12:00 AM, December 09, 2012 / LAST MODIFIED: 12:00 AM, December 09, 2012

Seven steps to more effective capital inflows

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Lutfey Siddiqi

Lutfey Siddiqi

The intellectual case in favour of Bangladesh has been well-established in a wide range of reports in recent months and there is little political debate about the need for external capital. Policies around taxation and repatriation remain investor-friendly.
It is telling that even while the stalled financing of Padma bridge captures headlines, the World bank has issued guarantees for over $300 million of proposed investment in Bangladesh and has issued a recent report that says, “Bangladesh belongs to a rather small group of countries that have done well on both economic growth and human development indicators.”
However, the substance of the Bangladesh story does not seem to translate proportionately into actual inward investment. It is estimated that only 4 percent of the total investment dollars available to South Asia comes to Bangladesh. This brings me to my first point:
1. We have a perception gap. It's not that we are unattractive. We just need to get better at makeup and join the international beauty parade. The immediate issue to address is one of messaging and marketing. This requires professional expertise and some of our competitor countries do a better job of courtship, of connecting with key potential investors at a human level and with a customer-service attitude. The Indian High Commission for example has proactively put me on their database, sending me a relevant alert at least once a month.
2. Secondly, we underestimate the considerable amount of “soft power” that Bangladesh commands in the international arena. When it comes to social enterprise, we are seen as global leaders in innovation and management. Then there are business leaders within the country such as Latifur Rahman who are recipients of international awards and businesses such as his Pepsi distribution unit that has received the highest performance award within that global organisation. Moreover, there are multinationals such as Singer who have thrived in Bangladesh over decades and who could act as poster-boys for our cause. Finally, there are expatriates with resources and expertise who could also add to the firepower. Picking a few of them to set up an international advisory council with a fixed tenure as goodwill ambassadors and some tangible targets; I'm convinced that we have several million dollars worth of brand advertising available for free!
3. I make my next point not as a literal suggestion but to drive home a point. Why not poach Magnus Bocker, currently CEO of Singapore Exchange and previously at Nasdaq New York, to be CEO of the Dhaka Stock Exchange at the next changeover? Britain has just announced that the next governor of the Bank of England will be the current governor of the Bank of Canada! Explaining the decision, British Chancellor George Osborne said, “He is quite simply the best, most experienced and the most qualified person in the world to do the job”. In the same way that we hire a foreign coach for our cricket team, we should be comfortable making a handful of internationally high-profile appointments in key international-facing roles. It doesn't always work out but in most cases, our competitors have adopted this approach to combat issues of perception.
4. My fourth point is about financial literacy and awareness. Just over two weeks ago, I watched the family of Martin Luther King Jr inaugurate a training facility adjoining the Ebenezer church where the civil rights icon practiced as a preacher. Every Sunday, after prayers, there are lessons on finance at a retail level. I have well-educated friends and family in Bangladesh who have extremely low literacy when it comes to concepts of finance and investment. As a country, we are good at awareness campaigns when it comes to breastfeeding or sanitation. We should be able to translate that to financial education at least for those that seek to play in the stock markets. Markets contribute to efficiency precisely because they can be unforgiving. Not enough people may be aware of that.
5. When it comes to the design of rules and processes in a stock exchange, international investors look for three factors: consistency, transparency, and visibility. We are fortunate to have a last-mover advantage i.e virtually every mistake that can be made in this arena has already been made by someone somewhere. We need to be seen to have internalised those lessons. Most major portfolio managers have allocation models that prevent them from investing in countries that do not have water-tight conduits of investment, no matter how strong the fundamental story might be.
6. Now, Bangladesh is included in the “Next 11” set of countries because of its score in (a) macroeconomic stability, (b) political maturity, (c) openness of trade (d) investment policies, and (e) quality of education. In this grouping, we are in good company. My suggestion is to pick one or two say the Philippines and race against them. In recent months, Philippines have punched way above its weight in terms of inward investment, growth of capital markets and public finances. They have overtaken India as the largest cluster of call-centres and they have launched a “PPP Centre” which appears as one of the first results when you Google for “Public Private Partnership”. While we have seen the 'Walmart effect' of business moving from China to Bangladesh, they have also focused on value-add services such as delivering English lessons to Japanese housewives on Skype for example!
It doesn't have to be Philippines. My general message is to get a sparring partner and keep a comparative perspective on our progress.
7. My last point - let's go win some international awards. The hosts of this event, Finance Asia and Investor Asia, must have awards for “most improved” or “best governed” frontier market or something like that. We have won dozens of these in the social enterprise sector. I'm sure we can get more of them for the commercial sector. Each one of these will help our perception deficit and build momentum.

The writer is a banker and adjunct professor at the National University of Singapore and a young global leader at the World Economic Forum. These views are expressed in a strictly personal capacity.,/h5>

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