Investment faces challenges

Investment has been the engine of growth and prosperity for much of the world since the end of the Second World War. It proved to be a boon to the Bangladesh economy, particularly since the launching of liberalisation measures to attract investment, both local and overseas.
Bangladesh has a dynamic and vibrant investment environment with increasing industrialisation and opening up of new avenues of corporate establishments. Given the geographic location, availability of abundant labour and fiscal incentives, there is no reason why the country should not be regarded as a suitable investment destination for foreign direct investment (FDI) and joint ventures. Besides, the wage hike in most industrialised countries has made it a case for many overseas manufacturers to relocate their plants in Bangladesh.  There were ups and downs in the flow of foreign investment in the country throughout the last decade but the flow did not gain the desired momentum. Information on investment trends in the country do not, as yet, indicate any remarkable breakthrough. To be straight, flow of FDI into Bangladesh is far below the potential.
As a result, promotional measures for attracting increased foreign investment have figured as a priority agenda for the policy makers. Successive governments have picked up the issue but investment is far from the expected level.
Looking at foreign investment, one finds that this is an era when relocation of industries from developed and developing countries to low-wage countries with reasonably functional infrastructure is taking place. Alongside relocation, setting up of manufacturing plants, especially labour-intensive ones, is also gaining increasing prominence. Bangladesh, unfortunately, has not been able to cash in on this, so far. Prospects are there and observers believe that given the right environment the country has the potential of becoming an investment hub in the region.
Understandably, there are bottlenecks that do not sufficiently encourage investors to land in Bangladesh in a big way.  Some of these include legal /regulatory challenges such as restrictions on obtaining expatriates' quota, embargo on import of certain goods, obtaining business permits from the relevant authorities, securing industrial property, resolution of disputes, intellectual property-related issues, among others. It is badly necessary for a country like Bangladesh to have rules and procedures that will take care of regulation as well as promotion in investment-related matters.
Every investor wishing to establish a business in Bangladesh is required to cross several hurdles, some of which are really daunting. Not to make the list long, some of the critical ones can be mentioned. While finding a suitable land for setting up a factory is a serious problem, gas and electricity connectivity, roads and other basic infrastructure have not improved adequately. If these could be improved, things would have been much different than they are now.
On the other hand, enabling regulations that protect the investor interest encourage domestic investment as well. In today's globalised world where capital is fairly mobile, weak domestic investment climate riddled with too many regulations and bureaucratic hurdles not only adversely affect the inflow of foreign investment but also cause domestic capital flight to more hospitable investment environment abroad.
The feeling is that some additional regulatory reforms would greatly attract foreign investors. High corporate tax is another big hurdle. The corporate income tax is very high, not by world standards necessarily, but compared to other countries which compete for foreign investment in Bangladesh.
The Bangladesh government is very enthusiastic about attracting foreign and local investment. Regulators and the private sector also agree that foreign direct investment should be encouraged by removing some of the regulatory roadblocks. Sooner the government takes steps to do it, the better for the cause of investment.
The writer is an Assistant General Manager of Bangladesh Krishi Bank, and a life member of Bangladesh Economic Association
 sobhan_bd2003@yahoo.com