Constraints: Understanding the nature of foreign investment

By way of summing the puzzle behind this series (whether infrastructural development overlooking the Bay can survive a contentious playing field), this article reviews some obvious constraints, before stock-taking opportunities in the next. Since foreign investment has emerged as the backbone of infrastructural breakthroughs, understanding the nature of foreign investment sets the tone below of what we must do at home in order to successfully navigate the global sources, where market competition mixes with political rivalry.

Raymond Vernon's eye-raising 1971 thesis that corporations steal state sovereignty, prompted Robert Gilpin to distinguish between the "necessary" and "sufficient" conditions of corporate operations. He sought to explain world leadership, but his argument applies to both the domestic context and for aspiring or emerging countries, like Bangladesh. The "necessary" condition was political order and the "sufficient", the economic and technological resources invoked.

For Bangladesh, the political order is amply clear: specifically the routine nuisances of strikes and stoppages, but broadly, apprehensions of a security breakdown, as for example, political parties directing sine qua non positions against each other without adequate quid pro quo deliberations, or mobilising Islamic extremism against foreigners generally, western foreigners more particularly, and targeted individuals/institutions most narrowly. Any security umbrella must have parallel contingencies, both at the smallest threat level and within panoramic blueprints. Foreign investors typically hold on tighter to their chips as the targets get more specific, knowing that the broader picture is strewn with leeways. Our last two years were riddled by broad, particular, and targeted threats, given the strikes and stoppages: one opposition party against the government (broad); RMG factories or "gonojagoron" versus religious forces (particular); and Rana Tower plant or specific bloggers (narrowed). In the absence of contingencies, hell broke loose at all three levels.

Islam is not hostile to business, although its call for greater corporate social responsibility (CSR) than western literatures usually posit, and its interest-elimination mandate do invite justifiable rethinking on the part of corporations: not only are some of our banks introducing interest accounts and "zakat", but also the CSR drive, as institutionalised by Bangladesh Bank, seems to be seeping down to private banks. That said, gluttonous corporate (or individual) behaviour sets up targets for any group, including Islamic. Historically, Islam has blended well with private entrepreneurship, as evident in the bustling Hajj business, Eid shopping, and generally, in pushing humans to release their potentialities. Once business incentives surpass disincentives, corporations examine the logistics, ranging from the wages to be paid to assembly-line workers, how these connect with both unions and governmental legislations, what facilities permit the fastest and most cost-efficient access to countries (which is the meat of the whole story), and the kind of a marketing or distributional system needed. All of these require specific infrastructures. All of them need to be globally streamlined if we expect cash to flow in from the outside for us to climb the income ladder.

Wages, to begin with, pose the first set of thorns: they have to be marginal enough to attract the investor in the first place, with the key questions being if, at the margin, both ends can be met, and national and international laws have been satisfied. If these do not, as is of relevance to Bangladesh, can the gap be offset by those CSR fringe-benefits, such as housing, or healthcare, or a free-lunch? Labour laws inform corporations about protections against strikes and stoppages; but even if they do, whether the cost-benefit analysis favours investment begs attention. Where the host corporation draws the line is crucial to the foreign investor's entry. Once infrastructures relating to wages, corporate social responsibilities, prevailing local practices, and relevant national legislations bearing upon proprietorship, taxes, profit distribution, and so forth, have been ironed out, attention shifts to the exogenous setting, the market, transportation, and consumer tastes.

Clearly, "konar dokaans" (corner stores) will not do in any globalised operations, but they must not be downsized nor eliminated: they perform crucial indirect tasks, uphold family-run initiatives, and serve as a last resort even in strikes and stoppages. The need to supplement them with malls increases as fast as the climb of any LDC (least developed country) community into middle-income or higher category. Having them conveys the size and senses of the consumers, with chain-stores appealing all the more since one contract with any particular franchise can cover the entire network nationally rather than piecemeal contracts with different operators, and, most of all, communication networks (from telephones to transportation companies, highways, as opposed to roads, steamboats, ports, and ships, not to mention banks, insurance companies, and lawyers), serve as a litmus test of corporate interest.

No wonder infrastructural development has overtaken poverty and education as a vital Bangladesh interest at this moment: not that poverty and education have been demoted or eliminated, but we now have more than half a population of 160+ million people literate enough and free from life's margins whose hopes and goals need to be fulfilled through free choices (necessitating the democratic vote) and ample material resources (to sustain the upward economic climb). No middle-income society can survive without these; and no upward-mobility from here is possible without cultivating them. Once done, reaching the beckoning nirvana is not automatic, but what that entails is the subject of the concluding piece of this series, next.

To be sure, then, constraints mobilise diplomacy locally, domestically, and between corporations and countries; while the length, breadth, and depth of any country's infrastructural stock foreshadow the country's future mileage, an Achilles heel for all, but for us, not from the lack of resources, rather from galvanising the desired atmosphere. Face-lifting measures, crucial to attracting investors, must accompany deepening-pocket treasures.

The writer is Professor of International Relations, formerly in Universidad Iberoamerica, Mexico City.

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