There is no denying the fact that Bangladesh is now confronting some major challenges in steering its economy to a higher growth trajectory. Such challenges are slow implementation of development projects, low investment and sluggish growth of revenue.
The challenges were identified many a time in countless meetings of the country's renowned economists, policymakers and high government officials. Economic analysts say high interest rate is an obstacle to increasing private investment. The shortage of land and a lack of electricity and gas connections are main obstacles to investment growth.
Analysts regret that the implementation of the annual development programme was always slow. The allocation increases every year but the ministries and divisions are unable to spend the budget. The fallout of deadly coronavirus pandemic is also responsible for slow implementation of the ADP.
According to an International Monetary Fund (IMF) expert, slowdown in exports and weak remittance growth are the new challenges for the economy. Bangladesh should implement the Value Added Tax (VAT) law and boost investment to attain sustainable growth as well as to become a middle income country, he said.
The Bangladeshi economy has undergone a major transformation over the past two decades, spearheaded by the rapid expansion of the garment industry, which has helped reduce poverty and acted as a catalyst for women empowerment. This resulted in a significant and sustained increase in per capita income, with Bangladesh now reaching lower middle-income status.
The country stands out in many development indicators such as poverty, inequality, life expectancy, infant mortality and access to water and sanitation. The authorities have also made good progress in financial inclusion. However, it needs to boost private investment to sustain high growth.
A significant increase in public investment is necessary to maintain competitiveness and generate further productivity growth. This needs increase in investment which is conceivable from a boost in revenues and FDI.
In order to move forward, the country's economic institutions and governance practice should to be upgraded to support its transition to middle-income status and as the country becomes more integrated globally.
There are many problematic factors for doing business in the country. Interestingly, some of these factors such as inadequate infrastructure, corruption, inefficient bureaucracy, limited access to financing and policy instability remained the same like the previous year.
Some major risks were also identified by the country's entrepreneurs at national and global level for doing business in Bangladesh in the next decade. The risks include situation arising out of the pandemic, failure in national governance, climate change adaptation, institutions and urban planning.
Successive governments did always claim to have made substantial progress in reforming business environment in the country. But many of such reform measures could not be implemented due to typical bureaucratic inertia.
Reforms are badly needed for creating congenial business climate to ensure higher economic growth, create more employment opportunities and reduce poverty level. In reality, some areas of business are over-regulated while others are less regulated. Only reforms can strike a balance between the such dichotomies.
In many of the Global Competitive Rankings (GCI), the country's performance has deteriorated in some major and sub-indices of businesses including institutions, financial market sophistication, goods market efficiency and technological readiness. Overall performance in efficiency enhancers, and innovation and sophistication for competitiveness also declined in the year.
However, a UN body has defined competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country which, in turn, sets the level of prosperity that can be earned by an economy. As for Bangladesh, identifying potential markets and buyers, difficulty in meeting quality and quantity as required by the buyers and high cost of domestic transportation still remain as major problems in export.
Local businesses' perception of government's implementation plan for utilising information and communication technology to improve overall competitiveness has significantly improved but availability of latest technology is otherwise unsatisfactory.
The existing level of corruption also encouraged the country's financial delinquency. However, other reasons such as black money, tax dodging and poor scope for investment were also responsible for worsening condition of the economy. Financial auditing and reporting standards remain weak.
The financial sector needs further reforms in order to become more competitive and efficient. In case of foreign trade and investment, export suffers due to a weakness in internal and external connectivity, pandemic, lack of diversity in products and markets and poor networking of entrepreneurs. However, the impact of the existing challenges is now less than before.
Reforms in Bangladesh should, in general, aim at facilitating easy access to loans for small and medium enterprises, improvement of customs clearance process, making tax payment easier, simplifying labour regulations and land issues. Besides, the businesses in the country have to be adequately prepared to confront major challenges like capital scarcity, inflation, labour problems etc.
However, the situation needs to improve -- substantially -- for creating a major stimulus among the investors -- both local and foreign. For the last few years, domestic investment has remarkably slowed down in Bangladesh. Despite official measures to reduce the cost of doing business, domestic investors are not putting in their money in new investments, particularly in the manufacturing sector. The shortage of power and gas did otherwise emerge as a major obstacle to new investments.
Why should investors go for setting up new units when the existing industries are finding it hard to continue with their day-to-day operations because of the shortage of power and gas? A good number of industrial units throughout the country have to face operational hazards due to power crunch.
The power supply situation should, in fact, be improved more. Many industrial units are still keeping their operations unhindered through captive power generators during load-shedding, thus adding to their cost. The power outage, already in operation in the name of load management, does still exist nominally. However, the government has recently started giving electricity connections to a number of new industrial plants at a limited scale.
In fact, the country's bid to win more overseas investment calls for reducing the cost of doing business. The economy should aim at becoming more and more competitive, especially to promote its external trade. Bangladesh has many things to do for making its economy more and more competitive. A vital requirement is to drastically improve and expand its infrastructure, transportation and solve the related problems.
An identical transportation improvement throughout the country is expected to help boost the economic output. But such improvement calls for otherwise building better highways, better maintenance of the infrastructure and other supportive action including the elimination of graft.
All modes of transportation need to be developed as soon as possible to keep pace with the country's business and economic development. An integrated strategic plan can develop the country's communication system on an urgent basis. With such facilities in place, Bangladesh can certainly emerge as a strong regional business hub by reducing cost of doing business substantially.