Introduction:
In a global economy fueled by advances in telecommunications and information technologies, offshore outsourcing is evolving from conventional international-trade practices.

Every year US companies outsource their task to other countries where they can get their task done by labors at a cheap rate.

IT companies can save up to 30 percent in operational expenses when compared to a US-based operations.

So, setting up a business in those countries where labors are cheap can be beneficial for the company because of this trend.
The ICT industry saw a phenomenal growth over the last decade across the world due to the need of lowering cost and the ability to gain access to talent.

The ICT sector of Bangladesh is almost comparable to other countries in the SAARC region.

Bangladeshi firms mainly deal with IT enabled services, such as ERP, website development, graphics design, etc.

During the last couple of years there has been a new trend in Bangladesh of individual/group based outsourcing which is also known as freelancing. * firms in developed countries look for outsourcing businesses in developing countries because of their comparative advantages, such as low human resource costs, technological skills, language proficiency, and geographic and cultural proximity to major markets. * Such as Maldives, Pakistan, but India is way too far out. * Enterprise Resource planning * Dhaka ranked 3rd in global outsourcing so this states what portion of people in Dhaka are involved in IT outsourcing.

Example of MNCs in bd * Bangladesh Japan Information Technology (BJIT) Ltd which has developed software's for renowned companies like NOKIA, Motorola, Panasonic through its operations from Bangladesh * Graphic People, specializing in web development and desktop publishing. * PyxisNet Ltd, specializing in Consultancy services, Software testing and Quality assurance, etc. * - a joint venture between Danish company Groupcare and Bangladeshi company Datasoft and last year they had a revenue of US$ 400,000

Why bd? * India has also became quite a bit expensive and big outsourcing customers like Walmart, Home Depot finds it to be 15% more expensive than it should be. * Bangladesh is comparably better in the South Asian region with quality IT enabled services output at low cost. * The government of Bangladesh as stated this sector as a thrust one and facilitate FDI’s in this sector. * And there are also some of the other benefits for investing in Bangladesh , which are: * So India is losing its competitive advantage in terms of low cost… * The labor costs for BD services is 30% of the costs in the US or Europe. Much lower than our neighboring countries. * tax holiday, tax exemption, venture capital support and some other extra facilities

Advantages in Investing in BD * It has one of the lowest wages of IT professionals which follows international standards in IT enabled services. * Lowest Space rent in the South Asian region, 20% less than Delhi. * Friendly Fiscal and Investment policies and has zero corporate tax. * Workforce is adequate , easily trainable and much more skilled now with the help of Universities which offers quality IT education.

* Salary of programmers in Bangladesh is 40% of that in India, 50% of Philippines and 70% of Vietnam. * Incentives given to ease start up cost with the help of lowering utility and energy cost

Financial and tax incentives * Tax holidays – Exemption from payment of tax is available for periods of five to seven years, depending on the location of the investment. * Tax exemption on the interest on foreign loans. * For 100% export-oriented industries, which IT enabled services are too , can be benefited from no duty on imported capital machinery. * Facilities for the full repatriation of capital, profits and dividends. * Foreign investors may set up wholly-owned subsidiaries or joint ventures with local partners. * Incentives are mainly available to investors in the form of tax exemptions * Other than all these, Bangladesh is now ranked with Top 20 destinations for IT outsorcing.
Industry Analylsis: * With the help of Bangladesh Association of Software and Information Services (BASIS), the industry is in a vision of developing vibrant software & IT service industry in the country. * The industry no more remains at the sideline and has joined the mainstream of the whole IT industry of the world. * Not only the industry is contributing significantly in the national income, but also it has been playing very crucial role in creating highquality employment for a sizable portion of young graduates of the country.

Operation and Finance: * It is easier to set up IT companies in Bangladesh than other types of companies because not much transport of goods across borders, raw materials to import are needed in this sector. * The IT enabled services are exported mainly through online. * When the business is established and properly registered, and the trade license is obtained, the business runs without too much interaction with government bodies. * However since the subsidiary is going to be export oriented so it needs to obtain an Export Registration Certificate (ERC).

ERC: * When the remittance (money transfer) arrive in the MNC’s bank, the company will have to present the ERC, as well as other registration certificate with the declaration of remittance to the Central Bank. * After that the bank will transfer the money in local currency to the local currency account and keep 40% of the remittance in foreign currency in its foreign currency account

Ease of doing business

Setting up: * The MNC can set up its subsidiary in the ICT incubator in Kawran Bazar to enjoy the benefits the government gives such as low office rent, high speed internet, and mainly no electricity problem. * Can move its operation in future to the ICT park of Bangladesh which would be located at Kaliakoir in a 230 acre land in which the government of Bangladesh will also give various offerings.
Finance:
* A relatively low capital is needed in outsourcing business, financing for these types of businesses is not a difficult task at all. * Working capital can be attained from the income of business operation and startup capital can be mainly financed by the MNC itself in form of FDI. * But later they can take finance from stock market, bank & insurance companies’ loan or by using export incentives, etc.
Exchange rate risk: * Since it is a US based MNC and they will remit their earnings to their parent company eventually , so these transactions will face exchange rate fluctuation risk . * The BDT is which the subsidiary have to operate in is weakening with respect to dollar which is the parent company’s currency. * So, the MNC has to take policies for hedging exchange rate risk s as both appreciation and depreciation of these two currency’s will affect its earnings. * MNC can hedge risk by using the contracts offered through the foreign exchange market or with the help of analyzing economic variables of the country or by forecasting.
Tax rate in Bd:
As the years passed, we have seen that the tax rate for publicly and non-publicly traded companies have decreased by a certain percentage. From the year 2008- 2009 till 2011-2012 the tax rate for publicly traded companies have decreased from 30% to 27.5%. This might mean that the government is encouraging corporations to trade publicly by decreasing the tax rate and might want to do so for increasing the GDP of the nation. The tax rate for non-publicly traded corporation has also decreased by 2.5% and has become 37.5%.
Interest in bd:

Inflation rate in bd:

PPP:
This theory tries to quantify the relationship between inflation and exchange rates. When one country’s inflation rate rises relative to that of another country, decreased exports and increased imports depress the country’s currency.

* IRF: The IFE theory suggests that foreign currencies with relatively high interest rates will depreciate because the high nominal interest rates reflect expected inflation. * As Bangladeshi taka is foreign currency to us, we can see due to its (BD) high nominal interest taka is losing its value. * Currently 1USD= 80.30BDT * The taka continues to slide against the dollar putting further pressure on soaring inflation.

Forecasting method in Bd: * Among the four kinds of forecasting for Bangladesh, Mixed forecasting method should be used because Technical forecasting is based on historical data only and it is suitable for day to day forecasting. * Where as, market based forecasting considers market values only and fundamental forecasting is based on the relationship between economic variables and exchange rates. * For Bangladesh all other information are needed for forecasting so mixed method will be used.
Conclusion:
* Bangladesh government has stated its ICT sector as a thrust sector and facilitate its on a great scale. * Neighboring giant India is losing its competitive advantage of low cost and Bangladesh nowadays is considered to be better for outsourcing IT enabled services. * As a US based MNC investing in the ICT sector , the MNC can enjoy lot of incentives such as tax exemption, and holidays.Since the subsidiary is going to remit the fund eventually to US, so has to deal with foreign exchange market and develop strategies to hedge the exchange rate fluctuation between BDT and USD.