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The electoral victory of ABM Mohiuddin Chowdhury for the third time in a row testifies to the hold he has on the public imagination in Chittagong. It is obvious, judging by the popular support he has received in the face of overwhelming odds, that he has over the years made a good, deep impression on the minds of the people of the port city. But much more important than the victory of the individual Chowdhury at the Chittagong mayoral election is the reality of the elections having gone off to the satisfaction of the country. The element of fear that somehow entered the public mind in the days and hours before voting commenced has now been revealed to have been quite misplaced. Overall, the Election Commission has done a good job despite all the last minute obstacles it came up against. The appointment as polling officers of individuals not ready or qualified to hold those positions was embarrassing for the EC, which saw to it that the situation was rectified even at the eleventh hour. Then too, there remains the clearly indefensible behaviour of the Chittagong metropolitan police commissioner, a fact that has since been dealt with strongly by the Election Commission. Overall, therefore, we can safely conclude that the EC did the best under the circumstances, work that has now paid off.
   In a very broad manner of speaking, the mayoral election in Chittagong reflects, to a significant extent, a coming of age of democracy in the port city as well as the country. Of course, during the polling and in the hours of vote-counting, there were the hiccups that one could not fail noticing. When the announcement of results stopped for sometime in the late hours of Monday, there were the natural worries among people that something could be going wrong. It was thus that something of people power was observed to get into action. Men and women poured out into the streets of the city to demand that nothing be done that could constitute a breach of the principles of democracy. In the course of the voting earlier, there were reports of certain presiding officers taking firm action against intruders, including influential political figures, when they attempted to trespass into the polling stations. Such action revives in us somewhat the confidence that democracy is today on fairly solid ground in the country despite all the efforts that may be made from time to time to undermine it. But let us not fail to note that the entire tenor of the campaign, barring a few disturbing episodes, was generally a healthy affair. The candidates, especially Mohiuddin Chowdhury and Mir Nasiruddin, made a point of wooing voters at the personal level and in the process coming up with some concrete ideas of what they meant to do about Chittagong in the event of their emerging triumphant at the election. In a very special way, therefore, the election campaign was a reflection of candidates’ awareness about the changing nature of popular expectations. And they did all they could to respond to those expectations by way of making promises they thought they could keep.
   The nation is today satisfied that a good, well-fought election is over. It should now be up to the newly re-elected mayor to fulfil his responsibilities in the greater interest of the people of Chittagong. He can do that through making politics an inclusive affair. His return to office demonstrates hugely the capacity he holds to do the job over a fresh term. He has the best wishes of the nation as he moves ahead.

Child mortality issues

That we have a high child mortality rate is not a new discovery, but most of us do not have the exact figures for children who die every year. A report by the Bangladesh Health and Injury survey informs us that every year 30 thousand children in Bangladesh die due to some form of accident or violence. In addition, 13 thousand children become paralysed each year and every day the death toll is 83 with permanent paralysis affecting 36 children. Naturally, these are alarming facts and to an extent focus on the pitiful state that children of the country often find themselves in. As we explore the reasons behind these deaths and injuries, we find that in most cases the chief cause of death is drowning. Electrocution, burns and physical violence are the other causes.
   But will just knowing the causes solve our problems and ensure a better future for our children? In fact, we have had so many seminars to identify the problems facing people below the age of 18 that now the time has come to act on our findings. Though children die or end up wounded due to physical violence, we do not have any programmes aimed at addressing violence within homes. Parents, unable to control children, resort to beating which often crosses the limit and results in irreversible damage. Though drowning accounts for most deaths, we hardly see any awareness programme aimed at young children. We believe that if not parents then NGOs in the rural areas can increase awareness among children about swimming, thus reducing the mortality rate significantly. Now, if we regard the young to be the future of tomorrow then merely finding statistics will not get us anywhere.
   If the NGOs, both local and foreign, unite and decide to launch efforts for the children a lot of their suffering will be reduced. In this regard, we must highlight the increase of awareness among children working for a living. Much human rights abuse is carried on at the work place but children working cannot protest because defiance would lead to hunger and eventually death. But the issue of the young and their rights at the working place needs to come under the spotlight too. Basically, to ensure child rights what is needed initially is mass awareness among adults. If the grown ups are responsible then the growing environment for children will become more conducive. Unfortunately, we do not see any measures by the authorities to make adults conscious of what act is right towards a child and what is not.

Bangladesh will reportedly receive about $8 billion worth of foreign direct investment within the next three years. These include Tata’s $2.5 billion proposal and Vulcan’s $1.6 billion deal.
   The government can quite rightly claim the credit for attracting foreign investors successfully. Such news is always portrayed in a good light in the media, saying that foreign direct investment boosts the economy, contributes to development and reduces poverty. But does it? Common sense as well as logic would say ‘no’.
   But international organisations, often safeguarding the commercial interests of the developed countries, dub foreign investment an engine for development. Here are two instances of concerted propaganda.
   The UN Conference on Financing for Development in Monterrey, Mexico, in 2002 ended with the Monterrey Consensus, which reads, ‘Foreign direct investment contributes toward financing sustained economic growth over the long term. It is especially important for its potential to transfer knowledge and technology, create jobs, boost overall productivity, enhance competitiveness and entrepreneurship, and ultimately eradicate poverty through economic growth and development.’
   The World Development Report 2005, an annual publication of the World Bank, titled ‘A Better Investment Climate for Everyone’, declares that foreign investment expedites growth and reduces poverty. It goes on to suggest that reduced distortion, among other things, will eventually lead to development. A portion of the report reads, ‘While governments have limited influence on factors such as geography, they have more decisive influence on the security of property rights, approaches to regulation and taxation…Improving government policies and behaviours that shape the investment climate drives growth and reduces poverty.’
   Convinced by such rhetoric, successive governments of Bangladesh, both democratic and autocratic, opted for the easiest quick fix measures, increasingly liberalising the industrial policy, import policy and investment policy (Bangladesh Export-Processing Zones Authority Act of 1980, Foreign Investment Protection Act 1980, Investment Board Act 1989, Companies Act 1994, Industrial Policy 1999), apparently in a bid to attract foreign direct investment.
   The possible benefits of foreign investment, at least in theory, besides consolidating foreign reserves, include technology transfer to local firms, technological spill-over to the wider economy, increased productive efficiency and managerial efficiency, employment generation, better services, quality goods for cheaper prices due to increased competition and benefits to the balance of payments due to the inflow of foreign currency.
   But the widespread euphoria that now, at long last, unprecedented levels of foreign investment will chase away poverty and drive growth, has little basis or reason, if any at all. The ground reality as MM Akash, professor of economics of Dhaka University, puts it is distinctly different. Citing the case of the oil and gas sector, he said there has been substantial investment but it has not generated much employment, neither has there been any technology transfer. ‘Moreover, the foreign companies have systematically destroyed capable domestic institutions such as the BAPEX — the exploration wing of Petrobangla — besides increasing the cost of power and putting the general economy in debt.’
   While advocates of foreign investment strain themselves to demonstrate a positive link between foreign investment and development, dissenters believe that foreign investment is hardly the magic potion for development that it is proclaimed to be.
   According to a briefing paper for the Asia-Pacific Research Network, ‘Multilateral Investment Agreement in the WTO: Issues and Illusions’ by Kavaljit Singh, ‘Foreign direct investment is not a panacea for development. There is hardly any reliable cross-country empirical evidence to support the claim that FDI per se accelerates economic growth. In the present circumstances, it is quite difficult to establish direct linkages between FDI and economic growth if other factors such as competition policy, labour skills, policy interventions and comprehensive regulatory framework are not taken into account. Further, in the absence of performance requirements and other regulations, many of the stated benefits of FDI would not occur.’
   According to a policy brief, ‘Foreign Direct Investment, Development and the New Global Economic Order’, published by the South Centre in 1997, foreign investment has a major influence on national politics and models of development in many developing countries. It reads, ‘There are, nevertheless, powerful arguments to suggest that a fully liberalised regime for FDI would not necessarily promote widespread growth and development or take account of the developing countries’ socio-economic or political preoccupations.’
   Another publication from the International Institute for Sustainable Development, ‘Towards a Southern Agenda on International Investment: Discussion Paper on the Role of International Investment Agreements’, recognises the possible benefits of foreign investment but cautions that implementing public policy to ensure these benefits ‘is a demanding task, vastly more complex than trade liberalisation. Indeed, it has little to do with “liberalisation” since it requires a careful balancing of private rights and public good at all levels.’
   The complex process of implementing appropriate policy regimes, according to a bulk of scholastic literature, involves application of a set of performance requirements for potential investors.
   Although the advocates of free trade and outward-oriented growth argue against such measures, saying that these thwart investment, most developed and developing countries have used them and still retain them.
   According to a presentation at an UNCTAD experts’ meeting in Geneva in November 2002 on ‘The Development Dimension of FDI: Policy and Rulemaking Perspectives’: ‘Given the possibility of conflict of interests, performance requirements have been employed by host governments…to maximise the contribution of FDI to the process of development. It is crucial to realise that there must be policies in place to ensure that the nation accrues maximum benefits from foreign investment.’
   The presentation sums up: ‘Performance requirements have been employed extensively by developed as well as developing countries to improve the quality of FDI and to maximise their contribution to development…The incidence in developed countries appears to have declined also because they have evolved new forms of policy interventions to achieve the objectives of performance requirements.’ It concludes by saying that well-conceived performance requirements with clear objectives that are effectively enforced are not only able to meet their objectives but may also bring significant favourable externalities to the host countries. ‘The available evidence does not suggest a significant adverse effect of performance requirements on FDI inflows, which are governed more by the overall economic potential of the host countries.’
   Commonly suggested performance requirements include local content requirements, export performance, requirement to establish a joint venture with domestic participation or for minimum level of domestic equity participation, employment requirements, requirement to transfer technology, production processes or other proprietary knowledge, research and development requirements.
   It has been well documented that Asian economies, including Malaysia, South Korea, Taiwan, China, Japan and even neighbouring India, have imposed a number of performance requirements, and some continue do so but still manage to attract higher levels of investment than Bangladesh.
   Besides their potential domestic market, skilled labour force and good infrastructure — all of which are important factors — the governments have ensured predictability, consistency and accountability of the policy regime and concerned domestic authorities. According to the UN Conference on Trade and Development, the latter factors are often the main determinants that attract foreign investment. It is needless to say that in the present political climate the governments of Bangladesh can ensure none of these factors, and instead have resorted to liberalising the trade regime.
   Current regulations allow foreigners to have full ownership of commercial establishments in Bangladesh. According to a World Bank research paper, ‘To Share or Not To Share: Does Local Participation Matter for Spill-overs from Foreign Direct Investment?’, and as observed in the World Investment Report of 2001, fully foreign-owned firms are typically more interested to procure their raw materials through imports while joint ventures with local ownership tend to procure them locally, thus contributing to the vertical spill-over within the host economy.
   On the other hand there are virtually no local content requirements for investors except for some raw materials for pharmaceuticals, and companies are free to procure their raw materials locally or from abroad at competitive prices, and that too without any import duty. As if to encourage them to import increasing amounts of raw materials, the government has recently reduced the number of restricted import items to 25 from 60.
   As for technology transfer, there are no binding requirements for investors, except for oil companies, to transfer their technology to Petrobangla. It completely escapes the policy-makers that oil companies, predatory by nature, are seeking resources and are notorious for wreaking havoc on the domestic economy if it suits their interest. Such companies would hardly bother with such trivial requirements. Consequently, Petrobangla is far from evolving as an oil company like its Indian counterpart.
   Current investment policies also allow tax holidays of 7 years if industries are set up in Barisal, Khulna, Rajshahi, Sylhet or the Chittagong Hill Tracts, and up to 5 years in other divisions. Investment for power generation is exempted from taxes for 15 years. These policies ensure that foreign investment and local investment are given the same treatment in all respects, and strip the government of the ability to protect or promote local investment in certain sectors of particular interest to the economy.
   The industrial policy also allows full repatriation of foreign investment including profits and dividends accruing to it. Foreigners employed in Bangladesh are entitled to remit up to 50 per cent of their salaries and will enjoy facilities for full repatriation of their savings and retirement benefits. Incentives are even better under certain conditions in the export processing zones.
   These fiscal incentives, while luring investors, could potentially have a negative effect on the foreign reserve, since the dividends, along with the capital, would have to be paid back in foreign currency. Sudden accumulation of excessive foreign investment beyond the absorption capacity of the domestic economy could, in fact, turn out to be debilitating for the economy as well.
   The foreign reserves could also be drained by the increased levels of foreign investment due to an increase in imports of intermediate capital goods. Besides, the major investments during the present times are all geared for domestic consumption and lack any export requirement, so they will not lead to generation of foreign currency earning sectors in Bangladesh.
   There is no reason for euphoria simply because investment is on the rise since the hard part of the task is still ahead — properly utilising foreign investment to enhance development. A discussion paper of the Kiel Institute of World Economics on ‘To What Extent Can Foreign Direct Investment Help Achieve International Development Goals?’, published in 2004, concludes that proponents of FDI create unreasonably high expectations in developing countries by ignoring the possible flaws and limitations of FDI and taking its benefits for granted. ‘For poor developing countries, in particular, it appears much more difficult to derive macro-economic benefits from FDI than to attract FDI.’
   With the recent boom in foreign investment, Bangladesh’s investment policies perhaps need an urgent re-examination so that investment truly drives growth and reduces poverty.
   But with the main political parties already in ‘election gear’, the BNP would not want to bring any change to the investment regime, in order to maintain the inflow of foreign funds and to be able to claim all the credit for having attracted such unprecedented levels of foreign investment.
   The main opposition party chooses not to protest against the liberal attitude towards foreign investment because it has also been a party to the liberalisation process of the economy.
   The general people, who are the real stakeholders of the economy, and the pro-people organisations dedicated to development, should perhaps take up the issue and demand a change in the policy regime.
   The writer is senior staff correspondent, New Age