Attracting foreign investment

A rise, though a slight one, in the flow of foreign direct investment (FDI) to the country, as was reported in this daily early this week, is a welcome sign. Another positive development is the reported interest, shown by the Netherlands, in building the country's deep-sea port. The first indicator, however, is no guarantee of a future flow, due to some stark domestic ground-level realities. Also the Dutch interest, as was indicated by another report carried in the FE also early this week, does not really mean that the authorities will readily be accepting the offer. A number of other foreign investors including those of China had given similar offers on the deep-sea port. But no tangible decision on such offers has yet been made. The Board of Investment (BoI) is otherwise flooded with hundreds of memoranda of understanding on investment. But there is hardly any forward movement on a majority of them.    

A number of organisations such as the Bangladesh Export Processing Zones, BoI and Public-Private Partnership Office are working to help attract investment. But their efforts are not being properly coordinated. Now is the time to bring in reforms. Furthermore, the BoI, which is mandated to facilitate the inflow of FDI to the country and also to help promote domestic investment, has now become an organisation that only provides work permits; it is not in a position to ensure gas and electricity connections -- two vital services that are needed by any industry - to the investors, despite its being a 'one-stop' service-provider. The country does not have adequate infrastructural facilities to meet the demands of prospective investors who want everything in right time from the right place. The foreign investors are particularly hard-nosed. They always think on a long-term basis. But the country's tax structure tends to be unpredictable. There are also other policy flip-flops. As a result, the investors cannot estimate the long-term cost of a project. But investment is demand-driven. Confidence plays here a major role in planning investment activities by actual and potential investors, both local and foreign.

For attracting long-term investment, political stability is a must. It is heartening that the country's polity is now relatively more turmoil-free than before though some contentious issues that had earlier led to confrontation are yet to be resolved. But internecine or inter-party conflicts which continue to surface, time and again, give some disconcerting signals. Investors do not generally like to invest their money in a country where such things tend to become the norms rather than the exceptions. Particularly, foreign investors take the cue from local investors.

Fears about lack of policy continuity - real or perceived ones - are one of the reasons behind the slow flow of FDI. A stable policy framework ensures the continuity of various facilities and incentives that are promised to the investors, thus limiting the scope for any major policy reversal. Frequent policy changes perplex investors who cannot then take a long-term view of their business openings. Many thought that the investment situation would soon witness a turnaround. But the situation has not improved even in the last eight months. It is time for the government to work for creating an enabling environment before holding seminars and road-shows on foreign investment. All such exercises will be of little use unless investors are assured of a safe and profitable location for making long-term investment here.