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close this bookDeveloping the non-farm Sector in Bangladesh: Lessons from other Asian Countries (WB, 1996, 116 p.)
close this folderRural industry and export-led growth
View the document(introduction...)
View the documentPossibilities for foreign investment
View the documentDomestic hardles
View the documentFinancing of new enterprises
View the documentNiche exporting

Possibilities for foreign investment

Assuming that agricultural intensification and commercialization gain momentum, they can trigger the development of sideline activities such as the production of vegetables, tropical fruit, cut flowers, and fresh water shrimp, which can be exported. In some respects entry barriers into an industry such as cut flowers, which commands a growing international 33 market, are not especially high. The investment required for greenhouses, piped irrigation systems, rootstocks, cooling facilities, and packaging equipment is moderate. More important is to stay abreast of technology, sustain quality, meet standards with regard to pesticide residues, and conform to delivery schedules. Because significant scale economies are absent and technology is widely accessible (from Israel and the Netherlands), a country can entry the market relatively easily. But the experience from Kenya (Jaffe1994) and Zimbabwe suggests that becoming established and finding a foothold in the international market is not easy. Survival requires close relations with foreign networks, and foreign direct investment is often a precondition for success. Apart from capital, foreign participation brings a bundle of services-technology, quality control, financial, and marketing-and induces the necessary degree of specialization. Local firms that do not have foreign partners frequently distribute their efforts across several smallscale activities. As a result that export business fails to reach a critical mass, and there is insufficient learning and uncertain commitment.

Inadequate communications facilities can be a serious bottleneck to FDI. Without good telephone and fax connections it is difficult to respond quickly to market opportunities, keep in close touch with buyers, regularly update delivery schedules, and organize the transport logistics of highly perishable commodities that require efficient post harvest handling and reliable shipment. In the absence of reliable modern communications system the cost of doing business can be prohibitively high. In the modern international marketing environment, "telecommunications is at the heart of the kind of logistics management necessary to move products from rural farms through ports [or airports] and to the clients door, just-in-time. [Furthermore] rural telecommunications, can be a [source of profitsJ-private sector suppliers of rural cellular systems in countries such as Mexico, Brazil, Thailand, Malaysia and Philippines are finding it a profitable undertaking." (Goldstein 1993: 25, 29).

Foreign involvement can also help overcome the problems posed by lumpy investments in cold storage and packaging facilities and can facilitate dealings with air carriers, which are an essential link in the marketing chain. Without regular, competitively priced freight services running to desired international destinations, an export business in cut flowers cannot survive.