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LEADING SECTORS FOR U.S.
EXPORTS AND INVESTMENT IN BANGLADESH
Best Prospects for Non-Agricultural
Products
Source : US Embassy ( Bangladesh Country
Commercial Guide)
Courtesy: Global Amitech
Sector Rank and Identification:
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 shuganj-Bakhrabad (AB) pipeline was
completed in 1997 under the World Bank’s Third Gas frastructure
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 etc. 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 financation 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.
source: eb2000IT
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