Overcoming impediments to investment

When the country's leading businesspeople seek the prime minister's intervention for removal of impediments to investment, the move speaks volumes for the lack of proper set-ups in proper places. For long two decades there has not been a major policy reform, as pointed out by a Dhaka University Economics professor, and this has stymied investment if not the process of economic growth. Businesspeople, bankers and academics present at a discussion meeting on 'A new Investment Regime for Bangladesh' arranged by the Metropolitan Chamber of Commerce and Industry (MCCI) in the capital unanimously agreed that the first generation reforms have outlived their tenure because the GDP (gross domestic product) growth rate at 6.0 plus per cent is a product of the jaded policy. A growth rate of this level is inadequate for achieving the cherished status of a middle-income country (MIC) by 2021. The target set for attaining the 8.0 per cent GDP growth rate by 2020 will thus remain unrealised if investment cannot be augmented by second generation reforms.

Business leaders have sought the prime minister's audience most likely because their suggestions fall on deaf ears at the level where such issues should have received top priority. They feel that there is an urgency to go at the root of the near-stagnant investment. Also there is the danger of excessive liquidity in banks if increasing remittance earned by migrant workers continues to accumulate without finding channels for productive investment. The danger will take a turn for the worse when the profit earnings of enterprises also rise without being re-invested or re-deployed in expansion and new ventures for reasons of lack of new business avenues or opportunities.  At a time when the aim should be to draw more foreign investment, the disincentive for local investors counts most negatively.

There is no argument that the country is desperately in need of coming out of the mistaken comfort zone of 6.0 per cent GDP growth. Without investment this will not be possible. Whether getting rid of corruption that -- even the finance minister has admitted -- eats away no less than 2.0 per cent of GDP growth rate would have helped achieve the 8.0 per cent growth remains in theory. The important thing is to materialise the concept into reality. No matter whether it is micro or macro corruption, it needs to be checked in the interest of a healthy investment regime. People are more or less familiar with the adverse environment of investment but no serious effort has yet been made to overcome impediments to investment. It is this stalemate that really prompts business leaders to take up the matter with the country's premier.

True, the inadequacy of infrastructure needed for investment cannot be overcome overnight but there are areas where indecisions and faulty steps do send wrong signals. Political instability apart, the controversy over the Korean Export Processing Zone, to cite an example, has not helped the cause. Had the authorities been prudent, such controversies could be avoided. There is no point needlessly souring the environment of investment for potential foreign investors. Such issues have to be settled amicably through negotiations. Otherwise, investors will shy away from this country.