Role of IPAs in Attracting More FDI

Md. Sayful Islam

22 May, 2021 12:00 AM printer

Role of IPAs in Attracting More FDI

Md. Sayful Islam

Investment Promotion Agencies (IPAs) are mandated to serve the investors for fostering economic growth and development of the country through cooperation with other government stakeholders.There are four Investment Promotion Agencies (IPAs) in Bangladesh to promote domestic and foreign investment, such as Bangladesh Investment Development Authority (BIDA), Bangladesh Economic Zones Authority (BEZA), Bangladesh Export Processing Zone Authority (BEPZA) and Bangladesh Hi-Tech Park Authority (BHTPA). BEZA is working to establish approximately 100 Economic Zones (EZs) throughout the country. BEPZA promotes investments in Export Processing Zones (EPZs) and there are currently eight EPZs in the country. Several Hi-Tech Parks have been established across the country under the supervision of the BHTPA. BIDA works for investmentat any location outside of BEZA, BEPZA and BHPTA.

It is pertinent to note that IPAs in the developing world have a difficult time performing a combination of specific mandates to promote investment. Moreover, focusing only on the priorities and investor types which an IPA is appropriately positioned to lead on and keep in mind its impact indicators and strategies for the specific investments through non-promotionalactivities, such as policy making, administering One Stop Services and incentives. In the contrary, some strategies will be formulated for investment promotion in terms of foreign investor-servicing activities described as some form of investor-targeting, project-specific facilitation, image-building, monitoring and evaluation, aftercare service, or foreign investor driving linkages which make the country a more attractive investment destination.

In addition, Bangladesh progresses fast towards achieving a middle-income status by 2024 and aims to be a high-income economy by 2041. The most significant contributor to the growth is adequate and consistently-growing investment in both public and private sectors. Bangladesh’s national plans put higher emphasis on attracting private investment and supporting industrial diversification. The country also targets for more FDI to enhance capital, transfer technology and knowledge, participate in global value chain and generate more employments. Domestic and foreign investments havesubstantially different impacts on an economy and Bangladesh needs both. While all successful companies create jobs and pay taxes, foreign firms can have a positive impact on sectors in a different way. Foreign companies often look at opportunities from a more global perspective and can bring capital, technology, market access and skills together in a way that will open new sectors and opportunities. This in turn can impact the domestic sector through backwards linkages and local service provision. In Bangladesh, the importance of domestic investors stands out further than in many other countries. But even these successful entrepreneurs also require support and attention from IPAs in a manner similar to the needs of international investors.

Hence, the essential elements of investment promotion strategy should be fixed up to promote local and foreign investment. Target impacts and indicators are to identify the potential investors with the right profile and characteristicssuch as new investor vs. established investor, investor-conceived project vs. government-conceived project, wholly foreign-owned vs. public-private partnership, and wholly foreign vs. domestic-foreign joint venture. The IPA works to collect data to identify potential investors include business chambers of commerce, trade associations, foreign embassies and online sources. However, the successful IPAs also subscribe to formal international databases to help identify and screen potential targeted companies.Once identified the role of the IPA is to contact and qualify these target companies. Where several targets are located in the same country, sales missions can also be effective to make it easier. Some IPAs should have their own offices in high potential target markets. Otherwise, direct contact via internet, phone and through intermediaries such as embassies or sales agents can also work.

It should be ensured that the business location served by the IPA is seen in a positive light for each type of target sector, subsector, business activities which are expected to yield the target impacts and which are adequately internationally competitive for foreign direct investment. This requires a good understanding of modern media techniques including social media as well as knowledge of the strengths and weaknesses of the location compared to competitors.

Another important component is that image building and outreach generate contacts from investors either in the form of an information enquiry or a request for a proposal on specific mobile investment project for which the location can compete. This involves providing tailored information and organizing visits and meetings with key stakeholders to demonstrate that the location can meet the specific needs of the investors.

Furthermore, Monitoring and Evaluation Compliance wing of the IPA will monitor continuously the registered investment projects to track investment activities in terms of investment volume and employment creation and identify the projects which are confronting any difficulties and constraints on implementation. IPAs also work with established investors in solving operational issues and fostering their expansion through aftercare services and assist their expansion with view to maximizing their contributions for economic development.

It is pertinent to note that an IPA speaks the language of business as the friend of business inside government.  But at the same time, it represents the interests and policies of the state in relation to investors. It has a private sector culture and unlike most government departments rewards staff for risk taking and entrepreneurial approaches to problem solving so that actions speak louder than words. It does however require that the IPA contain a special blend of skills and experience from both public and private sectors.

Therefore, the key factors include access to land, infrastructure, skills, operating costs and of course the tax regime and incentives should be competitive. Effective IPAs have up-to-date information about all relevant factor conditions at their fingertips. Thus, they often become an important source of information and references for other public and private bodies. While IPAs are not taking the lead on reform, they can help test the solutions with those stakeholders likely to be most impacted. However, because of its role inside the private sector the IPA has a special opportunity to help government with a key task of making priority sectors more attractive to investors through removal of constraints to investment through implementing plans for ecosystem development or regulatory reform. Government institutions including IPAs, Ministries, PPP Authority, SEZs and SEM development agencies, among others, are most appropriately positioned to lead on promotion and facilitation of the specific project.

 

The Writer is Law Officer, Bangladesh Investment Development Authority under Prime Minister Office.

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