Removing barriers to FDI inflow  


FE Team | Published: November 20, 2020 22:17:09 | Updated: November 22, 2020 22:51:55


Removing barriers to FDI inflow  

Bangladesh's performance in the export and foreign remittance sectors has been impressive over the years. Excepting the early few weeks since the end of March when the pandemic-induced shutdowns were in force, the trend has remained more or less stable. The country's growth in terms of its Gross Domestic Product (GDP) also reflects this fact. This is doubtless uplifting. But the economy's performance in the other vital area, that of its ability to attract Foreign Direct Investment (FDI), is far from being at the expected level. In FY 2019, for example, the net inflow of FDI in the economy was said to be rather high at US$3.88 billion compared to those of the previous years. But the amount as a percentage of the country's GDP was only 0.5 per cent. Evidently, this is a rather low FDI-GDP ratio for an otherwise well-performing economy.

Many other nations in the South and Southeast Asia including India, Vietnam, Indonesia and Thailand performed far better in drawing FDI in the year under consideration. Of the many hurdles discouraging foreign companies to invest in a big way here include the difficulty they face in repatriating their dividends. The complexities in our banking procedures are largely to blame for this. The central bank, in a bid to address the issue, has reportedly instructed the scheduled banks to remove the obstacles so that the foreign currency account holders can repatriate their funds from the balance held with those accounts without hassle. The central bank's directive will be applicable, the report mentions, to all the three types of foreign account holders, namely, the private foreign currency (PFC) account, non-resident foreign currency deposits (NFCD) account and resident foreign currency deposit (RFCD) account. At long last, the government has taken a right decision. Especially, the provision that no further approval of the central bank will be required to repatriate the balances held with the FC accounts is an important step forward. It is believed that this necessary move to simplify the banking rules by the central bank will remove one of the major impediments to foreign investment in the economy.

As has often been forecasted by experts, as a fallout of the Sino-US trade war, we would be witnessing a race among multinational companies to relocate their investments out of China. Obviously, they will be looking for destinations where conditions are attractive. Bangladesh should be able to present itself as a potential port of call for such investors. For the purpose, reducing the cost of business is a precondition that Bangladesh will be required to meet. Simplification of banking procedures is one of such enabling conditions.  But the government will have to take more such bold steps to facilitate the flow of FDI in the economy.

On this score, the government's decision to open up more than a hundred economic zones is definitely a commendable one. The United Nation's Conference on Trade and Investment (UNCTAD) in its World Investment Report 2020 predicted a 40 per cent decline in FDI flows in the current year. But the scenario is changing fast with the reports that drug makers have finally succeeded in developing vaccines that can fight the pandemic. Global stock markets were buoyant in response to the positive news.   This is definitely a good omen for global trade in the coming years. Bangladesh should be well prepared to capitalise on the opportunities thus opening up. This time it cannot afford to miss the boat.

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