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Factories moving from China: Possibilities for FDI in BD

Published : Tuesday, 11 August, 2020 at 12:00 AM  Count : 551
Anik Ahmed

Factories moving from China: Possibilities for FDI in BD

Factories moving from China: Possibilities for FDI in BD

Since the beginning of Trump administration the relation, especially trade relation, between the USA and China has been deteriorating. Due to sanctions and counter sanctions foreign investors are losing their interest in China. Corona pandemic has sparked a new phase of this trade war. Multinational corporations from the United States, Europe, and Japan have been setting up industries in China for the past three decades to produce low-cost products. As a result, China has become one of the leading countries in world economy very quickly. But the United States and its allies have been working hard to reduce China's production and export monopoly worldwide.

Donald Trump's administration has imposed an additional 25 per cent tariff charge on importing Chinese products in the US market already. Therefore various countries have taken the goal of reducing their dependency on China for security and strategic reasons. Many countries are using this Covid-19 crisis to remove industrial plants from there. New bases are being set up in South and South-east Asian countries including Vietnam, Thailand, Malaysia, Indonesia and India. In relocating factories, these multinational companies are mainly giving priority to the countries that are easy to invest in.

This could be a special opportunity for the economy of Bangladesh, which has been hit by the Corona pandemic severely. Bangladesh will benefit greatly if it can attract these multinationals for investment. But the question is will Bangladesh be able to take that opportunity properly? Foreign investment in Bangladesh has been stagnant for a long time. Drought of foreign investment can be cut by properly utilizing this opportunity. Economic activity around the world has been stagnated for the past seven months due to the outbreak of the Corona epidemic.

Like other countries of the world, the same situation is prevailing in Bangladesh. Production has declined in various industrial sectors. About one crore people have lost their jobs. The role of domestic and foreign investment is very important in the economic development of the country as well as in increasing the national income.

If foreign investment increases, new industries will emerge. Along with economic development, new jobs will be created. As a result, the country's economy will recover quickly after overcoming the loss of corona. One of the positive aspects of attracting investment is that there is relatively cheap labor in Bangladesh.

However, Bangladesh has always been neglected in terms of large foreign investment. There are a number of problems, including bureaucratic complexities and infrastructural weaknesses. Bangladesh ranks 168th out of 190 countries in the World Bank's Business Facilitation Index. In this case, Vietnam is in 60th place, Thailand is in 21st place and Indonesia is in 73rd place. Even Myanmar's position is three steps ahead of Bangladesh's, 175th. In terms of foreign investment, this ranking is one of the major setbacks of Bangladesh.

According to media reports, Bangladesh government is taking steps to remove these barriers and paving the way of foreign investment. In the case of foreign investment, 11 barriers have been identified by the government in bold. These include lack of incentives for corona virus relocated investments, signing of investment agreements with projects or other agencies without vetting from the National Board of Revenue, corporate tax inequality between domestic and foreign companies, different investment policies, image deficiency in abroad, tax and VAT complications related to investment in PPP etc.

Bangladesh needs foreign investment to strengthen the economy in a post-pandemic situation. So the existing obstacles must be removed as soon as possible. To attract foreign investment land can be provided at a nominal price for a certain period of time in a public economic zone. New economic zones can also be established if necessary. Diplomatic effort must be intensified related countries. The focus should be on infrastructure development, land registration facilitation, availability of electricity and giving some institutional benefits.

Bangladesh is an emerging economic power. The rapid economic growth of the last decade and the upcoming decisive transition from a least developed country to a middle-income country has given a new dimension to the country's economy. It is hoped that due to the stable political situation, Bangladesh will soon be able to overcome the economic crisis caused by the Corona epidemic and attract foreign investment. If Bangladesh can facilitate a better environment for the foreign investors, those are eager to relocate their industries from China to other places, the country will be industrially prosperous.
The writer is a student, Department of Law,
University of Rajshahi

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