Non-economic factors of Tata investment

In an economic sense, global mobility of capital and labour is the single most important element of globalisation. Although, as Marxists would put it, a higher stage of capitalism based globalisation leads to imperialist tendencies to exploit foreign lands and resources. These are conditions which individual states, presumably capital-starved, can use for their own benefit.

Capital always seeks profit and hence cheap labour. This has been one of the major reasons of huge increase in Foreign Direct Investment (FDI) under globalisation. FDI has been one of the major contributing factors in the industrialisation of newly industrialised countries including China, Taiwan, South Korea, Malaysia and Singapore. India, Thailand, Indonesia, Philippines and Vietnam are showing healthy signs of skilful use of foreign capital for their industrialisation. However, cheap labour is far from being the only factor of FDI. That capital could profitably use labour it needs inter alia good infrastructure facilities, peaceful conditions meaning primarily absence of social and political unrest, efficient administrative and judicial mechanism to deal with problems that any investment encounters, and of course, safety of profit proceeds. In return, the country of investment ought to gain by way of industrialisation, employment and strengthening of national economy.

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Capital's relationship with labour is ambivalent, seeking and pursuing each other in a peculiar way. This ambivalent cohabitation has always been a factor of capitalist development, but needs careful orchestration for healthy development. We in Bangladesh, a country with a huge reservoir of cheap labour, have so far reaped the benefits of globalisation in the form of exporting labour, but not up to our potential and to the extent that many other developing countries have done. Nourished and regulated efficiently, it holds great promise for the future. On the other hand, our attempts to attract foreign capital to use our indigenous labour have not been very successful. This is one area where huge potentials of our industrialisation are hidden, for capital always follows cheap labour. The reasons for our dismal record are not far to seek -- first, socio-political unrest accompanied by inefficient legal-administrative system, and second, weak infrastructure.

While the reasons for which foreign capital is short in Bangladesh can not be overcome overnight, any offer of FDI at this stage merits the highest consideration not only for immediate economic gains but also to take into account its contribution to confidence building of foreign capital. Tata's recent proposal of investment of up to three billion dollars needs to be seen and considered, in this light.

In recent months Tata has made newspaper headlines and prompted expert analysis in the media as well as in seminars and scholarly discussions. Most of the analyses and discussions understandably have centred round direct economic gains for Bangladesh. In negotiations between Tata and Bangladesh Board of Investment (BoI) and other relevant agencies naturally economic issues prevailed. Now it seems that the issues have boiled down to one major question -- use of gas and its pricing.

Gas is the main natural resource of Bangladesh, and its reserves are limited unless new gas fields are discovered. Moreover, the proposed price at which gas be supplied to Tata for their industrial complex is subsidy price, which is much lower than the international price. It is understandable that Tata would bargain for lower gas price, tax holiday, export facilities for their products and, maybe many other financial incentives to maximise their profit. On the other hand, Bangladesh would naturally weigh the proposals taking into account its own gains in the form of employment, infrastructure building, revenue earnings and use of products that Tata would produce. In fact, negotiations and expert discussions centred round these issues. Ultimately, Tata submitted a revised proposal agreeing to raise gas price, though it was still lower than international market price, and to provide Bangladesh government 10% equity share.

Bangladesh side should definitely examine every detail of Tata's latest package proposal and should be guided by its prospective economic gains both in the short-term and long-term. And, of course, use of gas, gas price and the factor of gas reserve as well as the probability of discovery of new gas fields in the future should be on the minds of the Bangladesh side. While long-term economic gains and rational use of gas are the prime factors for our policy makers to accept or to reject Tata's proposal, some considerations of not immediate economic effect need to be taken into account. Although they may be in way called non-economic factors, they will definitely have positive impact for further investment.

At a time when Bangladesh desperately needs to boost its FDI, and has substantially liberalised its investment regime to attract FDI, Tata's investment proposal is likely to allay many of the fears that haunt potential foreign investors in Bangladesh. Successful negotiations and actual investment by Tata will undoubtedly contribute to confidence building amongst foreign investors. Tata, as a group from our closest and biggest neighbour which shares many cultural commonalities with us, is in a better position to take up investment challenges in Bangladesh. It would of course be on the Bangladesh side to play its part skilfully to use Tata's offer to its best advantage and make a major break-through in FDI in the country.

Besides confidence-building, the other positive developments which are certain to follow from robust investment are (a) infrastructure development including getting into regional and international network of transportation and communication, (b) enhancement of work ethics and more provision for labour training, (c) possibility of transfer of technology, (d) exchange of corporate experience with local entrepreneurs, (e) more opportunities to apply international labour and capital standards.

Any major foreign investment is a result of international economic cooperation which, as a manifestation of globalisation, is assumed to be based on the principle of mutual benefit to be judged not only by the immediate economic gains but also by the no less important accompanying factors such as being partners in the regional and global march for development. The days of plundering of national resources by foreign capital are over. Every state has the opportunity to weigh its own options for decision making. Under the prevailing international law and custom, every sovereign state reserves the right to reevaluate and revise its decisions on any ongoing foreign investment, if its national interests so demand. FDI is not merely a business agreement with a private foreign company, it is also entering into more intimate economic cooperation with the country of nationality of the company. Such cooperation strengthens the sense of partnership and contributes to mutual understanding and resolution of outstanding problems in many other fields.

Dr. M Shah Alam is Professor, Department of Law, University of Chittagong.