Investment, privatization issues need closer look
Thursday, 13 May 2010
Shahiduzzaman Khan
Investment -- both local and overseas -- has marked a declining trend in recent times. It is a situation, which can largely be attributable to lack of confidence among both local and foreign investors. This situation has been persisting because of unpredictability about supplies of infrastructural facilities, gas and electricity, land etc., and also about a favourable regulatory regime.
A recent report published in a national daily says no concrete steps have been taken as yet to bring back investors' confidence while the 'one-stop service' in the Board of Investment (BoI) for investors remains only a rhetoric. Rather shortfall in power, gas and infrastructure as well as governance-related problems continue to put dampers on investment activities. This has led to a prolonged sense of uncertainty in the minds of potentials investors.
A discussion meeting on 'Investment climate in Bangladesh' held in the city this week dwelt at length on various aspects relating to the constraints and potentials of investment growth in the country. It was participated by the chiefs of BoI, Bangladesh Export Processing Zone Authority (BEPZA), Bangladesh Small and Cottage Industries Corporation (BSCIC) and Small and Medium Enterprises (MSE) Foundation. The participants in the meeting observed that various constraints were impeding the investment growth. There are no visible signs about investment increasing in the recent past. The BoI, which had earlier made some attempts to provide investors with one-stop service, is now working on an organogram as part of its restructuring programme, besides making it possible for providing services such as licence, bank loans, land lease, gas and power connections, telephone line, water supply and environmental clearance from a single point.
But one worrying issue related to investment, has been that the government is still not decisive on a matter of consequence -- whether to stop further privatisation of state-owned enterprises or rely on the private sector. Besides, the development activities have not yet picked up to a desirable extent. The government has not also been able to finalise a policy on how to execute the budgetary provision of Public-Private Partnership (PPP) for undertaking large infrastructure and power generation projects.
Global Competitiveness Index 2009, prepared by World Economic Forum, had earlier placed Bangladesh at 106th among 133 nations, while noting that inadequate infrastructure, corruption, low-quality higher education and ineffective bureaucracy continue to trouble the country's business sector.
The World Investment Report 2009 showed that Bangladesh had received more than $1.0 billion in foreign investment in 2008. However, incumbent BoI chief termed such investment inflow 'very low'. He reportedly said that Bangladesh was among the worst performers in the global ranking. In fact, the challenge here lies not only in mobilising sufficient resources, but also in developing effective institutional arrangements to implement large infrastructure projects.
During the previous caretaker government, now-defunct Regulatory Reform Commission (RRC) had made a number of recommendations, in conjunction with some proposals mooted then to reinvigorate the BoI and the Privatisation Commission (PC). Then, the updating of the old, ineffective and complicated laws to speed up development process through boosting investment and trade were suggested. Such recommendations relating to investment and privatisation were termed by an important functionary of the incumbent government as 'brilliantly clustered'. But no effective move could be taken so far to implement those.
In this backdrop, it is no surprise that overseas investment is not coming to Bangladesh in a big way. Excepting telecommunication sector, Bangladesh did not attract much foreign direct investment (FDI) over the past several years. Gas shortage, power crisis, lack of infrastructure, traffic jams etc., pose as bottlenecks to a steady inflow of FDI. Somehow or other, the BoI still appears not to be organisationally well-equipped to deal firmly, decisively and expeditiously with investment proposals of the foreign entrepreneurs. Lots of registrations are done at preliminary stage every year; yet afterwards, investors move out to other attractive investment destinations. Bangladesh does otherwise offer one of the most liberal and investment-friendly policies. But in reality, it has not been able to give one-stop service to the investors. Archaic customs formalities at the air and seaports discourage intending entrepreneurs to decide positively on investment in Bangladesh.
The functional role of the Privatisation Commission (PC) remains now largely uncharted. This is because of no clear signal yet about the future of privatisation programme. After coming to power, some government functionaries expounded their firm position on no further privatisation of public sector mills and industries. The draft industrial policy also pursues more or less the same line. If that is the real situation, then the question arises about the utility of running a commission for privatisation. Why is the government not firm on its policy about this issue?
The ruling party in its election manifesto stated about not closing or privatising any industry without creating alternative employment opportunities for the workers and employees. The government has already reopened some of the closed jute mills in order to rejuvenate the long-ailing jute sector. But many loss-making entities in the public sector have otherwise been causing haemorrhage to the country's public exchequer. Will the government continue to sustain such heavy losses year after year?
Many public sector mills and industries have been suffering huge losses due to inefficient handling, corruption and worn-out machineries. Such industries have not been modernised with the change of time. State-owned sugar mills are glaring examples of how mismanagement and rampant irregularities could bring such units to near collapse.
All concerned would agree that key institutions responsible for investment facilitation and promoting private sector-led growth should be revamped at the earliest. Otherwise, it would in no way be possible to help boost new investment activities. The country has suffered much for too long a period because of policy flip-flops and a procrastinating decision-making process. All these must change - and change sooner than later. szkhan@dhaka.net
Investment -- both local and overseas -- has marked a declining trend in recent times. It is a situation, which can largely be attributable to lack of confidence among both local and foreign investors. This situation has been persisting because of unpredictability about supplies of infrastructural facilities, gas and electricity, land etc., and also about a favourable regulatory regime.
A recent report published in a national daily says no concrete steps have been taken as yet to bring back investors' confidence while the 'one-stop service' in the Board of Investment (BoI) for investors remains only a rhetoric. Rather shortfall in power, gas and infrastructure as well as governance-related problems continue to put dampers on investment activities. This has led to a prolonged sense of uncertainty in the minds of potentials investors.
A discussion meeting on 'Investment climate in Bangladesh' held in the city this week dwelt at length on various aspects relating to the constraints and potentials of investment growth in the country. It was participated by the chiefs of BoI, Bangladesh Export Processing Zone Authority (BEPZA), Bangladesh Small and Cottage Industries Corporation (BSCIC) and Small and Medium Enterprises (MSE) Foundation. The participants in the meeting observed that various constraints were impeding the investment growth. There are no visible signs about investment increasing in the recent past. The BoI, which had earlier made some attempts to provide investors with one-stop service, is now working on an organogram as part of its restructuring programme, besides making it possible for providing services such as licence, bank loans, land lease, gas and power connections, telephone line, water supply and environmental clearance from a single point.
But one worrying issue related to investment, has been that the government is still not decisive on a matter of consequence -- whether to stop further privatisation of state-owned enterprises or rely on the private sector. Besides, the development activities have not yet picked up to a desirable extent. The government has not also been able to finalise a policy on how to execute the budgetary provision of Public-Private Partnership (PPP) for undertaking large infrastructure and power generation projects.
Global Competitiveness Index 2009, prepared by World Economic Forum, had earlier placed Bangladesh at 106th among 133 nations, while noting that inadequate infrastructure, corruption, low-quality higher education and ineffective bureaucracy continue to trouble the country's business sector.
The World Investment Report 2009 showed that Bangladesh had received more than $1.0 billion in foreign investment in 2008. However, incumbent BoI chief termed such investment inflow 'very low'. He reportedly said that Bangladesh was among the worst performers in the global ranking. In fact, the challenge here lies not only in mobilising sufficient resources, but also in developing effective institutional arrangements to implement large infrastructure projects.
During the previous caretaker government, now-defunct Regulatory Reform Commission (RRC) had made a number of recommendations, in conjunction with some proposals mooted then to reinvigorate the BoI and the Privatisation Commission (PC). Then, the updating of the old, ineffective and complicated laws to speed up development process through boosting investment and trade were suggested. Such recommendations relating to investment and privatisation were termed by an important functionary of the incumbent government as 'brilliantly clustered'. But no effective move could be taken so far to implement those.
In this backdrop, it is no surprise that overseas investment is not coming to Bangladesh in a big way. Excepting telecommunication sector, Bangladesh did not attract much foreign direct investment (FDI) over the past several years. Gas shortage, power crisis, lack of infrastructure, traffic jams etc., pose as bottlenecks to a steady inflow of FDI. Somehow or other, the BoI still appears not to be organisationally well-equipped to deal firmly, decisively and expeditiously with investment proposals of the foreign entrepreneurs. Lots of registrations are done at preliminary stage every year; yet afterwards, investors move out to other attractive investment destinations. Bangladesh does otherwise offer one of the most liberal and investment-friendly policies. But in reality, it has not been able to give one-stop service to the investors. Archaic customs formalities at the air and seaports discourage intending entrepreneurs to decide positively on investment in Bangladesh.
The functional role of the Privatisation Commission (PC) remains now largely uncharted. This is because of no clear signal yet about the future of privatisation programme. After coming to power, some government functionaries expounded their firm position on no further privatisation of public sector mills and industries. The draft industrial policy also pursues more or less the same line. If that is the real situation, then the question arises about the utility of running a commission for privatisation. Why is the government not firm on its policy about this issue?
The ruling party in its election manifesto stated about not closing or privatising any industry without creating alternative employment opportunities for the workers and employees. The government has already reopened some of the closed jute mills in order to rejuvenate the long-ailing jute sector. But many loss-making entities in the public sector have otherwise been causing haemorrhage to the country's public exchequer. Will the government continue to sustain such heavy losses year after year?
Many public sector mills and industries have been suffering huge losses due to inefficient handling, corruption and worn-out machineries. Such industries have not been modernised with the change of time. State-owned sugar mills are glaring examples of how mismanagement and rampant irregularities could bring such units to near collapse.
All concerned would agree that key institutions responsible for investment facilitation and promoting private sector-led growth should be revamped at the earliest. Otherwise, it would in no way be possible to help boost new investment activities. The country has suffered much for too long a period because of policy flip-flops and a procrastinating decision-making process. All these must change - and change sooner than later. szkhan@dhaka.net