Is Bangladesh the invisible magnet for Sri Lankan private sector!

Is Bangladesh the invisible magnet for Sri Lankan private sector!

SAM Staff,

Amidst hype for greater economic cooperation with China and India often being mixed with controversy, it appears Bangladesh has been the inconspicuous magnet for the Sri Lankan private sector. This explains, according to the Island’s leading financial daily Financial Times, why nearly 40 top business leaders are scheduled to accompany President Maithripala Sirisena on his first State visit to Bangladesh starting on Thursday (13 July).

Bangladesh, with a population of around 160 million, abundant labour, a fast-growing economy and rising per capita income, among a host of other advantages, has attracted a growing number of Sri Lankan firms. Almost all leading Lankan apparel exporters have set up shop there, employing thousands in Bangladesh, and this strategy has been an integral part of their global success despite the challenges that exist.

A report in the FT’s online outlet said, several thousands of professionally qualified and skilled Sri Lankans are based in Bangladesh as well providing the human capital expertise required to make such ventures a success. Following the apparel industry has been the logistics, financial services and the ICT industries. More recently Sri Lankan investments in Bangladesh have charted new sectors including consumer goods, agriculture and energy.

For example, it is a lesser known fact that Hemas Holdings’ Kumarika is now the leading value added hair oil brand in Bangladesh, a feat achieved by beating Indian giant Dabur Amla.

The business of Hemas Consumer in Bangladesh saw some exceptional results during FY16/17. The topline of the sector achieved growth of 32%.

For Hemas, business in Bangladesh now accounts for 15.2% of its overall consumer sector sales and Kumarika achieved market leadership in the value added hair oil category in Bangladesh. Encouraged by the success, it recently launched Kumarika facewash and shampoo and entered the feminine hygiene segment.

Ceylon Biscuits has struck gold in Bangladesh after a bitter experience in India and the company does not shy away from promoting the progressive South Asian nation among Sri Lankans.  Diversified blue chip Hayleys is also among the new entrants to Bangladesh seeing great future prospects.

Another optimistic investor is Laugfs Gas, which runs successful LPG operations in Bangladesh and within less than two years has become one of the largest LPG distributors in Bangladesh, which is one of the fastest growing LPG markets in the region.

Laugfs invested Rs. 1.3 billion in its entry into Bangladesh and during FY17 Bangladesh operations contributed Rs. 5.8 billion to Laugfs Gas’ revenue of Rs. 18 billion. The contribution to operating profit was Rs. 512 million. It employs 91 people in Bangladesh. In Bangladesh, Laugfs has a 13% market share and is the pioneer in the Auto Gas segment with the most number of filling stations.

“Bangladesh is a market with tremendous growth potential to increase household penetration. The exhaustion of natural gas reserves, Government support to popularise LPG as a fuel for household consumption as well as increasing acceptance by industrial consumers create tremendous potential for LPG in Bangladesh,” says Laugfs Holdings Chairman W.K.H. Wegapitiya, who will be among the 40-member strong business delegation accompanying President Sirisena.

In line with its strategic thrust towards strengthening regional capabilities, Hayleys Agriculture sector’s Haychem dealing with crop protection chemicals expanded its international operations in Bangladesh last year.  It remains optimistic over the opportunities presented by these regional markets and hopes to leverage on existing capabilities in driving synergies across markets

The scheduled delegation accompanying President Sirisena includes existing investors or those currently engaged in trading with Bangladesh as well as new aspirants.

The Lankan private sector delegation will figure in a business/economic dialogue which will be addressed by President Sirisena as well.

Bangladeshi’s economy has more than doubled to $ 221 billion in 2016 from $ 115 billion in 2010 with GDP growth of 7% in 2016 as against 5.6% in 2010, helping Bangladesh reach lower-middle income country status in 2015.

This comes despite it facing many domestic and external shocks. Reflecting robust economic transitions, its per capita income is $ 1,404, up from $ 807 in 2010, and growth is also higher than Vietnam’s.

Its foreign exchange reserves amount to a record $ 33 billion whilst Government debt is at a low level of 22% of GDP.

With over $ 25 billion in shipments, the Ready Made Garments sector remains Bangladesh’s flagship export sector whilst leather and leather goods, footwear, agribusiness, pharmaceuticals, plastic and ceramics and light engineering are fast-growing and high-potential sectors.

In terms of competitiveness, its rank has increased by 12 places since 2012. Foreign Direct Investments have achieved a Compound Annual Growth Rate of 21% over the past five years.

“There has been significant emphasis on improving the business climate, easing infrastructure gaps, increasing investment, including FDI,” a spokesman for the Bangladesh High Commission in Sri Lanka said.