Looming uncertainty in the political arena and its ultimate consequences through continuous violence on the streets for the last couple of months have restrained foreign entrepreneurs from making fresh investments in Bangladesh.
The number of proposals for fresh investments by foreign entrepreneurs has halved within a month, according to sources, reports the Independent.
The Board of Investment (BoI) received only seven proposals in October against 15 in September this year. The amount of proposed investment against those projects also declined drastically. The foreign companies proposed to invest only $20 million in October against a commitment of $1,915 million in September. The number of local investment proposals also declined to 75 in October from 81 in September. The committed investments against those projects, however, went up to $504 million in October from $187 million in September.
Bangladesh Bank sources, however, claimed that the net flow of Foreign Direct Investment (FDI) was a little bit higher in the first quarter of the current fiscal year than the corresponding period last year.
The BB data shows that a total of $504 million came as FDI during July-September period in 2013 against $399 million in the corresponding period last year.
According to BoI, the projected employment generation against these projects went down significantly this month from previous months. The foreign entrepreneurs committed to generate a total of 681 employment in the 7 projects, while the number of employment generation was committed to be 4,000 in the 15 projects received in September.
The officials of the (BoI) said the volatile political situation discouraged the entrepreneurs from making big investments. The declining trend in receiving foreign and local investment proposals started since March-April this year.
Economists said this trend is very normal with such an uncertain situation prevailing in the country for several months. “How can we expect that entrepreneurs would come to invest their hard earned money in such a volatile situation?” wondered a leading economist of the country.
He added that the investment sector would suffer a blow if the situation does not improve immediately. The overall economy is going to be stagnant due to continuous road, rail and river route blockade programmes enforced by political parties. The output in the industrial sector has already hit bottom for volatile political situation and frequent labour unrest in industrial districts.
“We are observing a depressive trend in both foreign and local investment sectors for the last couple of months,” said Dr Mustafizur Rahman, a leading economist and executive director of Centre for Policy Dialogue (CPD).
When asked about the declining trend in the number of investment projects with BoI, Rahman said, “Although all the registered projects under BoI do not take place always, it gives us a picture of interests by the entrepreneurs.”
“As a result, this declining trend gives us a further depressive signal about the prospects of investment in the country in future,” he added.
“The situation is alarming as the present political condition disrupts all economic activities,” said Dr Helal of DhakaUniversity’s economics department. He added that everything depends on investment.
“It will be more alarming if the political deadlock lingers further,” he said. According to him, apart from the volatile political situation, there are some other factors that affect investment in both foreign and local sectors.
These factors are poor infrastructure, lack of utility services and frequent labour unrest in the industrial belts.
A total of 219 foreign investment proposals were received by BOI during the 2012-13 fiscal year, while the number of local investment proposals was 1,457 during the year. The committed investment against those projects was $27 billion in foreign category and $55 billion in local category.