Biharis Attitude Towards Bangladesh

Behari people like their own language, culture and as well as Bangladeshi language and culture also. Some camp residents think of themselves as Pakistani or Indian and would like to be reunited with family members in Pakistan or India. This repatriation could be funded by money already put aside by the Pakistani or Indian government. Others, who have never been to and have no family in Pakistan or India, can only imagine a life in Bangladesh. Those Biharis that are keen to establish lives as Bangladeshi citizens sometimes see “no other way” and marry local Bangladeshis. Others, such as 20-year-old Abdul, who survives hand to mouth as a garment factory worker, says he would like to go to Pakistan. In any case, the Office of the United Nations High Commissioner for Refugees (UNHCR) is not addressing the plight of the Biharis




     J.P Morgan & Company was advised by Brasil Investimentos to give a statement regarding a sale or restructuring of its subsidiary Paginas Amarelas – the telephone directory business. The responsibility for the valuation of business of Paginas Amarelas was given to Juan Lopez, a new associate of JP Morgan’s Latin America M&A Group who had better understanding of the business markets where they were conducting their businesses.. Juan Lopez estimated the future cash flow (in US$ as requested by the client) of the operations in the three Latin American countries (Argentina, Brazil and Chile) where they were competing. 

     After calculating the future cash flow, Lopez estimated the weighted average cost of capital (WACC) to find out the target rate of return for each country operation through which he determined the DCF value of the three country operation as well. 

     JP Morgan Company was basically a global financial service provider and considered as a major global player in the investment – banking industry. JP Morgan generally made use of three approaches-DCF (Discounted Cash Flow) method, trading multiples and transaction multiples for estimating the valuation of the company. 

     The Argentine subsidiary achieved 33 percent of Paginas Amarelas total net revenue whereas Brazil and Chile accounted for 52 and 15 percent of total revenue respectively.  In these three countries the telephone companies were state-owned and in monopoly position. The privatization of state-owned companies ended the operation of monopoly marketers and it resulted in creating superior services with lower charges which was followed by a remarkable increase in the number of lines. This privatization process also allowed the entrance of international companies into the local market of these three countries and increased competition and reduced margins. 

     Previously, Argentina, Brazil and Chile had been under dictatorship but in the mid and late eighties in had replaced by the democratic system. The economic of Argentina, Brazil and Chile had experienced major changes in last five to ten years and high inflationary environments gave more stable economies with recent annual inflation rate below 15%. 

     Lopez tried to consider the factors which have future impact on the changes in the telephone-directory business in the Latin American region for preparing the cash flow forecasts. He also considered the synergy like increased bargaining power when buying papers, printing efficiencies and partnership network with other companies all over the region. But one of the important factors Lopez did not consider when preparing the cash flow forecast was the ability that the single buyer would have to issue international debt on behalf of the three combined units. He also found that the telephone industry in Latin America there was no local “pure play” competitor and beta cannot be easily calculated for each country operation. 

     The valuation of the Paginas Amarelas was very difficult because too many problems had been faced by Lopez when he was trying to value the company. First thing he had to consider the future cash flows of the company. Second thing was that he takes an account of any type of benefits that the company can enjoy. 


     For estimating the cost of debt it had been found that the country operations never borrowed money at the corporate level but only at the country level. JP Morgan didn’t issue debt internationally and rely only on local markets for their borrowings. 

     The last step for determining the cost of equity, Lopez could choose between two different approaches under the CAPM method (Capital Asset Pricing Model). The first approach was to apply local market’s parameters considering local risk-free rate, local market premium and beta. The second option was to use US market parameters to estimate the cost of equity and adjusted it with an estimate of country risk arising from the local political and capital market environment. This last approach was considered by Lopez for determining the cost of equity. But the adjusting factors which were used reflect higher risk offered by equity investment in Argentina, Brazil and Chile. In such situation Lopez found some difficulties of applying the appropriate “adjusting factors”. 

     The valuation problems those have been faced by Juan Lopez are given below:

  • No Local “pure-play” competitor:   

                 o  As there was no strong local competitor, beta cannot be easily calculated.

                 o There were mostly private companies and number was too small for comparison and cannot use Capital Structure comparisons.

                 o Most companies owned other types of businesses rather than telephone-directory company.

  • Cost of equity:

                 o Risk free rate for each country was difficult to determine

                 o Market risk premium (return on market minus risk free rate) was questionable because local equity markets were not efficient.

                 o Cost of debt calculated on the basis of borrowings. But the company never issue debts internationally; they mainly relied on local markets for borrowing. 

     The cash flows were forecasted here in local currencies and US dollars. In first step the cash flows were calculated in local currencies and then converted to US dollars. Cash flows were projected in nominal local currency, taking inflation into account. The forecast of the exchange rate (the forward rate) between the dollar and local currency was based on Interest Rate Parity, which assumed that the exchange reflects differences in the inflation rate between two countries.  Cash flows were then concerted into US dollars using the estimated exchange rate for each period. 

     JP Morgan used US$ rather than to use local required rate of return to discount cash flows for all three countries because of highly inflationary currencies. 

     To estimate the required rate of return by using WACC method, the factors that should be considered is the cost of borrowed money. No international debt had been taken on behalf of three country operations together as the telephone-directory subsidiary but JP Morgan relied on the local markets for their borrowing needs. So the local borrowing rates, tax rates and long term capital structure should be taken into account for estimation. 


     Estimating the cost of equity under CAPM method there are two approaches. The first approach is to use local market parameters such as local-risk free rate, local market premiums and beta. The problems those had been faced were to determine the risk-free rate and estimating the equity risk premiums for each country. Historical data on equity market and key competitors in the industry should also be considered when estimating the required rate of return. 

     The second approach is to use US market parameters to calculate the cost of equity which will then be adjusted to reflect the country risk and this country risks measured from the local political and capital market environment by using “adjusting factors”. 

     The valuation process of Paginas Amarelas was in question whether the approach that had been used was appropriate or not. Because there should be some modification of the valuation methods using various adjusting factors in estimating cross border rates of return.


            AMLCD, or Active Matrix Liquid Crystal Display, is the high performance evolution of LCD technology and this flat panel screen delivers superb brightness, contrast and clarity. Using an array of thin film transistors (TFT) that control each individual pixel, AMLCD technology is able to achieve enhanced display quality given that the voltage used to power each pixel is not transferred to surrounding pixels. Additional offering of crisp displays, AMLCD flat panel screens can be made smaller and lighter than their LCD and CRT (Cathode Ray Tube) counterparts. In addition, a consumer or industrial LCD monitor utilizing AMLCD technology is more energy-efficient. These combined advantages have made AMLCD technology an increasingly popular solution for consumers and industries alike.

             AMLCD technology has been especially beneficial in military and healthcare fields, where display quality and physical size can be a matter of life or death. For people working in tight quarters, such as an operating room or fighter cockpit, AMLCD technology is a compact, reliable solution. On the other hand, a custom-designed industrial LCD monitor utilizes the latest technology in order to benefit military, transportation and industrial markets alike.

    1.    Evaluate the Commerce Department’s decision to impose duties on Japanese manufactured AMLCDs. Has this decision helped or harmed US industry? What is the likely impact on the US consumer?

Answer: The US Commerce Department imposed a 62.67% of duties on AMLCDs imported from Japan to US in 1991. This decision has been taken by the International Trade Commission as they got complain from a small US manufacturers of AMLCD about dumping activities of the Japanese suppliers who are exporting same product in US. According to US Antidumping Act of 1921, dumping occurs when imports sold in the US market are priced either at levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing country. The US manufacturer main claim was that the Japanese suppliers were dumping their products in US market as they were used to sell their imported products less than their market value and at less than half of their production cost. After investigating the above scenario of charges of imported AMLCD, the International Trade Commission got the result that the Japanese producers were used to sell AMLCD lower than the total cost and this trade activity was against the US Anti dumping Act. This decision had been taken by the ITC to protect the small US manufacturers from unfair foreign competition.

             But the ultimate decision of imposing this duty could not help the US AMLCD manufacturers because they required large amount of investment to get success for their local industry for which they did not get support in terms of subsidies from the government. On the other hand this duty affected the American laptop computer manufacturers because they were used to import LCD screens from Japanese suppliers mainly through joint venture operations. This duty increased the total manufacturing cost of the laptops by 30 percent. For these laptops 50 percent of the total cost is accounted for the AMLCD screens which are the mostly expensive component than the other parts of laptops.

             This increased manufacturing cost would have negative impact both for the manufacturers and consumers as well. Because this situation will put limitations on the consumers not to get the high quality product with low price from the producers and this may create direct and indirect customer dissatisfaction.

   2.  What, if anything, could the US government do to keep US computer manufacturers from moving their manufacturing operations offshore? Should the government take such action?

Answer: The decision of imposing an antidumping tariff on AMLCD screens imported from Japan made the suppliers asked the U.S. Court of International Trade to overturn the ITC decision that the American industry had been injured and thereby throwing out the 62.67 percent, specifically levied against Hosiden and collectively against all other Japanese supplier like Hitachi, Matsushita, NEC, Seiko Epson, Sharp, and Toshiba. Not only these firms, the other US computer manufacturers like Apple, Compaq, IBM, and Tandy were also filed a separate appeals with the Court of International Trade and all attacked the ITC finding that a U.S. industry in AMLCD panels exists, let alone that it could be injured. During that time IBM was studying the possibility of assembling computers using active matrix flat panels there. But now IBM has none on the market but, in connection with its joint venture with Toshiba, is expected to introduce laptop/notebook models using AMLCDs. The other two computer manufacturers Apple and Compaq decided to move their production outside the United States. They showed the logic that these third countries do not levy tariffs on imports of AMLCD from Japan and on the other hand the US does not levy tariffs on imports of finished laptops from those third countries.

       The computer manufacturers of America asked the Court of International Trade to set higher antidumping duties, and also to subject imported electronic subassemblies for AMLCD panels to the stiff penalty tariff. In order to motivate the US computer manufacturers from moving their manufacturing operations offshore the US government should revise the decision about the charges imposed on AMLCD. They can go for tariff classification and impose different duties on the basis of subassemblies. This tariff classification can offers a number of planning opportunities. For example, AMLCDs customs duty rate is 62.67% can be broken down, and imported in separate consignments – such as display drivers and controllers – which attract lower rates of customs duty

       The US Commerce Department in its final antidumping ruling should exempt the electronic subassemblies from the penalty duties.

   3.  What criteria should the US government apply in targeting industries for antidumping protection?

Answer: In US a group of small companies are involved in manufacturing AMLCD and their target niche market is Defense Department for whom they are only producing their product on limited basis. AMLCD is an important component for computer displays, camcorders, medical instruments, high-definition television, auto dashboards, factory control devices, aerospace instruments and the instruments for military. Among these products, US Airforce uses AMLCD screens for cockpit instrumentation and flight simulation devices and US Army needs the screens for its battle tank, and the Navy uses them in its shipboard command system. As the US AMLCD companies basically produce their product for Defense sector, the US government could impose antidumping charges for those AMLCD Japanese firms who are used to export the product which are used by US Defense Department. But the US government imposes duties on imported AMLCD from Japan to protect their domestic companies from unfair foreign competition. This decision by ITC affected the other industries like computer manufacturers, communications equipment and consumer electronics goods manufacturers.

   4.  If you were the CEO of a small US firm interested in AM-LCD manufacturing, what factors would be important in your decision to enter the AM-LCD market? Under what conditions might you enter the market?

Answer: If I were the CEO of a small US firm I would definitely be interested to enter the AMLCD market. The main factor that would be important in my decision to enter into the AMLCD market is the potential market growth rate of this product in near future. Active Matrix Liquid Crystal Display markets were over $19 billion dollars in the year 2000 and this huge market is expected to grow more and more. The possibility of traditional CRTs in desktops and televisions being replaced by AMLCDs is also creating the opportunity for the current growth of the AMLCD market.

In US a number of small local companies are engaged in this business but they are highly focused in supplying the specialized niches that is Defense Department except the other large companies like IBM which is producing AMLCD with the joint venture of Toshiba and offering the product in mass scale. The small US companies have made investments only to support their limited basis production and these companies do not have capabilities to go for mass production of AMLCD and sell those products on commercial basis. But there are possibilities of these US based firms to compete with those Japanese producers through attaining government and private funds to reproduce AMLCD technology and to improve the current manufacturing process. To be successful in this AMLCD industry as a CEO I would like to benchmark the business activities of IBM and other successful producers in Japan. High risks are involved in producing AMLCD screens but these risks have been overcome by the Japanese leading technology and the long payback period of investment. These strategies by the Japanese manufacturers and IBM’s joint venture entry strategies can be followed by my company.  However, the continued and growing investment in R&D for the development in next generation display device and additional AMLCD capacity features can also be the way so that none of the existing companies can find a worthy successor to AMLCD industry.

  5. Should the US government urge the pentagon to support production of AM-LCD’s? Explain the reasoning behind your answer.

Answer: The US government should ask the Pentagon to support the production of AM-LCD’s.

       Some US government experts visited the AMLCD plants in Japan and recognized that the US manufacturers are able to catch up with Japanese producers. They recommended, if the US companies can obtain government and private funds then they will be able to reproduce AM-LCD’s technology and improve manufacturing process. AMLCD companies need heavy investment and it’s not possible for the US government alone to provide full support to these companies by giving subsidies. So it will be better for the US government if they can persuade other investors like Pentagon to invest in AMLCD industry. The US manufacturers sold maximum of their screens to Pentagon  and in order to get grater value from these AMLCD companies Pentagon can go for partnering with them through investment. 

      The Pentagon also anticipated that the AM-LCD project meet it’s criteria for the “selective production” and this plan allows the Pentagon to commit funds for purchasing critical defense materials from selected contraction when projects meet certain standards. The firms obtaining contracts for AM-LCD production would be expected to find commercial buyers for the screens to keep their manufacturing cost effective and to avoid high priced products. 

      Pentagon’s funding decision to AM-LCD production may be a twist to encourage and attract other US investors to finance AM-LCD production to cultivate a customer base for the screen. From the upward consultation we can observe some chances or demand of the AM-LCD screen in the US market and how the business can established and successful within the home country.