Overview of historical and long-term growth of the Bangladesh economy. The report has a broad sweep covering monetary-fiscal-FX action, international trade, migration and remittance, demography, manufacturing, capital markets, infrastructure, energy, transportation, logistics and tourism.

1. Bangladesh Growth Report 2013
Strategic Sales February 2013
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2. Disclaimer
All cross-country data are obtained from the databases of development agencies including the World Bank and Asian
Development Bank unless otherwise mentioned. Data for domestic and external sectors of Bangladesh are primarily obtained
from the Bangladesh Bank database.
Estimates and projections herein are conducted by BRAC EPL Stock Brokerage Limited (hereafter “BESL”) officers and are
based on assumptions that we believe to be reasonable.
Data on market size and growth rates have been obtained from sources we believe to be authoritative and almost in all cases,
cross-checked with secondary sources and theoretical analysis. Nevertheless, with regard to all numerical estimates contained
herein, we are not able to guarantee either to their accuracy or completeness.
This presentation is intended for those this is sent to via electronic, air or hand-delivered mail. No part of this material may,
without BESL’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any
person that is not an employee, officer, director, or authorized agent of the recipient.
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3. Glossary
ACU Asian Clearing Union mmcfd Million Cubic Feet per Day
ASEAN Association of Southeast Asian MSCI Morgan Stanley Capital International
Nations MT Million Tons
BDT Bangladesh Taka MW Mega Watt
BERC Bangladesh Energy Regulatory MWh Mega Watt-Hour
Commission NAFTA North American Free Trade
BPDB Bangladesh Power Development Agreement
Board NBR National Board of Revenue
BSEC Bangladesh Securities Exchange OIC Organisation of Islamic Cooperation
Commission (Note: SEC is more OPEC Organization of the Petroleum
frequently used) Exporting Countries
DESCO Dhaka Electric Supply Company PPP Purchase Power Parity
DGEN DSE General Index RMG Ready Made Garments
DSE Dhaka Stock Exchange S&P Standard & Poor's
EU European Union SAARC South Asian Association for Regional
FDI Foreign Direct Investments Cooperation
FX Foreign Exchange SIPP Small Independent Power Producers
GCC Gulf Cooperation Council USD United States Dollar
GDP Gross Domestic Product YTD Year till Date
GNI Gross National Income
IPP Independent Power Producers
JICA Japan International Cooperation
Agnecy
kWh Kilo Watt-Hour
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4. Note to Investors
Greetings!
It is with great pleasure that we share with you our inaugural Considering a middle-class base of ~60 million, a working-age
Bangladesh Growth Report. population of ~100 million, and 30 million more below the age
of 14, the growth dynamism that awaits us may catch a few by
Bangladesh’s sustained ~6.0% growth since 2004 appeared to surprise. Of course, demographic dividend in Bangladesh’s
have caught worldwide media attention not too long ago. Of case is one of many growth engines.
course, if you are reading this, you are likely to have been
ahead of the curve. We believe, therefore, this is an opportune time to collate data,
analysis and estimates on economic growth, monetary-fiscal-
FX policies, trade, migration, demography, consumption,
Growth, while not being an end in itself, has certainly
manufacturing, and equity market trends while acknowledging
transformed the lives of tens of millions, lifting them out of
the challenges that lie ahead and opportunities lurking
poverty, inspiring ambitions, empowering the middle-class,
and setting the stage for what appears to be even higher underneath. Infrastructural development or lack thereof
growth. Growth, we believe, is a necessary condition for over- constitutes a significant challenge to and an opportunity for
arching development, if not sufficient. higher growth. Effective planning to orchestrate investment
decisions and operations is essential. In lieu of it, the country’s
economic potential will be unrealized.
The story of ready-made garments is rather unique and
deserves the attention it has attracted. However, a less-told
story that is increasingly significant is that of the Bangladeshi We hope that you will find this report useful and even
insightful, and welcome you to share any feedback or
consumer. As per latest income per capita estimates,
Bangladeshis earn US$1,940 per year. question, in relation to or independent of your investment
priorities.
Now, according to the S-curve of consumption (or product
adoption), that is not an arbitrary number, but one that Thanking you,
indicates an inflexion point after which, consumption increases Sajid Huq Amit
at an increasing rate. Feb 27, 2013
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5. Meet Bangladesh
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6. Growth Dimensions
DSE Turnover Growth in ’02-’12
3.4 x Bangladesh GDP Growth in ’02-’12
29.9 x
Remittances Growth in ’02-’12
5.1 x
DSE MCAP Growth in ‘02-’12
33.5 x
Garments Exports Growth in ’02-’12
6.4 x
83.7 x
22 x Motorcycle Sales Growth in ‘00-’10
Mobile Subscribers Growth in ‘02-’12
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7. Bangladesh : A Blurb
Bangladesh is the eight largest country in the world
population-wise: 150.49 million as of 2011. At 130,170 sq.
km., it is about the size of Iowa.
Despite a low GNI/capita (PPP, current) of $1,940 the growth
fundamentals of the economy has received widespread
international attention, e.g., Goldman Sachs’ inclusion in “the
next eleven” or N-11 economies as well as JP Morgan’s
“Frontier Five.” Guardian has enlisted Bangladesh among the
economies that have the potential of overtaking the west by
2050.
Located between China and India, two of the largest and
fastest engines of global growth, not to mention nearness to
South-east Asia, Bangladesh offers unique diplomatic and
commercial opportunities.
The Bay of Bengal and the planned deep sea port in the
south-east; the extensive riverine network; a large and
youthful population, fertile land, and a 99% mobile network
coverage have set the stage for speedier flows of capital,
people, tradable products and services, and ideas.
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8. Growth Path : Beginnings
Real GDP Growth (%) Low income Middle income World Bangladesh
9.0
7.0
5.0
3.0
1.0
-1.0 1985 1988 1991 1994 1997 2000 2003 2006 2009
-3.0
Bangladesh’s steady and in fact rising growth rate over a 25- For 2012, provisional estimates are in the 5.5-6.0% range,
year horizon surpasses in various country clusters (as notwithstanding a methodological revision expected to
defined by the World Bank). indicate ~6.0% GR.
Despite concerns regarding connectedness to US and While exports have sustained, other pillars of growth have
Eurozone markets via trade – the BD economy was resilient been inward remittances, consumption, SME growth and
through the 2008-09 financial crisis and 2011 Eurozone debt development, and agricultural self-sufficiency.
crisis.
The outlook indicates more of the same plus increasing
In 2010, GDP GR peaked at 6.7%, and in 2011, it was at manufacturing output, export diversification, and increased
6.5%. connectivity internally and regionally via air, road, rail, and
maritime links.
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9. Comparative : Frontier Markets
15
Bangladesh Kenya Lao PDR Nigeria Pakistan
10
6.6 6.7
5.9 5.9 6.3 6.2
4.9 5.4 5.3 5.7
5 4.6
4.2 3.7 4.4
3.2 3.3
2.2
0
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
-5
15
Looking at specific high-growth economies in Africa, South
Asia and South East Asia that are grouped with Bangladesh
on account of similar investment risk profiles and comparable 10
income levels - Bangladesh’s economic output has enjoyed a
steadier and more resilient trajectory. Certain high-growth
5
countries have had higher “high’s” but also 300-500 bp
variations in two years or less.
0
Bangladesh’s economic stability fares well even in 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
comparison with the “Emerging Asia,” i.e., more mature high-
growth South East Asian countries such as Thailand, -5
Malaysia, and Indonesia, whose growth rates plunged
500-1000 bp in two years. -10 Bangladesh Indonesia
Malaysia Thailand
Vietnam
-15
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10. Monetary & Fiscal Performance
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11. Growth, Inflation & Monetary Aggregates
After a slowdown in 2007-08 on political impasse, M2
M2 Growth 1995-2011 growth rate picked up in 2009. There was excess liquidity
109.0X
in the money market, which eventually entered the stock
market, leading to 2010’s rally.
61.9X
In 2011, the Bangladesh Bank (BB) turned a corner and
39.8X put in place a contractionary monetary policy. Since 2011,
repo and reverse repo rates have been hiked by 225bp.
12.4X 13.0X Meanwhile, M2 GR which had peaked at 21.7% in Dec’10
5.9X 7.7X 8.4X 9.6X
3.8X 4.7X fell to 13.7% in May’12, in line contractionary targets.
Thailand
Malaysia
Philippines
Kenya
Pakistan
Sri Lanka
Bangladesh
Indonesia
Nigeria
Vietnam
Ghana
Other than mopping up the excess liquidity and correction
of asset prices consequently raised – BB’s monetary policy
has also aligned closely with stipulations of a US$1.0bn
Extended Credit Facility (ECF) loan that the IMF approved
for BoP support.
Central banks around the world try to keep M2 GR in line with
nominal GDP GR and an optimal inflation level. In Bangladesh,
Broad Money grew 12.4X in 1995-2011. In the same time period, 22.4
Broad Money
GDP on PPP basis grew ~3X from US$90.7bn to US$267.4bn. 21.3
19.3 Growth 19.2
17.1 17.6
The above growth multiples are line with other economies’ that 15.5 Nominal GDP 14.8
have enjoyed sustained growth and those in which the banking 13.7 Growth
sector growth had internal liquidity generation had a relatively 12.9
12.1 12.6
slower start. 9.9
8.8
7.2 7.2 6.7 7.3
In 2006-2012, bank deposits (excluding inter-bank) grew at an
average 19.4% per year. During the same period, total advances Average Annual
(excluding inter-bank) grew by 20.0% on an average. Inflation
2006 2007 2008 2009 2010 2011
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12. Fiscal-Monetary Nexus
Stipulations for disbursements of successive tranches of the loan, Subsidizing energy costs enabled lower pricing of
included sustaining single-digit inflation and re-classification of electricity. However, given limited revenue and absence of
asset quality measurement guidelines as per best practices. In a secondary market for treasuries – subsidy financing via
line with inflation control, the ECF also stipulated curbing public treasury sales to primary-dealer banks and NBFI’s had the
sector borrowing from banks to finance subsidies. The prevalent unintended consequence of raising bank rates. Increased
fiscal policy of financing subsidies via bank borrowing was lending rates i.e., higher cost of capital economy-wide
discouraged, and rightly so, given it’s crowding out effect on naturally pushed up consumer prices.
private sector credit was quite evident.
In 2012, lending and deposit rates were higher than five-
70% year averages – peaking at 13.8% and 8.2%, respectively.
Total Domestic Credit On time deposits, leading private commercial banks
Growth (YoY)
Pvt. Sector Credit Growth (PCB’s) double-digit rates.
(YoY)
Public Sector Credit Growth
(YoY) 15
50%
12.8 13.8
12.3
11.9
11.3 12.4
10
30% 8.2
7.0 7.0 7.3
6.9
6.0
5
10% Commercial Lending Rate
Bank Deposit Rate
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
-10%
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13. External Sector Performance
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14. Trade & Exports
Trade Balance in USD mn Export in USD mn (fob) In 2012, and 1H in particular. the ready-made garments (RMG)
“export power-house,” as Bangladesh was referred to by a recent
Import in USD mn (foB)
New York Times article, experienced a lagged slowdown on
reduced demand from the US and the EU. However, trade deficits
3250
were lowered from 2011-levels thanks in part to the monetary
austerity program in place, one of the consequences of which was
2250 a curbing of non-essential imports.
1250 Exports grew 8.0% in 2012, which is respectable and also higher
than in countries with comparable export industries, e.g., Pakistan
250 and Vietnam. In fact, in 2012, Bangladesh became the second-
largest exporter of garments and textiles products after China.
-750
Diversification of export destinations sustained growth rates in
2012, especially in 2H, during which which the newer destinations
-1750 contributed ~US$1.0bn of US$9.94bn exports. The US is,
Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
however, likely to remain an attractive destination for Bangladesh
exports. India is also expected to become a larger export
Breakdown of Export by Commodity destination.
100%
27.2%! 28.4%! 25.4%! 25.1%! 27.8%! 24.4%! 27.7%!
To be sure, Singapore, Malaysia, South Korea, Japan, China,
75% Turkey, Australia, Mexico, Russia as well as several countries in
the MENA region are expected to become larger export markets
50% for Bangladesh. Another trend worth a mention is the steady
65.0%! 64.2%! 67.3%! 68.1%! 66.1%! 71.1%! 67.6%! growth of high-value products (HVPs). Their share in the
25%
garments export basket rose from 7-8% to 15-16% in 2012.
0%
2005 2006 2007 2008 2009 2010 2011
RMG! Fish! Leather! Jute! Others!
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15. Imports & Outlook
Breakdown of Import by Commodity
The largest category in imports comprises miscellaneous products
including dairy, spices, oil and oil seeds, pulses, sugar, clinker,
2005 2006 2007 2008 2009 2010 2011
100% chemical and pharmaceutical products, fertilizers, dying and
tanning materials, cotton, yarn, staple fibers, and iron and steel.
80%
As for import markets - India, China, Vietnam, Turkey, Poland and
68.1% 66.6% 65.6% 65.6% 70.0% 71.0% 64.5% Egypt are expected to contribute significantly in the future., This is
60% in addition to the traditional raw material suppliers in the OIC
(Singapore, Malaysia and Kuwait for minerals, fuels, and oils;
40% Indonesia for animal and vegetable fat oils; Pakistan, India, China
and Uzbekistan for cotton (India also for vehicle and China for
11.5% 12.8% 12.2% 12.0% 11.9% machinery); Saudi Arabia for plastic articles and Korea for iron,
20% 10.9% 10.2%
steel, and floating structures.
0%
Textile and Articles Capital Machinery
Petroleum and Products Food Grains Regional Import 2012 Q2 (USD)
Others
299.3
182.3
In FY 2012, Bangladesh spent US$6.17 billion on import of liquid fuels, 533.7 Other Asian Countries
more than twice FY 2011 levels, primarily to run quick-rental power
748.2 OIC
plants set up to address interim electricity generation gaps.
Asian Clearing Union (ACU)
2,894.5
However, monetary austerity, weak demand for exports in the EU and SAARC
US, not to mention bumper harvest of food grains, saw liquid fuel 1,384.3 ASEAN
imports decline in 2H 2012. New L/C opening for petroleum imports fell OPEC
22.4% in July-October 2012. 1,975.4
EU
1,250.8
1,270.4 NAFTA
Monetary tightening also led to a decline in import of consumer goods,
industrial raw materials and capital machinery. In July-November 2012, Other European Countries
import GR was -6.9% compared to 21.6% in the same period in 2011.
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16. Remittance & Other inflows
1,200,000
12,843 FDI (US$mn)
No. of persons left for abroad 961 995
11,650 913
1,000,000
Remittances (Million US. $) 800 793 768
10,987 743
9,689 650
800,000
564
7,915 391 376
600,000 276
5,978
400,000 4,802
3,848 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
3,062
200,000 Foreign direct investment (FDI) picked up 2009-
1,882
1,475 1,706 onwards and in 2012, reached US$909mn. In
1,089
2005-08 and 2001-04, average FDI-levels were US
0 $747.0mn and US$402.0mn, respectively.
1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12
Attracting FDI is particularly important for a growing
The Bangladeshi expatriate population estimated at around eight
economy like Bangladesh as it involves transfer of
million remitted back US$14.2bn in 2012, marking a 16.5% YoY
technical and managerial knowledge.
GR. This was noteworthy given the high base remittance dollar
volumes had achieved in 2011, and surpassed man-power
However, other frontier economies like Vietnam and
exporting countries that had higher volumes until 2011.
Cambodia have still higher average FDI levels both in
absolute dollar volume as well as share of GDP (~5%
Estimated at ~US$405.0bn in 2012, remittance to developing
for the two countries).
countries are expected to grow ~7.9%, 10.1% and 10.7% in 2013,
‘14, and ‘15, respectively, reaching US$534.0bn. Even if
The year 2012 also saw foreign-currency term loans
Bangladesh maintains average growth rates for developing
of US$1.49bn, about 82% higher YoY and 393%
countries, it could reach US$19.6bn in 2015.
higher than in 2010.
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17. FX Reserves & Exchange Rate
15 90
Reserve (USD bn) BDT-USD (End of Period)
In January 2013, the Bangladesh Bank’s foreign
exchange reserve surpassed the US$13bn threshold
for the first time. Strong remittance inflow, negative
75 import growth, quicker collection of export proceeds,
FDI growth, and other foreign currency inflows were
the primary drivers.
10 60 As of January 08, foreign exchange reserves stood at
US$13.1bn, up from US$9.6bn in December 2011.
Current reserves are equivalent tofour-month import
bill coverage.
45
On escalating FX reserves, the dollar rate, which had
been stable in March-November 2012 around the
BDT 81.0-82.0 range, dropped below the BDT 80.0
5 30 level in December. BDT appreciated thereafter.
After the free fall of 2011, when BDT depreciated
12.8% against the dollar, the 2.6% appreciation since
15 December is commendable, and is presently at a
level where it retains export competitiveness without
importing inflation into the economy.
0 0
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
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18. Consumerism & Manufacturing
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19. Bangladesh : The Next Emerging Consumer Market
16,000
Bangladesh’s per capita income, although higher than Kenya’s
and closer to Nigeria’s, is still much lower than in Lao PDR, Bangladesh Ghana
Thailand and less than 20% of Malaysia’s per capita income.
However, at US$1,940, Bangladesh’s per capita on the verge Indonesia Kenya
of the US$2,000-2,500 inflexion range on the S-curve of Lao P.D.R. Malaysia
consumption. 12,000
Nigeria Pakistan
Experience from South Asian, South East Asian and African Philippines Sri Lanka
countries with similar economic fundamentals indicates that
Thailand Vietnam
GDP/GNI per capita accelerate around the time it reaches US
$2,000.
8,000
Kenya 1,710
Ghana 1,810
Bangladesh 1,940 GNI per Capita in 2011
4,000
Nigeria 2,290
(PPP Current USD)
Lao PDR 2,580
US$2,000 income/capita line
Pakistan 2,870
Vietnam 3,250
Philippines 4,140 0
1980 1985 1990 1995 2000 2005 2010
Indonesia 4,500
Sri Lanka 5,520 Even modest assumptions on GR indicate Bangladesh is
about the enter a high-growth threshold for consumption.
Thailand 8,360
The consumer market in the offing is significant when one
Malaysia 15,650 realizes that 57% if the population or about 92.0 million are
under 25 years.
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20. Discretionary Spend : Mobile Phones & Durables
The market for discretionary consumer products in
100 Mobile Phones, 2008-12
90 Bangladesh is approximately ~95.000 for air conditioners,
90 50,000 for microwaves, about 900,000-1.0mn for televisions,
80 and ~800,000 for refrigerators. Refrigerator sales are
70
increasing at ~25% a year, television sales at 10-12% a year,
62
while air conditioners and microwave consumption growth
60
rates are still in high single-digits.
50 45
40 Growth rates for refrigerators and televisions for India and
24
China were similar in the 1990s, ie the first decade of high
30
discretionary spending, following which consumer spend
20 increased further. The case for Bangladesh ought to be
10 similar in the coming decade.
0
Mobile Phone Subscribers (mn) Mobile Penetration (%) Electronic Goods Sales (Units)
2009
Microwaves 2010
Mobile subscription doubled in the past five years. Drivers 2011
55,000
for subscription growth have been increasing per capita
income, migration to cities and overseas, delays in availing
land line connections, and so on. Air Conditioners
100,000
Bangladesh at present has ~62% mobile penetration, which
is certainly a larger market than its frontier market peers Televisions
such as Ghana, Kenya, Lao PDR, Nigeria, Pakistan, Sri 1,000,000
Lanka and Vietnam. However, penetration is higher for the
other frontier markets, especially for Ghana at 85%, Sri
Refrigerators
Lanka 87%, Lao PDR at 87% and Vietnam XYZ%. Only
798,571
Nigeria and Pakistan have similar levels of penetration.
- 400,000 800,000 1,200,000
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21. Bikes, Cars, and Internet Penetration
To continue on consumer discretionary spend, there is a
136 percent duty on refrigerators and 189 percent on Internet Users and Penetration
imported air-conditioners. It makes sense therefore to 6,000,000
buy locally-manufactured refrigerators. This is borne out
Internet Users
by growing sales of refrigerators assembled or 8%
manufactured by local names. 4,000,000
Internet Penetration
(% of Population)
4%
Motorcycle Sales 2,000,000
2012 290,000 0 0%
2000 2011
2006 13,176
The travel and tourism sector raked in BDT182.5 billion,
about 2.2. percent of the gross domestic product (GDP)
Meanwhile, motor cycle sales increased ~8x in in 2011. The sectors contribution to overall GDP is
2000-2013. As of 2012, motor cycle sales reached forecasted to rise by 7.3% in 2012 and on an average
290,000. Local manufacturers are increasingly 6.1% annually until 2022, according to the WTCC study.
competitive and gaining market share on their importer The Lonely Planet ranked Bangladesh number one in
counterparts. Their quality continues to improve as well 2011 in its value-for-money tourist destination rankings.
as their capacity and are eventually expected to
produce sufficient surplus to enable export.
Number of Tourists
Growth of the consumer sector is also evident from the 2010 303,000
rise in internet users and penetration of the internet
especially, recent growth rates. Between 2010 and
2011, internet penetration grew 8.7X, albeit from a low 2000 199,000
base, according to the International Telecommunication Data: World Travel Tourism Council (WTTC)
Union (ITU).
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22. Manufacturing Pathways
At current prices, Bangladesh’s annual imported car market is Agricultural yield will grow with dissemination among poor
around 30,000 units. Imported cars constitute ~80% of the farmers without access to information knowledge on optimal crop
small and medium motor vehicle market of which Toyota has rotation, usage of higher-yield varieties and hybrids, limited
69% share. experimentation with pesticides, increased urea-usage, and
education on weather and soil-quality-dependent farming.
The imported car market has altered however as duties have Increasing agricultural yield will accelerate the growth of the
escalated to 250% for 1600-2000 cc vehicles, 350% for country’s industrial sector by freeing up workers for the factories.
2750-4000 cc, and 821% for 4000 cc or larger. Meanwhile,
equity-loan ratio on car loans have risen ~6-8 times. With a Bangladesh has the sixth largest work force in the world after
shrinking of the imported car market, opportunity is rife for low- Brazil, Indonesia, US, India and China. On top of gains in
and medium-priced car manufacturers. employment generation for an estimated workforce of around
~80.0mn – Bangladesh also enjoys one of the most favorable
demographic dividends globally (Vietnam comes close) with
Automobile manufacturers entering the Bangladesh market
65.3% population bin the 15-64 age group and another 30.0%
estimate an annual demand six to seven times larger for
locally manufactured cars. South Korean Tagaz and Indian below.
TATA are the other significant foreign players looking to enter
World
the lower-priced automobile segment.
Vietnam
Population ages
Sri Lanka 0-14 (% of total)
Clearly, as borne by price differentials in refrigerator,
Pakistan
television, motor cycle and automobile markets between
Nigeria
imports and local manufactured products - consumerism is Population ages
Middle income 15-64 (% of
driving an expansion of the manufacturing industry.
Low income total)
Least developed
In fact, in the previous 50 years, countries that have sustained Population ages
Lao PDR above 64 (% of
periods of consistent 7 percent or higher growth over a horizon
Kenya total)
of 25 years or longer, manufacturing and services were
dominant contributors. Of course, the agriculture sector does Ghana
not diminish in absolute policy importance given the scope for Bangladesh 30.0 65.3
increasing yields and high global food prices.
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23. Emerging Manufacturing Sectors
Shipbuilding Industry Sales (US$ million)
Bangladesh minimum wages are the lowest in Asia,
30-100% lower than in Vietnam, Sri Lanka and India,
according to the ILO. While wages have recently and 2011 40
justifiably increased, the existing (and significant)
comparative differential has enabled development of labor-
intensive sectors, e.g., apparel, textiles, leather, footwear,
2010 10
and up-and-coming ones such as furniture, toys, bi-cycles,
sports equipment, and ship building.
An example of how domestic manufacturing to meet a
growing consumer segment − has begun to make small Labor-cost competitiveness is rather high for Bangladesh even
inroads in exports − is the furniture segment. The local in comparison other low-cost manufacturers, e.g., Pakistan. As
market is ~US$1.38bn with around 19% sales growth. of 2011, according to the World Bank, Bangladesh industry-
Meanwhile, export volume, albeit from a low base, has wide net profit margins averaged ~16% compared to 3% in
picked up from US$27mn in FY 2012 to around US$40.0 in Pakistan.
FY 2013.
Since this sector is likely to incur future costs from
In addition to demand from overseas buyers, significant environmental regulations, taxation, etc., Bangladesh’s cost-
market growth is expected on forward-linkage potential with advantage is expected to enable market share growth in the
the domestic ship-building industry. A small ocean-going ~US$200bn global industry. Single-digit percentage share of
vessel made in Bangladesh typically requires furniture of the global industry entails sizeable economic benefits.
~US$100,000, which are presently imported. Since
Bangladeshi ship-builders are increasingly competitive in In the coming years and decades, other sectors are likely to
the global market for small- and medium-sized vessels, catch policy-makers’ attention for their labor-cost
labor-cost arbitrage is expected to benefit both ship building competitiveness. It is important, however, that sectors are not
and the furniture manufacture industries. identified only using a basic model of labor-cost arbitrage, but
determined in consideration of other factors as well, e.g.,
access to raw materials, leadership talent, low-cost energy,
reliable infrastructure, favorable regulation, trade policies, and
of course diplomatic imperatives.
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24. Infrastructure Gaps Opportunities
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25. Energy Power
Electricity consumption in Bangladesh is one of the lowest In 2012, peak electricity demand was 7,518MW/day, up from
regionally and globally, as evident from the accompanying line 6,500MW/day in 2011, up by 16%. Meanwhile, peak supply
chart. Scarcity of power is possibly the most significant was 6,350MW/day and total electricity generation grew by
infrastructural constraint inhibiting growth and development, 12% to stand at ~35,000GWh (CAGR ~9.0% in 2001-2011).
and unlocking possible double-digit growth. The demand-supply gap came down to ~2,000MW to
~1,2000MW in 2012, reflecting reduced load-shedding.
However electricity prices are among the least expensive
regionally at US¢ 4.16-14.75/kWh for retail and US¢ 5.88/kWh
for bulk users as of Sep ’12 (Sri Lanka has highest retail tariff Load-shedding (as % of peak generation)
at US¢ 28.35/kWh). These are prices post-adjustment to lower 18.6
subsidies on energy. The Bangladeshi Energy Regulatory
Commission (BERC) raised tariffs by 38.24% and 63.77%
between 4Q 2011 and 3Q 2012. Further upward price 12.2 12.4 12.1 12.7 12
11.5 11.1 11.2
revisions are expected: by 9% in 2013 and 30% in 2014. 9.5 9.4
8.6
6.9 6.6
2000 Per Capita Electricity Consumption (kWh) 5.4
Low income 0.2 0.1 0.9
Middle income
1500 Bangladesh
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Ghana
1000
However, the reduction in power generation has been
driven by quick-rental power plants which require expensive
500 liquid fuels. A more cost-optimized energy mix, to take the
example of JICA’s proposed roadmap for 2030, “The Power
System Master Plan (2010).” recommends that 50%
generation be coal-based. As of 2012, coal-generated
0
1980 1985 1990 1995 2000 2005 2010 power contributed ~2% of total power generated.
www.BRACEPL.com 25

26. Sea Ports Maritime Transportation
The Bangladesh Power Development Board (BPDB) has begun With regard to maritime transport, Bangladesh’s sea ports are
coal and gas-fired base-load power plant projects, but risks of perhaps the most crucial to growth-impact. The main
implementation time-overrun and bureaucratic delays are Chittagong port in the south handles about 80% of the
significant. Existing gas reserves (~2,250 mmcfd against demand country’s imports and exports. It’s situated on the Karnaphuli,
of ~2,700mmcfd) are under pressure for lack of new discoveries. is close to the Bay of Bengal, and last year, handled more
than US$47mn tons of cargo and containers of 1.4 million
A possible silver lining may lie in gas exploration in the Bay of TEU’s and given growth outlook, requires urgent capacity
Bengal, which, following an ITLOS verdict, allowed Bangladesh expansion.
access to four deep-water gas blocks and partial rights over three
blocks. Bidding and subsequent exploration by international oil
The Chittagong port is particular commercial significance to
companies (IOC’s) are expected this year.
the garments industry. Positive changes thus far include
allowing private berth operators to handle containers and
Another positive development is the approval by ECNEC, cargo. Turn-around-time for ships has lessened to two-and-a-
Bangladesh’s highest policy-making institution, for a cross-border half days but still short of global benchmarks.
US$196.0mn power transmission project. A US$252.5mn power
generation project dedicated for greater Chittagong is also
approved, of which US$172.0mn will be provided by Saudi Arabia, The deep sea port in south Chittagong is however the biggest
Kuwait, the UAE, and OPEC. There are a few other power projects game-changer in the horizon which will enable manifold
in the pipeline. increase in connectivity between countries east and west of
Bangladesh as well as trade routes to and from land-locked
Energy issues notwithstanding, there is also considerable Nepal and Bhutan. China, India, Myanmar, the UAE, and of
investments to be made to develop Bangladesh’s roads, railways, course, Nepal and Bhutan have shown interest in developing
bridge networks, airports, and waterways. The investment case for the Chittagong port. Down the road, there will be competition
roads, railways and bridges is of course quite patent for a in the maritime transit business for Bangladesh; hence timely
developing country, but in Bangladesh’s case, waterways and action is paramount.
aviation present relatively compelling cases as well, especially the
former and in the near-term.
www.BRACEPL.com 26

27. Aviation, Roads, Railways Bridges
Another substantial market for aviation’s growth is the large
Mongla is the second sea port in Bangladesh. It has three
Bangladeshi expatriate population of mostly migrant workers, but
container years of 35,752 sq. meters, and can
several NRB’s naturalized in countries such as the UK, US, Italy,
accommodate 2,180 TUES containers in a single high; five
and so on, in total estimated at ~8.5 mn. Even by global standards,
transit sheds and two warehouses can store 33,258 m.t.
this implies a a fairly large market for international passenger
cargo. To develop Mongla, projects worth US$70.0mn for
flights. But the obvious bottle-necks to the sector’s growth are
equipment procurement and easier navigation of sea-going
technological know-how at various parts of the sector value chain
vessels are in the pipeline.
including policy design (e.g., pricing) as well as the scale of
investments to generate meaningful returns. Aviation’s sustained
Dredging will need to take place at a reasonably large scale growth may necessitate transfer of technical and operational
to deepen and widen riverine channels, which will knowledge at levels comparable to those witnessed in the early-
significantly reduce transportation time of goods and stage Bangladesh telecommunications sector.
services and reduce land traffic congestion. A developed
riverine transportation system will also enable renewable
energy generation from hydroelectricity. For purposes of To return to most conventional infrastructure-growth priorities of
developing nations, i.e., the building of roads, railways and bridges,
policy formulation, sophisticated synergies are possible
the larger projects in the pipeline are as follows (dates of
between policy programs aimed at sea port development
completion inexact):
and riverine transportation.
- ~US$3.75bn multi-purpose bridge about 6.15 km-long to connect
the south and south-east with the impoverished south-west (lower
To continue on transportation modes relatively initial estimates; may increase further with time)
unconventional to most frontier emerging economies at
- US$2.75bn Dhaka Mass Rapid Transit Development (DMRTD)
Bangladesh’s stage of growth – aviation also has
project for a 2.0 km-long metro-rail, of which JICA has pledged
considerable potential for growth and hence rationale for
85% funding
policy prioritization. The most obvious driver is
transportation of RMG exports and the market, several large - US$2.0bn second Padma bridge to connect Dhaka with the west
RMG manufacturers. Given the scale, growth rate, and and south-west as well as the main land port with Mongla port
ambitions of Bangladesh’s garments industry, international - US$1.24bn elevated expressway about 26.0 km-long to connect
cargo flights ought to be a logical next step to lowering the primary airport, Shah Jalal International Airport, to the Dhaka-
costs for the industry and enhancing its competitiveness. Chittagong Highway
- US$400mn four-lane highway for Dhaka-Chittagong traffic
.
www.BRACEPL.com 27

28. Regional Connectivity : Sharing Costs Spoils
However, building ports, river networks, expressways, an In fact, interest in developing Bangladesh’s transportation
widening roads into multiple-lanes are very expensive system and various modes thereof involve business cases
investments. The size of total investment capital required for for countries outside South Asia, and other than China, UAE,
the list of large projects is close to US$10.0bn, which does and Japan, all of whom have shown actionable interest.
not include the many roads that need to be laid, unpaved There is also the “Emerging Asia,” as represented by South
paths paved, smaller bridges to be built – to say nothing of East Asia, Indochina, Korea, and even the CIS.
deep sea port development, investments in Chittagong and
Mongla ports, riverine network development, and aviation For instance, there is an organization known as BCIM
industry development. The railway system also requires a (Bangladesh, China, India and Myanmar) that aims to
sizeable overhaul. The size of total investments required may increase connectivity across the four countries which
run into ~US$40-60.0 bn. constitutes around 40% of the world’s population. Very
recently, they organized the first four-nation joint-road survey
This is clearly untenable without foreign direct investment to accurately map road connectivity.
and other shared financing programs with regional and
distant sovereigns that have expressed interest. Since the There is yet another group called The Bay of Bengal Initiative
commercial gains from greater connectivity are inevitably for Multi-sectoral Technical and Economic Cooperation
shared, investments ought to be. Large scale commercially- (BIMSTEC) formed in 1997 in Bangkok and includes
driven diplomacy is clearly the required ingredient to Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan
actualize Bangladesh’s requisite transportation network and Nepal. This consortium is intended to promote trade,
development. investment and connectivity between South and South East
Nations. Dhaka happens to be BIMSTEC’s head-quarters.
A discernable benefits of the above is an inevitable
employment boom that results in construction and services The commercial and diplomatic opportunities for Bangladesh
sectors from investing in infrastructure. The second and more as a result of its advantageous geographic location can
lasting benefit is increased connectivity between South Asian facilitate growth of various Bangladeshi service sectors. As
countries, since trade between the neighbors are on the rise demonstrated by Singapore, the growth-impact of investing
and expected to accelerate. The travel time however in logistics and becoming a trading hub, can ensure
between capital cities in South Asia are presently 100-200% continued prosperity, especially given Bangladesh’s other
higher. Optimizing travel time entails considerably higher growth fundamentals.
trade volumes for Bangladesh and its neighbors.
www.BRACEPL.com 28

29. The Internet of Things
Internet penetration should also drive an increase in new
However, 3G will not immediately translate to increased
business activity. Particularly in a country like Bangladesh, the
internet penetration because of licensing and CAPEX costs
Internet can help make up for shortages in other forms of
involved for mobile operators (latter due to significant
infrastructure, such as roads, by enabling people to transact
network swap costs for 3G).
across large distances.
In the longer run, internet-based business are expected to
For starters, internet-based business can contribute to contribute significantly to the economy via sectors such as
agriculture. With small household farms in rural areas agriculture, health, education, commerce, retail and a variety
dominating production, there is great scope to increase value of service-oriented sectors.
added using the internet. It can be a useful tool with which to
disseminate information on planting times, methods, use of
fertilizers, etc.
In Bangladesh, where urban centers are inhabited by 30% of
the population - the bank sector’s physical penetration is
limited by the country’s terrain, lack of road networks, energy
supply gaps and infrastructure bottle-necks.
Despite such challenges, banks have built up impressive
branch networks. The next mile for financial inclusion of the
unbanked hinges on mobile banking, which in turn requires a
cheapening of internet access as well as affordable 3G-
enabled mobile devices. The auction for 3G licenses is
expected to take place around mid-2013.
www.BRACEPL.com 29

30. Capital Markets
www.BRACEPL.com 30

31. DSE : Upside despite Macro-Financial Stability
After a brief impasse in economic and trading activities in The boldest policy initiative was setting in motion the de-
2007-8, pent-up liquidity entered the stock market via margin mutualization of the bourse. So far we understand, this involves an
loans and re-purposed bank debt, fueling record retail and overhaul of the bourses’ ownership structure – towards greater
domestic institutional investor participation. In 2010 alone, representation of independent owners than stock-brokers; revenue
DGEN appreciated ~94%. In a densely-inhabited capital city model changes; and overall, improved accountability and
with scarce investible asset classes and rather early-stage governance. Thereafter, surveillance software was launched to
financial-literacy levels (among investors as well as licensed detect and deter fraud and manipulation. Regulators also pushed
intermediaries), speculation became rife which ultimately drove through a new free-float adjusted market-capitalization-weighted
DGEN’s relentless rally. index.
The bull market turned a corner in Dec 2010 as BB raised bank In sum, the country’s primary bourse, the DSE has become a safer
cash-reserve ratios. A multi-phase correction set in, initially market in which to invest. More importantly, it has become an
quicker but slowing gradually, largely on investor panic, attractively valued market uncorrelated to macroeconomic results
downsizing of bank portfolios and drying up of trade thereof. or outlook; which is a good thing because the market would not be
what it is to value investors now, had it priced in economic
Retail investor confidence waned, as did dollar values of performance past or expected.
average daily turnover. Regulatory changes turned a corner for 500,000
the better in 2012 after a phase of policy trial-and-error in 2011. Dhaka Stock Exchange MCAP and Liquidity
A series of policy initiatives were put in place aimed at curbing 400,000
manipulation and volatility risks; simultaneously strengthening
market fundamentals; in part on prescriptions from International
Total Volume (thousands)
Financial Institutions. 300,000
Total Turnover in USD (thousands)
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
10,000 200,000
Total Market Cap. in USD (mn)
DSE General Index
100,000
5,000
0
0 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12
www.BRACEPL.com 31

32. Market Fundamentals: MCAP Growth
In 19 years, DGEN’s Market Capitalization to GDP ratio
Total Market Capitalization (% of GDP) increased 15x – surpassing MCAP growth rates of comparable
frontier markets. Although it is true that DGEN MCAP probably
had a far lower base in 1993 than its frontier market
counterparts, its MCAP GR is still indicative of the underlying
7.9 2011
Ghana domestic investor interest in the stock market even at a
2.0 relatively early stage of its history.
1993
In fact, the external drivers of the staggering rally of a hitherto
15.6 little-known market in 2009-10 are also reasons for DSE’s
Pakistan
22.5 double-digit multiple growth rate in market cap.
First, for the median retail investor, there is a dearth of
16.1 investable asset categories. Real estate is usually expensive.
Nigeria In the more upscale parts of the capital city, real estate prices
4.8
are comparable to Mumbai, which is occasionally higher than
those in developed market capital cities. Prohibitively
21.0 expensive real estate, an under-developed fixed-income
Bangladesh market, and until recently, single-digit returns on deposits –
1.4 have fueled retail investor interest in the stock market through
time.
30.3
Kenya Dhaka’s high population density also lends to rapid
18.4 information flows. The dynamics are just right for high
multiplier effects of both positive and negative feedback on
investable securities. Lastly, high M2 growth rate also
32.8
Sri Lanka
Indicates high return-potential and high liquidity. Overall
24.2 market size is positively correlated with the ability to mobilize
capital and diversify risks across the economy.
www.BRACEPL.com 32

33. Market Fundamentals: Liquidity Ratios
Total Turnover to Market Cap Ratio (%)
Liquid markets are naturally preferred because they are likelier
Least developed
countries to have lower bid-ask spreads, enable more efficient price
Low income discovery and are less prone to long-term bubbles and
corrections.
Middle income
World
Liquidity also significantly predicts future returns. Moreover, a
lack of liquidity causes asset markets to dry up or render trades
Bangladesh difficult to execute when prices are falling, particularly when an
92.6 investor might want to exit.
Total Turnover to GDP Ratio (%)
Bangladesh Ghana
1993 2002 2011
Kenya Nigeria
Despite Bangladesh’s equity markets’ relatively early stage of Sri Lanka
development, dollar volume of turnover levels (as evident from
the adjacent pictorial) are generally higher than dollar volume
trends for the least developed, low-income and middle-income
country groups.
Turnover to Market Cap and Turnover to GDP are both useful
indicators of liquidity as the first represents the liquidity of the
market and the second of both the market and wider economy.
When liquidity risks of investing in markets are dispersed
systemically – it is easier to manage portfolio risks as long as an
economy’s financial services sector is well-governed and
regulated, as is turning out to be the case with Bangladesh’s
1993 1999 2005 2011
banking sector in light of asset quality and risk capital
adjustments underway.
www.BRACEPL.com 33

34. Indicators of an Under-valued Market?
Market P/E Monthly Deposits Flow and Stock Turnover
35x
600
30x Change in Deposits (BDT bn)
500
25x Stock Market Turnover (BDT
400 bn)
20x 17.8x
15x 300
10x 200
5x 100
0x -
2003 2006 2009 2012 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
(100)
Market P/E Market P/E (Avg. 2003-2012)
Despite debates about its utility for valuation of an entire market –
historical P/E is a more useful indicator of an undervalued market than Monthly Imports and Stock Turnover
an overvalued market. By this metric, DSE is under-valued given
current single-digit P/E ratios. 600 4,000
500
The next chart (top right-hand side) indicates the inverse relationship 3,000
between a high bank deposit rate and lower fund flows to the stock 400
market, which was clearly the case in 2011-12 as monetary tightening, 300 2,000
and provision growth led to higher deposit rates for fund mobilization.
200
1,000
Imports are a proxy for industrial production index. Clearly a leading 100
indicator for turnover, the widened gap in 2011-12 indicates the growth
in fuel imports viz-a-viz non-fuel imports, since the former’s effect on
- -
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
the market is not discernible yet. However, an uptick in overall imports
in 2H 2012 bodes well for the market, as does the de-growth in Stock Market Turnover (BDT bn) Import (USD mn)
deposits after June 2012.
www.BRACEPL.com 34

35. Appendix: Sectors Stock Picks
www.BRACEPL.com 35

36. Tobacco Footwear
The Tobacco industry in Bangladesh has an annual market size Footwear industry generates annual sales of BDT 18.0bn or US
of ~135 billion. Tobacco spend/capita is BDT844/US$10.55 and $225.0mn. Footwear consumption is 0.8 pairs per capita per year.
consumption 2.5 sticks/person per year. Market penetration in Bata Shoe and Apex Adelchi are the only large players in an
Bangladesh is around 40%. Tobacco sales consist of 52% otherwise fragmented industry. Bata has the largest market share
filtered cigarettes and 48% unfiltered varieties (local term: bidi). of ~20% and Apex ~5-7%. Bata has two manufacturing plants in
Bidi costs 1/6 the price of a low-end cigarette. Tongi and Dhamrai with production capacity of 110,000 pairs/day.
Apex has a production capacity of 15,000 pairs/day for export and
another 5000/day for domestic sales.
British American Tobacco (BATBC) is the only listed tobacco
manufacturer with about 99% market share in the high-end.
In Bata’s case, domestic sales contribute ~91% to revenue.
BATBC’s shareholding structure is as follows: 73% by the BAT
Meanwhile, Apex is export-oriented with ~80.0% revenue coming
group; 11% by the Investment Corporation of Bangladesh
(majority government-owned NBFI); and 16% free-float. Other from exports. Apex, however, plans to generate 40.0% from
players in the tobacco industry are domestic conglomerates of domestic sales by 2015.
significant size: Dhaka Tobacco (under Akij Group) and Abul
The footwear market is poised to surpass historical growth rates
Khair Tobacco.
as churn increases with higher disposable income of the
population. This bodes well for Apex’s re-purposing of export-
BATBC’s low-segment market share increased from 20% in quality footwear for domestic consumption while Bata should
2006 to 60% in 2010. Net profits grew at double-digit rates in continue to do well with sustained focus on design and brand
2006-11. Excises are high and constitute 11% of the building.
government’s tax revenue. Future profitability expected to be
driven by consumers upgrading to higher segments. Segments New entrants are also establishing operations encouraged by
are classified as follows: high-end; medium end; low-medium; industry’s growth prospects. Pou Hung Industrial (Bangladesh)
and low-end. BATBC has significant cash balance with minimal Limited owned by Pou Chen Group has set up a US$62.0mn
leverage. factory in the Karnaphuli Export Processing Zone (EPZ). Korea-
based giant Youngone group has also set up a US$110mn shoe
factory in the same EPZ with plans to increase their investment in
the coming years.
www.BRACEPL.com 36

37. Personal Care Pharmaceuticals
Marico Bangladesh Limited is the largest listed company in the Pharmaceuticals is one of the fastest growing and most
consumer and household products space. They have a “basket of technologically-developed sectors in Bangladesh. The retail market
oils.” Parachute, their flagship hair oil brand, has 50% market grew at 17.2% annually in 2007-11, reaching US$1.0bn in 2011. Of
share of a total annual sales of a 100 million. Per capita drugs sold, generic to branded ratio is 85 to 15. Increasing life
consumption of hair oil is 250 ml/year. expectancy, disposable income, information flow via mobile
connectivity and hospital sector penetration are growth drivers for the
pharmaceuticals industry. As of 2011, average pharmaceutical spend
Marico has the ability to pass on a price increases, often by
packing lower volumes per unit of product sold. They are efficient was about 3.4% of GDP/capita. Pharmaceutical exports constitute a
at building brands and developing distribution networks. Their small share of the sector’s business although it has increased from US
niche is the grooming, health and wellness space within the $3.7mn in 2001 to US$50.4mn in 2011.
consumer products space. Parachute, for example, is made of
100% herbal extracts whereas most of their competitors’ oils are Square Pharmaceuticals is the largest pharmaceuticals company with
blended. Parachute coconut oil is sold in India, Sri Lanka, and a total revenue of BDT17.0bn and market share of 19.2% in 2010-11.
Indonesia. Their nearest competitors are Incepta Pharmaceuticals and Beximco
Pharmaceuticals with market shares of 9.1% and 8.6% respectively.
Leading players enjoy elastic demand and can pass through
Keya Cosmetics Limited is a key player in the cosmetics and incremental costs on FX and inflation to consumers. Beximco Pharma
consumer products space. Its products include soap, shaving sells its drugs to Southeast Asian and African countries and has
cream, toothpaste, with their flagship brand, Keya Beauty Soap, is recently entered the highly-regulated EU market to sell ophthalmic
one of the market leaders domestically. Keya Beauty Soap is also products. Renata, erstwhile Pfizer Bangladesh, and another leading
exported to India, Bhutan and the Middle East. In 2007-2011, pharmaceutical player, exports to Sri Lanka.
Keya’s sales doubled, reaching US$30.0mn with increasing
operating margins (CAGR 28% in the said horizon). The WTO’s agreement on trade-related aspects of intellectual property
rights (TRIPS) expires in 2016. Consequently, the 150-odd drugs
Despite backward linkage via acquisition of Keya Soap Chemicals presently sold in the market without paying royalties may become
in 2010, raw materials account for 30% of costs, while exports are expensive. The medical profession and health care industry is then
7.0% of revenue. In April 2012, Keya raised US$18.5mn through a likely to resort to a rationalizing of prescription trends. Older off-patent
rights issue, to lower debt service obligations, which, until 2011, drugs may be brought back, and in rare cases, large players will
constituted 46% of assets. Keya is a relatively liquid stock, among sustain presence in export markets by sourcing domestically-produced
the 20 most-traded of 2012 with an average daily turnover of US API. There is however, a possibility of TRIPS being extended, so as to
$0.78mn. Keya has a market cap of US$60.0mn and 66% free enable low-income countries like Bangladesh export of affordable
float. drugs to other low-income destinations in Africa.
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38. Telecommunications
The Bangladesh telecom industry has six operators in a highly Bangladesh Submarine Cable Company (BSCCL), incorporated in
competitive environment. Mobile subscriber penetration is at present July 2008 and publicly listed in June 2012, operates the only
~57-58%. Pre-paid customers are 90% of the market and sector international submarine cable connectivity in Bangladesh. BSCCL
ARPU is around US$2.0. New customers, outside of urban zones, is 74% government-owned and has 26% free-float.
generate lower ARPUs. Drivers of industry growth will be increasing
dispensable income, spread of wealth, availability of inexpensive The cable is 20,000km-long and crosses 17 landing points in
mobile phones, and so forth. Singapore, Malaysia, Thailand, Bangladesh, India, Sri Lanka,
Pakistan, UAE, Saudi Arabia, Egypt, Tunisia, Italy, Algeria and
Grameenphone (GP) is the largest listed company on the Dhaka France. The Bangladesh landing station is at Cox’s Bazar. BSCCL
Stock Exchange and the only billion-dollar public company (Market is mandated to handle the submarine cable connectivity as a
Capitalization of ~US$2.3bn). It has ~45% of market share counting member of the SEA-ME-WE-4 (SMW-4) international submarine
dual SIMs and 38% on single SIMs. Their network covers 99% of the cable consortium. BSCCL has earned membership to the SEA-
country. ME-WE-5 consortium as well which allow it to handle a second
submarine cable connectivity through the country, scheduled to
GP is also the largest internet service provider (ISP) in the country, go live in 2014.
owing to its “Edge” internet services on mobile phones. The next
stage of growth for GP will come from 3G-based business. However, The company provides bandwidth access to all the telecom
having paid market-share-determined 2G license renewal fees and operators (e.g. IIG, IGW, mobile operators, ISP etc.) and with non-
undergone network swap for 3G, the business case for 3G is not cash depreciation being the major expense item, it is able to
imminent. It will depend on a cheapening of the internet, recouping generate significant margins. In 2011, BSCCL’s EBITDA Margin,
licensing fees over time and availability of low-cost of 3G-enabled Gross Margin, Operating Margin, and Profit Margin were 90%,
phones. GP has completed a year-long network swap to make it 3G- 84%, 73%, and 36%, respectively. Their business will be volume
enabled. driven and with internet penetration growth rate increasing
exponentially, BSCCL is well poised to grow sustains high
margins.
It’s primary competitors are gaining market share of late through
aggressive pricing, which is eroding the premium GP enjoyed on
ARPU. GP is presently focused on operational efficiency and
product diversification after the headwinds of 2012 in the form of 2G-
license-related payments, SIM-registration and 10-second pulse.
www.BRACEPL.com 38