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- Nov 29, 2009
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Indian interest keen, real investment low
Actual investments by Indian companies remain low in Bangladesh but they showed growing interest to invest here, according to data from Board of Investment (BoI) and Bangladesh Bank.
Analysts blame the poor investment on a "feeling of insecurity" among the Indian investors and inefficiency of the local service providers.
Since 2001, registration for investment by Indian firms has maintained a steady rise. But most of the proposed investment registered with the BoI remained unimplemented, according to an FDI survey by the central bank.
Data shows that BoI registered Indian investment worth $8.25 million in 2001. Of the amount, only $2.1 million was actually invested.
And the amount of actual investment touched the double digit mark at $11 million for the first time in 2008 when proposals were placed for investing $61 million.
"Bangladesh is yet to become a major global investment destination for Indian companies as they make their investment in the areas where our competitive advantage is low," said Dr Khondaker Golam Moazzem, senior research fellow of Centre for Policy Dialogue, a private research organisation.
According to Moazzem, Indian firms, which invested $14 billion globally in 2010, usually opt for those countries where they will be able to get raw materials, extract new technology or can become a leader.
He said the amount of total foreign direct investment that Bangladesh has brought in so far is about $6 billion. Of the amount, the share of Indian investment is meagre -- less than 1 percent.
''India is our major trading partner but not a major investment partner,'' he said.
The BoI data shows that Bangladesh has received investment proposals worth $589 million from 230 Indian firms since 1971.
Of these companies, 70 have gone into production investing $149 million, while investment of $41 million by 28 firms is at the implementation stage now, according to the BoI.
Majority of the investment proposals were for joint ventures.
The CPD researcher linked the low investment to a "feeling of insecurity" among the Indian investors and a lack of efficiency of service providing agencies in Bangladesh, he said.
"It appears that a sense of insecurity or political tension might have worked among the investors,'' he said.
But the prospect of sub-regional connectivity due to transit to India, Nepal and Bhutan offers more opportunity for the Indian firms.
The possibility that India may provide duty-free access to Bangladesh's apparel will also increase the competitive advantage of Bangladesh as an investment destination, Moazzem said.
The Indian firms can target the areas having a huge investment potential, he said, citing cheap labour-based clothing industry and the power and coal sectors.
''A rise in investment by the Indian companies will be good for both the domestic market and export,'' he said.
Investment in Bangladesh will provide the Indian firms with the location advantage to market products not only in Bangladesh but also in India and export to other destinations as well, Moazzem added.
Development of connectivity with the northeast Indian states will also offer the Indian firms an additional advantage to market products in that region, he said.
Indian interest keen, real investment low
Actual investments by Indian companies remain low in Bangladesh but they showed growing interest to invest here, according to data from Board of Investment (BoI) and Bangladesh Bank.
Analysts blame the poor investment on a "feeling of insecurity" among the Indian investors and inefficiency of the local service providers.
Since 2001, registration for investment by Indian firms has maintained a steady rise. But most of the proposed investment registered with the BoI remained unimplemented, according to an FDI survey by the central bank.
Data shows that BoI registered Indian investment worth $8.25 million in 2001. Of the amount, only $2.1 million was actually invested.
And the amount of actual investment touched the double digit mark at $11 million for the first time in 2008 when proposals were placed for investing $61 million.
"Bangladesh is yet to become a major global investment destination for Indian companies as they make their investment in the areas where our competitive advantage is low," said Dr Khondaker Golam Moazzem, senior research fellow of Centre for Policy Dialogue, a private research organisation.
According to Moazzem, Indian firms, which invested $14 billion globally in 2010, usually opt for those countries where they will be able to get raw materials, extract new technology or can become a leader.
He said the amount of total foreign direct investment that Bangladesh has brought in so far is about $6 billion. Of the amount, the share of Indian investment is meagre -- less than 1 percent.
''India is our major trading partner but not a major investment partner,'' he said.
The BoI data shows that Bangladesh has received investment proposals worth $589 million from 230 Indian firms since 1971.
Of these companies, 70 have gone into production investing $149 million, while investment of $41 million by 28 firms is at the implementation stage now, according to the BoI.
Majority of the investment proposals were for joint ventures.
The CPD researcher linked the low investment to a "feeling of insecurity" among the Indian investors and a lack of efficiency of service providing agencies in Bangladesh, he said.
"It appears that a sense of insecurity or political tension might have worked among the investors,'' he said.
But the prospect of sub-regional connectivity due to transit to India, Nepal and Bhutan offers more opportunity for the Indian firms.
The possibility that India may provide duty-free access to Bangladesh's apparel will also increase the competitive advantage of Bangladesh as an investment destination, Moazzem said.
The Indian firms can target the areas having a huge investment potential, he said, citing cheap labour-based clothing industry and the power and coal sectors.
''A rise in investment by the Indian companies will be good for both the domestic market and export,'' he said.
Investment in Bangladesh will provide the Indian firms with the location advantage to market products not only in Bangladesh but also in India and export to other destinations as well, Moazzem added.
Development of connectivity with the northeast Indian states will also offer the Indian firms an additional advantage to market products in that region, he said.
Indian interest keen, real investment low
