When a wealthy person in Bangladesh thinks about investing his surplus wealth, does he consider buying land, keeping it in a high-interest fixed deposit, or investing it in industries? Similarly, when a wealthy person, or company, in Dubai, Singapore, Mumbai, Kuala Lumpur, London, Paris or New York wants to make a new investment choice, what factors does he take into consideration?
From over 35 years of investment opportunities at home and abroad or management experience, I feel that businesspersons, rather than perusing the newspapers, give most importance to the experience of persons or companies that are already in business. Then comes the matter of capital or prospects of investment, the strength of the financial sector and ease of availing bank loans, getting skilled workers or managers, communication or transport infrastructure, the facilities to transfer profits overseas and the scope to keep corruption at bay. Also taken into consideration is the purchasing capacity of the consumers and the consumer expenditure trends.
From my university days I have been hearing about the need for creating new business establishments to bring diversity to the economy and expand employment. Investment, that is, foreign investment, is an important catalyst in this regard. When foreign investment is made in a country, that means it must have an investment-friendly environment and business is profitable there. But in the case of foreign investment, post-independence Bangladesh has not seen significant success. While it is said that Bangladesh is an attractive destination for investment, the matter of investment environment is restricted to discussions alone.
While all sorts of policies have been devised to attract foreign investors, there is no continuity to this. Bangladesh time and again fails to win the trust of being fit for investment. And the delays and discordance in services that are required to hold on to investment, have not been dispelled in the last three decades. Other than a couple of companies, the country has not achieved any significant success in foreign investment.
Given its per capital income, increase in consumer expenditure and an increased growth of the middle class, Bangladesh can become an attractive or prospective market for foreign investment. The reason for not being able to attract large investments is internal. The factors working behind this sparse investment are lack of discipline in the financial sector, lack of stability in the investment policies, that is, frequent changes in the investment policies, lack of capacity of the agencies responsible for investment, and bureaucratic complications.
Also, there is still no visible impact of the initiatives that have been taken up to attract foreign investment. Foreign Direct Investment (FDI) has played an important role in the economic transformation of developing countries. In the post-eighties period, FDI had contribution in the economic expansion of countries like Vietnam, China, Mexico and India. In particular, FDI plays a role as a catalyst in generating employment in the manufacturing sector, technology transfer and keeping the foreign exchange reserves stable.
Many years have passed since our independence, but it still has not been possible to create an investment-friendly environment here. If we want to attract foreign investment, we have to clear up the existing problems. If investment is to be attracted, first and foremost branding of the country is essential.
In order to build up an investment-friendly culture, a stable and corruption-free environment for business must first be created. Investment security and the scope for businesspersons’ licensing rights must be ensured. Above all, the government too must continuously make sincere efforts to attract investors.
In post-independence Bangladesh, alongside local investment, foreign investment has played an important role in the country’s socioeconomic, economic and infrastructural development. Economic theory maintains that if local investment increases, foreign investment increases. This is because foreign investment comes through the local investors. That is why, if foreign investment is to be increased, local investment must be increased. Irregularities and corruption must be halted in the financial sector. All lack of coordination and bureaucratic complications faced by the foreign investors must be eliminated.
If Bangladesh receives foreign investment like Malaysia, Thailand and Vietnam, then undoubtedly the country’s socioeconomic condition will improve
The way to increase foreign direct investment in Bangladesh is to create a skilled workforce and decrease political unrest. The main factor in attracting foreign investment in Bangladesh is cheap labour. But now cheap labour alone is not enough to being in significant investment. There must be all-out efforts to create a trained workforce alongside development of information technology. At the same time, land for establishing industrial units along with the development of infrastructure and communication systems is essential. Industries that draw in large capital must be paid due attention. This is extremely important in a densely populated country like ours.
Investments from Japan, South Korea and other countries in Malaysia’s electrical and electronics industries are behind the economic development of Malaysia. The multinational companies of Japan, South Korea and Taiwan invested hugely in Malaysia. Up until 1991-99, over 80 per cent of investments in Malaysia’s electronics industry was foreign investment.
Due to Japanese investment, Malaysia’s industrial sector flourished in 1980 and it aimed at graduating to a self-reliant industrially developed country by 2020. Many industries emerged though joint investment of local and foreign companies. Skilled workforce, abundance of natural resources, comparatively low wages, higher standard of living, digital communications systems, the government’s foreign investment police, etc, helped in attracting foreign investment and achieving economic growth and development in Malaysia.
It was the same for Thailand and Vietnam. If Bangladesh receives foreign investment like Malaysia, Thailand and Vietnam, then undoubtedly the country’s socioeconomic condition will improve. A country’s image features prominently in attracting multinationals. A clean and aesthetic environment, wide roads, good treatment of foreign nationals, political environment, law and order, the capacity to maintain communications and connectivity, natural environment, abundance of resources, skilled and trained or trainable workforce, less bureaucratic complications, etc, attract foreign investment and project a positive image of a country to foreign investors, which helps in increasing investment.
In today’s world, the importance of foreign investment in any country’s economic development is limitless. While there is scope for foreign investment in Bangladesh, foreign investors have certain qualms concerning the investment environment here. These mainly concern corruption and bureaucratic complications. Various reports of the World Bank, IFC in particular, point to these bottlenecks to investment in Bangladesh, predominantly corruption and bureaucratic complications. Other issues are tax, tariff concessions and repatriation of returns. It is unfortunate but true that progress in this area is insignificant. Then there is a lack of skilled workforce, infrastructural weakness and difficultly to avail land.
If we want to attract investment in competition with other countries, we must immediately move away from expensive investment conferences and trade fairs abroad, update our existing polices, and improve our education standard. Our regulatory bodies need to move away from the ‘licence-boss’ attitude and become business-friendly and step up use of technology.
Attention must be paid to ensure companies can get good returns on their investment, that they can easily repatriate their returns and get justice in legal lawsuits. And there should be no discrimination among local and foreign companies.
* Mamun Rashid is an economic analyst.
