Foreign investment and economic development
Md Joynal Abdin
The Daily Independent on January 15, 2010
Economic supremacy is the only key towards global leadership. A country like Bangladesh has to do so many reforms to have a sustainable growth essential for economic development. Factors that play vital role towards economic development of a poor country like Bangladesh are export earnings, remittance and foreign direct investment. Over two decades Bangladesh’s major export earning is coming from one particular sector only i.e. readymade garment (RMG), which is not a good sign for any economy.
Today or tomorrow better competitors may come and capture the market. In the past, Bangladesh lost its golden fiber market in a similar manner. It is likely that today or tomorrow some third country will enter our RMG market and drive us out of circulation. Are we preparing for that disaster? No, of course not; because during the last thirty years or so, Bangladesh could not develop a second export sector in order to counter such a disaster. If we fail to develop a substitute export earning sector of RMG then economic development of Bangladesh will face unsurpassable obstacles in the days to come. This is why we must develop two to three sectors with Public-Private Partnership (PPP) as early as possible.
Bangladesh’s remittance inflow was increasing even during the massive destructive period of the global financial crisis (GFC), 2008. But currently our workers are losing jobs and returning home due to post-GFC recession of the global corporate houses. If current government fails to manage alternative job location for these people, remittance inflow is bound to be lower in near future. We are losing our labour market in Middle East. So quick actions should be taken from the highest level to regain our labour market in this region and to discover new markets to relocate returning workforce and increase labour export. Foreign ministry and related agencies, bureau, commercial counselors and our diplomatic missions have a great task to do for the same. Newspapers reported that our foreign missions are showing zero interest to solve these problems. Specific direction should be given to our missions so that any labour inconvenience abroad has to be dealt with the concerned mission officials and reports of their action has to be submitted on all issues regarding our workforce abroad. There is a rumour that Foreign Service is the royal cadre in our civil service and they are not interested in dealing with the third class labour issues. It is also found that our mission officials are busy to give birth to a child in a developed country and make them citizen of those states. Some of them are too busy with their personal business, though they are the paid servants of the republic. Effective measures should be taken to root out these feelings of our mission officials.
There is no alternative of foreign investment for economic development of the poor countries like Bangladesh. Since foreign investment increases GDP growth, creates employment opportunity and boost government revenue earnings, it is a very important tool of economic development. With this view in mind Bangladesh has taken a good number of initiatives to attract foreign investment. Some of these initiatives are as follows:
a. Tax holidays for up to 12 years;
b. 100% foreign ownership;
c. Permanent residentship for the investors who have invested more than US$75,000;
d. Remitting full investment and profit/dividend in their own country;
e. Multiple visa facilities for the foreign investors;
f. Reinvestment of profit/divined.
Moreover, Bangladesh is gifted with world’s most competitive labour wages, duty free market access into the EU and US market and two active sea ports to attract foreign investment in Bangladesh.
Despite all these facilities, Bangladesh is not getting foreign investment as expected. Causes of this bad performance in attracting foreign investment are many, including bureaucratic complexity, inefficient performance of the board of investment, lack of infrastructure facility, lack of continuity of government policy, corruption, longer period for government decision-making, poor mentality of the chief executives of the investment related government agencies, political unrest, terrorism and high bank interest rate, etc. These problems are not supposed to be solved overnight, but government has to declare a reasonable timeframe to solve all such problems to facilitate rapid economic growth. A roadmap should also be declared to make the relevant agencies efficient and effective.
Major election manifesto of current government was to build a digital Bangladesh. Vision 2021 has been declared, but reasonable timeframe and roadmap are yet to be announced for attaining the goal of a digital Bangladesh. The present government is busy with implementation of their political agenda rather than development agendas promised in their election manifesto. Without spontaneous cooperation of the government offices relevant to trade and investment, such as the Board of Investment, Bangladesh Bank, Office of the Registrar of Joint Stock Companies, National Board of Revenue, Bangladesh Tariff Commission, Bangladesh Foreign Trade Institute, Export Promotion Bureau, and other relevant offices under the ministry of commerce, industry and finance, there is no hope to achieve the target of ‘Vision 2021’.
A high power task force can be formed with the honourable Prime Minister in chair consisting of Ministers and Secretaries of the Ministry of Finance, Industry, and Commerce, Governor, Bangladesh Bank, Presidents of FBCCI, DCCI, MCCI, AMCHAM, FICCI, BGMEA and BKMEA. They may sit together at least once every month to evaluate investment situation and take necessary measures to make a business-friendly environment at home and to expand our market access abroad. According to World Investment Report, 2009 (WIR) Bangladesh got $ 1.09 billion US foreign investment in the last financial year. This is 63% more than that of the previous financial year, but a nominal amount compared to the foreign investment India got in last financial year i.e. $ 41.56 Billion. Even a country like Pakistan passing through constant unrest got foreign investment of US $ 5.4 billion, which is five times higher than ours. This statistics proves that our performance in attracting foreign investment is, indeed, very frustrating.
Global investors are relocating their industries into poor countries due to the changed scenario of the global financial crisis. Labour intensive industries are looking for cheapest labour markets to survive. With the rise of labour cost in China, India, Brazil, Korea and Singapore, this relocation is expected to ncrease in the days to come. Bangladesh must be preparing itself to receive these relocated foreign investments to gear up its economic development.
In the last financial year our tele-communication, textiles, weavings, banks, food industries, agriculture and fisheries attracted foreign investment. But we have some more sectors like agro-processing, electricity generation, ship building, and infrastructure development to invite foreign investment. It is, indeed, an urgent necessity to revise our policies and strategies facilitating an investment friendly environment, so that we may widen our foreign employment aiming at earning more and more foreign currencies.