Mirsarai economic zone in Chattogram. -AA
Consistency in investment policies and long-term policy support are the most important factors in attracting both domestic and foreign direct investment into the country, said Bangladesh Economic Zones Authority executive chairman Paban Chowdhury.Bangladesh's prospects of fetching higher amounts of FDI are very bright given its incredible progress in setting up economic zones across the country.The issue of quality manpower of course is something that needs to be addressed through short-, medium- and long-term policy interventions.
The need for skills development is only now being seriously considered as a major impediment at the policy level and vocational training and higher education need to be aligned with the needs of foreign investing companies. Bangladesh can only become a major hub for FDI when it can boast quality manpower, not before.
We need to revisit our education system and see what steps can be taken so that those who graduate from the schooling system are enabled with analytical skills-an essential prerequisite for all skilled manpower. Similarly, vocational training must be revamped to serve the needs of industry. Merely establishing special economic zones will not guarantee FDI unless we remove these bottlenecks.
Everything is working in Bangladesh's favour in terms of attracting investment as the country is growing fast with a higher economic growth amid increased purchasing capacity of people, political and macroeconomic stability, liberalised trade and investment regimes and the huge amount of industrial land in the economic zones that come with the required infrastructure and attractive incentive packages.
The inflow of Foreign Direct Investment (FDI) had not improved in Bangladesh to a great extent. Inadequate infrastructure coupled with bureaucratic complexities and a wide range of corruption kept investors away. Foreign investment is badly needed in emerging economies of the world. Amid the Covid-19 pandemic, the emerging economies like Bangladesh are in big trouble.
The people in the ministry concerned are striving to woo foreign investors to boost economic activities. The talks with different countries are going on in full swing. Untiring efforts are being made to attract foreign investments and the Bangladesh Investment Development Authority (BIDA) has drawn FDI to the tune of US$ 11 billion since the inception in 2016.
BIDA has been working hard to ensure quality FDI services and an investment-friendly environment since the inception. The coronavirus has come both as a curse and blessing for every economy. After the outbreak of the pandemic the world's famed business magnets have decided to relocate their production and operation plants.
On hearing the message of relocation, many Asian countries opted for seizing the opportunities. Bangladesh, a South Asian country with a population of over 160 million is striving to woo the plants that have planned to move elsewhere. Apart from Bangladesh, many economies like Vietnam, Cambodia, Indonesia and India are in a mad rush to take the opportunities of relocation anyhow. The first ever severe competition among these countries is being widely noticed. The world's second largest economy China now sees drastic fall in inflow of FDI since the beginning of the pandemic.
The growth of FDI has sharply decreased across the world due to the deadly virus. In view of the Covid situation, the United Nations Conference on Trade and Development ( UNCTAD) made grim projections on FDI inflow. UNCTAD said global inflow of FDI may decline by 40 per cent in the current and next years due to Covid-19. Bangladesh among other countries began to see a fall in inflow of FDI even before the pandemic. One hundred Special Economic Zones (SEZs) are scheduled to cover the expected volume of foreign investment worth US$ 30.20 billion as projected in the Seventh Five Year Plan (7FYP). The SEZs have so far received US$ 20.50 billion investment proposals from 151 local and foreign companies.
So, it can be said that Economic Zones have begun to give green signals regarding foreign investment. Shortly after completion of one hundred SEZs, foreign investment is expected to flood the country. Bangladesh is in a sorry state in terms of attracting foreign investment compared to Indonesia, Vietnam, India and Cambodia. Despite cheap labour, Bangladesh could not attract FDI in so many years.
It is said that irregularities and corruption added to the cost of doing business here in Bangladesh. If possible existing terms and conditions set by the government may be relaxed to address the need of foreign investors. It is a piece of good news that the central bank of Bangladesh already revised the foreign exchange transaction guidelines, among others, aiming to bring in more FDI. But, considering the current economic situation, the registration process may be relaxed along with a foreign investor-friendly tax policy.
Moreover, customs act and bankruptcy act may be revised right now. To improve the ranking in the ease of doing business indicator of the World Bank (WB), regulatory reforms are a must. The matter of concern is that Bangladesh's economy is running with around $ 350 billion worth of investment gap in infrastructure construction.
A satisfactory volume of foreign investment is yet to come from China and Japan. Bangladesh has failed to address their demand. What should be noted is: Vietnam in the RMG sector got around 60 per cent investment from China. Vietnam's position in the apparel sector went above Bangladesh as it fulfilled the demand placed by foreign investors.
A move should be taken to sign Free Trade Agreements (FTAs) with developed economies. When Chinese President Xi Jinping came to Bangladesh in 2016, he signed more than two dozen deals worth $ 20.53 billion (2,053 crore) for infrastructure development. Once infrastructure development is completed, a huge volume of FDI is set to enter the economy in Bangladesh. Utility facilities at lowest tariff rates in economic zones need to be ensured.
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