Foreign or local investment being made in the country is not satisfactory due to the discrimination in providing stimulation for the investors.According to sources, Bangladesh is trying to attract the foreigners by ensuring various facilities to invest here while different obstacles impede the domestic investment.  As a result, investment at the stipulated rate is not being made either by the local or the foreign investors.To encourage foreign investment in Bangladesh, the opportunity is ensured to take back cent percent capital with profit. Tax exemption is assured for five years if foreign investment is made in Dhaka and Chittagong and for seven years if it is done outside of these two districts. Various policy supports are guaranteed for foreign investors at the import-export level. For procuring machineries to set up new industry, depreciation facility is granted at the rate of 50 percent in first year and 30 percent in the second and third year. Duty-free import of machinery parts and separate bonded warehouse facilities are given if 80 percent of the commodities produced is exported. Besides, there are facilities for 90 percent loan against the L/Cs and borrowing from export promotion fund at a lower rate of interest.  The cent percent export-oriented industries are also allowed to float on the markets up to 20 percent of products at the same rate of duty. Cash incentives from 5 to 20 percent are being given for some specific items.But, according to entrepreneurs, the situation in case of the local businessmen is quite opposite. There is no tax exemption. Some 35 to 40 percent of the profit has to be paid as corporate tax. Business expansion or new investment is not possible on payment of such huge amount of tax. Although, there is cash incentive for some export-oriented sector, no such facility exists in the import-alternate commodity production sector.  Former finance advisor to the caretaker government Dr AB Mirza Azizul Islam said, “The scope of employment generation is created if investment is made in the country. The GDP growth also goes up if production increases. In every country, the policy of giving priority to the local investors is followed. Because, rise in local investment creates no risk while investment by the foreigners makes it risky. If the foreign investor withdraws his/her capital, disorder may erupt in the economy of the country.” FBCCI vice president and BGMEA president Shafiul Islam Mohiuddin emphasised resolving the problems of local investors instead of  attracting the foreign investors offering various incentives. He said, “We are achieving GDP growth at the rate of over six percent. Our economy is stable, yet investment is not being made. We have to ensure one stop service free of bribe and hassle. If the local investors are happy with making investment, staging road show for foreign investment will not be required any more.”Terming high interest rate of bank loan a major obstacle to investment, the executive director of Policy Research Institute Ahsan H Mansoor said, “The difference between loan and deposit in Bangladesh is six percent. This should be within two percent and not more than three percent under any circumstances. In the economic sector of Bangladesh, loan default, irregularity and political influence in allocation of loan are responsible for high rate of interest. And this has brought about a disaster in the investment environment. There is no alternative to bringing down the interest rate to one digit for attracting the investors.”

Commerce Minister Tofail Ahmed has said Bangladesh is interested to export quality products such as furniture, medicines, garments and food items to India’s Manipur and its adjoining regions.”Bangladesh has achieved a good position in trade across the world including India. If bilateral trade with Manipur is increased both Bangladesh and India will be benefitted,” said the commerce minister during a meeting with Manipur Chief Minister Okram Ibobi Singh at his office, according to information received here on Friday.Tofail Ahmed said India has offered Bangladesh duty and quota free market access for all products except drugs and arms to reduce the trade gap. But imposition of countervailing duties is hampering Bangladesh’s trade with India in some areas, he said and hoped that it would be possible to solve this issue through discussion.Manipur Chief Minister Okram Ibobi Singh said there is a huge demand of Bangladesh products in Manipur and if products are imported from Bangladesh the people of Manipur will get quality products. He said business people of the two countries will have to come forward in this regard.A Memorandum of Understanding (MoU) was signed between the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and Manipur Chamber aiming at increasing the trade between Bangladesh and India’s Manipur state.Minister for the Department of Commerce and Industries of the Manipur Government Govindas Konthoujam and FBCCI President Abdul Matlub Ahmed were present.

The Japan International Cooperation Agency (Jica) is providing soft loans at 0.01% for remediation of readymade garment factories, but the factory owners have to take that loan at 9% to 10% from the market. Out of this 10%, the Finance Ministry and Bangladesh Bank are making a profit of 5% and the rest goes to commercial banks. As of now, around $200m in funds are available for remediation purpose of garment factories. Out of the total funds, the IFC is providing $50m, the USAID $22m guarantee fund and Jica $13m. Europe-based AFD is also going to provide a 50 million euro fund by mid-2016. All these funds are provided at a rate of 0.01% to 1% but the ultimate clients, the factory owners, have to take the loan as high as 10% because of bureaucratic problems. Ambassadors of the US, UK, Netherlands, Canada and European Union had a meeting with secretaries of Foreign, Commerce, and Labour Ministries and expressed their displeasure about the issue. At the meeting, the ambassadors wanted to know why the rate was so high for the ultimate consumers when they were providing the soft loan so that the readymade garment industry in Bangladesh becomes competitive, said a source who attended the meeting.  He said the envoys expressed their views that the loan disbursement issue should not be considered from petty commercial point of view. Another official, who attended the meeting, said the government gave the excuse that due to legal barriers, they have to provide the soft loan at a high rate. Exchange rate fluctuation and bank rate are the main causes of providing the loans at a high rate, he said. The finance ministry gets the fund at less than 1% and transfers it to The Bangladesh Bank at 4%. The central bank provides the fund at 5% to commercial banks which ultimately lends it for 9% to 10% to factory owners. After the collapse of Rana Plaza in 2013, all stakeholders including the government, manufacturers, buyers, and development partners took the initiative to improve the safety of the workplace and ensure security of the workers. The RMG sector is the country’s biggest export earning sector with an annual export earning of about $30bn. About four million workers, mostly women, are employed in the sector.

The country’s trade deficit decreased slightly to $4.05 billion in the first eight months of the current financial year, 2015-16, compared to that of $4.06 billion in the same period of FY15 due to a decrease in import payments against higher export earnings. According to the latest Bangladesh Bank data, the trade deficit had risen by around 14.04 per cent in July-February of FY15 compared to that of $3.56 billion in the same period of FY14. A BB official said the country posted a record trade gap in the last financial year but the deficit decreased slightly in the first eight months of FY16 due to a drop in import payments.The deficit also decreased significantly in the first four months of FY16. The trade deficit had hit its all-time high at $9.91 billion in FY15.The trade gap, however, increased slightly between November and January of FY16, as the imports picked up during the period.The BB data showed that the export earnings registered a 7.81 per cent growth in the first eight months of FY16 compared with that of a 2.44 per cent growth in the same period of FY15.The export earnings stood at $21.57 billion in July-February of FY16 and it was $20.01 billion during the same period of FY15. The imports registered a 6.44 per cent growth in the first eight months of FY16 compared to that of around 4.06 per cent growth in the corresponding period of FY15.The import payments stood at $25.63 billion in July-February of FY16, which was $24.08 billion in the same period of FY15.A BB official told New Age on Thursday that the country’s businesspeople were not interested much in opening letters of credit to expand their businesses due to the ongoing political uncertainty. So, the trade gap decreased in the recent months, but it would not put much positive impact on the country’s macroeconomic situation, as the import of industrial raw materials did not increase much to match the size of the country’s industrial sector, he said.Political uncertainty put an adverse impact on the country’s imports, which contributed to squeezing of the trade gap, the official said. The investors and businesspeople are yet to regain their confidence to go for business expansion, and so the import financing by banks has remained dull in recent months, he said. The businessmen are still following a cautious policy in setting up new industrial units and expanding existing industrial infrastructure, as they think political unrest may return anytime soon, the BB official said. The BB data shows that the current account balance increased to $2.71 billion in the first eight months of FY16 against $2.19 billion during the same period one year ago. The contracted trade deficit mainly played a role in registering a surplus current account balance in the first eight months of FY16. The net foreign direct investment increased by 27.19 per cent to $1.45 billion in July-February from that of $1.14 billion in the same period of FY15. The financial account of the country’s balance of payments increased to $905 million in the first eight months of FY16 from $528 million during the same period of FY15. The financial account includes foreign direct investment, portfolio investment, and medium- and long-term loans. The country’s overall balance increased by 41.65 per cent to $3.14 billion in July-February of FY16 against $2.22 billion during the same period of FY15 due to a strong position in the current account balance.

Bangladesh Bank on Thursday demanded Tk 2,250 crore from the government as cash subsidy payable to merchandise exporters in the current fiscal year, after the government yesterday raised the subsidy for the two struggling sectors. The central bank in a letter to ministry of finance said the amount sought against 14 products – subsidised to stimulate export earnings in the country – needed to be released soon as demands from the targeted exporters had piled up. Of the total amount, Tk 1389.30 crore will be disbursed against demands made between January to March, while the rest for the final quarter of the current 2015-16 fiscal year, the letter elaborated. BB officials concerned said they, at the insistence of the finance ministry, on Wednesday raised the rates of export subsidy against three items, including for apparel products. ‘With the enhancement of subsidy as asked by the government, the amount of cash subsidy will increase by nearly Tk 260 crore for the current fiscal year,’ a senior BB official told New Age. ‘We could not release subsidy demand of Tk 1389.30 crore made by nearly 30 banks in favour of their exporter clients, due to unavailability of funds.’ The government on Wednesday increased cash subsidies for exporters of garments, leather products and frozen fish. The enhancement will be effective only for the whole of the current fiscal year, a circular of BB said. The cash subsidy for garment exporters to the EU market has been raised from two per cent to six percent and subsidy for leather goods enhanced to 15 per cent from the existing 12.5 per cent. The central bank also increased cash subsidies for frozen fish exporters from $3.79 to $4.98 for a pound of shrimp and from $1.1 to $1.97 for per pound of other fishes. The BB circular also included potato starch in the list of the agro-processing products entitled to cash subsidies. A senior finance ministry official said the extra Tk 80 crore will be spent against the enhanced incentive for leather goods and another Tk 174 crore for the RMG sector. The government decided to widen and boost stimulus in merchandising export to shore up export-oriented industries reeling from the Euro zone crisis, higher production costs and infrastructure deficiencies, the official added. The Export Promotion Bureau data shows RMG export value in Euro zone declined by 2.70 per cent in the first six months of the current fiscal year. From July 1, 2015, all categories of export-oriented RMG industries have been enjoying four per cent incentive, medium and small RMG units enjoy another four per cent incentive, and three per cent incentive has been applicable for export earnings to be generated from countries other than the US, Canada and EU markets.