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Developing a New International Business Idea

In: Business and Management

Submitted By Adrita
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Globalization is the increasing integration of different national economies into one global market economy. It alters competitiveness conditions with the arrival of new players on the global scene and causes traditional roles to be redefined.
What seems to be a novelty is, in fact, a series of changes related primarily to the gradual removal of trade barriers, financial market deregulation, the communication technology revolution, and the impact of a more informed society.
The causes of the current globalization wave include:
• Technical and scientific progress, especially developments in the telecommunications sector and the communications sector as a whole.
• Widespread transport use on an international scale.
• A strong increase in demand for goods and services, resulting from a wealthier population and greater life expectancy.
Globalization is far from being one-dimensional.
Economically, the primary effects of globalization are seen in the reduction of protectionist policies, the liberalization of international economic transactions, and the expansion of Foreign Direct Investment (FDI).
Technological advances contribute decisively to productivity improvement, economic growth, and international trade.
From a political perspective, one of the consequences of globalization is the loss of the countries’ independence on certain issues in that international decisions are directly filtered through or managed by international organizations.
Globalization also affects the countries’ socio-cultural systems. World cultures met, and the main consequence was in cultural cross-influences. In addition, environmental concern became part of enterprise management.

It is predicted that the current market deregulation trend will continue over the next few years. Globalization will bring about a series of changes that will influence how the world will evolve over the coming years: * Some convergence on production costs, although a gap will persist for many years to come given the sizeable difference among countries. * Increased tertiarization of advanced economies, which will result in an increase in innovative forms of generating value. * A response to environmental concerns, supported by a growing demand for limited resources. * Integration of the benefits of globalization for the highest possible number of agents and countries, especially with regard to essential needs (food, water, housing and safety).
On the whole, the impact of globalization is beneficial. However, in the furniture industry, the short-term effects are not always positive and could even, in the long term, affect the industry’s sustainability in advanced countries.
The opening of the furniture trade to an international scale has brought about significant changes in the countries’ business models. Low production costs in Asian countries, led by China, have definitely caused relocation of production centres to these geographic regions, which have become the primary source of furniture import for the rest of the world.
Global furniture production experienced substantial growth from 2004 to 2006. During this period, a significant portion of this production (from 23 to 35%) moved to emerging countries.

Source: Eurostat , World Bank.
The following points show the effects of globalization on the furniture industry in various economies. The countries selected are among the leaders in global furniture production. * From 2000 to 2006, there was an increase in furniture production and consumption. * In high-cost countries, national furniture consumption volume exceeded that of national industry production. * High-cost countries mostly conducted their international furniture trade with other advanced countries. * Advanced countries had higher furniture import volumes than export volumes. * Advanced countries followed a double import model; they purchased as much furniture from Southeast Asia as they did from Eastern Europe. * Furniture production in emerging countries experienced an unprecedented boom between 2000 and 2006, led by the growth of the Chinese industry. * Furniture production in low-cost countries (China, etc.) profited from investments from advanced economies and from the learning process that was initiated, which enabled the improvement of both processes and goods. * Most of the production potential of low-cost countries was aimed at foreign markets, and furniture export volume to developed countries continued to grow.
Observation of the data collected enables the following conclusions to be drawn with regard to the effects of globalization on the furniture industry: * The furniture industry in emerging countries began a growth and consolidation process in the past few years. * The principal markets being the advanced countries, there is an industrial transfer to less developed economies, threatening the sustainability of the furniture industry in Europe, North America, and the other developed countries.
Although in the short term, the effects may appear positive because manufacturers have access to less expensive resources in emerging countries, it is advisable to look into whether, in the long term, current delocalization and cost reduction strategies will be able to support the furniture industry in advanced countries in terms of benefits and employment, given the technological, innovative, and production improvement processes which low-cost countries have adopted.
Globalization also modifies relationships between raw materials suppliers, manufacturers and distributors: suppliers have more bargaining power because materials are scarce, which causes an increase in prices, and distributors have more bargaining power because they can import inexpensive products from emerging countries instead of buying from national manufacturers.
The consequences of globalization are especially significant for the distributors’ strategy. The concentration of furniture distribution companies has given rise to large corporations with economies of scale enabling them to operate globally. Growing in size, the distributor becomes less dependent on the manufacturer. In extreme cases, the distributor’s power results in absolute control of the value system by the elimination of all of the manufacturer’s strategic directions, beyond cost reduction.
Another key aspect that is a result of globalization is the homogenization of consumer habits and preferences. Consumer experience in other consumption sectors and a greater knowledge of global trends have strengthened the assimilation of furniture styles that can be manufactured anywhere in the world.

Chapter 2
Industry Background
Furniture industry has changed over the years. It no longer restricts itself to a production of a chair or a table or a bed but today it includes manufacturing of a range of furniture and home furnishings and designed interiors which spell class and elegance. There is a boom time for furniture industry. Every country sports a string of furniture showrooms of all kinds and sizes. Changing lifestyle, disposable incomes, economy growth, increasing migration to urban areas have all contributed to the demand for furniture and in turn the growth of the furniture industry as whole.
Furniture industry comprises not only the production of a wide range of products related to office, living room, bedroom, kitchen , garden, school furniture but also mattresses, furnishings, upholstery, parts of furniture etc. A wide variety of raw materials are used in production of furniture like wood, rattan, plastic and metal and more recently silver. Including various varieties of wood, wooden furniture is the major production and exports of the furniture industry in almost every country.

CHARACTERISTICS OF THE FURNITURE INDUSTRY * Furniture manufacturing worldwide forms a regionally centralized competition pattern under the clustering effect. * The furniture industry is both organized and a non-organized sector. * Utilization of skilled and unskilled workers. * Utilization of handcrafted tools, machines and CAD/CAM for manufacturing and designing. * Source of employment for rural workers. * Employment is spread across many sectors showing the diverse nature of the industry and a broad product range. * Consumer expectations and purchasing behaviors have marked regional variations.

As the world economy is developing fast in the past 10 years, the furniture markets have opened up more and the world furniture industry has been growing fast.
Traditional furniture making countries continue to firmly take up over 70% of the global market. This is possible because of their long established production capacity, advancement in science and technology, solid funds and rich management experiences.
Meanwhile, developing countries and regions like China, Southeast Asia, Poland and Mexico, with China taking the lead, have built upon their respective competitive advantages and gradually have covered almost 30% of the world market. The furniture industry in such countries is developing strongly and showing great potentials.
The European Union furniture industry accounts for about half of the world's furniture production. The production value of this industry in this region is around € 82 billion. Considered to be a labor-intensive industry it provides employment for around 1 million people. Among the European countries, Germany takes the lead as the largest furniture producing country, accounting for about 27% of total EU production. This is followed by Italy (21.6%), France (13.5%) and the UK (10.4%).
The Canadian Furniture Industry is the 5th largest exporter of furniture in the world.
The major furniture producing countries in South East Asia are Philippines, Indonesia, Malaysia, Singapore, Thailand, Korea, Taiwan and India. In the context of global furniture trade, Asia shows healthy signs of growth with respect to its other international competitors. Asian furniture has always been popular in developed countries like USA, Europe and Australia.
Over 20 years of fast growth, China has been able to bring unlimited business opportunities and vitality to the global furniture industry. Now, China has today emerged as a furniture production center, a circulation center as well as an exhibition center in the world. The rise of China's furniture industry has brought about a new round of restructuring of the global furniture industry and trade pattern. According to a recent estimate, the Indian furniture industry is estimated at around Rs 350 billion. Eighty-five per cent of this falls into the unorganized sector. According to a study by the World Bank, the organized furniture industry is expected to grow by 20 per cent a year and India, Brazil and Russia will witness a boom.

Between 2004 and 2006 the worldwide furniture production has grown from 221,496 milion Euros to 271,860 million Euros which means a growth of 22.7 % in that period. This variation is more marked if the values are expressed in US dollars (+35.2%). The developed countries have contributed to this growth, increasing the furniture production by 14.4% (+26% in US$). On the other hand, in the emerging countries the furniture production’s growth achieved 57.4% in the same period between 2004 and 2006 (+73.4% in US$), that shows the productive potential of the furniture sector in those countries.
According to an analyzis based on geographic areas; the EU has maintained the role of the main furniture producer with a 37% share of the total production in 2006.
One of the main competitors of the EU has become Asia with a 27% share of the total production. However, in 2006, the second biggest furniture manufacturer area in the world was NAFTA countries with the 29 % of the global production. The global furniture exports have achieved 79,328 million Euros (+7.8%). The global apparent consumption of furniture in 2006 was 271 860 millions Euros.
The global apparent consumption hides wide differences. The highest growth of furniture apparent consumption can be observed in Asia, where the growth reached 12.1% (+22.3% in US$) in 2006 compared with a growth rate of 4.7% (+14.3% in US$) in the EU27 and a growth rate of 7.4% (+17.1% in US$) in the NAFTA countries. This growth is demonstrating that Asia is not only an enormous producing power, but the consumption of the region is becoming significant at a global level. The foreseen global average growth of furniture consumption for 2008 is about 5, 5%, China and Russia are predicted to have a higher consumption growth (around 9% and 7%) and the Asian countries are maintaining the foreseen level of consumption growth demonstrating that the region might turn into an important furniture consumer.
Due to the current furniture market situation, the globalization of the markets and the production growing capacity of the emerging countries, there can be seen a really increased competition in the sector at a global level, joined by a relatively low consumption. GLOBAL TRENDS OF THE FURNITURE SECTOR | PRODUCTION | Increasing (more intensive increase in emerging | DISTRIBUTION | Concentration (internationalization of buying) | CONSUMPTION | Non differentiated product |

Increased deregulation of the furniture trade to an international scale is the cause of the growing deficit in the sector’s trade balance in so-called advanced countries. With the exception of Italy, which is living up to its reputation as a dynamic exporter, most developed countries have seen a growing trade deficit in their furniture sectors.

As a result of Italy’s performance and of the joining of East-European countries to the EU, the European Union remained an exporter.
The Asian countries experienced substantial export growth rate at 513%. Of these countries, China became the primary exporter of furniture internationally, with 19% of global exports.
The NAFTA countries were severely affected by the growth in Asian exports. This was especially true for the United States, which had 27.6% of all global imports in 2006.
Following the opening of the markets over the past ten years, the value of the international furniture trade grew faster than its production rate. The spectacular growth of the global furniture trade over the past decade is simply a sign of the great strength shown by supply in the previous years, in terms of both products and prices. Supply growth meets furniture needs because furniture consumption has shown positive growth rates in almost all global regions.

PRESENT SCENARIO OF FURNITURE EXPORTING: Rank | Country | Exports (Billion $) | 1 | China | 1,904 | | 2 | United States | 1,497 | | 3 | Germany | 1,408 | | 4 | Japan | 788 | | 5 | France | 587.1 | | 6 | Korea, South | 556.5 | | 7 | Netherlands | 551.8 | | 8 | Italy | 523.9 | | 9 | Russia | 520.9 | | 10 | United Kingdom | 479.7 | |
This entry provides the total US dollar amount of merchandise exports on an f.o.b. (free on board) basis. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.
Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of January 1, 2012
The following factors guide the demand for furniture:- * Elasticity in terms of the disposable income of the household Generally the estimated elasticity changes from country to country. But the average elasticity has been found to be 1.5 that effectively means, if the income increases by 1, the demand for furniture is going to rise by 1.5 and vice versa. * Economic scenario - This translates into consumers' confidence in the economy of the nation, growth of the Gross National product, the purchasing power and also factors like level of unemployment. * Infrastructural considerations - Like level of investments in housing etc. * The evolution of the borrowing terms - If the interest rate is hiked the consequences are higher costs for borrowing for purchasing furniture and housing, and vice versa if the interest rate falls * Demographic variables - Such as the evolution of marriages, household formations, births taking place and the composition of age class. * Distribution of wealth - It is quite evident that demand for furniture would be s higher in countries where wealth is more evenly distributed than in countries where wealth has a tendency to be concentrated.
Traditionally furniture industry in Bangladesh developed as cottage based industry. It is in 90’s when the furniture industry in Bangladesh has transited from cottage based industry to mechanized mass production oriented industries. Following that the furniture businesses began to grow accommodating modern machineries, innovative designs and use of diverse materials. Furniture industry of Bangladesh is shifting its focuses from dependency on teak for raw materials to processed wood.

One of the key strengths of the local furniture industry is diversity in product portfolio. The main varieties of products are wood, processed wood & Medium Density Fibre board (MDF), laminated board, particleboard, rattan/bamboo and wrought iron furniture. For a more personal domain as one’s home, the preferred raw materials still remains solid wood, but combination of solid wood with other materials like cane, rattan, laminated boards, plywood and MDF are becoming very popular. But for offices furniture designs are usually focused on the more contemporary style and the preferred use of materials include plastic, MDF, laminated boards and wrought irons. Around 70% production of furniture sector of Bangladesh is home furniture and 30% is office furniture.

At present two relevant associations i.e., Bangladesh Furniture Export Association (BFEA) and Bangladesh Furniture Industries Owners Association (BFIOA) are actively working on materializing the potential of this sector. Bangladesh Furniture Export Association has 19 members.

Government of Bangladesh has declared the furniture industry as a ‘Thrust Sector ‘. The sector’s contribution to GDP (gross domestic product) is 0.29 percent on average, while the industry is comprised of around 41,560 enterprises and employs nearly two lakh skilled and semi-skilled people .
According the officials of Bangladesh Furniture Industries Owners Association (BFIOA), there are 28,000 furniture factories in Bangladesh (including all SMEs) among them 1,952 companies are registered member of furniture owner’s association. However, according to the baseline survey of furniture industry in Bangladesh by Dr. Ali Nesar Khan (2011), there are a total of 9,913 wooden and 2,628 non wooden furniture manufacturers in Bangladesh employing around 1,19,810 workers. Also there are around 74,926 carpentry households employing another 1,54,285 workers. Adding to this, there are 1,20,000 craftsmen producing soft furniture and 200,000 suppliers supplying raw and semi-processed materials. Out of this huge employment, almost 1,00,000 workers are women . Among the employees working in furniture sectors, 20% are working in large industries and 80% are working in SMEs . There are a number of furniture clusters in Dhaka which are located at Badda, Sutrapur, Mirpur area of Dhaka. A number of large companies have their factory in Savar and Gazipur area. Number of large companies is few compare to the total number of furniture industry in Bangladesh. There are 15 large Furniture companies are doing their business in the country which includes Otobi, Navana, Hatil, Akhtar, Partex, Brothers etc .

With the enterprise category definition, the furniture enterprises can be categorized into five groups, namely- Large, MSM 1, MSM 2, Small and Micro. However, in spite of the classification, manufacturers in this industry appear to enjoy quite high profitability. According to the survey results, increase of profit for the enterprise is dependent on the size of enterprise, automation in production, diversity in product and usage of better raw materials, joinery and finishing materials.
Table 1: Average sales and profit among different classes of furniture manufacturer Firm size | Number of Enterprises | Average Annual Sales (BDT) | Gross Profit | Net Profit | Micro | 7961 | 1,877,400 | 21.63% | 9.87% | Small | 1676 | 5,118,333 | 25.74% | 12.41% | MSM 2 | 276 | 8,571,429 | 29.67% | 14.67% | MSM 1 | 40 | 19,350,000 | 32.10% | 15.10% | Large | 35 | 104,100,000 | 35.80% | 15.80% |
Source: Baseline Survey of Furniture Industry in Bangladesh, Dr. Ali Nesar Khan, 2011
The micro and small firms are less efficient and need to upgrade skills and production techniques and technology. The medium are quite efficient by industry standards, however, they have a less diversified product range and have to sell at lower margins. The larger firms are clearly the trendsetters of industry production and production processes, they have the capacity to export and respond quickly to changes in taste of domestic customers. Further analysis of the drivers of profitability indicates that diversity in the product-variant mix and the input-mix are key factors. Therefore, a broader marketing strategy and matching production strategy will be more effective driving sales, value-added and profitability performance.
For Bangladesh the low labour cost advantage is a vital factor in becoming competitive in the world market. In wood furniture manufacturing, labour accounts for up to 40% of the total costs. In Bangladesh, labour costs account for about 20% of the production. Here, the hourly wage rate in furniture is between USD 0.06 -0.40, less than in China (USD 0.50-0.75) which is the largest furniture exporting country. Conclusively Bangladesh’s household furniture production is around 10% cheaper than the Chinese one. The situation is similar to Vietnam in 2002 when they started to explore the export market and attract importers based on their strength of inexpensive labour. However, trend shows the labour income gradually increased with expansion of the sector.

With the industrial growth in various industries like RMG, Textiles and Ship Building, there is a huge demand for industrial furniture in these sectors, which are currently being met through import. The industry is looking at an existing market of over $ 25 million and a potential deemed export market of around $ 80 million annually by 2014 following the emerging ship building industry in Bangladesh which spends about 0.15 -0.20 per cent for furniture, according to BFEA. Moreover some international furnishing suppliers for ships source products from different countries based on their product requirement and quality standards. As the overall quality of furniture in Bangladesh is considerably high, there is a chance to enter this market. The cost competitiveness of Bangladesh in terms of furniture production is attracting foreign investors. As an example;

Trendex, a Taiwanese furniture manufacturer has invested USD 200 million in setting up its offshore factory in Bangladesh and will be potentially employing 8-10,000 workers. Furthermore there are other examples (specifically regarding Vietnam) where FDI instigated the major boom in furniture export and thus positioned as a leading furniture exporter in the world.

A mix of cheap labour, modern technology, access to raw materials, know-how and favorable exchange rates gives Bangladesh a competitive edge compared to foreign competitors. Generally, major exporters of furniture like China, Taiwan, Philippines, and Vietnam depend heavily on imported wood for sustaining their export. Therefore, in case of raw materials having local access to timber is not a prerequisite

In both local and international market, the growth of Bangladesh furniture market is evident. This is a sector where the industry life cycle correlates with the macro level economic performance. When the disposable income increases the demand for furniture grows as well. The booming real estate sector in Bangladesh and the rising demand of furniture product in world market, lead the expansion of furniture sectors in Bangladesh, as well as the increasing number of new entrants in the furniture production. . As a result, with the present local production for furniture of USD 958 million, along with USD 16.84 million imports, there is a significant demand supply gap evident from the fact the industry is growing at a rate of 9.55% while the demand for furniture is increasing by 20%.This shows there is untapped market for local furniture firms. EXPORT SCENARIO:
Furniture sector has a noticeable potential, both in local and export market. Recently local manufacturers have started exporting to the US, Japan, Europe, India and other Southeast Asian countries, like Japan, Taiwan, Singapore, Thailand and Vietnam. Some of Bangladesh’s furniture-industry leaders, viz. Hatil, Navana, Otobi, Quality Agro forestry Ltd and Legacy Furniture have made a cautious beginning. It is significant that all of them are confident about establishing strong export linkages in the upcoming years. They are strongly committed to the achievement of ‘excellence’ in terms of quality and design. Moreover, they are also committed to standard employment and environmental practices, as this is required for positioning and creating a brand image in export markets.

Apart from it, there are huge export potentials of furniture. In February 2010, a study on “Export markets entry strategy for Bangladeshi furniture manufacturers” was conducted by Center for industrial studies (CSIL), an independent economic research and consulting company founded in Milan. According to CSIL (Centre for Industrial Studies), Bangladesh has a strong potential in linking home décor craft items with the furniture industry. The export of furniture products from Bangladesh started from 1995. The study shows that Bangladesh is able to export USD 40 million by 2015 with an additional USD 10 million export of accessories & soft furnishing. This export volume can increase up to USD 1 billion by 2020 provided there is increased productivity, better market linkage and ensured compliance standards.

There is a huge demand for Bangladeshi soft furniture in the international markets like the USA or Europe. It is reported that the demand of Bangladeshi soft furniture is worth US $10 million every year, yet again Bangladesh fails miserably to achieve the desired amount of export income. According to Export Promotion Bureau (EPB) data, the soft furniture worth US$ 3.79m were exported in the fiscal 2009-2010 while US$ 4.11m was earned by exporting the same in the FY 2008-2009. An analysis of EPB data since FY2006-2007 shows a downtrend of the country’s soft furniture export. Bangladesh earned US$ 8.16 million in 2006-2007, US$ 5.49 million in 2007-2008, US$ 4.44 million in 2008-2009 and US$ 3.79 million in 2009-2010 fiscals, indicating 53.55 percent decrease in the export of soft furniture over a period of last three years. And this decrease is due to the lack of design and technology research, lack of initiatives to promote this industry and keep abreast with other parts of the world. . Nonetheless, according to Bangladesh Furniture Industries Owners Association (BFIOA), real export is much higher than (20% higher) than the official figure.
Table 2: Trend of export in furniture sector (soft furniture) of Bangladesh (Unit: US$ million) FY | 2006-2007 | 2007-2008 | 2008-2009 | 2009-2010 | | | | | | Export | 8.16 | 5.49 | 4.44 | 3.79 |
Source: Export data has been compiled from (accessed on 15 May 2012),
Earnings from furniture exports grew by 27 per cent to $ 27.14 million in last fiscal year (2011-2012) exceeding the target of $22.45 million, officials said. Bangladesh earned $ 21.38 million through furniture export in 2010-11 fiscal years, and $ 19.26 million in FY 2009-10, according to a data of the Export Promotion Bureau (EPB).
Table 3: Trend of export in furniture sector of Bangladesh (Unit: US$ million) FY | 2009-2010 | 2010-2011 | 2011-2012 | | | | | Export | 19.26 | 21.38 | 27.14 |

Figure: Furniture Export Trend of Bangladesh (2009-2012)

Present local production for furniture of USD 958 million, along with USD 16.84 million imports, about 60% of raw materials of furniture sector are imported from different countries. Around 65% of wood comes through import. Most of the tic, gamar and hard wood come from Africa; oke wood and barmatic wood come from Myanmar. Around 100% of Wood coating and lock, 60% of ply board, 20% of particle board, 50% of adhesive is imported.

Bangladesh’s furniture is one that provides an outline of a possible success story. In 2009, Furniture has been declared as a thrust sector and recently has drawn significant attention due to its thriving demand both in Bangladesh and abroad. Hence, various private and public authorities are now working in collaboration to utilize the full potential of this industry. One of the key players in this possible export growth is the Export Promotion Bureau (EPB) of Bangladesh under the Ministry of Commerce.

EPB is the leading government agency, entrusted with the responsibilities of promotion export from Bangladesh. Some of the main objectives of EPB are coordination export development efforts, providing policy support, carrying out promotional activities, facilitating participation in international trade fairs and various research activities.

While the government and various other bodies are working to develop the sector, people directly involved in it have their say about the direction in which the industry is heading, its potential and drawbacks.

According to Bangladesh Furniture Industries Owners Association (BFIOA) one of the difficulties that the association (and government) currently faces is that maximum companies do not declare their real amount of sell; and that is why the figure of real trade volume is not available to the association or government for effective policy formulation. In addition to such problem, industries of this sector are also facing shortage of land. In the past, Furniture industry association demanded to have enough land so that an industrial cluster can be established where at least fifty companies can be accommodated. Though specific land was allocated in Kachpur area of Narayangonj district, the amount of land was quiet few (around 20 acre) compare to the Association’s original demand. In the end, land was not given to furniture association. However, a new location has been identified near Faridpur area where amount of land is much higher than land area of Kachpur area.
Furniture associations of Bangladesh participated in several fairs in Japan. Recent fair in Japan took place 2008; but the outcome of that fair is not as expected. One of the main reasons is the weakness of design of furniture products manufactured in Bangladesh. Therefore, this area needs much consideration for positive intervention. At the same time more marketing development in outside Bangladesh is necessary.
At present, there are no rules and regulation addressing standard of products from furniture sector is available. Hence, for effective export promotion of furniture product, it is necessary to maintain certain standard. In this regard, Katalyst, a foreign donor agency, is working on the development of furniture sector of Bangladesh. Moreover, the agency is also giving support to the sector in terms of market exploration and development. But their assistance is very short term and has no direct connection with the association.
Furniture industry is facing face shortage of wood supply from domestic forest. This is one of the great threats to the industry. To confront the constraint, initiatives have been taken both from government and from some private companies. In addition to that, Furniture Associations regularly organize programs to encourage people for tree plantation. The association also demanded to the government to lease certain amount land for tree plantation. Another severe problem which the industry is facing is shortage of electric supply which forced factories to maintain generator. As the cost of fuel of generator is getting higher, the production cost is going up.
There is no tax incentive for export of furniture product at the moment. However, the industry is discussing with EPB so that tax incentive can be applied to the sector. Under the circumstances, EPB has given certain export target to this sector, which the association expects to achieve by this year.

Industry Analysis:
SWOT Analysis: For the Furniture Industry of Bangladesh.
* Comparatively lower Labor cost. * Diversity in product portfolio and system. (Innovation, Integration) * Increasing demand in modern, clean, minimalist designs. * Favorable exchange rate. * Greater access to raw materials. * Highly skilled, young, capable & dynamic human resources * Established branding, tradition * Big democracy= big market & free media
* Inadequate supply of production technology and consultancy services. * Weakness in designing furniture at international standard. * Little or no focus has been given to supply chain management, backward linkage development and relevant support industries like training institutes. * Limited access to quality inputs. * Isolated working of potential exporters from organizations like the Export Promotion Bureau-EPB of the Ministry of Commerce. * Limited effort for all the stakeholders to work together and brand Bangladesh furniture. * Absence of skilled workforce and limitations in local and international marketing. * Lack of effective & execution framework * Industry has slow absorption of innovation & change * Lack of quality awareness which constrains access to international market.
* Big potential market in Design sector & emerging new market segment in Services * Trade facilities as LDCs in different countries, regions worldwide. * Diversified local demand condition driving quality products and services. * Increasing government recognition as a potential export sector. * Lower labor costs in outsourcing * Research & Development capability. * More efficient production method. * Hybrid solutions– balancing & blending of technology, skilled manpower, quality raw materials. * Need modernization of infrastructure. * Very little competition in modern furniture design.
* Lack government recognition as a potential export sector at present. * Limited export order processing facilities. * Lack of credibility in international markets. * Uncoordinated association activities and absence of effective initiatives for facilitating foreign direct investment. * Rising cost of imported goods. * Fast change Internet (IT), new inventions (Technology, Innovations) . * Gradual increase in labour cost with expansion of the sector.

South Asia Furniture Industry:
Market Overview
The entire South East Asian region has always been a dynamic area for the furniture sector. The majority of the ASEAN members have large and rapidly growing furniture industries: * Indonesia, Malaysia and Thailand are leading furniture exporters. * Vietnam is another very important emerging country, with its impressive growth in production and exports. * In addition, most of the leading furniture companies in Singapore and Taiwan have important production facilities in China as well as other Asian countries.
The amount of furniture exported from the ASEAN region has grown tremendously in the last decade. In 1996 the value of total export from ASEAN was approximately US$500m. Singapore, with its strategic location in the heart of Asia is 'well-positioned" to capture this growth.
An eye on ASEAN Asia in recent years has experienced a major surge in the demand for its manufactured goods from the world's largest markets in the United States and Japan. One sector which has benefited from this increase in demand is furniture that is manufactured in Asia. Breaking this trend down by nation, China and the Association of South East Asian Nations, "ASEAN", (of which Indonesia, Malaysia, the Philippines are major members) were responsible for the most gains. Latest statistics showed that the total volume of furniture trade amongst the seven ASEAN Furniture Industries Council (AFIC) member countries saw a 13 percent increase to US$14 billion during 2008, as compared to US$12.4 billion in 2007. The furniture industry's growth is driven, in part, by the bullish property and hospitality market. Strong emphasis on quality lifestyle and consumer spending in the US and Europe also contributed to growing demand. Emergence of new high-growth markets such as China, India and the Middle East have opened up new opportunities for ASEAN furniture manufacturers. In addition, ASEAN furniture makers are also benefiting from developments on the geopolitical front. The Asean Free Trade Agreement, or Afta, has brought together a market of more than half a billion people. Trade barriers are coming down, and tariffs — including those levied on furniture — are at zero, or close to zero. Afta has stimulated AFIC member countries to invest in one another. (Source: Beyond Singapore)

Competitor Analysis: Country-based: Organization-based (Local):
Major Players in Furniture Industry
Otobi Limited Basic information of Otobi Limited | Established | 1975 | Product profile | Wooden, Melamine Laminated Chip Board, MDF, Cane and Metal furniture. | Annual production volume | BDT 6,600,000,000 | Countries exported to | India | Potential export destination | Africa, Canada, Middle East, UK, USA. | Source: Booklet of Bangladesh Furniture St Interior Decor Exposition 2012 |

Otobi is one of the pioneers in furniture industry in Bangladesh. At present, Otobi has the widest distribution network all over the Bangladesh, including over 400 retail outlets, exclusive dealers and franchises. Otobi has now franchise in Kolkata with distribution centers in sic cities in India. With an opening capital of just Tk 5,000, Nitun Kundu, a graduate of fine arts, starts the business Dhaka in 1975. At present, It has 300,000 sq ft factory in Mirpur, Dhaka. Otobi is the first Bangladeshi company to become global. Otobi builds its flagship 42,000 sq ft retail store in Gulshan, Dhaka .
At present, Otobi furniture can be considered as market leader due to their immense market share of the branded market (80%). During last three years, Otobi is having double digit growth in terms of annual sales . Otobi’s products range office, household, and hospital furniture to specialized furniture like kitchen cabinets, built-in cabinets and workstations. Otobi employs over 5,000 people in it’s corporate office and manufacturing plants.
PARTEX Furniture Industries Ltd. Basic information of PARTEX Furniture Industries Ltd. | Established | 1991 | Product profile | Wooden furniture, Laminates Board furniture, Upholstery (Tubular Metal) furniture, Steels and Metal furniture. | Annual production volume | BDT 1,500,000,000 | Countries exported to | India | Potential export destination | Middle East, UK, USA. | Source: Booklet of Bangladesh Furniture St Interior Decor Exposition 2012 |

PARTEX Furniture Industries Ltd. is a concern of Partex Star Group of Bangladesh. PARTEX Furniture manufactures solid timber and timber-substitutes products. The industry offers a combination of timber, special particleboard, and decorative plywood. Within a short span of time the company has been able to claim a sizable portion of the market. At present, the production area of the company is about 162,000 sft and the company is building a new factory of area 3,50,000 sft. Around 1200 skilled manpower are currently employed in this company. The company has strong backward integration for their furniture production as their sister concerns produce Particle Board, MFC board, Filled / Flush Door, Plywood, Veneered Board, PVC Sheet & Door etc .
NAVANA Furniture Limited Basic information of NAVANA Furniture Limited | Established | 2001 | Product profile | Home furniture, office furniture, project furniture, doors, wardrobes, sawn timber | Annual production volume | BDT 1,200,000,000 | Countries exported to | India | Potential export destination | European countries and Middle East | Source: Booklet of Bangladesh Furniture St Interior Decor Exposition 2012 |

NAVANA Furniture Limited, a sister concern of Navana Group, was founded in 2002. NAVANA Furniture has its factory in Savar, operating in more than 12,000 sq.m area. It sells Office solutions, Home solutions, Medical and Lab solutions, Industrial solutions and Interior Designing Furniture.. The company has around 80 outlets across Bangladesh and also expanding business internationally. At present, around thousand of people are employed in corporate office and manufacturing plants of Navana furniture in Bangladesh
Akhtar Furnishers Ltd (AFL) Basic information of Akhtar Furnishers Ltd. | Established | 1976 | Product profile | Wooden, Melamine Laminated Chip Board and MDF | Annual production volume | BDT 120,00,00,000 | Countries exported to | Australia, UK, USA | Potential export destination | USA, UK, UAE | Source: Booklet of Bangladesh Furniture St Interior Decor Exposition 2012 |

Akhtar Furnishers Ltd (AFL) commenced its business in 1976. At present, around 800 people are directly working under the shade of Akhtar Furnishers Ltd. The company have thiere own seasoning capacity of 2000 cft. solid wood a month.
Akhtar Furniture Acadamy is the first and only private institute that provides education exclusively on furniture. The institute commenced on January 2012 and at present the institute has facility to train student on furniture manufacturing, marketing, general education (like English course) and technical courses (like driving, electrical instrument repairing, electronics, computer education etc). The institute has planned to expand its branches in coming years (Targeted number of branches by year is: 6 branches within 2013, 64 branches within 2016 and finally 364 within 2020). Though the institute at present concentrates on short length courses (three to six months), it has planned to start four diploma courses also. The institute has applied for approval from Bangladesh Technical Education Board and hope to have the approval within June 2012. The authority of the institute has a plan to convert the institute into a well functioning polytechnic institute in near future .
Mass urbanization over a short period of time is a defining characteristic of Bangladesh as know it today. While demand in general has gone up for almost all household and lifestyle products, the demand for furniture in particular has had a substantial growth. With urbanites looking for variety and diversity in furniture for their homes and offices, the furniture industry has come onto a market which has enabled them to experiment with different types and styles of furniture along with the materials with whom they are made. Being a market which is open to ideas and influences, some of the readily available styles which are currently going strong here include. * The transitional styled furniture is pieces that walk the line between traditional and contemporary furniture. Designs with no single extreme, but a harmonic blend of styles that can be adapted to an individual’s preference, keeping in mind comfort and practically. * There is the Amish style usually uses warm, dark, rich finish woods, often with intricate carvings. The lines of the furniture tend toward elegance and sensuous curves. The ornate carvings give traditional style furniture a very majestic feel. * Eclectic style is a fusion of many different styles, these pieces usually encapsulates furniture which are made up of the best aspects of various influences. * Marked by rounded edges, basic shapes and sturdy nature, furniture of the colonial style are predominantly influenced by early European designs and have an aura of aristocracy prevalent in the colonial times. Besides availability of various styles of furniture, the use of material is also multifarious here in Bangladesh. There is a combination of traditional and modern items that retains the cultural element while enhancing the responsiveness to modern market trend. For a more personal domain as one’s home, the preferred raw materials still remains solid wood, but combination of solid wood with other materials like cane, rattan, laminated boards, plywood and MDF are becoming very popular. But for offices, where the primary focus is on simplicity and functionality, furniture designs are usually focused on the more contemporary style and the preferred use of materials include plastic, MDF, laminated boards and wrought irons.
The major varieties in wood are Red Oak, Burma teak, Boilam, Garjan, Chapalish, Chikrashi, Shilkarai, Gamari, Walnut and Cherry. While these raw materials make for study and regal pieces, environmental concerns and overall consumer preference, for more affordable furniture, has made wood alternatives like MDF, plywood, laminated boards very popular in the recent times.

Industry Trend
The global furniture market can be broadly categorized into four categories - domestic furniture, office/corporate furniture, hotel furniture and furniture parts. Globally, domestic furniture accounts for 65 per cent of the production value, whilst corporate/office furniture represents 15 per cent, hotel furniture 15 per cent and furniture parts 5 per cent. According to a World Bank study, the organized furniture industry is expected to grow by 20 per cent every year. A large part of this growth is expected to come from the rapidly growing consumer markets of Asia.

Mainly since the 1990’s, another trend has been noticed among the entrepreneurs who goes for renovation and for business purposes. That trend is of using local brands as with the increasing use of branded furniture mainly when local brands began to achieve a certain level of trust among the entrepreneur. At present, the local furniture market stands at Tk 100-120 billion (Tk 10,000-12,000 crore) a year and employs about 3.0 million people directly, according to BFEA. To cater to these varied needs and trends, furniture makers keep products of various qualities and raw materials. Also, different groups of clients experience variations of local and imported goods and make their choices freely.

Wood is cut into different sizes of blocks and slabs. If the wood purchased is not seasoned than these blocks/slices are seasoned through different processes, namely: -Condensation
-Boiler System * Vacuum System * Seasoning through putting the wood slices under normal environmental temperature for considerable duration.
Before start of manufacturing of any furniture product a desired design is selected. Selection of elegant design is important to ensure attractive finished product.
The seasoned wood blocks are cut into desired shape and slices according to the requirement of design. The slices of wood are molded into the desired shape according to the design. Carving means different elegant pattern carved in the wood. Quality of carving depends on the skills of the labor. Once the different pieces are carved & molded than these parts/pieces are assembled or fixed together to give the shape to the final product.
Assembled product is grind to make the surface smooth. Once the surface is smooth, finishing material is applied to make the surface ready for paint or polish. After the base is prepared final finishing is applied depending on requirement in term of paint/polish. Upholstery of fabric is carried out according requirement of design.

The furniture manufacturing industry has been revolutionized over the past several decades. Today, most commercial and production furniture is created by large machinery, much of it automated and controlled by computer. The prevalence of high-tech machinery increases the accuracy and speed of manufacture, but also removes much of the craftsmanship involved. When used well, and with high-quality materials, machines can make solid and attractive furniture.

Marks & Spencer
Type Public limited company
Industry Retailing
Founded Leeds, West Yorkshire,
England (1884)
Founder(s) Sir Michael Marks
Thomas Spencer
Headquarters City of Westminster, London,
Number of locations 1,010 stores (2010)
Area served Worldwide
Key people Robert Swannell, (Chairman)
Marc Bolland, (CEO)
Revenue £9.7403 billion (2011)[1]
Operating income £836.9 million (2011)[1]
Profit £598.6 million (2011)[1]
Employees 81,223 (2012)
Marks and Spencer plc (also known as M&S; colloquially known as Marks and Sparks, Marks's or, simply, Marks) is a major British retailer headquartered in the City of Westminster, London, with 703 stores in the United Kingdom and 361 stores spread across more than 40 countries.[2] It specialises in the selling of clothing and luxury food products. M&S was founded in 1884 by Michael Marks and Thomas Spencer in Leeds.
In 1998, it became the first British retailer to make a pre-tax profit of over £1 billion,[3] though a few years later it plunged into a crisis which lasted for several years. In November 2009, it was announced that Marc Bolland, formerly of Morrisons,[4] would take over as chief executive from Executive Chairman Stuart Rose in early 2010; Rose remained in the role of non-executive Chairman until he was replaced by Robert Swannell in January 2011.[5][6]
It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Head office locations
The headquarters of M&S was for a hundred years at Michael House, 55 Baker Street, London. In 2004 the company moved to a new headquarters designed by mossessian & partners at Waterside House in the new Paddington Basin, London.
Across the UK
As well as the main offices in London, there are a number of other head office sites across the UK; Stockley Park (IT Services), Salford Quays and Spinningfields, Greater Manchester (Marks & Spencer Shared Services Ltd. which provides human resources, and finance administration),[114][115] Chester (HSBC's M&S Money[116] and Retail Customer Services), and Draycott (per una).
The company has overseas sourcing offices in Hong Kong, Thailand, India, Bangladesh, Turkey, Shanghai, Italy, Indonesia and Sri Lanka.
UK and Ireland shops
M&S have over 703 shops throughout the United Kingdom, with nearly 1.2 million square metres (12.5 million square feet) of selling space.[118] This includes the flagship, and largest, shop, Marble Arch, London, on Oxford Street, which has around 16,000 square metres (170,000 sq ft) of shop floor.

The second largest is in Warrington (Gemini), although the forthcoming M&S in Ellesmere Port will take over as the largest outside London.[119] The third largest shop is at the Sprucefield Centre in Lisburn, Northern Ireland. In 1999 M&S opened its shop in Manchester's Exchange Square, which was destroyed in the 1996 Manchester bombing and rebuilt. At re-opening, it was the largest M&S shop with 250,000 sq ft (23,000 m2) of retail space, but half was subsequently sold to Selfridges, the company's second site in Manchester.

New Town Plaza, Sha Tin, Hong Kong.
Shops outside the UK and Ireland
M&S store at Wenceslas square in Prague, Czech Republic
On 17 May 2001 M & S closed all 38 of its European shops. Some of the Spanish shops quickly reopened and were augmented by a couple of new ones a few years later. The company reopened its Paris store on 24 November 2011, following the launch of a new French website on 11 October 2011. In the Philippines there are 18 shops of M & S and the biggest store is Located in Greenbelt Mall.
There are currently shops located in 41 countries[126] including the following: Armenia, Bahrain, Bermuda, Bulgaria, People's Republic of China, Croatia, Cyprus, Czech Republic, Egypt, Estonia, France, Gibraltar, Greece, Guernsey, Hong Kong, Hungary, India, Indonesia, Jersey, Kuwait, Latvia, Libya, Lithuania, Malaysia, Malta, Montenegro, Oman, Philippines, Poland, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Thailand, Turkey, Ukraine, and the United Arab Emirates.
Home Furnishings

Bath Linen & Accessories Bedding Curtains & Blinds Cushions & Throws Dining Home Accessories Kitchen & Cookware Lighting Luggage Rugs Small Appliances Storage


Bathroom Furniture Beds & Bedroom Furniture Conservatory & Garden Dining Room Furniture Kids Furniture Kitchen Furniture Living Room Furniture Mattresses & Divans Office Furniture Sofas & Armchairs

Business Location: Bangladesh
Trade Regime: Foreign Direct Investment in Furniture Industry.

Present FDI Status
Bangladesh has attracted USD 913 million foreign direct investments (FDI) in 2010 calendar year, a leap by 30 per cent. This upgrades the country's position to 114 from 119 out of 141 nations in the World Investment Report (WIR). During this period the telecom sector received USD 360 million FDI, the manufacturing sector received USD 238 million in investment from abroad, USD 145 million in the textile and clothing sector, while leather and leather products got USD 46 million. (The financial Express, 27 July, 2011)
As a developing country, Bangladesh needs Foreign Direct Investment (FDI) for its ongoing development process. Since independence, Bangladesh is trying to be a suitable country for FDI. In order to accelerate economic growth, Bangladesh opened her economy in the late 1980s to reap the benefits of FDI. In 1989 the government set up Board of Investment (BOI). The primary objective of which is aimed at attracting and facilitating investment from abroad (Mondal 2003). The government also lifted restrictions on capital and profit repatriation gradually and opened up almost all industrial sectors for foreigners to invest either independently or jointly with the local partners. Further, the government also introduced various financial and non-financial incentives like tax exemptions for power generations, import duty exemptions for export processing industries, tax holiday schemes for undertaking investment in priority sectors and low development areas, zero duty rate for the import of capital machinery and spare parts for 100 percent export oriented industries, almost no restrictions on the entry and exit mode, and reduction of bureaucratic hassles in getting faster approvals of foreign projects. Together with all these incentives followed by a low labor cost structure, Bangladesh has been an attractive destination for FDI in the South Asian region since the late 1980s.
The trend of Inflow of FDI in Bangladesh has increased over the 1980s as compared to earlier periods and this same momentum continues in 1990s as well. The total inflow of FDI has been increasing over the years. During the period of 1977-2010, total inflows of FDI were USD 8927.9 million, among which the total inflows of FDI during 2006-2010 was USD 4158.63 million. In 1977, this inflow was USD 7 million and in 2008, annual FDI reached to USD 1086.31 million. Unfortunately, there was a declination in inflows of FDI in 2010 which was USD 913.32 million (Source: Survey Report, Statistics Department, Bangladesh Bank).

Figure : illustrates the trend of FDI inflows in Bangladesh during 1996-2010.

Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
The figure 3.1 shows an inconsistent proceeding of FDI inflows during the period. In 1999 there was a sudden decline in the FDI and the falling trend continued for many reasons again in 2001, 2002 and 2003. Serious political unrest during the period discouraged foreign investment and it took quite some time to regain the confidence of foreign investors. There were also some other factors that force this declination in the inflows. After that, there was very good news for Bangladesh. The FDI inflow was on the steady rise from 2003 to 2005. It rose to US$ 1086.3 million in 2008 but slumped to US$ 700.16 in 2009 and again increased to $913.32.

FDI Inflows by Areas (EPZ and non EPZ)
Figure 3.3.1: FDI Inflows (in million USD) by area (EPZ and non EPZ) in Bangladesh during 1996-2010,
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
Figure 3.3.1 reveals that despite the initial increase and steady continuation, FDI inflows in Non-EPZ areas was in declining trend during the period of 2001-2003. In 2004 it increased to 800 million USD and this trend continued up to 2005.The FDI inflows in Non-EPZ areas in 2010 recorded to USD 795.15 million which is 87 percent of total inflows whereas in the beginning of this period (in 1996) it was USD 189.3 million which is 82 percent of total inflows. In the EPZ areas, the FDI inflows were always in a steady direction.
FDI Inflows by countries
The country-wise FDI inflows in Bangladesh from top 10 investing countries during 1996-2010 are presented in figure 3.5.1.

Figure 3.5.1: FDI Inflows (in million USD) by countries during 1996-2010. Source: Board of Investment, Bangladesh.
The figure 3.5.1 shows that United Kingdom has gained the top most position among the top 10 investing countries in Bangladesh during 1996-2010 in investing in various sectors of economy. Out of total FDI inflows from the top 10 investing countries during this period, 17.4% was from United Kingdom, 13% from USA, 8% from Egypt, 7.7% from South Korea, 6.4% from Netherlands, 6.2% from Singapore, 5.6% from Hong Kong, 5.2% UAE, 4.8% from Japan, 3.5% from Malaysia, 3.2% from Australia, 2.1% from Denmark, 2.1% from Switzerland.

Bangladesh has been promoting FDI for decades with the most liberal investment policy and incentive regime in South Asia. The Foreign Private Investment (Promotion and Protection) Act, 1980, ensures equal treatment for local and foreign Investors. This act also provides legal protection to foreign investment in Bangladesh against nationalization and expropriation. It also gives the guarantee of repatriation of capital and dividend.
Bangladesh has achieved a consistent GDP growth of over 5% in the last decade and never experienced a negative growth. Even Bangladesh sustained growth of over 5% during the recent global economic crisis. In 2009 Bangladesh achieved a 5.9% GDP growth. Various necessary steps like generation of huge number of SMEs, success in microcredit and NGO activities, rapid spread of telecommunications services, record level of foreign remittances, acceleration of export earnings are taking the economy at a higher level of growth. Its investment friendly climate offers generous and attractive packages of incentives for foreign investors like 100% ownership, tax and duty exemptions and others. Actually, Bangladesh has gained a higher ranking than many developing countries in terms of incentive package. A lot of additional fiscal incentives are offered to export oriented industries. The government has created Export processing zones (EPZs) to attract private investment. The government targets foreign investors to invest in EPZ.
The vision is that the unique opportunities in energy and power, infrastructures, manufacturing and knowledge-based sectors will attract substantial investment. Bangladesh has become a least cost producer in the world with various positive factors like industrious low-cost workforce, strategic location, regional connectivity and worldwide access, strong local market and growth, low cost of energy, proven export competitiveness, competitive incentives, export and economic zones, positive investment climate.

Bangladesh is ranked 119th position globally and 4th in the SAARC region in the Ease of Doing Business Ranking by World Bank and IFC report entitled "Doing Business in 2010".
FDI has been allowed in all sector of the economy except five industries - defense equipment, nuclear energy, forest plantation, security printing and railways.
The investors enjoy the following incentives for investing in Bangladesh –
a) 5 to 7 years corporate tax holiday for selected sectors.
b) Private power companies enjoy corporate income tax exemption for a period of 15 years.
c) Tax exemption on royalties, technical knowhow and technical assistance fees and facilities for their repatriation.
d) Tax exemption on foreign loans regarding interest.
e) Tax exemptions on capital gains from transfer of shares by the investing company.
f) Remittances of up to 50% of salaries of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return.
g) No restrictions on issuance of work permits to project related foreign nationals and employees.
h) Facilities for repatriation of invested capital, profits and dividends.
i) Provision of transfer of shares held by foreign shareholders to local investors.
j) Reinvestment of remittable dividends would be treated as new investment.
k) An investor can wind up on investment either through a decision of the AGM. Once a foreign investor completes the related formalities to exit the country, he or she can repatriate the sales proceeds after securing proper authorization from the Central bank.
Bangladesh makes no difference between foreign private investors and domestic investors regarding investment incentives or export and import policies. In Bangladesh foreign investors enjoy the access to domestic capital markets for working capital in the form of loans sanctioned from the commercial banks and development financial institutions. The foreign investors have been given the opportunity to have access to the services of the country's stock exchanges. Some export-oriented industries of the thrust sector are provided with the benefit of cash incentives, venture capital, and other investment friendly facilities.
The Board of Investment (BoI) of Bangladesh provides registration and other services. They also provide the procedures for FDI those have been simplified to attract FDI.
Bangladesh Bank has prepared a sovereign and highly effective credit rating report. This should help to attract FDI as well as boost short-term borrowings for the country's private and public sectors. Country’s image will be enhanced by this sound and sovereign credit rating report. It will certainly help local financial organizations to tap low-cost borrowings from foreign sources. The dependence on the London inter-bank offer rate will be definitely reduced. It also helps to obtain low-cost funds from foreign sources.
Although Bangladesh is trying to be as friendly as possible to FDI, she is facing some problems regarding investment from foreign sector. The FDI friendly policies of the government and a culture of hospitality to foreigners are very much positive to welcome FDI in Bangladesh. But it is a matter of concern that FDI records in the country in terms of the number of projects implemented as compared to those officially registered is frustrating. Only 72 FDI projects went into production in end of 1999 and 27 were in process of implementation of the 365 FDI projects registered during the year of 1996 - 1998, while the remaining 266 projects languished only as the file-cases.
The problems that have restricted FDI potentials in the country are as follows: * Bureaucratic interference * Irregularities in processing papers * Overlapping administrative procedures * Absence of a transparent system of formalities * Continuity and prevent timely implementation of strategic, procedural, and even routine duties * Frequent power failures * Poor infrastructure support * Labor unrest * Political unrest * Lack of professional personnel * lack of commitment on the part of local investors * Unexpected delays in selecting projects in studying feasibility * Frequent changes in policies on import duties for raw materials, machinery and equipment etc.

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