Hiren Pandit: Due to continued inflation, the discomfort of the people at all levels of the country is increasing. Low-income people are the most affected. It is known that the income of a significant number of low and middle-income people in the country has decreased. Despite the decrease in income, the price of goods and services has increased continuously. In this situation, there is less surplus money in the hands of low and middle-income people, so many cannot save. When the people of the whole country were trying to recover after the impact of the Covid-19 pandemic, the price of almost all types of goods and services increased in the international and domestic markets due to the effect of the Russia-Ukraine war. A new crisis has arisen as the value of the money has continued to fall against the dollar. In this situation, many people are confused while reconciling income and expenses. Poor people are forced to cut back on nutritious food. If the food is low in nutrients, there will be a crisis in people’s healthy growth. If such a situation prevails in the long run, it will affect the manpower.
According to a report from the World Food Program, the income of the people of Bangladesh has decreased by at least 37 percent due to the global recession. To deal with this situation, steps should be taken to create an investment-friendly environment in the country. The import of capital equipment in the country has decreased in the last year. The issue of disruption of production in the country’s industries due to the energy crisis is repeatedly discussed. Due to the dollar crisis, there is also a crisis in the import of capital equipment. In this situation, necessary steps should be taken to expand industry and trade in the country. Steps should be taken to increase the remittance flow to solve the dollar crisis. All expatriate Bangladeshis should be encouraged to send remittances through bank channels. Since the remittance flow is not being increased to the desired level, steps must be taken to increase the export earnings. At the same time, initiatives should be taken to diversify export products. Steps should also be taken to reduce import dependence on various products.
Due to the increase in expenses compared to income, many people are running their families with loans. On the one hand, people are affected personally; on the other hand, the economy is suffering due to reduced savings. Investment is falling as saving is falling. Effective measures should be taken to deal with this situation. New entrants to the labor market should be ensured that they get jobs as per their qualifications and expectations. Experts have warned that if this situation continues for a long time, it will affect the country’s economy. In this situation, steps should be taken to sustain people’s income-generating programs. It is important to create adequate employment opportunities in the country to recover the economy quickly. Inflation should be curbed. The social safety net program undertaken by the government to help poor people is positive. In addition to increasing the scope of this sector, the amount of assistance should also be increased. The issue of corruption in this sector is repeatedly discussed. The government should be stricter in curbing corruption. The Russia-Ukraine war started before the end of a major pandemic like Covid. A dollar crisis has already occurred. LC opening has been tightened. Due to these reasons, the normal flow of business is being disrupted. Therefore, the revenue burden cannot be increased in any way in the budget of the next financial year. Traders will be able to pay revenue only if they can do business. It would not be right to create barriers to business by imposing revenue burdens.
The global economy has been hit by a prolonged recession due to the impact of Covid-19. The demand in the country has fallen, creating extreme uncertainty. In this situation, foreign direct investment or FDI will decrease, it is natural. According to the United Nations Trade and Development Organization (UNCTAD) estimates, FDI in Bangladesh decreased by 19 percent in the first half of 2021 to 116 billion 143 billion 7 million dollars. Then FDI in South Asia fell by 31 percent or 2 trillion dollars. It goes without saying that foreign direct investment in various countries has further decreased due to the impact of Covid around the world. Lockdowns were imposed in various countries around the world to combat the Covid, considering the situation. The dire consequences for the economy were inevitable. Business and trade, and industrial production all came to a standstill due to this. Multinationals have not only made new investments but have also wound up or scaled back existing investments in many cases. The uncertainty and fear of a deep recession halted the progress of many new investment projects as the new wave of Covid became evident. Global FDI rate halved due to Covid. But there are new opportunities for Bangladesh.
Prime Minister Sheikh Hasina has urged investors from around the world to take advantage of all the opportunities offered by her government to invest in Bangladesh. The Prime Minister said we are committed to providing all policy support including infrastructure development to create an investment-friendly environment in Bangladesh. 11 potential sectors have been identified for investment. The sectors are infrastructure, capital markets and financial services, information technology, electronics manufacturing, leather, auto and light engineering, agricultural and food processing, healthcare and pharmaceuticals, textiles, and the blue economy. Bangladesh’s importance in terms of foreign investment is increasing day by day due to the political stability prevailing in the country since 2008, the political stability in the country, creation of a skilled labor force, the liberal investment policy through attractive incentives and the geographical location between the large markets of South and Southeast Asia. As a result of confidence in Bangladesh, more than 60 percent of foreign direct investment is coming through reinvestment.
There are many opportunities to invest in Bangladesh. There are many possibilities. Bangladesh’s GDP has increased four times in the last four years. There is an educated, energetic, hardworking workforce. The Bangladesh government has already taken various incentive programs for the overall development and growth of the logistics sector. The Eighth Five Year Plan and Vision Plan for Bangladesh 2041 identified the logistics sector as a priority sector. Eighth Five-Year Plan has set targets for achieving growth based on two strategies. They are – attracting more foreign direct investment and private sector growth and export diversification. A dynamic logistics sector is required to successfully implement these two strategies. The government is committed to bringing in more private investment for the development of the logistics sector and all necessary steps are being taken for this.
The investment potential in the logistics sector is immense. By 2040, Bangladesh’s transport and infrastructure sectors will require an investment of around US$285 billion and the services provided by these sectors have a market of around US$15 billion annually. With the increase in business volume, this market will also grow at a proportional rate. The value of Bangladesh’s product exports will soon increase from the current 33.7 billion dollars and reach about 56.3 billion dollars in 2025. In addition, the value of imported goods is expected to increase from the current 51 billion dollars to 83.90 billion dollars. With the increase in business and economic activities, warehousing, storage, cold chain business, and transportation of goods by road, sea, air, naval, and land port activities will increase proportionately.
There are many types of problems going on in the field of investment for a long time. For example, Investors have to go to different offices or suitable land is not available. The government has introduced Economic Zone and One Stop Service (OSS) for this. They have not yet been fully implemented and implemented. That is, none of the initiatives that can have a major impact on investment have reached the final stage. Added to this is the dollar crunch as an additional poison in investment. There is a large negative growth in capital equipment imports due to the inability to open LC due to the dollar crisis. As a result, despite many complications, the investment did not come as much as it was supposed to. The current energy crisis is due to the dollar crisis. The government is not able to provide uninterrupted fuel despite increasing the price. Export Development Fund (EDF) borrowing limit has also been reduced from $30 million to $20 million. The business environment in Bangladesh has not improved significantly, rather the situation has worsened in three indicators in the last year. Such a picture emerged in the Business Climate Index (BBX) 2022-23 survey. According to the survey data published last January, getting bank loans for businessmen has become complicated. Harassment in payment of tax and VAT is more than ever. Also getting land for factories or businesses has become more difficult than before.
The BBX survey was conducted by the Metropolitan Chamber of Commerce and Industry (MCCI) and private research firm Policy Exchange. At present, the production of domestic industries is being disrupted due to the energy crisis. In addition to existing institutions, new investors are discouraged. To solve this problem, it is necessary to keep a special allocation in the budget. Domestic and foreign investors have many complaints about the country’s taxation system. Despite several reductions, overall taxes in Bangladesh are the highest among South and Southeast Asia. Taxes need to be reduced further. Apart from this, in addition to reducing multiple rates of VAT, simplifying this system will have a positive impact on investment.
Foreign direct investment (FDI) is very important among private investments. The capital or new investment has decreased, and reinvestment has increased. Due to the dollar crisis, many companies could not take profits in their home countries. Due to this, reinvestment is seen more on paper. In fact, it cannot be said that the entire amount has been invested.
The Japanese showed interest in investment during the Prime Minister’s visit to Japan. But they said, there are business problems in Bangladesh. Problems are being left hanging for a long time without being resolved quickly. Due to the energy crisis and reduced demand for products, the production of various industries including textiles, ready-made garments, ceramics, steel has decreased. Among them, new recruitment in textile and ready-made garments is closed. The export is one and a half percent less than in the same period last year. 84 percent of overall product exports came from ready-made garments. Currently, the growth of this sector is only 77 percent. Overall, the country’s business environment is currently not favorable for investors. Textile sector factories are running at 50 percent capacity due to the energy crisis. New recruitment closed. The current energy crisis is due to the dollar crisis.
Bangladesh is not the only one affected by the Ukraine-Russia war. In other countries now inflation is coming down, foreign investment is increasing, and growth is happening. Then why can’t Bangladesh? Therefore, the root causes of the problem should be recognized and solved quickly. We need to get out of the strategy of blaming the war. Efforts continue to improve the quality of investment services; more investment means more employment and further development. Bangladesh, a country of immense potential, is waiting for huge investment opportunities. Constantly contracting for investment from different countries. The list includes Singapore and Dubai and even the US is approaching for investment. Bureaucratic complexity, and Bangladesh’s lagging position in Ease of Doing Business as the reasons for the decline in foreign investment. We have an image crisis. It has to be dealt with holistically. The brand value of Bangladesh is very low in the outside world. When investors hear about Bangladesh, they think that this country is very poor or a disaster-stricken country. We have to get out of this situation. If necessary, branding Bangladesh in foreign media should be done by employing a global PR agency. We are not a poor country, developing and investment friendly – this should be understood by everyone.
Hiren Pandit is a columnist and researcher. He can be contacted at hiren.bnnrc@gmail.com