Attracting FDI

Bangladesh should by now have been a major destination of foreign direct investment (FDI) had the creation of new institutions alone been the catalyst for attracting a greater inflow of it. Barring one or two years, FDI has never flowed to this country to any notable extent while many South and Southeast Asian countries have successfully attracted a larger volume of it. Worse still, in the last calendar year, according to a UNDP report, the inflow of FDI to Bangladesh declined by 4.5 per cent compared to that of the preceding year. The government has disputed the UNDP estimate, claiming miscalculations. But this claim sounded too feeble to draw anyone's notice.  
The official circles, including the finance chief, have on occasions expressed their deep worries over the poor FDI flow in recent years. Some of them even pointed accusing fingers at the Board of Investment (BoI) for failing to do its job properly. Now, a move is reportedly there to set up a new entity, named the Bangladesh Investment and Industrial Authority (BIIDA) through the merger of a couple of state organisations -- BoI and Privatisation Commission (PC) -- to facilitate increased inflow of FDI. The proposed BIIDA, it is officially stated, will have greater authority to ensure fulfilment of all the requirements, including that of land, under one roof.
Thus the new law that would facilitate the creation of BIIDA would give enough authority to the new entity to take over unused or fallow land belonging to the state-owned enterprises (SoEs) and dispose of, or hand over, the same to foreign investors for productive use. The objectives behind creation of the BIIDA sound good. It would be relevant to note here that the promises that were made, while creating the BoI in 1989 and the PC in 1993, were also lofty ones. The BoI was supposed to act as a one-stop service centre for investors, local and foreign, while the PC's job was meant for divestiture of the SoEs. None of these two organisations could fulfil their respective objectives. The lack of coordination among different government agencies, indifference and bureaucratic complexities, among others, have kept them almost non-functional since long.
The proposed BIIDA, having  the authority to provide registration, lands for new industries and ensure utility services to new organisations will, as the official indications suggest, handle both investment and privatisation activities. It will thus be required to do multiple jobs. It is not that the FDI has not flowed into the country up to the desired level just because of incompetence of the BoI or the divestment has not taken place due to the inertia on the part of the PC. There are other factors, most of which are systemic in nature, that have also affected the performance of both the organisations.
Replacing one organisation with another is unlikely to serve the purpose. What is needed most is the identification of factors which discourage both foreign and local investors. Similarly, it is essential to identify the vested interests that have been scuttling the move to dispose of loss-incurring state enterprises. It is equally important to ensure long-term political stability under a democratic dispensation and remove the hurdles as regards infrastructure, energy and power.  For drawing increased volume of FDI, Bangladesh has to be a more attractive destination than others. The availability of cheap labour is unlikely to work wonder anymore as many other South and Southeast Asian nations are now offering the same, along with many more advantages.