In the journey of progress, we are aiming for a developed Bangladesh by 2041. Only 22 years are left. We have to increase capita income to the level of more than US$ 12,000 from $ 1,751 (FY 2017-18, BBS) and many other steps need to be taken. The honourable Finance Minister said that the per capita income in the country will also increase to US$ 1,909 at an Executive Committee of National Economic Council (ECNEC) meeting on March 19, 2019. He also added that Bangladesh's Gross Domestic Product (GDP) is set to grow by 8.13 per cent-the highest ever in the country's economic history-in the current fiscal year (FY2018-19). The minister mentioned that "the macro-economic performance of the country is very good, which will contribute to achieving the robust GDP growth". He added that the production of the agriculture and manufacturing sectors were "also very good", while the export performance was "robust", leading to healthy per capita income and the GDP growth. It has been forecasted that the investment to GDP ratio will stand at 31.57 per cent-of which 8.17 per cent will come from public investment and 23.40 per cent from private sector investment. Additionally, the government will give more incentives to the private sector to encourage their engagement in mainstream economy.
Not only the per capita income but also the other aspects of a developed country such as high standard of living, high rate of literacy and quality education, pollution free environment, green GDP, green tax, improved communication infrastructure, sophisticated and modern port operations, high and speedy railway networks, human resources and cultural development and many issues need to be properly addressed. We need a strong and investor-friendly business environment to that end. A number of assessments and projections have been very encouraging about our business environment. Bangladesh has enjoyed robust growth for the past decade and, given its inherent strengths, especially a vibrant private sector, strategic geographic location and a large pool of inexpensive labour, the prospects for continuation of such growth are relatively good.
World Bank has already observed that Bangladesh has a track record for growth and development despite frequent natural disasters, fuel, food price and global financial crises and other challenges. Bangladesh was referred by Goldman Sachs (December 2005) as part of the 'Next Eleven' emerging markets. The other countries in this list include Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam. JP Morgan (2007) included Bangladesh as a 'Frontier Five' country with impressive economic and investment potential while the other countries in this list included Vietnam, Nigeria, Kazakhstan, and Kenya. Bangladesh is on the growth trajectory where poverty was reduced by nearly a third whereas life expectancy, literacy and per capita food production have increased significantly over the past two decades. South Asia's largest shopping mall in Bangladesh is a testament to recent economic growth. Foreign Direct Investments (FDIs) are giving Bangladesh a much needed boost to become a persistent performer in the world economy. Bangladesh operates eight exporting zones nationwide which allow for 100 per cent foreign-owned ventures to operate. The Economist Intelligence Unit (EIU) has forecasted that real GDP of Bangladesh will expand at an average annual rate of 6.30 per cent, as it will be continuously supported by the steady expansion of private consumption and investment.
Foreign investors are allowed up to 100 per cent equity participation and all industries are open for private investment (exceptions are defence and armaments; nuclear energy production; forestry; currency printing, railways and air transport). The vast population of Bangladesh, with a large consumer market (young with rising incomes), is positive about private consumption. A strategic geographic location (located between South Asia and South East Asia) in the vicinity of India and China, as well as having low cost labour, makes Bangladesh a potentially attractive destination for foreign direct investment. The Foreign Private Investment Act provides legal protection from nationalisation and expropriation, and guarantees the repatriation of capital and dividends. Bangladesh is a founding member of the South Asian Association for Regional Cooperation (SAARC, along with among others India and Pakistan) as well as the South Asian free trade area (SAFTA).
Though financial markets are underdeveloped, forecasts have assumed a steady increase in the size over the coming ten years, with higher availability of credit, stronger capital markets and further extension of micro-financing schemes. Bangladesh's business environment indicator is gradually nearing that of India, and the infrastructure ratings of both are comparable. In order to sustain its growth in export commodities and FDI, Bangladesh should remain competitive by offering attractive investment incentives. Low literacy levels and an underdeveloped infrastructure are holding the country back from reaching its full potential. Bangladesh still faces many bottlenecks in its trade and investment climate. Besides placing Bangladesh in the list of 'Next Eleven', Goldman Sachs also categorised Bangladesh as a country with broad-based weaknesses. Indicators that helped improve Bangladesh's ranking in the Global Competitiveness Index include the adequate state of infrastructure, adequate access to finance, low level of corruption and political stability. Despite various odds Bangladesh has seen an average more than 6.5 growth annually, making it an investment destination with huge potential, also because government policy is gradually being geared towards improving the business environment. One of the biggest short term challenges for Bangladesh is to improve the supply of electricity.
Bangladesh offers opportunities for investment under its liberalised Industrial Policy and export-oriented, private sector-led growth strategy. All but four sectors (i.e. arms and ammunition and other defence equipment and machinery, forest plantation and mechanised extraction within the bounds of reserved forests, production of nuclear energy, and security printing and mining) are open for private investment in Bangladesh. Bangladesh Investment Development Authority (BIDA) has been working to accelerate private investment and provide institutional support services to potential investors. For investors, the BIDA provides an overview of all business laws, rules and regulations most relevant to setting up commercial or industrial activities. The Ministry of Finance offers an overview of all policies and strategies related to economic perspectives.
In order to stimulate rapid economic growth of the country, particularly through industrialisation, the government has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. The policy provides an overview of fiscal and non-fiscal incentives. The following have been playing an important role at attracting foreign investments:
n STRATEGIC LOCATION OF BANGLADESH-With access to international sea and air routes, the location of the country is ideal for global trade.
n ADVANTAGEOUS TRADE AGREEMENTS- Most Bangladeshi products enjoy complete duty and quota-free access to countries of the European Union, Japan, USA, Australia, and other developed countries.
n ATTRACTIVE BUSINESS & INVESTMENT CLIMATE-Bangladesh has a rapidly growing domestic market and, with nearly 170 million people, there is obvious potential for a further increase in domestic consumption.
n YOUTH AND AMBITION-Bangladesh has a vast workforce. A growing segment of this workforce is skilled while others are semi-skilled. There is an abundant supply of disciplined, easily trainable and low-cost workers suitable for any labour-intensive industry.
n LANGUAGE-Although Bengali is the official language, English is widely accepted as a second language.
n NATURAL RESOURCES-Bangladesh is endowed with an abundant supply of natural gas, water and fertile land.
n THE BANGLADESH EXPORT PROCESSING ZONES-The BIDA is responsible for attracting investment into Bangladesh and to ensure that investors receive the necessary assistance. The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government for promoting, attracting and facilitating foreign investment within different Export Processing Zones (EPZ). An EPZ is defined as a territorial or economic enclave, through which, goods may be imported and manufactured and reshipped with a reduction in duties and/or minimal intervention by customs officials. The primary objective of an EPZ is to provide special areas where potential investors can find a congenial investment climate, free from cumbersome procedures. An EPZ provides: Plots/factory buildings in custom bonded area, infrastructural facilities, administrative facilities and fiscal & non-fiscal incentives.
The Open Door Policy aims to boost inward foreign investment with a number of tax holidays (5-10 years depending on location). Eight export processing zones EPZ's are already in operation where 100-per cent foreign-owned ventures are allowed to operate and are given equal treatment as local enterprises.
To ensure uninterrupted power supply, the Government of Bangladesh is setting up new power stations, including nuclear power plants, with foreign investments. The Foreign Private Investment Act provides legal protection from nationalisation and expropriation, and guarantees the repatriation of capital and dividends. As of now, indicators have shown that openness to trade in Bangladesh is much higher (trade openness of Bangladesh is equal to India) than openness to investment. There have been some improvements in the institutional framework for facilitating public and private investments such as the Special Economic Zones Act, Public-Private Partnership guidelines and the Bangladesh Infrastructure Finance Fund. With regards to intellectual property rights, Bangladesh has adopted protection in line with WTO standards (TRIPS agreement, trade related aspects of intellectual property rights). Significant customs modernisation is under way to facilitate speedy customs clearance through automation and to improve transparency in the customs clearance process. Import clearance and export procedures have been further simplified by reducing the number of signatures needed for clearance of consignments and the frequency of inspection of goods.
In order to maintain a conducive, business-friendly environment, the government should ensure that the ongoing momentum and vibrancy of the private sector continues; business environment is facilitated through fiscal and non-fiscal incentives and roads and railway infrastructure and networks are constantly improved. Additionally, enhancement of trade facilitation at ports and customs stations; e-governance, e-business and automation in banking and payment gateways; necessary utilities at SEZs and EPZs and smooth and effective logistics and supply chain management will be helpful. There should also be better practice of model business cases; diversification of exports and markets; market development; proactive financial sector and capital market, so that Bangladesh can continue to move towards higher growth trajectory.
Dr. Md. Moniruzzaman is an Associate Professor at the Bangladesh Institute of
Governance and
Management (BIGM).
