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Saturday, April 11, 2009

Regulation hinders local brands’ global journey

The New Age

The present restriction on investment outside the country is creating roadblocks for the aspirant local companies to test their mettles against the rivals in foreign soils to win the ‘global brand’ recognition.
Companies like Otobi, Apex, Pran, Arong and Rahimafrooz want investment opportunity overseas after big success in their backyards in the last one decade.
They, however, could not go ahead with their invest plans in foreign lands land due to existing restriction in the foreign currency regulations of the Bangladesh Bank.
The local brand companies, however, firmly believe that they are well armed to compete with their international and regional brand operators which are in downbeat moods due to the global financial meltdown.
‘Prime target of these companies is the Indian market,’ Sabbir Hasan Nasir, the chief executive officer of Otobi said.
India brought changes to its foreign exchange policy in last November and withdrew decade old restriction on investment from Bangladeshi businessmen.
‘The withdrawal of restriction and the global financial crisis is a big opportunity for the local brands to make a foray in the Indian market,’ said Sabbir who has been piloting the company since 2005.
The prevailing situation in India suggests that business activities of many companies have slowed down due to recession. It will serve a suitable atmosphere for local brands in the strong 1.14 billion people Indian market.
With a 35 per cent annual growth in the local market, Otobi started franchise in Kolkata last year and was overwhelmed by response from brand concerned Kolkata shoppers.
Sabbir said the growing presence of Indian middle class will be an added advantage for the confident local brands, which can offer their products at much cheaper prices.
Despite the big opportunity, local companies are hamstrung by the existing central bank rules that do not allow big investment outside Bangladesh, he added.
So far the companies like Otobi, Rahimafrooz, Apex, Arong and Pran rely on export orders from the international buyers and the franchisers to market their products in India, oil-rich Arab and some other African countries.
‘Time has come for the central banks to review the existing rules enabling the local companies to invest outside’, said Apexadelchi Footwear Limited managing director Nasim Manzur.
Investment is needed to set up outlets and even manufacturing plants for higher value addition and global recognition for local brands, he said.
‘A company can earn reputation by marketing its products through franchises, but it needs its own presence with products to grow the brand image,’ he said.
‘A franchiser will not give more emphasise for a brand than a manufacturer,’ he added.
Manzur, who is also vice-president of the country’s oldest chamber body-metropolitan chamber of commerce and industry, in a written statement urged the finance ministry to review the existing barrier in last February.
The MCCI statement said:‘The present restriction on investment outside the country needs to be reviewed in the larger interest of the export and market access.’
The given permission to invest outside will help the market Bangladeshi products, it added.
The finance minister assured the MCCI leaders of reviewing the demands including that of investment restriction outside the country.
Manzur, however, said they do not want wholesale permission from the central bank to investment outside.
He said the permission will be case by case basis and after a thorough review to prevent capital flight from the country.
Manzur also said present financial meltdown is favourable to make the investment at a cheaper cost in part of the world.
Even the Bangladesh government is purchasing flats in the New York business district of Manhattan to accommodate its offices. The initiative has taken to cash in on the falling price of real estate in the most costly place on earth.
‘The present establishment costs to set up two outlets, suppose in England, would take half of the price than the last years costs,’ he added.
Rahimafrooz Group has already earned huge reputation for marketing 300,000 pieces of Volta, an automotive battery, in more than 25 countries in last year.
Of the number, Indians consumed the most.
To feed overseas markets, Rahimafrooz’s new plant at Ishwardi EPZ will go into operation by June. It will be the south Asia’s largest export-oriented battery manufacturing plant with an annual production capacity of one million units.
‘After putting years of efforts on brand development, we are now getting benefits from foreign markets,’ said Niaz Rahim, managing director of Rahimafrooz Group.
The experts, however, said the group needs to set up assembling plant in India and other countries in near future to keep its competitiveness against the rivals.
Juice, pickles, cookies and confectionaries of Pran Group are now being shipped to more than 50 countries and sold in villages in north-east India to cities in many Middle Eastern and western countries.
Pran’s last year’s exports amounted at around US $15 million, which was more than half of Bangladesh’s total processed food export earning.
It has planned to set up a plant in Indian state of Tripura at an initial investment of around Tk 25 crore to seize the market potential in landlocked north-east estates known as ‘seven sisters’.
‘The central bank restriction on FDI outflow from the country holds the progress of the proposed project,’ said Kamruzzaman Kamal, an executive director of Pran Group.
“We submitted our investment proposals to the central bank late last year,’ he said, adding that his company was waiting for a decision.
The Pran officials are sure about huge success in the Indian market, which can help them to cement their position as a juice to chocolate giant in this part of the world.



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