The politics of investment in Bangladesh

To the government, investment is a foreign policy tool, but foreign investors have shareholders interests in mind.

India has come back with a strong response to the now infamous outburst by Morshed Khan – close down those insurgent camps and stop Bangladeshi authorities from extending logistics support to terrorists and arms-smugglers. That is just as well, for there was nothing to be gained by allowing Khan to get away after making damaging allegations.

By all means, we should ask Bangladesh for an explanation for the tirade of its foreign minister. We should also bring to its government’s notice, if we have not already done so, a leading Bangladeshi daily’s on-the-spot report on madrassas running the countrywide Islamic militant network. But by threatening to advise the Tatas not to go to Bangladesh with an investment of $2 billion, we would be playing into the hands of fundamentalists who are making inroads in the name of religion in a country where people are poor and uneducated. Economic development will save Bangladesh from fanatics and terrorists who are reportedly influenced by Al-Qaeda’s philosophy. [Kuldip Nayar/IE]

Improving trade and investment between Bangladesh and India is in the mutual interest of the two countries. However, with the Bangladeshi government fueling anti-India sentiments, it is quite likely that trade and investment will suffer. While India should not explicitly threaten to hold back investors such as Tata from entering Bangladesh, it would be equally unadvisable to plunge the Tatas into a quagmire just for the sake of assuaging the Bangladeshi government’s sentiments. Ultimately, companies are responsible to their shareholders and would make the call based on their perception of risks and returns.

In the current situation, even without ill-advised outbursts and reflexive Indian government retorts, companies are scarcely falling over themselves to invest in Bangladesh. In fact, if the Bangladesh government is not able to take radical steps to improve the security situation soon, one-way tickets out of Dhaka would be in great demand.

It is fast becoming a Catch-22 — trade and investment are necessary for better bilateral relations but will not come about until bilateral relations themselves improve. If this is to be changed, what India does or does not do is less than half of the equation; whether or not Bangladesh evolves a national consensus over its relations with India is the more important bit.

4 thoughts on “The politics of investment in Bangladesh”

  1. The Areas targetted by the tatas are mainly in the Chittagong Distt., populated in significantnumbers by chakma buddhists.

    Something tells me we should do a Bangladersh on B’desh. Support insurgent camps here to eventually break away the chakma buddhist areas away from their grasp, grant them protectorate status (a la bhutan) and share their natural gas wealth with their people.

    Ideally, we would strive to help B’desh out of a tough spot. But aviciously anti-India Dhaka makes nonsense of such a policy. The islmists know, use and respect only strenghth. The weak get trampled upon. Let’s always keep our strong arms ready and deal with these guys hard!

  2. Shikhar,

    The point is, investors dont really make decisions based on their governments’ advice or even foreign policy decisions. Of course, governments can make it illegal to invest in blacklisted countries, but such moves make their companies (ie taxpayers and campaign contributors) uncompetitive. Other countries will simply grab those opportunities. The Indian government already has a long list of dos and donts that squeezes down its own industry which it should do away with, instead of adding new ones.

    Sudhir – I’m not sure if it will be in India’s interests to absorb the fallouts of state failure of any kind in Bangladesh. Think refugees. Think humanitarian crisis. Think communal tensions.

  3. I agree Nitin. Problem is are we gonna prop up this creaking country or what? We can always peacefully wish for a happy, stable B’desh but if they’re not up to it, thwen qwe should prepare for the fallout as best as we can, eh?

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