Downtrend in FDI flows
Thursday, 18 October 2007
INVESTMENTS are the keys to economic growth. Developing countries such as Bangladesh are specially keen to play host to foreign investments in greater number because in most cases the rate of their internal investments, remains poor. The foreign direct investments (FDI) flows to Bangladesh have been pushing up from an insignificant trickle to notable amounts in recent years. Particularly, in 2005, the FDI flow reached US$845 million which was the highest ever recorded. Thus, optimism was created that even higher FDIs would be received in the following year. But that has not happened according to the World Investment Report released by the UNCTAD last Tuesday. It showed that FDIs received by Bangladesh in 2006 was US$ 792 million indicating a drop from the previous year. However, this decline is not a major one, only 6.0 per cent from the previous year.
But the worry is not about the figures of last year when FDI inflows did not slump really despite political uncertainties, violence and other issues that apparently created a gloomy scenario about FDI inflows into Bangladesh. Proving the projections untrue, FDI flows had been reasonable under the circumstances in 2006. However, the signs are highly unfavourable in the current year. Nearly ten months of the present year have gone by and a full estimation of the FDI situation would not be available until the end of the year. But according to the available figures which were reported recently in this paper, registration of investment proposals, both foreign and local, has declined significantly, about 30 per cent in the first nine months of 2007 compared to that of the previous year. Undoubtedly, this piece of information needs to be received with due seriousness by the policy planners. Unless something dramatic and positive happens or the BOI and the government gird up their loins in the remaining months of the year and work exceptionally hard and efficiently, the FDI receipts in the present year would be significantly lower than those of the last two years.
Thus, it is imperative to work urgently on the pending FDI proposals and the same are not insignificant. FDI proposals amounting to some US$ 12.8 billion are there with the BOI. If this organisation and related authorities of the government make a determined effort to process the greater part of these proposals before the end of the year, then the ground will be well paved for the country to receive a substantial inflow of foreign investments early in the new year that would compensate for the lesser receipt in the outgoing year. However, BOI and others ought not to resort to errors in selection of FDI proposals from undue haste. They should prioritise and quickly process the proposals which have been found suitable on preliminary scrutiny and then engage in urgent steps to materialise them at the fastest. Doing of this alone will lead to a significant improvement in the FDI situation at an early date. It appears that FDIs that were made in recent years in this country have been heavily concentrated in the mobile telephone and other service sectors. But the BOI should be following a selective policy of specially patronising FDIs in industries or manufacturing activities where the prospects of value-addition out of local products, employment generation and other benefits seem to be larger. The BOI is the main body for taking actions on FDIs. It has to make determined efforts to overcome problems like inadequate manpower, and sloppy service it has been rendering to the potential investors. This body needs, therefore, to be streamlined immediately to do a far more effective job than it has done so far.
But the worry is not about the figures of last year when FDI inflows did not slump really despite political uncertainties, violence and other issues that apparently created a gloomy scenario about FDI inflows into Bangladesh. Proving the projections untrue, FDI flows had been reasonable under the circumstances in 2006. However, the signs are highly unfavourable in the current year. Nearly ten months of the present year have gone by and a full estimation of the FDI situation would not be available until the end of the year. But according to the available figures which were reported recently in this paper, registration of investment proposals, both foreign and local, has declined significantly, about 30 per cent in the first nine months of 2007 compared to that of the previous year. Undoubtedly, this piece of information needs to be received with due seriousness by the policy planners. Unless something dramatic and positive happens or the BOI and the government gird up their loins in the remaining months of the year and work exceptionally hard and efficiently, the FDI receipts in the present year would be significantly lower than those of the last two years.
Thus, it is imperative to work urgently on the pending FDI proposals and the same are not insignificant. FDI proposals amounting to some US$ 12.8 billion are there with the BOI. If this organisation and related authorities of the government make a determined effort to process the greater part of these proposals before the end of the year, then the ground will be well paved for the country to receive a substantial inflow of foreign investments early in the new year that would compensate for the lesser receipt in the outgoing year. However, BOI and others ought not to resort to errors in selection of FDI proposals from undue haste. They should prioritise and quickly process the proposals which have been found suitable on preliminary scrutiny and then engage in urgent steps to materialise them at the fastest. Doing of this alone will lead to a significant improvement in the FDI situation at an early date. It appears that FDIs that were made in recent years in this country have been heavily concentrated in the mobile telephone and other service sectors. But the BOI should be following a selective policy of specially patronising FDIs in industries or manufacturing activities where the prospects of value-addition out of local products, employment generation and other benefits seem to be larger. The BOI is the main body for taking actions on FDIs. It has to make determined efforts to overcome problems like inadequate manpower, and sloppy service it has been rendering to the potential investors. This body needs, therefore, to be streamlined immediately to do a far more effective job than it has done so far.