Investment climate can be characterized by macro economic conditions, governance based on institutional and regulatory policy environment that pays off in greater competitiveness for firms and sustain growth for the economy.
Private sector has been instrumental in Investment climate and engine of inclusive growth of Bangladesh generating employment, creating social parity, expanding public sector revenue, advancing innovation, adding affordable products and services in the consumption pattern. Today, private sector accounts for 90% of GDP, 80% of total investment, 94% of consumption expenditure and 80% of domestic credit.
Bangladesh compounded with accelerated pace of economic reform, pro-business and investment driven policy support has emerged as 'the bright spot' of 'global production factory' despite woe-stricken global economy. Business enabling policy environment in Bangladesh has proven in some extent by the success and strong footprint of global investors along with domestic investors in wide ranging high growth and potential Industries. However, an outsized gap is prevailed between the potential and current state of investment.
Since 1990s the Government of Bangladesh has been increasingly supporting private sector development through framing sound macroeconomic management policies, reforming policies towards open up the economy. These initiatives enabled our economy to shift industry-driven economy from agro-driven growth economy. It is evident that combination of pro-business supporting policy, fiscal and non-fiscal benefit, macro-economic stability, strategic market location, and competitive production factors position Bangladesh to liberalized, flexible and attractive investment trajectory relative to China, India and Vietnam. Amid this background, Bangladesh remains significantly behind other emerging countries especially China, India, Vietnam, and Philippines in terms of attracting domestic investment and Foreign Direct Investment in diverse industrial units.
Bangladesh is yet to reach in the targeted level of 34% of GDP which is hovering around 28% in line with achieving vision 2021 of GoB which ultimately cast a dampen spell on the potential of the country to be emerged as the 30th largest economy by 2030 which was recognized by PWC featured by 'double digit growth', '$6000 Per Capita Income', over 40% Investment and GDP ratio, massive export oriented and import substitute industrialization in high potential sectors. A disparaging scenario is evident in terms of attracting foreign direct investment in Bangladesh as Bangladesh accounts for insignificant share of the global FDI around 0.12% whereas the share of China is 10.5%, India is 2.80%, Vietnam is 0.75% and Philippine is 0.50%. The FDI in Bangladesh is around 3.5% of South Asia.
Some inheritance of pitfalls and paradox in the current setting of the investment policy ecosystem discount the credibility of Bangladesh as investment bright spot as well as undermine the investment growth potential. The interlinked elements discouraging private sector including new foreign direct investment can be outlined focusing on two-aspects which are (a) problem with-in the domestic endowments (b) Image crisis due to fragile perception of global think tanks.
Business community feels the following drawbacks perturb the fabrics of the investment eco-system:
♦ Bangladesh has well designed policy with attractive propositions. The efficacy of the policy is undermined depriving the economy of the country due to lack of enforcement.
♦ Reliable and smooth multimodal international standard connectivity, supply of uninterrupted industrial energy & power are the determining factor in proving capacity of the country in fostering investment and industrialization. There is no denial that Bangladesh made commendable progress in power generation in recent years. However, the progress is not enough to meet the growing industrial demand. As a result, private investment in different manufacturing sectors mark dispiriting state hurting the aspiration of Bangladesh to become a 'middle income' country and fetch export earnings to $ 58 billion by 2021.
♦ There is co-relation between cost of fund and investment. We have observed that cost of borrowing from banking channel has relatively declined over the two years but the investment has not scaled up proportionately.
♦ Inadequate intellectual property rights protection.
The problems within the domestic set-up pose a threat to the investment image of the country which sometimes leads negative commentary to the potential entrants. The following points addressed are eroding the positive physiology of the potential investors some extent:
♦ Poor ranking in the World Bank Ease of Doing Business report (Bangladesh ranks 174 out of 189 countries) , WEF Global Competitiveness Index (Bangladesh ranks 107 out of 140 countries), report, and Bangladesh ranks 131 in Economic Freedom Index (EFI) indicating limited freedom of economy, weak integration with global economy, increasing cost of doing business, weak regulatory environment, Policy discontinuation, bureaucratic bottleneck and weak contract enforcement give a negative indication about investment-ecosystem in Bangladesh.
However, Bangladesh expects to grow by an average 8% over the next seventh five year period. In order to achieving this by fostering private sector development, a broad range of policy interventions are required addressing the challenges that private sector of Bangladesh faces and catalyzing the promoting 'quadrilateral model investment' engaging public, local private, foreign investor and development partners. In this juncture, we require objectively reassess our existing policies and policy eco-system in order to develop a focused, result oriented and coordinated action plan to rekindle the confidence of private sector and invigorate private investment for GDP growth to 8% trajectory and graduate to Middle income Country. In this connection, I put forward the following recommendations:
♦ Policy and process for local Investment in Bangladesh needs to be simplified. Harmonized endeavors toward reshaping focused, resulted-oriented, predictable and comprehensive policy environment to explore the untapped potentials of Bangladesh and leverage the synergy of cooperative Private and public sector bondage positioning the Country into new height.
♦ In alignment with the national policy design downstream road map targeting different sectors and addressing the sectoral development elements like increased productivity, skills development, innovation, market access, financing.
♦ Periodical assessment and re-form needs to be conducted & framed to know the impact & outcome of policy without hurting the interest of the existing players
♦ Concerned Govt. agencies need to undertake and design comprehensive, inclusive and effective road map in coordination with private sector to improve the position of Bangladesh in Doing Business context and Economic Freedom index to add value, regain confidence and competitive advantages of Bangladesh to outperform other contending countries as attractive investment hub.
♦ Country competitiveness in infrastructure and industrial energy need to be improved with immediate priority.
♦ Coordinate mainstream macroeconomic policies especially fiscal, Monetary and trade related policies as well institutions working in this regard.
♦ Priority sectors for inviting foreign investment need to be selected focusing high value end RMG, Textiles, Leather and Footwear, Amusement park, Tourism infrastructure, High-tech medical facilities, ICT, Automotive. In addition low lying but promising Industries need up-liftment and promotion for creating low income employment generation and retention for new Industries in the bottom line.
♦ Regional integration & cooperation beyond SAARC has to be ensured to reach potential investors.
♦ Merge and coordinate One Stop Service of BEZA with One stop Service of BOI to effectively facilitate the Investment.
♦ Incentives of GoB for FDI has to be fine tuned with the customized requirements of the Investors.
♦ Entrepreneurial Innovation and innovation capacity has to be improved and turn into productivity.
♦ Regional Integration is essential to enhance the Investment provisions in Bangladesh.
♦ Replicating the tailored investment promotion and retention mechanisms of Vietnam and Korea.
Having done all aforementioned, business enabling policy eco-system can outstandingly contribute to add value, regain confidence and preeminent competitive advantages for durable and inclusive investment led economic growth which will lead to economic transformation and sustainable development pioneering the private sector regime.
