The South Asian: Indian Government Pushes for $3B Investment in Bangladesh

January 06, 2008

Indian Government Pushes for $3B Investment in Bangladesh

The government (of India) is using its decision to allow foreign direct investment (FDI) from Bangladesh to push for speedy clearance to the Tata Group's plans to invest about $3 billion in that country. An Economic Times (a Times of India publication) report.

Bangladesh has been sitting over the Tata Group's plan to invest $3 billion in power, steel and fertiliser units in that country. Earlier, the government could not push the case since FDI from Bangladesh was not allowed.

A notification has now been issued to allow FDI from Bangladesh through the Foreign Investment Promotion Board (FIPB) route, minister of state for commerce Jairam Ramesh said on Thursday. Pakistan and Bangladesh were the only countries figuring in the FDI negative list of Fema. With the government allowing investment from Bangladesh, the only name in the negative list now is Pakistan.

Sri Lanka also used to figure in the negative list of Fema, but was taken off after the country entered into an free trade agreement (FTA) with India which is now being developed into a Comprehensive Economic Cooperation Agreement (CECA).
"The Tata investment would be the single largest FDI in Bangladesh, more than all the FDI the country has received till now," Mr Ramesh told ET. Earlier, it was not be possible for India to lobby for speedy clearance to the Tata proposals in Bangladesh. "Investment is a two-way street. How can we push for permission to Indian investment in other countries if we do not permit them reciprocal market access," Mr Ramesh said.

Prime Minister Manmohan Singh and external affairs minister Pranab Mukherjee backed the move to remove Bangladesh from the Fema negative list, Mr Ramesh said. He had written to Mr Mukherjee last year, urging the government to allow FDI from Bangladesh. He had also flagged the issue during a meeting organised by the Indo-Bangladesh Chamber of Commerce & Industry in Dhaka last year.

Rather than the automatic route managed by RBI, the government will subject all investment proposals from Bangladesh to FIPB scrutiny. Officials feel this would take care of security considerations as well.

Mr Ramesh said the north-eastern region would benefit from the flow of investments from Bangladesh. Food processing, textiles, pharma and bamboo-based industries in the region could receive FDI from Bangladesh, he felt.

Neighbouring countries were running a huge trade deficit with India as they could not export much to India. In the case of Sri Lanka, for example, the deficit was as high as 10:1, Mr Ramesh said. After FDI from Lanka was allowed, Indian companies like IOC managed to tap the island-nation's emerging market. As a result, the trade deficit has now almost halved as imports have increased.

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