Foreign investments
Saturday, 26 July 2008
Foreign direct investments (FDIs) are important in the context of Bangladesh because investments hold the keys to economic growth which is the way to alleviate poverty, create jobs and earnings and produce further wealth for economic expansion. But FDIs into Bangladesh continue to be far less than the potential. Not only that, the flow of FDIs is declining worryingly though this country offers relatively better terms and conditions to foreign investors.
A report in this paper last Thursday highlighted that FDIs dropped by some 63.4 per cent in the last fiscal year. According to the report, the average monthly foreign investment inflow came down to Taka 3.63 billion in the first nine months of fiscal year (FY) 2007-8 in contrast to such average monthly inflow of Taka 9.93 billion in FY 2006-7. Neighbouring countries such as India, Pakistan and Sri Lanka appear to be drawing substantially greater FDIs than Bangladesh, although the latter, as the government functionaries here do often claim, hold out more attractive investment conditions to foreign investors. But the problems lie at the field levels in Bangladesh where the foreign investors are put off by various operational snags in the implementation of otherwise liberal investment policies, at least on paper.
The embassies of the countries from where a major part of existing FDI flows to Bangladesh have so far come, handed over sometime ago to the government here reports narrating their frustrations about investments by their businesses in this country. Clearly, the government in Bangladesh should have taken these reports seriously and acted immediately and effectively in response to them. But the same was not done and, therefore, it is no surprise that the FDIs have been only dropping. The evaluation of the FDI scene in Bangladesh, specially the one done by the Japanese, highlighted that the government seemed to be not seriously caring about the difficulties pointed out by the foreign investors from time to time. The report stressed that governments of other countries which aspire to receive FDIs usually conduct surveys or investigations on their own to learn about what difficulties foreign investors are facing. They then take steps swiftly and effectively to remove them. But the government of Bangladesh was not seen engaging in such fact-finding exercises. One very serious problem stressed in the reports was the lack of continuation of policies. Investors seek policy-contituity, regardless of changes of government for the safety and viability of their investment in the medium and longer terms. But a successor government in Bangladesh, as the experience suggests, do normally tend to dismiss or refuse to see the merit of the policies of its predecessor government in some cases. Thus, foreign investors find it difficult to invest with medium or longer term objectives as government policies here fluctuate frequently so as to add to risks to their investments.
The reports further underscored the gulf between the pledges and the reality. The pledged one-stop service at the Board of Investment (BOI) is far from becoming a reality. The BOI is yet to become a dynamic organisation with proper capacities to receive, and act upon, various FDI proposals with speed and efficiency. Investors also complain about law and order problems, delaying and frustrating bureaucratic procedures and rent-seeking that do otherwise undermine their interest to invest. Unreliable electricity supply is found to be a serious problem. And the overall situation in power sector has deteriorated further in the recent times, belying the expectations of all concerned about some improvements in supply position thereof. The efficiency of the Chittagong port has improved notably in recent months. But more facilities at this port and port-related supporting facilities in other areas of the country are needed to convince the foreign investors that competitiveness of vital infrastructures in this country are at par with their requirements.
The reports also pointed to the weekly working days in Bangladesh as unhelpful, making its business communication with the rest of the world difficult for at least, three days a week. The government needs to take these reports very seriously indeed. If increasing foreign investments in the country is really desired, then the grievances of the foreign investors call for early remedial steps.
A report in this paper last Thursday highlighted that FDIs dropped by some 63.4 per cent in the last fiscal year. According to the report, the average monthly foreign investment inflow came down to Taka 3.63 billion in the first nine months of fiscal year (FY) 2007-8 in contrast to such average monthly inflow of Taka 9.93 billion in FY 2006-7. Neighbouring countries such as India, Pakistan and Sri Lanka appear to be drawing substantially greater FDIs than Bangladesh, although the latter, as the government functionaries here do often claim, hold out more attractive investment conditions to foreign investors. But the problems lie at the field levels in Bangladesh where the foreign investors are put off by various operational snags in the implementation of otherwise liberal investment policies, at least on paper.
The embassies of the countries from where a major part of existing FDI flows to Bangladesh have so far come, handed over sometime ago to the government here reports narrating their frustrations about investments by their businesses in this country. Clearly, the government in Bangladesh should have taken these reports seriously and acted immediately and effectively in response to them. But the same was not done and, therefore, it is no surprise that the FDIs have been only dropping. The evaluation of the FDI scene in Bangladesh, specially the one done by the Japanese, highlighted that the government seemed to be not seriously caring about the difficulties pointed out by the foreign investors from time to time. The report stressed that governments of other countries which aspire to receive FDIs usually conduct surveys or investigations on their own to learn about what difficulties foreign investors are facing. They then take steps swiftly and effectively to remove them. But the government of Bangladesh was not seen engaging in such fact-finding exercises. One very serious problem stressed in the reports was the lack of continuation of policies. Investors seek policy-contituity, regardless of changes of government for the safety and viability of their investment in the medium and longer terms. But a successor government in Bangladesh, as the experience suggests, do normally tend to dismiss or refuse to see the merit of the policies of its predecessor government in some cases. Thus, foreign investors find it difficult to invest with medium or longer term objectives as government policies here fluctuate frequently so as to add to risks to their investments.
The reports further underscored the gulf between the pledges and the reality. The pledged one-stop service at the Board of Investment (BOI) is far from becoming a reality. The BOI is yet to become a dynamic organisation with proper capacities to receive, and act upon, various FDI proposals with speed and efficiency. Investors also complain about law and order problems, delaying and frustrating bureaucratic procedures and rent-seeking that do otherwise undermine their interest to invest. Unreliable electricity supply is found to be a serious problem. And the overall situation in power sector has deteriorated further in the recent times, belying the expectations of all concerned about some improvements in supply position thereof. The efficiency of the Chittagong port has improved notably in recent months. But more facilities at this port and port-related supporting facilities in other areas of the country are needed to convince the foreign investors that competitiveness of vital infrastructures in this country are at par with their requirements.
The reports also pointed to the weekly working days in Bangladesh as unhelpful, making its business communication with the rest of the world difficult for at least, three days a week. The government needs to take these reports very seriously indeed. If increasing foreign investments in the country is really desired, then the grievances of the foreign investors call for early remedial steps.