Addressing factors that retard investments
Saturday, 4 December 2010
Distinguished discussants at a seminar with its theme, Bangladesh: The Next Investment Destination, in a city hotel last Wednesday observed many positives and negatives about the investment situation in Bangladesh, particularly for foreign direct investments (FDIs). But the bottom line is that the rate of investment in Bangladesh remains unsatisfactory even by regional standards. The participants in the seminar that was organised by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, highlighted, once again, the hurdles to attracting investments, particularly FDIs.
To be frank, the problems here have been known for long. There is hardly any need to identify them afresh. Who does not know that weak governance, administrative malpractices, poor infrastructures (roads, ports etc.) ineffective implementation of the policy framework, flaws of the regulatory or oversight bodies, legal lacunae, inadequate and erratic supply of power and gas, low level of skill of human resources et al are distracting the attention of potential investors from Bangladesh?
Now that the same problems have again been cited, the challenge for the policy-makers lies in taking actions sooner rather than later to address these problems. The new industrial policy that has recently been announced by the government is unlikely to help accelerate industrialisation and create new employment opportunities, if problems remain where they were before. Targets that have been set about raising the contribution of industrial sector to the national income creating new jobs under the new industrial policy will, thus, in all probability, remain unrealised if the rate of industrial investments does not pick up.
It is worthwhile to note at this stage that Bangladesh would require, as the MCCI President noted at last Wednesday's seminar, additional investment equivalent to 2.0 per cent of its gross domestic product (GDP) every year to achieve GDP growth of 8.0 per cent by the year, 2013, and 10 per cent, by 2015. There was already an investment shortfall of $1.04 billion in fiscal 2009-10. This shortfall is projected at $9.40 billion in fiscal 2013-14 while the cumulative shortfall, on this basis, will stand at $28 billion to attain the desired GDP growth level. Even with the best of efforts, it will be well-nigh impossible to meet this shortfall through domestic resources for investments. Foreign aid is also not likely to increase to any robust level in the next few years in view of the massive budgetary deficits that many bilateral donors are now running because of the global financial turmoil. FDI flows offer the opportunities to meet Bangladesh's massive investment need. But here too, the picture has been unpromising for this country. In per capita terms, FDI in Bangladesh in recent years stood at $7.0 as compared to $31 in India and $32 in Pakistan. This situation should make it amply clear why Bangladesh needs to address, on a priority basis, the factors that have been impeding FDI flows to its economy.
There are lots to be done for harnessing Bangladesh's potential of becoming the regional transport hub by taking advantage of its strategic geographical location and, thus, to become a gateway to transnational trade and investment in this part of the world. Favourable sovereign credit ratings, some positive assessments by a number of global investment banks and relatively favourable macro-economic indications are, no doubt, positive indicators about Bangladesh's attractions as an investment site for foreign private investors. But all such indicators do not, however, tell the whole story. The mindset, determination, perception and ground-level realities do all matter. It is here where hard actions are critically important.
To be frank, the problems here have been known for long. There is hardly any need to identify them afresh. Who does not know that weak governance, administrative malpractices, poor infrastructures (roads, ports etc.) ineffective implementation of the policy framework, flaws of the regulatory or oversight bodies, legal lacunae, inadequate and erratic supply of power and gas, low level of skill of human resources et al are distracting the attention of potential investors from Bangladesh?
Now that the same problems have again been cited, the challenge for the policy-makers lies in taking actions sooner rather than later to address these problems. The new industrial policy that has recently been announced by the government is unlikely to help accelerate industrialisation and create new employment opportunities, if problems remain where they were before. Targets that have been set about raising the contribution of industrial sector to the national income creating new jobs under the new industrial policy will, thus, in all probability, remain unrealised if the rate of industrial investments does not pick up.
It is worthwhile to note at this stage that Bangladesh would require, as the MCCI President noted at last Wednesday's seminar, additional investment equivalent to 2.0 per cent of its gross domestic product (GDP) every year to achieve GDP growth of 8.0 per cent by the year, 2013, and 10 per cent, by 2015. There was already an investment shortfall of $1.04 billion in fiscal 2009-10. This shortfall is projected at $9.40 billion in fiscal 2013-14 while the cumulative shortfall, on this basis, will stand at $28 billion to attain the desired GDP growth level. Even with the best of efforts, it will be well-nigh impossible to meet this shortfall through domestic resources for investments. Foreign aid is also not likely to increase to any robust level in the next few years in view of the massive budgetary deficits that many bilateral donors are now running because of the global financial turmoil. FDI flows offer the opportunities to meet Bangladesh's massive investment need. But here too, the picture has been unpromising for this country. In per capita terms, FDI in Bangladesh in recent years stood at $7.0 as compared to $31 in India and $32 in Pakistan. This situation should make it amply clear why Bangladesh needs to address, on a priority basis, the factors that have been impeding FDI flows to its economy.
There are lots to be done for harnessing Bangladesh's potential of becoming the regional transport hub by taking advantage of its strategic geographical location and, thus, to become a gateway to transnational trade and investment in this part of the world. Favourable sovereign credit ratings, some positive assessments by a number of global investment banks and relatively favourable macro-economic indications are, no doubt, positive indicators about Bangladesh's attractions as an investment site for foreign private investors. But all such indicators do not, however, tell the whole story. The mindset, determination, perception and ground-level realities do all matter. It is here where hard actions are critically important.