1.Group Members Name 1) Sudipta Chowdhury 103011 54 6) Kazi Md. Abdull Al Noman 103011 48 2) Sabrina Mahmood 103010 17 7) Ziaul Hoque 103011 02 3) Mahmud Hasan 103010 85 8) Lucky Akter 103011 59 4) Biswajit Dey 103010 25 9) Md. Habibur Rahman Habib 103010 69 5) Md. Monirul Murshed 103010 10) Billal Hossain 103011

2. Balance of payment is a statistical statement designed to provide, for a specific period of time, a systematic record of an economys transactions with the rest of the world. Its major components are the current account and the financial account. The spending of foreign currency is debit and it is a negative item. If a transaction earns foreign exchange for the nation, it is recorded as a plus item and it is a credit. Generally speaking, imports are debits and exports are credit. If credits are more, i.e. exports are more, than it is a positive sign for the economy and it is known as a favorable balance of payment. If debits are more, i.e. imports are more, than it is a negative sign for the economy and it is known as an unfavorable balance of 3. A balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payment for the countrys exports and imports of goods, services and financial capital, as well as financial transfers. 4. Trade buying and selling of goods and services. Exports a credit entry. Imports a debit entry. Trade balance the sum of exports and imports. Factor income repayments and dividends from loans and investments. Factor earnings a credit entry. Factor payments a debit entry. Factor income balance the sum of earnings and payments. 5. The balance of payments is divided into two major accounts A) The Current Accounts and B) The Capital Accounts 6. The balance of payments on Currents Account includes items like imports & exports, expenses on travel, transportation, insurance, investment income etc. These relate to current transactions i.e. it shows all flows that directly affect the national income accounts 7. Items Taka Export of goods and services ( A ) *** Import of goods and services ( B ) *** Trade Balance ( A-B )= C **** Investment Income ( D ) *** Debt Service Payment ( E ) *** Net remittance and transfer ( F ) *** Total Current Account Balance (C+D-E+F)=G **** 8. The Capital Account, on the other hand, is made up of capital transactions e.g. borrowing and lending of capital, repayment of capital, sale & purchase of securities and other assets to and from foreigners - individual & Governments i.e. it shows all flows that directly affect the national balance sheet. These transactions show the International monetary reserve position of the country. 9. Items Taka Direct foreign investment ( H ) *** Foreign loan ( I ) *** Increase in foreign assets ( J ) *** Resident capital of outflow ( K ) *** Total Capital Account Balance ( H+I-J-K)=L **** 10. Items Taka Export of goods and services ( A ) *** Import of goods and services ( B ) *** Trade Balance ( A-B )= C **** Investment Income ( D ) *** Debt Service Payment ( E ) *** Net remittance and transfer ( F ) *** Total Current Account Balance (C+D-E+F)=G **** Direct foreign investment ( H ) *** Foreign loan ( I ) *** Increase in foreign assets ( J ) *** Resident capital of outflow ( K ) *** Total Capital Account Balance ( H+I-J-K)=L **** Increase/ Decrease Cash Reserve Account ( M ) *** Errors & Omission ( M-G-L ) *** 11. The economy of Bangladesh is branded worldwide for its quality RMG products. As we have basic export revenue from RMG sector, a slight change in this sector will have a significant impact on our economy. From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles and clothing industry is Bangladeshs biggest export earner with value of over $ 16 billion of exports in 2009-10. 12. Import dependence is one of BOP. The group of import is significantly higher than that of export. If can reduce import dependency or increase the level of export then it will help to reduce the 13. Major Commodities 2012-2013 ( Million US) 1. FOOD GRAINS i. Rice ii. Wheat 2. Milk & cream 3. Spices 4. Oil seeds 5. Edible oil 6. Pulses all sorts 7. Sugar 8. Clinker 9. Crude petroleum 10. POL 11. Chemical 12. Pharmaceutical products 13. Fertilizer 14. Dyeing, tanning etc. materials 15. Plastics and rubber articles thereof 16. Raw cotton 17. Yarn 18. Textile and articles thereof 19. Staple fibre 20. Iron, steel and other base 21. Capital machinery 22. Others 726 30 696 214 118 242 1402 422 731 487 1102 3642 1302 119 1188 399 1366 2005 1356 3273 455 2335 1835 6860 Sub Total 31579 Import of EPZ 2505 Grand Total 34084 14. Imports of goods and services (BOP; US dollar) in Bangladesh was last measured at 37660209273.17 in 2012, according to the World Bank. 15. Goods imports (BOP; US dollar) in Bangladesh was last measured at 32289687006.31 in 2012, according to the World Bank 16. Transport services (% of service imports; BOP) in Bangladesh was last measured at 78.89 in 2012, according to the World Bank. 17. Another strong component of BOP is remittance inflow. Our largest resource is manpower and our remittance inflow demonstration a satisfactory performance. Bangladesh scored the second position as the remittance earning nation. We can increase our remittance in two ways : By exploring new labor market. Increasing the skill of existing manpower working abroad. 18. Foreign direct investment (FDI) is a potent weapon of developing the economy of Bangladesh and can play an important role in achieving the countrys socio-economic objectives including poverty reduction goals. In a capital- poor country like Bangladesh, FDI can emerge as a significant vehicle to - To build up physical capital, To create employment opportunities, To develop productive capacity, To enhance skills of local labor through transfer of technology and help to integrate the domestic economy with the global economy. 19. This policy note provides an assessment of the current situation of FDI in Bangladesh and examines its impact on the countrys balance of payments. FDI usually involves participation in management, join venture, transfer of technology & expertise. 20. Dimensional Problems There are several dimensional problems in case of poor FDI Performance. Lack of branding our investment along with a poor RMG wings for FDI. We have poor infrastructural facilities, insufficient gas & poor supply & unstable political setting Failing to ensure work place security. 21. Positive Effects On Balance of Payment: Export: Bangladeshs export sector has played a key role in the countrys economic development over the past three decades and continues to play an important role in the economy in terms of employment, empowerment and social change; investment; foreign exchange earnings; and multiplier impacts. 22. Positive Effects On Balance of PaymentIncome on Investment: Income on investmentincludes the interest income, dividend income from foreign securities and bonds. If the income on investment increases, the cash inflow of a country also increases and have a positive impact on BOP. Any Receipt of Foreign Money: Sometimes different donor countries for example Japan, China provide assistance in terms of subsidies or loan. 23. Positive Effects On Balance of Payment Any Gifts Or Aids: ADB, IDB, World Bank, WHO, UNICEF, UNAID provides aids in case of educational and health sector which creates a favorable position for Bangladesh. Any Foreign Sale of Stock & Bond: Foreign securities and bond held by Bangladeshi people are sold in the foreign market generate money receipt in our country. 24. Negative Effects On Balance of Payment Import: Import has a negative effect not only on BOP but also on the monetary environment of a country specially for Bangladesh. If we import products or services, it reduces foreign reserve. It also increases the demand for the foreign currency and it causes devaluation of Taka. There are some reasons for dependency on import. Those are given below- Global Recession since 2008 Deteriorating law and order situation which stops investment Slow growth of production 25. Low exports Electricity shortage/Mismanagement which result in low crops Energy crisis causing low output and closure of many industrial units, which reduces the exports Political instability Fiscal policies Trade restrictions in developed countries Limitless export of primary commodities Depreciation of Bangladeshi Taka. Inflation Low foreign exchange remittances 26. Investment in Foreign Country: Investment generates income. But, too much investment reduces the reserve of a country. Stock of direct foreign investment - abroad: $108.1 million (31 December 2012 est.) Country comparison to the world: 89 $107 million (31 December 2011 est.) 27. Payment to Foreign Country: Sometimes, we have to take loan from the rest of the world for our country. So, we have to pay interest and dividend that stimulate the outflow of Taka. And also if the foreigners invest in our country, they earn on their investment and take those money to their country that also stimulate outflow of money. Gift or Aid Given: Bangladesh not only takes gifts/ aids from rest of the world, but also in case of natural calamities or 28. Any Purchase of Stock or Bonds From Abroad: When Bangladeshi people purchases stocks and bonds from foreign country, then it increases outflow of money and it reduces reserve of our money. 29. Political instability and uncertainty GSP (Generalized System of Preference) Facility Lack of good image Infrastructural problem Indecision of Government Lack of proper policy regarding FDI Lack of good governance Obsolete technology Corruption and bureaucratic delay 30. In outside world Bangladesh is familiar as a poor, terrorist, full of natural calamities and extremist country. 31. Foreign investors always consider infrastructural facilities to establish industry in foreign country. These facilities include Transportation Electricity supply Gas fuel power supply Building safety etc. 32. For example, we can say the FDI proposal of TATA group government cannot take the decision within one and half years. One reason is that the lack of effectiveness of the govt. in case of big proposal. 33. When the government changes FDI policy also changes. And government cannot take the better policy regarding coal policy. Due to change policy within a short period of time investors are not interested to invest in our country. 34. If we want to understand about the lack of good governance , Padma Setu will be the best example for us to understand. 35. We need to change old technology by modern technology. 36. Corruption spread in every sector of our country. Due to corruption and bureaucratic delay in every sector, investors are afraid to come in our country for their investment. 37. Foreign direct investment (FDI) may increase Future expectations: - Foreign direct investment (FDI) may increase if there is political stability and continuation of policies. - If the IMF, World Bank and Asian Development Bank release their loans for Bangladesh as promised, then our balance of payment may show some improvement. - Friends of Bangladesh have promised significant monetary support, which will certainly have a positive effect. - Imports are expected to decrease. If this happens, it will have a positive effect on balance of payment, since this is relying on foreign elements and support. If this is accomplished, then the balance of 38. Quality of bureaucracy and governance Improvement of law and order situation Development of infrastructure and human resources Improvement of port services Privatization and further reforms Modernization of business law Setting up of industrial parks Setting up of new EPZs Improving the countrys image abroad Policies regarding macroeconomic stability Economic and commercial diplomacy