Almost half of the foreign investment proposals registered with the Board of Investment (BoI) each year come to nothing, with experts blaming the government's poor negotiating skills and political unrest for the failure to capitalise on potential projects.

According to the Bangladesh Bank statistics, the FDI registration for FY06 was Tk US$ 1.34 billion for 130 projects while the actual investment was only $ 679 million.

"Although on paper the existing investment and trade related policies of the government and the incentive package for foreign investors are attractive, and macro-economic indicators are favourable, the inflow of FDI into the country remains much below the amount registered," Sharier Shahid, a senior executive of a joint venture company, said.

This is because of the mismatch between the written policies of the government and the realities on the ground at the implementation stage, the disturbing political and law and order situation, the absence of good governance, rampant corruption at almost all levels of the administration and judiciary, and the inadequate infrastructure, he added.

When asked, BoI Executive Chairman Moshtaq Uddin Ahmed said the situation is similar in all South Asian countries. He said that lack of capacity of the domestic partners of the potential foreign investors is the reason so many projects do not materialise.

He said local people with no business experience brought foreign investors in as their partners. In these cases the BoI did not allow them to go into business.

According to Abu Reza Khan, a BoI member, one of the main reasons behind the gap between the actual FDI figures and registration is the lack of follow-up with the investors after registration. He said the BoI recently appointed two officials to maintain contact with potential investors.

"As we seek foreign investment in our country so it is our responsibility to notify the investors about our incentives and to urge them continuously to invest in the country," Khan added.

Sources said in FY05, the actual FDI flow was $845 million against the registration of $ 3.5 billion investment proposals for 135 projects, and in FY04 the FDI flow was $460 million against the registration of $ 750 million for 120 projects.

Of late, some new factors like the dramatic rise of terrorism and religious militancy, coupled with procrastination on the part of the government in taking prompt decisions on FDI proposals, have added to the country's woes, a former president of Foreign Investors' Chamber of Commerce and Industry (Ficci), said

Such phenomenon sent wrong signals to prospective foreign investors and non-resident Bangladeshis, he added.

Dr Debapriya Bhattacharya, executive director, CPD, said investors explore three to four countries and switch to the destination which is competitively better for them. He alleged that the BoI count all proposals, even after signing an expression of interest with any investors, and this reflects a bullish trend of registration every year.

Ficci members suggested relaxation of the existing rules and regulation for FDI in the country. They also said the government should review the current FDI policy to woo more investment in basic industries such as steel and infrastructure.

For Bangladesh to catch up with rest of the world, and to achieve its millennium development objectives by 2015, the inflow of foreign direct investment (FDI) in larger volumes is critical due to the dearth of necessary domestic resources and technology.