Catalysing Change

Photo: Amdadul Huq/ Drik News

POVERTY reduction requires jobs, and productive jobs are created through investment. Unless the climate for investment is conducive, investors will not be forthcoming. This much we all understand.
But how do you bring about changes in the policies, laws, regulations and institutions that shape the investment climate? Experience shows that pious intentions and open-hearted pleas are not adequate. If you want to catalyse change, you have to do much more. Compared to some other subjects, such as natural resource exports, privatisation or import liberalisation, which often provoke controversy, investment climate improvement is something that many people seem to agree on. Yet, it has not proved easy to bring about the improvements in the business environment required to unleash the entrepreneurial potential of the nation and transform Bangladesh into a middle-income country. Nonetheless, people are trying and their experiences generate some useful lessons.
The prime responsibility for improving the investment climate lies with the government. It drafts the laws, formulates policies, rules and regulations, and carries out the public sector investment, especially in utilities and infrastructure, required for private investment to be productive. A pro-active government can do a lot to improve the investment climate of the country and do it fast. But that pro-activity is often missing in Bangladesh. In my own experience in dealing with the government the past few years, I have found at least four sets of contradictory dynamics in government that constrain efforts to improve the investment climate.
But there is hope. The same dynamics also create windows of opportunity. Those who want to catalyse change need to understand these dynamics and exploit the windows of opportunity.
There is widespread mistrust of the private sector among government officials. There is a common sentiment that the private sector is always looking for a quick buck and that business people would flout rules and regulations, and act against society's interest, unless the government constantly looks over their shoulders. Hence, there is a tendency to introduce new rules and regulations to "make the private sector behave." A large part of this negative sentiment is directed towards the big players.
At the same time, there is widespread recognition that the economy needs to be driven by the private sector and that the socialistic approaches of the past have not borne much fruit. There is quite a bit of faith in the small entrepreneurs players. This often leads to a paternalistic attitude in government officials who feel that the government needs to take care of the small players. But like over-indulgent parents, the government often ends up doing more harm than good through such misplaced paternalism.It is important to close the perception gap between government officials and the private sector. Catalysts who wish to bring about change will have to pay attention to this. There are a number of things that can be done, such as bringing the private and public sectors together whenever possible, ensuring the participation of the private sector even in programs primarily targeted at the government, advocating public-private partnerships and disseminating knowledge about what the private sector does and what problems it faces.

For the full version of this article please read this month's Forum, available free with The Daily Star on October 5.

Syed Akhtar Mahmood is with the International Finance Corporation.