Bangladesh lags behind Vietnam in reforms to attract FDI
Massive reforms and opening up of economic policies have helped Vietnam reach the current stage of development as Bangladesh still lags behind in these areas and has failed to keep pace with Vietnam’s development, said analysts.
For example, Vietnam adopted the Doimoi, an economic policy renewal program in the 1980s, brought about massive reform of turned economic policies and attracted many foreign direct investments (FDI), which ultimately made Vietnam a model of FDI destination, they said.
Even though the economic position of Bangladesh and Vietnam were similar even in 1990, Vietnam has achieved commendable success in many areas, but Bangladesh still lags behind.
For example, exports from Bangladesh and Vietnam hovered around $ 5 billion in the 1990s, but last year the figure stood at nearly $ 38.75 billion for Bangladesh and Vietnam, it’s over $ 280 billion.
Vietnam could make such a big difference in just 30 years because of its openness in economic and political policies, they added.
A minister, economists, trade agency executives and businessmen made the comments during a webinar on “Vietnam’s Superb Export Performance: Lessons for Bangladesh” hosted by the Policy Research Institute (PRI) from Bangladesh on September 17.
Zaidi Sattar, PRI president, moderated the discussion.
In his opening speech, Sadiq Ahmed, Vice President of the PRI, said that Vietnam had taken strong steps from the early stages to stabilize the macroeconomy and had taken steps to preserve macroeconomic stability at all stages of the process. of development.
Tax revenue as a percentage of gross domestic product (GDP) is around 9 percent of GDP in Bangladesh, one of the weakest fiscal performance in the world, compared to 26 percent of GDP in Vietnam, Ahmed said, adding that Vietnam also maintained a flexible exchange rate and became strong in the global value chain.
Vietnam has smartly reformed the investment law and adopted strategic trade policies, which have helped Vietnam attract FDI, said Mustafizur Rahman, distinguished member of the Center for Policy Dialogue (CPD), a private think tank.
Smart and strategic trade policy has also helped to secure a favorable tariff regime for Vietnam on foreign trade.
For example, Vietnam’s most-favored nation (MFN) tariff treatment is 11.09% on average, while Bangladesh’s MFN tariff is high in different countries.
Citing examples from Samsung and Youngone, Rehman Sobhan, Chairman of CPD, also said that the ease of doing business in Bangladesh is still a major factor in attracting FDI.
South Korean mobile tech giant Samsung wanted to invest in Bangladesh in 1996 and another South Korean conglomerate Youngone Corporation, which has large companies in the country, negotiated to bring Samsung to Bangladesh.
Finally, Samsung did not come here because Youngone was unable to cede land in its Export Processing Zone (EPZ) to Chattogram due to some land disputes.
Samsung established a factory in Vietnam and Bangladesh lost the opportunity to host the global electricity company, Sobhan also said.
Why did this happen in Bangladesh, he asked.
He also asked why diversification had not taken place in clothing items in Bangladesh even after the country took a long time to tap more market for the clothing trade.
Syed Nasim Manzur, Managing Director of Apex Footwear Ltd, a leading footwear exporter and local seller, said currently Vietnam is the second largest footwear exporter in the world with $ 22.07 billion in footwear export last year while Bangladesh’s position in the world’s footwear export is 17th with the export of just over $ 1 billion last year.
Manzur, also a former president of the Metropolitan Chamber of Commerce and Industry (MCCI), said Bangladesh needs FDI beyond the dollar, as many world-famous investors have chosen Vietnam as their destination. investment because of its good business climate and openness in trade and economic policies.
He also said that better ease of doing business, better connectivity, better exchange rate, better tariff regime and better customs policies have helped Vietnam attract FDI while Bangladesh cannot be so. performing in these areas.
For example, he said the average time for goods clearance in Vietnam is 2-3 days while in Bangladesh the average time for goods clearance is 2-3 weeks.
Rubana Huq, former president of the Bangladesh Garment Manufacturers and Exporters Association, said productivity in the manufacturing sector needs to be improved.
Huq said Bangladesh has opportunities even in the clothing sector, such as polyester staple fibers. The continuation of the policy is important for the country, she said, adding that light engineering is another potential sector for the country.
Mr. Syeduzzaman, former finance minister, said Vietnam is performing well not only in product manufacturing but also in agricultural and engineering products.
Vietnam is the world’s second largest exporter of coffee after Brazil and also a very strong country in the export of machinery and steel.
Free Trade Agreements (FTAs) have also played a very important role in Vietnam’s envious economic growth. Vietnam is a member of the Association of Southeast Asian Nations (ASEAN) and has already signed the FTA with the European Union (EU), which will soon enter into force.
Vietnam’s accession to the World Trade Organization (WTO) in 2007 also helped Vietnam open up its economy and trade, he said.
Nihad Kabir, President of MCCI, said: “We should ask foreign investors why they are leaving Bangladesh and what their problems are. If we don’t ask people what their problems are, then how are we going to contact them, ”she asked.
She also asked where is the fear of signing FTAs with Bangladesh’s major trading partners. It also shed light on the pathological state of the foreign currency exchange rate in business and the poor skills of university graduates.
Nazneen Ahmed, country economist in the United Nations Development Program (UNDP) office in Bangladesh, said the warm foreign relations with different countries have also helped Vietnam attract FDI.
Apart from trade policies, Bangladesh needs to initiate a very warm foreign relationship focused mainly on economic diplomacy.
Mr Masrur Reaz, chairman of the Policy Exchange of Bangladesh, another private think tank, said it was high time to develop sectors other than clothing to create more jobs for the unemployed.
He also said that Bangladesh has the potential to export electronic and mechanical items. Vietnam will enjoy more trade advantages once the FTA with the EU enters into force, he added.
Rizwan Rahman, chairman of the Dhaka Chamber of Commerce and Industry, stressed the need to improve warehouses, customs and port facilities to further facilitate business.
Planning Minister MA Mannan said political culture and the pursuit of politics in Vietnam played a vital role for development. After a few wars, Vietnam focused on trade and economic development, Mannan said.