FDI proposals call for prompt decisions

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Shahiduzzaman Khan
Foreign investments are not coming to Bangladesh in a bigger way. Successive governments have repeatedly boasted of most liberal investment policy a country could ever offer and invited foreign entrepreneurs to avail such opportunities in a massive way. But reality is this: such policy is seen only in papers -- without its practical application.
From the airport up to registration of an investment proposal, a foreign investor has to wait for months after months, even years. 'One-stop service' is there only in the book of the Board of Investment (BoI). But has it worked for a single day here in Bangladesh? In spite of such odds, many investors are waiting for a long time to get their proposals approved, until now even under the present caretaker government.
As reported by the FE this week, the chief of the local foreign investors chamber told a luncheon meeting that the country should have a double digit economic growth that could be achieved through adequate inflows of foreign direct investment (FDI). He was visibly frustrated seeing no representation of his chamber in the newly formed Bangladesh Better Business Forum (BBBF). How the Forum should succeed when the lone body for foreign entrepreneurs is kept aloof from its purview, he said.
The existing investors operating in the country are none other than the ambassadors to other potential investors. If they are satisfied with the investment-related situation in the country, they will act as catalysts for attracting others. There is a need to formulate an equity protection law in the country. Without an equity protection law, foreign investors do not feel encouraged to invest in government or private equity. Long procedural delay is witnessed while opening up a branch or liaison office of a foreign company in Bangladesh. It takes around a year or more to get approval for doing this simple job.
Foreign investors in the country have repeatedly urged the government to make quick decision on the fate of $5.5 billion investment proposals by big conglomerates like Tata of India and Asia Energy of the United Kingdom. Both the companies last month called upon the government for a quick decision on their investment proposals.
In addition, the country's investment promotion agency, BoI, has also been sitting on investment proposals worth another $5.0 billion from some of the top companies in the world.
This is not fair in any way. If the government finds no merit in such proposals or does consider them not conforming to "national interests", it should say 'no'. Otherwise, it should endorse the proposals so that these may become operational sooner than later. Potential foreign investors are least expected to wait for an unlimited period for getting their proposals approved in a world where most developing countries are making allout efforts to attract FDI.
A quick decision on the big investment proposals would send a positive signal to the other foreign investors. The incumbent caretaker government has already taken some initiatives for attracting foreign investment in Bangladesh. The Regulatory Reforms Commission is now engaged in simplifying existing systems to bring about changes in the legal framework relating to foreign investment. The country is also preparing ground for a favourable business environment to be created following speedy execution of recommendations coming from the BBBF.
Bangladesh received about $792 million FDI in 2006. The country's central bank is now preparing the statistics of the FDI in 2007. But the problem is: foreign investors are still facing hurdles to operating businesses in Bangladesh. The government needs to address the hurdles to help investors perform their business activities free from any hassles.
Almost half of the foreign investment proposals registered with the BoI each year do not materialise at all. The government's poor negotiating skills, lack of coordination among agencies concerned etc., are to blame for such failure. Although on paper the existing investment and trade related policies of the government and the incentive package for foreign investors are attractive and macro-economic indicators are otherwise favourable, the inflow of FDI into the country remains much below the amount registered. This is because of the mismatch between the written policies of the government and the realities on the ground at the implementation phase, absence of good governance, irregularities at almost all levels, and the inadequate infrastructure. Lack of capacity of domestic partners of the potential foreign investors is another reason why so many projects do not materialise at all.
One of the main reasons behind the gap between the actual FDI figures and registration is the lack of follow-up with the investors after registration. The BoI recently appointed two officials to maintain contact with potential investors. Indeed, procrastination on the part of the government in taking prompt decisions on FDI proposals, has added to the country's woes.
Investors generally explore three to four countries and switch to the destination, which is comparatively better for them. But the BoI count all proposals, even after signing an expression of interest with any investors, and this reflects a bullish trend of registration every year. For Bangladesh to catch up with rest of the world and to achieve its millennium development objectives by 2015, the inflow of FDI in larger volumes is critical due to the dearth of necessary domestic financial resources and technology. Considering all aspects of the pending larger proposals, prompt decisions have to be taken in right earnest. Otherwise, the investors will take the decision to relocate their industries elsewhere.