FDI SCENARIO OF

BANGLADESH,
TRADE BLOCS,
MNCs IN BANGLADESH,
and
SAARC
FDI SCENARIO OF Bangladesh, TRADE BLOCS, MNCs IN BANGLADESH, and SAARC

Submitted to

Mr. Avijit Mallik

Lecturer
Institute of Business Administration, University of Dhaka
Course: International Business Environment (L301)

Submitted by

Md. Raihanul Abedin Shovon

ZR- 11, Section A
BBA 23rd Batch
Institute of Business Administration
University of Dhaka

October 1, 2017
LETTER OF TRANSMITTAL

October 1, 2017

Mr. Avijit Mallik

Lecturer
Institute of Business Administration
University of Dhaka

Sir:

Subject: Submission of Assignment on FDI scenario of Bangladesh, trade blocs, MNCs in

Bangladesh, and SAARC
With humble veneration, I would like to submit my take on the assignment on FDI scenario of
Bangladesh, trade blocs, MNCs in Bangladesh, and SAARC. I have tried to conduct an extensive
and comprehensive secondary research, although, lack of information in many aspects has been
my shortcoming.

I sincerely hope that I have been able to fulfill the project requirements as per your instructions
and guidance. I humbly apologize for any mistakes I might have made in this report, and ardently
hope you will point out any discrepancies henceforth and guide me accordingly. I appreciate this
opportunity to work under you. I eagerly await your feedback on the overall report.

Yours sincerely,

Md. Raihanul Abedin Shovon

ZR- 11, Section A
BBA 23rd Batch
Institute of Business Administration
University of Dhaka
Table of Contents
FDI Scenario of Bangladesh ........................................................................................................... 2
FDI Inflow of Bangladesh (2000-2015) ..................................................................................... 2
FDI Outflow of Bangladesh (2000-2015) ................................................................................... 3
Top 10 FDI Inflow Countries ..................................................................................................... 4
Facilities and Incentives for foreign investment ............................................................................. 4
Fiscal incentives .............................................................................................................................. 4
Financial incentives for export oriented industries ......................................................................... 5
Additional facilities/incentives ....................................................................................................... 5
Challenges in attracting FDI inflow to Bangladesh .................................................................... 5
MNCs operating in Bangladesh ...................................................................................................... 7
EU (European Union) ................................................................................................................... 10
The European Economic Area (EEA)........................................................................................... 10
Members of EU ......................................................................................................................... 11
Benefits of trading between Members of EU ........................................................................... 12
Economic benefits ................................................................................................................. 12
Consumer benefits ................................................................................................................ 13
Attitude towards Non-Member Countries ................................................................................ 13
NAFTA ......................................................................................................................................... 13
Nafta's Provisions ..................................................................................................................... 14
Removal of Barriers to Investment ........................................................................................... 14
Elimination of Tariffs ............................................................................................................... 15
Dispute Resolution .................................................................................................................... 15
Environmental Provisions and Side Agreement ....................................................................... 15
Environmental Provisions in the Preamble ............................................................................... 15
Environmental Provisions within NAFTA ............................................................................... 16
Provisions of the Environmental Side Agreement .................................................................... 16
Side Agreement on Labor ......................................................................................................... 17
Impact of NAFTA ..................................................................................................................... 18
Trade and Economic Consequences ..................................................................................... 18
 Environmental Consequences ............................................................................................... 18
Labor interests and the environment ..................................................................................... 18
SAARC- What is SAARC? .......................................................................................................... 20
History of SAARC .................................................................................................................... 20
Objective of SAARC ................................................................................................................ 20
SAARC Recognized Bodies: .................................................................................................... 20
SAFTA .................................................................................................................................. 21
Member Countries of SAARC .................................................................................................. 21
Privileges Received by SAARC Countries: .............................................................................. 22
References ..................................................................................................................................... 24

List of Figures
Figure 1: FDI inflows over the years (2000-2015) ......................................................................... 2
Figure 2: FDI outflows over the years (2000-2015) ....................................................................... 3
Figure 3: Countries of Origin of the MNCs .................................................................................... 7
Figure 4: MNCs operating in different Sectors............................................................................... 8
Figure 5: Sectors Invested in by United States ............................................................................... 8
Figure 6: Sectors Invested in by United Kingdom.......................................................................... 8
SECTION I:

FDI SCENARIO OF
BANGLADESH

1
FDI Scenario of Bangladesh

The role of foreign direct investment (FDI) in the growth process has for long been a topic of
intense debate Foreign direct investment (FDI) is an investment made by a company or
individual in one country in business interests in another country, in the form of either establishing
business operations or acquiring business assets in the other country, such as ownership or
controlling interest in a foreign company.

Foreign direct investments are distinguished from portfolio investments in which an investor
merely purchases equities of foreign-based companies. The key feature of foreign direct
investment is that it is an investment made that establishes either effective control of, or at least
substantial influence over, the decision making of a foreign business.
Bangladeshs scenario still satisfactory enough but given the availability of abundant resources,
skilled and cheap labor forces, a stable political atmosphere, effective monetary and fiscal policy,
improvement of infrastructure and long term strategic planning o stimulate FDI might be able to
make the condition favorable to attract foreign investment in Bangladesh. This paper recommends
some guidelines that can be used to attract foreign investment in Bangladesh. We will further shed
light into the state of Business Environment in Bangladesh, identifies major determinants affecting
the FDI and the benefits that the country may derive from it.

FDI Inflow of Bangladesh (2000-2015)

As can be seen from Figure 1, Bangladesh has usually experienced a stable growth of FDIs from
the turn of the twenty-first century except for the years 2001, 2006, 2009, 2014.

FDI inflows over the years (2000-2015)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Figure 1: FDI inflows over the years (2000-2015)

2
The decrease in FDI inflows can be explained by the political instabilities that are ensued by the
election processes and changes in governments. However, in 2013-14, due to the Rana Plaza
Accident, FDI inflow dropped because of lack of confidence from investors. But, in 2015, investor
confidence was regained and FDI inflow experienced a sharp increase.
Detailed FDI data have been provided in the Appendix 1.

FDI Outflow of Bangladesh (2000-2015)

As can be seen from Figure 2, FDI outflows have dramatically varied over the years. Political

FDI outflows over the years (2000-2015)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Figure 2: FDI outflows over the years (2000-2015)

instability, lack of investor confidence, lack of administrative coordination among different

government bodies, differential treatment with the change of government, and delay to get services
from support organizations are some of the reasons that can be directly attributed to the dramatic
rises and falls in FDI outflow.
Detailed FDI data have been provided in the Appendix 2.

3
Top 10 FDI Inflow Countries
Table 1: Top 10 FDI Inflow Countries (source: Foreign Direct Investment in Bangladesh: A
Critical Analysis, South East Asian Journal of Contemporary Business)

Investment (in
Sl. Country
million UDS)
1 United Arab Emirates 2,229.89
2 Kingdom of Saudi Arabia (KSA) 1,850.40
3 United Kingdom 982.03
4 United States 735.37
5 The Netherlands 351.19
6 Egypt 177.14
7 Malaysia 162
8 South Korea 123.7
9 India 93.8
10 China 55.62

Facilities and Incentives for foreign investment

1. Tax exemption on royalties, technical knowhow and technical assistance fees and facilities for
their repatriation

2. Tax exemption on interests on foreign loans and capital gains from transfer of shares by the
investing company

3. Remittances of up to 50% of salaries of the foreigners employed in Bangladesh and facilities

for repatriation of their savings and retirement benefits at the time of their return

4. Level playing field: Foreign owned companies duly registered in Bangladesh will be on the
same footing as locally owned ones
5. Provision of transfer of shares held by foreign shareholders to local investors.

Fiscal incentives
1. Corporate tax holiday of 5 to 7 years for selected sectors
2. Reduced tariff on import of raw materials capital machinery
3. Bonded warehousing

4. Accelerated depreciation on cost of machinery is admissible for new industrial undertaking

(50% in the first year of commercial production, 30% in the second year, and 20% in the third
year)

4
5. Tax exemption on capital gains from the transfer of shares of public limited companies listed
with a stock exchange.
6. Reduced Corporate Tax for 5 to 7 years in lieu of tax holding and agricultural deprecation.

Financial incentives for export oriented industries

1. Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the
selected products
2. 90% loans against letters of credit (by banks)
3. Permission for domestic market sales of up to 20% of export oriented companies outside EPZ

Additional facilities/incentives
1. 100% foreign equity allowed.
2. Unrestricted exit policy
3. Remittance of royalty, technical know-how and technical assistance fees
4. Full repatriation facilities of dividends and capital at exit
5. Citizenship by investing a minimum of US$ 500000
6. Permanent resident permits on investing US$ 75000

Challenges in attracting FDI inflow to Bangladesh

Limited capacity to supply adequate electricity and gas to industries.

Absence of efficient physical infrastructure.
Bureaucratic complexity to get registered or permission.
Absence of investment promoting agency.
Lack of professionals and sector specific trained man power
Poor imposition of IP (Intellectual Property) law.
Lack of project specific proposals in hand to attract international investment.
Political unrest and blockades.
Absence of standardization/quality infrastructure in home.
Absence of technology infrastructure.
Corruption and Non-cooperation from relevant government agencies like, the Board of
Investment, Police, National Board of Revenue, Environment Authority etc.

5
SECTION II:

MNCs OPERATING
IN BANGLADESH

6
MNCs operating in Bangladesh

A multinational corporation (MNC) has facilities and other assets in at least one country other than
its home country. Such companies have offices and/or factories in different countries and usually
have a centralized head office where they coordinate global management. Very large
multinationals have budgets that exceed those of many small countries.

Since inception, Bangladesh has seen substantial investment from MNCs from various countries.
It is difficult to identify the number of MNCs currently operating in the country right now owing
to lack of information. However, through secondary research, a list of 65 countries has been
developed which has been provided in the appendix 4. For classification of the sectors, Dhaka
Stock Exchange and Chittagong Stock Exchange has been consulted.
Let us look at the country of origins of the MNCs and the perspective sectors that have received
the significant investments from the MNCs.

Countries of Origin of the MNCs

11

7
6
5 5
4 4
3 3 3
2 2 2
1 1 1 1 1 1 1 1

Figure 3: Countries of Origin of the MNCs

It can be seen in figure 3 that, United Kingdom has invested in highest 11 companies and stands
first among the origin countries. United States follows UK with 7 companies and Switzerland
stands third with 6 MNCs currently operating in Bangladesh. Both Germany and UAE have 5
MNCs currently working in Bangladesh. Neighboring country India has 4 MNCs operating in the
country.

7
 MNCs operating in different Sectors
9
8

6
5 5
4
3 3 3 3 3 3
2 2
1 1 1 1 1 1

Figure 4: MNCs operating in different Sectors

As can be seen from Figure 4, Banking industry has the highest number of MNCs operating in
Bangladesh with 9 banks. FMCG stands second in the list with 8 companies. Textiles industry is
dominated by local companies and has 6 MNCs in the market. Pharmaceuticals, the current thrust
sector of Bangladesh economy, has 4 foreign players in the market.

Sectors Invested in by Sectors Invested in by

United Kingdom United States

Textiles 2 NBFI 1
Logistics 1
Pharmaceuticals 2
Fuel & Power 1
United Kingdom

United States

Paints 1
FMCG 1
FMCG 3 Engineering 1
Engineering 1 Digital Media 1
Banking 2 Banking 1

Figure 6: Sectors Invested in by United Kingdom Figure 5: Sectors Invested in by United States

The sectors invested in by two of the biggest players: United Kingdom and United States has been
identified in Figure 6 and Figure 5.

8
SECTION III:

EU and
NAFTA

9
EU (European Union)

The European Union is a unique economic and political union between 28 European countries that
together cover much of the continent.

The EU was created in the aftermath of the Second World War. The first steps were to foster
economic cooperation: the idea being that countries that trade with one another become
economically interdependent and so more likely to avoid conflict.

The result was the European Economic Community (EEC), created in 1958, and initially
increasing economic cooperation between six countries: Belgium, Germany, France, Italy,
Luxembourg and the Netherlands. Since then, a huge single market has been created and continues
to develop towards its full potential.

A monetary union was established in 1999 and came into full force in 2002, and is composed of
19 EU member states which use the euro currency. Many nations, such as: UK, do not use the
common currency Euro.

The single or 'internal' market is the EU's main economic engine, enabling most goods, services,
money and people to move freely. Another key objective is to develop this huge resource also in
other areas like energy, knowledge and capital markets to ensure that Europeans can draw the
maximum benefit from it.

The European Economic Area (EEA)

The EEA includes EU countries and also Iceland, Liechtenstein and Norway. It allows them to be
part of the EUs single market. Switzerland is neither an EU nor EEA member but is part of the
single market - this means Swiss nationals have the same rights to live and work in the UK as other
EEA nationals.

Today, the EU is a single market thats the worlds largest economy, and the biggest exporter and
importer. The EU itself has free trade agreements with other nations, including South Korea,
Mexico and South Africa, which is similar to a free trade area in that it has no tariffs, quotas or
taxes on trade; but a single market allows the free movement of goods, services, capital and people.
EU strives to remove non-tariff barriers to trade by applying the same rules and regulations to all
of its member states. The region-wide regulations on everything from working hours to packaging
are an attempt to create a level playing field. This is not necessarily the case in a free trade area.
The creation of the single market was a slow process. In 1957, the Treaty of Rome established the
European Economic Community (EEC) or Common Market. However, it was not until 1986 that
the Single European Act was signed. This treaty formed the basis of the single market as we know

10
it, as it aimed to establish the free-flow of trade across EU borders. By 1993 this process was
largely complete, although work on a single market for services is still ongoing.

Members of EU

EU currently has 28 Members. However, United Kingdom is in the process of exiting EU through
a referendum in 2016 popularly known as BREXIT. The list of the current member countries is:
1. AUSTRIA Member since January 1995
2. BELGIUM Member since January 1958
3. BULGARIA Members since January 2007
4. CROATIA Member since July 2013
5. CYPRAS Member since May 2004
6. CZECH REPUBLIC Member since May 2004
7. DENMARK Member since January 1973
8. ESTONIA Member since May 2004
9. FINLAND Member since January 1995
10. FRANCE Member since January 1958
11. GERMANY Member since January 1958
12. GREECE Member since 1981
13. HUNGARY Member since May 2004
14. IRELAND January 1973
15. ITALY Member since January 1958
16. LATVIA Member since May 2004
17. LITHUANIA Member since May 2004
18. LUXEMBOURG Member since January 1958

11
 19. MALTA Member since May 2004
20. NETHERLANDS Member since January 1958
21. POLAND Member since May 2004
22. PORTUGAL January 1986
23. ROMANIA Member since January 2007
24. SLOVAKIA Member since May 2004
25. SLOVENIA Member since May 2004
26. SPAIN Member since January 1986
27. SWEDEN Member since January 1985
28. UNITED KINGDOM Member since January 1973

Benefits of trading between Members of EU

Economic benefits

Free trade and removal of non-tariff barriers have helped reduce costs and prices for
consumers. Increased trade with the EU creates jobs and higher income. Over 52% of UK
exports are to the EU. Trade within the EU has increased 30% since 1992.Over ten years
(1993-2003), the Single Market has boosted the EUs GDP by 877 billion [588 billion].
This represents 5,700 [3,819] of extra income per household.
Removal of customs barriers mean 60 million customs clearance documents per year no
longer need to be completed, cutting bureaucracy and reducing costs and delivery times.
Social cohesion fund has invested in poorer areas of the EU to help reduce regional
disparities. For example, Ireland benefited from the EU social cohesion fund (over 6
billion of investment in education and infrastructure spending)
EU structural funds to help Eastern European economies develop will benefit the UK in
the long term because as they become more affluent, they will be able to buy more UK
exports.
The European Union has attracted greater inward investment from outside the EU. Inward
investment grew from 23 billion [15.4 billion] in 1992 to 159 billion [106.5 billion]
in 2005. The UK is the 5th largest source of inward investment in the world, and being a
member of the single market is an important factor in encouraging Japanese firms.
Free movement of labor and capital has helped create a more flexible economy. For
example, UK and Ireland have benefited from the immigration of Eastern European
workers to fill labor market shortages in certain areas, such as plumbing, nursing and

12
 cleaning. Migration has helped increase productive capacity and make a net contribution
to tax revenues.
Mutual recognition of safety standards and rules have helped reduce costs for firms. This
has encouraged the development of small and medium business who rely on the low cost
of exports

Consumer benefits
EU competition policy has harmonized regulation of monopoly and cartel power within
Europe. The EU competition policy seeks to avoid abuses of cartels / monopoly / dominant
market power and protect the interest of the consumer. There has been successful
deregulation of airlines, electricity and gas markets.
The EU has reduced the price of making mobile phone calls; thus, making
telecommunication easier and more affordable for the consumers.
Consumers are free to shop in any EU countries without paying any tariffs or excise duties
when they return home.

Attitude towards Non-Member Countries

To attract investors and to facilitate import of low cost items, EU grants GSP facilities to non-
member countries. This facility has benefitted the world economy in that many LDC countries are
getting duty free entrance to EU markets and benefitting heavily through exports into the EU.

NAFTA
The North American Free Trade Agreement (NAFTA) is an international agreement among the
United States, Canada, and Mexico. Much has changed in the years since NAFTA took effect on
January 1, 1994. The biggest effect of NAFTA has been on trade volumes. From 1993 to 1997,
US.-Canadian trade increased more than 80 percent and U.S.-Mexican trade increased more than
90 percent. Mexico is now the second-largest trading partner of the United States, being second
only to Canada.

NAFTA phases out tariffs among the three countries over a period ending in 2009, and it liberalizes
rules related to investment in Mexico. NAFTA's adoption was supported strongly by most
businesses and investors in the United States. Many other citizens, however, opposed its adoption
and continue to be wary of its consequences. Many, but not all, environmental groups opposed
NAFTA prior to its adoption, and such opposition continues. As a result of opposition prior to
Congress's approval of NAFTA, side agreements on labor, the environment, and import surges
were negotiated.

13
NAFTAs Provisions
NAFTA liberalizes rules for investment by businesses from one NAFTA country in another
NAFTA country. It also eliminates tariffs and other barriers to trade among the United States,
Canada, and Mexico over a 15-year period that began January 1, 1994. Thus, it creates what some
commentators are calling "the world's largest trading bloc." As of December 31, 1993, there were
tariffs on approximately 9,000 products being traded between the United States and Mexico.
Approximately 4,500 tariffs were eliminated on January 1, 1994, and by 1999 tariffs remained in
effect on only about 3,000. The remaining tariffs will be gradually phased out, with the last of
them being terminated by the year 2009. NAFTA is a two-volume document covering more than
1,200 pages with extremely detailed, complex provisions specifying how tariffs and other barriers
for a multitude of different industries will be altered. The following description of NAFTA
summarizes some of its salient provisions with respect to selected sectors of the economy.

Removal of Barriers to Investment

NAFTA removes certain investment barriers, protects NAFTA investors, and provides process for
settlement of disputes between investors and a NAFTA country. Coverage includes
anticompetitive practices, financial services, intellectual property, temporary entry for
businesspersons, and dispute settlement procedures. One of the most significant aspects of NAFTA
is that it minimizes or eliminates many requirements of foreign government approval, which
formerly posed significant barriers to investment.

NAFTA includes provisions on anticompetitive practices by monopolies and state enterprises as

well as on such practices by privately owned businesses. It also sets out principles to guide
regulation of financial services. Under NAFTA, financial service providers from one NAFTA
country may establish banking, insurance, securities operations, and other types of financial
services in another NAFTA country. The advantage of this for investors is that they are able to use
the same financial service providers for both domestic and international transactions.

Transportation among the three countries is becoming more efficient and less costly due to changes
in investment restrictions. Pursuant to NAFTA, Mexico is removing its restrictions on foreign
investment for trucking firms. In January 1996, an agreement was to take effect that would allow
U.S. and Mexican carriers to pick up and deliver international shipments in states adjacent to the
U.S.-Mexican border, but the agreement was blocked by the United States.

Under NAFTA, Mexico's pharmaceutical market is being opened to U.S. investors. Mexico has
removed its import restrictions on pharmaceutical products, and it will phase out tariffs on such
products by 2004. Mexico has opened its government procurement contracts for pharmaceuticals
to bids from U.S. and Canadian companies. NAFTA builds on the work of the General Agreement
on Tariffs and Trade (GATT) and does not create a common market for movement of labor.

14
Elimination of Tariffs
NAFTA's provisions on farm products were of great concern to agriculture businesspeople in the
United States. Pursuant to NAFTA, tariffs on all farm products will be phased out, but producers
of certain "sensitive" products will be allotted extra time to adjust gradually to competition from
products of other NAFTA countries. Tariffs for those sensitive products will be phased out over a
period of 15 years ending in 2009. "Sensitive products" receiving such treatment include corn and
dry beans for Mexico, and sugar, melons, asparagus, and orange juice concentrate for the United
States.

Provisions related to the automobile industry were also of special concern in the United States.
Pursuant to formulas set out in NAFTA, as of 1995, cars must contain 50 percent North American
content to qualify for duty-free treatment. By 2002, they will be required to contain 62.5 percent
North American content to receive such treatment.

Dispute Resolution
Administration of NAFTA is handled by a commission composed of ministers (cabinet-level
officers) designated by each NAFTA country. A secretariat serves the commission and assists with
the administration of dispute resolution panels. Whenever a dispute arises with respect to a
NAFTA country's rights under the agreement, a consultation can be requested at which all three
NAFTA countries can participate. If consultation does not resolve the dispute, the commission will
seek to settle the dispute through mediation or similar means of alternative dispute resolution
procedures. If those measures are unsuccessful, a complaining country can request that an
arbitration panel be established. The panel is composed of five members selected from a trilaterally
agreed upon list of trade, legal, and other experts. After study, the panel issues a confidential initial
report. After receiving comments from the parties, a final report will be prepared and conveyed to
the commission. If the panel finds that a NAFTA country violated its NAFTA obligations, the
disputing parties have 30 days to reach an agreement. If none is reached, NAFTA benefits may be
suspended against the violating country in an amount equivalent to the panel's recommended
penalty until the dispute is resolved.

Environmental Provisions and Side Agreement

NAFTA has more provisions relating to the environment and, at least on paper, is more protective
of the environment than any other international agreement or treaty ever before entered into by the
United States. A coalition of eight major environmental organizations supported it, yet other major
environmental groups opposed its approval. NAFTA's environmental provisions are complex,
lengthy, and yet-to-be interpreted as they are implemented.

Environmental Provisions in the Preamble

The environment and the pursuit of what is called "sustainable development" are mentioned three
times in NAFTA's preamble. Nevertheless, in NAFTA's Statement of Objectives, which is part of
the agreement itself, they are not mentioned at all. Thus, sustainable development is a goal of
NAFTA, but there are no substantive provisions in NAFTA to require its pursuit or achievement

15
Environmental Provisions within NAFTA
In terms of the ability to safeguard the "status quo" in environmental regulation in the United
States, there are two key articles in NAFTA: Articles 7 and 9. Article 7 covers sanitary and
"phytosanitary" measures. ("Phytosanitary" refers to measures related to plant and food safety.)
Article 7 reserves to each party (the United States, Mexico, and Canada) the "right" to set its
"appropriate level of protection" for human, animal, or plant life or health. It confirms that a party
may adopt a measure more stringent than an "international standard, guideline or
recommendation." Further, adoption of these "more stringent" measures may be by federal, state,
or local governments.

Article 9 of NAFTA gives each party the right to establish the levels of protection that it considers
to be appropriate so long as the choice is made based on a "legitimate" objective. Environmental
measures cannot be used to promote unfair discrimination or to serve as a disguised barrier to
trade. NAFTA allows only those trade regulations involving "product characteristics or their
related processes and production methods." Thus, a process standard must be related to the
characteristics of a product, and a party can't prohibit trade in products grown or manufactured
using "unsustainable" methods.

Provisions of the Environmental Side Agreement

The North American Agreement on Environmental Cooperation, also known as the
"Environmental Side Agreement," was adopted as a part of NAFTA along with two other side
agreements, covering labor and import surges.
Part one of the Environmental Side Agreement lists two objectives:
(1) To promote environmental concerns without harming the economy
(2) To open discussion of environmental issues to the public.
Part two outlines the obligations of the three countries. It confirms that each party has the right to
set its own standards and states that the governments of each country are responsible for
monitoring and enforcing their environmental laws. It also states that private parties can request
government intervention and can seek remedies through the courts of their respective countries.

Part three establishes a Commission for Environmental Cooperation (Environmental Commission)

that is based in Montreal, Canada. The Environmental Commission consists of a council, a
secretariat, and a Joint Public Advisory Committee. The council consists of cabinet-level
representatives who will meet at least once a year. Its function is to implement the environmental
side agreement. The secretariat provides a support system for the Council.

Pursuant to part four of the Environmental Side Agreement, each party agrees to cooperate and to
provide information to the secretariat upon request.
Part five allows a party to request consultation with a second party concerning the party's failure
to enforce its environmental laws if such a failure is shown to be part of a persistent pattern. If a

16
mutually satisfactory resolution is not reached within 60 days, a party can request a special session
of the council, which must meet within 20 days. If the council is unable to resolve the dispute, it
can convene a panel for arbitration of the dispute. The panel will issue an initial report within 180
days, and the parties are allowed to submit comments within 60 days. Next, the panel will submit
a final report, which will be made public within 5 days after it is received by the council. The
parties are given an opportunity to reach their own settlement based on the report, and if they
cannot reach an "action plan" within 60 days, the panel can be reconvened to establish one. If the
offending country does not follow the plan, a fine can be imposed. If the fine is not paid, NAFTA
benefits can be suspended.

Side Agreement on Labor

The North American Agreement on Labor Cooperation, commonly known as the "Labor Side
Agreement," was negotiated in response to concerns that NAFTA itself did little or nothing to
protect workers in Mexico, the United States, or Canada. U.S. labor groups have maintained their
opposition to NAFTA even with the addition of the Labor Side Agreement. Representatives of
labor groups assert that the Labor Side Agreement does little to protect workers in the United
States, Canada, or Mexico.

The preamble affirms the three parties' desire to create new employment opportunities and to
protect, enhance, and enforce basic workers' rights while, at the same time, affirming their respect
for each party's constitution and laws.
Part one lists the objectives of the agreement.

1. Its basic goals include the desire to improve labor conditions and encourage compliance
with labor laws.

2. Another goal is to encourage open sharing of information (transparency) among the three
countries regarding their respective labor laws and their enforcement of those laws.

Part two of the Labor Side Agreement discusses the obligations of the parties. Each party is
responsible for enforcement of its own labor laws, but the parties agree that proceedings dealing
with enforcement of labor laws will be "fair" and tribunals will be "impartial." Labor laws and
information about their enforcement are to be made public, and public education will be promoted.

Part three establishes a Commission for Labor Cooperation. It will consist of a council and a
secretariat. The council meets at least once a year or upon the request of one of the parties. Its
primary tasks are to oversee implementation of the Labor Side Agreement and to promote
cooperation among the parties on various labor issues.

The secretariat is headed by an executive director, and that position is rotated among the three
countries. The secretariat's tasks are to assist the council, make public the labor policies of each
country, and prepare studies requested by the council.

17
The United States, Mexico, and Canada have each established a National Administrative Office
(NAO) led by a secretary. NAOs are responsible for gathering information within their respective
countries and conveying it to the secretariat and the other two NAFTA parties. In addition, the
Labor Side Agreement allows the NAOs in each country to review each other's labor laws (and
enforcement) in response to complaints from workers. Thus, the Labor Side Agreement provides
a mechanism for dealing with a party-country that shows a "pattern of practice" of failing to
enforce its occupational safety and health, child labor, or minimum wage technical labor standards.

Impact of NAFTA

Trade and Economic Consequences

Economic Integration - NAFTA is facilitating an unprecedented level of economic integration in
North America. It is creating opportunities for investment and growth by private business, and it
is promoting more stable relations between and among the United States, Mexico, and Canada.
Nevertheless, NAFTA is not welcomed by all people in the three countries. Overall, NAFTA is
neither a complete success nor a complete failure. Its benefits vary for each of the three countries.
The effects of NAFTA on trade between the United States and Canada have not been as dramatic.
The U.S.-Canada Free Trade Agreement was enacted in 1989, and tariffs between the United States
and Canada were completely eliminated (with a few minor exceptions) as of 1998.

Job creation: It is reported that NAFTA led to the creation of 100,000 jobs in the United States
during the first half of 1994, and that as of January 1995 there were at least 700,000 U.S. jobs that
depended on exports to Mexico. Trade officials say that 2.6 million U.S. jobs were supported by
exports to Mexico and Canada in 1998.

Environmental Consequences
Environmentalists, business representatives, and the governments of the three NAFTA countries
agree that environmental contamination has reached serious proportions in northern Mexico,
where U.S. businesses have been operating for nearly three decades under the maquiladora
program and where industrial development has continued to grow under NAFTA. The hazardous
waste treatment industry was expected to be a major area for U.S. investors under NAFTA. The
United States could offer experience and expertise that Mexicans lacked.

Labor interests and the environment

On the other hand, NAFTA has not been a success for labor interests and the environment. The
Labor Commission created under the Labor Side Agreement has had little success in improving
the status of workers. And the Environmental Commission has had similar limited results. Further,
the environmental contamination in Mexico is escalating.

18
SECTION IV:

SAARC

19
SAARC- What is SAARC?
The South Asian Association for Regional Cooperation (SAARC) is the regional
intergovernmental organization and geopolitical union of nations in South Asia. Its member states
include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka.
SAARC comprises 3% of the world's area, 21% of the world's population and 3.8% (US$ 2.9
trillion) of the global economy, as of 2015. SAARC was founded in Dhaka on 8th December,
1985. Its secretariat is based in Kathmandu, Nepal. The organization promotes development of
economic and regional integration. It launched the South Asian Free Trade Area in 2006. SAARC
maintains permanent diplomatic relations at the United Nations as an observer and has developed
links with multilateral entities, including the European Union.

History of SAARC
It was back in 1980 when the concept of regional political and economic cooperation in South Asia
was first thought of and fired the public imagination. Even before that, the idea was discussed in
three major conferences: Asian Relations Conference (New Delhi), Baguio Conference
(Philippines) and Colombo Powers Conference (Sri Lanka), which were held between 1947 and
1954. Ex-president of Bangladesh, Ziaur Rahman was the one who made a formal proposal on
May 2, 1980. The first SAARC summit was held in Dhaka on 8 December 1985, when the
organization was established. Afghanistan is the only new inclusion that happened since SAARC
was established.

Objective of SAARC
SAARCs edifice is built upon a foundation of a strong set of objectives. Every decision SAARC
takes and every policy it frames is guided by the overall objectives it had set for itself in the charter.
Although promoting welfare economics and collective self-reliance among the South Asian
nations are the commonly quoted objectives, yet there are some equally important focus areas
which need a mention. Accelerating economic growth and cultural development in South Asia
is one of the priorities, which come under the broader goal of improving quality of life. Giving
every individual the opportunity to live in dignity and to realize their full potentials also finds a
place in the list of objectives. Understanding and appreciation of one anothers problems is one
of the rare objectives that one finds in any regional grouping. SAARC also seeks collaboration in
the field of economics, culture, technology and science. The member countries aim to strengthen
cooperation among themselves in international forums on matters of common interests.

SAARC Recognized Bodies:

As an organization, SAARC mainly operates through six apex bodies which ensure regional
cooperation on multiple levels:

20
SAARC Chamber of Commerce & Industry (SCCI): The entity encourages intra-regional trade
by creating business linkages among the entrepreneurs. Its primary focus is on the holistic growth
of service sector and small & medium enterprises.

SAARCLAW (South Asian Association for Regional Cooperation in Law): The desire to
establish an association within the SAARC region to disseminate information and promote an
understanding of the concerns and developments prompted the birth of SAARCLAW in 1991.
This association of legal communities of SAARC nations was established in Colombo.

South Asian Federation of Accountants (SAFA): In 1984, this organization came into existence
with an objective of strengthening and serving the accountancy profession in the South Asian
Region.

South Asia Foundation (SAF): A non-profit and non-political organization founded by UNESCO
Goodwill Ambassador Madanjeet Singh in 2000, SAF encourages regional cooperation through
UNESCO Madanjeet Singh Institutions of Excellence. The institutions offer courses on varied
subjects ranging from Climate and Green Energy to Human Rights and Visual Arts.

South Asia Initiative to End Violence against Children (SAIEVAC): Founded in 2005, this
regional forum aims at ending all forms of violence against children in South Asia.

Foundation of SAARC Writers and Literature (FOSWAL): Its the first non-government
organization working towards nurturing and strengthening cultural connectivity through
interactions among SAARC nations.
SAFTA- In a landmark move, SAARC nations unanimously decided to form South Asian Free
Trade Area (SAFTA). Although the agreement was reached at the 12th SAARC summit in 2004,
it came into force on 1 January 2006. The agreement not only created a free trade area of 1.8 billion
people in SAARC nations (except Afghanistan), but also removed trade barriers to increase the
level of economic cooperation.
SAARC Secretariat- SAARC Secretariat in Kathmandu (Nepal) facilitates and monitors
implementation of activities of the organization and acts as a communication channel between
SAARC and its member states. Presently, the Secretariat is headed by Nepals ex-foreign secretary
Arjun Bahadur Thapa.

Member Countries of SAARC

The member states are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and
Sri Lanka. SAARC was founded by seven states in 1985. In 2005, Afghanistan began negotiating
their accession to SAARC and formally applied for membership on the same year. The issue of
Afghanistan joining SAARC generated a great deal of debate in each member state, including
concerns about the definition of South Asian identity because Afghanistan is a Central Asian
country. The SAARC member states imposed a stipulation for Afghanistan to hold a general

21
election; the non-partisan elections were held in late 2005.Despite initial reluctance and internal
debates, Afghanistan joined SAARC as its eighth member state in April 2007.

Privileges Received by SAARC Countries:

Members can have access to World of opportunities i.e. from networking with the corporate majors
of SAARC member countries and global industry to assisting in framing economic and industrial
policies, through close linkage with the government. SAARC CCIs proactive approach focuses
on helping to increase efficiency and competitiveness:

Access /dissemination of information and Publicity in the region:

Directory of Members with company profile and advertisement
Access to publications and reports on a wide range of subjects and activities
Free distribution of SAARC Biz Newsletter, A Monthly update on Business News,
activities, events etc.
Advertisement opportunity in SAARC Biz Newsletter
Regional and foreign offices providing assistance at all levels
Get information of seminars/programs through email, fax, telephone and postage
Receive advance notice, early reservation service, and discounted registration fees on
SAARC CCI events and programs

Business Opportunities
Participation in trade fairs & exhibitions
Develop business through buyer seller Forum
Be a part of business delegation at international Forums

Women Specific Opportunities:

Participation in SAARC Chamber Women Entrepreneurs Council
Trainings for Promoting Gender Equality
Seminars for Empowerment of Women
Credit Guarantee Fund Facility
Creation of greater market opportunities, design and deliver integrated solutions for
business development
Support and expansion of the operations of SMEs through increased access to local,
regional and global markets.

Platform for Young Entrepreneurs:

Platform for closer contacts and interactions between young entrepreneurs in South Asia
for regional fellowship and cooperation
Providing out-of-the-classroom education through ideas, experience sharing, discussions,
and interactions with business professionals across South Asia.

22
 Summits aimed at sharing best corporate strategies and empowering positive business
thinking

Networking:
Platform to interact with other members, institutions, state & central governments
Fora to meet global business and political leaders
Participation in topical seminars, training programs, conferences and meeting
Meet and network with South Asian business community, academicians, research
professionals, marketing agencies and media personals
Business to Business (B2B) meetings
Visa Facilitation:
Get Visa Facilitation from SAARC CCI to easily grow and move your business with in
the region.

SAARC Visa Exemption Stickers (SVES):

SAARC Visa Exemption Stickers (SVES) facility only for those who meet criteria i.e.
fall under 200 leading businessman category and EC/MC member of National
Chamber/Federation of the respective country or member EC, SAARC CCI.

Web Services:
Information on important events organized by SAARC CCI and other activities, press
releases, advertisement, partner hotels, membership etc.
Advertisement opportunity on website

Involvement in Policy Work:

Participation in different National Policy making and Policy Committees
Expert advice on government legislations, regulations, etc.
Provides information on export and import.
Provides information for technology collaboration and investment
Undertakes research studies

Accommodation in Hotels at discounted rates:

Availability of room/ accommodation at discounted rates in SAARC CCI partner hotels
throughout the region.

Publications/ Research Studies:

Access to research studies and market information related to the South Asian Countries

Participation in SAARC CCI Events (region and abroad):

23
 Opportunity to participate in fairs/exhibitions and similar events under SAARC CCI
umbrella

Arbitration:
SAARC Arbitration Council, Islamabad (SARCO) is mandated to provide a legal
framework/forum for fair and efficient settlement of commercial, industrial, trade,
banking, investment and such other disputes
Enables the parties to a dispute from different legal and cultural backgrounds to resolve
their disputes, without the formalities of going through a judicial process.

References
Bangladesh Business Directory. (2017, September 30). Bangladesh Multinational Company List.
Retrieved from Bangladesh Business Directory:
http://bangladeshbusinessdir.com/bangladesh-multinational-company-list/

Investopedia. (2017, September 29). Foreign Direct Investment - FDI. Retrieved from
Investopedia.com: http://www.investopedia.com/terms/f/fdi.asp

Investopedia. (2017, September 29). Multinational Corporation - MNC. Retrieved from

Investopdia: http://www.investopedia.com/terms/m/multinationalcorporation.asp

World Bank. (2017, September 15). World Bank Open Data. Retrieved from data.worldbank.org:
data.worldbank.org

24
Appendices

Appendix 1

Year FDI(inflows)
2000 $280,384,629.68

2001 $78,527,040.08
2002 $52,304,931.04

2003 $268,285,231.83

2004 $448,905,400.71
2005 $760,504,265.76

2006 $456,523,167.70
2007 $651,029,738.05

2008 $1,328,422,986.52
2009 $901,286,583.13

2010 $1,232,258,246.59

2011 $1,264,725,163.33
2012 $1,584,403,459.98

2013 $2,602,962,095.37
2014 $2,539,190,939.68
2015 $3,380,251,354.53

25
Appendix 2

Year FDI(outflows)
2000 $2,000,000.00
2001 $20,600,000.00
2002 $2,642,487.05
2003 $2,777,817.74
2004 $4,068,822.75
2005 $1,974,048.40
2006 $3,594,819.62
2007 $134,263,505.53
2008 $190,660,725.29
2009 $180,829,229.56
2010 $66,442,085.51
2011 $297,434,389.82
2012 $289,058,929.52
2013 $546,876,802.62
2014 $41,769,923.69
2015 $49,778,988.78

26
Appendix 3

Investment (in
Sl. Country
million UDS)

1 United Arab Emirates 2,229.89

2 Kingdom of Saudi Arabia (KSA) 1,850.40

3 United Kingdom 982.03

4 United States 735.37

5 The Netherlands 351.19

6 Egypt 177.14

7 Malaysia 162

8 South Korea 123.7

9 India 93.8

10 China 55.62

27
Appendix 4

Country of
Sector Company Origin
Agro-Processing C.P. BANGLADESH Co. Ltd. Thailand
Automobiles Kotobuki Bangladesh Ltd. Japan
Aviation Arirang Aviation Ltd. South Korea
Banking Bank Al-Falah Limited Pakistan
Banking Citibank N.A United States
Banking Commercial Bank of Ceylon PLC Sri Lanka
Banking Habib Bank Limited Pakistan
Banking National Bank of Pakistan Pakistan
United
Banking Standard Chartered Bank Kingdom
Banking State Bank of India India
Banking Woori Bank South Korea
United
Banking HSBC Bank Kingdom
Cement Heidelberg Cement Bangladesh Ltd. Germany
Cement Lafarge Surma Cement Ltd. Switzerland
Cement Holcim (Bangladesh) Ltd. Switzerland
Cement CEMEX Cement Bangladesh Ltd. (CCBL) Mexico
Cement Emirates Cement Bangladesh Ltd. UAE
Ceramics RAK Ceramics (Pvt) Ltd. UAE
Ceramics Fu Wang China
Ceramics China-Bangla China
Digital Media MediaVest Bangladesh France
Digital Media Grey Advertising Bangladesh Ltd. United States
Engineering Bd.Thai Aluminium Ltd. Thailand
Engineering Singer Bangladesh Limited United States
United
Engineering Renwick Jajneswar & Co (Bd) Ltd Kingdom
United
FMCG Unilever Bangladesh Ltd. Kingdom

28
 United
FMCG Reckitt Benckiser Bangladesh Ltd. Kingdom
FMCG Nestl Bangladesh Ltd. Switzerland
FMCG The Procter & Gamble Company United States
FMCG Marico Bangladesh Ltd. India
United
FMCG British American Tobacco Bangladesh Kingdom
FMCG Perfetti Van Melle Bangladesh Pvt. Ltd. Italy
FMCG Li & Fung (Bangladesh) Ltd. Hong Kong
Footwear Bata Shoe Company (Bangladesh) Ltd. Switzerland
Fuel & Power Chevron Bangladesh United States
Fuel & Power Linde Bangladesh Ltd. Germany
Fuel & Power GIZ Bangladesh Germany
IT Siemens Bangladesh Ltd. Germany
IT NewVision Solutions Ltd. Japan
Logistics MCC Transport Bangladesh Denmark
Logistics SA Trading UAE
Logistics ThyssenKrupp Elevator (BD) Pvt. Ltd Germany
Logistics TCI Bangladesh Ltd. India
Paints RAK Paints (Pvt) Ltd. UAE
United
Paints Berger Paints Bangladesh Ltd. Kingdom
Paints Asian Paints (Bangladesh) Ltd. India
United
Pharmaceuticals GlaxoSmithKline GSK Bangladesh Kingdom
United
Pharmaceuticals Advanced Chemical Industries (ACI) Ltd. Kingdom
Pharmaceuticals Novartis (Bangladesh) Ltd. Switzerland
Pharmaceuticals Alcon Pharmaceuticals Ltd. Switzerland
Services Vinarco International Ltd. Thailand
United
Textiles ACS Textiles (Bangladesh) Ltd. Kingdom
Textiles YKK Bangladesh Pte Ltd. Japan
Textiles Youngone Corporation South Korea
United
Textiles Coats Bangladesh Ltd. Kingdom

29
Textiles Ever Smart Bangladesh Ltd. Hong Kong
Textiles Denim Expert Ltd. Netherlands
Travel & Leisure Amari Dhaka Thailand
Saudi-Bangladesh Industrial & Agricultural
NBFI Investment Company Limited KSA
The UAE-Bangladesh Investment Company
NBFI Limited UAE
NBFI MetLife ALICO United States
Logistics Uber United States
Telecommunicatio
ns Grameen Phone (Telenor) Norway
Telecommunicatio
ns Banglalink (Global Telecom Holdings) Netherlands
Telecommunicatio
ns Robi (Axiata Group Berhad) Malaysia

30