The Bangladesh Investment Development Authority (BIDA) was born out of the merger of the Board of Investment (BoI) and the Privatisation Commission (PC) last week. With the approval of the draft Act by the cabinet, there will now be only one authority responsible for giving registration to the industries, to be set up in the private sector of the economy.
All the officials and employees working under the BoI and PC will be absorbed in the newly formed investment-promotion body. Besides, all the assets and liabilities of the BoI and the PC will be devolved upon this new organisation.
In fact, the BoI and PC remained virtually non-functional over the years. Both of these bodies were earlier set up with the avowed goal of playing a pivotal role in attracting foreign and local investments. In reality, they however did not succeed much in performing their expected jobs during the last several years.
The newly formed organisation now has been debarred from taking care of the investment proposals under the Bangladesh Export Processing Zones Authority (BEPZA), Bangladesh Economic Zones Authority (BEZA), Export Processing Zones (EPZ), Bangladesh Small and Cottage Industries Corporation (BSCIC), Hi-tech Parks etc.
Its main tasks will be to help the authorities concerned in land acquisition and work for ensuring efficient use of land. It will also make a list of unused land and structures and thus frame a policy for their utilisation, prepare guidelines for allotting and transferring plots and form a one-stop-service committee for making the one-stop-service delivery more effective.
Sharp differences between a number of ministries and the PC had earlier surfaced on the issue of the privatisation of state-owned enterprises (SoEs), since inception of the latter. The PC alleged that the ministries had never taken any initiative to make the loss-making firms profitable. Various constraints also impeded the growth and momentum of investment activities. There are no visible signs about the overall investment activities gaining pace in the recent times.
The finance ministry took several attempts to close down the PC as per the directive of the Prime Minister's Office (PMO). However, it later changed its mindset. In 1993, the government constituted Privatisation Board, which was later upgraded to Privatisation Commission (PC) in 2000.
Meanwhile, land scarcity is otherwise a big problem for the investors to set up new industries. The merger aims at addressing this particular problem. Keeping in mind the barriers that are often put by ministries to productive use of public land by setting up industries, the new law stipulates formation of an execution committee of investment-related projects. It will take decisions on land use in meetings with all stakeholders so that no barrier remains on its way at a later stage.
The SoEs have large areas of land at their own premises. The new organisation will chalk out a plan how to meet the investors' demand for land, once they make registration for investment. The land of the SoEs has built-in facilities like roads, gas and electricity and investors may utilise such services quickly. One wing of the new body will handle investment proposals while another will deal with matters about making land available and take steps to allocate it to the real investors.
During the previous caretaker government, the now-defunct Regulatory Reform Commission (RRC) did make a number of recommendations with a view to reinvigorating the activities of the BoI. It had suggested for updating of the old, ineffective and complicated laws to speed up development process through boosting investment and trade. But those did not receive any proper attention from the authorities.
It is to be noted here that the ruling party made its electoral pledge about not closing or privatising any industry without ensuring alternative employment opportunities for the already-employed workers and employees. The government did reopen some of the closed jute mills in order to rejuvenate the ailing sector. The loss-making entities in the public sector did in fact entail a huge drag on the country's economy and the ways for getting rid of it are not that much easy.
Although the political situation remains now otherwise stable with no volality in sight, the entrepreneurs are yet to be pro-active about making new investments. They want to be fully assured that their investment would remain safe and ensure a rate of return that is attractive for them. Foreign investors operating in the country also insisted that the government should not own or operate any left-out organisations, as those (SoEs) only spoil public money and become the breeding grounds for corruption. The government should, instead, act, as they suggest, as a facilitator to encourage industrialisation.
The findings of a recent study show that a staggering 83 per cent of foreign firms located in Bangladesh identified corruption as a major constraint. They also identified crime and severe slacks in law and order as major business constraints. Such a negative perception about Bangladesh as a corruption- and crime-prone country, if it persists for long, will surely be taking a toll on its FDI inflow.
The study further notes that a higher percentage of foreign firms located in Bangladesh identified tax rates and administration, business licensing and permits, customs and trade regulations, and skill level of labour force as major business constraints. Such perceptions do otherwise conform to the results found in the econometric model that identifies human capital as one of the major determinants of FDI inflows.
Coming back to the merger issue, the manpower size of the new investment-promotion organisation will reportedly remain at the same level as that of the combined strength of both the erstwhile PC and BoI. If that remains to be the case, critics will have grounds to raise questions about cost-effectiveness of this new state-administered body.
In the circumstances, there will be many operational aspects of the newly-formed body to come under the scanner in the coming days to see how the 'high profile' merger works for attracting much sought-after foreign and local investment. The merger of the two entities will serve no worthy purpose, if the country's investment situation does not witness some noteworthy improvements.
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