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FDI Bottlenecks: Bangladesh may suffer serious setback |
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June 17, 2000
Dhaka, June 16 (UNB) – Serious warnings--not only new investors will refrain from investing in Bangladesh but also the existing Japanese entrepreneurs might reconsider continuing their operations here.
Bangladesh Embassy in Tokyo in a report expressed such apprehensions based on various complains raised by the Japanese investors.
It noted with concern that country’s foreign investment may face a serious setback if the bottlenecks identified by the Japanese investors are not removed.
Among them are political instability, sense of insecurity, delayed procedures, non-implementation of reform programs, lack of infrastructure, burglary, corruption, bureaucratic tangles, improper domestic investment and crisis over KAFCO.
The embassy has prepared the report incorporating observations of the Japanese investors in various countries, especially in Asia, as well as those who have already invested in Bangladesh.
The Japanese business community also identified various other bottlenecks for import from Bangladesh, which included lack of quality products, delayed shipment and non-fulfillment of commitments.
These problems were raised by the Japanese entrepreneurs in an investment conference in Tokyo last week, jointly organized by the Bangladesh Embassy in Japan, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and Japan-Bangladesh Joint Committee for Commercial and Economic Cooperation.
“The report, in fact, is a compilation of observations of the Japanese about country’s investment climate,” said Bangladesh delegation leader Abdul Haque, a director of the FBCCI.
Apart from fear of political instability, the report said, prospective Japanese investors still complain about the red tape, corruption and delays in procedures for investment in Bangladesh.
Power interruptions, problems in the transportation sector and delay in providing adequate communications services are some other complaints from the Japanese investors, the report says.
Japan tabled third after USA and Malaysia in investing capital in Bangladesh. As of March 2000, a total of 135 Japanese private-sector investors have registered investment proposal to the tune of 1,061 million US dollars, 8.8 percent of the total foreign direct investment (FDI). The amount of implemented investment is 786 million dollars.
Bangladesh’s labor costs, considered the lowest in the world, were the main consideration for Japanese investors to come to Bangladesh since early 90s.
But, according to the report, the Japanese investors now think the Bangladesh workers’ productivity is also low because of poorly skill, low literacy, low nutritional levels, poor management and inefficient infrastructure and machinery.
Frequent interruptions in workdays due to hartal as well as labor and political unrest are negative aspects for foreign investment noted by the Japanese investors, the report mentioned.
“Political stability and security conditions are among the prime concerns for the flow of Japanese investments. Cheap labor is not enough and not considered by them as the only criteria for attracting foreign investment.”
The embassy report says Bangladesh is yet to draw interest of Japanese investors in natural gas sector. “The handling of KAFCO investment project which infuriated foreign shareholders, in particular the Japanese, tended negative image for investing in Bangladesh” the report says.
It said the low rate of domestic investment in proportion to GDP in Bangladesh is still another negative factor for low foreign investment. “A foreign investor may ask why should I invest if the people of the country -- the people who know the culture and customs -- are not investing?”
The report quoted experts to have identified too high interest rates as one of the prime reasons for lower domestic private-sector investment.
With the foreign investors cheated on various occasions, the embassy in Tokyo cited a burglary committed with a Japanese company in Chittagong Export Processing Zone.
“The Japanese company complained that it was not an isolated case. The incident, if not handled appropriately, might cast a severe negative impact on the confidence of Japanese investors in Bangladesh.”
About hurdles to export to Japan from Bangladesh, the report said most of the trade-dispute cases reported are mainly related to supply of low quality and downsized commodity. “Strict inspection procedure is required to stop these types of malpractice which damages the market reputation.”
Apart from the reasons caused by political disturbances, it is sometime reported that Bangladesh suppliers failed to honor the shipment schedule. The embassy cited various cases of delayed shipment and non-fulfillment of commitments by the Bangladeshis, mainly shrimp and jute exporters.
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