FDI grows 2 pc of GDP
BD needs yearly $10b FDI
Lenin Rahman: Bangladesh is receiving lower Foreign Direct Investment (FDI) compared with the rival countries which is impeding the expected level of economic growth, said experts.
In the recent years, the FDI inflow is above 1 to 2 percent of country’s GDP which is not adequate against the demand to attain sustainable development goals (SDGs) within the stipulated time, they said.
On the other hand, the average FDI inflow to Vietnam, China and India, the main competitors of Bangladesh, was 6 percent, 5 percent and 3.5 percent of their GDPs respectively, they said.
Experts said the current FDI inlow is inadequate to become a mid-level status country by the year 2030. Experts recommended Bangladesh adjust its tax rates accordingly in order to attract more foreign investment.
“We have to rely on foreign direct investment to drive economic growth in Bangladesh”, said Sushmita Basu, head of Bangladesh Tax and Regulatory Practice for PricewaterhouseCoopers (PwC).
She laid emphasise on the eradication of the problem of multilayered taxation which results in multiple taxation of the same dividend by the time it reaches the investor. Nabila Sajjad, senior consultant of Government Reform and Infrastructure Development (GRID) at PwC, highlighted the importance of infrastructure investment and the utilization of private sector investment in reaching this goal.
The export performance depends on the domestic incentive system which is the reason behind. “Our domestic market being very small in comparison to the international market.”
Economist Prof Dr Abu Ahmed mentioned that the idea of higher tax rates leading to higher revenue is a myth, adding: “On the contrary, the lower the tax rate, the more transparent companies will be.”
He recommended the lowering of tax rates to attract more companies to be listed in the stock exchange.
On the other hand, business leaders have underscored the need for improving doing business environment in order to attract more FDI in the country.
According to a Daily Industry report, Bangladesh needs five to six percent Foreign Direct Investment (FDI) of GDP until 2030 with a view to attaining a mid income status country and achieving sustainable Development Goals (SDGs).
Considering the necessity of more FDI flow in promoting country’s economy, the experts recommended that the authorities concerned will have to undertake more policy and logistic support for boosting the existing trend of foreign investment.
Bangladesh received FDI amounting to $913 million in fiscal 2010, followed by $1.13 billion in 2011, $1.29 billion in 2012, $1.59 billion in 2013, $1.52 billion in 2014, $ 1.83 billion in 2015, $2 billion in 2016, $2.15 billion in 2017 and $3.61 billion in 2018.
Experts have underscored the need for improving the supply chain to attract more FDI in the country. An underdeveloped supply chain in the manufacturing sector is the main cause behind low FDI levels in Bangladesh.
The business climate is unfavourable as access to utilities, like electricity, gas, transportation, and waste management are still inadequate and below the expectations of investors, they pointed out. FDI in the energy sector may have a causal relationship with corruption, they claimed.
Talking to Daily Industry, Foreign Investors Chamber of Commerce and Industry (FICCI) President Rupali Chowdhury said Bangladesh needs at least $10 billion Foreign Direct Investment (FDI) every year for achieving the expected level of economic growth or SDGs.
The country received $1.5 to $2 billion FDI in the recent year, which is not sufficient to attain a vibrant and sustainable economy, she said.
Many factors hindering the FDI in the country, Chowdhury claimed.
The number one obstacle in attracting FDI in Bangladesh is especially the bureaucratic complexities. The further reasons are lack of investors’ confidence and congenial environment, unavailability of land, institutional weakness, corruption and some other ‘unknown reasons’.
However, efficient bureaucracy, simplification in procedures for FDI registration, improvement in legal infrastructure as well as acceleration in one-stop service provided by the Bangladesh Investment Development Authority (BIDA) are needed for attracting FDI at expected level, suggested Rupali Chowdhury.
The government should find out the reasons why new foreign investors are not making investment at expected level in the country, whereas, existing foreign investors are earning good profit and making reinvestment in the country, she added.
FICCI members have been making many recommendations to the government for attracting FDI, she also mentioned.
Foreign investors are also concerned about inconsistency in the government’s policy, she said. She has underscored the need for strengthening the BIDA and ensuring coordination among the government agencies to facilitate the FDI.
International Chamber of Commerce Bangladesh (ICCB) President Mahbubur Rahman said, the government should find out the reasons why the foreign investors were not coming in the country despite having all favourable regulatory regimes.
A strong partnership between the public and the private sectors are needed to solve the problems faced by the foreign investors and for creating better business environment to attract more FDI, he suggested.
Continuation in policy regime is needed to boost confidence of foreign investors, he observed. The number one obstacle in attracting FDI in Bangladesh especially the bureaucratic complexities, said ICCB President.
Dr SM Mahfuzur Rahman, Professor of International Business Department, Dhaka University said bureaucratic problem and legal framework along with poor infrastructure are major challenges for foreign direct investment.
“When a foreign investor starts to prepare documents for business, he or she has to face bureaucratic tangle first and different laws also create barriers,” said Prof Rahman.
Technological innovation, simplification of policy regulations and connecting domestic and foreign investors are keys to attract FDI in Bangladesh, he added.
The government should address the taxation complexity to increase the FDI and create attraction among the foreign investors.
Frequent change of rules and regulations discourage the foreign investors to invest in Bangladesh, he said adding conservative foreign exchange rules and regulations create hindrance to the FDI flow in Bangladesh.