Increasing the flow of FDIs

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Foreign direct investments (FDIs) are sought after by most countries, specially the developing ones, for economic expansion and the accompanying benefits that come from the same. But it is a matter of concern that in spite of Bangladesh's comparative advantages in labor- intensive manufacturing, adoption of investment friendly policies and regulations, establishment of export processing zones (EPZs) in different suitable locations and offering other privileges, FDI flows to this country have failed to be accelerated. The amount of FDI in Bangladesh has reduced by about 36 per cent between 2008 and 2009. According to the World Investment Report 2010 prepared by UNCTAD, the country only received $700.16 million in FDI in 2009 compared to $1086.33 million in 2008. The FDI received in 2010 is yet to be computed fully and would be available later in 2011 in the World Investment Report. But from whatever figures are available with the Bureau of Investments (BOI) of the Bangladesh government, the FDI gains would be assessed as even lower than what were received in 2009.
It continues to be a shock that foreign investors still prefer other countries in the South Asian region, Pakistan and Sri Lanka for instance, over Bangladesh as their destination. Pakistan is today torn by sectarian strife. Bangladesh, in comparison, offers a far greater safe place for investment. It did not suffer from a terrible anti-insurgency fight like Sri Lanka did, and for which Sri Lanka's FDI flow also dipped sharply, though the latest trend indicates an uptrend of such inflows. The remnants of the militant bands in Bangladesh are on the run and the government is firmly committed to fight extremism. Bangladesh's economic health is also relatively stable in the region, and it has made reasonably commendable advancement in the social index. And yet, even in the South Asian ranking, Bangladesh's position trails the other countries suffering from instability and violence. Therefore, the country's policy planners do need to research carefully the main reasons for the lower FDI flows to Bangladesh and the same getting even lower after showing some promise in 2008.
Any such objective research is certain to show up that the pick-up trend in FDIs that was noted in 2008 is going down for the simple reason due to investors' lack of faith in the country's energy sector. It should be obvious that energy sufficiency is too basic for investments. But the spectacle of even domestic investors not getting power and gas connections for running their otherwise completed industries after two years, must have otherwise sent the wrong signals to potential foreign investors.
Foreign investors also put a great deal of importance on the state of a country's infrastructures. But in this area, too, there was hardly inspirational signals received. The Chittagong port, the pivotal infrastructure of the country, only declined drastically in its performance after it was significantly improved two years ago. Recently, the port has got back a measure of its past efficiency but only after the army was put back in its management. Sustained efforts will, however, need to be made for improving further the operational efficiency of the port. Otherwise, any kind of uncertainty or lack of policy sustainability in running a very important infrastructure, will not help to polish the investment image of Bangladesh.
Foreign investors wish to bank on favourable policy continuities, good governance of the country as a whole, the least negative bureaucratic impediments, etc., while making their investment decisions. But in these areas, Bangladesh's rating is still low which in actuality explains its not receiving the expected level of FDIs despite its having fine FDI promoting policies on paper. Therefore, realistically addressing each of these factors would be the prerequisites for attracting FDIs.