Excerpts from a Scoping Paper On

Investment Climate Research Opportunities in Bangladesh

NOTE ON RESEARCH THEMES FOR RESEARCHERS
Preambles Developing countries are increasingly concerned about improving country competitiveness and productivity as they face the increasing pressures of globalization and attempt to improve economic growth and reduce poverty. Among such countries, Investment Climate Assessments have become a very important instrument for identifying key obstacles to country competitiveness and imputing their impact on productivity, in order to prioritize policy reforms for enhancing competitiveness. According to Weingast, investment climate is a menu of policy, regulatory, social and institutional factors that provide incentives sufficiently robust to induce the private sector to invest in socially desirable projects. The World Bank identifies Investment Climate as good investment providing opportunities and incentives for firms of all sizes to invest productively, create jobs, and expand. It thus plays a central role in both growth of the organization and poverty reduction through such economic emancipation. Research by management experts and economists in recent times decisively conclude that business firms are the lever of growth, thus instead of dealing with broad aspects as practiced by economists in general, investment climates require to focus on the micro aspects of investments and assess how firms thrive and create jobs which ultimately addresses 90% of employment, tax base, and improving of living standards. Various studies have been embarked on to identify factors contributing to classification of investment climate; findings from some of these reports are outlined below. The world bank report outlines some general investment climate constraints based on study of 26,000 firms in 53 countries which are: policy uncertainty, macro economic instability, tax rate, corruption, cost and access to finance, crime, regulations & tax administration, skills level, court & legal system, electricity, labor regulations, transportations, access to land and telecommunications. Studies from some East European states identify five major factors contributing to investment climate, they are; security & stability, labor, infrastructure, finance, taxation, and regulations. 1. The World Bank in broad terms have identified four distinctive climate factors essential for investment, they are; stability & security, regulation & taxation, finance & infrastructure, and workers & labor markets. 2. Other independent studies in developing and developed economies outline factors which are: taxes & regulations, financing, policy instability, inflation, exchange

rate, corruption, street crime, anti competitive practice, organized crime, infrastructure, and judicial system. 3. A study of selected ASEAN countries identified six major factors important for assessing investment climate, viz. infrastructure, quality of service, innovation, labor skills, access to finance, and red tape. 4. Studies by United States Government identify the following factors essential for investment climate assessment: openness to foreign investment, conversion & transfer policies, expropriation & conversion, dispute settlement, performance requirements & incentives, right to private ownership & establishment, protection of property rights, transparency of regulatory system, efficient capital markets & portfolio investment, political violence, corruption, bilateral investment agreements, labor, and foreign or free trade zones. 5. Experts in Bangladesh have identified the following: competitiveness & regulations, labor law, enforcement of contracts, infrastructure investments, policy environment, SME environment, subcontracting for promotion of investment, productivity, governance, and incentive mechanism. Some Generic Issues in Research on Investment Climate It is apparent from above that no single parameter can be considered as holistic; based on the above, we can identify some generalized factors that have been outlined by most of the researchers/organizations. They are depicted in the Table 1. Table 1: Factors Contributing to Assessment of Investment Climate Factors 1 2 3 4 5 6 Policy including Foreign X X X Investment Macro Economic Stability X X Tax Related Issues X X X X Corruption X X X Finance X X X X X Security X X X Skills Level X X Legal System & Regulation X X X X X Infrastructure X X X X X Labor X X X X X Stability X X X Crime X X Red Tape X Innovation & Property Rights X X Quality X Dispute Settlement X Efficient Capital Markets X

7 X

X X X X

Economic Zones Competitiveness SME

X X X

It must be noted that investment climates vary not only across countries but also within countries because of differences in the way national policies are administered and in the policies and behaviors of sub national governments. Even within a single location, the same conditions can affect firms differently depending on the activity they are engaged in and their size. There can also be differences in policy preferences within firms, between owners and managers on matters of corporate governance, or between owners and workers on labor market policies. All governments must arbitrate those differences in an environment where firms, officials, and other stakeholders seek to tilt the outcome to their advantage. Based on the above results, the following generic constructs are considered most practical as factors influencing investment climate. The working definition of each of the selected factors is based on the explanation derived out of the literature survey. 1. Macroeconomic Sustainability: This measures the countries overall stability and growth to ensure sustainable business performance. 2. Investment Policy: This embraces all policies related to both internal and external investments. This includes incentives, ease in operations, red tape, etc. 3. Infrastructure: This constitutes all types physical and support facilities essential for undertaking business related activities. Thus it includes economic zones, power, water, etc. 4. Financial Environment: This encompasses all finance related variables such as interest rates, tax structures, capital markets, etc. 5. Human Capital: This considers availability of productive human capital and development of the same as the primary concern and appropriateness of the knowledge imparted as an extended element. Thus it covers, subject area, curriculum, pedagogy, behavioral change, etc. 6. Governance: This includes activities associated with enhancement of sustainable business and thus includes, reduction in corrupt practices, human resources principles, working environment, etc. 7. Business Security: This encompasses issues that provide a tenable working environment for the business and may include political will, physical environment including insurance, entry and exit risks, prospects for market expansion, etc. 8. Legal Security: This constitutes all types of legal support involved in both domestic and international trade including property rights, transparency in the overall legal system, corporate law, etc.

Suggestions for a good proposal The proposal should be based on original research theme that has not been submitted or being initiated elsewhere in Bangladesh. 2. The project presented should focus on economic, political or social issues confronting Bangladesh in the new millennium which is likely to initiate investment or create an environment for investment. 3. The proposal should contain development of concepts that the research plans to address based on literature study. 4. The proposal should clearly identify the contribution of the study in terms of economy, social, environmental, and if possible theory building. 5. The proposal should comprise of detailed objectives, scope of the work along with a detailed methodology. 6. The research will require both inductive and deductive approach to arrive at a strategic plan. 7. The research proposal must show in some quantifiable values expected outcome of the research. Thus, the proposal should contain detailed propositions that will give direction for development of hypothesis. 8. The proposal should also provide analysis plan based on the objectives set for the research. 9. The detailed organization of the research project along with the time plan and budget must be provided. 10. The team must ensure that individuals submitting the proposal have not been mentioned by others in similar projects. 11. The details of the key team members should be submitted. If required clearance from parent organization may be required. 12. The research team must be willing to submit at the end of the research one or more articles for publication in selected journals. 13. Simple layout design should be as followed. 1

1. Profile of the team The profile of the team should be in line with the proposed area of research. Major considerations will be given to the following factors consulting/research/work experience in the area of research, composition of the team in terms of detailed activity profile, and a brief on the organizations the team members are affiliated with. 2. Research theme and area selected The theme of the research along with its contribution to the overall investment climate should be clearly spelled out. 3. Literature review Literature review is considered one of the major considerations in developing the foundation of the research. It should aid in definition of the concepts and constructs along with developing of propositions and hypothesis. 4

4. Application of the research The researcher should be able to show not only the theoretical strength of the research output but also the applicability of the recommendations under the given conditions in Bangladesh. In addition, the proposal should be able to outline the probable agencies/individuals likely to implement the strategic outcome of the research. 5. Methodology and Technical Issues This will consider the basic methodological dimension and the analysis plan of the research proposal. The methodology should be sound and all concepts under study should be presented in measurable terms as much as possible. Thus, the propositions should be supported by the details of techniques considered for measuring the hypothesis derived from the said propositions. In addition the sampling plan and the selection of survey methods for both qualitative as well as quantitative research should be detailed out. 6. Budget The budget should include all major cost elements of the study. Organizations subsidizing the research with internal contribution will be considered with due diligence.

Suggestions on Various Steps to think through in writing the Proposal 1. 2. 3. 4. 5. Problem Identification, formulation and validation Problem formulation questions The purpose of qualitative Study Development of propositions and hypothesis The research objective - The objectives should be as explicit as possible, yet confined to one or two pages. It should have the broad objective derived directly from the problem statement and specific objects outlined in detail to clearly segregate the variables under study. 6. Scope of the research - The scope of the study outlines the boundary of the study. The scope should be set both in terms of the knowledge base as well as the physical base. The scope of the study to a great extent determines the methodology to be followed. 7. Contribution of the research may be looked at from various dimensions. As far as investment based research is concerned, under the modern perspective it may look at the following areas economic, social, environment, poverty alleviation, and theoretical dimensions. 8. Sampling plan (where applicable) should entail the following 9. Questionnaire outline may concentrate on the following 10. Limitations of the research includes issues that is related to information that could have increased the validity of the proposed research but could not be included or sources which could have further strengthened the arguments but were kept out

because of given budget and time. Thus time and budget are constant not limitation. 11. The analysis plan is based on the hypothesis and the objective of the proposed research. Analysis plan may include both statistical as well as qualitative methods. 12. At the end of the proposal provide time plan against each broad activity, the organization structure detailing functions of key personnel, the detailed budget for the proposed research, the major output from the proposed research, and a tentative outline of the report. 13. The reference plan can follow any standard practice. Please refer to the standard that the authors prefer to follow. Make sure that the method is consistent. A general guideline could be as follows.

Selected Readings on Investment Climate Issues 1. ADB, DFID, JETRO, The World Bank; 2005; Our Strategy in Support of Bangladesh PRSP. 2. Aloysius Milon Khan; 2008; Country fact Sheet: Bangladesh; DFID. 3. Alvaro E, Luis J G, Jorge P, and Manuel De Orte; 2005; Investment Climate Assessment on Productivity and Wages: Analysis Based on Firm Level Data from Selected South East Asian Countries; University of Madrid. 4. Andy Mukherjee; 2006; Commentary: Why Goldman Sachs May be Right about Bangladesh; International Herald Tribune. 5. Anonymous; Country Summary of Higher Education: Bangladesh. 6. Bangladesh Economic Profile; 2008; Online Business Directory; Bangladesh Trade Info. 7. Bangladesh Enterprise Institute; 2008; Bottlenecks to FDI in Bangladesh: How Best to Improve the Investment Climate; A Roundtable of Experts. 8. Countries and Consumers; 2008; The Next 11 Emerging Economies; Euromonitor Archive. 9. Criag Wilson; 2007; The Bangladesh Private Sector forum: A Case Study; International Workshop on Public Private Dialogue; SEDF/IFC. 10. Education Watch; 2005; The State of Secondary Education: Progress and Challenges; Campaign for Popular Education (CAMPE). 11. Government of Japan; 2004; Japans Statement for Bangladesh Development Forum. 12. Investor Chronicle; 2007; Bangladesh one of the hottest Emerging Markets; Board of Investment, Bangladesh. 13. Jill Sperandio; 2005; Social Entrepreneurs and Educational Leadership in Bangladesh; Lehigh University; College of Education. 14. K M Gopakumar; Trips and Public Health in Asia; Center for Trade and Development; Backgrounders. 15. Mahmudul Alam, M Shamsul Haque, and Syed Farhad Siddique; 2008; Private Higher Education in Bangladesh; editor: N V Varghese; UNESCO

16. Minakshi Seth; 2008; IFC in Bangladesh: Growth Amidst Challenges; IFC News, IFS, World Bank Group. 17. Mohammad Niaz Asadullah; 2005; Returns to Education in Bangladesh; Working Paper Number 130; QEH Working Paper Series; Department of Economics, University of Oxford. 18. Mubasshir Mushtaqu; 2008; Buoyant Bangladesh: An Emerging Investment Destination; OIC Trade. 19. Munir Quddus; 1999; Access to Higher Education in Bangladesh; International Higher Education, Center for International Higher Education; Boston College. 20. Naomi Hossain and Naila Kabir; 2004; Expanding Access to Education in Bangladesh; Economic and Political weekly; IDS Working Paper 167. 21. Nicholas Stern; 2002; The Investment Climate, Governance, and Inclusion in Bangladesh; Bangladesh Economic Association Speech; The World Bank Group. 22. Pilot Investment Climate Assessment; 2003; Improving the Investment Climate in Bangladesh; Bangladesh Enterprise Institute & The World Bank. 23. Regional Conference on Education, Training, and Knowledge Economy in South Asia, New Delhi; 2005; Vocational Education and Training System in Bangladesh: An assessment; World Bank Institute. 24. Richard Hooper; 1998; Emerging Private Universities in Bangladesh: Public Enemy or Ally?; International Higher Education, Center for International Higher Education; Boston College. 25. S Z Haider; Chemical Education in Bangladesh; Chemical Education in Asia Pasific. 26. Syed Ferhat Anwar; 2008; A Strategic SME Business Model for Alleviating Poverty: The Case of Bangladesh; BDI, DDBF, AIDGI John F Kennedy School of Government; Harvard University Conference. 27. The American Center; 2004; Foreign Investments in Bangladesh; Foreign Investors Chamber of Commerce and Industry; Embassy News, Embassy of the United States. 28. The Office of Electronic Information; 2007; Investment Climate Statement: Bangladesh; Bureau of Public Affairs, USA.gov. 29. The World Bank; 2006; The Bangladesh Vocational Education and Training System: An Assessment; Human Development Unit, South Asia Region, The Bangladesh bank. 30. The World Bank; 2004; World Development Report 2005: A Better Investment Climate for Everyone; A Co-Publication of The World Bank and Oxford University Press. 31. Warrick Smith and Mary Hallward-Driemeier; 2005; Understanding the Investment Climate; Finance & Development. 32. Weingast, B; 1995; The Economic Role of Political Institutions: MarketPreserving Federalism and Economic Development.; Journal of Law,Economics & Organization, Vol. 11, Iss. 1 33. Window 2 Bangladesh; 2004; Directory Education System; Banglapedia.