Foreign investment not coming as desired due to Bangladesh’s image crisis

A B Siddique :

There is no foreign investment in Bangladesh. One of the reasons behind the lack of investment is the ongoing high inflation, import difficulties due to the US dollar crisis and the increase in bank interest rates.

This is compounded by growing political uncertainty, which has negatively impacted investor interest.

The World Bank has revised down its growth forecast for Bangladesh to 5.6 percent for the fiscal year 2023-24, because, in the face of increasing inflation and external challenges, the economy of Bangladesh is considered to be under pressure throughout the year.

Private investment flows are usually low before any general election. But, this year’s economic challenges have worsened the situation.

Let’s take the case of Bangladesh Investment Development Authority (BIDA) investment proposal registrations, which declined last fiscal year.

According to the report of Bangladesh Bank, FDI or foreign direct investment (foreign direct investment) has reached 344 million dollars in the financial year 2021-22.

Among them, the net capital is 135 million dollars, which is 39 percent of total FDI. Net capital is $820 million out of 251 million in FY2020-21, which is 33 percent of total FDI.

In the fiscal year 2019-20, out of 237 crores, the net capital is 73 crores, which is 31 percent of total FDI.

Net capital is $1.2 billion out of $3.89 billion in FY 2018-19, which is 31 percent of the total investment.

Although FDI has increased slightly in the last two financial years, there is a gap in the account.

A major part of FDI comes from loans and profits from one company to another. 30 to 39 percent of the total investment comes as net capital.

Those concerned think that there is an opportunity to increase foreign investment in Bangladesh.

But because the problems are not solved quickly, the doors of investment are not opening.

In order to increase foreign investment, domestic investment must first be increased. Foreigners will come forward after seeing domestic investors.

Instill confidence in them. Infrastructural facilities including gas, electricity should be increased.

It is important to build a good image of the country. Only then will investment come.

Investment will not come in just one or two steps. Entrepreneurs in foreign investment in Bangladesh first face major hurdles in terms of communication.

Generally, large foreign investments in the country come through the hands of local entrepreneurs.

But the country’s investors are not interested in joint venture factories.

They are more interested in setting up industries under sole proprietorship.

As a result, foreign investment is not coming in the relationship with foreign entrepreneurs through investment conference, import-export. There are many complications in business.

To run the factory, a large sum of money has to be paid at the local level.

The central office also has to meet the demand of subscription at various ghats. This increases the cost.

At present, the crisis of gas, electricity and energy is evident. Uninterrupted supply of these is not met even with high prices.

There are infrastructure problems. Foreigners should be summoned and put in danger among them.

Because of this, many are not encouraging foreigners to invest in the country.

Many foreign entrepreneurs are interested in investing in the garment sector in the country due to tax and quota benefits for exports from Bangladesh. But garment sector entrepreneurs have opposed it.

They say that foreigners should invest in the technology sector.

It is also important to establish basic and large industries in the country.

It is easy to bring in foreign investment through the hands of domestic investors.

For this reason, a bridge should be built between domestic entrepreneurs and foreign entrepreneurs.

It will facilitate foreign investment. Foreign direct investment (FDI) in South Asia is very low.

To increase FDI, countries in the region need to simplify the tax structure.

At the same time, political stability and friendly relations should be maintained by creating an atmosphere of trust among themselves.

Foreign investors will be encouraged to invest in this region, which has potential in trade and commerce.

In the 1990s, South Asian countries benefited from integration into global value chains to increase trade.

By utilizing this facility, it has been possible to achieve economic growth through technological development as well as creating new jobs in the South Asian economy.

However, the weakness of South Asian countries is the relatively low presence of intermediate and capital goods in the global value chain.

Apart from that, there is little mutual cooperation between these countries to reduce the cost of production and increase competition.

In the future, Bangladesh, Nepal and Bhutan in the region will be removed from the list of Least Developed Countries (LDCs).

Countries will increase their participation in value chains in the South Asian region to meet the challenges of post-LDC transition.

According to UNCTAD data, in 2022 FDI came to South Asia at 5 thousand 587 billion dollars.

This is only 4.30 of the FDI inflows across the world. More foreign investment should have flowed in because of value chain benefits.

But lack of viable economic corridors in the region, disputes and mistrust among neighbors, slow-moving policies in trade facilitation and free trade agreements, as well as some non-tariff barriers make regional economic alliances impossible in South Asia.

If these obstacles can be overcome, there is an opportunity to attract more foreign investment.

South Asian countries have made considerable economic progress in their respective fields.

But the overall development of the region was not that way. Although SAARC was formed to enhance regional cooperation, it has not been of much use so far.

There is no alternative to strengthening regional institutions under SAARC in the changing global context.

It is also important to have political consensus with neighboring countries, especially India-Pakistan. Geopolitical stability is needed to increase trade and investment between countries in the region.

But till now it is missing. In addition, seven countries have separate complex tax structures for conducting business. In this case, it should be considered whether a simple tax policy acceptable to all countries can be formulated.

The availability of cheap labor is slowly diminishing in South Asia. So, more foreign investment is needed.

FDI provides the necessary funds as well as it enables a country’s increased participation in global value chains.

Emphasis should be placed on facilitating investment in cottage, micro, small and medium enterprises (CMSMEs).

Other speakers in the session said that initiatives should be taken to reduce the cost of bringing and taking products between the countries of the region.

Reasonable price of food products and low transportation cost should be ensured especially in case of import and export from one country to another country.

The main role of the SAARC Chamber of Commerce should be to mediate in the private sector. They can work not only with large industries but also with investments in the CMSME sector. South Asian countries need to work together in greening to combat climate change.

(The writer is a journalist.)