EXPORT OF SOFTWARE

INTORDUCTION

During the late 90’s, Bangladesh has seen an increasing growth of the ICT industry. Initially, the favorable tax policy of the government of Bangladesh in 1998 accompanied by the global affordability of personal computers have had tremendous impact on the usage of computer. The favorable import tax policy on computers and computer accessories during that time was one of the timely steps taken by the government of Bangladesh. From then on, in accordance with the global trends, both private and public sectors in Bangladesh caught up with effective utilization of information technology. Information Technology is the combination of all activities relating to collecting, processing, storing, using and transmitting data and information through the use of computers and communication networks. The computer services are of the following major types:

SIZE OF SOFTWARE INDUSTRY IN BANGLADESH

According to the Bangladesh Bank source, export earnings from Software and ITES was
USD 27.01 million in the fiscal year 2005-06 registering a high growth of 113 per cent from the previous year (2004-05). The following chart shows the Bangladesh software and ITES export earning for last five years.

Table 1: Export earning of Bangladeshi software in recent 4 years

EXPORT ORIENTED COMPANIES IN BANGLDESH

In recent days many local and Joint Venture Company are operating in Bangladesh to meet the rising demand of the software and automation industry. The following companies are playing the key role in export performance.

IBCS-PRIMAX SOFTWARE LIMITED was recognized as an export oriented Software House and governmentally financed at a concessional interest rate.

NORTH AMERICAN COMPUTING DYNAMICS was recognized as a 100 % export oriented Data Processing Service House. A bonded warehouse facility was made available and duty free imports of a substantial number of computers and peripherals were allowed.

BANGLADESH INFORMATION TECHNOLOGY GROUP LIMITED is a virtual Company consisting of 23 IT vendors in Bangladesh. This Company was expected to promote export of Software and Data Processing Services with the help of combined resources available with the share holding companies.

SOMEWHERE IN... is a Norwegian (80 per cent) Bangladeshi (20 per cent) joint venture company that has set out on a journey to make a global solution for local communities.
We started in Bangladesh, a country lacking good web and mobile value added services, but with a huge and fast growing domestic market and international market.

KEY OPERATION OF BANGLADESHI FIRMS

BASIS carried out a survey among the 152 participating companies in SOFTEXPO8
2005 to find out some key industry trends9. One of the findings of this survey provides a good insight into the client/industry focus of the software companies operating in the
Bangladeshi market. The following section reproduces the findings of the BASIS survey of operational domains of the software companies.

Fig. 1 Industry focus of Bangladesh software industry

INVESTMENT SENERIO IN SOFTWARE INDUSTRY

After the software commencement of the software company in mid 90’s, Bangladesh is dominated by the international giants like Microsoft, Oracle, Sun etc. With passage of time local companies are established without help of the government. The local companies’ performances attract the foreign investors to invest in Bangladesh.

SOFTWARE INDUSTRY EMPLOYMENT SCENERY

According to BASIS, more than 300 local software companies employ about 5,500 software professionals. In 2005 (during SOFTEXPO 2005), BASIS carried out a survey on 1,100 employees working in 55 companies. This section discusses the general findings from that survey. Section 2.0 (Labour force) includes other findings (skill matrix, educational level etc.) of the same survey.

Table 3: Technical job distribution in software companies

Industry experts are of the opinion that the significant proportion of the jobs in the ‘noncoding’ segments (Project Management, System Analysis etc.) is an encouraging sign. They contribute to the commitment and seriousness of the local software companies. Keeping in mind the ever used 80-20 rule for management and technical work in software projects, the experts believe that with the increase in larger projects, the ‘non-code’ professionals in IT companies could establish their prominence more effectively and efficiently.

FACT OF BANGLADESH’S STRENGTH IN WORLD MARKET

To build up a DIGITAL Bangladesh we need to grow up with world current trends of ICT policy. Bangladesh has a favorable environment to grow up a well established export sector in this field.

According to the industry stakeholders/experts, the major comparative advantages for software industry in Bangladesh are as follow:

 Cheap labour

Bangladesh has one of the cheapest rates for work force among the similar business destination countries. Concerning the Software industry, the highly skilled labour force comes at a significantly competitive price. In addition to that, the IT professionals in Bangladesh are very good at absorbing new learning (easily trainable). In Bangladesh a skilled software engineer get only USD 500 as salary monthly. But for the same kind of skill in USA they are paid USD 2500 as monthly salary which is 5 times more.

 Quick learning/easily trainable

The Bangladeshi work force as well as the business people are traditionally renowned for their quick learning abilities. The work force, especially, has historically strong abilities in mathematical and logical analysis processes. Bangladeshi students have won a number of programming and mathematical competitions globally. Because of their capability to quick learning, the Bangladeshi work force can easily be trained to acquire specific technical knowledge.  Geographical Location

Geographically, Bangladesh has the potential to become a business hub. Naturally, utilization of this advantage would result in growth in all industries. Furthermore, as ‘nonnuclear’ country, Bangladesh has added advantage for countries that have restrictions in collaborating with ‘nuclear’ countries.

 Availability of financially capable investors

Local business investors in Bangladesh are well equipped to invest in strategic alliances and partnerships. The willingness of the investors combined with their local business knowledge could be utilized for better return on the investment. Another aspect of these local investors is that they have proven records of accomplishment in international businesses in other sectors such as textile. These people have funds and are ready to invest money in new industries. As a result, the foreign investors feel comfortable working with them. However, in this regard, the local investors have more or less never favored the IT investment, as intellectual investment in IT businesses sometimes make the return ‘invisible’.

 English proficiency

Bangladeshi people have higher competencies in English compared to countries like
China and Vietnam. However, the language proficiency is to some extent skewed towards professionals with better schooling. In general, the English skills need to be
Improved for Bangladeshi IT professionals to be able to compete in the global market.

 New outsourcing destination

Bangladesh is relatively new as an outsourcing destination. This means many unexplored areas of business. More and more investments are coming in and the industry is experiencing growth. The attractive business prospects are bound to encourage local and international investors in the near future.

SOFTWARE APPLICATION COMPETENCE BY BANGLADFESHI FIRMS

In response to the question regarding the specific software application competencies for
Bangladesh ICT industry, the respondents of the interviews were of the opinion that
Bangladesh is not yet ready for complex outsourcing support. They think that any foreign company intending to enter Bangladesh IT sector, should start with small projects such as web development, desktop publishing, data entry, 3D animation and back office development. For venturing into more critical software solutions such as ERP and CRM, the proper resources need to be built gradually. However, all the respondents were very optimistic about the potential of ICT in Bangladesh.

Table 4: Expertise in various application development in software companies of Bangladesh

IDENTIFIED PROBLEMS AND BARRIERS

The following problems and barriers hindering the growth of export-oriented Software and Data Processing Services Industry, and classified those under the following major functional areas:

 Fiscal
1. In the absence of any incentive scheme, the exporters do not feel encouraged to explore potential markets.
2. Interest rates on loans, charged by the Commercial Banks (currently between 13% to 15% p.a.) are too prohibitive for entrepreneurs to investment in IT field. The existing banking procedures are too complicated to induce exporters to bring their export remittances through banking channel.
3. The e-payment system is too complicated in Bangladesh. Though Bangladesh bank has developed a policy in e-payment system, it is not yet fully functional.
 Human Resource Development
1. Course curricula for computer-related education followed in the Universities do not fully reflect the requirements of the IT industry.
2. The number of graduates in computer-related subjects produced by the Universities each year is far less than the actual requirement. Substantial number of such graduates leave the country for overseas employment. Private IT training institutions lack the required quality of trainers.
3. Private IT training institutions do not follow any standard course curricula and examination system.
4. There is no planned scheme to increase computer literacy.
 Infrastructure

1. Absence of necessary laws protecting the Intellectual Property Rights, discourages prospective overseas customers from using Bangladesh as a source of supply.
2. The facility of high speed data (both nationally and internationally) is very limited. Present cost of data communication is very high.
3. High Speed Video Conferencing facility is not available.
4. Custom formalities for handling equipment / documents for export purpose are too time consuming to encourage export.

 Marketing

1. Bangladesh is not known to be a potential off-shore source of software and Data Processing Services. Information on prospective overseas customers is not available.
2. Not all software in use are Licensed.
3. The use of Customized Application Software is virtually non-existent; therefore, domestic Software market has not developed at all.
4. It is not possible to enter into the export market without having a strong domestic market base.

RECOMMENDATION

For a software based export economy our governments first have to concern about the Copyright issue, which is no yet applied in our economy. While preparing the report I would like to recommend on some long term and short term issues.

Short Term Issues
• Power is the main concern in this industry. So the government has to ensure the uninterruptible power supply.
• The software piracy protection law must modernize and also have to apply at least in industrial or corporate sector.
• Arrange for short term loan or subsidy or Tax Holiday or incentive for the Software industry.
• Arrange software related exhibition in regular basis and arrange it in a large scale the foreign buyers or investors feel comfort here.
• Intellectuality is the main raw material in this industry. So our local institution have arrange program to develop their professional skill.

Long Term Issues
• Mobilize Non-Resident Bangladeshis (NRBs) involved in I.T. activities abroad. This can be done by arranging meeting/seminars in selected locations (e.g. in the Silicon Valley of California, USA) where the incentives being provided by GOB may be highlighted. These meetings should be addressed by policy makers/high officials/IT personnel representing GOB.
• Re-design course curricula of Computer related studies in the Universities, Colleges etc.
• Set up Software Technology Villages with all necessary infrastructure facilities in line with STP, SEEPZ etc.