Located on the northern edge of the Bay of Bengal, Bangladesh is bordered on three sides by India and shares a small border with Burma (also known as Myanmar). It has a land area of nearly 56,000 square miles, rendering it slightly smaller than the state of Iowa. Bangladesh is a republican parliamentary democracy, and Bengali is the language spoken most widely, with English considered the country's second language.
Although investment activity is nascent, there is growing interest in the country due to its large population - about 164 million people - and a rapidly expanding economy. Bangladesh's gross domestic product (GDP) rose more than 6 percent in 2012 to nearly $119 billion. The country's main industries are agriculture and manufacturing, and Bangladesh is ranked second only to China in clothing exports. The government is working to encourage investment. In 2011, the World Bank Group began helping Bangladesh's board of investment simplify registration procedures to make it easier for local and foreign investors.
"We wanted to get rid of cumbersome procedures and introduce a truly investor-friendly system," says Syed Abdus Samad, chairman of Bangladesh's investment board. "We simplified the process, reducing steps by 40 percent and eliminating several unnecessary documents."
Political instability coupled with overpopulation has left the country largely uneducated and in a state of poverty. Bangladesh is "miles behind" other countries in South Asia, says Tim Dattels (pictured), a senior partner at TPG Capital LP, who is based in San Francisco and oversees Asian investments for the Fort Worth, Texas, private equity firm.
A recent tragedy serves as an important reminder that Bangladesh is still a developing nation. The garment industry, which employs more than 3 million workers, made headlines around the world in April when a factory building collapsed in the capital city of Dhaka, killing more than 1,000 people. At press time, U.S. and European companies, including The Gap Inc. (NYSE: GPS), were trying to iron out an agreement on a new Bangladesh Fire and Building Safety Accord.
Since the beginning of 2012, only two M&A transactions involving a U.S. acquirer or target have been completed in the country.
In May 2012, American & Efird Inc., a Mount Holly, N.C., thread maker owned by New York private equity firm KPS Capital Partners, bought the 67 percent that it did not already own of A&E Bangladesh, a textile manufacturer in Dhaka, from its two joint venture partners, Brandix Lanka Ltd., based in Colombo, Sri Lanka, and Brandot International Ltd., based in Salem, N.H.
The same month, UL LLC (formerly known as Underwriters Laboratories), a product-safety certification company headquartered in Northbrook, Ill., acquired Magnus Textile Services Ltd., a textile-testing center in Dhaka. The acquisition enables UL to provide local testing services to customers that manufacture textiles in Bangladesh.
Bangladesh is one of the least expensive places in the world to manufacture goods. As labor wages in China continue to rise, more factories are expected to move to Bangladesh.