IN the 1980s, Bangladesh, India and China started with almost similar levels of per capita income. There were differences but not that big. After near about two decades, even after maintaining fairly high per capita income growth, Bangladesh has fallen far behind China and India whose economic success has been awe-inspiring and is one of the most talked-about-issue globally. A number of factors have contributed to their successes, but a climate conducive to investment growth -- both domestic and foreign -- has been the key to their success. The nature of an investment climate depends on a host of factors and it can either attract both local and foreign investors or scare them away.
The investment climate in Bangladesh has never been that ideal and the reasons are not unknown. That is why it could not attract sufficient amount of investments which is necessary to pull millions of its people out of abject poverty. The findings of a study recently carried out by a renowned international publication, Forbes magazine, have come as a grim reminder of the poor investment climate in Bangladesh. The country has been ranked 119 out of 135 countries in terms of the factors that influence foreign investment decisions. It scored only 32.6 out of 100 in the capital hospitality index as gauged by the Forbes. Neighbouring India, Pakistan and Sri Lanka are well ahead. The study found Bangladesh to be less capital hospitable because of massive graft, lack of access to technology, poor competitiveness and tight regulations. In spite of doing well in areas of protection to investment, administrative decision making, wage and prices, massive corruption has eclipsed all good works, the study mentioned.
In keeping with the tradition, the executive chairman of the Board of Investment (BoI) has dismissed the Forbes study findings and termed those 'motivated'. Though in his reactions given to the FE on the Forbes study findings, the BoI chief has raised some valid points. Those are certainly not sufficient enough to call a study done by a reputed international magazine 'motivated'. The BoI chief has referred to the substantial rise in the actual investment flow in the last year compared to those of the previous years, meaning that investment climate in Bangladesh has certainly improved. That appears to be a hasty conclusion under the given circumstances. Pervasive corruption, poor infrastructures, power situation, tight regulations etc., do still discourage investors. But his observation that foreign investors mainly choose their destinations in terms of return on their investment is, however, is partially true.
But here the quality and nature of foreign investment are as important as its volume. For instance, most part of foreign investments in Bangladesh has flowed in to the energy and telecom sectors. These are the sectors that fetch quick and sizeable profits and are worth taking risks by foreign investors. The deals with many foreign investors in energy and telecom sectors have now come under fresh scrutiny because of the failure of the authorities concerned to protect the national interest. The finance minister a few weeks back were very critical about the foreign investment in the telecom sector and a couple of days back the BoI chief, who is also energy adviser, held both successive BNP and Awami League governments in the '90s responsible for striking an unfair deal with a foreign coal mining company. All these observations are causing more harm than good to the country's investment interests. The deals signed between the government and the foreign oil and telecom companies were supposed to be scrutinised thoroughly by adequately qualified experts to protect the country's interests best. If the national interest was overlooked in those cases, it could be due to corruption by a section of people in power. The BoI rather than becoming complacent about foreign investment flow needs to look closely at the foreign investment trend and the government does also need to remove the bottlenecks to foreign investment flow into the country.