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.
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