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Bangladesh, a future investment destination

Jesmin Papri, Diplomatic Correspondent |
Update: 2013-09-23 23:11:06
Bangladesh, a future investment destination

Ambassador of the Republic of Korea Lee Yun-Young said geographical importance, abundant human resources and cheap labour costs make Bangladesh a good future investment destination.
 
He also said: Electronics and shipbuilding are very promising industries for foreign investors. Those industries need lots of labourers and you have abundant human resources here.
 
Apart from RMG, leather goods and shoes are also prospective sectors for investment here. Still Bangladesh has competitive wage rates.
 
We expanded our duty-free quota-free trade facilities for Bangladeshi products. Your goods get free tariff facility to Korea. Made-in-Bangladesh products, (especially RMG), fisheries(mainly prawns) and leather goods are the major exportable products.
 
Bangladesh’s export to Korea is rising. Korea’s total RMG import is USD 6 billion globally, while it is less than 3 percent from Bangladesh. Bangladesh has much more scope to expand its market in Korea.”
 
Besides, the envoy hoped the Bangladesh government would resolve the pending issues of the KEPZ at the earliest possible.
 
He shared his opinions over many issues in an exclusive interview at his office in the capital’s Baridhara.
 
The full text of the interview is as follows:
 
Banglanews24: First of all we extend our thanks to you for granting this interview. You will be happy to know that the people of Bangladesh are thankful to the people of Korea for their generous friendship and good will.
 
 
Lee Yun-Young: Since I came here one year back, I have met many Bangladeshis and found them very friendly. They expressed gratitude and appreciation for Korean contribution to Bangladesh’s socioeconomic development in the last 40 years. They appreciate Korea’s contribution to the development of the readymade garment industry here, which is now the second-largest apparel exporter in the world. I feel very proud to state the fact that for the last 40 years, Korea remained a reliable and trusted partner of Bangladesh and made tremendous contribution to Bangladesh’s export promotion. This year marks the 40th anniversary of Korea’s diplomatic relations with Bangladesh. I feel honored to serve as Korea’s Ambassador to this great country. I would do my best to strengthen this relationship even further.

Banglanews24: Republic of Korea has achieved tremendous growth in various sectors. How can Bangladesh eradicate poverty and achieve development by sharing technical know-how and experience with your country? How does Korea help Bangladesh in the process of development through transfer of technology? How could more be done by your country?
 
Lee Yun-Young: Very important question. I can share my thoughts on how to strengthen the bilateral relations and find the ways to support Bangladesh’s economic and social development.
First of all, let me explain some of the trends in the Korean economy. Korean economy now ranks number 11 in the world.

Some 112 Korean items including cellular phone, shipbuilding, semiconductor, etc. now rank number one in the world. Automobiles, steel, petrochemicals are also among the top five in the world.

Korea is a country of 50 million population with 100,000 square kilometers of area. It’s a small country in terms of size of land and population. For the last 60 years, we have had to be faced with continuous provocations from North Korea. We had been invaded by North Korea in 1950. During the years 1950-53, we experienced the tragedy of civil war with North Korea. Tens of millions of people died. The whole land was totally devastated. We were one of the lowest income countries even until the early 1960s.

In spite of that very unfortunate history, we, one of the OECD members, are now one of the top countries in terms of economy, democracy and social development.

Let me share some experiences about what we have learned. We overcame the vicious cycle of low income and low development. Actually, three factors are very important to escape from this vicious cycle. Firstly, we had to focus on the right direction for development. The second is motivation and the third is capacity building. These are the three key elements for economic development.

In the early 1960s, we had to decide which direction would be suitable for our economic development. There were two theories. One is balanced economic growth theory, which means adopting economic strategy of import substitution. The other one, unbalanced growth strategy, is to select services and industries for export. Export promotion strategy is important for sustainable unbalanced growth.

If you think your country has a big size, huge population and resource, then balanced growth may be the best option for growth. However, we had very limited resources, low-level technology and insufficient fund. So, we had to maximize the utilisation of our very limited resources including foreign exchange reserve. Late President Park once said, “We will win nothing when we try to win everything.”

During the 1960s, we tried to support light industries first. In the 1970s, we had poured money into heavy industries. Since the early 1960s, we pursued five-year economic development plans prepared by our economic development agencies. Two think-tank institutions – one is Korean Development Institute (KDI) and the other is Korea Institute for Science and Technology (KIST)-played important roles in preparing for six five-year economic plans.

During the years 1961 to 1993, we pushed ahead with the five-year economic development plans under very strong leadership and with the support of capable institutions.

The second is motivation. At that time, people in the rural areas of Korea with limited land suffered from low-income. But, we tried to encourage them to do better. We started the “New Village Movement.” Free cement rationing was provided to all villages across the country. If any villages did very well after two years, then the government gave more materials to them. We invited competition among villages. During the 1960s, the farmers’ income was only 60% of the urban worker’s, but it became 100% in 1974.

On December 5 every year, we gave awards to the companies who performed well in exports. If a company exports more goods than the previous year, it enjoys policy financing. The government gives them honour, and also provides finance at a very low interest.

Capacity building is another important factor. We reformed our academic system: combination of “universal” and “elite.” Technical trainings were also encouraged. We opened many vocational schools. Another dimension of capacity building is creating a clean and competent system to combat and prevent corruption. There are very high-level and powerful national audit agencies in Korea. They are totally independent and audit budget accounts every year. All the government agencies including the public enterprises and state-run banks are reviewed by the agencies. If any wrong-doing or corruption is identified, the offenders face legal punishment.

Meanwhile, our Economic Development Cooperation Fund (EDCF) provides long-term soft loan. Last July, the Framework Arrangement of EDCF was signed with ERD Secretary Abul Kalam Azad. The EDCF provides US$300 million to Bangladesh during 2013-14. That money will be used for large projects like the Wireless Broadband Network Project for Digital Bangladesh at a cost of almost US$80 million.

Also, a world-class hospital will be established here with the support of EDCF. One million people from Bangladesh fly abroad every year for better treatment in Thailand, Malaysia, and India. We think Bangladesh desperately needs such a world-class hospital to raise the level of public health.

Bangladesh has also benefited from the valuable support of Korean International Cooperation Agency (KOICA). This year marks its 20th anniversary for KOICA in Bangladesh.

I was in Bhaluka in Mymensingh to open Shanti, a cloth shop. KOICA, in coordination with Bangladesh Rural Development Board (BRDB), has been working to train poor females to make clothes by sewing and printing of textiles. They want to open shops to sell their own products to the customers. The women there were so happy. This is a kind of motivation. Poor women and mothers can find jobs now.

They can expect profit from selling textiles and hand-made items. We also support Korea-Bangladesh Friendship Hospital in Savar. Around 180 orphans in Dhaka were taken care of by our KOICA volunteers.

Technical know-how can be shared through many channels such as investment, official development assistance (ODA) and trade. KOICA operates diverse training programmes and so many government officials are still going to Korea for trainings.

There are also many technical training centres that we are supporting here. We are trying to transfer our technology to your young generation. Many ODA programmes are there for trainings.

Actually, Daewoo is the first Korean company to be here. In the late 1970s, they first invited Bangladeshi workers to Korea to train them on how to make ready-made garments. Some 165 workers were invited at that time. Now, almost all of them are the owners of readymade garment factories here. That was the first case of transfer of technology between the two countries.
Samsung Electronics operates R&D centre here and employ more than 600 engineers. They have been trained to become essential human resources for Digital Bangladesh.

Banglanews24: Korean investment in Bangladesh is quite considerable. As per BEPZA report, Korean entrepreneurs made the highest investment that has created jobs for 65,564 people. Do the Korean investors face any problem here, especially in the KEPZ? If so, can you specify those?

Lee Yun-Young: Our information shows that over 220 companies are operating here and employ 160,000 people or more. They are exporting products worth US$1.6 billion every year, accounting for more than 5 percent of the Bangladesh’s total exports.

Basically, our pattern of investment is changing. Before, major investments were made in RMG sector. However, in March last year, Samsung opened the R&D centre.

Also, we also invested in the financial sector. Woori Bank, one of the Korean banks, now operates three branches, and has a plan to open one or two more branches in Bangladesh. CJ Group and the Korea Telecom (KT) also have their presence here. KT now plans to open telecom-equipment business in Bangladesh.

The KT presence will invite more competition in Bangladesh. Good quality of equipment and service can be provided by Korean companies.

Sectors where Korean investment will be promising include distribution, departmental store and hotel, and other service sector businesses. Some large service-sector firms are considering to come here and it would be very good for your balanced economy. I find the service industry here lagging far behind other countries and facing various obstacles. Hotel service here has very limited facilities, so the rate is too high.

Bangladesh has more than 6 percent GDP growth every year; it will become a big market, and is geographically well located. It has huge human resources with cheap labour costs. All these have made Bangladesh a good investment destination for Koreans. However, I have to point out one pending issue.

Certain issues with the Korean EPZ should be resolved at the earliest possible time. Delay in addressing the issues has been impacting the reputation of Bangladesh. So, we hope the Bangladesh government will resolve the pending issues of the KEPZ as soon as possible.

KEPZ is continuously asking the government for execution of transfer of the entire land. We also seek its withdrawal of a restriction that allows only 14 types of industries in KEPZ. All EPZs in Bangladesh are allowed to set up all types of industries. So, we want a level-playing field.

To lease out land to the new investors, we have to go to the Prime Minister’s Office for approval. All EPZs have the authority to lease land to new investors.

Power supply has been cut for more than one year without any prior notice. We have been asking for the resumption of power connection to the KEPZ. Chittagong EPZ is continuously receiving electricity. But KEPZ has no power supply. So the investors have to set up their own diesel-fired power plants, which is much costly.

Banglanews24: What are the sectors in Bangladesh where Korean entrepreneurs could invest more? How does your government encourage them?

Lee Yun-Young: I think electronics, ship building, infrastructure are very promising industries for foreign investors in the future. As you know, electronics and shipbuilding need lots of labourers, and you have a good human resource here.

You already have developed your shipbuilding and shipbreaking sectors. You have got a very good natural environment, favourable for the development of the shipbuilding sector. Many rivers are there. But definitely, you need to develop the infrastructure.

Service industries are also needed to be developed further. They include distribution, logistics, tourism, banking, insurance, and so on.

The problem is that there is a big gap between expectation and realities. You can’t deny that there are many obstacles as well.

Bangladesh is suffering from an image problem due to political volatility, natural disaster, industrial disasters like Rana plaza collapse and factory fire. Foreigners and foreign countries consider Bangladesh as a disaster-prone country. There is instability as well.

My suggestion would be to pay more attention to improving the country’s image. A nation’s image is very important for attracting foreign investors.

You are competing with the neighbouring countries. I invited the Dhaka Chamber delegation to Korea last July. Korean investors were saying they are only focusing on Myanmar for their new investment along with Cambodia and Vietnam. I did not find anyone interested in Bangladesh.

I arranged a business roundtable for Bangladesh delegation including Tourism and Civil Aviation Minister Faruk Khan, DCCI President Sabur Khan with Korean entrepreneurs. I tried to encourage Korean investors to look into Bangladesh for their future investments. Korean investors need to get more information about Bangladesh.

Korea is among the top three investor countries in Asia. In China, our total investment is more than US$45 billion. In Vietnam, our investment is over US$25 billion, while in Bangladesh the investment is half a billion. Korea’s investment in Vietnam is 500 times bigger than that in Bangladesh.

Samsung electronics has huge investment in Vietnam. One factory there, employing more than 6,000 workers, exported more than US$10 billion last year. They are exporting only one item : cell phone. They started investing in 2009 and in just four years they exceed US$10 billion.

Also, Korean investment of automobile is in Chennai, in India. Hyundai Motors produces 600,000 units of cars every year. They export half of them to other countries. It means, if you can successfully attract Korean investment, you can add US$10 billion to your export basket. The size of Bangladesh’s export at present is US$25 billion. If you can add US$10 billion with that, it will impact your employment, exports, and economy enormously.

Banglanews24: Please make your comment on investment prospect here. In recent days, some Korean entrepreneurs seem reluctant in making investment in Bangladesh. What are the reasons, merely political unrest or anything
else?
 
Lee Yun-Young: Actually, investors want to come here, but they face so many obstacles. Inefficient infrastructure and complex procedure are one of those problems. And the bureaucracy, political instability, unpredictability are also hindering foreign investments here. There are many investors saying that they are facing anti-foreign investment culture here. That is very important issue, too.

If you make any investment, predictability is very decisive. Before you put your money into anywhere, you need the confidence that you would get benefit in the future. That is very important. If they find no confidence in their investments, they would give up.

Insufficient infrastructure, electricity crisis, lengthy procedure, bitter bureaucratic tangle, and many more obstacles are preventing further investment in Bangladesh.

The business community wants political consensus. We are hopeful the problem will be settled as soon as possible. It is very important to hold a free, fair and credible election. Many investors are waiting for this to happen.

The Board of Investment (BoI) and government agencies have to be aware that they are competing with many countries. Bangladesh is competing with Myanmar and other countries. Natural resource in Myanmar is better than your country.

You need a better gesture to business visitors to attract new investments. I also invited DCCI to open a one-stop service to provide information to any new investor visiting Bangladesh. Anyone coming to invest in Bangladesh should get a feeling that a pro-business atmosphere is prevailing here.

Bangladesh has to develop its tourism sector to attract more tourists from across the world. For tourists, there are little decent facilities to enjoy, even in Cox’s Bazaar.

Tourists like to spend their money. Why should they spend their money here if there is no attractive facility for them? Tourism sometimes makes bigger contributions to the economy than the manufacturing sector.
 
Banglanews24: Which are the preferential sectors for Korean investors to invest in new ventures in Bangladesh and what facilities do they require for smooth
investment here?
 
Lee Yun-Young: RMG is still a preferred sector. Providing more facilities is essential for further growth of this sector.
Leather goods and shoes are also prospective sectors for investment here. Some Korean companies want to relocate from China and Vietnam. They would like to come to Bangladesh as workers’ wage is rising there. Still, Bangladesh has a competitive wage rate.

In addition, your country should open your economy. There are so many problems. There should be competition, more consumer welfare and more choices for shopping.

An open economy can attract foreign investment. Vietnam, Indonesia, Myanmar are attracting investors by opening their market.

We have free-trade agreements with 47 countries, and we opened our economy through FTAs. You need to give more access to your market to foreign investors if you wish more investments.
 
Banglanews24: We have a good volume of trade and business between the two countries. But the trade imbalance is heavily against Bangladesh. Is it possible that the imbalance will be reduced in the near future?
 
Lee Yun-Young: We are in a favourable condition. Our trade is increasing for many years. Our export was US$1.5 billion to Bangladesh, but import from Bangladesh was only US$0.3 billion last year. Good news is that Bangladesh’s exports to Korea have increased over the years.

We expanded our duty-free quota-free trade facilities for Bangladeshi products. Your goods get free tariff to Korea. RMG, fisheries(mainly prawns), leather goods are the major Bangladeshi export items to Korea.

In the last five years, Bangladesh saw 69 percent growth in exports to Korea. There are some large Korean stakeholders in Bangladesh: RMG sector, and now Korea emerges as a huge market for Bangladeshi RMG exports. While Korea’s total RMG import is US$6 billion, Bangladesh market share stands at less than 3 percent. Bangladesh has the scope to expand market in Korea.  
 
Banglanews24: In your opinion, what are the measures urgently needed to strengthen the political, diplomatic and economic ties between the two countries?
 
Lee Yun-Young: Our relationship completed 40 years and this is the right time to explore ways to strengthen this relationship further. We have developed relations based on trade and economy. We should continue to develop relations for more mutual benefits.

Exchange of culture and people are very important for more strengthened ties between the two nations. Korea is a powerhouse of culture, pop songs, TV dramas, films and arts.
A team from Bangladesh is flying to Korea on October 3 to showcase traditional culture. Exchange of visit of high officials as well as journalists can also help the relation flourish more. We are partners in international issues like environment and regional security. Joint anti-drug campaigns were held in Bangladesh recently.  

The biggest obstacle would be the absence of direct air flights between Dhaka and Seoul. At present, flights have a stopover between the two countries. KAL and Asiana Airlines have been asked to set up direct air flight. It would bring more tourists and facilitate exchange of people and investors. We are using so many stopovers to fly to Korea.

There is some progress in this regard. Korean Air vice-president visited Bangladesh recently. KAL cargo service was already launched in July.

Bangladeshi people who want to work abroad choose Korea first.
Bangladeshi people working in Korea earn almost 10 times more than they earn in any other country. There is no discrimination in terms of wage, working condition for workers in Korean companies. 14,000 Bangladeshis are working in Korea. In Middle East and South Asia, many Bangladeshi workers are employed by Korean companies.

For example, some 50,000 Bangladeshis are going to be employed by one Korean company in Iraq.

Banglanews24: Prime Ministers of Bangladesh and Republic of Korea, during the second Asia Pacific Water Summit in Chiang Mai last May, discussed ways to resolve the problems of the KEPZ to boost Korean investment. What are the problems and prospects there?
 
Lee Yun-Young: The biggest obstacle is the absence of a direct air flight between Dhaka and Seoul. Air flights have a stop-over between the two countries. KAL and Asiana Airlines have been asked to set up a direct air flight. It would bring more tourists and facilitate exchanges of people and investors. We are using many stopovers to fly from Bangladesh to Korea.
 
In fact, there is some progress in this regard. Korean Air vice-president visited Bangladesh recently and a KAL cargo service was already launched in July.
 
Banglanews24: Vice Chairman of Korea Importers Association (Koima) Hi-Hyun Kim last month told a visiting Bangladesh delegation that they would request their 8000 importers to import more products from Bangladesh, specially the Readymade Garments. Do you visualize real progress in this regard?
 
Lee Yun-Young: During its visit to Korea, DCCI team had a meeting with KOIMA. We hope KOIMA will dispatch a delegation to Bangladesh next year. As I said, Bangladesh’s RMG export shows strong performance in Korea now. You can expect more export to Korea in the future.

Banglanews24: Some Korean manufacturers especially Samsung has showed interest in setting up industries here and they are looking for suitable sites for these. Could you give any update about such venture?
 
Lee Yun-Young: Samsung is the world’s largest electronic giant that earned over US$200 billion last year. It is producing cellular phones, LCD, semi-conductors, home appliances and so forth, and secured the top position in many of these sectors.

Samsung considered investment here. But, it is currently conducting a feasibility study in Myanmar.

I met Samsung officials and encouraged them to invest here.

You need to make them understand that Bangladesh is the right destination for investment and will be a real good partner. Korea has enough resources, but it lacks manpower. Bangladesh has good expertise, and we can go for new ventures here.

You need to invite more foreign investors to Bangladesh.

Bangladesh is also a big market of 160 million people. There will be high demand for electronics goods here.

In the future, middle-income Bangladesh, “Bengal Tiger,” will also be a very good market for the global manufacturers.
 
Banglanews24: Thank you very much.
 
Lee Yun-Young: Thank you very much also.

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