There are two sides to an elevation of the economy beyond the rhetoric. Foreign indirect investment (FII) is the most harped on because it looks good, brings in further foreign exchange, creates jobs and capacity. Side by side, local investors simply have to join in but, there's something keeping them from it.
In both cases companies won't be convinced unless a clear pathway of return on investment (ROI) is in the picture. Foreign direct investment (FDI) plods on in an elephant gait and local investors, even the more successful ones, are lolly overseas for investment they believe would provide respectable returns. The recent merger and acquisitions by companies internationally, with the latest news that toy manufacturer Toysaufrus have filed for bankruptcy protection and that Philippine fast food company Jellybee mulling a $1.0 billion bid to buyout the British organic meal provider Pret A Manger are examples of how much on-line sales are beginning to rule the roost.
It should be a hallmark decision to allow seven competent companies invest abroad in readymade garments (RMG), pharmaceuticals and in the car lubricant sectors spanning countries from Africa to Asia. Added to others, Square Group in Kenya, DBL Group in Ethiopia, BSRM in Kenyaand Mobile Jamuna Limited (MJL) are to invest close to $25 million in pharmaceuticals, RMG and lubricants. The last may be reconsidered in the context that MJL's proposal is for a half million dollar joint venture in Myanmar, not-exactly everyone's most favoured nation.
In contrast, Akij Group's venture in acquiring two Malaysian companies at an estimated $1.6 billion, Deshbondhu Group's proposal to build a sugar factory, 'Summit Group's proposal to setting up a shipyard in Singapore and Nitol Niloy's plans to buy cultivable land in Uganda have been scuppered. Nitol Niloy's proposal was perfectly in line with the Prime Minister's first-time suggestion of leasing land abroad to grow more crop abroad as part of overcoming precisely the situation we are faced with today. Also discarded was Pran Group's attempt to invest in a company in India.
Economists are divided in the utility of such investments; these experts would rather see investment decisions locally. Bangladesh government's finance division believes the approved investments would be smooth sailing but hasn't been able to nail down why the excess liquidity isn't being snapped up. The usual excuses relating to approval delays and infrastructure shortcomings aside, the Finance Minister recently waded in to the banking sector saying they have made loan disbursement difficult and complex, to the extent that from day-one companies are on the back-foot. Bankers moan that they need a four per cent spread between deposit rates and loan rates in order to make money. Stuck in the mire of tradition, the concept of volume vs value isn't being considered even after the low bank rates and negative deposit returns in international markets have produced growth even in the idling Eurozone.
Nothing works better than success. Maybe the seven that did get their investment proposals approved-though finance ministry is yet to give the final nod, -could share their views on further flexibility of interest rates on the basis of the nature of investments. If bigger projects get lower interest rates then will come a time when the tide changes and larger spreads could become a reality again. At a time of stagnation, stagnated ideas don't work. Maybe a new set of rules can be introduced for the defaulters, one for the ones that are in line, a fresh look at empowering finances for new investors and a long look at the red-tape that led to the default culture. If defaulted loans are repaid both in terms of cash and kind tied to restrictions on stick market exchange rules, the coordinated approach might bring out something new. At worst, it might fail - but then, what's new about that?
