Where exactly is the glitch?

One of the oldest questions doing the round in developing economies is why doesn't Foreign Direct Investment (FDI) continue to flow in to countries where macroeconomic fundamentals are doing well. Countless seminars and think-tank deliberations try to pin-point the reasons and almost always come back with the common denomination factors: communications, port congestion and ease of doing business. The points are politely noted by the government, positive policy changes are highlighted and we're ready to move on till the next round of 'why' deliberations.

In the meantime we hear of new FDIs mainly in the free economic zones and the International Chamber of Commerce, Bangladesh (ICCB) suggesting the new investment is only that re-ploughed in the economy by existing operators.

The confusing part of it is when one considers the gains made in infrastructure sector and communications. Or, are we to view those as being detached from the necessity of business? In which case we have major cracks in the planning process. 

When it comes to port congestion, how is it that the second largest exporter in the world of ready-made garments are getting their shipments out on time? But facts are facts as they are made to appear. Large-scale FDIs are unlikely unless returns on investment ratios are more favourable than others, manufacture for export only made easier and enough growth in the economy to support a strong consumer base exists.

Several businesses have made forays into the consumer segments with a mixed bag of success. Pran has recently signed up to supply products for Denmark and Sri Lanka. Akiz has bought into a Malaysian company while essentially jettisoning its tobacco interests to Japan Tobacco International. Moneys invested in increasing existing capacities are not considered new direct investment as these are plucked from a banking system that is creaking under mismanagement.

The long-term investments in power have not been visible with most of the success clearly due to quick supply rentals that are both limited in capacity and expensive. The cost-benefit ratio has to be factored in before corporate debt on account of unpaid bills does not exacerbate private debt as well. The flip side of more capacity is that it can't be allowed to remain idle.

The megastructural projects have just taken too much time delaying the vital cog of connectivity with economic zones and regional connectivity. India is chortling with all the transit objectives realised and plans laid out. Their cost of transportation will be sliced to a third. But it's the others who do not benefit from such regional access that hesitate to come in.

Ease of doing business must provide for smoother repatriation of profits and thereby healthier foreign reserves than what we currently have. Nonsensical debate over illegal fund repatriation just comes up as a new barrier. Drain the swamp, clear the pipelines and let's move on.

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