For emerging economies, investment works as a lifeline. Bangladesh enjoys the status of a lower middle-income country on one hand and of a Least Developed Country (LDC), on the other. Such a unique combination is an opportunity for investors.
PricewaterhouseCoopers (PWC) recently estimated that Bangladesh would be the world's 23rd largest economy by 2050. Intelligent and far-sighted investors may welcome this news. The country offers the entrepreneurs and share-market investors business-friendly policies, suitable geographical location and skilled workforce at cheap wages as basic facilities. Moreover, Asia has become the world's new consumer market. Investors may derive comparative advantage of Bangladesh's LDC status while exporting most of its products to Asian and developed countries.
Considering current dynamics of stock market under low index, potential economic growth of the country and the scope for considerable value growth of fundamental stocks also create unique investments opportunities in the Bangladesh share market.
The country's existing investment opportunities offer big scopes for public-private partnerships (PPPs). Under PPP, all professional institutes such as Institute of Chartered Secretaries of Bangladesh (ICSB), Institute of Chartered Accountants of Bangladesh (ICAB) and Institute of Cost and Management Accountants of Bangladesh (ICMAB), chambers and associations like the Federation of Bangladesh Chambers of Commerce and Commerce Industries (FBCCI) and the Dhaka Chamber of Commerce and Industries (DCCI) in collaboration with the government's relevant ministries, authorities and regulators may join in this collaboration to achieve Sustainable Development Goals (SDGs).
WHY SHOULD WE CREATE FDI ATMOSPHERE? Foreign direct investment (FDI) is a powerful weapon for economic development in the present global context. It enables a capital-shy country like Bangladesh to build up physical capital, create employment opportunities, develop productive capacity, enhance skills of local labour through transfer of technology and managerial knowledge, and help integrate the domestic economy with the global economy.
FDI investors usually search a country having good facilities for production and sustainable business operations. Despite the factors of production like land, labour, capital, entrepreneurship being crucial, production and investment nowadays rely on undisturbed supply of electricity and gas, good transportation, efficient human resources and, last but not least, good governance.
POTENTIAL AREAS FOR FDI: The potential investment areas in Bangladesh are power generation, distribution and exploration of gas and other mineral resources, highway development including bridges, expressways and tunnels, port infrastructure facilities, industrial parks and private export processing zones, computer software and electronics, diversified jute-based pulp and goods, chemicals and petrochemicals, LP gas, environment-friendly insecticides, leather, leathered goods, tourism, food processing, fruit canning and allied products, sports goods, light engineering and agriculture-based industries.
CONCERNS FOR FDI: As a developing country, Bangladesh needs FDI for its ongoing progress. In order to attract increasing amount of FDI, the government undertook a massive liberalisation of the investment policy. However, a number of concerns exists that needs to be addressed to inspire FDI investors. These are:
n Unfriendly taxation policy and unfair tax burden
Presently, Bangladesh's taxation policy is not favourable at all to attract FDI. Many incidents of unfair tax claims were imposed on foreign investment/multinational companies (MNCs) while misusing gap of local regulations that violates the provisions of equal treatment as per international treaties. It is alleged that the National Board of Revenue (NBR) tries to impose additional tax burden irrationally on multi-national companies (MNCs) to meet revenue target. MNCs sometimes complain that they do not get proper justice against unfair treatment as well as irrational additional taxes claims through administrative process. The aggrieved MNCs then take recourse to time-consuming judicial process.
n High corporate tax rate
The maximum corporate tax rate for MNCs is significantly higher in Bangladesh compared to other Asian countries. A comparative chart shows significant difference in corporate tax rate.
n Absence of level playing field
Local competitors apparently get extra advantage from law-enforcement agencies and other government authorities whereas the same authorities are not found to be supportive enough for the MNCs at the same level.
Foreign investors often do not get the same facilities as local investors. It is always difficult for foreign investors to adopt the culture and associated business mechanism of a foreign country. The lack of facilities makes it harder to attract FDI.
n Excessive bureaucratic interference
Bureaucratic complexity to get registered or permission and lack of administrative coordination among different government bodies have restricted FDI potential in Bangladesh.
n Alleged irregularities in processing papers
Alleged irregularities in processing papers, lack of commitment on the part of local investors, and frequent changes in policies on import duties for raw materials, machinery and equipment make it difficult for foreign investors to determine the feasibility or the prospect of their investment.
n Lack of proper infrastructure
Bangladesh needs to develop its infrastructure facilities and service in various sectors and in this context should also encourage private participants with policy initiatives.
Bangladesh should think in a broader perspective, overcome the present barriers to foreign direct investment (FDI) and set the goal in a higher trajectory under the present dynamics of the country's economy.
Md. Azizur Rahman FCS is a Member of Institute of Chartered Secretaries of Bangladesh (ICSB); Director-General of Intellectual Property Association of Bangladesh (IPAB); Company Secretary of British American Tobacco