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Posted by Rezwan

BANGLADESH -WHY SHOULD INVESTORS CARE?

Bangladesh has been a land of confusion to many. Just as there are much potential to make this democratic country overcome many challenges like the overpopulation, poverty and extremism and go forward, there are many setbacks like political instability and corruption.

In October, Berlin-based research organization Transparency International declared Bangladesh to be the most corrupt nation on Earth, for the fifth time. Then last month Goldman Sachs Group Inc. included it in a list of 11 developing countries that, according to its analysts, have the greatest potential to emulate the long-term economic success expected from China, India, Brazil and Russia. The pendulum is swinging like yo yo and nobody knows when it will strike a balance somewhere.

Andy Mukherjee of Bloomberg writes that there are three good reasons why investors should care about Bangladesh:

* First, no matter how bad things get, Bangladesh almost always manages to produce a decent economic growth rate of about 5 percent.

* Second, almost 35 percent of Bangladeshis are now aged 15 years or younger. They will soon enter the workforce. Compared with three decades ago, when women, on average, produced six children, fertility rates have dropped below three children.

* Third, with some cleaning up, the Bangladeshi judiciary can be made to support a modern economy if only politicians would agree to create one.

And there are even more solid reasons:

* Enforcing a contract is 4 percentage points cheaper in Bangladesh than in China.
* Not only are Bangladesh's investor protection standards far superior to China's, they're also better than what's available, on average, in rich countries.
* Bangladesh is also competitive on labor costs. Garment workers in Dhaka earn 39 U.S. cents an hour, while the hourly wage for sewing and stitching in coastal China is 88 cents.

Andy's prescription for Bangladesh:

"Bangladesh needs to cut red tape and open up to foreign trade and investment so that more and better-paying jobs lead to a bigger middle class and stronger public institutions. Only then will the nexus between corruption, poverty, terrorism and general lawlessness be broken."
We strongly believe that Goldman Sachs will be true.

This entry was posted on January 24, 2006 at Tuesday, January 24, 2006 . You can follow any responses to this entry through the comments feed .

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