PRIVATlSATlON OF INDUSTRIES IN BANGLADESH: PROBLEMS AND PROSPECTS OF PRIVATE FOREIGN INVESTMENT

This article evaluates Bangladesh’s mid-1980s privatisation drive with emphasis on attracting private foreign investment. It inventories legacy constraints—overstaffed SOEs, arrears, and soft-budget constraints—and explains how partial divestiture, leasing, and management contracts sought to improve performance without social dislocation. The paper identifies investor concerns: currency risk, contract enforcement, land titling, customs bottlenecks, and utility reliability. It proposes credibility devices—transparent tendering, dispute-resolution clauses, step-in rights for lenders, and tax administration reforms—to lower perceived risk. Sector snapshots compare textiles, agro-processing, and light engineering in terms of input linkages and export potential. The article concludes that privatisation can unlock productivity if paired with regulatory strengthening, competition policy, and targeted skills programs that expand the pool of managerial and technical talent.

The body benchmarks case experiences from comparable economies, showing why sequencing matters: resolve arrears and rationalize tariffs before sale; publish valuation methodologies; and ring-fence proceeds for debt reduction and worker adjustment. It details model concession terms, performance targets with milestone payments, and escrow arrangements to align incentives. On FDI, the paper discusses investment promotion, aftercare services, and one-stop windows that integrate licensing, environmental clearance, and utilities hookup. It examines the domestic financial system’s role in crowding in co-investment through credit guarantees and development-bank instruments. Governance safeguards include independent regulators with clear remits, competition rules to avoid replacing public monopolies with private ones, and sunset clauses for incentives. The article ends by mapping KPIs—capacity utilization, defect rates, export shares—and a monitoring cadence that lets authorities recalibrate without policy whiplash.