Govt needs to play the long game in telcos’ audit dispute

When you want someone to put money in your project, what do you do? Well, you will try to highlight all the good things about your project and show the potential investors how their money will get the best return if they were to invest in your venture.

Unfortunately, the investment decision is not that straightforward; it has to cross a few more loops.

The potential investors would like to review your past record in handling investors. When a country tries to invite potential foreign investors to invest in the country, the same process applies at a national level.

Simply put, a country’s past record in dealing with foreign investors who have already been operating out of the country influence potential foreign investors.

When you consider that the foreign investors have plenty of options when it comes to investing their money, all the competing countries are trying to spruce up their image as a safe haven for foreign investment in every which way they can.

Bangladesh with a large population have for a long time grabbed the attention of foreign investors. But having a large population is not enough to entice foreign investment; one only needs to turn to India to see why.

It has come up in recent media reports that India is planning to introduce new law to protect foreign investment. You know why?

According to the Indian finance ministry officials, the new law in the making will try to address the concerns the foreign investors have with regards to enforcement of contracts and speedy dispute resolution.

India is currently entangled in more than 20 overseas arbitration cases -- the most against any country -- brought by companies including Vodafone, Deutsche Telekom and Nissan Motor Co for disputes over retrospective tax claims and breach of contracts.

If India loses these cases, it could end up paying billions of dollars in damages. When you consider the poor shape of the Indian economy, you can see where the motivation is coming from for introducing such a law.

In comparison, one would have to say that Bangladesh is far ahead, as the country had enacted a specific law, named, Foreign Investment Protection Act, way back in 1980.

However, looking at the way the country has been dealing with the two leading mobile phone operators, Grameenphone and Robi, one may feel that Bangladesh has not been living up to the spirit of the law.

I think we need to put things into perspective when we observe the sorry state of affairs in the country’s telecom sector.

Commercial disputes between the government and foreign investors are a common thing across the world.

Just because it puts these two entities against each other doesn’t in either way indicate one’s culpability. Either party could be at fault; no party enjoys a lower threshold when it comes to adherence to the rule of law.

Settling disputes out of the court through arbitration makes sense and the Bangladesh government rightly encourages the disputing parties to explore this option.

Hence, it was baffling to see the telecom regulator turn down the mobile operators’ offer of arbitration to settle the audit claim dispute. The regulator cited that the telecom act does not support arbitration. Is it true?

I leave it to legal experts to make a judgement on that, but even if it was to be the case, don’t you think the telecom act was failing the country in protecting foreign investment?

I think we need to closely look at the telecom act to see if it is in sync with the Foreign Investment Protection Act.

Anyways, it was very encouraging to see that Robi came forward to break the stalemate in the telecom sector by making the payment of the first installment as ordered by the High Court.

I sincerely hope that this will pave the way for the resumption of investment in the telecom sector by this leading foreign investor. Likewise, I would hope that Grameenphone also follows the court order and resumes investment.

I understand that the orders passed down by the High Court so far only deals with the immediate resumption of investment; our legal system is yet to review the audit claims in its entirety. I hope both parties would feel that justice has been served when the final ruling is made.

However, if the foreign investors do not feel that justice is what they received and takes the government to international arbitration, the entire country’s reputation to host foreign investment will be at stake.

I sincerely hope that our government will win their battle in the international court too if it had to defend its position there.

But if it were to lose, the country will find it difficult to make the next investment pitch in front of foreign investors.

The author is the former president of Foreign Investors’ Chamber of Commerce and Industry and Metropolitan Chamber of Commerce and Industry