Investment destination Bangladesh: Possibilities and constraints

The prime minister recently called upon Vietnamese entrepreneurs to invest in the country promising conducive facilities. We laud her for her efforts to woo much-needed foreign investment. Yes, Bangladesh has the potential to become the investors’ choice destination. We have a number of things going for us at the moment. At the same time there are major bottlenecks that will have to be addressed so that Bangladesh can cash in on the increased interest Asian and European interests have been showing lately.

The good news first: South Asian wages are no longer cheap. In fact, wages have been on the rise across the Asian board. According to a study by Japanese External Trade Organisation (JETRO) conducted in 2011, Asian workers’ wages have increased significantly. “Among the major countries in Asean, a rise in the basic wage rate was observed, in descending order, in Vietnam (16.8%), Indonesia (9.6%), the Philippines (5.6%), Thailand (5.3%), and Malaysia (4.7%). But even after such a rapid rise in pay, the monthly wage of workers in Hanoi was a mere $123, less than half that in Bangkok ($286). In Jakarta, the monthly wage of workers was $209, roughly 70% of the wage in Bangkok. The questionnaire survey mentioned above also revealed that the average monthly salary for workers employed by Japanese companies in Bangladesh was $78, significantly higher than the minimum wage of $39.” Hence, even with $78 as average wage, Bangladesh offers a far more competitive advantage than, say, Vietnam.

Besides the wage advantage, certain industries are very much viable in Bangladesh. Besides garments, textiles and the shoe industry show a lot of promise. Indeed several joint-venture shoe companies have already opened up shop in Bangladesh. More investment is in the pipeline. This has been possible because these factories by nature are less energy-intensive. The second reason for Bangladesh to be the choice destination for shoe industry is that our good quality leather is cheap. Leather available in Bangladesh, available at competitive prices, is ideal for outer-shoe application.

Another resource in abundant supply is Bangladesh’s young labour force. Compared to Asean our labour force has two distinct advantages. First, and here it gets interesting, Bangladeshi workers are disciplined and second their eagerness to learn is translated into higher productivity. If one looks at Kuwait, more than half the population (est. 2.6million) is made up of expatriate workers — where Bangladesh has 250,000 workers, or about 9% of the total population. Yet the presence of such a large number of people of a foreign nationality working in Kuwait has not presented any major hiccups. Given proper conditions, there is no reason why Bangladeshi workers cannot excel as a productive force in this country too.

The not so good news: According to a recent interview of the present president of Foreign International Chamber of Commerce and Industry Syed Ershad Ahmed, new investment shows a decline. Yet at the same time re-investment and modernisation of existing industry is on the rise. From what has been published in the latest edition “ease of doing business index” brought out by the World Bank and IFC, access to electricity has been touted as a major hurdle. Next in line comes the poor communication infrastructure that includes roads. The lack of progress in expanding the major commercial artery, i.e., Dhaka — Chittagong highway to 4-lane from present 2-lane causes terribly long tail-back. The chronic and traffic jam on highways has been singled out as the biggest problem for doing business in the country, considered a more acute problem than political unrest.

The problems were highlighted in an interview by BBC’s Kadir Kollol of a Pakistani entrepreneur who set up a garments unit in Ashulia industrial belt. He was attracted by availability of cheap, disciplined labour force and duty-free access to the European market. What sets apart this factory from the hundreds of others is that workers get payment on time. The friendly environment for workers coupled with timely payment of wages that are a notch above the common local industry standard. The entrepreneur is happy since his investment has not suffered any incidence of labour unrest. Interestingly, trade unions in the area, traditionally left-leaning and generally anti-foreign investment are not averse to a Pakistani-owned garments industry operating there, since basic workers’ rights are looked after. Mr. Moghul’s greatest concerns are neither political instability nor agitating workers. Rather they revolve around poor communication which, result in lost time, and the dire straits of energy for industry, i.e. supply of gas and electricity (load shedding and low voltage). The erratic supply of these two essential prerequisites of production automatically translates into loss of productivity on the one hand and a higher cost of production on the other (since diesel-run generators come into play to keep production lines running).

Never before has Bangladesh been at the centre of so much interest. The advantages the country enjoys could propel it to a very positive future in the near term provided our policymakers have the vision to take steps necessary to remove the obstacles to growth. Governments need to move away from archaic notions that any infrastructure project that cannot be concluded in one term of government should not be taken up. Projects adopted by one government are carried out and completed by successive governments in neighbouring countries like India, they are never shelved. Unless a fundamental rethinking along these lines is adopted, there exists every danger that Bangladesh will get left behind while neighbours like Myanmar clinch opportunities that ought to have been ours.

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