Industrial Development Through Knowledge -Myassignmenthelp.Com

Question: Discuss About The Industrial Development Through Tacit Knowledge? Answer: Introduction Foreign Direct Investment refers to investment that is made by company for the business interest in another country. It can be done either by establishing business operations or by acquiring the assets in relation to that of the business. Primary feature of Foreign Direct Investment is that the investments are made that can help in establishing effective control or by having influence over the process of decision making of a business. Globalization has led to an increase in the volume of trade and FDI in between different countries (Bandyopadhyay, Sandler Younas, 2013). Economic factors play a huge role in the process of decision making as the economic actors want return of their investment. The political factors are also crucial as the country that has a high political unrest faces uncertainty and becomes less prone for that of investment (Castro Nunes, 2013). Government stability, socio-economic condition, laws and regulations, religious tension, external conflict, bureaucratic q uality, corruption and internal tensions are the different political economic factors that can have an influence on the aspect of foreign direct investment. This report analyses how the political economic factors of Bangladesh have an effect on that of the foreign direct investment. Government stability in Bangladesh The tenth parliamentary election was responsible for changing the scenario in relation to foreign investment. The Bangladesh Awami League was responsible for winning ten parliamentary election in which 153 members were elected in an uncontested manner. The country witnessed agitation on the streets in between the year 2013 and that of 2015 (Rahman, 2015). Macroeconomic stability is a major cause of strength of the Bangladesh economy. The economy of Bangladesh has shown many promising aspects. Bangladesh has been able to increase the growth by that of 1 % in each decade from 2013 to 2015 (Sarker et al., 2017). The per capita income has increased that helps in drawing foreign direct investment to a great extent. Socio-economic Condition The rate of unemployment within Bangladesh remained unchanged from that of 4.10 percent in the year 2016 from that of 4.10 in the year 2015. The unemployment rate within Bangladesh averaged that of 3.83 percent from the year 1991 till the year 2016. The Household Income and Expenditure Survey conducted in the year 2016-17 pointed out that around 1 of every 4 Bangladeshis are living in a state of abject poverty and it has been found that 12.9 percent of people have to suffer on account of poverty (Bandyopadhyay, Sandler Younas, 2013). Poverty and unemployment prove to be major causes of hindrance that can adversely affect foreign direct investment in Bangladesh. The government of Bangladesh tends to limit resources in relation to building of new infrastructure and in order to maintain existing infrastructure. Inefficient infrastructure undermines economic development of the country. CIA World Fact book has highlighted that a meagre 10 % of the roads in Bangladesh are paved that hinde rs in drawing foreign direct investment (Uddin, Ali Masih, 2017). The underdeveloped telecommunication services within Bangladesh do not bode well for that of foreign direct investment. Laws in Bangladesh The tax service within Bangladesh suffers on account of low level of that of revenue mobilisation, regressive nature of that of taxation, low tax base and that of high degree of that of tax evasion. It has been found that the tax receipts can roughly generate four-fifth of that of total revenue (Islam, 2015). The consumer price inflation within Bangladesh got eased to 5.83 percent on year-to-year basis in 2017 (December) from that of 5.91 percent of that of the previous month. The inflation rate within Bangladesh averaged to 6.58 percent from the year 1994 till the year 2017. Bangladesh is known for the restrictive trade regimes and it earns a lot of revenue from that of excise taxes. Infrastructure development surcharge is levied on all imports and the lengthy custom procedures prove to be deterrent in terms of attracting foreign direct investment. Internal Conflict in Bangladesh Internal conflicts and unrest has taken a toll on the economy of Bangladesh. Public life as well as the business activity is hampered to a great extent owing to the political strife of the different parties within Bangladesh. This country was witness to political violence when the leader of the main opposition, Khaleda Zia was confined to that of her office (Rahman, 2015).The unrest continued even after the release of Khaleda Zia and frequent strikes were rampant after this incident (Hayakawa, Kimura Lee, 2013). These kind of political conflict hamper the economic activity of the country to a great extent and prevents the normal operation of a business. The frequent shutdowns taking place in Bangladesh takes a toll on the economic activity and the industrial sectors face a lot of losses owing to the inability of shipping goods. It bears a negative impact on that of foreign direct investment. External Conflict Government of Bangladesh brought into existence the Import Policy Order 2015-2018 and the new policy eased import in relation to raw materials so that they can be of use for that of the export-oriented industries (Castro Nunes, 2013). Bangladesh has been able to settle the border disputes in a peaceful manner with India and improving the ties can help in the aspect of foreign direct investment (Islam, 2015). Corruption Corruption has entered all the sectors of Bangladesh like that of the judicial system, police, public services and tax administration (Mostafa Klepper, 2017). There is the Money Laundering Prevention Act that states that the companies can be held for bribery. Business-to-business corruption can be handled by the help of Money Laundering Prevention Act (Kim Li, 2014). Religious Tension Religious minorities like that of the Hindus along with the Buddhists have been subject to discrimination in Bangladesh. The land laws that are discriminatory have proved to be disadvantageous for the Hindu population that is minority in Bangladesh (Bayraktar, 2013. The Hindu-Muslim divide is being used by that of the political elite of Bangladesh for serving their own narrow benefit (Bagchi, Lejeune Alam, 2014). The party clashes taking place arise on account of the fervour centralized around religion that severely cripples the foreign direct investment of the country (Hayakawa, Kimura Lee, 2013). Bureaucratic Quality Bangladesh is a developing country and the bureaucrats belong to middle or the lower classes. It is a country that revolves around the use of black money (Shah, 2014). Bangladesh is hence inefficient in terms of bureaucracy and is not able to produce desired service to the citizens. The quality of bureaucracy in Bangladesh cannot face the challenges of globalisation and is not conducive for that of foreign direct investment. Conclusion The above discussion brings to light the socio-economic condition of Bangladesh and its effect on that of foreign direct investment. Violent street agitation reduced on the streets after the year 2015 that helped in attracting foreign direct investment to Bangladesh. Around 12.9 percent of the people in Bangladesh are reeling under the effect of poverty and the people of Bangladesh hence cannot buy expensive foreign products. The non-enforcement of that of anti-corruption legislation has impaired the business of Bangladesh and proved to be a deterrent for that of foreign direct investment. Corruption pervades all aspects of society in Bangladesh and party clashes take place in Bangladesh owing to the deep seated religious prejudices. The corrupt bureaucracy also harms the foreign direct investment of the country. The kind of FDI that can take place in Bangladesh is that of Backward FDI. There are certain raw materials that are found in abundant quantity in Bangladesh and the foreign companies can buy the firms in Bangladesh in order to dominate competition. Investing heavily in the particular firm can help in the production of better quality product. Pharmaceutical raw materials can be found in Bangladesh and foreign companies can invest in them in order to earn profits. Factors Risk Rating ( out of 10) Effect in Foreign Direct Investment Government Stability 4 Attracts the foreign investors Socio-economic Condition 6 Badly affects FDI Laws and Regulation 6 Not conducive for foreign investment Internal Conflict 7 Internal conflicts paints a bad picture in front of investors External Conflict 8 External conflicts harm foreign investment Corruption 8 Badly affects Foreign Direct Investment Religious Tension 8 Severely cripples Foreign Direct Investment Bureaucratic Quality 7 Inefficient bureaucracy cannot attract foreign investors References: Bagchi, P., Lejeune, M. A., Alam, A. (2014). How supply competency affects FDI decisions: some insights.International Journal of Production Economics,147, 239-251. Bandyopadhyay, S., Sandler, T., Younas, J. (2013). Foreign direct investment, aid, and terrorism.Oxford Economic Papers,66(1), 25-50. Bayraktar, N. (2013). Foreign direct investment and investment climate.Procedia Economics and Finance,5, 83-92. Castro, C., Nunes, P. (2013). Does corruption inhibit foreign Direct investment?.Poltica: Revista de Ciencia Poltica,51, 61-83. Hayakawa, K., Kimura, F., Lee, H. H. (2013). How does country risk matter for foreign direct investment?.The Developing Economies,51(1), 60-78. Islam, K. A. (2015). Foreign Direct Investment (FDI) in Bangladesh: Prospects and Challenges and Its Impact on Economy.Asian Business Review,4(1), 24-36. Kim, P. H., Li, M. (2014). Injecting demand through spillovers: Foreign direct investment, domestic socio-political conditions, and host-country entrepreneurial activity.Journal of Business Venturing,29(2), 210-231. Mostafa, R., Klepper, S. (2017). Industrial development through tacit knowledge seeding: evidence from the Bangladesh garment industry.Management Science. Rahman, A. (2015). Impact of foreign direct investment on economic growth: Empirical evidence from Bangladesh.International Journal of Economics and Finance,7(2), 178. Sarker, M. N. I., Bingxin, Y., Sultana, A., Prodhan, A. Z. M. S. (2017). Problems and challenges of public administration in Bangladesh: pathway to sustainable development.International Journal of Public Administration and Policy Research,2(1), 008-015. Shah, M. H. (2014). The significance of infrastructure for FDI inflow in developing countries.Journal of Life Economics,2(1), 1-16. Uddin, M. A., Ali, M. H., Masih, M. (2017). Political stability and growth: An application of dynamic GMM and quantile regression.Economic Modelling,64, 610-625.