Chinese investors find infrastructure crisis, a lack of policy reforms and insecurity as the major stumbling blocks to the implementation of the registered investment proposals – resulting in low foreign direct investment (FDI) in Bangladesh.
At a webinar on Monday, they suggested reducing the hassles of investment, lowering the interest rates and developing the business environment to attract more FDI here.
“The rate of interest in Bangladesh is very high; lower interest would help reduce the cost of the investors,” said Zhuang Lifeng, president of the Overseas Chinese Association in Bangladesh, at the virtual event organised by the Bangladesh Investment Development Authority (Bida) and Standard Chartered Bangladesh.
Li Jiming, Chinese ambassador in Dhaka, at the event said per capita income in Bangladesh surpassed $2,000 and the country is on the way to achieve a status of a higher-income country by 2041. But Bangladesh should work on reducing hassles of investment and develop business environments.
Jean Lu, head of global banking and corporate and institutional banking of Standard Chartered China, said Bangladesh should ensure sustainable development by implementing infrastructure projects under the public-private partnership mechanism.
He proposed that the Chinese currency RMB be included as a settlement currency to operate trade between the two countries to prevent both from the risk of the fluctuating rate of the US dollar.
Chinese entrepreneurs have 521 projects registered with the Bangladesh Investment Development Authority (Bida) with proposals to invest $9.12 billion in Bangladesh, policy-makers and government officials said at the webinar titled “China-Bangladesh Investment Summit”.
There will be employment opportunities for around 1.25 lakh people if these projects see the light of the day, they added.
Till now, the total investment from China amounts to only $1.02, of which, $80.29 came last fiscal year.
Several large projects are being implemented, giving the highest priority to the infrastructure sector, claimed policymakers.
Planning Minister MA Mannan was the chief guest at the discussion and Prime Minister’s Private Industry and Investment Adviser Salman F Rahman spoke as the special guest.
MA Mannan said China is now the world’s most tactically prudent country in terms of international trade. The Bangladesh government wants to move forward on the basis of friendly cooperation with China. The country is one of the largest development partners in Bangladesh.
Bangladesh is in an advantageous position in wooing FDI because of the government’s zero-tolerance policy on terrorism and militancy, alongside offering a number of benefits, including tax exemptions and incentives, said Md Sirazul Islam, executive chairman of the Bida, while presenting keynote paper titled “Bangladesh – a land of investment opportunities for Chinese investors”.
The paper highlights bilateral trade with China in Bangladesh, FDI registration, the status of implementation and various benefits provided by the government for foreign investment.
Highlighting nine potential sectors for Chinese investment in Bangladesh, Sirazul Islam said Bangladesh is one of the five fast-growing economies in the world and ensured 5.24% of economic growth in the last fiscal year amid the pandemic.
To sustain the growth, Bangladesh proactively reached out to the private sector, undertook economic policy reform initiatives and declared stimulus packages worth $14.62 billion, about 4.44% of the GDP.
“Bangladesh is a profitable and safe investment destination as foreign investors are reinvesting significantly,” he said adding over half of the FDI are re-investments, indicating high profitability and confidence.
He also said, “Business opportunities here are limitless, be it greenfield and brownfield investments, or joint ventures or any other mode. Industries here are equipped with backward linkages to support your operations.”
The bilateral trade between the two countries reached $12.09 billion in the last fiscal 2019-20, while only $600.11 million worth of goods were exported from Bangladesh to China against the import of $11.49 billion.
A huge trade surplus worth $10.89 billion would provide an opportunity to Chinese entrepreneurs to invest in Bangladesh and export products to China or any other countries, Sirazul pointed out.
He said China proposed 521 projects involving $9.12 billion to Bida, which could produce 1.13 lakh of employment opportunities in Bangladesh. The country realized the FDI worth $1019.53 million, while the power sector received the highest $342.06 million.
The textile and wearing sector received $265.35 million, leather $106.38 million and trading $44.75 million.
He said it is easier to do business in Bangladesh as the country offers a conducive investment climate for investors, unrestricted entry and exit, and 100% foreign equity is allowed. The foreign investment is secured in Bangladesh by law against nationalisation.
“A wide range of sectors are open for foreign investors in Bangladesh,” said the Bida chief and named nine promising sectors like readymade garments, leather, pharmaceuticals, API and medical equipment, software & IT-enabled service, agro-food processing, agricultural tools and machinery, electrical and electronic products, including parts, automobile and shipbuilding.
He also said the government is providing attractive incentives and subsidies to ensure global competitiveness and company profitability, including reduced income tax for 5-10 years for designated sectors, and up to 10 years for investment in economic zones, tax exemption on export income and interest paid for foreign loan, reduced import duty for import of capital machines and raw materials.
Sirazul Islam identified Matarbari and Payra deep seaports, the new terminal of Dhaka airport, a bridge over the River Padma, the metro rail and the bus rapid transit in Dhaka, economic zones and hi-tech parks as a major game-changer infrastructure in Bangladesh.
Mahbub Uz Zaman, ambassador of Bangladesh to China, asked Chinese entrepreneurs to invest in Bangladesh and recommended Bida to take proper initiatives in order to improve the business environment.
Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said Bangladesh managed the Covid-19 crisis very well. The country ensures multimodal connectivity, including riverways.
The country diversified the base of the industry with vertical and horizontal integration while the maximum raw materials being shipped from China.
Chinese entrepreneurs have opportunities to invest in apparel, machinery, health, technology, high valued textile, cybersecurity components and shipbuilding sectors of Bangladesh.
Salman F Rahman said the government gives the highest importance to infrastructure to attract investment from home and abroad.
He said the economy has a sustained growth record for the last decade but the rate reduced due to Covid-19 in the last fiscal year.
He also said the government has liberalized industrialization and investment policy to attract investment. Bangladesh providing country-specific special economic zone. China is also included in the unique initiative.
He also said the government is ensuring equal treatment for both domestic and foreign investments. There are stable long-term investment and foreign exchange policies.
Bida is providing about 41 services online with its one-stop services, and the number of services will reach 146 by this year, he added.
The government declared its zero-tolerance policy against crime and terrorism. The business environment also improved due to the political stability in the last few years, Salman F Rahman said.
Janet Ming, head of Belt and Road, Standard Chartered Bank, China, said the economy of Bangladesh will grow by 5.6% in the current fiscal year according to the estimation of Standard Chartered. The growth rate would reach 7% in the next fiscal year, she added.
Nasser Ejaz Vijay, chief executive officer (CEO) of Standard Chartered Bank Bangladesh, Jerry Chan, CEO of Standard Chartered Bank China, and Paban Chowdhury, executive chairman of Bangladesh Economic Zone Authority (BEZA), also spoke on the occasion.
