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Twin pillars

Jahangir Bin Alum
IT is needless to say that investment, both domestic and foreign, is vital for the economic development of a country, irrespective of its development status. It is more so for a developing country like Bangladesh.
Investment and development are interdependent phenomena. However, much depends on the socio-economic policies of a country and policies relating to trade and investment.
A stable political environment, existence of efficient and businessfriendly bureaucracy, credible law and order situation, an independent judiciary, and businessfriendly policies are sine quo non for attracting investment.
Industrial policy, trade policy, fiscal policy, monetary policy, labour policy, energy policy, and laws relating to protection of investment and intellectual property rights, are critical for getting investment.
Consistency of fiscal and monetary policies plays an important role in the decision of any prospective investor. Frequent changes in these two policies discourage
investment. If the ground realities are different from the policies, no investor will be interested in investing here.
Holding road shows, organising media campaigns and speeches by top functionaries of the state are not enough to convince prospective investors. Before deciding to invest, it is only natural that an investor will look into the prevailing investment climate vis-i-vis the policies of the government.
A prospective investor, particularly a foreign one, will look into the infrastructural facilities like supply of gas, electricity, water, highspeed data transmission etc., and also the state of the economy.
Bangladesh scenario
With a population of 150 million, Bangladesh is a significantly large market, even if 20% of the total population is targeted for the purpose.
The investment and trade related policies of the country are liberal, and by far one of the best available in South Asian. All foreign investments are adequately protected by the Foreign Private Investment Promotion and Protection Act. I960.
However, one will discover
some gaps between the policies and prevailing ground realities. There are discrepancies even in policies of different ministries.
For example, the industrial policy allows hundred percent foreign investment in any industrial venture, excepting nuclear energy, security printing (mint) and armament industry, but in the recently declared policy of Bangladesh Telecom Regulatory Authority (BTRC), instead of allowing hundred percent foreign investment in call center operation, it allows only joint ventures having a maximum of forty-five percent foreign equity capital in anyone venture.
If this is the scenario, then how can a prospective foreign investor consider Bangladesh as an investmentdestination?
Furthermore, for the last several years, investors' confidence is on wane due to unstable political situation and lack of political will, coupled with inordinate delays in the decision making of relevant government agencies and the attendant corruption involved in the process.
In addition, severe shortage of power and gas supply is a major hindrance to investment.
Taking the country forward.
One cannot foresee any improvement in these two vital areas In the near future unless immediate steps are taken to the effect These are the reasons why prospective investors are sitting on the fence and waiting for the situation to improve.
Moreover, in spite of the fact that there is severe shortage of power and gas during the last seven years or so, there has neither been any significant addition of electricity to the national power grid nor any effort undertaken towards exploration of new gas fields.
Likewise, the government's
procrastination and indecision coupled with uncalled for blithering of a section of the so-called environmentalists are causing inordinate delay in harnessing another vital natural resource.
During the last four years or so, a good number of foreign investment proposals from some internationally reputed business houses like Tata of India, Global Oil and Energy Limited of UK (Mittal Group), Abu Dhabi Group of UAE, Essar Group of India, Azmat Corporation of Malaysia and the Italian-Thai Development of Thailand, could not see the light of
the day due lack of political will of both the incumbent and immediate past governments and lack of negotiating capacity coupled with inefficiency of the bureaucracy and shemozzle created by a section of political and environmental activists for reasons best known to them.
It is no wonder that, according to the recently (September 3,2008) released World Bank's hassle-free environment for "Doirtg Business Report," Bangladesh's ranking has gone down to 110 this year from 104 in the last year.
And, according to World
Investment Report (WIR) of the United Nations Conference on Trade and Development (UNCTAD) released on September 24,2008, the inflow of foreign direct investment (FDD to Bangladesh fell by 16% in 2007 compared to that of the previous year, when there had been a significant rise in both regional and global inflows duringthe period.
According to WIR, the flow of FDI to Bangladesh declined to $666 million in 2007 from $793 million in 2006 in the backdrop of an 18 percent increase (a record level of $249 billion) in the inflows to South, East and South-East Asia, while the global FDI flow in 2007 rose by 30% to $ 1,833 billion, a mark well above the previous all time high seen in 2000.
However, in spite of the constraints stated above, there have been significant investments in almost all sectors of the economy over the last two and a half decades, with resultant economic develop-
This was possible mainly due the resilience and determination of the people in general and entrepreneurship of the investors in particular.
Had there been continuity and consistency of policies relating to investment and commitment of the incumbent and immediate past governments, and adequate infrastructure support, the country could have seen more investments and development.
Way forward
In order to come out of the existing morass, immediate proactive measures shall have to be under-
taken to ensure policy continuity and removal of existing contradictions between policies of various government ministries.
To this end, the government should also undertake administrative reforms by shunning the age-old system of recruitment and try to appoint highly educated and skilled officers from outside the cadre services on contractual basis.
For improvement of the power and gas supply situation, an immediate action plan must be devised to encourage prospective private domestic investors in the power sector to set up as many small and medium size power plants (having 10 MW 20 MW generating capacity) as possible, especially in various industrial zones of the country.
To this end, duty free import of plant machinery should be allowed and the hassle of going through mandatory bidding process must be done away with. But, in their turn, the private power producers must offer to sell their generated electricity to the relevant government agencies like PDB, Desa, REB etc. at a reasonable unit price.
Bangladesh Petroleum Exploration Company (BAPEX) should be entrusted with the job of undertaking new exploration projects in prospective locations for which necessary fund should be provided by the state.
Fund for the purpose could be allocated fro wage earners remittances. However, international oil and gas companies (lOCs) should not be kept outside the purview of such exploration jobs.
Jahangir Bin Alam is Secretary, Foreign Investors' Chamber of Commerce and Industry (FICCI).
**Investment and development are interdependent phenomena. However, much depends on the socio-economic policies of a country and policies relating to trade and investment. A stable political environment, existence of efficient and business-friendly bureaucracy, credible law and order situation, an independent judiciary, and business-friendly policies are sine quo non for attracting investment.**