FDI flow blocked

Pol uncertainty, sense of insecurity prevailing

15 June 2014 Kazi Zahidul Hasan

Weak infrastructure, poor governance, high-lending cost, unfriendly regulatory environment and ill-conceived investment promotion strategies stand on way to attract Foreign Direct Investment (FDI) in Bangladesh, opined experts on Saturday.
The prevailing 'political uncertainty' and sense of insecurity were attributed as other  
major roadblocks  to lure the expected FDI in the country.  "Despite having huge potential and comparative advantages, the country has failed to lure adequate FDI over the years due mainly to lack of conductive investment climate couple with infrastructure bottleneck," former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation on Saturday.
He said, the flow of foreign investment remained low in Bangladesh compared to other neighbouring countries in the region although the government of Bangladesh has been offering various fiscal incentives for the foreign investors. "That means, the foreign investors are still not finding the country as a favourable destination to shift their capital here due mainly to the above mentioned factors," he added.     
The persisting uncertainty in the country's political arena also made the foreign investors shaky. They may come forward with their investment in different sectors, given that there is political stability, he said.
"The government should pay more attention to improve infrastructure and law and order to attract more FDI. Besides, concerted efforts are needed to make a conductive environment to attract significant investment flows to the country," he said.
"FDI is not attracted to a country where its own nationals are not investing. If we look at the overall investment situation of the country the domestic investment is declining," said former finance adviser to the caretaker government Dr AB Mirza Azizul Islam.
The low domestic investment has been a matter of concern because it holds back foreign investment additionally, he noted.
Emphasizing the need for accelerating domestic investment for attracting more FDI, he said, the rate of investment of the country itself has been stagnant at around 24 per cent to 25 per cent of the country's gross domestic product (GDP) for the last 10 years.  The sixth five-year plan (2011-15) of Bangladesh targets a GDP growth of 8 per cent. If the country wants to achieve the target, the share of investment in value needs to be 32.5 per cent by 2015, he said.
The proposed budget offered various fiscal incentives for the investors, but this may not yield any positive result if we cannot overcome sluggish private investment scenario, achieve higher economic growth and macroeconomic stability, he said.
Although the deterrents for attracting FDI remain the same over the years, he also said, the prevailing sense of insecurity for life and assets also appear as a key roadblock towards reaching the target for both foreign and local investment.
He further said high cost of doing business and policy inconsistency is discouraging the foreign direct investment. The investors need supportive policies along with congenial political environment for the return of their investment.  Dr AB Mirza Azizul Islam said the removal of the problems could help achieve the higher FDI flow in the country and it help to beat the targeted GDP growth set in the sixth five-year plan.
Inadequate infrastructure, prevailing bad shape of major highways, deteriorating law and order situation and energy crisis are the major reasons behind the poor FDI flow to the country, said an office bearer of Foreign Investors' Chamber and Commerce and Industry (FICCI).
He also said that the prevailing traffic situation in the capital is distorting the image of the country. When the investors are paying visit to the capital city they feel irritated over the nagging traffic congestion. It also leaves negative impact on their minds.
Until the government can control the traffic in the city, it cannot expect to achieve any success in attracting FDI in the country, he said.
 An official of Board of Investment (BoI), which is promoting the country's FDI, said the government is confident that FDI inflow will cross $2.0 billion mark in 2014. "We could have easily achieved this target in the last year had there been no political unrest," he added.

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