Investment with war-like preparation is essential for the exploration, development, and infrastructure streamlining of the primary energy resources of Bangladesh. Entrepreneurs will not come forward until they are assured of the availability and smooth supply of primary energy with enabling infrastructure. Foreign Investment will flow hand in hand with local investment. Hence, it is of prime importance to create confidence among local investors. For this, the country must get out of political unrest and uncertainty. No good initiative for attracting investment would work unless, alongside ensuring the free flow of information about the economic index, the nation gets rid of inefficiency, corruption, and social conflicts.
Abdul Awal Mintoo, former President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and Chairman of National Bank, said this in an exclusive interview with Mollah Amzad Hossain, Editor Energy & Power.
We are aware that a four-day Investment Summit was recently held in Bangladesh to attract foreign investment. What has been achieved from it?
There is no reason to undermine any endeavor. But foreign investment would flow into the country in partnership with local investment. Tracking back to memory lane, we find that, except for a few isolated cases, foreign investment came as a joint venture with local investment. Investment has two integral parts – local and foreign. You need to give priority to the feelings and thoughts of local investors about the investment climate.
Foreign investors, while considering investment in a country, scrutinize two factors: whether the venture would be profitable and whether there would be a return on the investment. They critically evaluate these through a due assessment of fiscal earnings and expenditure, export and import transactions, and fiscal policies of a country. We welcome any initiative, like the investment summit, to inform potential investors of the above. The success or achievement of such an investment promotion initiative could be ascertained by a country’s investment climate and economic indices.
Which preconditions and indicators would you like to highlight for creating an investment-friendly environment?
There are a slew of things. First, the authenticity of the economic indices being presented. Over the past 12 years, information regarding GDP growth, inflation, and associated indices has reportedly been manipulated to demonstrate a rosy picture. GDP is a major index that reflects the economic state of a country. Information on consumption, government expenditure, investment, export, and import those were released now appears to be window dressing. The GDP growth was announced to be 7-8%, and the total GDP was above US$500 billion. However, the interim government is not disclosing some of the forged data and information. The GDP is now said to be US$400 billion. Tax, tariff, revenue, and Investment are linked to GDP. All information would be misleading if the GDP information is incorrect.
It is usually said that investors also prioritize social factors alongside financial indices. What are your views?
Financial capital is a major element of investment. Social capital is of equal importance. It merits some explanation. Social discipline is of prime importance. It means the inter-organization, inter-political parties’ relation/cohesion, and the relation among organizations. These are all like family bonding. These all depend on and contribute to the law-and-order situation of a country. Existence of rape and extortion reflect poorly the law-and-order situation of a country. You cannot say with assurance that an investment-friendly, stable law and order situation exists in the country now. Hence, social discipline is not there for the free flow of investment. Even the Police are not functioning well now.
You have discussed two important dimensions of investment climate. How much does politics, especially political stability, influence investment in a country?
We usually say whether political stability exists in the country. There exist political uncertainties and instabilities. Wherever you go, people talk about when the election will be held. You will see that political parties are fighting against one another. There are intra-party rivalries. When such political uncertainties and instabilities prevail in a country, you cannot term this an ideal climate for investment.
Questions are being asked about the nature and character of the party and government that will be formed following the election. What will be the policies of that government for the investors and investment? Unless and until these are known, it is not possible to predict or preempt how the investment community will react.
Financial management is also a major area when you talk about investment. What are your views?
You are correct. It is being reported that two banks are doing alright, and 5 are not performing well. So you can then say that financial management is not good. The discussion about the banking sector does not evidence that the financial management in the immediate past was good at all.
It is often said that the monetary and revenue policies lack consistency. Does this create confusion about the investment community?
Please note that there must be consistency in the monetary and fiscal policies. We do not understand the country’s revenue policy now. At the time of the budget, we only discuss tax matters. The budget reflects the revenue policy. The finance bill is a law. It is the statement of earnings and expenditure. Now we fight over how we will earn? But we do not discuss how we will spend it. We do not discuss how much we will spend in each sector. Where will the spending benefit people? We also hardly discuss how the spending will contribute to economic development, facilitate the expansion of business and commerce, economic activities, increase competitiveness of our export commodities in the global markets, and stimulate demand among local communities. There are very few discussions we find among us about ways and processes for achieving the aims and objectives of the budget.
Let us now discuss monetary policy. Bangladesh Bank, as the central bank, possesses an instrument. That is controlling inflation through adopting a contractionary monetary policy. Under this comes the setting of interest rates. The rates will increase if the money flow to the market is restricted compared to demand. In a country like Bangladesh, almost everything needs to be imported. The only exception may be the salt. Rice was not imported last year. Now, 6-8 lakh tonnes of rice or maybe more will need to be imported. The cost of these commodities will increase with the increase in interest rates. Again, exchange rate fluctuations also impact the prices of commodities. A crisis will be created in the commodities market if there are issues opening LCs. If contractionary monetary policy is adopted without considering all economic indices and the demand for commodities, a two-dimensional inflation will be created.
Assessing your observation in perspective, we can say that the situation now is not at all investment-friendly. In some reports, we see energy crisis is also a major deterrent to attracting investment. What is your observation?
You have rightly pointed out. How would investors consider investment against the backdrop of the prevailing electricity and fuel supply crisis? According to a government statement, the installed electricity generation capacity, including captive, is above 31,000 MW. But it does not mention how much we can generate and supply. We must consider that power sector utilities do not have the capabilities if these fail to meet the demand for 17,000 MW consistently, despite having capacity. Let us talk about natural gas as the main primary fuel. LNG is now being imported to supplement its production. Coal and liquid petroleum are other fuels for energy generation. Each fuel has separate customs duties. In a discussion of the Dhaka Chamber of Commerce and Industry, there have been talks about a unique customs duty. That will reduce the cost of fuel and power generation.
The problem is not confined here. The capacity of state-owned enterprises has progressively diminished. Irregularities and corruption have increased. Politicians have lost the intellectual capabilities to monitor these. He who gets the power starts plundering.
You said Bangladesh imports almost everything. Not only finished products but also various industrial raw materials are being imported. Our challenges in maintaining competitiveness in the global market are getting intensified. What are your observations?
Except for jute and raw hides, we need to import all raw materials for manufacturing our export commodities. We must deeply assess the state of each industry while considering increasing production in a situation where Bangladeshi industries are almost exclusively dependent on imported raw materials. A logical question arises: whether the monetary policy of a country, which depends on imported raw materials, should be similar to countries that get raw materials locally? But we are following the wrong policy now. Under the circumstances, you cannot say that there is an investment-friendly environment. However, I appreciate and congratulate the commendable initiative of BIDA and the interim government. But creating an enabling environment is extremely challenging and will take time. These are also related to politics. Investment is an integral part of the economy. It is an essential macroeconomic indicator. The economy will not be cured until the derailed politics get back on the right track. Economy and politics complement each other. Hence, whatever may be the depth and diversity of initiatives taken to allure investors, the existing climate is not conducive for investment.
Asian countries attracted a huge amount of investment in recent years. The policy interest rates in all countries but Pakistan are less than Bangladesh. What do you say?
The policy interest rates are much lower than ours, not only in Asian countries but also in many developed countries. I said earlier, too, that it is a big problem.
You are aware that the country possesses significant coal and petroleum resources. But over the past 25 years, we failed to explore and exploit it. What should we do now?
We have been hearing for a long time that Bangladesh has reasonable reserves of superior quality coal. We could only set up a mine at Barapukuria. Gas exploration started during the time of British rule. Gas came to the surface at Bhola Island naturally. Then it was explored and discovered at Shahbazpur. But being a high-potential riverine delta, Bangladesh remains the least explored country. In the USA, you will find hardly any 10 square-kilometer area where some exploration has not been done. Some work has been done at the Surma basin in the Sylhet region. But vast areas in the rest of the country remain unexplored.
In my opinion, top priority must be given to mobilizing investment to exploit coal resources. We must adopt and utilize appropriate technology. We must not leave even an inch of our onshore and offshore areas unexplored for petroleum and mineral resources. We have been listening since childhood that Bangladesh is floating on gas. But now, home dwellers in gas franchises suffer from gas draught.
Political leaders must stop telling lies about exploring and exploiting primary fuel resources. The capacity of the institutions must be increased. Corruption must be uprooted and eliminated. Using all concerned institutions and agencies in a planned manner, exploration and exploitation of coal and petroleum resources must be ensured. We must bear in mind that until we can ensure sustainable energy security through utilizing our primary fuel resources, the expected investment will not come.
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