaner production.

Mision-
BGMEA works with the vision to develop the RMG industry of Bangladesh and the economy of the country.
Having such vision BGMEA chalked out the following missions and its strategic direction is paved accordingly –
Firstly, to protect and promote the interests of the industry; thus ensuring a sustained growth in the foreign
exchange earnings of the country.

Secondly, BGMEA is committed to ensure all legitimate rights and privileges of the garment workers. The
association also strives toward the betterment of the society and environment.
Members-
BGMEA started with only 12 members in early 1980's and presently has around 4500 member factories. Around
40% of BGMEA member factories are knitwear and sweater manufactures, and the rest 60% are woven garment
manufactures. BGMEA member factories account for 100% woven garment exports of the country and more
than 95% of sweater exports, while around half of the light knitwear exports are made by them.
 How BGMEA Runs-
BGMEA is being run by a 35-member elected Board of Directors. The Board of Directors is elected for a two-
year term. Seven Vice Presidents having important portfolios, along with a secretariat of experienced officials,
assists the President in formulating and executing vital policies and programs of the organization. The President
is the highest executive authority of the association. The Board of Directors takes assistance from different
Standing Committees headed by a Chairman and composed of members having vast experience in the related
fields. Strict adherence to democratic norms and code of conduct are being maintained in the BGMEA elections,
which has been regarded as a trend setter in trade body elections of Bangladesh for its pre-election projection
caucus and election-day discipline.

₪ Bangladesh Small and Cottage Industries Corporation (BSCIC)

This is a prime government organization to supervise, help and finance the small and cottage industries in the
country. This corporation is one of many corporations created in 1972 as a preliminary step to establishment of
‗Socialism‘ in the country. Small and Cottage industries constitute a major portion of industry, production and
employment. Proper policy support and financing are contributing to economic development of the country. The
corporation also helps small industrial development through industrial estate, counseling and finance. The main
objectives of BSCIC are- Increase of industrial production and productivity in the SCI sector; Accelerate
economic and Balanced regional growth and Optimum utilization of economic, human and other resources.

The main functions of BSCIC are-

 Registration of SCIs
 Advice, training and other services
 Skill development for related parties
 Construction and development of industrial estates
 Provide necessary infrastructural facilities
 Linkage among SCI, medium and large industries etc.

₪ Bangladesh Development Bank Ltd. (BDBL)

With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL) was incorporated on 16
November, 2009 as a Public Company Limited by shares under the Companies Act, 1994 by amalgamation
of former Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS), two Development
Financial Institutions (DFIs) in the public sector.
Bangladesh Shilpa Bank (BSB) was established on October 31, 1972 for accelerating the industrial pace of the
country through providing loan and equity to the industrial projects as per Bangladesh Shilpa Bank Order, 1972
(President‘s Order No. 129 of 1972). With the same objective, Bangladesh Shilpa Rin Sangstha (BSRS) was also
established on October 31, 1972 as per Bangladesh Shilpa Rin Sangstha Order, 1972 (President‘s Order No. 128
of 1972).
₪ Bangladesh Chemical Industries Corporation (BCIC)
Bangladesh Chemical Industries Corporation (BCIC) is a government owned corporation in Bangladesh. It
operates 12 factories in Bangladesh including Urea Fertiliser Factory Ltd in Ghorashal and Polash Urea Fertiliser
Factory in Palash, Narsingdi. It is subsidized by Bangladesh government. The Training Institute for Chemical
Industries (TICI) is a sister concern of BCIC and is run by BCIC too.
BCIC College is an educational institution Dhaka, Bangladesh. It is an institution operated by Bangladesh
Chemical Industries Corporation. This institution is managed by the intelligent officer of Bangladesh Army.
Currently, the number of students in the college section is more than 2000.

₪ Trading Corporation of Bangladesh (TCB)

A trading corporation is a commercial corporation engaged in buying and selling. The word ―trading‖ is much
narrower in scope than ―business‖ as applied to corporations, and though a trading corporation is a business
corporation, there are many business corporations which are not trading companies.

TCB is a national trading bureau. It works under the ministry of commerce. It imports huge quantity of essential
goods. The queues of buyers to buy products of the TCB became several times longer following the price hike of
necessary commodities. Middle-class people also joined the queues.

TCB's main functions are: to import commodities according to the requirements of the government; to distribute
the imported commodities at fair prices to keep the market stable; to create overseas markets for traditional and
non-traditional products of Bangladesh and export those products;

Undeniably, poor people in urban areas in particular get some benefit from the subsidized open market sale of
rice, wheat, pulse, sugar and a few other items from trucks. The TCB operates through almost three thousand
dealers enlisted with it, the distribution and the mechanism for reaching the benefit to the deserving population
and suspect. Sometimes the dealers resort to corrupt practices in order to make greater profit.

₪ Board of Investment (BOI)

Board of Investment (BOI) is an agency works for the promotion and facilitation of private investment.
Directorate of Industry (DOI) was replaced by the establishment of BOI on January 1, 1989 by the Investment
Board Act of 1989 to promote and facilitate investment in the private sector both from domestic and foreign
sources/FDI with a view to contribute to the socio-economic development of Bangladesh. The main functions of
BOI are: Promotion of investment; Help in rapid industrialization; Registration of industrial projects; Assisting
foreign investors; Providing import facilities; Allocating land; Providing some infrastructural facilities etc.

₪ Privatization Board (PB)

Certain terms such as privatization, denationalization, and disinvestment are, on many occasions, used
synonymously. Privatization is the transfer of ownership from the public sector (government) to the private
 sector (business). A transfer in the opposite direction could be referred to the nationalization or municipalization
of some property or responsibility. Privatization includes state policies that shift from the public sector to the
private sector the financing and supply of a good or service. In a broad sense, privatization implies the transfer of
a function, activity, or organization from the public to the private sector.

PRIVATIZATION IN BANGLADESH

After liberation in 1971, Bangladesh inherited an economy dominated by private sectors. The new government,
led by Sheikh Mujibur Rahman was committed to socialism and nationalized the heavy industries that were
previously run privately.

To streamline privatization processes and implement quicker disposal of the identified enterprises of public
sector to private hands, the government established a Privatization Board in 1993.

Privatization the policy of handing over public ownership of an asset to private ownership or of permitting the
performance of a certain activity hitherto carried out by a government department, by a private sector business.
The shift in activity from the state to the private sector takes place in the belief that private ownership and control
are more efficient in terms of resource utilization than state ownership and control. The two methods of
privatization in Bangladesh are: sale of state-owned enterprises by tender in which local and foreign individual
buyers, as well as association of workers, employees and officers may participate; and conversion of state-owned
enterprises into public limited companies through sale of more than 50% of shares directly or through STOCK
EXCHANGE.

The main functions of the board include formulation and implementation of a privatization policy, sale of
identified state-owned enterprises with a view to reducing the burden and drainage of government resources and
ensuring timely recovery of sale prices. For enterprises to be sold through tenders, the board invites bids which
are evaluated by the board and placed before the ministerial council committees for final decision. The successful
bidder is to pay 22.5% of the bid amount as down payment within 30 days. This is in addition to the 2.5% paid as
earnest money. The balance of 75% is payable within five years in 6-monthly installments with a compound rate
of interest of 9%. A rebate of 10% is allowed if the whole amount is paid at the first due date.

₪ Export Processing Zone (EPZ)

Export Processing Zone (EPZ) is the new initiative to attract foreign investment. Bangladesh possesses most
inexpensive but productive labor force in the world. International market is very competitive but Bangladesh is
very poor in modern technology, land and capital. Foreign investment is very crucial for rapid development of
Bangladesh. Govt. of Bangladesh is providing some special facilities to foreign investors under EPZ scheme.
Mainly three types of investment are allowed in the EPZs-
 Type-A: Fully foreign owned units having 100% foreign investment including investment by NRB
 Type-B: Joint venture projects by foreign investors and Bangladeshi investors living within the country
 Type-C: Fully local projects where 100% investment made by Bangladeshi investors residing in Bangladesh.
₪ Some Export Processing Zones (EPZs) in Bangladesh
**Adamjee EPZ **Chittagong EPZ **Comilla EPZ **Dhaka EPZ
**Iswardi EPZ **Karnaphuli EPZ **Mongla EPZ **Uttara EPZ, Nilfamari.

Some Private, Special and Proposed EPZs-

 Korean EPZ, Chittagong
 Rangunia EPZ sponsored by Chittagong Industrial Park Ltd.

₪ Bangladesh Export Processing Zones Authority (BEPZA)

In order to stimulate rapid economic growth of the country, particularly through industrialization, the government
has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. The Bangladesh Export Processing
Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign
investment in the Export Processing Zones. The primary objective of an EPZ is to provide special areas where
potential investors would find a congenial investment climate, free from cumbersome procedures.

₪ Legal Framework of Dhaka Stock Exchange (DSE)

The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by
its Articles of Association, rules & regulations and by-laws for day-to-day operation. Being a self regulatory
body, the DSE is also empowered by the Securities and Exchange Ordinance – 1969. Its operation also guided by
the Companies Act - 1994 and Securities & Exchange Commission Act – 1993.

₪ Major Functions of Dhaka Stock Exchange (DSE)

The major functions are:
 Listing of Companies (As per Listing Regulations).
 Providing the screen based automated trading of listed Securities.
 Settlement of trading
 Gifting of share/granting approval to the transaction/transfer of share outside the trading system of the
exchange
 Market Administration & Control.
 Market Surveillance.
 Publication of Monthly Review.
 Monitoring the activities of listed companies.
 Investor‘s grievance Cell (Disposal of complaint bye laws 1997).
 Investors Protection Fund (As per investor protection fund Regulations 1999).
 Announcement of Price sensitive or other information about listed companies through online.
₪ Chittagong Stock Exchange (CSE)
CSE is a second stock exchange in Bangladesh. It was established in 1995 to attract more people. It was
registered as an unprofitable public limited company on April 1, 1995 under the companies act-1994. It officially
starts its business on October 10, 1995. The main functions of CSE are-

 To attract investors to invest in securities of different companies.

 To help in buying and selling of securities
 To protect the interest of investors
 To conducts research work to expand the share market
 To publish different statements of listed companies etc.

₪ Bangladesh Securities and Exchange Commission (BSEC)

The stock exchange is an organized financial market where an investor can trade company stocks and
bonds. Buying stocks or shares actually means becoming part owner of a company. This ownership
proportion depends on the number of shares purchased.
Bangladesh Securities and Exchange Commission (BSEC), [former Securities and Exchange
Commission (SEC)] is a statutory organization constituted by the Government through the SEC Act
1993. The main functions of the commission are to regulate, supervise and patron the operations in the
capital market. Enlisting of companies in the stock exchange, share trading and other related activities
are regulated by SEC.