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3. Trade and Investment Promotion by the Netherlands |
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To stimulate Dutch foreign direct investment and pro-poor economic growth in Bangladesh (and other developing countries and emerging markets) a financing instrument called PSOM has been introduced by the Netherlands government. This instrument has been introduced in Bangladesh on 7 March 2005 [for more information, see the press statement [Web link Bellow] PSOM supports private sector development by promoting cooperation between Bangladeshi and Dutch companies on the basis of partnership. Financial support up to 60% (maximum of EUR 825,000) is provided to initiatives of private companies from the Netherlands and Bangladesh in setting up jointly innovative projects, making use of international and local know-how, goods and services, which is environmentally friendly and has development spin-off effects. On the website of the EVD, who is responsible for administering PSOM, the eligibility criteria, procedures and status of PSOM in Bangladesh can be found (www.evd.nl/psom/). Currently two PSOM projects are running while three projects are in the pipeline.
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Bangladesh and the Netherlands agree on new investment
programme
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PSOM– a new Dutch joint venture for Private Sector Development in Bangladesh
PSOM – Program for Cooperation with Emerging Markets – was signed with ERD the Netherlands on 7 March 2005. PSOM aims at supporting private sector development by promoting cooperation between the business sectors in Bangladesh and the Netherlands on the basis of equal partnership and mutual benefit with a focus on private investments.
Royal Netherlands Embassy in association with DBCCI successfully held a workshop for PSOM with participation from BOI, ERD and other relevant representatives of different ministries and the business community in 2005. Wim Bekker, the project officer for Bangladesh from EVD, Ministry of Economic Affairs in the Netherlands presented the key note paper. He met with all interested companies on a one-to-one basis later on.
The Dutch already has a trade deficit and a small amount of Foreign Direct Investment (FDI) in Bangladesh. The Netherlands has a trade deficit to the amount of € 202 and ranks only 17th in the country list of FDI in 2004 with an investment worth $ 4.4 million only. Therefore, Bangladesh should try to improve its overall image to attract FDI. A good trend is seen by large investment proposals by India, USA, UAE, China, France, UK and many other countries. It is expected that this PSOM should encourage Dutch companies to take advantage of this fund to invest in Bangladesh.
Two proposals had been submitted in the August tender in 2005. One project on fabric dye has been approved and ongoing. The next tender date was March 2006 and it was on plastic bags which has been recently approved. It is expected that a lot more proposals may be submitted next time as awareness grows about this available subsidized fund among the business community of Bangladesh. Since Bangladesh is an LDC, the joint Dutch Bangladesh project is entitled to obtain 60% financial support from PSOM. However, one must take note that the Bangladeshi company has to have a Dutch counterpart and the proposal has to be submitted in the Netherlands by the Dutch company. The project will go through strict screening by EVD and later by an External Commission for approval.
The project has the following selection criteria:
Although priority is given to the development of projects in the sectors of Agriculture & Agro-business and Information and Communication Technology, good project proposals for other sectors will also be considered.
Financial Aspects:
Company specific information requirements:
How to get started:
Given the above information, all that is needed to be done is GET DOWN TO BUSINESS WITH NO TIME TO WASTE. |
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Programme for Co-operation with Emerging Markets (PSOM) Frequently Asked Questions
Background
The Minister for Development Co-operation of the Netherlands has initiated PSOM in order to alleviate poverty through co-operation between Dutch businesses and businesses in the PSOM countries* with a focus on private investments. A total of EUR 51 million is yearly available for new commitments to PSOM projects.
Key-aspects
Implementation
The Programme shall - on behalf of the Government of the Kingdom of the Netherlands- be executed by the Dutch Government Agency EVD, in consultation with the Royal Netherlands Embassies and local authorities. EVD is responsible for the accurate implementation of PSOM.
A PSOM pilot project must:
Procedure
The EVD will invite twice a year in March and August (consortia of) companies to submit proposals for projects. The Dutch company in the consortium will make the application to the EVD and serve as the contact point with the EVD. The proposals must be based on the tender instructions which are available on the PSOM website www.evd.nl/psom. Also on this website there is information available on information meetings, workshops and there is a description of a number of successful PSOM projects. After appraisal all companies that were successful will be awarded a result-based PSOM-contract. During the appraisal process EVD will consult the Netherlands Embassies in the PSOM countries and visit both the Dutch and local project partner. Frequently asked questions
Eligibility
Q: Can starting companies apply for PSOM? A: All companies applying for PSOM should prove their financial capacity to finance the own contribution of 40-50%. This must be supported by audited financial reports of the last two years. Starting companies normally cannot fulfill this requirement and are then not eligible for PSOM. Starting companies are recommended to look for a financially strong business partner, which becomes the lead investor.
Q: Can starting companies be the recipient of a PSOM project? A: Yes, but recipient companies should be duly registered in the PSOM country and have substantial activities.
Q: Can the local partner be a 100% subsidiary company of the Dutch company? A: Yes, but the PSOM programme prefers a local partner company with clear roots in the PSOM country. For PSOM projects in China, the recipient must be a 100% Chinese company.
Q: Who decides which countries are eligible for PSOM? A: The Ministry of Foreign Affairs decides. The list is based on the DGIS partner countries plus a few emerging markets countries. No new non-partner countries are added
Q: Why are only Mozambique and Uganda open for lead-investors from other countries? A: The partial untying of PSOM in these two countries is an experiment. There are currently no plans to expand this experiment.
Q: Can foreign companies outside the Netherlands and the PSOM country be involved as partners in the consortium of PSOM projects? A. Yes they can be project partners, however, they can be not the applicant or recipient.
Q: Can the own contribution be paid for by one of the project partners, not being the recipient or applicant? A: The project partners must show their commitment to the project by contributing financially to the project. In case of difficulty in financing the own contribution another project partner can contribute partially.
Q: Can a project consist of more technical assistance than hardware? A: The type of project defines the balance between technical assistance and hardware.
Q: Can a company apply twice for PSOM? A: In principle this is possible. The projects should have different activities. The applicant must be able to manage both projects and must be financially strong enough to make multiple follow-up investments. Companies that have applied for PSOM can also be project partners in other projects.
Q: Are there rules for the division of shares between joint venture partners? A: Ideally the division should be on a balanced basis (around 50-50). However sometimes the recipient is unable to cover half of the own contribution. In these cases a different division of shares may be proposed, but each partner must be seen to contribute substantially.
Procedures
Q: Can companies from PSOM countries apply directly for PSOM to the EVD? A: No, PSOM proposals are submitted by the lead company (applicant) to the EVD. The lead company must be registered in the Netherlands. Only for companies interested to start a PSOM project in Mozambique and/or Uganda the lead company can be another foreign company from a DAC-I country. PSOM promotes foreign investment, so the lead company is always a foreign company.
Q: Are there organizations that can help a local company find a partner from the Netherlands? A: Local companies could consult the Netherlands Embassies for assistance. They can also search for a (trade-) partner on the website of CBI www.cbi.nl. EVD can provide lists of consultants and intermediary organizations that specialize in match making.
Q: What role can research institutes, universities and NGO's play within PSOM? A: They can not play the role of applicant or recipient, but they can very well play a role as a project partner providing training or services within the project.
Q: How is the selection of the proposals carried out? A: The selection is done by EVD. The proposal is firstly checked on completeness and then judged according to set criteria. These criteria are listed in the tender instructions (www.evd.nl/psom). Subsequently EVD's ranking is presented to an external board. Here the outcome of the appraisal is decided upon. During the appraisal process EVD will normally visit the applicant and the recipient. In most cases external experts are also involved in the appraisal process.
Q: Is PSOM a subsidy? A: No, PSOM operates through a tender procedure whereby successful bidders get a contract with the EVD. The annual budget is limited and only the best proposals are offered a contract.
Q: How do projects compete? A: Depending on the MoU for the PSOM country concerned, either the first two or the first four projects that score the highest number of points (and at least above the minimum required points) are awarded a contract. Should more projects for a PSOM country qualify, then the proposals with the highest points worldwide are awarded a contract depending on the funds available.
Q: How often a tender is held and where do I find information on the tender process? A: Twice a year there will be a call for proposals. The information on the exact dates for submission and the tender instructions are available through the website www.evd.nl/psom.
Q: How are the different criteria weighed in the selection process? A: There are a number of criteria on which a project proposal is evaluated; strategic interest project plan, financial aspects and capability, additionality and development effects. See www.evd.nl/psom for the tender instructions.
Implementation
Q: Does the hardware that is being purchased in the PSOM project have to come from the Netherlands? A: No, it can be bought wherever the companies get best value for money, but the environmental standards of the equipment must meet European safety and emission standards.
Q: Who becomes the owner of all PSOM (hardware) investments? A: The recipient in the PSOM country becomes the owner. Normally a Joint Venture will be set up and becomes the recipient and owner of these hardware investments. For China different rules apply. The Chinese business partner(s) will be the benificiary of the hardware part financed through the programme (for details see the PSOM MoU with China).
Q: Can second hand goods be purchased under a PSOM project? A: Yes, on the condition that reasonable guarantee conditions apply and that the price is checked on it's market conformity.
Q: What is market conformity? A: The price of hardware with a value > EUR 25,000, that is purchased under a PSOM contract, should be validated by an independent validation organisation (SGS, Veritas etc.), on its market conformity. The request to purchase hardware must be accompanied by a market conformity document stating that the price is fair and reasonable.
Q: What is a result based contract? A: A PSOM contract is based on the results that are defined by the applicant in the project proposal and agreed in the contract. Once a result has been achieved, EVD will make a payment as per the contract. When a result is not achieved EVD will not reimburse the costs. [*]For Mozambique and Uganda the programme has been partially untied on an experimental basis. This means that for these two countries any company from a DAC-I country may act as the applicant (instead of the Dutch company).
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A Sketch of the AGRO Sector in Bangladesh Updated July 2006
Agricultural Sector: Bangladesh has an agrarian economy (23% share of GDP) with most of its population still heavily dependent on the agricultural sector in terms of its substantial contribution to the gross domestic product (GDP) and employment. Agro sector has always remained in the focus but recently Bangladesh Government and the business community has jointly emphasized the need to promote this sector without which emancipation of poverty and achievement of pro-poor growth cannot be attained. Agriculture in Bangladesh is mainly categorized into Crop & Vegetables, Fishery, Livestock & Poultry, and Forestry. This sector is the source of production for domestic consumption and source of raw-materials for processing/manufacturing for the local market and export. It is a vital source of foreign exchange earning.
Basic Economic Indicators:
Agriculture Share in GDP and Sectoral GDP Growth Rate in 2004
(Source:National Accounts Statistics, Bangladesh Bureau of Statistics (BBS), July 2004, p = provisional Annual Report, Bangladesh Bank, 2003-04 Bangladesh Agro Processors Association (BAPA) 2005
This sector has the potential to foster economic growth in the near to medium term by commercialization and expansion of economic activities associated with this sector as it is a vital source of raw materials and can still claim to have productive agricultural land. Despite natural calamities, like flood, the agriculture sector as a whole has performed well in Bangladesh during the last few decades. Domestic as well as international market potential, development and value addition in agriculture have created favorable prospects for agribusiness development in the country. Agro-climatic conditions are suitable for production of a wide variety of crops, livestock, fish and forest products. In addition, the large population provides a sizeable supply of low cost labor, which also favors agribusiness development.
Activities under this sector: Agri business encompasses:
Potential:
Budget for Agriculture: Total budget expenditure in Budget 2006/07 is Tk 69740 crore (Tk 694.70 billion). Agriculture accounts for 7.5% of the use of budget resources. Tk. 5802 crore constitutes in: Ministry of agriculture – Tk 3149 crore (42% higher than revised FY 2005/06) Ministry of Fisheries and Livestock Tk. 578 crore (36% higher than revised FY 2005/06) Ministry of Environment and Forest Tk. 242 crore Ministry of Land Tk 371 crore Ministry of Water Resources Tk 1466 crore (22% higher than revised FY 2005/06)
Government Policy & Incentives:
Economic and Business Factors:
Scope of Interventions can be at the following levels:
Potential Areas for Exploring Business Opportunity:
This sector that has been emphasized in PSOM, signed Memorandum of Understanding (MOU) between Royal Netherlands Embassy (RNE) and External Resource Division (ERD), Ministry of Finance (MOF), the Government of Bangladesh (GOB) on 7 May 2005. The following areas hold business opportunities.
Crop:
Rubber Roller Rice Milling: 3% of rice milling is done by rubber roller which ensures lower breakage and also bran is gotten for oil extraction. (95% of rice milling is done by traditional means of dheki and huller which does not produce bran for oil extraction and has 35% breakage).
Processing of Potato flakes, daal (pulses) and spices.
Post harvest storage, processing and packaging of fruits and vegetables.
Production of organic fertilizer and mixed fertilizer: Only Tk. 50 lac is required for such plants. Currently chemical fertilizers like TSP (Triple Super phosphate), Urea, Nitrogen Phosphate (NP), Murete of Potash (MP) is used. However, organic fertilizer is much emphasized now. In Khulna, one such organic fertilizer plant has been set up which produces 14 tons of organic fertilizer from wastes.
Poultry:
Production of vaccines from poultry.
Dairy Feed Manufacturing using Dutch hardware/technology
Artificial insemination of breed: Currently on GOB does this and BRAC (an NGO) has the license.
Modern Slaughter House: Current slaughter houses are unhygienic and also wastes valuable raw materials like leather, hoofs, horns, etc which are raw-materials to leather and leather goods industry and also the garments industry.
Fishery:
Processing and Freezing of Prawn in the Coastal Belt: Currently Bagerhaat, Chakaria, and Shatkhira are the prawn belt. Lot of scope remains to establish modern freezing and processing of prawn.
Quality Control Institution: Bangladesh Standard Testing Institute (BSTI) is not internationally recognized. Therefore, Bangladeshi producers/exporters need to get their certificate from Malaysia and Singapore.
Risks/Constraints:
Specific to this sector
Useful Contacts for further Information
Bangladesh Agro Processors Association (BAPA) Contact: Maj. Gen. (Retd.) Amjad Khan Chowdhury, Chief Executive, and Mr. Mozammel Huq, Advisor Address: Mohananda, House 39, Flat 1D, Road 11 new, Dhanmondi R/A Dhaka 1209 Ph: 8156353/0175098909 Fax: 880 2 9110055 Email: mohananda_pro@yahoo.com
Board of Investment (BOI)Address: Prime Minister’s Office, Government of Bangladesh,Jiban Bima Tower, (19 flr), 10 Dilkusha C/A, Dhaka 1000 Bangladesh Ph: 880-2-9561430-1 Fax: 880-2-9562312 Website: www.boibd.org
Bangladesh Export Processing Zones Association (BEPZA)BEPZA Complex House No 19/D, Road 6, Dhanmondi, Dhaka 1205 Ph: 88-2-9670530, 8650058, PABX 8650059 Fax 880-2-6850060 Website: www.epzbangladesh.org.bd
Export Promotion Bureau (EPB)1 Kawran Bazar, Dhaka 1215 Tel PABX: 880-2-9144821 Fax 8802-9119531 Website: www.epbbd.com
Bangladesh Poultry Industrial AssociationAddress: 115/120 Adamjee Court, Ground Flr. Motijheel, Dhaka 1000 Ph: 880-2-9555403, 956413 Fax: 880-2-716
Royal Netherlands EmbassyContact person: Riffat Zaman, PhD, Advisor, Economic & Commercial Affairs House 49, Road 90, Gulshan 2 Dhaka, Bangladesh Tel: (880-2) 882-2715/8 Fax: (880-2) 882-3326 Email: dha-ea@minbuza.nl |
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A Sketch of the Telecommunication Sector in Bangladesh, Updated July 2006
Telecom Sector Organizational set up: The telephone sector was strictly under Bangladesh Telephone and Telegraph Board (BTTB) mainly operating in the field of landline connections. Currently there are six cell phone operators and 15 private land phone operators.
The first private operator licenses was issued in 1989 to a company operating as a monopoly till 1997 when telecom market was opened up to three 15 year GSM mobile license operators. These are namely Citycell, Aktel, and Grameen Phone. Later on joined in Sheba telecom, which sold out to Orascom operating as Banglalink.
WorldTel Ltd. was the lone license holder to provide land phone in Dhaka and were supposed to start operation in March 2006. However, Bangladesh Telecom Regulatory Corporation (BTRC) cancelled its exclusive right terming it anti-competitive and volatile of the Bangladesh Telecommunication Act 2001. WorldTel went to court. The Appellate Division of the Supreme Court on August 23, 2005 dismissed WorldTel’s petition for retaining its four-year co-exclusive right with BTTB to provide land phone in Dhaka. This paved the way for private companies to compete for land phone license. There are now fifteen private companies which obtained license for land phone operation.
Very recently Teletalk is providing mobile phone service under BTTB. Warid Telecom International of Dhabi Group is likely to start operation this year, 2006.
Teledensity: 0.6% landline phone and 10% mobile phone connection with 12 million covered by cell phone.
Thus, the country’s telecom sector constitutes of:
Landline: BTTB: State-run landline 15 Private companies received license. These are: Bangla Phone, Bashundhara Communication & Networks, Dhaka Telephone, Dominox Technologies, GEP Telecom, Jalalabad Telecom (Bijoy phone), National Telecom, Nextel Telecom, One Tel Communication, Peoples Telecommunication and Information Service, Ranks Telecom, S. A. Telecom System, Square Informatix, Tele Barta (Jubok phone), Westec (Bay phone).
Cell phone: 5 private companies and one state- run company. City cell, Aktel, GrameenPhone, Banglalink, Teletalk (state), Warid telecom. Five of them use GSM (globalized system for mobile communication) service in the country while one uses CDMA (code division multiple access) technology.
Chronology of Events:
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