‘Dhaka being named the most expensive South Asian city for internationals does not bode well for business’

The Business Standard: Dhaka was named the most expensive city in South Asia for international employees in the Mercer Cost of Living Survey 2021. Do you think this can have an impact on our ability to attract foreign investment?

Mustafizur Rahman: The higher the cost of living in a city, the less likely foreign nationals are to invest there. Obviously, the fact that Dhaka has been named the most expensive city in South Asia for international clients does not bode well for business. Foreign nationals who were looking forward to doing business in our country will now be discouraged.

Dhaka costlier than Washington for expats, costliest in S Asia

There are numerous reasons why the city is so expensive. Most notably, when compared to other cities with better business infrastructure, the price of land and real estate is unreasonably high, which is reflected in the rent people pay to live here.

Dhaka is just as expensive for locals as it is for visitors from other countries. Thus, this high cost is a significant impediment to our own investors gaining a competitive advantage in the global context.

TBS: While on one hand we are one of the most expensive cities, on the other hand we remain one of the most unlivable cities in the world. Dhaka was ranked 137th out of 140 cities in the Economist Intelligence Unit's Global Liveability Index this year.

Mustafizur Rahman: In Dhaka, issues such as traffic jams, water clogging during the rainy season, and pollution make life much more difficult.

This obviously has a negative impact because not many investors and businessmen will be willing to go through all of this while also bearing the burden of paying an unreasonably high living cost.

Several infrastructure projects are being built, which is adding fuel to the fire. Hopefully, once these are completed, the high living costs will be justified due to the improvement in overall connectivity.

There are numerous reasons why the city is so expensive. Most notably, when compared to other cities with better business infrastructure, the price of land and real estate is unreasonably high, which is reflected in the rent people pay to live here.

Professor Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue

However, in order to attract investors and businessmen, we must pay equal attention to the factors included in the liveability index such as stability, healthcare, culture and environment, and education.

TBS: It is not just the city that remains unattractive to investors, but a host of other issues plague our ability to improve our FDI. Bangladesh was ranked 168th out of 190 in the World Bank (WB) Ease of Doing Business 2020 index. What can be done to improve our position in this regard?

Mustafizur Rahman: In this context, it is worth noting that Bangladesh was ranked 176th out of 190 countries in 2019. Despite the fact that our position has improved significantly in a year, we remain far from a respectable position that will attract investors and businessmen.

Some steps are being taken in our country, which will help us in improving our ranking in the near future. However, as long as we are unable to digitise key areas and expedite the process of obtaining permission, we will not make significant progress in terms of business, trade, and investment.

In terms of obtaining permission, some countries use the "silence is acceptance" method, in which permission is assumed to have been granted if it is not granted within a certain period of time. It's something we can think about.

The enactment of the One Stop Service Act, in my opinion, is a commendable move by the government, as it establishes, among other things, a time frame within which businesses must be provided with electricity and gas.

Thus, if properly implemented, the provisions of this Act will greatly benefit us in the long run by giving businessmen and investors at least some confidence in our legal framework.

Despite the fact that we drafted a good law, we have been unable to build institutional capacity or digitalise platforms to the extent that would allow us to fully utilise this Act.

We also need to strengthen our regulatory regime and dispute resolution mechanisms. These will play a significant role in realising our dream of establishing special economic zones and creating 10 million new jobs there, by attracting investors.

Improving our ranking in the ease of doing business index will obviously be critical for us going forward, because our country experienced negative growth in foreign direct investment in 2020.

In fact, in the Seventh Five Year Plan (FY 2016-FY 2020), we expected to bring 43 billion dollars in net FDI to the country, but we only succeeded in bringing in 11 billion dollars.

So, now that we're thinking about establishing special economic zones, we will have to do everything we can to improve our infrastructure in accordance with ease of doing business metrics if we want to attract more FDI.

Sadly, there is a clear lack of willingness among the relevant authorities to prioritise the issues of building the infrastructure required to provide better ease of doing business, regulatory regime, and institutional capacity.

TBS: It is safe to assume that we will take a long time to climb to a respectable position in these rankings. What can be done in the meantime?

Mustafizur Rahman: The investments are most likely to take place in special economic zones. So, we should focus on improving infrastructure, living conditions there first. There is no short-term solution for this problem. We will have to deal with it by formulating medium-term and long-term plans.

We must do everything possible to complete the short-term infrastructure projects that we are constructing as soon as possible, as we have turned Dhaka into an unlivable city by undertaking these projects.

By bringing digitalisation and regulatory reforms, I believe that we will be able to minimise the losses to some extent in the shortest time possible. What is more important is the formation and efficient execution of medium-term and long-term strategies that include, among other things, improving our transportation connectivity, institutional capacity, access to gas, electricity, and other utilities, as well as ensuring the proper implementation of our One Stop Service Act.

However, rather than limiting our development efforts to Dhaka alone, we must do these for the entire country, as only then will investment in our country increase exponentially.

To conclude, I'd like to state that we are living in a competitive world. Duty-free and quota-free market access, which was the foundation of our competitiveness, will cease to exist after LDC graduation.

Hence, enacting these changes has become more critical than ever before for our survival. These changes will benefit not only foreign investors, but also national investors.