The New Nation - Internet Edition

Pulack Ghatack

Investment scenario in the country did not improve despite the government's all out efforts to create a business friendly environment, when the banks are loaded with huge liquidity.

Without going for fresh investment, prospective investors have been preferring to see how political situation develops ahead of the general election to be held by December 2008, sources in the business community said.

The large scale investment proposals by foreign farms like India's Tata Group, Mital Group, UK-based Asia Energy and UAE's Dhabi Group are also remaining undecided for a long time.

However, excess liquidity of the banks stood at Tk 142.79 billion (US $2.08 billion) at the end of June, 2007 against Tk 95.91 billion (US $1.39 Billion) of the corresponding period of the previous year, according to the statistics provided by Bangladesh Bank (BB).

Foreign direct investment (FDI) declined by 27 percent during last 11 months of the fiscal year (FY07) compared to a year earlier due to political instability and the failure to reach decisions on large-scale investments.

Since October 2006 the country had experienced three different governments leading to a discontinuity in dealing with investment proposals. Moreover, foreign investors have been reluctant to push projects apprehending that decisions may be reversed. The country had experienced serious political turmoil during the past one year and this was the main reason behind the negative growth of FDI.

FBCCI president Mir Nasir Hossain, however, expressed the hope that investment would increase if the government genuinely follows the election roadmap, as their would be no political turmoil again after election.

"The government has taken some welcome moves to restore business confidence. These measures will help encourage investment, both domestic and foreign. But, it will take time to have the benefit," the leader of the apex business body said.

Noted economist Dr Atiur Rahman identified three causes, including sense of uncertainty about political future, government's relationship with the business community and the devastating floods, behind this slowdown in investment

He said, "The government has taken some positive measures recently. If the government goes ahead smoothly with its election roadmap, the sense of uncertainty about political future will diminish. In that case investment confidence will grow among businessmen. "

"Successful rehabilitation of flood will also help rebounding the investment climate," he added.

According to the Bangladesh Bank, in the 11 months to May, $495 million FDI flowed into the country against $ 675 million in the same period in FY06, and was well below the record year FY05 when it reached $846 million.

Almost half of the foreign investment proposals registered with the Board of Investment (BoI) each year come to nothing, with experts blaming the official's poor negotiating skill and political unrest for the failure to capitalise on potential projects.

According to the BB statistics, the FDI registration for FY06 was Tk US$ 1.34 billion for 130 projects while the actual investment was only $ 679 million.

This is because of the mismatch between the writen policies of the government and the realities on the ground at the implementation stage and inadequate infrastructure.