business challenges and opportunities in maldives - copy

8/3/2019 Business Challenges and Opportunities in Maldives - Copy

1/4

Business Opportunities &Challenges: Focus on South Asian

CountriesArticle by Ms Rishu Bhardwaj

South Asia typically consists of Bangladesh, Bhutan, the Maldives, Nepal, Pakistan and Sri Lanka, alsoincludes Afghanistan, and Iran.The global economy has gone into recession with developed

economies recording negative growth and substantial slowdown of emerging economies. The globaltrade is forecasted to decline by 7% in 2010, as more and more countries adopt import substitutionand protectionist policies. Although the decline in international commodity prices have helped to curbdomestic inflation and averted a supply side shock, the decline in demand for both export goods and

private remittances has reduced foreign exchange inflows, the global economy is still witnessingmergers & acquisitions. Bangladesh offers opportunities for foreign investors in important sectors,including power, steel, fertilizer, hotel, tourism, and petrochemicals. These opportunities are reflectedin the inflows of foreign direct investment (FDI), which increased from virtually zero in the early

1980s to 0 million in FY2007.. To meet the challenge, market-oriented liberalizing policy reforms wereinitiated in the mid-1980s and were pursued much more vigorously in the 1990s. These reforms were

particularly aimed at moving towards an open economic regime and integrating with the globaleconomy. Bhutan, one of the worlds smallest and least developed, is based on agriculture andforestry, which provide the main l ivelihood for more than 60% of the population. Hydropower exportsto India have boosted Bhutans GDP growth. Bhutans hydropower potential and its attraction for

tourists are key resources. The Bhutanese Government has made some progress in expanding thenations productive base and improving social welfare. Sri Lanka, the regions leading reformer ofbusiness regulations, made it easier to obtain credit by strengthening the legal rights of creditors and

enhancing the availability of credit information.The structure of the Pakistan economy has changedfrom a mainly agricultural base to a strong service base. Agriculture now only accounts for roughly20% of the GDP, while the service sector accounts for 53% of the GDP Significant foreigninvestments have been made in several areas including telecommunications, real estate and energy.

Other important industries include apparel and textiles (accounting for nearly 60% of exports), foodprocessing, chemicals manufacture, and the iron and steel industries.. Iran is a founding member ofOPEC and the Organization of Gas Exporting Countries. Petroleum constitutes the bulk of Iransexports (80%), valued at .9 billion in 2006 Since the mid 90 s, Iran has increased its economiccooperation with other developing countries in south-south integration including Syria, India, China,South Africa, Cuba and Venezuela. Iran is expanding its trade ties with Turkey and Pakistan and

shares with its partners the common objective for the creation of a single economic market in Westand Central Asia.

BANGLADESH: BUSINESS OPPURTUNITIES AND CHALLENGES

BUSINESS OPPORTUNITIES

1. The present government has adopted an economic strategy to create a suitable environment tomake Bangladesh a very attractive destination for foreign investors in the South Asian region. 2.Bangladesh wants to be an active partner in the world economic community. It is one of the most

open economies among the developing countries. The Bangladesh economy has already beenliberalized extensively and it is vigorously pursuing a private sector-led, export oriented growthstrategy. 3. Private investment both local and foreign is welcome in areas with the exception of onlyrive sectors on strategic grounds There is no restriction on the amount of investment or in the share

of equity. Full 100 percent foreign investment and joint venture with local private partners or with thepublic sector is freely allowed.Foreign investors now enjoy the same treatment as provided to thedomestic investors.


2/4

CHALLENGES

1. Food security and inflation are pressing concernsThe unusual rise of food prices in therecent time, which has been a world phenomenon, has really hard hit the poorest and themarginalized groups. This price hike was caused by domestic production shortfall following successivenatural disasters and also by international higher prices. The food price rise has severe humandimension and has seriously eroded the purchasing capacity of people living below the poverty line

and government employees, industrial workers, and others with fixed incomes. Addressing thehardship of poor people affected by higher food prices remains a challenge.2. Environment andclimate change pose a serious development challengeThe climate change also poses a major

development challenge for Bangladesh. Bangladeshs vulnerability to natural disasters also poses arisk. The recent severe flooding and cyclone are premonitions of future possible catastrophe.

According to the United Nations Human Development Report 2007/2008, one meter rise in sea level

would inundate 18% of land area in Bangladesh, directly threatening 11% of the population. Risingsea levels and exposure to climate disasters could result over 70 million people being permanently ortemporarily displaced. 3. Foreign Investment: Private investment from overseas sources iswelcome in all areas of the economy with the exception of only five industrial sectors (reserved for

public sector) as mentioned earlier. 100% foreign direct investment as well as joint venture both withlocal private sponsor or with public sector is allowed.Foreign investment, however, is speciallydesired in the following categories:* Export-oriented industries;-industries in the Export

Processing Zones;* High technology products that will be either import-substitute or export-oriented;-undertaking in which more diversified use of indigenous natural resources is possible;* Basicindustries based mainly on local raw materials;

IRAN

BUSINESS OPPORTUNITIES1. The Iranian government estimated in 1986 that several countries,chiefly Egypt, the United States, and France, owed Iran US to US billion. Clearly, the continued costsof the war coupled with falling oil revenues afforded the economy little elasticity. 2. Iran had a US.4

billion balance of payments deficit during 1986, largely as a result of low oil prices and the disruptionof oil shipments caused by Iraqi bombing. Oil prices fell from US per barrel in November 1985 to USin February 1986. Although prices rose in the fall of 1986, the average price of oil for the year was USper barrel, half that in 1985. The estimated US billion in export earnings in 1986 was the lowest since1973. 3.CAIRO Egypts Beltone Financial has signed a deal to complete its planned merger with

Pioneers Holding and expects to complete the deal by the end of May, Beltone said on Sunday.

CHALLENGES

1.Political tensions between Tehran and Kuwait increased significantly after the United States agreedto reflag Kuwaiti oil tankers. Iran accused Kuwait and its neighbors, especially Saudi Arabia, of beingmere puppets of the Great Satan.(US)2. Irans relations with the other three GCC membersKuwait,

Oman, and Saudi Arabia- have been more complex and, throughout the early and mid-1980s, havebeen characterized by alternating periods of tension and mutual accommodation.3. The outbreak ofwar between Iran and Iraq further alarmed the Persian Gulf Arab states.4. Continues to suffer fromdouble-digit unemployment and underemployment. 5. Underemployment among Irans educatedyouth has convinced many to seek jobs overseas, resulting in a significant brain drain.

PAKISTAN

BUSINESS OPPORTUNITIES

1Unilever has acquired the shares of Ambrosia International Ltd., Mehran International Ltd., andPakistan Industrial Promoters Ltd., which form what is often called the Polka group of ice-creamcompanies. Polka is one of the oldest and well-known brands of ice-cream in Pakistan. The Polkagroup has three factories in Hub, Karachi and Lahore, respectively. It employs more than 700 people

and had a combined turnover of some Rs. 725 million in 1995.2. In recent years, the Government ofPakistan has substantially simplified the Foreign Private Investment (Promotion and Protection) Act,


3/4

1976, specifically provides that foreign investment shall not be subject to more taxation on incomethan in investment made in similar circumstances by Pakistani citizens. 3. The recent reduction in the

number of days to set up a business is significant and ranks the country among the best in thisregard in Asia.

CHALLENGES1. The rapid depletion of the countrys foreign exchange reserves has now emerged asthe most imminent risk facing its sovereign ratings and country ceiling.2. At the same time, delays in

the ability of its fi scal authorities to wean themselves away from central bank financing of the budgetdeficit also represent a formidable obstacle for improving inflationary expectations and reducingpressure on the Pakistani Rupee,3. Lack of good governance, war on terror and decline in

investments are the main challenges faced by national economy and strong political commitment isneeded to steer the country out of the current economic crisis.

SRI LANKA

BUSINESS OPPURTUNITIES With the gradual improvement of the security and safety situation,arrival of foreign visitors to Sri Lanka has increased by 28% in July 2009 compared to thecorresponding period of the previous year. According to IMF latest report: Sri Lankas economy willgrow 5.5 percent in 2010 due to improving domestic demand and potential export growth after the

25-year war ended in 2009 and as global recovery takes hold.1. Aitken Spence, one of Sri Lankas top

hotel firms, has resumed talks with Six Senses Spas, an international spa chain, on building an up-market resort on the south-west coast near Ahungalla, a prime beach resort where it has two hotels

and Trans Asia Hotel has been refurbished and reframed as Cinnamon Lakeside Colombo.

2. There have been several other initiatives by business organizations including signing of anagreement by Suntel Ltd with Orient City one of the largest IT parks under construction to providean advanced data communication solution, an investment of US Million by Dialog Telekom for the

development of mobile telecommunication infrastructure in the Northern Province linking the warravaged province with rest of the mobile network in the country.3. Initial steps taken by theInternational Organisation for Migration (IOM), to establish eight rice processing centers in Batticaloa

district through a project funded by the Australian Governments Aus AID programme, and setting upof two s state-of-the-art chilling centers in Trincomalee district by Nestle Lanka directly benefiting thelocal rural communities.

CHALLENGES1. Poor governance can be viewed as a major constraint to the development of acountry. Through a brief political history of Sri Lanka this section will demonstrate the linkagespresent in a number of government issues that have hindered the development of Sri Lanka. SriLankas income inequality is severe, with striking differences between rural and urban areas. About

15% of the countrys population of 20.2 million remains impoverished. The effects of 26 years of civilconflict, falling agricultural labor productivity, lack of income-earning opportunities for the ruralpopulation, high inflation, and poor infrastructure outside the Western Province are impediments to

poverty reduction.

2. Sri Lanka depends on a strong global economy for investment and for expansion of its export base,and the global slowdown is a major worry. It hopes to diversify export products and destinations tomake use of the Indo-Lanka and Pakistan-Sri Lanka Free Trade Agreements, GSP Plus treatment by

the European Union, and other regional and bilateral preferential trading agreements.

BHUTAN

BUSINESS OPPORTUNITIES1.Various companies, including hydropower, banking and minerals,

will join together in Bhutan in the countries new grouping of 14 companies striving to promotegrowth in the countries private sector. The government has either a full or partial stake in all thecompanies. 2. An agreement was signed between Bhutans Planning secretary, Karma Tshieem andHenrik Neilson, head of the Danish liaison office, to provide Bhutan with DKK140 million. The money

is for the 10 year plan within the health and education sector. The majority of the money, 76 percent,will go towards assisting the health and education sector, while 11 percent will be allotted for


4/4

vocational training. Denmark has been providing assistance to Bhutans health sector since 1989 andin 2003 began helping the education sector.3.Bluewater Systems secured a deal to supply Bhutan

Telecom with new back-up systems, that will attempt to relieve the decade old system of monkstraveling across the Himalayas carrying magnetic tapes to the capitol of Thimphu. Bhutan and NewZealand are the only countries thus far to have installed Bluewater systems.

CHALLENGES

1. Unemployment The current rate is 3.7% and is stil l increasing. This has led to increases inmany youth related problems in urban centers. 2.Education The education sector has been riddledwith many problems in 2008. Our seemingly trail and error approach hasnt improved anything.

There is a lot of work.3. Private Sector Development The country looks forward to the newindustrial policy and the assessment of the impact of the FDI policy. The Government should put inprogrammes to develop entrepreneurial skills, and support individuals to start and own small

businesses.

CONCLUSIONWhile South Asian countries have made significant progress in integrating with therest of the world, intra-regional trade remains very low. The reasons for this low level of trade includeprotectionist trade regimes, which discriminated against trade among larger neighbors; continued

conflict between countries, transport and trade facilitation constraints followed by restricted number

of mergers and acquisitions in these countries.However, there is ample scope of growth among thecountries discussed above based on the recent developments in their economies. To conclude,

emphasis is on enlistment of these countries which are in future list of N11 so that more and moreintra-regional trade in goods and services, investment, and development of supply chains can takeplace in Asia.

About the Author

business challenges and opportunities in maldives - copy

Documents