Although the country’s political transition has brought new hope, the business climate remains a concern. The interim government is still struggling to restore the country’s economic stability and law-and-order situation. At the same time, domestic and foreign rating agencies, including Fitch and MCCI, downgraded the country’s business climate and credit rating.
Mr. Shah Mohammad Mahboob, additional secretary to the Government of Bangladesh and executive member of Bangladesh Investment Development Authority (BIDA), talked to Md. Asaduz Zaman, from Industry Insider, regarding the country’s foreign investment outlook at the moment.
How can Bangladesh revive and overcome its image crisis regarding FDI in this situation?
We all should first recognize that Bangladesh showcases one of the most robust economies in the world given the scenario that Bangladesh has never shown a negative growth of GDP, nor has it defaulted in foreign debt servicing liabilities irrespective of the administrative or political regime. The economy is primarily steered by its dynamic population and the private sector. The role of government has been to facilitate the environment so businesses can operate on a level playing field without much hassle.
Currently, the Bangladesh Investment Development Authority (BIDA) focuses on two streams of activities: improving and sustaining the pro-business and pro-investment environment internally and enhancing Bangladesh’s branding as a potential global investment destination.
We have established the Bangladesh Investment Climate Improvement Program (BICIP) platform, which includes 100 reform agendas aligned around seven pillars. Multi-agency task forces have been assigned to implement and monitor the reform agendas.
Another step is to roll out a message to assure the relevant people and places that Bangladesh’s investment and general living situation have been in order and are further improving. The BIDA Executive Chairman, who comes from the private sector, appears in monthly bulletins to assure investors and foreign missions/agencies. In addition, better branding strategies will be rolled out using the redesigned BIDA website and through a professional PR agency.
The government’s investment promotion agency is developing an FDI heatmap with local and global institutions and experts. BIDA has also partnered with the Foreign Investors’ Chamber of Commerce and Industry (FICCI) to overcome investment obstacles and ensure the continuity of foreign investment.
Which sectors do you believe hold the most potential for investment in Bangladesh, and why?
Although RMG has been Bangladesh’s single largest exporting industry, several other industries are well on course to go big, provided that we give them the necessary attention.
Our traditional RMG exports are low-value but wider-circulation items like knitwear, woven garments, and T-shirts. However, the industry is slowly switching to more profitable, high-value products like lingerie, premium shirts, suits, jackets, and fashion wear. With more than 220 green-certified factories, Bangladesh can also go big with green products. Having RMG utilize man-made fibers is another important pathway to undertake.
The agro-processing industry has massive potential. The country already exports more than 700 basic processed food products to over 140 countries. Still, most agro products are exported raw and can surely add to our revenue if exported after processing. Especially in the case of dairy products, Bangladesh loses a great amount due to not having a standard accreditation process in the country. Suppose a Bangladeshi company has to export dairy products. In that case, it’ll have to get its raw material tested by global accreditation companies outside the country, which results in a great deal of hassle, time, and money. Having a local accreditation system that is accepted globally will facilitate the situation.
The leather and footwear industry has big export markets. This is particularly favored by a steady supply of rawhide from local sources. However, non-leather footwear products also have a lot of potential. Jute products, geotextiles, packaging, jute home decor, etc., can also be big as there is a worldwide growing demand for organic products.
The ICT sector can attract investment as proper network infrastructure, and hi-tech parks are being established. Bangladesh also has sufficient tech graduates and skilled labor. The country can be an ideal place to invest in captive BPO and accreditation businesses.
Also, the pharmaceutical industry has huge investment potential since the country will focus on API production in the coming days, with the API park going into production.
What government incentives like tax breaks would most appeal to investors?
There are already many incentives to attract investors. Tax on capex imports is only 1%, which is lucrative for investors. In the RMG sector, 100% export-oriented businesses get duty-free material import benefits. Also, there are tax-cut benefits for companies with green certification. There are several initiatives by the Bangladesh Investment Development Authority (BIDA), too. If any industry feels that a specific incentive is required or some special facilitating measures need to be taken, BIDA can always support them in talking to the relevant government authorities regarding those.
Any prediction regarding how long it will take for Bangladesh’s FDI to find an upward graph?
I think the critical point is to assure the investors and other global agencies that the country’s investment ecosystem has been quite normal, and the new leadership is taking action to improve it further. The economy mostly depends on how fast everything becomes stable. Given that the interim government has hinted at a timeline for a general election, the new investors can start their due diligence process right now.
There are signs of recovery as things cool down, and some indexes already show positive notes. Several global donor organizations have already shown their interest in financial assistance. Exports and imports are also getting back to normalcy. So, we can expect the investors to gain confidence soon, and there will be a steady rise in foreign investment within six to twelve months.
