Recommendations of the Economic Policy Paper on
Foreign Investment Protection Policies and Anti-Expropriation Measures

Advocacy at the highest level is needed to bring about an environment conducive for foreign direct investment. This pre-supposes a political consensus and political stability through meaningful dialogue amongst the political leaders to keep the interests of the nation uppermost in their respective agenda. A way must be found to settle political differences through means other than hartal and similarly negative activism that breed violence and turmoil, which are inimical to the interests of foreign investors. There are instances of prospective investors coming to the country for exploring business prospects and remaining confined to hotel rooms due to hartal, achieving nothing at the end. A situation of this kind is by no means desirable from the point of view of foreign investment. Even the domestic investors have expressed dismay over the continuously volatile political situation in the country. A political problem of this kind should no doubt be resolved politically. A satisfactory law and order situation is equally critical to attract foreign investment. The two most important factors for attracting and retaining foreign investment are:

• National political consensus.
• Law and order situation.

A satisfactory law and order situation and a corruption-free administrative machinery are essential to attract foreign investment. In the words of Mr. A.M. A. Muhith, who was quoted earlier also, "If political parties could shed their goons who romp around industrial centres, labour colonies, educational institutions, transport junctions, sea ports and IWTA landing stations, airports, border check-posts, godowns of factories, bonded warehouses and such other strategic points for extortion and rowdyism, the scene would undoubtedly be very different". The scene would be very different too if the concept and practice of "speed money" was banished from the country and corruption was stamped out of the political and administrative scenario for all time to come.

• Extortion must be eliminated.
• Corruption must be ended.

Foreign investment should be perceived and pursued not as a substitute of, but as complementary to, domestic investment and measures should be geared accordingly. More thrust should be given to creating conditions for setting up joint ventures in an atmosphere where not only the local entrepreneurs are built up but opportunities are also created for local expertise and technology to develop in tandem with foreign expertise and technology. The bridge between the two has to be built cautiously and diligently by the stakeholders who are operating on the scene. The attention of the BOI in particular should be focussed on these points in the years to come:

• Domestic investment must be supported to create appropriate economic and infrastructural preconditions.
• Efforts to eliminate mistrust between domestic and foreign investors.
• Exchange of views between domestic and foreign investors.

A situation in which the Industrial Policy is not accompanied by Acts that are truly equipped to ensure conditions for enforcement should be put to an end. A policy without an updated Act is only a document of pronouncements. Both the Investment Act and EPZ Authority Act should be revised to remove the clauses that have become redundant over time and to incorporate provisions that are needed to meet the demands of present time. Rules should be framed right away to provide legal backing for the Acts. Care should be taken to revise the Acts and to frame the Rules through a consultative process involving both public-sector and private-sector stakeholders, taking the good examples from outside the country to serve as a guide. A broad-based forum under the chairmanship of the Industries Minister and co-chairmanship of the Law Minister may be set up to address the tasks. The process should be transparent and given wide publicity both at home and abroad. Suggestions may be sought on internet from our embassies and through them from non-resident Bangladeshis to enrich the process. Meanwhile, the Industrial Policy ‘99 should be translated into important languages and circulated to the embassies for circulation in industrialised countries. All other laws of the land, e.g. labour laws, having a bearing on the investment situation, should be brought into conformity with Investment Act.

• Measures to ensure policies.
• Strategies to implement policies.

5.1 Apex Forum for Co-ordination and Policy Adjustments

Since policy enforcement involves a number of stakeholders, public and private, a co-ordination platform of the highest level is the need of the hour. Therefore a forum such as the National Council for Industrial Development has been proposed in the Industrial Policy. But such a forum will lack a focus on foreign investment, which should attract the attention of the highest level. Therefore the setting up of a Council with the Prime Minister in the chair for the exclusive purpose of dealing with foreign investment should be under consideration. Standing committees should be formed to separately deal with matters having to do with foreign investment, such as matters related to financial resources, especially banking, governance, etc. These committees should be used for consultations with all the stakeholders at short notice.

5.2 Monitoring Cell

A strong and well-equipped monitoring cell should be put in place in the Board of Investment to:

• Monitor the investment situation on a continuous basis.
• Monitor the progress of implementation of projects that have been undertaken.
• Review capacity utilisation, etc.
• Maintain close liaison with trade and investment promotion organisations.

A proposal should be considered in this context to enforce registration as compulsory and intimation of the periodic status of implementation of an investment project as mandatory so that BOI can compile and bring out statements reflecting the progress of investment by foreign investors.

5.3 One Stop Service Centre: Upgrading its Capability

As has been indicated earlier the One Stop Service Centre, as it has been constituted, is not vested with decision-making authority and, therefore, fails to deliver the goods properly and effectively. It needs, therefore, to be upgraded by giving it decision-making powers. Recommendations in this respect, as contained in the Report of Shawkat Ali Ferdousi, are worth considering.

5.4 Information and Data Bank

An information and data bank needs to be set up within the Board of Investment to serve as a central pool of information and data to address all types of requirements of investors who ask for wide-ranging information relating to investments. The data bank should have access to information pertaining to the investment situation of foreign countries as well and should also gather information on technology. An important task may be performed by the unit in compiling a list, with periodic upgrading, of the prospective investors willing to put up equity with foreign investors. This unit should maintain a steady interaction with our embassies to collect and disseminate information on foreign investment through Internet facilities. The unit should be equipped with facilities for computer networking with all the chambers of Bangladesh as well as internet linkage with selected foreign chambers of the developed and developing countries together with our embassies abroad.

5.5 Legal Support Unit

Legal counselling is a critical need for a foreign investor. This unit should be equipped with facilities for giving legal counsel to the foreign investors that will relate to documentation needed for procurement of land, formulation of partnership deeds, drafting treaties, etc. It should be the custodian of all acts, rules and regulations which the investors would be interested to access to familiarise themselves with the laws of the land.

5.6 Training and Orientation Unit

Foreign investment is a field where the functionaries involved should have a high level of professionalism which cannot be acquired without quality orientation and training. There should be continuous training and orientation addressing all aspects to which the private and public sector functionaries are likely to be exposed. Even those who deal with peripheral facilities for prospective investors, such as airport, hotel and tourism officials and employees, should be given adequate training. It is recommended that the Bangladesh Institute of Management (BIM) should be re-structured to encompass training activities pertaining to foreign investment. Setting up of an Institute of Training for Industrial Development is also possible through joint government-private initiative. Such an institution may serve as the forum for holding seminars, workshops, round-table conferences, etc. apart from holding training and orientation courses. Assistance from development partners may also be obtained to implement the proposal.

5.7 Commitment Towards TRIPS to be Strengthened

All the national policies should recognize that Intellectual Property Rights (IPR) is an important ingredient in economic development and plays a vital role in world trade as well as in attracting foreign investment. The amendment and formulation of IP laws should be given priority consideration to convey a distinct message to the potential foreign investors that Bangladesh is serious about protection of IPR and fulfilment of its due obligations towards TRIPS.

A separate study should be undertaken to examine all the aspects of trade enjoined by the WTO and their relationship with the potential for foreign investment. A collaborative effort between the commerce and industry ministries is highly important in this regard.

5.8 Protection Against Expropriation and Nationalisation

• The words "except for a public purpose" should be omitted from the expropriation and nationalisation clause of the Investment Act 1980 to make the guarantee against nationalisation appear more convincing and credible. The Act should be further updated.
• The elimination of the above clause from the Act altogether should be given serious consideration by the policy-making authorities.
• Treaties should be signed with individual countries guaranteeing protection from expropriation and nationalisation of investment.
• All the factors that amount to de facto expropriation should be considered seriously and adequate safeguards taken to:

• Prevent fluctuations of taxation and tariff policies.
• Ensure a favourable foreign exchange reserve (which itself warrants a list of measures).
• Strengthen and stabilise the capital market to protect portfolio investment.
• Resolve the issue of labour unions in export processing zones to maintain a favourable and guaranteed climate for investment. (Please see the appropriate section in the report).

5.9 Bangladesh Embassies Abroad: Galvanising them into Action

The contribution of Bangladesh embassies in image building or projecting the right image of the country abroad is still not satisfactory. Bangladesh is very often projected abroad as a perpetual victim of natural disasters, political strife and tension, while its best characteristics are not highlighted by the international media. This kind of impression does not attract foreign investment. Here is an area where efforts may be intensified by our embassies for giving wide publicity to the favourable aspects of the Bangladesh’s socio-economic and cultural status. They should also serve as information centres for prospective investors. With this end in view our embassies in the industrialised countries should open a Bangladesh Window for Foreign Investment to disseminate up-to-date information to intending investors, foreign as well as non-resident Bangladeshis. Their job should not be necessarily confined to arranging workshops, seminars or organising investors' forum from time to time. They should also use the local media to publicise the favourable climate existing in Bangladesh for foreign investment.

In short, the required institutional measures could be as follows:

• Establishing a National Council to review the Industrial Development Policy.
• Establishing a Cell to review the development of foreign and domestic investment.
• Establishing a legal support Unit.
• Providing information about TRIPS.
• Providing information about the national Anti-Expropriation Law.
• Establishing an Orientation and Training Centre.
• Restructuring and empowering the BOI.
• Re-activating the embassies abroad to improve the political and economic image of the country to attract foreign investments.

Traditional development partners can contribute indirectly, if not directly, towards the encouragement of foreign investment in Bangladesh. Every year in April the meeting of the Bangladesh Development Forum is held under the auspices of the World Bank to review utilisation of past foreign assistance and prospects of assistance in the coming year. Various important issues are brought up and discussed in this forum where Bangladesh presents detailed responses. The meeting of this forum may be followed up every year by organising an Investors’ Forum through obtaining the good offices of the donor countries. Donors' representatives may be present in this forum as observers. After all, foreign assistance and foreign investment are getting linked up in many ways, one having implications for the other. The possibility of having such a forum may be discussed with the World Bank through the initiative of the Economic Relations Division.

International pressure is mounting on the question of allowing trade/ labour unions in places where no union has been allowed in Bangladesh in the interest of ensuring trouble-free investment. The issue has to be seriously considered by the public as well as private stakeholders so that the pro-trade union lobbies are convinced that in the present situation of Bangladesh trade unions are not desirable mechanisms to be adopted in some designated areas at present. A counter-lobby with the involvement of Bangladesh embassies may be mobilised. The point that may be emphasised is that a gradual approach towards opening the door to trade unions may be a more advisable course of action to take in the Bangladeshi context. A position paper on this issue may be prepared and acted upon in the quickest possible time.

Simultaneously, a political decision may be taken to overcome labour opposition to foreign investment projects, such as the container port project which, if stalled, may convey wrong signals to the outside world. 

Foreign direct investment should not be regarded from the viewpoint of incentives alone; it has to do with the host country’s total vision as to how to attract and sustain the stream of capital inflows and to what extent it is consistent with the nation’s aspirations and commitment. Foreign investment can feel secure and protected only when all the conditions for its sustainability in the host country are ensured and that calls for networking of all laws with the enforcement machinery working in an atmosphere of harmony amongst political leaders and public and private stakeholders. Needless to say, a glittering package of incentives may easily go sour if the powers that be, whether political leaders or bureaucrats, do not show enough inclination and do not put in enough effort to enforce the termination of corrupt practices.

A nation-wide mission should be undertaken to liberalise our attitude towards foreign investment; this should be ensured through participation of all stakeholders. All tools and mechanisms should be used in harmony within the framework of the policy and no mindset should work as an impediment to the amendment of Acts and framing of rules and amendment of the Policy itself, if needed. The benefits of foreign direct investment should be harnessed to ensure a healthier economy and a better future for the people, most of whom are still languishing in poverty.