The Bangladesh Investment Development Authority (BIDA) has reportedly prepared a five-year plan to improve the environment of doing business and make it easier for investors. The authority was born following the merger of the Board of Investment and the Privatisation Commission last year.
The BIDA plans to bring reforms in rules and regulations, policies and traditions which will create a business- and investment-conducive environment of global standard. It is also reviewing the rules and regulations related to foreign direct investment in a bid to make those more competitive.
The BIDA has set a target of improving ranking of the country in the global doing business from the present 176th position to the 99th position or below by 2021 through improvement of regulatory environment and solving other complexities in doing business.
The BIDA has prepared a set of national-level reform initiatives and a plan of action for ministries and other government agencies. The aim of the initiatives is to substantially improve business climate and attract foreign direct investment. Under the plan, the BIDA will conduct studies on 10 different sub-matrices related to ease of doing business.
The BIDA is planning to launch the reform initiative from this month. Its executive chairman, in a letter, requested the cabinet secretary recently to take appropriate and effective programmes and implement those in line with the target.
In the letter, BIDA chief said that the ministries and agencies would have to make improvement at the highest level within minimum time. The ministries and agencies will have to identify the reasons behind lengthy process, additional time and money and higher number of projects taken for doing business.
According to the draft action plan, the ministries and agencies will have to make improvement in the fields where the country lag behind in the ease of doing business including regulatory affairs, taxation, starting a business, getting credit and electricity, enforcing contracts, number of procedures in starting business, protecting minority investors and trading across borders.
Bangladesh is one of the world's fast growing economies. But the country is, at present, facing a number of challenges like inadequate infrastructure, governmental and bureaucratic delays, and concerns over workers' rights and safety for attracting foreign direct investment (FDI).
Land scarcity is a big problem for the investors to set up new industries. The BIDA aims at addressing such particular problems. Keeping in mind the barriers often put by ministries to productive use of public land by setting up industry, the new law stipulates formation of an execution committee of investment-related projects. It will take decision on land use in meetings with all stakeholders so that no barrier remains on its way at a later stage.
The state-owned enterprises (SoEs) have a large area of land at their own premises. The BIDA is chalking out a plan how to meet the investors' demand for land once they make registration for investment. The lands of the SoEs have in-built facilities like roads, gas and electricity and investors may utilise these quickly. One wing of the new body is handling investment proposals while another will line up land and take steps to allocate it to the genuine investors.
In September last year, the BIDA sought Tk 1.0 billion from the Ministry of Finance to create an equity fund of Tk 1.10 billion. It said the fund will be utilised for giving financial assistances to new investors having no collaterals for getting loans from banks. Besides, the fund would also be used to train the new entrepreneurs.
However, many foreign investors in Bangladesh insisted that the government should not own or operate any business organisation, as state-owned enterprises only spoil public money and are the breeding ground of corruption. They made such observation at a recent monthly luncheon meeting of Foreign Investors' Chamber of Commerce and Industry (FICCI).
The FICCI said the government might consider reopening some closed SoEs. But it should not get involved in any business other than running schools, hospitals or railways. It should not emerge as a manufacturer. The government should act as a facilitator to encourage the growth of industrialisation.
According to a study, a staggering 83 per cent of foreign firms located in Bangladesh identified corruption as a major constraint. They also identified crime and lack of law and order as major business constraints. This negative image of Bangladesh as a corruption- and crime-riddled 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. These perceptions are consistent with results found in the econometric model that human capital is a determinant of FDI. An educated and skilled labour force is the key to success for attracting foreign investors,
In the circumstances, the country needs to overcome infrastructure bottlenecks, especially gas and electricity crisis, in attracting investments in industries. There is a need for a policy shift to promote 'less gas-consuming' industries, encourage investment in infrastructure, and focus on the service sector, particularly information technology. Bangladesh also needs to explore coal as an alternative source of energy.
There is no doubt that Bangladesh requires massive doses of FDI and the present government is serious about it. To obtain that the BIDA should act as a facilitator and it should be put at the centre of the Public-Private Partnership (PPP) initiatives.
Bangladesh is in need of investment protection, easing bureaucratic bottleneck, mitigating infrastructural scarcity, removing differential treatment and one-stop service provision for attracting more FDI into the country.
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