Ambassador Faruq Sobhan also says Bangladeshi diplomats must pursue economic interests in a highly competitive global environment
By Khawaza Main Uddin and Ahmed Noushad
The country can take its Gross Domestic Product (GDP) growth to 10% from the current level of 6%, if a number of barriers are removed and congenial business environment is created, says Ambassador Faruq Sobhan, former Executive Chairman of Board of Investment.
‘Yes, opportunities are there, but there are challenges also which we need to address,’ he told ICE Business Times in an exclusive interview. Sobhan, also a former foreign secretary and now President of Bangladesh Enterprise Institute, emphasised the need for political stability for the sake of economic stability.
He touched on a wide range of issues of business and investment, corporate governance, economic diplomacy and the potentials of the blue economy:
How do you look at Bangladesh’s development potentials – under-performing, exaggerated, yet to be properly defined, or how to paint an accurate picture?
In my view, Bangladesh has enormous potentials in terms of growth and per-capita income. I think we can aspire to achieve middle income status by 2021, and take our GDP (Gross Domestic Product) growth rate from 6% to 10%. Needless to say, we need to do a number of things in order to achieve this. We need to improve the investment climate, we need to improve the quality of infrastructure, we need a deep sea port, we need to improve connectivity with all the neighbouring countries, we need to intensify our economic diplomacy to attract more foreign direct investment, we need to diversify our exports, we need to be more competitive, and we need to improve efficiency of the government’s delivery system, we need a highly trained and motivated merit-oriented bureaucracy which can deliver.
If we can address these requirements, along with ensuring the political stability, then definitely we can achieve the middle income status. So it all has got to do with our ability to implement. I think we need a deep sea port urgently, we need an 8-lane, not a 4-lane highway connecting Dhaka and Chittagong; we need to improve the road network system throughout the country. We need immediate improvements in power and energy supply situation, because if we are to fulfill the targets that are critical to achieving the middle income status, we can’t do it without adding another 20,000 megawatt of electricity. So how will we do this? What is going to be the source of energy? Is it going to be through improved exploration activities? Is it through finding more gas fields — off-shore and on-shore? Is it through development of our own coal fields? Or is it through importing coals and other fuels, such as diesel and furnace oil? All these key issues, we need to look into, alongside our monetary and fiscal policy, our banking system, our interest rates, and all that comes into play.
What is your assessment of the current business and investment climate in the country? How far is it congenial for new entrepreneurs or foreign investors to take decisions?
The answer lies in examining and scrutinising how much investment we have been able to attract, both foreign and domestic. We should be attracting much more investment if we are to achieve the growth rate of 8-10%. The investment climate definitely needs to be improved, particularly in terms of foreign investment. There is a stock of 14 special economic zones, which will include three country-specific zones for India China and Japan. But my question is: What happened to the Korean Export Processing Zone, which has been hanging for 20 years. Why can’t the government operationalise the Korean Export Processing Zone, and is it realistic to expect that we can see these other zones operational unless we demonstrate that we can do it in the case of Korean Export Processing Zone? And why is it that a country like Myanmar is attracting almost 10 times as much foreign investment as Bangladesh (attracts)? We should try and answer this question. Fifteen years ago we were ahead of Vietnam; today Vietnam is far ahead of us, it is attracting 20 times as much foreign investment as Bangladesh. So are we now going to be in a situation where today we are well ahead of Burma, but tomorrow we will find that Burma is well ahead of Bangladesh? So we need to scrutinise an answer, why we are not able to attract more foreign investment. If we look at the picture of foreign investment in the country, most of the foreign investment in the last 5 to 10 years has gone to the telecom sector, some investment is now coming to the power and energy sector. During my tenure as executive chairman of the BOI, from 1997 to 1999, most of the investments were made in the energy sector, particularly for oil and gas exploration. But in the last 15 years there has been hardly any exploration. From being a country that was thinking of exporting gas or we have been told that we have enough surplus to export gas, is now running out of gas because of the lack of exploration. We need to sit down and try answering these questions.
How could the Bangladeshi business entities overcome some barriers to doing business and create opportunities for them and for the society? Do you notice and foresee any transformation in the pattern of ownership and operation of corporate/business houses and family-owned businesses?
Yes. In many family-owned businesses, the second generation has taken over charge. Most of the second generation business leaders have been foreign-educated and foreign-trained. This is positive because they are bringing in new ideas, and I would say, better understanding of global business environment. So I have great hopes and expectation that this new generation of business leaders will give importance to professional management and training, and will run their business houses in a very professional manner. And that they will give importance to corporate governance, they will have strong bonds, which will provide strong leadership, and they will hire the best management. And yes, I am not saying that we should not see that the second or third generation play an important role, but we have to make sure that they know the business, and conduct themselves professionally and apply best business practices to help their businesses grow.
Where does the public sector need to put emphasis on, in terms of regulation and also make investments for facilitating the growth of the private businesses to accelerate national development?
We should recognise this, that one of the singular weakness of the Bangladesh economy has been the public sector. There are hardly any public enterprises that are run professionally, without political interference. If we look at our state-owned banks, on an average the non-performing loans would be in an excess of 30%, which in foreign countries would have the banks declared bankrupt. If you have political interference, if you do not have good boards where there is leadership, and where you do not expect any interference and your books can be scritinised transparently, then you can have performance. And frankly, I do not see such institutions. Many of them have an excess of employment on political considerations; in many of the state-owned banks, and with one scandal after another, what has been the accountability of such cases? My view has always been that you cannot expect the private sector to conduct itself professionally, if you cannot do the same in the case of the public sector. There can be many reasons for our high interest rates, which today imposes a big burden on the growth of the economy, the private sector, and the investment. We need to understand why we have such high interest rates. When we compare ourselves to the neighbouring countries, we are the only country in this neighbourhood where we have double digit interest rate; all the others have been able to bring the interest rates down to single digit. One reason is because of the fact that we have to subsidise our public sector, and in a sense, the whole country is bearing the burden of subsidising the public sector. So we need much greater levels of efficiency, we need to bring down the interest rates, and that is the way we can attract more investments and more growth.
Would you please share your thoughts of how Bangladesh can benefit from the concept of the Blue Economy, pointing out some of the areas to focus on and steps to be taken for the purpose?
I think this provides us with enormous opportunities, but here again what is very important in developing the concept of blue economy, is to look at best practices, to look at how we can work best with our neighbours, in exploiting the opportunities. Probably the most important aspect now in this is going to be the issue of exploiting the opportunities both in terms of fisheries and oil and gas within the Exclusive Economic Zone that has fallen to Bangladesh. We definitely have the opportunity to find gas and oil, Myanmar, and India have found it, and we found it earlier. If we can attract sufficient invest interest of major oil and gas companies, we will also be able to find oil and gas in large quantities. According to some estimates we probably have 200 TCFs (trillion cubic feet) of gas offshore. This can solve all our energy problems. But we also need to simultaneously address the maritime security; we need to look at how we need to expand our fisheries and fishing fleets. The blue economy does provide us with an opportunity.
Where does the country stand in terms of regional cooperation and connectivity? Do you believe Bangladesh can emerge as a building bridge between SAARC and ASEAN blocs in the foreseeable future? Why and how or not?
I believe that Bangladesh should emerge as a bridge between SAARC and ASEAN, but this too needs a lot of hard work and active diplomacy from our part, because it is not only SAARC and ASEAN, we are in a sense can also be a bridge or a hub with SAARC on one side and ASEAN on the other side, and China sitting on top, and then we. As we are at the opening of Bay of Bengal, it gives us an excellent strategic location, so whether it is BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) or SAARC (South Asian Association for Regional Cooperation) or the BICM (Bangladesh, India, China and Myanmar) Corridor, or the growth quadrangle linking us to Nepal, Bhutan, and the north-east India, these all are building blocks where we need to focus on the issue of connectivity; we need to focus on creating the institutional mechanisms that will bring this organisations to life. We have a SAARC summit in few days from now, and I hope this summit would provide a big push. We also have seen that new Indian prime minister, Mr. Modi is showing a lot of interest in reaching out to his neighbours, and we hope that he will take SAARC seriously and invest it with the kind of resources and authority that can bring life to SAARC. SAARC has not realised its potentials yet, one important reason being the problems between India and Pakistan, so this is an issue that needs to be resolved, simultaneously we know that there are opportunities and challenges when India’s relation with China is so far concerned. But we see China as a country today that has the resources and has the potential to play a major role in helping South Asia develop its infrastructures. We know that the multilateral financial institutions, the World Bank, the ADB, they are all very keen to finance and support a whole range of infrastructure projects from hydro-power to road and rail connectivity, these are all absolutely essential in terms of moving towards economic integration, and moving towards South Asian economic union, which I hope is something we can all aspire to and indeed can achieve. But it needs not simply political-will at the top, it also needs the resources, the mechanism, and the people who can bring life into these regional bodies.
As a former Foreign Secretary and ex-Executive Chairman of Board of Investment, what do you think of the economic diplomacy? Could you please define a few components and focal points of it that might serve best the national interests?
We have for a long time talked about serving as a bridge between SAARC and ASEAN, one very important feature in this wheel-cost is the relation with Myanmar. We need to resolve whatever outstanding issues and problems there is with Myanmar, because they are also an important link to ASEAN as well as within the BICM corridor linking Bangladesh, China, India, and Myanmar together, and they are also very important players in BIMSTEC. So the relationship between Bangladesh and Myanmar is very important and critical. And all of this requires a very deft handling of our foreign policy. We need very good professional people running our foreign policy; we need good professional ambassadors who have the ability to take this whole agenda forward. And yes, we have given a lot of lip-service to economic diplomacy, but I think we now need to move from lip-servicing to actually doing things on ground. We need better coordination, we need to see adequate training, and we need to increase the recruitment process. You can’t do diplomacy on the cheap, you need good people, you need to attract the best and the brightest, because we are in a highly competitive environment, and I believe our diplomats have a big role to play, whether it is in attracting foreign investment, or in promoting our exports, or whether it is finding employment opportunities for our people. Foreign policy and foreign relations of Bangladesh need to be geared to achieving these objectives. We have some success stories, but cannot afford to relax, we need to move forward and build on all the advantages that I think are available to Bangladesh by virtue of its geographic location. Whether it is with deep sea port, or integrating road and railway systems with other ASEAN and other SAARC countries and China, this requires huge investments in improving our infrastructure.
In a densely populated country like Bangladesh, which of the two paths the policymakers need to follow – pursuing development with low-skilled manpower, or switching to high-skilled and innovative human resources for the next stage of development?
I must agree that one of our key strengths is the fact that we have a young population; we have therefore the human resources to make Bangladesh a major economic power, but we need to impart training. We have a lot of training institutions, but the quality of our training needs a lot more improvement. So we need to invest in education and skills development, we need some high quality institutions for skills development, because in the past, we were able to send our unskilled workers and semi-skilled workers to the Middle East and to other parts of the world, but I think it is very clear that in the coming years, there will only be a market for skilled workers. And we need to create the infrastructure and the institutions to create the skills that will be necessary to help this youth bulge to become a highly trained working force. So to conclude I would say, we have the huge opportunities available to Bangladesh, but it requires huge investments in infrastructure, we need very efficient bureaucracy, we need good training establishments, we need coordination, we need to see a harmonious relationship between different stakeholders in the country, and we need political stability, because political stability is also linked to economic stability. And that is the key requirement in order to attract foreign investment. So yes, opportunities are there, but there are challenges also which we need to address.