Bedevilled by poverty and vulnerable to floods and cyclones, Bangladesh nevertheless has had some measure of success in economic terms, micro-credit programme implementation for the poor being one example. And although the country has yet to build its new image divested of the taint of corruption and politico-economic sores, it has been able to attract substantial foreign investment in the past and can hope to do even better in future.

That Bangladesh needs investments is beyond question. Investments can help reduce unemployment and revitalize the economy, thus contributing to poverty alleviation. Indeed with such prospects in mind, The Royal Danish Embassy started its Business to Business (B2B) Programme under Danish International Development Assistance: Danida. While the overall objective is to promote economic growth and social development, the immediate objective is to establish long-term, sustainable partnerships between companies in Danida's programme countries and Danish companies, with a view to promoting local business development. Through access to Danish know-how and technologies local companies can strengthen their market position and competitiveness, while Danish companies can gain access to reduced production costs, new market and other opportunities. The B2B Programme replaced the Private Sector Development (PSD) Programme in June 2006.

Since 1993 the PSD Programme, which is now called B2B programme, has supported the establishment of commercially based partnerships between Danish companies and companies in selected countries. The progamme operates in Asia, Africa (including South Africa) and Latin America.

During the last 15 years since its implementation, the programme has covered projects in 15 countries. In Bangladesh it has been operating for the last 7 years. One of the major objectives of this programme is to promote commercial and long term co-operation between Danish and Bangladeshi companies. "We support long-term commercially viable and profitable business cooperation between Danish and Bangladeshi companies. We call ourselves some sort of marriage consultant -- we try to bring the companies of these two countries together, engage them and then marry them -- but like [for every other] marriage we cannot guarantee that they will stay forever!" says Ib Albertsen, Programme Coordinator, Business to Business ( B2B) Prgramme of Royal Danish Embassy in Dhaka.

Danida tries to attract Danish partners to Bangladesh with attractive project payback periods, benefits from Bangladesh's LDC status and the low cost of production. There are other enticements: investors have access to the opportunities of a growing domestic market without having to face any serious competition; they get the first mover advantage and the chance to experiment with new business models.

The Phases of B2B Programme

Even in its initial phase the marriage consultancy is not an easy task. Albertsen points out three key phases spanning a few years to go through before actual marriage can take place between the Danish and the local companies. The phases are:

Contact Phase: This includes preliminary contacts made and ideas discussed. This also includes study visits. The purpose of the Contact Phase is to match potential partners and to develop a preliminary partnership idea into a well-defined one for business co-operation. Normally the contact phase lasts for a few months or up to a year. Danida supports 90% of the cost and the maximum support can amount to DKK 100,000.

Pilot Phase: When the match of partner companies has been made and the partners have developed an idea for business co-operation, they may apply for B2B support for the Pilot Phase. Here, the concept of the business co-operation is developed through analyses and possible test productions and the support can be worth DKK 1 million, maximum. The cost share can be 75% for study and for the pilot project 90%.

Project Phase: The last of the phases is Project Phase in which the concept of business co-operation is implemented. In this Phase the support includes training, technical training, adoption of environmental measures and other measures of CSR. At this stage the maximum support is DKK 5 million, inclusive of all previous supports.

Criteria for Applying

Companies applying for B2B support must be financially sound and have the necessary resources to enter into a long-term partnership. Both the local and Danish companies must demonstrate this role to the embassy by handing over relevant accounts and licences.

The Danish B2B programme is open to cooperation within all lines of business that are capable of making a positive development impact However, production of alcoholic beverages (including beer), tobacco and weapons is an exception to this general rule and thus not eligible for support. Partnerships should have the potential to become commercially sustainable and to carry on even when the B2B programme ceases.

Project Approvals until now are around 206797197 and distributed as follows.

Prospective Projects

Albertsen says the IT industry of Bangladesh is extremely promising and he believes it has huge potential for attracting Danish investments. "In Denmark, we have many successful IT companies but now many of them are facing shortage of qualified IT people and even if they do find [some], they are too expensive." As a result, the growth of the IT companies in Denmark is being impeded. He reckons that Bangladesh, on the other hand, has many qualified IT people and so can be an ideal place for Danish IT investors and for outsourcing business. Indeed one third of the 56 long-term projects approved in Bangladesh so far has been in the IT Industry. And more such projects are expected in the near future. In mid February a high profile IT delegation from Denmark visited the country's largest software exposition, Softexpo 2008.

There are several reasons for IT being a very attractive sector. Albertsen observes the cost of IT jobs is very reasonable compared to many other countries in the world. According to him, Bangladesh is probably 30% to 50% cheaper than Bangalore, India. Even then as far as the western countries are concerned, it is Bangalore, India, that generally comes first into their minds. So, more promotion is needed to brand Bangladesh as a country for outsourcing. However promising the IT sector of Bangladesh is, its growth cannot be attained fully unless some barriers -- such as the cost of internet bandwidth -- are removed. Albertsen says the internet is extremely costly here. According to him, the internet of high speed (needed to send heavy files), which costs around US $ 80,000 annually in Bangladesh, may only cost US $ 1,000 in Denmark. So, he suggests that Bangladesh take proper steps to make internet cheaper for business to boom in this sector.

Apart from the IT sector, there are many successful Danida projects now being implemented in Bangladesh. ISIS and Asef Trade International formed a joint venture and they are producing Diabetic Food Products. Toys for kindergarten are being made by 8Cold Legeredskaber and Multi Sash and there are many other successful joint ventures.

Challenges for B2 B Programme Implementation

In spite of all the success stories, there are still many challenges in implementing this programme. Commercial expectations of Bangladeshi companies are said to be often out of tune with Danish (DK) capabilities and interests. Also, identification of potential DK partners has been a constraint in promoting good project ideas. DK partners quite often are unable to spare the necessary time for study visits and feasibility studies, causing delays in working out a project. Then there are Bangladeshi bureaucratic procedures, which are very frustrating for the DK partner. What is more, though cheap labour force is available in Bangladesh, DK partners often find to their disappointment Bangladeshi partners ill-equipped with managerial skills.

"When we try to market Bangladesh, the customers in Denmark do not just accept what we say," says Albertsen. "They also go to China, India, Vietnam and other countries and compare everything before they decide on Bangladesh so Bangladesh has to compete with all these countries." He emphasizes that we all make sure that Bangladesh do not lag behind when competing with these markets. "One way to make sure this is to make life easy for the investors. If doing business in Bangladesh is too complicated, investors will run away!" Albertsen further observes nowadays it is not only China, India and other Asian countries that are favourite for Danish Investors; many Eastern European countries are also getting noticed.

Albertsen underlines the importance of political stability in Bangladesh, which is essential for attracting long term investment in the country. Though the investment scene here is very encouraging nowadays, political uncertainty still looms. "Things are working very well now but then investors do not like unsecured future -- what will happen after the election?, who will be in the new government?, and so on are the questions in the minds of the investors. In such case, making a long term decision is difficult." Once a new democratic government is in place (which is expected to lead the country for 5 years), the political situation is expected to be stable and the investor's confidence will get strengthened, adds Albertsen.

Some Successful Danida Projects in Bangladesh

Snow Sledges Made in Chittagong

In 2005, DANIDA's B2B Programme supported a partner match between Cold Legeredskaber ApS of Denmark and Multi Safh Bags Limited of Chittagong, a company which produces high quality backpacks and specially designed pants for export. A joint venture was established in 2006 as a result and DANIDA's B2B Programme has supported the project and made it possible to transfer know-how from Denmark in areas such as PVC free production techniques, production efficient measures, quality assurance, logistics, sales and marketing - just to mention a few.

Together, Cold and Safh formed Cold Play School Products Ltd. based in Chittagong. The Danish partner had been in search of a place to outsource some of the production of their kindergarten items. Cold Legeredskaber specialises in play items such as trampolines, sack chairs, bouncing castles, air and foam mats, foam pillows a.o. - all made in PVC free material. International competition calls for combining high quality products with attractive pricing and the requirements are fulfilled in Bangladesh.

Offshore Development Centre in Bangladesh

Groupcare A/S is a young but fast-growing Danish company focused on software solutions. The company delivers an increasing number of specially developed solutions for member organizations. Today, more than 600,000 people and 180 organizations communicate and collaborate via Groupcare solutions. In order to stay competitive with respect to price-levels and innovative solutions, Groupcare considered the option of outsourcing certain activities, eventually establishing a joint venture PyxisNet Limited, together with Datasoft.

The reasons for which Groupcare chose to create a Development Centre in Bangladesh were the assistance of Danida's Business-to-Business (B2B) programme, the high level of the ability of IT firms and the large recruiting pool. Initially, during the "Contact Phase," the B2B team identified and investigated potential companies, ensuring that local partners lived up to certain standards. B2B narrowed the list to the three top candidates and provided funding for introductory site visits. These initial interactions were carried out to ensure that the companies had a chance to meet and set a platform for potential cooperation. After initial interactions, Groupcare chose Datasoft as their local partner.

Steen Alexander, CEO of Groupcare A/S in Copenhagen, observes, "When exploring the possibilities of going offshore with our projects, we had to recognize the difficulties of creating close business relationships over a distance of thousands of kilometres. However, thanks to Danida's B2B programme, we managed to get a break-through and find the partner we needed."

With good initial interactions, the two companies entered the "Pilot Phase." In this stage, with additional funding from Danida, the two companies conducted a pilot project. Thanks in part to Danida's funding, Groupcare and Datasoft were able to carry out initial collaboration and explore opportunities.

Following a successful pilot project, with additional Danida funding, PyxisNet Ltd was formed in 2005 and the Project Phase began and is currently ongoing. The collaboration has proved to be beneficial for both companies. The high standards imposed by Groupcare have resulted in, among other things, PyxisNet presenting the first NET platform in Bangladesh, which has been certified by Microsoft. Furthermore, the successful collaboration has helped to improve PyxisNet's abilities to attract new business, which has resulted in a larger workforce and an improved outlook for the up-and-coming IT sector in Bangladesh.

At the same time, Groupcare has benefited immensely from the partnership through the introduction of a new platform and new products, while simultaneously ensuring that the company remains cost-effective.

"From the very beginning we have set high standards for our work with PyxisNet - and it is beginning to pay off," says Steen. "Our focus on education and international certification makes Groupcare and PyxisNet interesting partners for Danish companies who are looking for offshore outsourcing. We would be very happy to let other companies benefit from our experience. Let's get going!"

High quality Thin Plate Steel Components Production Unit

A joint venture between Treco A/S of Denmark and Unitech Products Ltd. of Bangladesh has been established at Kabirpur, Savar, about 1 hour's drive northward from Dhaka.

In 2006 Treco was on the lookout for a suitable place to produce special designed metal components for their supplies to customers in the metal industry. With the initial help of DANIDA's B2B Programme, Unitech - which was established in 1999 and is run by Anis Ahmed - was chosen as the perfect partner match.

Back in Denmark, Treco is a supplier of metal components for various industries such as wind turbines, furniture and special designs in metal. Furthermore, the company is especially active in one niche product -- the postal equipment comprising sorting trays, sorting frames, letter carrier workstations, info pillars, task tables, lift operators etc. On the other hand, Unitech Bangladesh Limited is mainly active in the production of air condition systems/air changing systems. However, both the companies have one thing in common -- they are experienced in sheet metal processing. And so, they clicked immediately.

The primary objective of the cooperation is to establish a high quality thin plate steel components production unit in Bangladesh to cater for the needs of the customers of Treco in North America and European countries. With this aim in mind, the partners entered into a joint venture, exporting to international markets. Treco is providing technical expertise, training and access to knowledge that is necessary for production of the thin plate steel components. Unitech is responsible for establishing a production/ assembly facility, local infrastructure, human resources and the operational costs of the production unit.

A very measurable, positive first result of the partnership is the successful completion of the project and production and delivery of more than 20,000 conveyors/trays. The products are being exported to Switzerland for use by its National Postal Service. Additional orders are coming in, which proves that the quality and price of the products are well accepted in the market. "We have reached a high quality level much quicker than expected and with on-going ISO training activities, we expect to receive certifications within a short time," says Allan Prang, Managing Director of Treco.

Not only that; with 65 workers currently employed, the partners are looking forward to developing their co-operation into new products and markets. Lamp production for Louis Poulsen - one of the newest ideas -- is combining Danish design and know-how with local production skills in metal work. Furthermore, the joint venture has recently embarked on the production of adjustable office furniture, which has been well received in the local market and which will also be promoted for export. "The co-operation with Treco has given us access to new export markets, which we could not serve previously," says Anis Ahmed, Managing Director of Unitech.

DANIDA's B2B Programme has supported the co-operation in order for Unitech to be upgraded in drawing and measuring techniques, production planning and optimisation, quality control, surface treatment and other areas. Part of this training and upgrading has been done in Denmark and part of it has been through a Danish technical advisor stationed at the factory.

The joint venture co-operation has clearly demonstrated the possibility of Bangladesh to become an outsourcing target for overseas steel manufacturers, which will help to position Bangladesh as a quality supplier of thin plate steel products.

Healthy Food for Diabetics

Many diabetics are deprived of quality life, as their situation prevents them from enjoying a wide range of foodstuff considered harmful to their health. In Bangladesh at least 8 million people are known to be diabetics. The actual number is likely to be much higher.

The Danish ISIS Food International A/S has been involved, since 1993, in producing conventional food products that especially comply with the requirements of diabetics. By removing sugar and fat and replacing this with natural dietary fibres, ISIS has managed to live up to EU requirements on Diabetes Standards and at the same time provide products that match the texture and flavours of the traditional food.

ISIS of Denmark formed a joint venture with Healthcare Pharmaceutical Ltd. of Bangladesh early 2007 for the production in Bangladesh of diabetic friendly food products. As step number one, the products will be marketed in Bangladesh. Production for export under the ISIS brand is planned at a later stage. The joint venture has already started producing and marketing vanilla and strawberry ice creams now being distributed all over Bangladesh. The next range of products in the pipeline - jelly, jam, ketchup, biscuits and chilli sauce - are soon to be launched.

DANIDA's B2B Programme has supported the co-operation in order to secure a transfer of technical know-how within functional food manufacturing, the establishment of reliable supply chain management systems, a production complying with international health and safety regulations and quality assurance a.o.

Outsourcing

GraphicPeople - a subsidiary of PeopleGroup - is developing quickly, in part due to the outsourcing of graphical assignments. These are offered from Dhaka, Bangladesh, for one-fifth of the Danish market price. Revenue, the client portfolio, and the number of employees have been rising steadily.

Large Danish and international firms have become aware of the advantages of outsourcing desktop publishing (dtp) assignments, such as adjustments to product catalogues, to developing countries. GraphicPeople in Bangladesh, which was founded by the Danish communication house PeopleGroup in 2004, is one of the Danish companies that have taken advantage of this trend. It collaborates with large, international companies such as Dell and INTERSPORT and has recently entered into an agreement with the paint producer Flügger concerning the graphical remodelling of commercials, product catalogues and packing-related materials.

"We save about 80% in expenses by collaborating with GraphicPeople instead of hiring new graphic designers in Denmark, without sacrificing quality. The goal is to reduce time-to-market and move our existing employees in Denmark up the value chain without having to increase the budget. We have very positive expectations for the collaboration," says the marketing director of Flügger, Kasper Søvsø.

"GraphicPeople's success is a good example that global sourcing of assignments can succeed in practice. The employees in Bangladesh are very competent and work across three shifts, which reduces the time-to-market for the clients. Furthermore, GraphicPeople solves the assignments for about one-fifth of the Danish market price, which allows us to offer our clients significant savings," says Jan Duckert, director of PeopleGroup.

GraphicPeople was founded in collaboration with Danida, which has supported the project through the B2B program. The goals of the B2B program include ensuring that knowledge, know-how, and technology are transferred to the developing country's private companies through partnerships with Danish companies.

The B2B advisers initially screened and identified potential local partners. After a match was found, the B2B program provided further advice and financial assistance in the three phases that it supports: the introductory visits, the pilot project, and the implementation of the actual project. Danida's B2B program has been instrumental in ensuring that GraphicPeople is a success.

"Bangladesh is one of the world's poorest countries, and responsible foreign investments are therefore particularly important. In general, the people are highly competent and show a desire to learn something new, and it is therefore positive that Danish companies have realized the country's potential," says B2B coordinator Ib Albertsen. He adds: "We are following the development of GraphicPeople carefully so that we can pass along the positive experiences to other companies."

All this and further cooperation between Danish and Bangladeshi companies in other fields such as that between Ananda Shipyard in Meghna Ghat and a Danish ship consortium CS & Partnere A/S testifies to the enormous importance of the role played by Danida in the economic development of Bangladesh.

ET Report