Foreign investors follow local investors In conversation with President, MCCI | The Daily Star
12:00 AM, March 11, 2015 / LAST MODIFIED: 04:46 PM, March 11, 2015

24th Anniversary of The Daily Star (Part 2)

Foreign investors follow local investors In conversation with President, MCCI

BUSINESSES have been affected most from the current turbulent political situation. Both the export and the domestic businesses have been passing through a difficult time.
Although the businessmen painted a brighter future with a relatively calm political situation in 2014, the damage started with New Year's in 2015. Now, every day the economy is bleeding from the political impasse. We caught up with Syed Nasim Manzur, President of the Metropolitan Chamber of Commerce and Industry (MCCI and leading exporter, about the politics, economy and the future of the business.
What is the outlook of the economy of the country in future?
Outlook of the economy is very perilous. Bangladesh is still recovering from the economic damage that took place in 2013. We are struggling to recover. 
Every bank has surplus money due to the lack of investment. More than 47 percent companies did not go for new investment in 2013-14 year. 
The overall investment has gone down. On the other hand, exports were in negative territory up to November last year.
The employment scenario has really deteriorated. Even one and half years ago, the company owners were hunting for workers. But now almost every factory in the industrial zone, i.e. Dhaka, Savar, Ashulia, Narayanganj and Chittagong, hang the 'no vacancy' signboard up front. The number of unemployed is increasing every day. The number of unemployed persons will keep increasing because entrepreneurs are not allocating money for new investment plants.
The main fact is that the confidence of the investors waned drastically due to the volatile political situation over the last two years. For example, the local hospitality or tourism sector has suffered seriously for the tensed political situation. Local tourists drive tourism, but people cannot travel from one place to another anymore. So the current political situation is taking the country to a long-term economic crisis.
There is also no good news for Bangladesh from outside. The Euro zone, Bangladesh's main export destination has been entering deflation as the nations are struggling to contain inflationary pressure. The Euro zone is in crisis now and if this continues, people will either reduce consumption or spend less.
60 percent of Bangladesh's exports, particularly garments, are destined to the Euro zone. Pressure will be felt by exporting countries like Bangladesh. Export to the US market, where Bangladesh ships more than USD 5.60 billion worth of goods in a year, is also declining in recent months. 
At the same time, the local currency appreciated against the greenbacks and Euro.  Even a few months ago, the exchange rates for Euro were BDT 110 and BDT 105, but it has declined to BDT 90 now. Similarly, the dollars also devalued against the local currency. The exchange rate is BDT 77, which was nearly BDT 80 a year ago. But, the cost of doing business has been increasing almost everyday for different reasons. 
The outlook for the economy in the coming days does not appear as optimistic as was depicted a few months ago.
What would be the determining factors for a brighter outlook of the economy? 
Declined petroleum price was good news for Bangladesh. But unfortunately, Bangladesh could not utilise the price opportunity due to the volatile domestic political situation. 
With the fall in prices of petroleum products, prices of other basic commodities have also started to decline. So the inflationary pressure will remain under control. The government should now think how to foster economic growth. 
Definitely, good governance and political stability are two major determining factors for brighter economic outlook. But Bangladesh is still struggling at basic governance. Another important determining factor is better infrastructure. 
The government should invest significantly towards better infrastructure, like on the Dhaka-Chittagong highway. Despite all odds, Bangladesh's economy has been growing over the years for its resilience. 
Will the country be able to achieve the targeted economic growth in this year? 
For the resilience of the economy, it is taken as granted that the economy will grow. But, the growth at the traditional 6 percent is not enough. If we want to create enough jobs, we should come out from the 6 percent economic growth trap. We need to grow at 10 percent to achieve the expected economic development.
With the current turmoil political situation, Bangladesh's economy will not grow at the government's expected level. The government has already started losing tax revenue earning due to the tense political situation. Now, the government will target slashing down the ADP (Annual Development Programme) allocation meet the expenditure. 
In the exports industry, Bangladesh has already started losing business in the EU. On the other hand, competing countries like Cambodia, Vietnam, India and even Pakistan have been performing well in major export destinations like the EU and US. Moreover, India in the process of signing the free trade agreement (FTA) with the EU, which is also a potential threat for Bangladesh's exports. 
Employment generation is one of the major factors for economic growth. What should the government do to create more employment at this moment? 
Job creation is definitely interlinked with the economy. Agriculture, SME and garments are the major sectors for employment. 
All the major sectors have been affected by the political unrest. In the services sector, the banking sector is suffering from having a lot of non-performing loans. People will not be able to repay the loans to the banks as their businesses have been hurt by the unrest. 
If the economy goes down, the companies will start reducing costs. Human cost is a major cost in any company. In such a situation, it will be really difficult to employ new people in the companies. 
What about investment? 
Investment is demand driven. Confidence plays a major role in investment plan. For attracting long-term investment, the political violence should be stopped immediately. 
The foreign investors follow the local investors. Due to the political crisis, the local investors are not confident enough to invest. In such a situation, Bangladesh cannot expect the flow of foreign investment. For example, a Japanese company with USD13 billion in turnover came to Dhaka in the last week of January, but they cannot leave the hotel to talk with potential local partners and chamber leaders. The officials of the Japanese company had to finally leave Bangladesh. If such a situation continues, the arrival of local and foreign investments will just be hampered and people will not be employed.
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The writer is Senior Staff Reporter for The Daily Star.

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