3. Trade and Investment Promotion by the Netherlands
3.3 PSOM (programma
samenwerking opkomende markten)
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
[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
Currently two PSOM projects are running while three projects
are in the pipeline.
Bangladesh and the Netherlands agree on new investment
In Asia, Africa and Latin America new markets are expanding
rapidly. These emerging markets provide promising
opportunities for businesses to expand their investments and
trade relations. Trade and investments stimulate economic
growth, generate employment and enable the local population
to improve its standard of living.
Foreign direct investments (FDI) from Netherlands companies
into Bangladesh are still at a low level. The Netherlands
share in total imports to Bangladesh is 0,38%. The
Netherlands Government intends to increase investment and to
support private sector development. To this end the
Programme for Cooperation with emerging markets (PSOM) has
been introduced into Bangladesh.
A Memorandum of Understanding regarding PSOM was signed on 7
March 2005 between Mr. Md. Ismail Zabihullah, Secretary
Economic Relations Division of the Ministry of Finance and
Mr. Kees Beemsterboer, Ambassador of the Netherlands. 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.
Financial support up to 60% is provided to initiatives of
private companies of the Netherlands and Bangladesh in
setting up joint innovative pilot projects in specific
sectors, making use of international and local know how,
goods and services. PSOM projects should meet the following
Improve the position of the poor by
creating extra employment and income.
Offer genuine prospects for further
investment (visible spin off) or else offer a
sustainable trade relationship with a
Have a pilot character that enables
replication or follow-up investments.
Include the transfer of knowledge
from one company to another and reflect a combination of
technical assistance, training, market research and
installation of equipment (hardware).
Be tailored to local circumstances
and skill levels.
Preferably have a positive impact on
the environment and on the position of women.
Not be feasible without PSOM
financing due to high risks.
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. The average PSOM contribution is Euro
The Netherlands Foreign Trade Agency (EVD) will invite
at least once a year (consortia of) companies to submit
proposals. Every consortium will contain at least one
Dutch and one Bangladesh partner. The Dutch partner will
make the application to the EVD. Projects are selected
on the basis of an open tender procedure. EVD will
announce tenders on its website:
PSOM a new Dutch
joint venture for Private Sector Development in Bangladesh
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.
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
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.
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
has the following selection criteria:
the position of the poor by creating extra employment
genuine prospects for further investment (visible spin
off) or else offer a sustainable trade relationship
with a Bangladeshi company.
pilot character that enables replication or follow-up
the transfer of knowledge from one company to another
and reflect a combination of technical assistance,
training, market research and installation of equipment
tailored to local circumstances and skill levels.
have a positive impact on the environment and on the
position of women.
feasible without PSOM financing due to high risks.
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
duration is 2 years, max. budget EUR 825,000;
Approximately EUR 2
million for Bangladesh per year;
project costs are approximately EUR 825,000 (60% PSOM +
is 60% (max EUR 495,000) and own contribution of project
partners is 40% (max EUR 310,000)
Mature project idea
creating employment & income in Bangladesh;
Two companies; one
Dutch; one Bengali, each partner providing
How to get started:
above information, all that is needed to be done is GET DOWN
TO BUSINESS WITH NO TIME TO WASTE.
Co-operation with Emerging Markets (PSOM)
Frequently Asked Questions
for Development Co-operation of the Netherlands has
initiated PSOM in order to alleviate
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.
(50-60% of the initial investment costs is paid in
the from of a grant) is provided to joint
initiatives of at least a Dutch company
(lead-company) and a company in the PSOM country in
setting up joint innovative pilot-projects, making
use of international and local know-how, goods and
services. Companies from other countries may join
It is expected that
successful try-outs will be continued on a
commercial basis and/or duplicated by the private
The business projects
are expected to contribute to poverty alleviation.
Projects creating substantial local employment,
transferring knowledge, making extensive use of
local SMEs in the supply chain, operating in
geographically disadvantaged regions, generating
income for a substantial group of beneficiaries
and/or contributing in other ways substantially to
poverty alleviation will receive priority in the
selection process. Projects however have to be at
all times sound business proposals that lead to a
sustainable business relation.
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
responsible for the accurate implementation of PSOM.
PSOM pilot project must:
initiated by a private company from the Netherlands (applicant), together with a company from the PSOM
innovative for the PSOM country (new product, new
contain large commercial and/or financial risks
which make it unlikely that the project will be
initiated without PSOM's involvement;
pro poor effects (employment creation, positive
income effects etc.);
consist of a combination of technical assistance and
exceed a maximum budget of EUR 1,500,000 (or EUR
800,000 for LCD's);
finalized within two years;
to commercial follow up investments.
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
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
Can starting companies
apply for PSOM?
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.
Can starting companies be
the recipient of a PSOM project?
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?
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?
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
The partial untying of PSOM in these two countries is an
experiment. There are currently no plans to expand this
Q: Can foreign
companies outside the Netherlands and the PSOM country be
involved as partners in the consortium of PSOM projects?
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?
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?
The type of project defines the balance between technical
assistance and hardware.
Q: Can a company
apply twice for PSOM?
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?
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.
Q: Can companies from
PSOM countries apply directly for PSOM to the EVD?
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
Q: Are there
organizations that can help a local company find a partner
from the Netherlands?
Local companies could consult the Netherlands Embassies for
assistance. They can also search for a (trade-) partner on
the website of CBI
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
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?
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
Q: Is PSOM a subsidy?
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
Q: How do projects
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
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?
There are a number of criteria on which a project proposal
project plan, financial aspects and
capability, additionality and development effects.
for the tender instructions.
Q: Does the hardware
that is being purchased in the PSOM project have to come
from the Netherlands?
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?
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
Q: Can second hand
goods be purchased under a PSOM project?
Yes, on the condition that reasonable guarantee conditions
apply and that the price is checked on it's market
Q: What is market
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
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.
Agro Update 2006
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.
Share in GDP: 22.8 %
Growth rate of agriculture
is 2.7 (p) %
Employment Share: 60% of
Foreign Exchange Earnings
from Agro-Processing Sub-sector: US$ 52 million
Agro Processing Sub-Sector
Growth Rate: 10 15%
Share in GDP and Sectoral GDP Growth Rate in 2004
Share in GDP
i) Crops and
iii) Forest and
(Source:National Accounts Statistics, Bangladesh Bureau of
Statistics (BBS), July 2004, p = provisional
Annual Report, Bangladesh Bank, 2003-04
Agro Processors Association (BAPA) 2005
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:
production of agricultural commodities
Transformation of agricultural commodities into products
of inputs to the production
marketing and distribution of agri commodities
business is commercially oriented with organized
linkages among different sectors. It excludes agro based
activities that are conducted at a subsistence level.
Agri business system consists of suppliers of production
inputs and services, commercial producers, market
intermediaries, agro-processors and other
agribusiness-related entities. Agribusiness systems
differ according to the commodities involved and their
particular economic, political, social and physical
in Government of Bangladesh (GOB) Policies including New
Agricultural Policy, The Export Policy and the
Agricultural Marketing Policy.
It is in
the GOBs Thrust Sector List.
2006/07 continues and reinforces focuses on this sector
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
Tk. 5802 crore
agriculture Tk 3149 crore (42% higher than revised FY
Fisheries and Livestock Tk. 578 crore (36% higher than
revised FY 2005/06)
Environment and Forest Tk. 242 crore
Land Tk 371 crore
Water Resources Tk 1466 crore (22% higher than revised FY
Government Policy &
In Budget 2006/07 once
again it was mentioned that with the increase of
budgetary allocation for expansion and development of
agriculture and agro-based industries, the Government is
also increasing the quantum of agricultural credit and
Agricultural subsidy of
Tk 1200 crore is allocated in FY2006/07.
Tk. 244 crore for
agricultural research is
allocated in FY2006/07
Tk. 6000 crore
target for agricultural
credit distribution in FY2006/07. Up to March 2006
the total agricultural credit disbursed stands to Tk
For the development of
agro-product processing and software industries,
allocation for Equity Development fund has been raised
to Tk 200 crore from TK. 100 in previous year.
To build agro-based farm
and industries, an allocation of Tk. 150 crore has been
made under the Agro-based Industries Assistance Program
in this budget (raised from Tk. 100 crore from
Tk. 50 crore has been
allocated in FY 2006/07 to create a fund called Fund
for Assistance to Small Farmers Affected by Natural
Agro based industry enjoys
tax holiday. Any investment in this sector will enjoy
similar tax amnesty.
Government provides 30%
cash incentive on export of ago-based industrial
products through Export Processing Zones (EPZs)
(decision taken on 5 Sept 04) at the Prime Ministers
Office. Earlier this incentive was available to export
of the agro-based industrial products outside the EPZs.
It is expected that Foreign Investors would be
encouraged to set up joint ventures with Bangladeshi
companies. Such interest has been already received from
Prime Minister on 23 Nov
2003 has declared that a special EPZ will be set up at
Ishwardi for a agri-processing industries.
Government has reduced the
rate of interest against bank loan for investment in
agriculture from 14% to 10%
Bangladesh Bank has opened
an opportunity for Equity & Entrepreneur Fund mostly for
establishing agricultural products processing
Duty rebate facility for
export of agricultural products has been announced
Electricity charges for
agro-processing enterprises has been reduced.
Campaign Abroad: The Executive Chairman of
Bangladesh Export Processing Zones Authority (BEPZA)
undertook aggressive investment promotional campaign in
Sri Lanka and Malaysia to attract more investment in the
agro based sector, both in backward & forward linkage
and Business Factors:
This sector unfolds lot of
scope for growth potential for foreign investment. The
growth of Agri-business will accelerate employment and
income of the rural population and stimulate farm and
non-farm activities such as production, agro-processing,
marketing, and business services. The potentials seem to
be promising because of prevailing comparative
advantages in the production of a range of agricultural
commodities, and growing demand for high quality
products in the rapidly expanding local and
The fragmented small land
holdings of rural areas provide good opportunity through
contract farming to raise income via business
development through value addition. For steady growth of
agribusiness, strong linkages (value chain linkage)
between farmers, traders, processors, and service
providers are key essential elements. These linkages
require specific strategies and an enabling environment.
With the growing urbanization, with growing urban middle
class the need for value added diversified food
products, which meet the requirements of the urban
population are increasing. Opportunity lies in packaged
food for easier preparation, higher food quality, and
longer storability. In major cities, the emergence of
modern agricultural food distribution systems, including
superstores/markets and stop-and-shop outlets, has
started in recent years indicating higher demand for
such commodities. Obviously, the local products have to
face tough competition vis-�-vis the imported products.
Agribusiness has achieved
limited success in a few areas, including poultry,
shrimp, fruits, dairy products, vegetables, wheat and
bakery products, medicinal plants, animal feed, flowers
and orchids. Other commodities and products including
rice, tea, sugar, jute and tobacco have been part of the
commercial system of production, but have not shown yet
the required dynamism for agribusiness. The largest
agricultural sub-sector namely rice is still mainly
dominated by a large number of farmers producing for
household food security or producing for a small
marketable surplus. One example is the aromatic rice.
PRAN, a local company is producing aromatic rice.
However, scope remains to improve the milling, packaging
and distribution capacity.
Interventions can be at the following levels:
of production through new products and commodities, such
as high value crops, livestock, poultry and fisheries
Development of forward
linkages through improved services, packaging,
processing, storage, transport, removal of marketing
constraints and opening up of new markets
through the provision of inputs (seeds, fertilizers,
animal feed and agriculture machinery)
Areas for Exploring Business Opportunity:
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.
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
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.
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
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.
to this sector
High incidence of
land-lessness and small size firms:
In terms of the commercialization of production, land
resources are limited in both size and suitability. Many
land-holdings are too small to consider a high degree of
diversification and many areas are subject to seasonal
Lack of access to
credit: Furthermore many
potential producers do not have access to the capital or
credit needed to diversify their production and do not
have the capacity to face the risk that investing in new
crops and commodities might entail. The limited amount
of credit that is available for small to medium
producers tends to be lent to non-agricultural ventures
that are perceived by lenders as less risky.
Lack of market
Constraints to the development of forward linkages
include undeveloped markets and inefficient marketing
chains. There is little market information. Moreover,
access to alternative crops and commodities and
knowledge about alternative crops and commodities are
limited and markets for many potential crops or
commodities are undeveloped, as is the marketing chain.
Middlemen reduce profit margins between the buyer and
the end user and there is little access to credit for
potential processors, packagers, transporters or
Lack of Efficient
is not that developed (cold storage facility, port and
air cargo facilities are inefficient) in Bangladesh.
However, this problem is being addressed for exporters
of agro products with the Ministry of Civil Aviation and
Tourism and the Foreign Airlines in Dhaka, Bangladeshi
owned private Airlines, Ministry of Commerce, Export
Promotion Bureau (EPB), Bangladesh Biman and Bangladesh
Fruits vegetables and Allied Products Exporters
Association. The solution partly lies in lifting more
vegetables and fruits of Bangladesh by the foreign
Airlines to different destinations in the middle East
and UK particularly, and reduction in the handling
charge of equipment and storage charges etc. at ZIA for
encouraging private and foreign airlines to bring more
cargo planes here.
Quality Control Mechanism:
There are a limited number of institutes for quality and
grading standards. Bangladesh does not have any testing
laboratory that is of international standard and as such
does not have international recognition of its
Contacts for further Information
Agro Processors Association (BAPA)
Gen. (Retd.) Amjad Khan Chowdhury, Chief Executive,
Mozammel Huq, Advisor
Mohananda, House 39,
Flat 1D, Road 11 new,
Fax: 880 2 9110055
Board of Investment (BOI)
Prime Ministers Office, Government of Bangladesh,
Jiban Bima Tower, (19 flr), 10 Dilkusha
C/A, Dhaka 1000
Export Processing Zones Association (BEPZA)
House No 19/D, Road 6, Dhanmondi, Dhaka
Ph: 88-2-9670530, 8650058, PABX 8650059
Promotion Bureau (EPB)
1 Kawran Bazar,
Tel PABX: 880-2-9144821
115/120 Adamjee Court, Ground Flr.
person: Riffat Zaman, PhD,
Economic & Commercial Affairs
Road 90, Gulshan 2
A Sketch of the
Telecommunication Sector in Bangladesh,
Updated July 2006
Sector Organizational set up: The telephone sector was
strictly under Bangladesh Telephone and Telegraph Board
(BTTB) mainly operating in the field of landline
there are six cell phone operators and 15 private land phone
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.
namely Citycell, Aktel, and Grameen Phone. Later on joined
in Sheba telecom, which sold out to Orascom operating as
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 WorldTels 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
Teletalk is providing mobile phone service under BTTB. Warid
Telecom International of Dhabi Group is likely to start
operation this year, 2006.
0.6% landline phone and 10% mobile phone connection with 12
million covered by cell phone.
the countrys telecom sector constitutes of:
companies received license. These are:
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).
phone: 5 private companies and one state- run
Aktel, GrameenPhone, Banglalink, Teletalk (state), Warid
them use GSM (globalized system for mobile
communication) service in the country while one uses
CDMA (code division multiple access) technology.
independence: BTTB landline operation under GOB
phone license given to Pacific Telecom (City Cell)
opened up to three more GSM mobile license
Grameen Phone (GP), Telekom Malaysia (Aktel), Sheba
Telecom (now Banglalink)
a licensing and regulatory body set up under the
provision of Bangladesh
Telecom Act 2001 came into effective operation.
Fifteen private companies received license for land
Teletalk BTTB started mobile phone service
telecom a venture by Dhabi group of UAE is to start
telecom services in 2006
SEA-ME-WE-4 (South East Asia, Middle East, West
Europe 4) submarine cable connection inaugurated in
launched prepaid cards for land phones.
Fixed Phone Service:
Fixed phone or PSTN is
provided by BTTB. There are four types of telephone
exchanges operating: digital, analogue, central battery
(CB), and magneto with the transformation of these to
digital in near future. BTTB operated through four
satellites in Betbunia, Mohakhali, Sylhet, and
Kaliapur-Gazipur. Currently there are 15 private
companies which received license for land phone
operation. List in Annex.
Cellular Mobile Telephone Service:
Three are currently four
private operators: PBTL, Grameen Phone (GP), Telekom
Malaysia (Aktel), and Sheba Telecom (Banglalink),
Teletalk, Warid telecom. PTBL initially used AMPS
and CDMA system to provide service while the other three
operators are using GSM system. Among these GP has the
most coverage. Details of cell phone companies are
Nation Wide Dialing (NWD):
BTTB provided this service
all over the country through different transmission
links and TAX (Transit Automatic Exchange) and Sub-tax
system. More modern and sophisticated systems with
extended capacity like SDH Optical Fiber, SDH Microwave
and PDH Microwave System have replaced older versions.
Currently there are 16 TAX and Sub-TAX and 3 TAX cum
Local Switch (TLS) are providing NWD service. Private
mobile operators are establishing their own transmission
network. GP has taken lease from Railway Optical Fiber
System to establish transmission network through- out
the country. It also leases out to other operators.
International Dialing Service (ISD):
BTTB is the only operator,
which provides this service through two international
trunk exchanges (ITX), by Intermediate Data Rate System.
BTTB will hold monopoly over ITX till 2010. Bangladesh
has been linked to global network through submarine
cable SEA ME WE4. Even though international voice
service is provided by BTTB alone, since 1998 it has
been opened up to the private operators through data
The sole provider of this service is BTTB
and this is losing its market to fax and internet
In 1989 a private operator
has obtained a license to provide this service which has
almost been wiped out with the introduction of cellular
Radio Trunk Service:
BTL got the license to
provide this service in 1989. However, it is being
almost wiped out for inefficient technical quality and
BTTB provides this service locally and internationally.
But some private operators are being given license for
point two data circuit for corporate users inside the
Internet Service Provider (ISP):
168 companies have been
issues license in the private sector to provide internet
service through using BTTB telephone lines and
international connection through VSAT. BTTB started
internet service since 1999.
It is in operation since
1994 though BTTB. There are 1550 card phone booths in
the country but the quality of the magnetic cards are
sometimes not up to the standard. BTTB launched
pre-paid land phone card in mid July 2006.
Telecom Regulatory Commission: The BTRC, a licensing and
regulatory body set up under the provision of Bangladesh
Telecom Act 2001, came into effective operation in 2002.
From the start, BTRC had a job on its hand to impose its
authority on a sector long dominated by BTTB, both as
regulator and sole operator.
BTRC has made
regulatory interventions as and when appropriate. Mobile
phone users and operators were charged for calls made from a
mobile phone to a BTTB fixed line; but the BTTB subscriber
was not similarly charged for calls made from BTTB to
mobile. BTRC introduced new legislation enabling all
operators to deal with each other on terms of parity. The
private operators are currently renegotiating their original
inter connectivity agreements with BTTB. The issuance of
fixed-line licenses to new operators goes to BTRCs credit.
Tele-density: Tele-density in Bangladesh is very low.
The country's telecommunications services are inadequate.
Bangladesh devotes a mere 0.7% of its GDP to the telecom
sector as compared to the regional average of about 2.0%.
The government-run telephone service has approximately 9
telephone lines for every 1,000 people, giving it one of the
lowest penetration rates in the world. However, this rate
is improving fast with the introduction of private sector
involvement. Approximately, a little over 900,000 telephone
landlines are located in Dhaka, a city of over 12 million
people. Bangladesh's call completion rate remains under 50%
and its landline network barely supports modern telecom
accessories such as call waiting, call forwarding, and voice
of cellular phones has been growing and with 12 million
mobile phone clients cellular tele-density is now 10% and
landline density is 0.6%. The demand for fixed phones in the
capital is estimated to be around 10 lakh while the
registered demand with the state-run BTTB is about two lacks
only. BTTB does not have the infrastructure to meet the
growing demand for land phones. Therefore, land phone
operation has been opened for private operators to provide
service through competitive bidding in the Central Zone
Dhaka Multi Exchange Area consisting of Dhaka city,
Zinzira, Savar, Narayanganj, Gazipur and Tongi. This area
comprises of 60% demand of the countrys fixed phones.
status in South Asia:
rates owe much to its strong growth of mobile phone
services. Mobile phone calls cost US$ 0.03-0.04 per minute
in India against US$ 0.084 per minute in Pakistan, US$ 0.11
per minute in Sri Lanka and over US$ 0.014 in Maldives. In
Nepal and Bangladesh mobile phone calls cost US$ 0.065 per
tariff in India is one of the lowest in the world and around
50% cheaper than tariffs in neighboring countries such as
Sri Lanka, Pakistan and Bangladesh, according to Telecom
Regulatory Authority of India (Trai). The tax of handset is
$25 per set. Duty on imported handset is substantially
higher than neighboring countries except Myanmar.
Bangladesh (GOB) took some good initiatives in this budget
of FY2006/07. It reduced tax on SIM (Subscriber identity
module) card or cell phone connection from Tk 900 to Tk.
800. Customs duty on imported telephone sets, both mobile
and fixed phones, has been cut to Tk. 200 per set from Tk
300. This years budget allocation is Tk. 1574 for this
sector, which is 10% higher than last years.
The cell phone
is working very well here. Bangladesh is an attractive
market for mobile phone services due to its large population
of around 140 million but still the mobile phone penetration
rate here is very low, 4%. The potential of adding new
subscribers in Bangladesh is enormous. It is estimated that
the number of mobile phone subscribers in Bangladesh will
reach around 15 million by the end of 2007 (10%). There will
be scope to tap the untapped market!
Scenario of Mobile Phone Sector in Bangladesh
As of June
Name of the Operator
Type of service
Period of Service Launch
Number Of Subscribers
Pacific Bangladesh Telecom(PBTL)
GSM-900 & 1800
GSM-900 & 1800
November 15, 1997
qtr of 2006
5 million planned by 2007
Land phone operation
Jubok Phone/Tele Barta has
target to reach around three lakh land phone subscribers
in four zones of the country by the end of 2006. Among
others, Dhaka phone, Jalalabad telecom, National
telecom, One telecom, Peoples telecom, Ranks have
Bangladesh Telecom Limited (BTL)
was awarded a license to operate cellular, paging and other
wireless communication networks. In April 1990, BTL and
Hutchison Telecommunication (Bangladesh) Limited created a
joint venture in the name of Hutchison Bangladesh Telecom
Limited (HBTL). It began operation in 1993 using AMPS
technology. Interestingly it was the first cellular
operation in South Asia. However, it charged a price of TK.1
lakh per package which was for purely profit motivated and
not within the reach of general mass. In December 1993,
Morshed Khan (foreign Minister) acquired 50% share of HBTL
and named it PBTL launching cellular products with the brand
name CityCell Digital. This is the only operator
using CDMA technology.
has lost its market to GP and then AKTel. It dropped its
package by 95% to be competitive. It adopted advanced
customer service and choice of budget friendly packages.
CityCell was the first to introduce IDD and NWD for prepaid
subscribers. It covers 54 districts. It is trying to compete
in the market and has been exploring possibility for
investment from Signtel.
Grameen Phone: The countries
leading mobile cellular operator started operation in 1997.
It was Iqbal Quadir, a Wharton MBA, who in 1994
conceptualized the mobile-phone company called GP with the
help of micro-credit pioneer Dr. Yunus of Grameen Bank.
Quadir convinced Norways state-backed telecom company,
Telenor, to take a 51% stake in GP. Later, with Japans
Marubeni Corporation on board and $65 million in loans from
international shareholder, Telenor AS owns 62% of the shares
of GP, brings technological and business management
expertise. The local shareholder is Grameen Telecom, which
owns 38% of the shares of GrameenPhone, and is a
not-for-profit company which works in close collaboration
with Grameen Bank. It understands the economic needs of the
rural population, in particular the women from the poorest
households, and provides a presence throughout Bangladesh.
At present (As
of 30 June 2006) it has 8.5 million subscribers across the
country having 62.01% market share in the mobile sector and
91% population under its network by the end of this year.
It was the
first Mobile Operator offered International Roaming service
to its valued subscriber and also the pioneer of introducing
prepaid service in this arena.
GP reaches the
remote rural area by its internationally acclaimed
Village Phone Program. It is an initiative, which
provides telephone services in remote rural areas where no
such facilities existed before. Village payphone is one of
the important products through which GrameenPhone is
empowering the poor village women. There are now more than
206,000 village phones in 55,000 villages. Grameen Telecom
is a non-profit organization and a sister concern of Grameen
Bank. Grameen Telecom with the help of Grameen Bank
administers Village Phone services to the villagers, trains
the operators as well as handles all service-related issues.
As of February 2006, Grameen Bank covers 62,089 villages
through its 1,161 branches.
Telecom Malaysia International Bangladesh (TMIB), a joint
venture between Telekom Malaysia Berhad and A. K. Khan & Co.
Ltd, was established in 1996 launching its services in 1997
with the brand name Aktel. Since its commencement,
AKTel soon became the second biggest operator and claims to
have the widest International Roaming service in the market
connecting 170 countries. It was first mobile operator to
connect Tetulia to Teknaf the North and South Pole of
Bangladesh and to provide seamless coverage along the Dhaka
Chittagong highway. With a strong network, coupled with
first Intelligent Network (IN) Prepaid Platform, Aktel is
geared to provide a wide range of products and services.
With TMIB/Aktel of Malaysias investment of $200
million, Aktel has invested $ 308 million between 1997 to
2005 and paid Tk. 8.500 million (8.5 billion) to the
Government on different heads including fees, taxes and VAT.
The company has a plan of investing $237 million during 2006
for expanding its network. It has signed a $200 million
equipment deal with Huawei of China to upgrade its network
to the GPRS system, which will support much higher data
transfer rates other than voice, multi-media messaging (MMS)
and faster mobile internet service.
Banglalink: Egyptian Telecom
Orascom acquired 100% Sheba telecom, a joint venture of
Malaysia and Bangladesh, in October 2004. Sheba had launched
its operation in 1997 but had poor performance. Orascom paid
a price of $60 million including $ 10 million in settling
outstanding loans to SCB, Dhaka. It inherited 1% market.
However, it took an aggressive approach to invest $250
million towards accelerated network deployment and launched
new prepaid packages in nine cities. It plans to extend
network coverage from 9 to 61 districts by the end of 2005,
using uptodate telecom communications soured from Siemens
and Huawei. Its target is to make a difference by providing
affordable and reliable connectivity solution. It has
steered extreme competition in the market by offering Tk.
3,800 mobile-to mobile package. Its
mission is to reduce the total cost of buying and using
mobile phones. Banglalink
currently operates a GSM network and provides a range of
prepaid and postpaid voice, data, messaging and value-added
services. It spread its network in record speed and covered
all of the 61 districts, 425 thanas.
Teletalk: Government decided to
start up a state-owned mobile company to provide cheaper
affordable cell service to people and to check excess profit
by the private operators. However, the inception of this
company has undergone a much-debated political process on
the transparency issues of BTTB. However, it has started
operation with an investment of TK. 2500 crores. Teletalk
created huge buzz in the sector with its free incoming
facility from fixed-line phones of Bangladesh Telegraph and
Telephone Board (BTTB).
The Post and
Telecom Ministry discloses that the government plans to sell
a total of one million cell phone connection in the country
in phases. In the first phase, 250,000 connections will be
provided to the users, of which 50,000 are being distributed
initially. The minister confirmed that a policy decision has
been taken to open up Voice Internet Protocol (VOIP). The
decision will be implemented after studying the operational
processes followed in the neighboring countries of India
Pakistan and Sri Lanka.
Telecom International Ltd. Its
initial plan is to acquire over 14 million customers in four
phases by December 2007. First, it will launch services in
26 districts with an aim to net 2.8 million subscribers by
October 2006. In the second phase ending in January 2007 its
plan is to expand the service coverage to 22 more districts,
targeting 3.1 million fresh customers. In the third phase,
13 more districts will come under its net-work by March 2007
with an aim to enlarge its subscriber base by 3.35 million.
Warid will cover the rest of the country in the fourth and
last step ending din December 2007 during which it expects
to add 5 million new clients. Given the political
uncertainties of the election period, it has the challenge
to decide to install microwave links for rapid deployment of
local and country wide transmission net works. It has
stipulated a few critical tasks like site acquisitions for
base stations and energizing these installations as the
suppliers responsibility. It is recruiting employees and
has taken an office site in Gulshan 2.
Equipment Suppliers: The major
equipment suppliers are: Alcatel, Ericsson AB, HUWAEI,
Recent events: SEA-ME-WE 4 has
been inaugurated in May 2006 to connect Bangladesh to the
superhighway. It is the fourth cable of a series of cables
connecting the continents over almost 20000 km. The cable
has the design capacity of 1.28 tera bytes per second (tbps).
It connects the country with undersea fiber-optic cable
passing from Singapore through Malaysia, Thailand,
Bangladesh, India, Sri Lanka, Pakistan and a number of
Middle Eastern countries to finally land in France.
country will have a 10-digabyte data transfer capacity per
second. 68 times higher than the current speed. It will
facilitate high-speed data and voice transfer and also
increase the number of international communications circuits
that will ultimately lead to enhancement of revenue for the
exchange through leasing out the unutilized capacity of the
It creates the
opportunity to introduce broadband data transfer and call
centre services at a very significantly cheap rate.
There will be
scope for software could be made at low cost for export
while e-governance, e-commerce and tele-medicine series
could be easily introduced at cheaper costs. Video
conferencing will enable better services for the above as
prepaid cards of Tk 500. Tk 200 for land phones on 17 July
2006. ISD and economy ISD (E-ISD) calls can be made from
BTTBs phones across the country by dialing 010201 while NWD
calls only from Dhaka multi-exchange area.
Areas for Exploring Business Opportunity:
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.
Telecommunication has been one of the fastest growing
sectors in Bangladesh. Many local and international
companies are taking advantage by tapping the emerging
market here. Bangladeshi mobile users spend 300 minutes of
talk-time on an average per month, the highest in South East
Asia. So the scope for further growth is immense.
Telecom is an
industry, which requires millions and billion dollars of
investments. Therefore, it may not be appropriate for PSOM
financing, the amount of which is small, up to 825,000.
Telecom Specialists of IIFC (who are former BTTB and BTRC
personnel) had identified two areas which could be
undertaken with a small amount of investment. Due to
inadequate interconnection facilities for mobile phones,
only about 10% of mobile phones can actually call a
landline. A National Interconnection Exchange would solve
Internet service providers, featuring electronic mail and
World Wide Web services, now exist in Bangladesh.
Bandwidth, however, is very expensive since the country does
not have an Internet Exchange Point and is not yet connected
to a submarine fiber-optics cable system. Thus, NIX
National Internet Exchange is the second area which could be
undertaken with a small investment.
Post and Telecommunication Ministry
Minister, Mr. Aminul Haque
(Bangladesh Telephone and Telegraph Board)
37/2, Eskaton Garden
Fax: 880 2 8322661-4
(Bangladesh Telecom Regulatory Commission)
Rustam Ali, Director, Administration
Address: House 10, Rd. 135,
Gulshan 1, Dhaka 1212
Fax: 880 2 9890029
Name: Mr. Muhmmad Jamil
Designation: Business Development Advisor
Address: Road 23/A, House 3, Gulshan 1,
Tele-Talk - BTTB
House 101, Road 13A,
Block C, Banani
Fax: 880 2 9888535
Address: Road 113/A,
Building 5, 6th Floor
Fax: 880 2 9882970
BRAC Centre (9th Floor)
75 Mohakhali, CA
Fax: 880 2 9885464
Pacific Bangladesh Telecom Ltd (PBTL)
Address: 4th Floor,
14 Mohakhali, CA
Fax: 880 2 8823575
Address: Land View, Level 13,
28 Gulshan North C/A
Warid Telecom International LLC
168 Gulshan Avenue
Gulshan 2, Dhaka 1212
Address: Prime Ministers Office, Government of Bangladesh,
Jiban Bima Tower, (19 flr), 10 Dilkusha
C/A, Dhaka 1000
Infrastructure Investment Facilitation
IDB Bhaban (6th flr),
Agargaon, Dhaka 1207
Fax: 880-2-812 4266,
RNE (Royal Netherlands
Private Land phone operators
of Licensee and Address
Bangla Phone Limited
Karwan Nazar, BSRS Bhaban. Dhaka - 1215,
91237375, Fax: 9883121
bashundahra Communication & Networks Ltd.
Kalyan Bhaban (14th Floor)
Motijheel C/A. Dhaka-1000
01711546743. Phone: 9556452-54, 71 12617-18
9560973 , 9556459
- East, South - East
- West, South - West
Dhaka Telephone Company Limited
Erectors House, 18 Kemal Ataturk Avenue, Banani
Dhaka-1212. Tel: 8857186-7, Fax: 9861917
- East, South - East
- West, South - West
Dominox Technologies Ltd.
No 23, House No: 1A (5th Floor)
9886679, 9894763, 9894737, Fax:9886679
GEP Telecom Ltd.
Delta Soft Ltd. House No: 74, Road No: 21
B, Banani, Dhaka-1212
88109 5, 9887518, Fax: 9883783, 9887518
- East, North - East
Jalalabad Telecom Limited (Bijoy Phone)
Motijheel C/A, Ispahani Building (3rd Floor)
9564922, 9569541, Fax: 9569612
National Telecom Ltd.
Annex Building (1st Floor)
Dilkusha C/A, G.P.O Box:3769, Dhaka-1000
956457-61, Fax: 9564554
- East, South - East
- West, South - West
Nextel Telecom Ltd.
10-20, Priyo Prangon Tower
Kemal Ataturk Avenue, Banani, Dhaka-1212
8852609, Fax: 8956684