Job leads, News, and Conversations with Those Who Write and Edit
Foreign Direct Investment (FDI): Bangladesh Perspective
Md. Joynal Abdin
The Daily Sun on 24 September 2014
Bangladesh is a country with thousand year’s history in international trade, investment and business. We have both good and bad experiences with the foreign investors or trading partners. Because of fertile plain lands and favorable climatic condition, ours had predominantly been an agricultural country for centuries. Industrial setup started its journey in the region mainly during British colonial age but got its momentum during 1950s. Investment promotion agencies started their activities at that period.
As a result, today we have an about USD140 billion economy, which is growing with on an annual average 5% - 6.5% growth rate during last two decades. Bangladeshi economy is transforming from traditional agriculture based economy into industry based economy. Contribution of agriculture into GDP is reducing day by day but till now it employs 47.5% of workforce. In FY 2012-13, contribution of agriculture, industry and the service sector into GDP is about 13.09, 29% and 57.91% respectively. Contribution of investment is about 15.76% at the same time. Bangladesh received USD 1599.16 Million Foreign Direct Investment (FDI) in 2013 when we have exported about USD 30.71 billion and imported about USD 40.61 billion. Therefore the contribution of investment into GDP and percentage of FDI we received in the stated period is not satisfactory at all.
Sectors for Investment:
Readymade Garment (RMG) is the prime mover of Bangladesh economy along with remittance, and export of home textile, frozen food and shrimp, agro-processing products, tea, vegetables, plastic products, pharmaceuticals, electrical products etc. Other potential Bangladeshi sectors for investment could be agro-based and agro-processing industry, skilled human resource export, ship building, tourism, basic chemicals/dye and chemicals, ICT and ICT based service, active pharmaceuticals ingredient industry and radio pharmaceuticals industry, polymer industry, jute and jute products, leather and leather products, hospital and clinic, light engineering industry, plastic industry, furniture, energy efficient appliances, frozen and processed fish industry, tea industry, home textiles, ceramics, toy, container service, warehouse, innovative and import substitute industry, and cosmetics and toiletries etc.
Existing Strengths and Opportunities:
We are trying to attract foreign investors here by stating that, Bangladesh is located at a strategic point to reach into two largest market of the world i.e. India and China. At the same time we have a large domestic market of 160 million people and our purchasing power parity is increasing day by day. Bangladesh enjoys duty and quota free market access mainly in the EU, Japan, Canada and Australian market. We have bilateral agreement to avoid double taxation with 28 countries. Bangladesh is offering protection of foreign investment through the Foreign Private Investment (Promotion & Protection) Act 1980. We are offering skilled and non-skilled manpower at a competitive price; other factors of production are also available with comparatively lower cost here in Bangladesh.
Bangladesh is offering a good number of fiscal and non-fiscal incentives like, tax holidays five years in different slaves for fist five years in Dhaka and Chittagong, seven years for other cities. For export oriented industries duty free import of machinery and spare parts, bonded ware house facility, up to 90% bank loan against LC, Permanent residence facilities is available upon investment minimum USD 75000 and citizenship is available for minimum USD 0.5 million investment. Repatriation facilities for invested amount with earned profit, dividends while exit. A favorable budgetary incentives is also available for the foreign investors here in Bangladesh.
Current Trend of FDI:
Developed and developing countries like Japan, Australia, Canada, Switzerland, China, Singapore, Malaysia, South Korea, France, Germany, USA etc. are shifting their industries into high-tech capital intensive industry due to rise in manufacturing cost of land and labor. Therefore labor intensive industries are relocating into cheaper destinations like Bangladesh, India, Brazil, South Africa, Sri-lanka, Vietnam, Cambodia, Mongolia etc. This trend of relocation makes an opportunity for the countries like Bangladesh to get foreign investment as a form of relocated industry. On the other hand Multinational / Transnational Companies are always in search of new markets to manufacture products at competitive price to sell at domestic market or export into the target markets.
From both the aspects Bangladesh is a promising location. We have a growing market of about 160 million people at home and we are locating in a strategic point to reach into Indian (about 1.27 billion) market and the Chinese (about 1.36 billion) market.
Net foreign direct investments into Bangladesh during the last few years are USD800 million in 2004-05 FY, and USD 675, 793, 748, 961, 913, 775, 995 million in 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 FY respectively. Bangladesh’s net FDI receipt is not satisfactory in terms of our GDP size.
Causes of our failure to attract foreign investment could be listed as political instability, shortage of power, gas and other utilities supplies, absence of effective IPR imposition so on and so forth.
Why do Bangladesh Needs FDI:
Bangladesh is a growing LDC and projected to be a developing country before 2021. At this point of time we have limitation is terms of technical knowhow, skilled manpower, power supply, infrastructure development, managerial capacity, product’s standards and international certifications etc. With so many limitations we have to grow further even faster to achieve the goal. Therefore foreign direct investment could be the best alternative to keep the wheel rolling, to move the economy faster toward prosperity.
What to do & how to do:
Our investment promotion agencies could consider the following steps to attract foreign investment in an effective manner:
1 Priority sectors for inviting foreign investment have to be selected: Because today Bangladesh do not need foreign investment to establish a RMG industry but it could be welcome to develop a world class amusement park, sea or hill station, five star hotel, to construct an alleviated express way, establish a modern laboratory, high-tech medical facilities etc. Therefore we have to select priority sectors for foreign investment.
2 Complete project proposals (fiscal & technical) shall be prepared: Promising projects could be listed and preparing project proposals in terms of capital, technology required, potential markets, with payback period etc.
3 A long list of global investment giants could be made: Sectoral list of multinational or transnational investment companies could be drawn and approached with specific project proposals. This approach could be given one to one basis or organizing investment summits into global corporate hubs like Singapore, Dubai, Geneva, Paris, Frankfort, London, New York etc.
4 Providing One Stop Investment Facility Services to the Investors: One stop investment services like Trade License, TIN, VAT registration, Environment Clearance, Boiler Clearance, Joint Stock Registration, Export / Import Registration, Copyright, Patents, Trade Marks, Industrial Designs etc. has to be offered digitally to avoid corruption and delay in decision making.
5 Post investment services: A package of thousand days post investment services could be offered for the foreign investors to monitor and guide sustainable investment.
Off course, local investors shall be equally eligible to get similar treatments from the government and relevant agencies. Joint venture investment may be promoted to ensure local stake and equal access to decision making.
Finally I would say that, this is the peak time for Bangladesh to promote its existing strength and opportunities to attract foreign investors, because each of the targeted investment will lead us one step forward to a developing nation within shortest period of time. Each of the ventures will work for us in terms of employment generation, export earnings, technology transfer, managerial knowledge, standard of living and poverty alleviation. So many criticisms could be written against FDI but we need it badly today, if possible now.