Concluding Session: Theme: The Way ForwardMr. Syed Nasim Manzur Vice President, MCCI
Monday, 17 May 2010
Since the title of the afternoon is "The Way Forward", I just thought I would make a few points starting from Prof Papanek's very informative and detailed presentation. I am thankful that he started off saying something which is a very common complaint or shall we say plea on the part of Bangladeshi investors that domestic investment also serves as a magnet for FDI. We have seen in India and China where investment decisions often are determined for a country based on what the local investment trends are. Countries which have very low local investment levels do not often succeed in attracting FDI.
The second point he said is that the government should not favor necessarily FDI over local investments which is again a very common concern of ours, and which is very close to our hearts. I think if you look at the overall growth of the Bangladesh export sector and the domestic import substitution sector, you will see that the investment growth has happened simply because of the potential of Bangladesh. I believe that we need to highlight the high risk-high potential; and also high risk-high reward potential of Bangladesh. If we were really Singapore already, people would not invest in us. I think it's the challenge that exists in Bangladesh and how we can overcome these challenges makes Bangladesh an interesting destination for FDI.
I think when we hear a lot of these presentations on FDI, we think of it as a nebulous cloud of FDI whereas other countries have had a much targeted FDI policy. One interesting presentation I heard was on the tourism sector for example; where 77% of the largest source tourist in the world today is China, and they actually travel within Asia. Cannot Bangladesh have a strategy in place to actually try and attract some of these tourists into Bangladesh? So instead of saying we will be the source of destination for all FDI, for all industries, for all sectors, surely there are areas, based on competitive advantage, which naturally lend themselves to FDI into Bangladesh rather than the others. And that brings us to the strongest point. Which is the window of opportunity? I personally believe that the window of opportunity for Bangladesh is the next ten years. We will either catch that opportunity or that opportunity will pass us by; and simply the reason is China. China is the factory of the world; it is the MFG source of the world. For reasons we all know, the Yuan, forget about the cost of labor, factories in the Pearl Delta today have 20 to 40% shortages of labor. We are receiving in Bangladesh every month. Multiple delegations from Taiwan are looking for relocation of factories from Taiwan and China. The largest furniture maker in China, which is a Taiwanese group, has already set up a factory here. The Largest shoe maker in China is already setting up a factory here and the stories continue.
But there are some basic pre-requisites for FDI; the first one, which I think has already been touched upon, is perception. More than good governance which everybody is shouting out for, the change in the perception of good governance is important and for which a few moves could actually help overcome these kinds of problems that we have. Predictability of policy and our Laws, that change from day to day, are a few of them. We suffer a lot because of these and I will give an example of acquiring technology, which in our country is called royalties for technical fees. There are two completely conflicting definitions in this country. According to the BOI, it is 6 % of net sales, and according to BB it is 5% net profits. Which one applies? Depending on which government official you talk to, a different one applies. These are the kind of actual bottlenecks which deter FDI and in fact domestic investments.
The second point which I think is a prerequisite is implementation of policy. I've talked to many investors, who say on paper that we have better policies than India, Sri Lanka, and even Pakistan, but I would say implementation of policy is critical. If we want to get a work permit and we want to get it in 7 days, it will cost us more. If we are able to pay a fee then it will be fast tracked. But it cannot go on open ended without deadlines as it happens now.
Infrastructure, we all know the story about power but I don't hear enough about the transportation system. It takes us 2 hours and 30 minutes to fly in from Bangkok to Dhaka but from Dhaka to Gazipur where I work and we have 20000 factories today, it takes us 3.5 hours nowadays. Our buyers don't want to visit. They want to stay in Bangkok. We have to go to Bangkok to negotiate with them. We need to do something on a crash basis to fix the infrastructure. Power and gas we all know; but the ports, the capacity of the ports to handle. And, most importantly, I think is land. In a recent joint venture negotiation with our Taiwanese partners, they were shocked when we told them that land in Gazipur district costs close to half a million dollars an acre. They couldn't believe it. They had to actually employ independent auditors to verify that and the truth is that it does cost that much of amount. Unless we can create land banks, where are we going to set up these factories?
The next requisite is the rule of law. The move towards establishing an independent judiciary is fantastic. The move towards arbitration- alternative dispute resolution (ADR)- is good. And again it comes down to predictability of policy. The court cases in Bangladesh that often take generations is not a very attractive proposition for Foreign or in fact domestic investments.
Managing our image is our biggest single challenge now; since we have to compete with countries like Vietnam and Indonesia. Indonesia is the greatest threat to us these days. We've heard Mr. Fung, from Lee and Fung, that Indonesia is a great destination for foreign investors. If we have to compete with countries like that, we have to manage our image. And for example look at the Indian case study. Their whole targeted campaign was the "Pink Press Campaign", where all they did is every month they had stories of good business practices, policies, investments in their country, not in the general press but in what's called the "pink press", the financial expresses of the world, the financial times of the world, the Asian wall street journals.
The Government needs to have a policy in place. I think we need to show that we can do something on fast track basis. We are extremely pleased by the fact that the government has finally decided to fast-track certain rental power plants and now we are quite hopeful. We need to show some more results on the short term, for our own confidence and for the sake of the confidence of our foreign partners.
In conclusion I think that the secret in Bangladesh is the famous PPP. But my definition of PPP is different; I think investment will happen and we can make profits in this country. I think we can have inclusive and job creating growth. You need P for patience, P for perseverance and P for pursuit. We need to pursue and pursue and pursue and we will succeed. Thank you.
The second point he said is that the government should not favor necessarily FDI over local investments which is again a very common concern of ours, and which is very close to our hearts. I think if you look at the overall growth of the Bangladesh export sector and the domestic import substitution sector, you will see that the investment growth has happened simply because of the potential of Bangladesh. I believe that we need to highlight the high risk-high potential; and also high risk-high reward potential of Bangladesh. If we were really Singapore already, people would not invest in us. I think it's the challenge that exists in Bangladesh and how we can overcome these challenges makes Bangladesh an interesting destination for FDI.
I think when we hear a lot of these presentations on FDI, we think of it as a nebulous cloud of FDI whereas other countries have had a much targeted FDI policy. One interesting presentation I heard was on the tourism sector for example; where 77% of the largest source tourist in the world today is China, and they actually travel within Asia. Cannot Bangladesh have a strategy in place to actually try and attract some of these tourists into Bangladesh? So instead of saying we will be the source of destination for all FDI, for all industries, for all sectors, surely there are areas, based on competitive advantage, which naturally lend themselves to FDI into Bangladesh rather than the others. And that brings us to the strongest point. Which is the window of opportunity? I personally believe that the window of opportunity for Bangladesh is the next ten years. We will either catch that opportunity or that opportunity will pass us by; and simply the reason is China. China is the factory of the world; it is the MFG source of the world. For reasons we all know, the Yuan, forget about the cost of labor, factories in the Pearl Delta today have 20 to 40% shortages of labor. We are receiving in Bangladesh every month. Multiple delegations from Taiwan are looking for relocation of factories from Taiwan and China. The largest furniture maker in China, which is a Taiwanese group, has already set up a factory here. The Largest shoe maker in China is already setting up a factory here and the stories continue.
But there are some basic pre-requisites for FDI; the first one, which I think has already been touched upon, is perception. More than good governance which everybody is shouting out for, the change in the perception of good governance is important and for which a few moves could actually help overcome these kinds of problems that we have. Predictability of policy and our Laws, that change from day to day, are a few of them. We suffer a lot because of these and I will give an example of acquiring technology, which in our country is called royalties for technical fees. There are two completely conflicting definitions in this country. According to the BOI, it is 6 % of net sales, and according to BB it is 5% net profits. Which one applies? Depending on which government official you talk to, a different one applies. These are the kind of actual bottlenecks which deter FDI and in fact domestic investments.
The second point which I think is a prerequisite is implementation of policy. I've talked to many investors, who say on paper that we have better policies than India, Sri Lanka, and even Pakistan, but I would say implementation of policy is critical. If we want to get a work permit and we want to get it in 7 days, it will cost us more. If we are able to pay a fee then it will be fast tracked. But it cannot go on open ended without deadlines as it happens now.
Infrastructure, we all know the story about power but I don't hear enough about the transportation system. It takes us 2 hours and 30 minutes to fly in from Bangkok to Dhaka but from Dhaka to Gazipur where I work and we have 20000 factories today, it takes us 3.5 hours nowadays. Our buyers don't want to visit. They want to stay in Bangkok. We have to go to Bangkok to negotiate with them. We need to do something on a crash basis to fix the infrastructure. Power and gas we all know; but the ports, the capacity of the ports to handle. And, most importantly, I think is land. In a recent joint venture negotiation with our Taiwanese partners, they were shocked when we told them that land in Gazipur district costs close to half a million dollars an acre. They couldn't believe it. They had to actually employ independent auditors to verify that and the truth is that it does cost that much of amount. Unless we can create land banks, where are we going to set up these factories?
The next requisite is the rule of law. The move towards establishing an independent judiciary is fantastic. The move towards arbitration- alternative dispute resolution (ADR)- is good. And again it comes down to predictability of policy. The court cases in Bangladesh that often take generations is not a very attractive proposition for Foreign or in fact domestic investments.
Managing our image is our biggest single challenge now; since we have to compete with countries like Vietnam and Indonesia. Indonesia is the greatest threat to us these days. We've heard Mr. Fung, from Lee and Fung, that Indonesia is a great destination for foreign investors. If we have to compete with countries like that, we have to manage our image. And for example look at the Indian case study. Their whole targeted campaign was the "Pink Press Campaign", where all they did is every month they had stories of good business practices, policies, investments in their country, not in the general press but in what's called the "pink press", the financial expresses of the world, the financial times of the world, the Asian wall street journals.
The Government needs to have a policy in place. I think we need to show that we can do something on fast track basis. We are extremely pleased by the fact that the government has finally decided to fast-track certain rental power plants and now we are quite hopeful. We need to show some more results on the short term, for our own confidence and for the sake of the confidence of our foreign partners.
In conclusion I think that the secret in Bangladesh is the famous PPP. But my definition of PPP is different; I think investment will happen and we can make profits in this country. I think we can have inclusive and job creating growth. You need P for patience, P for perseverance and P for pursuit. We need to pursue and pursue and pursue and we will succeed. Thank you.