Joint Ventures and Foreign Investment
Despite its early concentration on developing a socialist economy, the government became increasingly open to private investment. The 1974 New Investment Policy restored certain rights to private and foreign investors. In December 1975, President Ziaur Rahman promulgated the Revised Investment Policy, which allowed greater private sector activity and authorized joint ventures with public sector corporations in a number of previously reserved areas, provided that the government retained 51 percent ownership. The Dhaka Stock Exchange was reactivated in 1976, and the Bangladesh Investment Corporation was established the same year to provide financing for bridge construction and underwriting facilities to the private sector. Investment ceilings for private industry were abolished in 1978. Then, in 1980, the government delineated a more liberal attitude toward foreign direct investment in the Foreign Private Investment (Promotion and Protection) Act. Growth of investment nonetheless remained slow, and industry was still dominated by relatively inefficient public enterprises and governed by an elaborate system of administrative controls.
In June 1982, the new government of Hussain Muhammad Ershad introduced its own New Industrial Policy, calling for a significant increase in private sector activity and denationalization of selected public sector enterprises. The government transferred 650 industrial enterprises to private hands, leaving only 160 under public ownership. In 1986 the government announced a comprehensive revision of its industrial policy, setting out objectives and strategies to accelerate the pace of industrialization. The policy also emphasized private and foreign investment in high technology, export-oriented, and labor-intensive industries. The revised policy increased the number of sectors open to private investment, liberalized the tariff structure, reduced quantitative import restrictions, and furthered privatization of state-managed enterprises.
The role of the public sector in the late 1980s was limited to seven fields: arms, ammunition, and sensitive defense equipment; electrical power generation, transmission, and distribution; management and exploitation of reserved forests; telecommunications; air, water, and railroad transportation; atomic energy; and currency note printing and coin minting. In addition, public sector involvement was still possible, alone or jointly with private participants, in projects where investment was not forthcoming from the private sector. The only consistent moneymakers among public sector industrial corporations were the Bangladesh Petroleum Corporation (Tk248 crore in FY1986; for value of the crore, the Bangladesh Chemical Industries Corporation (Tk18.7 crore), and the Bangladesh Forest Industries Development Corporation (Tk5.8 crore).
In 1987 an amendment to the Bangladesh Industrial Enterprises (Nationalisation) Ordinance was adopted, providing the legal basis for plans to sell up to 49 percent of government shares in remaining nationalized enterprises. The fact that the government would retain the majority was understood by some as a political gesture to workers and entrenched management opposed to privatization.
An export processing zone was established officially at the port city of Chittagong in 1980. But because of political controversy and indecision surrounding the project from the moment it was proposed, the Bangladesh Export Processing Zones Authority did not actually begin functioning until March 1983, when a program of inducements was offered to investors opening up enterprises. Zone enterprises enjoyed a tax holiday of 5 years (10 years for pioneer industries), subsequent rebate of 50 percent of income tax on export sales, freedom from duties on both imports and exports, and guaranteed full repatriation of profits and capital. Additional export processing zones were contemplated for Khulna and Dhaka.
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