There are several intermediate steps between 'attending a summit' and actually 'opening a factory'

What can we expect from the ongoing investment summit?

First of all, there should be a clear understanding of why Bangladesh wants foreign investment.

It is important to remember that while investors will bring a lot to the table, we will also have to provide a lot in return — ranging from land and utilities to skilled manpower. These are limited and highly valuable resources for us. So, we must ensure that, in exchange, the foreign investors truly add value to our economy.

I often say that many investors come just to exploit our market. So, just because we struggle to attract foreign investors, we shouldn't blindly welcome whoever shows up. For example, if an investor comes now and manufactures traditional garment products like trousers, shirts, sweaters, etc., it won't add significant value because our own entrepreneurs are good at making these.  We don't really want more FDI of this kind. We want FDI that will help get us a foothold in global value chains and help diversify our exports. 

I understand that some foreign investors will want to exploit our domestic market. That's ok but here too we must ask what value are they adding – are they helping to raise productivity, are they bringing in good business practices that our local businesses can learn from, are they helping to address our energy shortages and infrastructural bottlenecks?  

Bangladesh's strategy must be clear. What are we actually gaining?

There have been many investment summits in the past, but the results have not been that great. Such summits are necessary. They provide a platform where everyone can come together, and foreign investors can visit the country to see the market firsthand.

However, without proper follow-up, we won't reap the full benefits, just like what happened in the past.

We Bangladeshis probably have a thing for big, glamorous events. However, we often lack the focus on the implementation process that should follow, which is painstaking, not glamorous. But that's where the real work needs to be done.

How can we make the most of the summit?

I have worked with different countries on behalf of the World Bank. One important thing I've observed in countries that attract foreign investment well is the investor tracking system. That is, if 100 foreign investors come to an investment summit today, it's essential to track whether they have followed up, such as sent a letter, or communicated their decision, showing their interest to move forward.

It is often seen that when foreign investors express interest, it is widely reported in the news that a certain amount of investment is coming, but that does not necessarily mean they will actually follow through. What I'm saying is that there are several intermediate steps between 'attending a summit' and actually 'opening a factory'.

The investor tracking system keeps track of where each investor is in the process and checks if anyone is stuck at any stage. As far as I know, BIDA did not have such a system in the past. I'm not sure if they have it now or if there are plans to implement it, but it is definitely necessary.

Secondly, foreign investors will not take the government's word as the final one. They will seek feedback from current investors and inquire about their experiences. If they do not find it positive, they may become discouraged.

Therefore, we must fulfill the demands of existing investors. For example, they might say, 'Your policy states that we can easily repatriate the profit we make. But we are hearing that recently, due to foreign exchange issues or other reasons, your existing investors are finding it difficult to do so. What about that?' We need to be prepared with valid responses for such questions.

In terms of attracting FDI, what should be our main goal now?

One of our main development goals currently is to diversify exports.

When we diversify our export sector, one part will be labour-intensive, simple products, like garments. This will create employment in the country. There is indeed scope to diversify within garments and other labour-intensive products.

However, the country also needs to move towards more complex products, such as electronics or semiconductors. This will allow us to learn a lot of new things. When a country works with complex products, its learning curve is much steeper. Based on those lessons, it can develop many more industries.

To diversify exports, we need foreign investment in different sectors. This is because foreign investors possess technological knowledge, and more importantly, they have access to global markets. This is something that local entrepreneurs may not yet have, especially in the case of new products.

Therefore, as I mentioned earlier, one of the main goals of attracting foreign investment should be to see if it helps diversify Bangladesh's export sector. According to Bangladesh Bank's FDI data, less than one-third of the FDI is export-oriented. Two-thirds are focused on natural resources or the domestic market.

The summit emphasises five key sectors— renewable energy, digital economy, textile and apparel, healthcare and pharma, and agro-processing. Do you think these areas are sufficient?

While these sectors are essential, we could explore other sectors like the semiconductor industry. We've recently been discussing the potential in this field. Semiconductor manufacturing includes a part called assembling and testing, which is somewhat labour-intensive. It doesn't require highly skilled technical workers. Malaysia and the Philippines are already working on a large scale in this field. We could consider exploring this sector as well. And then there is chip design, a field which we have already entered. This requires highly skilled people such as software engineers.

Thus, instead of only focusing on the sectors or activities that we have identified, we should also consider the investors' perspectives. If they have studied a sector, identified potential, and are interested in investing, we should react efficiently.

Do you think the country's political shift will have an impact on FDI attraction?

A few years ago, the World Bank conducted a survey, where CEOs of various multinational companies were asked about what drives or discourages FDI. While political instability was mentioned, their main concern was 'policy and regulatory uncertainty'.

They are actually concerned about political instability because it often causes policy and regulatory uncertainty. Foreign investors always prefer clarification. They want a clear answer — yes or no. They do not appreciate being left in limbo with constant, but insincere, reassurances.

However, for Bangladesh right now, political uncertainty doesn't mean a war-like situation, although we have seen disturbances that worry foreign investors, but it could refer to concerns such as how long the interim government will stay in power and what the policies of the new elected government will be.

What does your task force recommend to address this issue?

There are several important recommendations but I shall highlight two for now. One is to establish a Regulatory Reform Commission. The role of this commission will be to maintain regular communication with businesses to identify areas where our regulatory system has issues, identify reforms and advocate for their implementation. South Korea established one in 1998 and India just announced one in their latest budget. Countries are moving from ad-hoc approaches to regulatory reforms to more systematic ones. We must too.

Additionally, there are several areas where we need new regulations. This is because, if a new type of business and technology emerges in Bangladesh, the existing regulatory framework will not be able to cover it effectively. The proposed Commission can identify such regulatory gaps.

The other recommendation I want to highlight is about imposing performance disciplines on any support provided to businesses. In Bangladesh, business owners frequently ask for various incentives. If we look at the Korean example, they also provided many incentives to the private sector over the decades. However, the difference is that when they gave incentives, they attached performance discipline conditions. In other words, they said, 'I'm offering you tax breaks, subsidies, or low-interest loans, but in return, I want this from you. If that condition is not met, I would withdraw the incentives'. The performance conditions varied over time. Initially these conditions focused on increased exports, later on diversifying exports, upgrading technology and improving productivity.  

However, in Bangladesh, this does not happen. Business owners demand incentives, and they are given without any conditions. So, the support is used to maintain the status quo, not bring about change as has happened in South Korea.

What are the government's challenges in attracting investors?

A major problem that I want to emphasise is the lack of coordination between various sectors of the government. For example, BIDA is saying one thing, Bangladesh Bank or NBR might take a different step. This contradiction, or lack of coordination, is a big problem. BIDA's efforts may fail to produce results if the Bangladesh Bank suddenly starts restricting the repatriation of profits or NBR imposes a tax on a foreign investor with retroactive effect. Additionally, the sudden imposition of regulations without thinking about their long-term effects also creates uncertainty.

We must remember that FDI attraction is the entire government's agenda, not just BIDA's. BIDA won't be able to do anything alone unless other parts of the government understand that their actions can discourage FDI.

At the same time, swift execution is crucial. Without coordination, progress tends to slow down. It's important to remember that foreign investors have numerous options. If they don't find favourable conditions in one location, they can quickly shift their focus and seek other investment destinations.