BIDA\'s role in divestment process under scanner

In order to rejuvenate the private sector activities and reactivate the state-owned enterprises (SoEs), the government has recently moved for the merger of the Board of Investment (BoI) and the Privatisation Commission (PC). Following the merger, a new authority styled Bangladesh Investment Development Authority (BIDA) will be born replacing the two entities.

The cabinet approved a draft bill titled 'Bangladesh Investment Development Authority Bill 2015' in August this year. Once the law comes into effect after its passage in Parliament next year, the new authority will take over replacing the BoI and the PC.  

As per the draft law in the making, final signing authority on divestment of SoEs will reportedly remain with the concerned ministries even after the unification of the two government organisations. As a result, analysts see the move to reform SoEs may not yield any tangible result, especially in divestment process as the ministries concerned will reign supreme under the proposed new law. 

Under the proposed law, BIDA is set to conduct registration of industries to be set up in the private sector and the foreign trade liaison branch offices for making investment in the country. The investment authority will take necessary measures for transfer of the land or industries once the list of the unused land and industries are placed with them. But the final signing authority will still remain with the owning ministries.

On its part, the PC has long been complaining that ministries and divisions concerned have never cooperated with it, making it difficult to function. Due to legal tangles and unwillingness of a powerful lobby in the government and non-cooperation of the owning ministries and corporations, the PC activities have virtually stalled.

Despite granting greater powers to the PC, there has not been any significant advancement in its performance. Unless the political leadership desires, dictates the process and pushes it through, nothing tangible will happen, say analysts. They say since privatisation involves political decision, privatisation policy also needs to be updated with clear political mandate, reflecting popular support of both the policymakers and the general people. 

With the proposed law in place, reports say BIDA will come into being and all officials and employees working under BoI and PC will be absorbed in the new entity. Besides, all the assets and liabilities of these two organisations will also go into BIDA's hands. There will be a 17-member Governing Board headed by the Prime Minister with the Finance Minister as its Vice Chairman. 

The newly formed organisation has now been debarred from taking care of the investment proposals under the Bangladesh Export Processing Zones Authority (BEPZA), Bangladesh Economic Zones Authority (BEZA), Export Processing Zones (EPZ), Bangladesh Small and Cottage Industries Corporation (BSCIC), Hi-tech Parks etc.

Sharp differences between a number of ministries and the PC had earlier surfaced on the issue of the privatisation of SoEs. The PC alleged that the ministries had never taken any initiative to make the loss-making firms profitable. Various constraints also impeded the growth and momentum of investment activities. So far, 58 non-profit SoEs have been privatised while 23 offloaded their shares. During the last four years, the PC has been able to privatise only one SoE while another divested itself of its shares. The finance ministry took several attempts to close down the PC as per the directive of the Prime Minister's Office (PMO). In 1993, the government constituted the Privatisation Board, which was later upgraded to Privatisation Commission (PC) in 2000.

Meanwhile, land scarcity is posing a big problem for the investors to set up new industries. The merger aims at addressing this particular problem. Keeping in mind the barriers that are often put by ministries to productive use of public land by setting up industries, the new law stipulates formation of an execution committee of investment-related projects. It will take decisions on land use in meetings with all stakeholders so that no barrier remains at a later stage.

The SoEs have large areas of land at their own premises. The new organisation will chalk out a plan how to meet the investors' demand for land, once they make registration for investment. The land of the SoEs has built-in facilities like roads, gas and electricity, and investors may utilise such services quickly. One wing of the new body will handle investment proposals while another will deal with matters about making the land available and take steps to allocate it to the real investors.

During the previous caretaker government, the now-defunct Regulatory Reform Commission (RRC) made a number of recommendations with a view to reinvigorating the activities of the BoI. It had suggested for updating of the old, ineffective and complicated laws to speed up development process through boosting investment and trade. But those did not receive any proper attention from the authorities.

According to a recent study, a staggering 83 per cent of foreign firms located in Bangladesh identified corruption as a major constraint. The study also identified crime and lack of law and order as major business constraints. This negative image of Bangladesh as a corruption- and crime-ridden country is evidently taking a toll on its FDI inflow. 

The study further says a higher percentage of foreign firms located in Bangladesh identified tax rates and administration, business licensing and permits, customs and trade regulations, and labour skill level as major business constraints. 

Although the political situation is otherwise stable, entrepreneurs are yet to be proactive about making new investments. They need to be fully assured that their investment would remain safe and ensure a rate of return that is attractive. Foreign investors operating in the country also insisted that the government should not own or operate any left-out organisations, as those (SoEs) only spoil public money and become the breeding ground for corruption. The government should, instead, act, as they suggest, as a facilitator to encourage industrialisation. 

In the circumstances, the merger of the two entities will serve no worthy purpose if the country's investment situation does not witness some radical improvements. [email protected]