Direct_Foreign_Investment

Table of content 1. Introduction Definition Abstract Back ground and Aims of the paper 1.2. Foreign investment policy reform: 1.2.1. Context of foreign investment regime 1.2.2. FDI Govt. policy in Bangladesh 1.3. Conclusion 2. Trend and pattern of Foreign Direct Investment in Bangladesh 2.1. Flow of Investment 2.1.1. Sources of FDI into Bangladesh 2.1.2. Sector wise distribution of FDI into Bangladesh 2.1.3. Structure of Investment 2.2. Characteristic of FDI in Bangladesh 2.3. Why does FDI decrease in Bangladesh' 2.4. Benefits of FDI 2.5. Disadvantages of FDI Conclusion of benefits and adverse situation of FDI 2.6. Example 2.6.1. Different types of Products 2.6.2. Different types of company 3. The high-lighted company 3.1. Introduction 3.2. Management structure 3.3. Product 3.3.1. Production Unit 3.4. Feature 3.5. Limitation 3.6. History 3.7. Problem 3.7.1. Political 3.7.2. Tax 1. Introduction Definition: FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly. Abstract: The paper aims at tracing the trajectory of Foreign Direct Investment (FDI) flowing into Bangladesh. The analysis of the trend and pattern of FDI in the country indicates that, on the whole, the volume of FDI had been increasing over the years. As regards sources of FDI, Asian NIC is the largest investors in the country. Bangladesh had to improve its overall investment climate with an emphasis on political climate, labor productivity and infrastructure development Back ground and Aims of the paper : The international flow of financial resources takes two main forms : (1) Foreign direct and portfolio investment, consisting of (a) foreign direct investment by large multinational (or transnational) corporations with headquarters in the developed nations and (b) foreign “portfolio” investment (e.g. stocks, bonds and note) in LDC “emerging” credit and equity markets by private institutions (banks, mutual fund, corporation) and individuals, and (2) public and private developmental assistance (foreign aid), from (a) Individual national governments and multinational donor agencies and increasingly, (b) private non-governmental organizations (NGOs) , most working directly with third world nations at the local level . In this study has focused only foreign direct investment (FDI). The most heavily indebted poor countries and low income countries like Bangladesh, of the world remain largely dependent on bilateral and multilateral aid for their development strategy. However, since 1990 Total Overseas Development Assistance has dropped by more than half. Much grater importance is now being placed on alternative sources of capital to finance national development and foreign direct investment is mow the largest source of foreign private capital reaching developing countries. Now-a-days, the issue of Foreign Direct Investment has been receiving phenomenal attention of the firms as well as national governments. In the change of landscape of global economy, blessed with improved information and communication technology and liberal trade framework, foreign investment has been a necessary response of the firms to the market competition. The national governments, particularly developing countries now consider FDI as a conduit of capital, technology and management know how. As a result, there is an obvious race among the nations to host investment from abroad. To this end, the governments around the world are found to offer incentive packages to the foreign investors and at the same time, actively trying to promote their countries as location of investment. Being placed at the lower end of the least developed countries, the economy of Bangladesh is characterized by dominance of agriculture, absence of raw materials, low investment, over reliance on foreign assistance of agriculture, absence of raw materials, low investment, over reliance on foreign assistance, low growth rate, low share of manufacturing in national income, few exportable items, and heavy reliance on imports of manufactured goods. With an annual per capita income of just over $362, it characteristically suffers from problems relating both to shortage of savings and foreign exchange resources. So not being an exception, the governments of Bangladesh, especially since 1980, has turned to FDI as a vehicle to serve its economic goals. In this connection, the government has put in place a generous programmed of incentives to the investors. However, by international standard, so far Bangladesh could attract only an insignificant amount of foreign capital (See Table 2.1& 2.2) . All these mean that Bangladesh could not prove it to be an attractive location of investment and those investors cannot have confidence in the investment climate of the country. Eventually, from the trickle in the 1980s, inflows of private foreign direct investment in Bangladesh have risen to nearly $1 Billion in fiscal 2002. While, Bangladesh has been ranked 125th among 145 countries concerning inward FDI performance index in 2001, FDI has become even more important as a source of capital for development. Therefore, the relevant search in this connection is the anatomy of the trend and pattern of the existing foreign investment in the country. Moreover, no doubt, the injection of foreign funds into Bangladesh has important implications for economic growth in the country. 1.2. Foreign investment policy reform: 1.2.1. Context of foreign investment regime: There has been a perceptible shift in the attitude of developing countries towards foreign direct investment in recent years. The debt crisis of the early 1980s caused a specter of declining investment, mounting fiscal deficits and a deteriorating balance of payments in many developing countries. These countries were increasingly required to open up their markets to FDI which was seen as a means to compensate for reduced access to band credits from international financial institutions. The need for reliance of FDI was also reinforced by the declining trend in official development assistance. At the same time, the changing nature of activities of transnational corporations led to a more benign perception of their role. In fact, the transnational corporations were being increasingly looked upon as sources not only of capital, but also of production, management and marketing technologies. Thus, many developing countries started liberalizing their FDI policy regimes on the basis of the new perception of the new perception of commonality of interests. Liberalization of FDI represents just one of a number of determinants of investment flows. This explains why liberalization is not always followed by an upsurge of FDI. However; the importance of liberalization can never be overemphasized. In fact, highly restrictive conditions can effectively shut the door to foreign investment. 1.2.2. FDI Govt. policy in Bangladesh: The Government is encouraging foreign investment with special importance. Such investments shall be established either independently or through joint venture on mutually beneficial terms and conditions. The Foreign Private Investment (promotion and protection) Act,1980 will continue to be the legal framework of foreign investments. The main provisions of the Act to protect foreign investment include: a) Ensuring equal treatment in all respects for local and foreign investment: b) Protection of foreign investment from nationalization: c) Ensuring repatriation of proceeds from sale of shares and profits. In addition, adequate rules will be framed for protecting the intellectual property rights such as patents, designs and trademarks and copyrights. 2. In case of foreign investment, there will be no limitations pertaining to equity participation, i.e. up to 100 percent foreign investment will be allowed. 3. In case of joint ventures or industries set up independently by foreign investors, there will be no obligation to sell shares through public issue irrespective of the amount of paid up capital. 4. If the foreign investors reinvest their reparable dividends, those will be treated as new investments. 5. Foreign investors or companies with foreign investment may obtain working capital loans equivalent to their equity amount. The amount and terms of loan will be determined in accordance with the Bank-Client relationship and the bank's rules and procedures. 6. Rules will be framed to facilitate foreign investors or companies with foreign investments to buy shares through the stock exchange. 7. BSCIC has already developed industrial states with infra-structural facilities like roads, water, power & fuel etc. for small and cottage industries and steps are being taken for setting up more industrial states. In case of industries set up in the industrial estates, foreign investors will also get special concessionary financial benefits similar to local investors. 8. Other facilities to be provided to foreign investors are as under: a. Tax exemption on royalties, technical knowledge and technical assistance fees and the facilities for their repatriation b. Tax exemption on the interest on foreign loan c. Tax exemption on capital gains from the transfer of shares by the investing company. d. Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements e. Exemption of income tax up to three years for the foreign technicians employed under the approved industries. f. Remittance up to 50 percent of the salary of the foreigners employed in Bangladesh and the facilities of repatriation of their savings and retirement benefits at the time of their return g. There will be no restriction in issuing work permits to foreign nationals in Bangladesh and h. Facilities for repatriation of invested capital, profit and dividends. 1.3. Conclusion: Government of Bangladesh GOB’s reformed various policies for improving the FDI climate. Actually all these policies measures manifesting the GOB’s positive effects to attract FDI. 2. Trend and pattern of Foreign Direct Investment in Bangladesh: Context of FDI inflows: International flows of capital perform a variety of functions in the world economy. Among other things, such inflows permit the level of domestic investment in a country to exceed that country’s level of savings. On the other hand, international capital flows provide countries that generate large amounts of savings with a means to invest in countries where returns are higher than in the originating country. Such flows from mature to emerging and to developing economies not only allow for higher rates of investment in the host country, but also increase the quality of human capital in the developing countries through the transfer of technology, marketing and management skills as well as market access through network leakages. The flow of FDI into developing countries of often a inflows vary from region to region and country to country, depending upon the socioeconomic infrastructure, political stability and the presence of other institutional factors. 2.1. Flow of Investment: Since opening up the economy to attract FDI by the foreign private investment act 1980, Bangladesh has been gradually drawing the attention of foreign investors. However, by international standard the magnitude of FDI flowing into Bangladesh has been precariously low(see table 1). According to UNCTAD sources the inflow of FDI in 2001 accounted for only $78 million for Bangladesh while it was $735146 million for world (see table 1). However, as far as the FDI scenario of Bangladesh against the backdrop of its history and other factors affecting FDI flows is concerned, it has been showing an improving trend, especially since 1997. (see table 1) Table 1:- Foreign direct investment inflows (US$ Million) |Country | Source: Statistics Department, Bangladesh Bank Million makes kingdom of Saudi Arabia as the third largest investor in Bangladesh. Pakistan, Netherlands, Canada, Switzerland, Italy, Taiwan Sweden, France etc. are other sources of investment in the country. One recent trend in relation to the origins of FDI in Bangladesh is joint investment by consortiums of two or more countries, such as an industrial park by South Korea and Malaysia and a 5-star hotel by Taiwan, Singapore and Hong Kong. However, in recent years the Asian NICs including those from India and other neighboring countries have been coming up with larger investment proposals. The lower level of investment from developed countries indicate that so far Bangladesh could attract very few world leading MNCs having better technology and managerial and marketing skill than their Asian(except Japan) counterparts. Even though Bangladesh could attract some Japanese investment in other Asian countries. US investments are concentrated in service sectors like power generation, oil and gas, LPG bottling, medical service etc. European countries including European Union have about 32% share in FDI inflow. European investments spread over manufacturing and service sectors like taxies, cement, agro chemical, leather goods, drugs and pharmaceuticals, telecommunication, LPG bottling, Lubricants, power generation, industrial gas etc. Investments from south, east and south East Asian nations like china, Hong Kong, India, Malaysia, Pakistan, Sri Lanka, Taiwan, and Thailand are concentrated on manufacturing sectors. 2.1.2. Sector wise distribution of FDI into Bangladesh An analysis of distribution of FDI amongst different sectors indicates that the Textiles, garments and accessories sector topped the race of total investment, followed by service sector, Drugs and chemical sector and agro-based sector (see table 2.3). However, in terms of the number of projects registered until December 2002, the sector wise distribution shows a different picture. Out of total 1244 projects, the highest numbers of projects were found registered in Textiles, Garments and accessories sector. The huge investment in textiles and garments sector can be attributed to the success of this sector as an export oriented industry and easy availability of cheap labor in the country. Significant investment in service sector indicates the expanding internal consumer as well as industrial market in the country. Investment in Hotel and Motel, Restaurant, Hospital and clinic, domestic air services, telecommunication services, Recreation park etc. are to cater to the needs of the increased local demand. Investments in industrial park, leasing services, construction, power and communication, cold storage etc. are mainly to feed the local aspiration for higher industrialization. The considerable investment in the agro-based is primarily resource seeking in mature and based on the available agricultural raw materials like crops, fruits, and fish in the countries. Opportunity for exporting, particularly of tea, fish and frozen foods is another reason for investment in this sector. The machinery sector has so far attracted rather insignificant volume of investment. This can be attributed to low domestic demand due to low level of industrialization and modernization in the country. Lack of sufficient skilled engineers and technical personnel may also partly explain the meager investment in the sector. 2.1.3. Structure of Investment One aspect of FDI in Bangladesh is that In spite of almost continuous rise in the volume and number of projects over the years, one or two large investments have accounted for the bulk of total investment in a particular year. Obviously, the dominance of a few projects in total FDI registered in Bangladesh every year indicates the vulnerability of the country’s FDI flow to the implementation of those pivotal projects. It also suggests that yet Bangladesh could not make any significant headway in attracting a steady flow of FDI. 2.2. Characteristic of FDI in Bangladesh The overall motive of the FDI is profit maximizing. The choice depends on overall condition production cost and trade costs, market size and the importance of economies of scale, and economic policies in both host and home countries. The motive of foreign direct investment from the firms perspective may be grouped into three: Market access, const reduction and access to natural resources (oil, gas, forest resources, etc ).The former is called horizontal FDI, while the later types are vertical FDI. In horizontal FDI the purpose of the investment is to serve the foreign markets from local plants rather than by trade, this saving trade costs. In such a case FDI should be regarded as a substitute to trade. FDI can be a substitute to trade if they are in import- substituting industries. One trade, and hence this is often called tariff jumping. FDI in service oriented industries is attracted by large local market as well as by liberalization of investment policies over the period. But with vertical FDI foreign investment occurs as a part of a production networking scheme, where the production process is fragmented in order to take advantage of local cost and productivity advantages. Export- oriented where the aim is to take advantage of low costs of production usually labor related. Market- seeking where the objective is to produce for a large domestic market. In Bangladesh, Export Processing Zones offered companies controlled labor, subsidized infrastructure, expedited customs administration and freedom from import duties and export taxes. However, most of the FDI inflows came from developing Asia and was concentrated on export processing, on the other hand, FDI inflows came from Europe, North America, and Japan and targeted to the domestic market. 2.3. Why does FDI decrease in Bangladesh Despite substantial changes in government policy FDI in Bangladesh is significantly below its potential, in both economic and statistical sense. However, Bangladesh’s opening to foreign investment started relatively late and that the army based Government temporarily diminished FDI over 1982-1985. there are a number of institutional and structural bottlenecks that discourages healthy foreign investment in Bangladesh. Poor infrastructure and lack of utility service: Poor infrastructure facilities and lack of utility service are one of the most important bottlenecks of investment in Bangladesh. With the growth of foreign trade, the country’s main seaport, Chittagong Port is one of the most cost and inefficient seaport in the world. Inadequate power supply is another major problem. Likewise, the country’s transport and telecommunication services are severely underdeveloped. Negative image of the country: Overall image of Bangladesh to the foreign investors is not that good. In addition to poor environment for investment, many other factors are responsible for poor image. These include policy inconsistency, lack of proper treatment to foreign investors, instability of policy etc. Exchange Rate Issue: Because of the narrow domestic market in Bangladesh, FDI will target the export-oriented industries. However, competitiveness in the export market depends on real exchange rate, among others. An overvalued exchange rate may discourage export oriented FDI. Corruption and lack of good governance Corruption has entered into every corner of the society. Overall governance increase cost of doing business and create unfair competition within the business. Corruption not only discourages investment, it also distorts investment priority so as to end up with suboptimum allocation of inevitable fund. 2.4. Benefits of FDI The main policy conclusion that can be drawn from the study is that the economic benefits of FDI are real, but they do not accrue automatically. To reap the maximum benefits from foreign corporate presence a healthy enabling environment for business is paramount, which encourages domestic as well as foreign investment, provides incentives for innovation and improvements of skills and contributes to a competitive corporate climate. The net benefits from FDI do not accrue automatically, and their magnitude differs according to host country and context. The factors that hold back the full benefits of FDI in some developing countries include the level of general education and health, the technological level of host-country enterprises, insufficient openness to trade, weak competition and inadequate regulatory frameworks. Conversely, a level of technological, educational and infrastructure achievement in a developing country does, other things being equal equip it better to benefit from a foreign presence in its markets. Yet even countries at levels of economic development that do not lend themselves to positive externalities from foreign presence may benefit from inward FDI through the limited access to international funding. By easing financial restraint, FDI enables host countries to achieve the higher growth rates that generally emanate from a faster pace of gross fixed capital formation. The eventual economic effect of FDI on economies with little other recourse to finance depends crucially on the policies pursued by host-country authorities. The spectral composition of an economy can also make a difference. While the service sectors of many developing countries may be underdeveloped and hence unable to attract large inflows of FDI, extractive industries in countries with abundant natural resources can be developed beneficially with the aid of foreign investors. 2.5. Disadvantages of FDI The common disadvantages of FDI are- - Inflation may increase slightly - Domestic firms may suffer if they are relatively uncompetitive - If there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a risk that is why countries like the Czech Republic are "seeking to attract high value- added services such as research and development (e.g.) biotechnology)" Conclusion of benefits and Disadvantages situation of FDI: In addition to the potential drawbacks of inward FDI mentioned earlier, some micro-oriented problems could arise. For instance, while the overall impact of FDI on enterprise development and productivity is almost always positive, it generally also brings distributional changes and a need for industrial restructuring in the host economy. Changes give rise to adjustment costs and are resisted by social groups that do not expect to be among the beneficiaries. Structural rigidities in the host economy exacerbate such costs, not least where labor markets are too slow to provide new opportunities for individuals touched by restructuring. Overall, the costs are best mitigated when appropriate practices are pursued toward flexibility, coupled with macroeconomic stability and the implementation of adequate legal and regulatory frameworks. While the responsibility for this lies largely with host-country authorities, home countries, MNEs and international forums also have important roles to play. In cases where domestic legal, competition and environmental frameworks are weak or weakly enforced, the presence of financially strong foreign enterprises may not be sufficient to assist economic development – although there are examples (notably in finance) where the entry of MNEs based in OECD member countries has contributed to an upgrading of industry standards. Where economic and legal structures create a healthy environment for business, the entry of strong foreign corporate contenders tends to stimulate the host-country business sector, whether through competition, vertical linkages or demonstration effects. FDI can be said to act as a catalyst for underlying strengths and weaknesses in the host countries’ corporate environments, possibly exacerbating the problems in “non governance zones”, while eliciting the advantages in countries with a more benign business climate and better governance. This reinforces the point made above about the need for host (and home) countries to work to improve regulatory and legal frameworks and other elements that help enable the business sector. Finally, FDI – like official development aid – cannot be the main source for solving poor countries’ development problems. With average inward FDI stocks representing around 15 % of gross domestic capital formation in developing countries, foreign investment acts as a valuable supplement to domestically provided fixed capital rather than a primary source of finance. Countries incapable of raising funds for investment locally are unlikely beneficiaries of FDI. Likewise, while FDI may contribute significantly to human capital formation, the transfer of state-of-the-art technologies, enterprise restructuring and increased competition, it is the host country authorities that must undertake basic efforts to raise education levels, invest in infrastructure and improve the health of domestic business sectors. Domestic subsidiaries of MNEs have the potential to supplement such efforts, and foreign or international agencies may assist, for example through measures to build capacity. But the benign effects of FDI remain contingent upon timely and appropriate policy action by the relevant national authorities. 2.6. Example 2.6.1. Different types of Products In Bangladesh there are different kinds of products produced by direct investment. Such as Garments, Fertilizer, Show, Lather Product etc. 2.6.2. Different types of company: To produce these different types of products different types of company involved. Such as- • Karnaphuli Fertilizer Company Limited • Young one • Liver Brothers Bangladesh Ltd. 3. The high lighted company : For those I want to discuss about the - “Karnaphuli Fertilizer Company Limited”. 3. 1. Introduction: Karnaphuli Fertilizer Company Limited (KAFCO) is a foreign invested company in Bangladesh. It is also a 100% export oriented international joint venture company. [pic] [pic][pic] Established in Bangladesh with the shareholding and support of the governments and private sectors of Bangladesh, Japan, Denmark and the Netherlands, KAFCO is the largest joint venture investment in Bangladesh. KAFCO markets its products to many countries around the world. The KAFCO plant is a fully integrated complex, it lies on 55 acres of land, located in Rangadia, Anowara, Chittagong just alongside the Karnaphuli river. The company employs a total of over 600 people at it's plant site and corporate office in Dhaka. Most of those employed at plant site live in the company's housing colony built 3km down from the plant on 16 acres of developed land. The housing colony incorporates a school, medical clinic and recreational facilities for the benefit of the company's employees. |Board of Directors | | |  Name: |  Date of Incorporation: | |Karnaphuli Fertilizer Company Limited |16 July 1981 | |Board of Directors: |  | |Mr. Dewan Zakir Hussain |Chairman & Director representing Government of Bangladesh (GOB) / Bangladesh Chemical | |  |Industries Corporation (BCIC). | |Mr.  Mohammad Mohsin |Director representing GOB/BCIC. | |Mr.  K. H. Masud Siddiqui |Director representing GOB/BCIC. | |Mr. Tsuyoshi Endo |Director representing KAFCO Japan Investment Co. Ltd. (KAFCO Japan) | |Mr. Takao Kawai |Director representing KAFCO Japan Investment Co. Ltd. (KAFCO Japan) | |Mr. Kazuhide Usui |Director representing KAFCO Japan Investment Co. Ltd. (KAFCO Japan) | |Mr. Poul Erik Lorentzen |Director representing Subcontinent Ammonia Investment Co. ApS (SAICA) | |Dr. Toufiq Ali |Director representing Subcontinent Ammonia Investment Co. ApS (SAICA) | |Mr. Jens Bayer |Director representing Industrialization Fund for Developing Countries (IFU) | |Executive Committee: |Organization Committee: | |Mr. Dewan Zakir Hussain              :  Chairman |Mr. Poul Erik Lorentzen                        :  Chairman | |Mr.  K. H. Masud Siddiqui             :  Member |Mr.  Mohammad Mohsin                     :  Member | |Mr. Tsuyoshi Endo                         :  Member |Mr. Takao Kawai                                   :  Member | | |  | |Finance &  Budget Committee: |Audit Committee: | |Mr. Dewan Zakir Hussain               :  Chairman |Mr.  Mohammad Mohsin                     :  Chairman | |Mr. Takao Kawai                             :  Member |Mr. Jens Bayer                                       :  Member | |Mr. Jens Bayer                                 :  Member|Mr. Kazuhide Usui                                :  Member | |Technical Committee: |Working Group: | |Mr. Takao Kawai                             :  Chairma |Mr. Poul Erik Lorentzen                        :  Convener | |Mr. K. H. Masud Siddiqui                :  Member |Mr.  Mohammad Mohsin                     :  Member | |Mr. Poul Erik Lorentzen                  :  Member |Mr. K. H. Masud Siddiqui                    :  Member | | |Mr. Tsuyoshi Endo                               :  Member | | |Mr. Takao Kawai                                   :  Member | |Company Secretary: |Executive Management: | |Mr. Md. Rabiul Haq Chowdhury |Mr. Salahuddin Ahmad, Chief Executive Officer (CEO) | | |Mr. Takehiro Hirobe, Chief Technology Officer & Dy. CEO | | |Mr. David Victor Bunn, Chief Financial Officer & Dy. CEO | |Auditors: |Principal Local Insurers: | |Rahman Rahman Haq & Co. |Reliance Insurance Limited | |Chartered Accountants |Pragati Insurance Limited | |Principal Bankers: |Legal Adviser: | |Citibank NA |Dr. Kamal Hossain & Associates | |Hong Kong Shanghai Banking Corporation (HSBC) |122-24 Motijheel C/A, Dhaka | |Standard Chartered Bank | | |Uttara Bank Limited | | |Registered Office: |Plant: | |IDB Bhaban  (13th Floor) |Rangadia, Anowara, | |E/8-A, Rokeya Sharani, |Chittagong, Bangladesh. | |Sher-e-Bangla Nagar, | | |Dhaka-1207, Bangladesh. | | 3.2. Management structure 3.3. Product: KAFCO produces and markets two products: granular Urea and anhydrous Ammonia. The annual availability of granular urea is 0.68 million MT and ammonia is 0.15 million MT. |Ammonia | |The ammonia plant uses Haldor Topsoe A/S technology | | | |Liquid Anhydrous Ammonia | | | |Product: Anhydrous Ammonia | |Ammonia : 99.50% by weight minimum | |Nitrogen: 81.90% by weight minimum | |Moisture: 0.50% by weight maximum | |Oil : 10 ppm by weight maximum | |Temperature: -33oC or lower | | | |Typical | | | |Ammonia : 99.75% by weight | |Nitrogen : 82.10% by weight | |Moisture: 0.25% by weight(seasonal) | |Oil : 1.00 ppm by weight | |Temperature: -33oC | |Urea | |The Urea and Granulation plant is based on Stamicarbon bv technology | | | |Granular Urea | | | |Product: Granular Urea | |Characteristics : White , granular , free flowing | |Nitrogen : 46.0% by weight minimum | |Moisture : 0.5% by weight maximum | |Biuret : 1.0 % by weight maximum | |Particle Size : Between 2 mm - 4 mm (minimum 90%) | |Bulk Density : 750 kg/ m3 | | | |Typical | | | |Nitrogen : 46.2% | |Moisture : 0.25% - 0.35% by weight (seasonal) | |Biuret : 0.9% by weight | |Particle Size : Between 2 mm - 4 mm (minimum 93%) | |Bulk Density : 735 - 750 kg/ m3 | |SGN : 295-305 | |UI : 45-50 | 3.3.1. Production Unit |Plants: Ammonia | |The ammonia plant uses Haldor Topsoe A/S technology, it is a state of the art, low energy ammonia plant, | |incorporating the necessary modifications for integration with a urea plant. The Topsoe primary reformer is based on | |the side-fired furnace concept and ensures optimum utilization of high alloy tube materials and extended catalyst | |life due to very accurate temperature control. | |Plants: Urea | |The Urea and Granulation plant is based on Stamicarbon's well known carbon dioxide stripping process. Due to the | |42-metre height limit imposed on the location, the synthesis section of the urea plant incorporates the first | |commercial application of the Stamicarbon H.P. Carbonate Condenser(Pool Condenser) which provides the following | |distinct advantages: | |The pool condenser acts as a gas agitated reactor with a high degree of heat and mass transfer. | |Reduced heat transfer area. | |Much reduced risk of stress corrosion. | |More stable pressure and level control in the urea reactor. | |Reduction of reactor volume by some 50 per cent. | |Ease of plant operation. | 3.4. The Potential of KAFCO [pic]  [pic]  has paid off all its loans and, with this, is looking very strongly to the future. [pic]  [pic]  has a fully established infrastructure enabling KAFCO to expand much more financially attractively and with shorter implementation time than other investors. [pic]  [pic]'s existing infrastructure already includes jetty, gas supply ring main access, the majority of land requirements, maintenance and administrative facilities, utility networks, and housing. Such existing infrastructure would be likely to reduce KAFCO investment costs for an expansion by a very considerable amount. National infrastructure costs for gas supply piping may also be significantly lower than for alternatives [pic]  [pic]'s  established infrastructure could significantly speed additional domestically produced urea supply to the country. As one of Bangladesh's largest and most succ- essful companies, KAFCO is committed to supporting development of the country and lessening some of its problems. Currently ; [pic]  [pic]  is following its own belief that prevention is better than cure, by providing funding to organizations - national and local - working towards the prevention of HIV/AIDS in Bangladesh. [pic]  [pic]  provides financial support in the case of major disasters. 3.5. Limitation Most of the time KAFCO face some limitations. • Shortage of Gas • Unable to approach any decision without the Govt. permission 3.6. History However, KAFCO is a joint venture multinational project. The idea of KAFCO was developed in late 1970s when the International Finance Corporation (IFC) began considering the possibility of promoting an export-oriented nitrogenous fertilizer complex in Bangladesh. At the core of the idea was the intention to derive the highest benefit from the country's abundant natural gas. The concept was discussed with the major international ammonia technology licensor and catalyst supplier Holder Topsoil A/S (HTAS) and with Steelyards Development Corporation (SDC). In July 1981, the Company was incorporated in Bangladesh. In December of the same year, a promoters' agreement was signed in Washington DC between the Government of Bangladesh, SDC, and HTAS. IFC pledged to provide a major portion of the financial support. As the project was developed further, the idea of a barge-mounted plant was abandoned and SDC's interests were taken over by HTAS. The project struggled to find finance until Japan showed interest in participating the venture. The project then gained momentum and various agencies soon came forward to become core investors. These included Bangladesh Chemical Industries Corporation (BCIC) on behalf of the government of Bangladesh; the Overseas Economic Cooperation Fund, Marubeni Corporation, and Chiyoda Corporation of Japan; Holder Topsoil A/S and Industrialization Fund for Developing Countries (IFU) of Denmark; Stamicarbon by of Holland, and Commonwealth Development Corporation (CDC). The core investor group later became shareholders in KAFCO and participated in the promotion, financing, design, engineering, supply, construction, marketing of products, and in rendering of technical and operational services. The effective date of contract for the project was 30 November 1990 and the mechanical completion was on 16 November 1994. Production of Ammonia and Urea began on 15 December and 27 December 1994 respectively. A 1,500-MT/day low energy ammonia plant using Topose technology is being used for ammonia production. The plant has its own 20,000 MT storage facility and is fully equipped for the export of anhydrous ammonia (500 MT/hour) from its own jetty, which can handle refrigerated ammonia carriers of up to 20,000 DWT. The Urea plant is equipped with an 80,000 MT bulk storage facility while there is a bag manufacturing as well as a bagging plant that incorporates bagged as well as bulk product handling facilities within KAFCO's own urea loading jetty, capable of handling 30,000 DWT vessels. 3.7. Problem: 3.7.1. Political KAFCO had faced many political problems. The different Govt. has different opinion. So, different types of rule are implementing by them. It is a major problem of KAFCO. 3.7.2. Tax KAFCO have to bare a huge amount of tax. As a foreign invested country it suffer by tax problem greatly.