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     Volume 7 Issue 44 | November 7, 2007 |

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Cover Story

The Future of Business

Nader Rahman and Syed Zain Al-mahmood

Bangladeshi business is a tough topic to converse on. No one is really sure how well we are doing and seemingly every success is met with a failure. Yet one thing can be said the business community is a resilient one, inept governments have come and gone, international agencies continue to meddle, and natural disasters hit us in endless waves, yet our economy and GDP continue to grow. The growth may not be robust, but at least it's measurable growth, which is more than one can say about most of the countries in the global south. This year marked the 50th anniversary of the Dhaka Chamber of Commerce and Industry and to celebrate its golden anniversary they put some of the best and brightest minds in the world together for an International Business Conference which celebrated not only our nation but the glorious past of our capital.

The conference included a host of roundtable meetings, which discussed topics as diverse as the impact of the WTO on SMEs and business strategies in a world of change. Not everyone agreed with what was said, but that is to be expected when intellectuals with different perspectives on the same problems are put under one roof. Through the discussions, people argued and agreed in the end came up with conclusions and suggestions to take Bangladesh and its business community forward. They drew the line to be followed to our success. Now we must walk it.

Business Strategies in a World of Change

While business will forever be geared towards making profit, how we go about that process must be looked into. As the world changes, so must business strategies and practices.

(From L to R) Poul Shultz, Toufiq Ali, Hossain Khaled, Patricia Francis and Latifur Rahman.

Many people have many ideas as to what to do about Bangladeshi business. But what is often left out of those ideas and equations is that the economic and financial systems of the world are in a constant state of flux. The old concept that only foreign direct investment can save us has been met with the brute force of the current economic meltdown. Countries are scrambling to repair their economies and for many of them investment anywhere in the world, let alone Bangladesh is a risky idea. In a world of change Bangladesh and its businesses must find a strategy to move forward.

At the recent roundtable organised by the Dhaka Chamber of Commerce and Industry (DCCI) to celebrate its 50th anniversary, top names from the world of economics and trade came together to discuss business strategies in a world of change, with a distinct focus on Bangladesh. Latifur Rahman, President, Metropolitan Chamber of Commerce and Industry moderated the discussion and set the tone with sensible and incisive comments. He said, "the last few weeks have been challenging and it has forced us to think out of the box. The problem is no longer regional and now we must devise a plan to change with the world."

Patricia Francis, Executive Director of the International Trade Centre (ITC) in Geneva produced a keynote speech that not only pointed out where we should aim to be, but also provided a loose framework of how to go about it. She stressed the importance of setting values in any goal-oriented partnerships. Francis said, "Targets and milestones which are measurable must be set." Ambassador Taufik Ali echoed her thoughts: "there should be incentives for new businesses but those incentives should be associated with benchmarks." While the ideas are not revolutionary they have often been the bane of progress in Bangladesh. Francis's ideas are not simply limited to the rich helping themselves as she continued, "Grameen and Brac buy into the philosophy of more inclusive business strategies. Their value systems look not only at shareholders, but the wider stake holders." The point is well made as Bangladesh could provide a global model for inclusive business strategies and growth which would also push at greater sustainability.

Interestingly Bangladesh and much of the global South are more confident at tackling globalisation than their developed partners. This fearlessness must be harnessed as should partnerships with the diaspora. Currently the relationship with them is strictly one-dimensional with remittances coming in, that must be changed. They must be involved and lured to create partnerships between their host countries and their motherland. Francis also said, "Human capital is the heart of competitive country and company." A point which clearly struck a chord with Professor Poul Shulz of the Copenhagen Business School and Director of Asia Business Forum who feels that we can, "offer outstanding people who are ready and willing to be trained. And all at low prices." To move with the times Bangladesh must look beyond its abundance of unskilled manpower. Training and education would add to the value of our most important exports, our fellow countrymen.

The topic of Special Economic Zones (SEZ) brought about a mixed response from the panelists, while Shulz believes that Bangladesh could follow the Chinese example of creating such zones as a path to development, Latifur Rahman viewed them with a little more suspicion. He believes the sheer area needed to set them up would be difficult to carve out of the most densely populated country in the world without displacing and causing trouble to innumerable people. Possibly the answer to that question lies somewhere in between the two ideas. Bangladesh is not large enough for a slew of such zones, although one properly managed and maintained zone could be the harbinger of future commercial and economic successes.

The roundtable ended with Rahman saying that domestic investment must be the catalyst for foreign investment and therein lies the problem. FDI can only ever be a supplement for our nation, it must be treated as an enhancement to our economy, not the backbone. The over reliance on it must be done away with and domestic investment should be encouraged just as much, maybe even more. The most difficult investment is in ones self and our future depends on that investment. Its best we make it now, before its too late.

Small Enterprise, Big Business

Small only in name, small and medium enterprises form the backbone of our country's economy. Is the World Trade Organization helping or hurting them?

Former President of the Dhaka Chamber of Commerce and Industry, A.S.M. Quasem addressing the panelists.

Small and Medium Enterprises play a crucial role in the global economy. SMEs are considered to be the engine that drives growth. Worldwide, SMEs account for 99% of business numbers and 40% to 50% of GDP. In Bangladesh, around 95% of all business units are in the SME category. As such, SMEs are employing the bulk of private sector workers, and creating most of the net new jobs. SMEs are often a vehicle for the empowerment of women and various disadvantaged sections of the workforce. Many of today's large industries and transnational conglomerates started life as a humble SME.

SMEs are directly and indirectly embedded in the international trading system. Many of Bangladesh's SMEs such as RMG units export directly to foreign buyers, while many more sell products and services to other domestic businesses that in turn incorporate them into export products. Those small and medium businesses that cater to a domestic customer base are also affected by competition from cheap foreign products and services. Globalisation therefore presents a formidable challenge to the survival of SMEs.

Panelists at the Roundtable titled “Impact of WTO on SMEs” organissed by Dhaka Chamber of Commerce & Industry as part of the International Business Conference 2008, agreed that the World Trade Organisation regime presents a daunting landscape for small and medium enterprises in Bangladesh. But the experts stressed that every challenge is an opportunity. With appropriate domestic policies, capacity building, and a progressive outlook, Bangladesh's SMEs can rise to the occasion.

Small and Medium Enterprises should be protected by the WTO, not harmed.

The speakers at the roundtable that took place on the first day of the two-day DCCI International Business Conference presented a range of perspectives and discussed strategy, collaboration and synergies that will determine how Bangladeshi SMEs fare in the global marketplace. The discussion was moderated by a former president of DCCI, A.S.M. Quasem. In his opening remarks, Quasem defined SMEs from the Bangladesh perspective. Different definitions of SMEs exist, he said, but from a Bangladeshi viewpoint, a business unit that employed less than 250 people and had an investment of less than Taka 200 million could be called an SME. Quasem said SMEs suffered from information asymmetry and the WTO needed to do more to make sure small and medium sized businesses continued to grow in the free trade environment.

The Keynote Speaker, Harsha V Singh, Deputy Director General of the Word Trade Organisation took the floor and explained how the WTO regime could work in favour of SMEs. Singh stressed that the whole purpose of the WTO is to facilitate the links to market and have a non-arbitrary and non-discriminatory trading system. It provides a set of fixed rules that will smooth the progress of trade between nations, and in today's climate of uncertainty the value of such a defined set of rules is incalculable.

The Deputy Director General of the WTO invoked the example of traffic lights. It may be argued that alternating red and green lights slow down traffic. But in reality, the traffic lights impose discipline that actually allows the smooth flow of vehicles and prevents gridlock. “The WTO is not just about free trade,” said Mr. Singh. “It's about opening markets in an orderly and transparent way.”

Harsha V Singh rebutted the allegation that the rules of the WTO Doha Round would open SMEs up to unfair competition too fast and too soon. The WTO does not prevent governments from helping their SME sector with subsidies and capacity building initiatives, he asserted. General subsidies are not prohibited by the WTO. Only specific subsidies are disallowed, but even then there are windows of exemption for developing economies. The Doha round would seek to bring down tariffs in all developed countries below 8%, he said, and this could only be a good thing for export-oriented industries in countries like India, Bangladesh and Vietnam.

Claire Durkin, Director of the UK's Department for International Development (DFID) got a laugh out of the audience by invoking Monty Python. “What did the Romans do for us…?” She went on to spell out in clear terms what the WTO does for us. The WTO accords will lower tariff and non-tariff barriers,” she said, “and USD 300 billion can be saved through trade facilitation alone.” She sounded the call to arms, saying SMEs must prepare to take advantage of the international system, and governments must support the SME sector with proactive policies.

Professor M A Taslim, CEO of Bangladesh Foreign Trade Institute struck a jarring note. He pointed out that international trade only makes up 15% of GDP, while WTO is silent about the other 85%. He also said unilateral measures such as “anti-dumping” are not addressed by WTO.

Dr. Harsha V Singh rose to respond to the points raised by Prof. Taslim. He said the WTO provides a clear-and-simple-rules based system of trade. It is up to the member countries to use this to their benefit. He also said that capacity building must be demand-driven. Dr. Singh stressed that the WTO has rules that prevent developed countries from using trade advantages against developing nations in an unfair way.

In response to a question from The Star Magazine, Dr Harsha V Singh said that although the Doha Round Ministerial talks had not been concluded, talks were still ongoing at a lower level. The main issue that had caused gridlock in Geneva in July that of agriculture subsidies -- had already been resolved, the audience was told.

Small and Medium Enterprises are the backbone of the economy in countries like Bangladesh. During the Roundtable a consensus emerged that SMEs suffer from common constraints such as lack of capital, difficulties in procuring raw materials, lack of access to relevant business information, low technological capabilities, problems caused by cumbersome and costly bureaucratic procedures, and policies and regulations that generate market distortions. However, with proper domestic policy support from the government, and an eye towards global market trends, SMEs can build capacity and reap the rewards of globalisation.

Global Economic Shift to Asia
Regional Synergies

With a global economic shift to Asia, we must now strategise on how to deal with more than just wealth, each other.

Ministerial meetings are not usually the most interesting roundtables. The speeches are often full of rhetoric padded with hot air and catch phrases which try and make the people talking sound smarter than they actually are. But owing to the fact that the DCCIs conference was not arranged by the government the ministerial meeting they arranged was far more casual than one might have expected. The discussants spoke frankly and seemingly without ulterior motives as one might expect between such traditional rivals. Advisor for Commerce, Hossian Zillur Rahman, was the amiable host of the discussion and performed his duties as efficiently as possible.

Jairam Ramesh the State Minister of Commerce of India was the keynote speaker and did not disappoint. He chose to first set the topic, the global economic shift to Asia within his country and then expanded on it. To much surprise he said, “There is a belief within India that we can globalise without the rest of the world. There is a belief that we can leap forward without regional integration, but that idea is not only unrealistic but quite obviously wrong.” The truth of the matter is that if Asia is to be the destination of an economic shift, then regionally we must integrate and in the process not only help ourselves but our neighbours as well.

The eloquent Ramesh hits on a contentious and slightly philosophical topic when he said, “I'm not worried about GDP growth and remittances but I'm worried that our society which has lived by diversity may be pulled apart by the same diversity”. He continues, “Our ability to celebrate plurality is going to determine the benefits to which economic development can be achieved”, a point which G.L. Peiris, MP and Minister of Export Development and International trade, Sri Lanka reiterated. Peiris said, “to move forward and deal with the current crisis we must understand that cultural diversity and plurality must be maintained.” The example of Sri Lanka is especially important as their civil war is based on those problems and as we have seen recently there has been a spate of religious attacks across India. Bangladesh must move forward in this regard as well and try to integrate with the many indigenous people who live within its borders.

Ramesh said, “The worst possible thing is that education has led to a dissecting of the social structure”, a point which readily applies to Bangladesh and its many Madrasa schools which cater mainly to the poor. One might question what all of this has to do with a global economic shift to Asia, but the point is, it has everything to do with that shift. If we cannot live with ourselves and neighbors and celebrate diversity the region is doomed to social and economic failure. Professor Rehman Sobhan, Chairman of CPD added a different dimension to the discussion when he said, “65 percent of Chinese exports originate within Asia. Their economies are not dependant on the rescissions of the economies of the West,” he continued, “Asia can only rely on Asia and ride out this financial crisis, the markets we need are all within Asia.” His thoughts hit the right chord as they showed that Asia has in a way already become an economic hub, the change to this region may already have taken place. No longer do we need to sell to the west; the markets we need to survive and make profits out of are out very neighbours.

He finally mentioned a familiar point on which many earlier discussants of previous roundtables have stressed. Sobhan said millions of people were being under or half educated and that there would be great value addition to educate them properly, a point which needs to be looked into not only in Bangladesh, but generally throughout South Asia. Dasho Sonam Tshering, Secretary, Economic affairs, Bhutan made some interesting observations as well. He said the basis of economic integration is free trade, yet that alone without foreign direct investment would be useless. Tariq Sayeed, President, SAARC Chamber of Commerce and Industry, Karachi, Pakistan added some private sector thoughts which added to the ministerial insight. He says. “we must brand our nations properly to achieve a foothold in the global market and attract investment and partnerships here (Asia).” The freedom to travel is a big hindrance and especially between the two rivals India and Pakistan. If that could be sorted out, with something like a common SAARC passport then trade would really boom between nations. Tshering also talked of a point that is seemingly absent from all economic discussions, happiness. He said, “In Bhutan we think not only of trade and commerce but also of Grosse National Happiness.” That is a concept that could move this region forward as well, at the end of the day trade, commerce and economic activity is all about happiness, if the region looked after its Grosse National Happiness quotient then pretty much everything would fall into line. But that may be the longest shot yet.

Does Bangladesh have a niche in Asia?

Our country may have a niche within Asia, but identifying and nurturing it is a whole different matter.

Corporate governance must improve if Bangladeshi businesses are to move forward.

The question of whether Bangladesh has a niche or not, is one that has intrigued many economists and businessmen. The roundtable organised by the DCCI on the issue tried to offer as many different views on the topic as possible and resulted in more than a few raised eyebrows. If nationalistic feelings are to be believed, then the answer is quite obviously a resounding yes. But if we dig a little deeper beneath the surface, the resounding yes is a little harder to back up with hard facts.

Ifty Islam, Managing Partner, AT Capital Partners, Dhaka started off the discussion with a half hour presentation which succinctly placed Bangladesh within the larger map of Asia and talked more of what is needed in the country than if it had a niche or not. Regional integration was high on his list of things to do as was leveraging the diaspora. This proved to be one his central themes and it is understandable why so many others felt compelled to mention it as well. Shahagir Bakth Faruk, President, Bangladesh British Chamber of Commerce was another who felt that the diaspora could help find or even create a niche for Bangladesh within Asia. They both made valid points as the Middle East employs 30 lakh Bangladeshi labourers who could be leveraged to create mini-Bangladesh markets abroad, which could give export sector a much needed boost. Recently Square Industries started exporting Bangladeshi food to the tightly controlled Japanese market where over 10,000 non-resident Bangladeshis live and small steps such as this may lead to greater advancements in the future.

The need for superior infrastructure along with better education, training was also emphasised by Islam. His final and most interesting point was that corporate and political governance needed an overhaul if Bangladesh was to any position in the global economy. We have often heard businessmen complain about political governance as the reason behind their failures, but not often has corporate governance been blamed for the same performance. Waliur Rahman Bhuiyan, OBE, President, FICCI stressed the need to clean up our image internationally. He said, "our (Bangladesh's) image must be looked into if we with to have a niche in Asia. To the outside world we are a country of endless natural disasters. We project ourselves as a poor country that needs aid. That sentiment must be changed to 'we need trade'." He continued that Bangladesh was not a poor country, but a poorly managed country.

Saiful Islam, former President, DCCI made an interesting contribution to the discussion when he said that in spite of sketchy governance, economic growth has steadily increased. This is an issue which points to the positives that can be taken out of Bangladesh. Natural disasters, incompetent governance and yet we continue to grow, how utterly paradoxical. Lutfey Siddiqui, Managing Director, Barclays Capital, Asia-Pacific, Singapore created a stir as he started off with a bang, saying as a nation we don't stand out as something special. Asking rhetorically he said, "Do we have a niche in Asia? No. Could we have a niche in Asia? Yes." His frankness to take the topic by the horns caused shock and awe. He focused on the steps he thought necessary for us to carve out a niche for ourselves in the future. Steps, which included converting our liabilities such as our huge population into assets, increased implementation of rules and regulations, privatisation of the civil service and the declaration of 2012 as the invest in Bangladesh year. Every speaker after him could not help taking a swipe at his comments that Bangladesh did not yet have a niche in Asia.

The question of whether Bangladesh has niche in Asia or not has no conclusive answers. What can be said with some certainty is that if the right atmosphere prevails, if we leverage our diaspora, if we plan for the future then anything is possible. Now all that is left to be done is to turn those intangibles into reality and that is the real task. When the roundtables end, actions must speak louder than words.

Towards Sustainable Development
The Next 15 Years

The future starts now, how we deal with current crises will define how we deal with future ones.

Dr. Rajendra Kumar Pachauri

The Concluding Plenary Session was lit up by the presence of Dr. Rajendra Kumar Pachauri, the Nobel Peace Prize Recipient and Chair of the United Nations' Intergovernmental Panel on Climate Change. Other luminaries at the concluding session included Mahfuz Anam, Editor of the Daily Star, Annisul Huq, President of FBCCI, Patricia Francis, Executive Director of the International Trade Centre, Geneva, and Kartik Siva, Chairman of the Global Brand Forum.

The final session of the DCCI International Business Conference 2008 was titled “The Next Fifteen Years The Way Forward” and Dr. Pachauri gave us a tantalising glimpse of the future, the opportunities that lie ahead and the perils that are in store for us. For most of the audience Dr. Pachauri needed no introduction. The man who heads the UN panel on climate change, and received the Nobel Peace Prize last year on behalf of his Panel, is not only an environmental scientist but also an economist, and he held the conference hall spellbound.

Dr. Pachauri reminded us that we are at a pivotal point in our planet's history. The balance of economic power is shifting and Mother Nature is reminding us that the earth's resources are finite. What we do in the next fifteen years may affect the following one hundred and fifty years, Dr. Pachauri told the gathering.

The Nobel laureate, famous for explaining the effects of climate change in everyday language, quickly sketched a sombre picture. We must learn the lessons of decades of faulty policy, he said. The natural resources of the planet are being rapidly depleted, and the course the world is taking is clearly not sustainable. Industrial development has left a huge carbon footprint that is moving us towards disaster.

Former Presidents of the Dhaka Chamber of Commerce and Industry along with the incumbent, line up for a commemorative photograph.

"Eleven of the warmest years since instrumental records have been kept occurred during the last 12 years and therefore climate change is accelerating. In the twentieth century sea levels rose by 17 cm," he said. “You may think that's a tiny amount, but if you are in a low-lying island like the Maldives this threatens your very existence.”

If the earth's temperature rises more than 2 degrees Celsius on average, he said, the consequences will be disastrous. We are already witnessing extreme weather patterns and studies have shown that mega-deltas like Shanghai, Kolkata and Dhaka are especially vulnerable. To avert disaster, we must bring about a net decline in carbon emissions by 2015 at the latest.

Dr. Pachauri made the case for sustainable development practices, saying that mankind must reduce its carbon footprint. He urged government and businesses to adopt environment-friendly measures such as renewable energy, efficient use of water, and change in agricultural practices. Global warming, if unchecked, will endanger food security, warned Dr. Pachauri, and threaten the stability of the world. The balance of economic power is shifting towards Asia, and the Asian bloc must lead the way towards sustainable development. “We can show the developed nations how its done,” said the bold visionary.

The message was clear: We have a relatively small window of opportunity to ward off a planetary emergency. We must act. From the top level of government to the level of a humble citizen, environmental awareness is necessary. It needs a radical re-thinking of the entire development process. We stand at a crossroads. The decisions we make will determine our future, and the future of our children.

Dr. Pachauri wrapped up his speech by playing a small video clip about a remote village in Rajasthan where “the sun is lighting up the nights”. A solar lantern has replaced carbon-belching oil lamps, and children can study after the daylight fades while breathing the clean, cool night air. Sustainable development in action.

Dr. Rajendra Pachauri is a tough act to follow. But the other panelists did their best. Patricia Francis summed up the preceding sessions and noted the common themes of hope and resolve. She pointed out that the Bangladeshi diaspora is a largely untapped resource, and called on Non-resident Bangladeshis to get involved in the country's development.

Mahfuz Anam issued a clarion call for change. Sadly, we cannot expect our politicians to bring about real change, he said. It is up to our businessmen, our civil society and the media to lead the way towards a new approach. He expressed a sense of injustice that countries like Bangladesh have to face the consequences of an environmental problem that they did not cause. But we must move towards sustainable development, The Daily Star editor told the audience, and we must look to science for solutions.

Annisul Huq in his forthright way lambasted George W Bush for ignoring climate change, and causing the economic meltdown. However, the economic outlook for Bangladesh remains bright, he said.

The International Business Conference ended on a note of promise as Hossain Khaled, President of DCCI read out the Dhaka Vision. “… it is indeed possible for our country to achieve middle-income status within the next fifteen years.”As the delegates gave him a big hand, the sense of optimism was palpable. Bangladesh means business.

Photos: Zahedul I Khan

Copyright (R) thedailystar.net 2008