Revamping BoI to attract overseas investment
Sunday, 2 August 2009
Shahiduzzaman Khan
AGAINST the backdrop of the dismal performances of the Board of Investment (BoI), Prime Minister Sheikh Hasina said that the BoI had to start afresh with the aim of bringing momentum to investment. Presiding over the 24th meeting of the BoI this week, the Prime Minister said there are large numbers of expatriate Bangladeshis around the world, and the Board should encourage them by offering excellent incentive package and other facilities to invest more at home. The expatriates have financial capabilities and are interested in investing in Bangladesh. If they get incentives, they will come forward. She said Bangladesh missions abroad should take effective measures for attracting the non-resident Bangladeshis (NRBs) to invest in the country.
The Prime Minister has rightly identified the NRBs abroad as the key resource persons for investment. Yet the overall foreign investments scenario is unfortunately not encouraging. Successive governments have repeatedly been inviting foreign entrepreneurs to take advantage of the 'most liberal investment policy.' But it is available only on paper. From the airport up to registration of an investment proposal, a foreign investor has to wait months after months. 'One-stop service' which is there in the ledger book of the Board of Investment (BoI), did not work for a single day in the country.
The reality is that the BoI itself was not functioning properly. For long, the vital organisation ran without an executive chairman and did not convene board meetings. The BoI board, headed by the Prime Minister and industries minister as vice president, was scheduled to meet once every three months. Its purpose was mainly to determine vital policies to promote foreign investment in the country and exports. Such slow-going situation has apparently made the prime investment promotion and facilitation agency directionless and one of the most inefficient departments of the country. Foreign investment proposals have piled up, delaying and discouraging the much-needed foreign direct investment (FDI) in the country.
According to records, the previous BoI board meeting was held in November last year headed by the chief adviser of the last interim government. Since then the BoI could not take any vital decision, making the regulatory body one of the most inactive arms of the government. The organisation is supposed to provide one-stop investment solution to foreign investors and facilitate and guide FDI. Its effectiveness and importance is supposed to be even greater than that of the Bangladesh Export Processing Zones Authorities (BEPZA).
The flow of foreign direct investment into the country dropped by 16 per cent to $666 million in 2007 from $793 million in 2006, marking an investment climate which was plagued by energy shortage.
Although there was no political instability in 2007, entrepreneurs could not be free from a sense of political uncertainty. Foreign investment inflow into Bangladesh decreased in a year when South, East and South-East Asia held the lead with 19 per cent increase in FDI among developing regions that are attracting investments, and the global FDI showed record flows with 30 per cent rise to $1,833 billion. The FDI flow into the country jumped to $845 million in 2005 from $460 million in 2004. However, BoI sources claimed that the registration figures of both local and foreign investment has risen in recent times, bouncing back from the previous years' decline in investment trends. In 2008, local entrepreneurs registered investments worth $1.63 billion with the BoI compared to proposals valued at $441 million in 2007, $1.12 billion in 2006 and $1.6 billion in 2005, according to official figures.
Meanwhile, foreign investors in Bangladesh insisted the government should not own or operate any business organisation, as state-owned enterprises only spoil public money and are the breeding ground of corruption. They made the observation at the monthly luncheon meeting of Foreign Investors' Chamber of Commerce and Industry (FICCI) recently. The FICCI chief, addressing the meeting, said the government might consider reopening the closed state-owned enterprises (SoEs). But it should not get involved in any business other than running schools, hospitals or railways. It should not emerge as a manufacturer. The government should act as a facilitator to encourage the growth of industrialisation.
According to a study, a staggering 83 per cent of foreign firms located in Bangladesh identified corruption as a major constraint. They also identified crime and lack of law and order as major business constraints. This negative image of Bangladesh as a corruption- and crime-riddled country is evidently taking a toll on its FDI inflow.
The study further says, a higher percentage of foreign firms located in Bangladesh identified tax rates and administration, business licensing and permits, customs and trade regulations, and labour skill level as major business constraints. These perceptions are consistent with results found in the econometric model that human capital is a determinant of FDI. An educated and skilled labour force is the key to success for attracting foreign investors, it added.
Indeed, the BoI needs to overcome infrastructure bottlenecks, especially gas and electricity crisis, in attracting investments in industries. There is a need for a policy shift to promote 'less gas-consuming' industries, encourage investment in infrastructure, and focus on the service sector, particularly information technology. The country needs to explore coal as an alternative source of energy and the government should endorse the Coal Policy at the earliest.
All BoI needs is a little attention of the government to make it vibrant again. There is no doubt that Bangladesh requires massive doses of FDI and the present government is serious about it. To obtain that the BoI is the best available option and it should be put at the centre of the PPP (Public Private Partnership) initiatives.
.........................................................
szkhan@thefinancialexpress-bd.com
AGAINST the backdrop of the dismal performances of the Board of Investment (BoI), Prime Minister Sheikh Hasina said that the BoI had to start afresh with the aim of bringing momentum to investment. Presiding over the 24th meeting of the BoI this week, the Prime Minister said there are large numbers of expatriate Bangladeshis around the world, and the Board should encourage them by offering excellent incentive package and other facilities to invest more at home. The expatriates have financial capabilities and are interested in investing in Bangladesh. If they get incentives, they will come forward. She said Bangladesh missions abroad should take effective measures for attracting the non-resident Bangladeshis (NRBs) to invest in the country.
The Prime Minister has rightly identified the NRBs abroad as the key resource persons for investment. Yet the overall foreign investments scenario is unfortunately not encouraging. Successive governments have repeatedly been inviting foreign entrepreneurs to take advantage of the 'most liberal investment policy.' But it is available only on paper. From the airport up to registration of an investment proposal, a foreign investor has to wait months after months. 'One-stop service' which is there in the ledger book of the Board of Investment (BoI), did not work for a single day in the country.
The reality is that the BoI itself was not functioning properly. For long, the vital organisation ran without an executive chairman and did not convene board meetings. The BoI board, headed by the Prime Minister and industries minister as vice president, was scheduled to meet once every three months. Its purpose was mainly to determine vital policies to promote foreign investment in the country and exports. Such slow-going situation has apparently made the prime investment promotion and facilitation agency directionless and one of the most inefficient departments of the country. Foreign investment proposals have piled up, delaying and discouraging the much-needed foreign direct investment (FDI) in the country.
According to records, the previous BoI board meeting was held in November last year headed by the chief adviser of the last interim government. Since then the BoI could not take any vital decision, making the regulatory body one of the most inactive arms of the government. The organisation is supposed to provide one-stop investment solution to foreign investors and facilitate and guide FDI. Its effectiveness and importance is supposed to be even greater than that of the Bangladesh Export Processing Zones Authorities (BEPZA).
The flow of foreign direct investment into the country dropped by 16 per cent to $666 million in 2007 from $793 million in 2006, marking an investment climate which was plagued by energy shortage.
Although there was no political instability in 2007, entrepreneurs could not be free from a sense of political uncertainty. Foreign investment inflow into Bangladesh decreased in a year when South, East and South-East Asia held the lead with 19 per cent increase in FDI among developing regions that are attracting investments, and the global FDI showed record flows with 30 per cent rise to $1,833 billion. The FDI flow into the country jumped to $845 million in 2005 from $460 million in 2004. However, BoI sources claimed that the registration figures of both local and foreign investment has risen in recent times, bouncing back from the previous years' decline in investment trends. In 2008, local entrepreneurs registered investments worth $1.63 billion with the BoI compared to proposals valued at $441 million in 2007, $1.12 billion in 2006 and $1.6 billion in 2005, according to official figures.
Meanwhile, foreign investors in Bangladesh insisted the government should not own or operate any business organisation, as state-owned enterprises only spoil public money and are the breeding ground of corruption. They made the observation at the monthly luncheon meeting of Foreign Investors' Chamber of Commerce and Industry (FICCI) recently. The FICCI chief, addressing the meeting, said the government might consider reopening the closed state-owned enterprises (SoEs). But it should not get involved in any business other than running schools, hospitals or railways. It should not emerge as a manufacturer. The government should act as a facilitator to encourage the growth of industrialisation.
According to a study, a staggering 83 per cent of foreign firms located in Bangladesh identified corruption as a major constraint. They also identified crime and lack of law and order as major business constraints. This negative image of Bangladesh as a corruption- and crime-riddled country is evidently taking a toll on its FDI inflow.
The study further says, a higher percentage of foreign firms located in Bangladesh identified tax rates and administration, business licensing and permits, customs and trade regulations, and labour skill level as major business constraints. These perceptions are consistent with results found in the econometric model that human capital is a determinant of FDI. An educated and skilled labour force is the key to success for attracting foreign investors, it added.
Indeed, the BoI needs to overcome infrastructure bottlenecks, especially gas and electricity crisis, in attracting investments in industries. There is a need for a policy shift to promote 'less gas-consuming' industries, encourage investment in infrastructure, and focus on the service sector, particularly information technology. The country needs to explore coal as an alternative source of energy and the government should endorse the Coal Policy at the earliest.
All BoI needs is a little attention of the government to make it vibrant again. There is no doubt that Bangladesh requires massive doses of FDI and the present government is serious about it. To obtain that the BoI is the best available option and it should be put at the centre of the PPP (Public Private Partnership) initiatives.
.........................................................
szkhan@thefinancialexpress-bd.com