Mr Kishore Kumer Basak on South Asian economic policies

Published in The Financial Express on Friday, 9 January 2014.

Economists show how to unlock huge uplift potential of SA
Intra-regional investment can greatly help

FE Report

South Asia holds huge potential of prospering through investment cooperation only if the governments devise proper policies and strategies to realize it, speakers at a meet in Dhaka said Friday.

They said the governments also have to provide appropriate facilities for investment-friendly environment for the entrepreneurs in the regions

“To realize these huge potentials, South Asian governments must devise policies and strategies in such a manner as would support the efforts and investments being made,” they said by a common voice in a working session at the three-day Bangladesh Economic Association 19th conference in the capital.

The session’s topic was ‘Globalization, Foreign Investment and Development’. Three papers were presented in the session, showing problems and prospects for trade, investment and development in the region.

‘Promotion of Investment Cooperation in South Asia: What is the Appropriate Framework?’ was presented by Dr Khondoker Golam Moazzem, ‘Investment Climate and Foreign Direct Investment: Comparing Bangladesh with Selected Countries in Asia’ and ‘Is the Low Wage Competitive Advantage for Attracting FDI?: An Economic Study’ by Sonjoy Chakraborty.

BEA vice-president Professor Hannana Begum presided over the session. Assistant secretary of BEA Professor Mozammel Hossain was present.

Kishore Kumar Basak, co-writer of ‘Promotion of Investment Cooperation in South Asia: What is the Appropriate Framework?’ presented their paper.

The keynote paper noted that in recent years, most South Asian nations are practicing more liberal and outward-looking economic policies rather than inward-looking and import-substituting economic policies.

“With an average of 6.0 per cent economic growth rate over the years and US$ 954 GDP per capita, South Asia has some unique features which make it distinct from other regions of the world,” he told the meet of economists.

He sees potential sectors in South Asia and East Asia wherein Bangladeshi entrepreneurs would be interested to invest.

“Bangladesh could invest in Yunnan’s hydropower projects and could re-export the generated electricity through ‘regional energy grid’ via Myanmar and India for the special economic zones,” he said in his tips for the trade that saps much of Bangladesh’s money and energy.

“Cross-border energy trade between Bangladesh and Myanmar would make significant contribution to enhancing regional trade and investment; in this context, development of regional energy grid and harmonization of energy pricing at regional level would be important.”

Sonjoy Chakraborty suggests Bangladesh should ensure healthy investment climate conducive to both traditional and non-traditional export sectors for attracting more foreign direct investment (FDI).

He said according to the Ease of Doing Business indicator, among the ten Asian countries concerned the position of Bangladesh is (134th)–just above the last one.

“Japan External Trade Organization (JETRO) survey reveals Bangladesh is the most cost-comparative advantageous country for operating business. Despite this advantageous situation, per-capita FDI is the second-lowest among the ten Asian countries,” he said.

He said policymakers should recognize the fact that the best evaluation of investment climate is country-specific assessment.

Sonjoy Chakraborty proposes that Bangladesh should develop its own indicators of business environment and investment climate, especially in the arena of governance indicator.

“Keeping aside the inter-country ranking, Bangladesh needs to develop a pragmatic way of studying investment-climate issues and taking the necessary corrective measures,” he said.

He suggested policymakers should be more concerned for the improvement of the governance indicator in the present situation rather than financial and other special incentives for attracting more inflow of FDI to Bangladesh.

He said inflow of FDI is low where wage rate is significantly low because low wage rate is the sign of low productivity.

On the other hand, when the wage rate of a country is significantly low, then there may have frequent labour unrest, huge unemployment and. As a result, it may create social and political instability.

“This political instability creates the uncertainty of political regime as well as uncertainty of economic policy, and for that reason the investors’ return of the capital becomes uncertain and then they hesitate to invest there. And, finally, we can see that the wage rate and inflow of FDI are directly related,” he observed about the inner-dynamics of economy.

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