Vol. 5 Num 568 Sat. December 31, 2005  

Investment likely to slow down in 2006

Investment in the country is likely to slow down in the coming year as prospective investors would prefer to see how political situation develop ahead of the next general election.

"Businesspeople feel reluctant to go for new investment before any general election," Board of Investment (BoI) Executive Chairman Mahmudur Rahman, a business executive turned policy maker, told the news agency on the country's investment prospect in 2006.

"The present upward trend of investment might slow down in the coming days as the country is heading for a general election," said Rahman, who is also the adviser to the Ministry of Energy and Mineral Resources.

"Normally businesspersons prefer to wait for the next government and then take decision on investment," he said.

He also suggested that the trend in investment would continue to go up if there is no major political turmoil before the election.

Rahman claimed that the country has attained 228 percent investment growth in last six months of the previous fiscal year (January-June, 2005). "This is the highest growth in the investment history of Bangladesh," he said.

The BoI chief cited Bangladesh Bank figures that said the country received US$ 553 million in investment during the period. "This huge volume of investment took place despite terrorism and bomb blasts," he added.

He said a strong confidence has been created among foreign investors about the country's economic strength that resulted in the investment growth.

Economist Dr Ananya Raihan does not see any major shock in the investment scenario in the short term, but apprehended that the new entrepreneurs would not be willing to come up for investment in the wake of political upheaval.

He, however, said seasoned businessmen, who showed their resilience to cope with even 300 days of hartal, are unlikely to remain idle as they would try to capitalise the opportunities being created by the gradual opening up of international market with preferences for countries like Bangladesh.

BoI figures say entrepreneurs registered investment proposal worth US$ 13 billion in the first five months of the current fiscal (2005-06), including US$ 12 billion in foreign investment.

The investment proposal in 2004-05 fiscal was worth US$ 3.2 billion against a figure of US$ 2.8 billion in 2003-04.

There was a 50 percent growth of inflow of foreign direct investment (FDI) in 2004.

According to the 4th FDI Inflow Survey Report of the BoI, the investment inflow was 10 percent higher than the strategic FDI target set by the BOI under its Mid-term Strategic Plan 2003-06. The target for the year 2004 was US$ 600 million.

Among the three main components, re-investment accounts for the highest share (47.7 percent) of the total FDI inflow followed by equity (46.5 percent) and intra-company borrowings (5.8 percent).

The highest FDI came for telecommunication sector in 2004, followed by manufacturing, energy and power. The telecommunication sector got 36 percent investment while the percentage is 31 for manufacturing, 20 for energy and power and 13 for other sectors.