Post Breakfast
Becoming an Asian tiger
Quite often we refer to certain countries in Southeast Asia as 'emerging tigers'. Their economies and their progressive economic development are analysed and extolled for their performance. Such an approach also draws our attention not only to the manner in which such countries identified the weaknesses within their development paradigm but also how such measures to overcome challenges subsequently facilitated foreign direct investment.
In the recent past, we have watched such enthusiasm also about Bangladesh. Despite a generally negative image of the country, resulting out of natural calamities, corruption, poor governance, extremism and lack of a participatory political process, efforts have been undertaken by several external institutions to point out the latent possibilities of Bangladesh. 'Investor Chronicle' from United Kingdom has identified the country as a 'hot emerging market'. JP Morgan and Goldman Sachs, two United States financial institutions have acknowledged existing detracting factors but have also suggested that Bangladesh could be included among a handful of countries whose economy has potential for absorption of future investment. Such views are particularly welcome given the fact that the country was recently being written off by so-called experts as having no future during the post MFA era.
The other interesting feature has been the recent acquisition of a licence for investment banking by Citigroup. This step has been interpreted as a sign of potential for other multinationals (Shell, BP, Mobil, HSBC, Citibank. Samsung, Toshiba, Cemex, Singtel and Orascom) also entering the local market despite its perceived limitations.
Many non-resident Bangladeshis who have been associated with financial institutions abroad and watched the possibilities unfold within Bangladesh have followed these developments with great interest. During the recently concluded NRB Conference and also through separate interventions in the media, they have expressed their desire to actively participate in the future potential economic development process within Bangladesh.
One such example of constructive engagement has been that of Asian Tiger Capital Partners, a group of young expatriate Bangladeshi entrepreneurs experienced in consulting, banking and investment abroad. Mostly of British origin, the stakeholders of the Company, in the presence of the British High Commissioner in Dhaka, recently presented their plans to launch a US dollar 100 million private equity fund to be invested in Bangladesh. Media reports indicated that this group seriously believes that foreign direct investment in the country could increase tenfold from the current figure of around US dollar 700 million to US dollar 7 billion by 2015. In this context, the group also unveiled its first research report on the Bangladesh economy, entitled 'Bangladesh: Growth. Investment, Opportunity', focusing primarily on 14 investment sectors ranging from agriculture to power and pharmaceuticals.
It has been suggested that the initial steps pertaining to this equity fund would probably be in place by September this year. It will be aimed at 'general investment' and will be followed by a 'separate stock market equity fund and an infrastructure fund'. The group is hoping to raise money from global investment institutions and non-resident Bangladeshis. Most interesting! This company believes that given better information and removal of informational asymmetries, top global investors and multinational financial institutions will 'see Bangladesh as Asia's next great untapped investment opportunity'. It is indeed good to see such confidence.
I have always personally described Bangladesh as the 'untapped frontier'. I remember the stark days of 1972, when one had milk only if one had a cow. We have come a long way since then. Today, we are almost self-sufficient in food. We still have problems in several sectors -- energy, water management, fertilizer and different areas of infrastructure. Nevertheless, we are slowly, but steadily moving forward. Rampant corruption and abuse of official power has to a large extent been reduced. Accountability and transparency, as concepts, are being re-introduced within the matrix of governance. The enforcement of draconian measures might have led to some degree of torpor within the business community, but one hopes that this will pass under an elected government.
I am optimistic about our economic future when I see groups like Asian Tiger Capital coming forward to participate in the regeneration of this country's future economic development.
I agree with the need to predicate our success on the basis of an economic vision. We need to believe in ourselves and also in our ability to seize opportunities in different fields and find solutions to problems. What we require is a change in our mind-set. That is the real catalyst for economic recovery. It has already been demonstrated in India, Thailand, Malaysia, Vietnam and South Korea. We might not right now have cutting edge technology, but we have cheaper alternatives.
What we require is a sustainable economic strategy that will automatically provide us with investment opportunities. The World Bank in its July 2007 Report on Bangladesh has remarked on the need to shift from agriculture to industry and services, to intensify integration with global markets and to evolve diverse dynamic urban centres. They have also noted that FDI will improve if there is better macroeconomic governance, continued macroeconomic stability and a commercially viable energy sector. To this one can add the need to have in place better infrastructure, larger pool of skilled manpower required for management, information technology and the services sectors, the spirit of innovation and the existence of due process of law. These factors are all inter-related. It is the juxtaposition of all these elements that will spur development and possibly take Bangladesh to the status of a Middle Income country by 2015.
We have to understand that we have a difficult task ahead in this globalized, competitive world. We have to not only project Bangladesh as a creative economy but also market it as a brand that will not be scoffed at. In this regard, both our Bangladeshi diplomatic Missions as well as our Diaspora have to play key roles. They can help in the creation of an enabling environment. At the same time, to ensure rapid growth, serious measures have to be taken, in a coordinated manner, to streamline the regulatory principles and to develop the financial system, both in capital markets and banking.
Asian Tiger Capital and other similar institutions in Bangladesh should be given assistance and access by the responsible authorities in Bangladesh so that their efforts can succeed. We need their presence, connectivity and outreach contacts in areas like-Energy, Non-Energy Infrastructure and alternative energy sources, Cold Storage facilities, Textiles (weaving mills and dyeing-finishing mills), Outsourcing, Pharmaceuticals (plants with certification for developed markets), Healthcare, Biotechnology, Light and Heavy Engineering. Tourism and Hospitality sectors and Education (both in information technology as well as vocational training).
The report prepared by Asian Tiger Capital has noted that currently several very large FDI proposals (total worth US dollar 9.7 billion) are pending for decision by the government. These include investment proposals made by the Indian conglomerate Tata, the Abu Dhabi Group from UAE, Global Oil and Energy Ltd. from UK, Azimat Corporation from Malaysia and Contech Ltd. There have also been other offers by the steel group Mittal. The significant aspect pertaining to this scenario is the absence of decision making for many years. One can only hope that necessary action will be taken in this regard soon after the next elected government is in place based on transparency and national interest. We have to remember that for a developing country like Bangladesh, increasing the level of FDI is likely to have a direct bearing and 'significant positive impact' on export growth, foreign exchange reserves and the balance of payments. It will also facilitate the transfer of knowledge and technology.
Bangladesh needs to grow a 'can-do' attitude and work ethic. It also needs to upgrade its corporate culture and improve its 'bureaucratic processes'. We need to learn and replicate the experience of South Korea, China and Vietnam. We must also open our mental windows and be more focused in our strategic approach. We also have to streamline the underlying market fundamentals so that future flow-in of foreign investment (in the form of preferred stocks and subordinated debt) does not upset the institutional investor base. We have to be cautious so that the commercial banking sector can absorb the expected growth.
The AT Capital Report, in my opinion is a 'must-read'. One hopes that this group will make sufficient copies available to our Ministry of Foreign Affairs so that it can be distributed among all our Diplomatic Missions abroad for their information and comments.
Muhammad Zamir is a former Secretary and Ambassador who can be reached at mzamir@dhaka.net.
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