Concerted action by S Asian states for attracting FDI emphasised

Express Report

A two-day roundtable on foreign direct investment (FDI) concluded in Dhaka Wednesday resolving that concerted action by the South Asian countries is needed to attract a proportional share of rapidly growing global investment.

Participants of the roundtable noted that South Asian countries were generally perceived as posing high security and political risks for business and FDI, both regionally and domestically, said a summary on the roundtable released to the press by the organisers.

"Participants noted that there was an international perception that South Asia lacked 'credible commitment' and a 'sense of urgency' in undertaking the reforms and administrative changes necessary to attract FDI," it added.

It was viewed that policy liberalisation and reform measures had already been undertaken in many South Asian countries, but it was a matter of urgency for these to be deepened, accelerated, and maintained over the long term.

There was a consensus that, to be effective reforms must reach beyond FDI-specific entry and operation conditions to create a competitive, predictable business environment for all private sector enterprises, existing and new.

"This would require not only policy liberalisation at the national level but effective implementation and administrative actions at the sub-regional and regional levels," the roundtable summary said.

The event was organised by the Foreign Investment Advisory Service (FIAS), a joint service of the World Bank and the International Finance Corporation (IFC), the British Department for International Development (DFID), and the Asian Development Bank (ADB) in association with the government of Bangladesh.

Asked about factors concerning Bangladesh, Executive Chairman of the Board of Investment (BOI) Mahmudur Rahman at a post-roundtable press briefing said there was no country-specific discussion.
But the lack of infrastructure, problem in implementing adopted policies and negative perception of the region as a whole are the factors deterring inflows of FDI into Bangladesh as well as other countries in the region.

On another question about the country's shattered image following publication of a report in the Hong Kong-based Far Eastern Economic Review, Michael E Lester, senior investment officer of FIAS, said they have little idea about the impact of the report.

But, quoting a recent study, he said the geopolitical factors, for the first time, are being considered by the investors following the September 11 attack on key US establishments, including the landmark twin-tower.

Arjuna Mahendran, chairman and director general of the Board of Investment of Sri Lanka, however, ruled out such impact, saying his country was able to receive FDI worth 150-200 million US dollars annually despite a war in its northern region during the past two decades that left 60,000 people dead.

Participants of the roundtable noted that there were emerging encouraging examples of technology-based export-oriented successes in the region. If policy and infrastructure challenges can be confronted there is a great latent potential and underlying entrepreneurial tradition of doing business which can be capitalised for the future prosperity of the countries of the region.

There was consensus among participants that in addition to improving the macroeconomic situation, it was critical to address the wide range of microeconomic factors that determined a competitive business environment and investment climate.

These constitute the day-to-day realities of doing business that resulted in unnecessary high transaction costs, they said, calling for dismantling the bureaucratic barriers and implementation of broad-based regulatory reform, preferably alongside more extensive civil service reform.

Experts on tax incentives noted that, while the governments responded to increasing global competition for FDI by offering incentives, the evidence was that they had very little effect on investment decisions.

They said tax and incentives regimes in South Asia, bearing on FDI and business in general, are generally heavily discretionary, selective, complex and open to unnecessary revenue sacrifice, noting there is scope to improve their administration and effectiveness.

They also noted that special economic, export or industry zones could provide enclave environments for FDI, bypassing otherwise unfriendly investment environments.

They said "one-stop shops" for regulatory approvals are one way of by-passing bureaucratic red tape, especially in smaller countries, while inter-agency coordination forums and new information technologies can also streamline processes.

The participants said there must be political commitment to deep-rooted legislative and regulatory reforms, including agency restructuring.

The difficult long-term challenge to improving administrative efficiency and minimising delays, costs and corruption involves changing deep-seated regulatory attitudes and fostering an accountable, client-service oriented ethos within the bureaucracy.

The roundtable brought together 45 participants including senior policy makers from South Asian countries, senior executives from major global corporations, representatives of international agencies and investment experts.

Visit: http://www.financial-express.com/ and find 11 April 2002

Also see the Welcome Address by Executive Chairman BOI