Industrialists and economists have blamed poor service quality, slower credit growth and lack of policy supports for the downward trend in the proposed investment in the country
Investment outlook for the economy looks grim, as both local and foreign investment registrations fell nearly 10% last year.
The country’s local and foreign investment (including joint venture) proposals have declined by 9.47% to $10 billion and 9.82% to $4.66 billion respectively in 2019, according to the latest data of BIDA.
Investment proposals, both local, foreign, or joint venture entities typically get registered with the Bangladesh Investment Development Authority (BIDA). Investors get preferential treatments in terms of getting public utility services and easy bank credit following the registration process.
Industrialists and economists have blamed poor service quality, slower credit growth and lack of policy supports for the downward trend in the proposed investment in the country.
With the investment proposals declining, the number of business firms registered with the Bangladesh Investment Development Authority (BIDA) in 2019 also dwindled, according to the latest data of BIDA.
The number of local and foreign registered companies for investment purpose declined by 25.70% to 1,153 last year, as per the data.
According to BIDA, the country saw investment proposals worth $14.71 billion under all categories against 1,153 proposed enterprises last year, against $16.27 billion for 1,552 enterprises a year ago.
As per the latest data, registration of domestic industrial entities has seen a 29.55% fall to 968 projects and the investment proposal was over $10 billion. In the same period, it was 1,374 entities with $11.10 billion investment proposal.
On the other hand, foreign (including joint venture) registration saw a 3.93% rise and stood at 185 against 178 in the previous year.
A senior official at BIDA has said business registrations with the estimated investment proposals do not necessarily mean the amount will surely be invested.
He, however, added that registration figures indicate investment outlook and possible investment scenario in the economy.
Why negative growth in business proposals
Businesspeople and the economists have blamed slower implementation of government policy towards establishing economic zones and unfavourable business climate for new investors for the downward trend in the proposed investment proposals.
Besides, global slower economic recovery is another reason for the slower inflow of the foreign investment, they believe.
“The more we make delay in delivering services or executing an order to start a new business, the more we keep losing to our competitors in receiving business proposals,” Business Initiative Leading Development (BUILD) Chairperson Abul Kasem Khan told Dhaka Tribune.
He says faulty tax structures that impose higher taxes put pressure on businesspeople and make them unable to keep the business cost affordable.
On the other hand, slower private sector credit growth along with the soaring default loans is another major deterrent that squeezes fund flow, says Kasem.
Centre for Policy Dialogue research director Khondaker Golam Moazzem thinks lack of adequate policy supports and infrastructure deficits may be the major reason for the grim investment picture.
“Downtrend in business proposal registration is a kind of new experience. We did not see similar downtrend in the past,” Centre for Policy Dialogue Research Director Khondaker Golam Moazzem has told Dhaka Tribune.
“It can be assumed that investors who want to make green field investment are not getting enough support in terms of infrastructure and policy support, which are being implemented at a slow pace,” adds Moazzem.
Complexity has been created in the way of new investment as the government has identified the industries, areas, and zones for investment, he maintains.
On the other hand, government’s special economic zones are not fully ready, which might have cast negative impact on investment, he adds.
Both private sector people and economists also think that BIDA’s one stop services are yet to come up with the full-fledged services, which is another barrier to investment.
How to attract investors
For attracting more investment, businesspeople call for making the process easy and remove double and higher taxation.
“The more easy the services are, the more the investment is guaranteed. On the other hand, the government has to make taxation system investment-friendly and the rate should be affordable,” said Abul Kasem Khan, also a former president of DCCI.
He also called for expediting the infrastructure to provide service within the possible short span of time and making more improvement in ease of doing business ranking.
FDI Scenario in 2019
According to Bangladesh Bank (BB) provisional data, Bangladesh last year received $3.05 billion in FDIs, down by $562 million or 15.57% comparing to $3.61 billion in 2018, when the growth was 68%.