Sahara in Bangladesh: Opportunity or threat?

Subrata Roy Sahara

On May 23, 2012 a Memorandum of Understanding (MoU) has been signed between the housing and public works ministry of Bangladesh and India's large conglomerate Sahara India Pariwar for large-scale investment in the housing industry. The Sahara India Pariwar belongs to Subrata Roy Sahara, a mechanical engineer by profession, who has been named among the 10 most powerful people of India by 'India Today'. In 2004, the Sahara group was termed by the Time magazine as the second largest employer in India after the Indian Railways. Subrata Roy also owns Pune Warriors India (IPL cricket team), Grosvenor House Hotel(London), Aamby Valley City and has 42.5% stake in Force India (source: Wikipedia). Born in Bihar, aged 64, he loves to address himself as managing worker instead of managing director or CEO of Sahara group. Through subsidiaries he involves himself in a variety of businesses in India, such as-- real estate, media, film, tourism, healthcare, hospitality, sports, information technology and so on.

With the purpose of doing business in Bangladesh, Sahara developed a company titled Sahara MatrivumiUnnoyon Corporation Ltd and appointed an influential ruling party leader's son as its director and pioneer of their business in this country. Sahara sought 100,000 acres of land from the government to build a township. Though the government is still reticent about the content of the MoU but according to a newspaper report, the MoU would expire if no definite agreement is arrived within 36 months from the date of its signing. 

Mixed responses are heard from different quarters whether the advent of Sahara group in Bangladesh is a threat or an opportunity. Government is allowing Sahara in Bangladesh as per its policy of foreign direct investment (FDI) in the backdrop of high demand for housing in the city of Dhaka. Sahara corporation also announced to invest initially $100- 125 million. No doubt, this sounds good. But allowing FDI in a vital sector as real estate has reasons to be fraught with adverse reactions because we have a fast growing real estate industry of our own. Strategically, it is not sagacious to allow FDI in priority sectors where we have scope, strength and potential to flourish. It is a general perception that vital sectors like power, energy, irrigation, housing, real estate, telecom etc., should be kept off the ambit of foreign investment because the return will be siphoned out of the economy in the form of dividend and divisible profit. According to the REHAB, the association of the real estate developers, with their collective efforts they are successfully implementing their housing and real estate projects, handing over some 12,000 flats and 6,000 plots to the buyers annually. This definitely indicates the growing strength of this sector in Bangladesh. 

Every country, no matter the size of its economy, has its own strengths and potentials in some sectors which the respective governments try as far as practicable to protect. Countries in the Middle East are endowed with oil and minerals, so are China and Japan with the manufacturing of electronic goods, garments and car respectively. In Bangladesh, besides RMG, real estate must be reckoned with as our strength. Hence, permitting FDI in this sector is not viewed in good grace by all concerned, within and beyond the industry. While the local entrepreneurs developed the industry over a period of last two decades and made available skilled workforce and necessary logistics, allowing a foreign developer to reap the ready benefit is a sheer neglect to the domestic players, and more so, a negation of prospects in terms of income generation from a home-grown industry. 

Already Transparency International Bangladesh (TIB) has raised questions about the MoU and asked the government to divulge the conditions since land in Dhaka is sparse, and without a cost-benefit analysis and proper risk assessment it is unwise to sign any such contract. That Sahara's proposal will not be well received by many in this country is a fact that Sahara knows well enough. And if I am not wrong, the mega offer by Sahara to be the main official sponsor of the Bangladesh cricket team is a corporate trick to turn public sentiment positively towards them, let alone business. 

FDI is always welcome to us but not in the primal sectors by ruining our potentials. There are many underdeveloped sectors where investments, both foreign and local, are very crucial and the profits could be shared on a win-win basis. In the aforementioned context, our expectation to the government is that they will address this issue with utmost seriousness in order to ensure that nobody is be allowed to indulge in a zero-sum gain. A wrong step forward can destroy our real estate industry with dire consequences. Looking at the self interest of an individual or of a vested quarter is despicable, while looking at the collective interest of the country is commendable indeed.

This article is published in The Financial Express, Views & Analysis, (Sunday, June 03, 2012)

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