FDI: Key to multi-pronged development

Like most other developing and least developed countries, Bangladesh also considers Foreign Direct Investment (FDI) as an important tool for development. In order to attract more and more FDI, the country has taken many initiatives. One such initiative was the Board of Investment (BoI) established in 1989 under the Investment Board Act to encourage investments in the private sector, address hindrances to investment and provide necessary support for establishment of industries.
The wide range of services the BoI provides includes investment promotion and facilitation covering support and suggestion and aftercare support to investors. The prime vision of the BoI is to promote domestic and foreign investment and enhance international competitiveness of Bangladesh and contribute to overall socio-economic development of the country.
Bangladesh offers opportunities for private investments under its liberalised industrial policy and export-oriented and private sector-led growth strategy. All but four sectors-( i) arms and ammunition and any other defence equipment and machinery, (ii) forestry plantations within reserve forests, (iii) production of nuclear energy, and (iv) security printing and mining-are open to private investment in Bangladesh.
FDI strengthens ties with developed countries that may yield advantages in the form of transfer of technology. The other benefits associated with it also enhance Bangladesh's capacity in making the country an attractive destination for FDI, which itself offers several other advantages. The FDI provides the incentive of educating and training the population to make Bangladesh's labour force more competitive. As a result, potential investors from home and abroad come forward to invest in sectors like manufacturing, telecommunication, energy and gas, in addition to other sectors or sub-sectors.
FDI is the capital provided by a foreign investor, either directly or through any enterprise, in the management of which the foreign investor is directly involved. When a country offers low production costs and a stable political situation, that country is generally the best choice of foreign investors. Until 1980s most developing countries maintained a cautious stance on FDI, as there are some bad aspects of it. For example, it exploits the cheap labour of such countries.
We have a large and active manpower. Foreign entrepreneurs come here with FDI, but virtually they just exploit our manpower. Besides, they use our natural resources recklessly. Another most important thing is since they are giant companies they have the capacity to influence government decisions.
If there is a proper government control on a foreign company, it results in some advantages for the country most of the time. In recent years the FDI restrictions had been significantly reduced. Most countries offer incentives to attract FDI, such as tax concessions, tax holidays, accelerated depreciation of plants and machinery, export subsidies, import entitlements etc. As a developing country, Bangladesh needs FDI for continuing its development process. That is why special zones have been set up and lucrative incentive packages have been provided to attract FDI. There are many advantages of FDI. A large number of unemployed people get employment. The living standard sees improvement with the increase in incomes of the newly-employed people. Besides, facilities like road communication, transportation and education also improve at a greater speed.
The Gross Domestic Product (GDP) increases in accordance with the enhancement of production in the economy. Foreign investors bring with them modern technology, skilled manpower and the know-how to the host country. Many backward and forward linkage industries and institutions are set up to support the industries they establish. And thus the wheel of economy starts moving at a faster speed.
The gas sector in Bangladesh has drawn a large volume of foreign investment. The FDI is increasingly becoming a significant source of financing in some domestic areas. But unlike in Sri Lanka and some other countries in the region, the FDI targets mainly export-related activities in this country.
Apart from red tape and myriads of procedural and policy-related hindrances, a major problem in the country is the lack of professionals, i.e., technical, managerial and innovative skills that we need to efficiently tap the entrepreneurial potential. Bangladesh has the advantage of low labour cost, which can be tapped in manufacturing more exportable products. But the advantage is associated with many difficulties. The factories in the country have to deal with constraints beyond their control, such as, power failure, poor communications or increased transportation costs and cumbersome customs-related procedures at many government offices. However, the situation is expected to improve if the political commitment of the government to promote and protect FDI in the country can be materialised, and the policy environment can be changed from the one that is regulatory to the one which is supportive and complementary.
Many foreign companies feel disturbed and, ultimately, discouraged by disruptions in the production process in the country because of frequent power failures, political and labour unrest, poor infrastructure support etc.
However, the competitive strength of Bangladesh in the area of investment is good. The geographical location of the country is ideal for global trade-it has highly-convenient access to international sea and air routes. Bangladesh is endowed with an abundant supply of natural gas, water and its soil is very fertile. The country has a hard-working and generally intelligent population of 160 million. Although Bangla is the official language, English is generally used as a second language. The majority of the moderately educated people can read, write and speak in English. As a result of the relatively low per capita income at present the domestic consumption is not significant. However, it should always be considered that there exists a middle class with some purchasing power. If the economic growth goes up, the purchasing power will also grow substantially. And in a country of 160 million people, even a small middle class may constitute a significant market.
Most Bangladeshi products enjoy complete duty and quota-free access to the markets in the European Union (EU), Japan, Australia and most of other developed countries.
It is the government that should come forward with initiatives to make the foreigners feel interested in our economy and encourage them to invest here. Political leaders should try to keep the political situation stable so that it helps the investors make their investment decisions easily.
In a developing country like Bangladesh, it is the FDI which is the key to its multi-pronged development. The FDI performances should be very satisfactory, when it comes to development of the country. The FDI can influence the country's trade, commerce and industrial production leading to rapid development.
The writer is a retired Professor               of Economics, BCS                             General Education Cadre.                        [email protected]