Lately, Bangladeshi social media is experiencing a new wave of optimism regarding the investment summit and the potential for more foreign companies investing capital in Bangladesh. The FDI (Foreign Direct Investment) flow of the last ten years has been poor, to say the least, ranging from $2.83 billion in 2015 to $3.48 billion in 2023, which is the highest that we could get, according to Bangladesh Bank data. It is therefore time to understand why Bangladesh is lagging behind others when it comes to FDIs and what could be done to improve our standings.
Cost of doing business
Any government’s role in attracting investment from both domestic and foreign entities is undoubtedly to ease or minimise the hassle of setting up shop. However, the bureaucratic intermingling within Bangladesh’s government operations is often detrimental to such a cause.
The Bangladesh government is not the only one affected, as large entities often need to strike a balance between efficiency and due diligence.
Even a layman can attest to the bloated nature and the excessive amount of steps needed to complete any task. The fact that we have three ministries of education and two ministries for water management and transport is one such example. The whole point of needing 5 signatures to approve one task was to ensure that each sector of the government was aware of the changes and could provide the necessary services needed, yet this very step has become a barrier for effective governance. The term “bureaucratic red tape” refers to such an issue.
One such instance of Bangladesh missing out on a $22 billion investment was that of Samsung, as discussed on 7 April by the new chairman of BIDA, where he said, “Samsung saw that the land papers were not in order, and we could not tell them when the papers would be in order. After that, Samsung left Bangladesh.”
Embarrassingly, and maybe in similar occurrences, Bangladesh may have lost large sums of potential investments that we probably have never heard about.
Solution
In an attempt to make the process more accessible for foreign investors, Bangladesh established the Bangladesh Investment Development Agency, or BIDA, through the Bangladesh Investment Development Agency Act of 2016. This organisation is responsible for handling all the subsequent paperwork, information, legal aid, licensing, and other actions that are required of investors, both foreign and domestic.
The organisation itself is independent of any interministerial struggles and reports directly to the Prime Minister’s office or, in today’s government, the Chief Advisor’s office. BIDA was a response to the embarrassing red tape and an admirable attempt at a solution.
In an attempt to rebuild and reconstruct the infrastructure required to attract investors, BIDA has organised a 4-day-long investment summit, and many investors around the world have joined. While these are appreciable attempts, the underlying problems still seem to exist.
Challenges
The nature of special organisations such as BIDA is quite fragile. Its inevitability may be that it is staffed and initiated by one government but overlooked and demolished by another when it comes to such entities. The reasons behind this are many, but one substantial one may be the unique nature of the organisation.
BIDA had been created through a special ordinance giving it power outside of the existing bureaucratic body. Which means BIDA holds its own regulatory policies, prepares budgets, distributes land, and facilitates permits for companies. All of which were supposed to be done by independent ministries and other signatories, and therein lies the redundancy. The authority BIDA holds is only through the will of the Chief Advisor and, in the future, the Prime Minister’s office.
That means the workings of BIDA are not a part of the regular workings of the bureaucracy. It acts independently of it and holds considerable power as long as the Chief Advisor’s office allows it to. The executive body of BIDA, under the Bangladesh Investment Development Agency Act of 2016, consists of the executive chairman, the governor of Bangladesh Bank, the chairman of the Bangladesh Securities Exchange Commission, and the president of the Federation of Chambers of Commerce and Industries. All holding significant offices that are unlikely to function with a singular agenda in mind unless it is specifically told to do so by the prime minister’s office.
The political turmoil and the nature of the shift whenever a new government arises are the factors most challenging to BIDA’s actual jurisdiction. This is evident when we see even though BIDA was established in 2016, it was headed by a secretarial position, holding the title of executive chairman and hardly organised any functional policies or events that we heard of, and consequently Dr Mohammad Yunus appointed Chowdhury Ashik Mahmud Bin Harun, who is independent of the government’s inner workings and maybe perfect for the role, as the Chief Advisor saw fit. This implies that BIDA’s actions and policies, as well as their effectiveness, are subject to the whims of the individual in charge, potentially leading to an unsystematic and ineffective course of action if the next government so desires.
Stability and predictability are the cornerstones of any business investment, and as Bangladesh lacked these traits, we saw inadequate numbers of FDIs. However charming and flashy the new executive chairman may be, his role and actions are not a part of the routine within the government. It seems instead of fixing government red tape, we have put green tape on it to mask the current issue. Such quick fixes will never be sustainable in the long run unless we have a deeper discussion about the bloated nature, waste, and fraud within the workings of the government.