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The Financial Express

Foreign direct investment sluggish

| Updated: October 18, 2017 04:29:44


Foreign direct investment sluggish

The EU-Bangladesh Business Council meeting held recently in the city listed impediments to foreign direct investment in the country. Lack of coordination among the government agencies, political uncertainty, shortage of energy and limited infrastructure were among the bottlenecks hampering FDI  in Bangladesh. According to the EU, Bangladesh has many assets for attracting foreign investment but foreign investment is not coming in a big way. The FDI flow fell short of expectations. The EU delegation suggested simplifying the regulations of the central bank, the Board of Investment and the National Board of  Revenue in order to attract more FDI into Bangladesh. The FDI in Bangladesh stood at $2.23 billion in 2015. Of this amount, about 50 per cent came in the form of reinvested earnings of the existing multinational companies.
Standard Chartered Bangladesh and City Bank sponsored a daylong conference in Hong Kong on April 26 to highlight Bangladesh's macroeconomic fundamentals, growth prospects, the investment outlook and the associated challenges. The event was styled 'Bangladesh Investment Summit, Asia'. It was  supported by the Board Investment of Bangladesh. The finance minister in his keynote speech said that never before was Bangladesh so well prepared to absorb investment from outside as it is today. He said never before the country was so investment hungry as it is to day. He assured the prospective investors that the environment for doing business will only get better in the coming days.
Economic zones in Bangladesh would be the most preferred place for foreign investors who want to set up fully-owned or joint venture companies. The government is in the process of establishing economic zones. Bangladesh offers the most low-cost workforce in the region. Investors will get tax exemption for ten years. Bangladesh has a large domestic market of 160 million people with a fast growing middle class and increasing purchasing power. Bangladesh's economy has been maintaining an impressive growth rate of more than 6 per cent on average over the last ten years.
According to the President of the Bangladesh Chamber of Industries, there is a dearth of appropriate land for industries. Gas connection is stopped and power supply is not regular because of distribution difficulties. It will take two years to upgrade distribution lines. When local investors come forward, foreign investors become interested. If the economic zones are made operational, the problem of land for industries will disappear. The government has made a declaration that gas will be supplied through LNG within a year. The chamber president said these in a press interview.
The chief justice said in a meeting that foreign investment will not come to the country unless rule of law is established .Legal system must guarantee the return of money of the investors. Good lawyers are needed for establishing rule of law. Good institutions too are needed to produce good lawyers. In India, the best students are studying law. In Bangladesh, standard of law teaching is very low in private universities.
The President of the Metropolitan Chamber of Commerce and Industry said because of rising cost of doing business, he is losing competitiveness and profit is going down. As profit is falling, entrepreneurs would not be interested in investment. When local investors are not forthcoming, foreign investors will be far behind. Employment has declined for lack of investment.
Businessmen have been talking about the crisis of gas, power and land for a long time. These problems can not be resolved overnight. The government has been talking about setting up special economic zones since 2010. But not a single zone has been developed in six years. It is not known whether big industries can be set up in those zones. Industrialists can not plan in the vacuum.
It is said that LNG price will be 3/4 times more than the current price of gas. In that case it is uncertain whether the existing industries can survive by using LNG. Businessmen are passing days through uncertainty. There must be definite plan about gas and land.
The World Economic Forum evaluated and rated Bangladesh's infrastructure at 127th amongst 144 countries. Because of weak infrastructure, entrepreneurs have to wait for many years for connectivity of gas and electricity after setting up their industries. Latest information shows that about 2,000 factories are waiting to get electricity connection. Besides poor infrastructure, lack of land, acute shortage of power and gas for new industries, finding right people and getting to work productively are the biggest problems of Bangladesh today.
Our education system and curriculum do not serve the goals of human development. There is a lack of communication and collaboration between the government, academia and industry. As such we are not producing quality or skilled persons for modern industry.
When investors tend to come to a country, they first look at the rate of return on their investment and whether they will be able to repatriate their profits or funds and most importantly, whether there is sufficient security for their investments.
Bangladesh received $1.6 billion last year but the country needs about $5.4 billion a year to fulfil its dream of getting the middle-income status by 2021.
The writer is an economist and columnist
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