Editorial
FDI inflow dipping for Bangladesh
Time to reverse the trend with a good strategy
THE World Investment Report, 2008 of the United Nations Conference on Trade and Development (Unctad) has some eye-opening messages for Bangladesh. We have had FDI investment in 2007 showing a 16 percent decrease in the inflow from the level of 2006. This is in stark contrast to 32 percent increase in FDI receipts globally, let alone 18 percent higher investment notched in the region.
The declining curve for Bangladesh began in 2006 when the figures dropped to US$793m from US$854m in 2005. Political unrest had to do with the sudden trough; but somewhat ironically in 2007 under the caretaker government rule, as the Unctad report depicts, the figure slumped to US$666m.
The narrow base of FDI inflow is another concern as textiles and telecom attracted bigger chunks compared to assorted others. There is obviously yet untapped potential for diversifying FDI inflows, especially in the infrastructure and service sectors.
But the real signal to read on the radar screen is: even though there has been no political unrest in the last nearly two years, a certain climate of political uncertainty accompanied by business and investment hesitancy existed. However, with the election dates having been announced and political parties gearing up to participate in the polls clouds hovering the political and economic future of the country should now be clearing away.
Significantly, local investment projects registered with the BOI have increased substantially -- from 286 in 2007 to 1055 projects during the first eight months of 2008 fiscal. This is perhaps attributable to a switch from mercantile investment to productive ones. The vastly improved performance of Chittagong port has had a positive bearing on local investment, a factor which ought to weigh favourably with potential foreign investors eventually.
As far as infrastructure goes, we are caught up in a dilemma. While the drawbacks in infrastructure like gas and electricity supply crunches cannot be overcome without massive doses of FDI these on the other hand stand in the way of attracting FDI inflows.
We can cut through the barrier by responding timely to big foreign investment proposals with better negotiating skills based on firm estimates of our projected energy needs and availabilities underpinned by a decisive political will. As part of a balanced stratagem we might try to attract FDIs in the service sector.
The foreign entrepreneurs are greatly dampened by bureaucratic tangles in this region. The impression that despite a technocratic government, red tape hasn't lessened in Bangladesh needs to be removed.
At the operative level, it is of utmost importance that government agencies monitor the FDI trends across the globe, particularly in South and South East Asia, and advise the government for timely intervention to wean away some of the FDI on offer to Bangladesh.
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