Creating business-friendly environment for investors

There is no alternative to raising the level of investment, if Bangladesh is to attain the status of a middle income country by the year 2021. Moody's projection of a stable outlook for Bangladesh's credit rating should encourage all stakeholders to look forward to more investment activities taking place in the country. Such a rating is thus expected to give some positive signals across the world for prospective investors to choose Bangladesh as the new location for their business operations.

The growing interest of foreign investors has lately been indicated, once again, by the UK-Bangladesh Catalysts of Commerce and Industry (UKBCCI). A visiting UKBCCI team met different local chambers and business groups last week to highlight their priorities. The UKBCCI, as a promoter, can serve as matchmaker among prospective investors in both Bangladesh and the United Kingdom. However, the leader of the team sought, as a first step, a business-friendly environment in the country for investors to set up one hundred per cent foreign investment projects or joint venture ones. In the meantime, Lamudi.com, an online real estate marketplace, has announced to pump in US$1.6 million new investment in its Bangladesh venture. The company is a venture of internet incubator Rocket Internet which was established in Berlin in 2007. It has 170 ventures in 40 countries. The comments of the company chief are quite encouraging. He said his company is in Bangladesh because of the latter's increasing economic empowerment to reach to the non-resident Bangladeshis and to help promote rapid urbanisation.

There is no denying that Bangladesh's investment scenario needs to be improved substantially in order to put its economy on a higher level growth trajectory. Its domestic investment rate has remained almost stagnant at around 24 to 25 per cent of its gross domestic product (GDP) for the past many years. This is far below the level that is required for an economy aiming to become a middle-income one by 2021 with a double-digit growth rate. The Sixth Five-Year Plan (2011-15) has also targeted at reaching an eight per cent GDP growth rate by its terminal year. This requires the economy's total investment to grow by 8.1 per cent per year; the share of investment in GDP has also to reach 32.5 per cent by fiscal 2015.

Against this backdrop, all-out efforts are now required to be taken to attract foreign direct investment (FDI) as the country can take advantage of capital, technology and knowledge transfer through it. It can see this as a source of improving efficiency and strengthening competitiveness on a global scale. The size of a country's domestic market, its cost of labour and nature or characteristics of its trade and regulatory framework are the major determinants of attracting FDIs to a country. On its part, Bangladesh has been making efforts to put in place FDI-friendly policies over the years, even much ahead of some of its neighbours. Yet FDI inflows to the country have not really been up to the mark, despite the demonstration of inherent strengths of the economy in sectors like agriculture, readymade garments and remittance earnings. In this context, the government needs to undertake pro-active policy measures to create an attractive business-friendly environment in regional and international perspectives. It has to address sooner rather than later the problem of making lands available for setting up industrial units through proper land zoning arrangements. It should also take effective steps to meet the infrastructural deficit and to strengthen the institutions for better governance.