Published: Wednesday, March 13, 2013

Energy sector requires heavy FDI infusion

Lack of power impedes economic growth

Despite having one of the most liberal investment regimes in the region, Bangladesh has failed to attract serious foreign direct investment in the cash-starved energy sector. From the data available, investments in the gas and energy sector as a whole stood at approximately US$2.248 billion, a mere fraction of the cash infusion needed to bring the sector up to speed to meet the economy’s needs.
There is no denying the fact that without sufficient supplies of gas and electricity, industrial development is not possible. Unless policymakers can ensure coherent policy that will ensure security of investment to potential foreign investors, the dismal inflow of FDI is likely to continue. Several reputed financial institutions like Goldman Sachs have highlighted the potential of Bangladesh to be part of the “Next 11” economies for the world to watch. But in every survey report published nationally or internationally, one of the major impediments highlighted has been ‘lack of power’.
Again, the pricing regime offered by the government-run institutions for foreign oil and gas companies is not considered competitive enough by international standards. This will have to be looked into if Bangladesh is serious about attracting international companies to invest in drilling and exploration  all of which are hugely capital and technology-intensive in nature. Apart from these the legendary bureaucratic red tape that the government machinery suffers from increase the “cost of doing business” for interested foreign and local companies alike.
The country needs more FDI in energy for economic growth and ensuring energy security. Unless the government makes serious effort to tackle governance issues, particularly insufficient rules and regulations, and a more comprehensive and investment friendly policy, FDI inflow could remain largely stagnant at present levels.