Addressing the challenges of investment climate

The climate for investment is determined by the interplay of a whole set of factors, economic, social, political, technological and environmental, that has a bearing on the operation of businesses. The government of Bangladesh has adopted a pro-market stance in pursuit of its short- and long-term development objectives. In view of that scheme, the private sector is recognised as the primary engine of growth, owning and operating production systems, and accounting for most of the investment in the economy.
To facilitate business operation in the country, the Sixth Five-Year Plan focuses on improving governance, strengthening administrative capacity and establishing a results-based monitoring and evaluation system for accelerating economic growth and employment.  A number of policy reforms have as well been implemented by the government to create a more open and competitive climate for both foreign and local investment.
However, inadequate supply of infrastructure, unstable and overlapping regulations, procedural abnormalities, inadequately educated workforce etc. are some of the problematic factors in doing business in Bangladesh. Such problematic factors, which are non-conducive to smooth business operation, need to be addressed with careful dedication to ensure a congenial investment climate in the country.
STRIKING RIGHT BALANCE IN BUSINESS REGULATIONS: Bangladesh needs both domestic and foreign investments for the economy to grow at a steady rate. Foreign direct investment (FDI) acts as a principal agent for skill and technology transfer and access to international supply chains. To improve the business atmosphere, trade infrastructure and logistics, including port services and automation, need to be enhanced to lower transaction costs and facilitate faster clearance of goods. The trade regime also requires more liberalisation, through tariff and non-tariff reform.
It is apparent that liberal business regulations support economic growth. Regulations have been likened to traffic signals. Good business regulations enable the private sector to thrive and businesses to expand their transactions network. But, if poorly designed, regulations put in place to safeguard economic activity and facilitate business operations can become obstacles to doing business.  Striking the right balance in business regulation in a changing world, where regulations must continually adapt to new realities, is a reality based challenge.
POLICY FOR LOCAL AND FOREIGN INVESTMENT: Policy towards FDI that Bangladesh has adopted is liberal. It does not require any prior approval for foreign investment except that a foreign investor has to register at the Board of Investment (BoI). There is no limit on foreign equity participation. There are no limits on repatriation of profit and income. Industrial policy of Bangladesh encourages private investment without making any distinction between local and foreign investors. A good number of fiscal incentives are provided to both local and foreign private investment. There is no sector-specific restriction.
Like any other private investment, FDI is welcome in all sectors except ones in the reserve list.  Export-oriented industries are offered a lot of additional fiscal incentives. Bangladesh actually has a higher ranking in terms of incentive package than many developing countries.  In spite of incentive packages FDI inflow is not encouraging at present. In fact, it is less than average figure in developing countries. Real inflow is only partly a function of the degree of liberalisation of the investment regime.
FDI inflow as well as domestic investment is less than actually required because of uncongenial investment climate prevailing at present. The advantage of cheap labour is offset by the high cost of doing business. A huge transaction cost is entangled arising from procedural inefficiency, corruption, poor governance, political uncertainty inefficient port service, etc. It is a necessity to take prompt steps to improve the investment climate of the country through reality-based curative measures, to ensure steady economic growth.
A COUNTRY POWERED BY PEOPLE: It is generally observable through socio-cultural trends and economic strives of the masses that the people, particularly the emerging young population of Bangladesh, are very hard working. With minimum investment and training a lay labour can be converted into a semi-skilled and skilled worker. There is also a somewhat natural affinity to a certain degree of innovativeness, creativity and adaptability to new technologies and environment. As such, the labour-intensive dense population of the country is a huge pool of resource for us.
Rapid economic growth, composition of the economy, and absorption of labour in high productivity, high income jobs are inter-linked factors.  Natural resource in Bangladesh is not lavishly abundant. The one abundant resource it has is its emerging young population. However, presently the average labour productivity and income in agriculture are low. A large part of the labour force is rather occupied in informal economy with low productivity and insufficient income.
DEMAND FOR HIGH-SKILLED WORKERS: Due to increased dependence on knowledge economy throughout the world, labour market demands are transforming rapidly. Even established and existing industries today require more creative and innovative workers as they attempt to move up the value chain. In the emerging information and communications technology (ICT)-dependent industries demand is even higher for more high-skilled and adaptable workers. In all economic scenarios across the globe, demand for low-skilled workers is declining.
In the Sixth Five Year Plan (FY 11-15) it is laid down that productive employment is the most potent means of economic development and poverty reduction. But this is not easily achieved. This requires strategies and actions on the demand side of the labour market, driven primarily by economic growth, as well as by strategies and policies for labour force quality and growth on the supply side. Much of the high-productivity, high-income jobs in Bangladesh have to come from a labour-intensive manufacturing sector based on domestic and export markets as well as from organised services.
LINKING EDUCATION WITH INDUSTRY: Industry today increasingly wants to recruit work-ready employees. Businesses need workers who excel in quality service provision, innovation and leadership, because the international environment for trade, business and investment across the world has become vigorously competitive in face of current trends of market economy and globalisation.
In Bangladesh at present, there is a big disconnection between industry and educators. Typically, course contents, particularly in academic education, are not sufficiently related to the workplace. This needs to be addressed to link up industry demand with education design. Mechanisms should be put in place to allow and encourage businesses to get more involved in the design and delivery of professional education.
For the massive young population to contribute to the national economy, the Government of Bangladesh focuses on balanced distribution of manpower for all diverse professions, alongside crucial emphasis on general education. For achieving development targets through rapid growth, strategies and initiatives are on the way to offer a wide range of courses in industry-related disciplines like Science and Technology, Technical and Vocational Education (TVE), Professional Courses, Agriculture Technology, ICT and so on.
For addressing employment-related vulnerability and for pursuance of full employment, home-grown solutions for technology, products, services and managerial skills are encouraged through policies and strategies. Provisions for Research and Development (R&D), both in the academia as well as the industry also need to be put in place on a priority basis, to harness the potentialities of the talented and hard-working young population of the country.
DRIVE FOR KNOWLEDGE ECONOMY: To reach middle-income threshold by 2021, emphasis on knowledge economy is a key development priority for Bangladesh. A strong and competitive manufacturing and vibrant service sector are especially important for generating productive high-income jobs. With the current trends of vigorously competitive market economy and globalisation there is no option for Bangladesh but to be transformed into a knowledge-driven economy to survive in this fierce competition. The 'Vision 2021' aims at developing Bangladesh into a resourceful and modern economy through efficient use of information and communications technology (ICT). This goal has eloquently been described as 'Digital Bangladesh'. It is believed that through the successful implementation of the ICT policy and its principles it would be possible to create a Digital Bangladesh by 2021 as has been envisioned by the Government.
Among other factors, productivity improvement depends on research and technology. FDI is an important channel for obtaining access to resources as well as technological know-how for development. FDI has the potential to generate employment, raise productivity, transfer skills and technology, enhance exports, and contribute to the long-term economic development.
GAINING INVESTORS' CONFIDENCE FOR INVESTMENT: Problematic factors in doing business like insufficient infrastructure, abnormalities in regulatory framework and half-hearted implementation of reforms hold back investors' confidence. Investment priority is distracted if absence of good governance and good practices prevail, because those factors raise the cost of doing business and create unfair competition within the business. Negative image of the country to the world population caused by prevalence of problematic factors in doing business can mar the investment climate to a damaging degree.  
To boost trade and investment climate of the country the Government has taken up crucial and large infrastructural projects to eliminate power, transportation and connectivity problems. For scaling up investment in infrastructure development the Government has taken steps to create Public-Private Partnership (PPP) for investment in large infrastructure projects.
Along with inadequate infrastructural development and policy reforms, inconsistent and overlapping regulations, incoherent implementation of reforms and uncertain social and political conditions are major challenges for an investment-potential emerging economy like Bangladesh. Coordinated efforts as well as commitment on the part of the business leaders, the civil society and the Government may improve the image of the country to the global community and thus foster a congenial investment climate for business development and growth.
The writer, a trade, business, IPR and ICT expert, is secretary-general & CEO of AMTOB. [email protected]