Bangladesh's capital machinery imports record remarkable decline

The capital machinery import has declined notably in recent months, reflecting the negative impact the Covid-19 is having on the country's economy, analysts said on Friday.

Statistics show the capital machinery import dropped by 13 per cent to $2.63 billion in the first nine months of this fiscal year (FY) 2020-21.

During the same period in FY 2020, according to the Bangladesh Bank (BB) and the National Board of Revenue (NBR) data, the import was recorded at $3.01 billion, which was lowest in six years.

The capital machinery import during the outgoing fiscal, if the recent trend persists, might marginally cross the level of the FY2020.

Higher import of capital machinery represents a boost in investment in industrial and infrastructure development.

In Bangladesh, businesses usually import capital machinery for expanding industrial units and setting up new plants, and the government does it to develop infrastructures.

An FE analysis found that capital machinery import was the highest in FY 2018 in seven years, starting from FY2015, when local businessmen and the government bought the machinery worth $5.46 billion from abroad.

The procurers brought in the equipment for expanding their industrial plants or setting up new factories or developing infrastructure.

Since then, the import has been on the decline, according to the BB data obtained from the NBR's customs department.

A big fall was registered in the FY 2020 when the machinery import plunged by nearly 34 per cent year on year to $3.58 billion. The pandemic was responsible for this.

During the July-March period of FY 2021, the import showed a falling trend as it dropped by 12.76 per cent to $2.63 billion from the same period in FY 2020.

The FE analysis, however, found the machinery import statistics between FY2015 and FY2018 an indicator of a booming economy.

According to the central bank, capital machinery import in FY 2015 stood at $3.32 billion.

In FY 2016, the import rose to $3.55 billion. The import swelled by 7.35 per cent to $3.82 billion in FY 2017, the BB data showed.

But the capital machinery import jumped to 5.46 billion in FY 2018, maintaining a massive 43-per cent rise over that of the previous fiscal.

Economists and analysts said coronavirus has hit hard the local economy and, resulting in lower import of capital machinery and other allied products for more than a year now.

The pandemic started to affect investment and businesses since the last quarter of FY 2020 and many struggled hard to continue production and dropped their planned expansion.

Policy Research Institute executive director Dr Ahsan H Mansur spoke about the severe impact of Covid-19 on investment and a drop in the capital machinery import.

"The country's weak economic scenario over the past few years had also been a factor in the fall in capital machinery import," he told the FE.

"Weak export growth, poor tax-GDP and investment-GDP ratios, slow private-sector credit growth and inadequate revenue earnings did also speak of a weak economy. In such a situation, the investors have reasons not to invest here."

"You see, when an economy grows at more than 7.0-8.0 per cent rate but its investment-GDP ratio remains stagnant at 22-23 per cent-what types of message it beckons to businessmen?" Mr Mansur said.

"It must not be a good signal for investors," he observed.

Dr Zahid Hussain, former lead economist at the World Bank in Bangladesh, said Covid-19's impact was the key reason for a decline in the capital machinery import.

Since the local and external demand for different products had fallen, he said, businessmen neither showed interest in the expanding their existing industrial units nor starting new ventures.

"Large infrastructure like Padma Bridge project authority need not procure big machinery… as they already did that one or two years back. So, the import has shown a negative trend in recent years."

However, Mr Hussain sees better prospects for Bangladesh as overseas economies like the US and the European Union are now growing as the virus shock has started easing there.

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