Economists, experts and business leaders want to see some new directions and continuation of previous policies on foreign direct investment (FDI) in the fiscal year 2009-10 national budget, announcement of which is due next month, as fresh FDI inflow to Bangladesh is in a state of decline, mainly because of the global financial trauma.Only US$ 54 million worth of foreign investment proposals were registered with the Board of Investment (BoI) in the first two months of 2009, while the investors desired a $ 165 million investment during the same period a year ago.2008 was also a gloomy year for FDI proposals. The BoI registered only $ 60 million proposals in FDI covering 13 projects in the year against $ 326.85 million worth proposals covering 141 projects in 2007, an 81.64 percent drop, according to BoI statistics.The current recession has put the FDI inflow at low ebb, as most investors are much concentrated on utilising their existing capacity to face the financial crisis, rather than initiating new ventures.The Institute of International Finance (IIF), an association of the major global financial institutions, in its latest report pointed to the recent significant decline in private capital flows to emerging markets. The IIF also forecast such a flow of $165 billion for 2009, down from $ 466 billion in 2008.However, the actual foreign investment in Bangladesh witnessed an upturn in the first eight months of the current fiscal year, backed by Japan's NTT DoCoMo's purchase of 30 percent stake in AKTEL for $ 350 million from local AK Khan and Company.During July-February of 2008-09 fiscal, $ 851 million in FDI was received, which was $ 446 million in the same period of the previous fiscal, according to Bangladesh Bank statistics.The portfolio or foreign investment in the country's capital market also dropped significantly amid global financial crunch, as selling pressure by foreign fund managers or investors continue.During July-February of 2008-09 fiscal, net withdrawal by foreign investors was $ 76 million, while net investment by them was $ 70 million in the same period of the previous fiscal.Many market experts however opine that at this stage of global recession portfolio investment should not be encouraged here.Salahuddin Ahmed Khan, professor of Finance at Dhaka University, said, "Portfolio investment can be encouraged in the form of equity and there must be certain lock-in period in selling shares." Meanwhile, advocating continuation of the budgetary measures, such as tax holiday benefits for new industries, reduction in capital machinery and spare parts import, and reduction in corporate tax to encourage FDI, experts said the next budget should have some specific directions to resolve the problem of gas and power, as the utility is considered basic facilities for investment.Pointing to the decline in investment flow worldwide due to the recession, impact of which is feared to linger up to early 2010, Mustafizur Rahman, executive director of Centre for Policy Dialogue, said, “It's not expected that the FDI to Bangladesh will rise dramatically in the coming days.” On the other hand, he said, this year's budget will be a big deficit budget, for which the government will have to depend on domestic borrowing and foreign aid.“We have to think about public-private partnership to attract FDI to the country,” he said.Annisul Huq, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said, “Assurance of utility such as gas and electricity is the prerequisite for any kind of investment, while the country is facing a severe problem to provide those services. "He said adequate infrastructure facilities and an investment-friendly environment will have to be ensured.On tax holiday, Huq said, "The facility should be for 10 years for setting up industries inside the export processing zones (EPZs) and five years for new industries outside the EPZs." Ifty Islam, managing partner of Asian Tiger Capital Partners, a financial institution focusing on private equity and venture capital, said while public-private partnerships are clearly going to feature prominently in the budget “we should also adopt a similar mindset in outsourcing some of the functions of investment promotion to the private sector.” At a minimum, he said, there should be a joint venture approach between the government and the FBCCI in 'Brand Bangladesh' and investment promotion strategy going forward.Islam said the BoI needs substantially increased funding.“Every dollar spent on effective investment promotion would see at least a potential tenfold return to Bangladesh. The budget for the BoI should at least be trebled in the upcoming budget,” he suggested.
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