Is Bangladesh investment-friendly?

Despite the government’s desperate call for foreign direct investment (FDI) citing lucrative opportunities in Bangladesh, including that of repatriation of hundred percent of their profits and equity, FDI flow is still falling.

The government, however, denies to agree with the scenario. They say it happens in the beginning of fiscal years.

So far, local investors claim that cost of doing business in the country is rising while the facilities are not adequate and of high-quality. These include infrastructure, availability of energy sources and political and social stability.

On Oct 25 prime minister Sheikh Hasina in Germany said, “Despite the global economic downturn, the country during the present government’s tenure could maintain an average 6 percent GDP growth. Last year, it was 6.7 percent.” Bangladesh’s next Five-Year Plan (2011-2015) has been designed with the goal of achieving an average growth of around 8 percent, she maintained.

Highlighting the growth in export and increase of remittance flow she said Bangladesh in recent years has made vast advancement in manufacturing, infrastructure, human resource development, banking and corporate sectors. “Our macroeconomic fundamentals are solid and we are socio-economically a stable country with a domestic market of 150 million people,” she said.

Referring to Bangladesh’s geographical location, Hasina said the country bordering with India and close to China, Nepal, Bhutan, Myanmar and the South East Asia might be a natural regional hub at the heart of an economic area of three billion people.

She said the government has taken steps for corporate tax holidays, cutting import duty on machinery import, bureaucratic tangle and reducing time for setting up companies from several months to a day.

a report published on Nov 8, 2011 say:

According to the latest figures of the Economic Relations Division (ERD), Bangladesh has received only USD 240.62 million or 10 percent of its USD 2.5billion foreign aid target in the first three months of the current fiscal.

Of this, USD 171.8 million has been used to repay earlier loans and their interests.

In the same period last fiscal, USD 315.9million aid had been received of which USD 142.9 million was used for repaying loans.

The dismal foreign aid scenario put a strain on bank borrowings, as the government had to borrow Tk 110 billion in the first four months, a major part of its current fiscal target Tk 189.57 billion.

Expressing concern, former finance advisor to the caretaker government Akbar Ali Khan told that the foreign aid would continue to decrease, if ‘the Padma bridge project funding row is not settled in a respectable manner’.

Analysing ERD figures, he said, “It means that reaching the target (of foreign aid) in the next nine months is uncertain.”

He also advised the government to take the allegations of corruption in the Padma project execution ‘seriously’.

A B Mirza Azizul Islam, another former finance advisor to the caretaker government, seconded the comment and said, “If the World Bank stops funding the Padma project, it could affect funding for other projects (by the Bank).”

A confident finance minister had, however, told on Thursday that the aid flow would increase in the upcoming months.

“Many of them (aid) are stuck in pipeline. The situation will change once they are cleared.”

Admitting increased bank borrowing, Muhith said, “It increased as the foreign aid decreased. But I can strongly say that it will not cross the target.”

Former finance advisor Mirza said it is only ‘natural’ that the amount of repayment would grow with the size of loans.

“But this time, it increased more than the past years,” he said, explaining, “As we failed to devise an alternative to foreign loans, we’ll have to continue to repay.”

The government spent USD 30 million more to pay interests of loans in July-September compared to the same period last year.

The ERD figures also show Bangladesh received USD 1.77billion foreign aid in the last fiscal and repaid USD 727.5million loans and their interests.

In 2009-10 fiscal, the amount was USD 2.16 billion, of which USD 687.4 million had been used for repaying loans and interests.

It’s frustrating

Even in the era of modern technology and open market economy, Bangladesh is lagging behind with its slow growth while the rest of the world’s developing nations are approaching.

In such a situation, when the country has been drowned in corruption and irregularities, foreign investors are likely to look towards other competent countries, no doubt.

Moreover, its failure to make sure ample supply of gas and electricity is a major concern for investors too, where the development of road-rail-or water communications are remained underdeveloped for big businesses.


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