The weakness in financial sector and infrastructure deficit are the major factors affecting the country's private sector investment and its economic growth. This has been noted by the International Monetary Fund (IMF) in its recent global report where it relates to the Bangladesh economy. The constraints in the case with Bangladesh stem in part from low-quality public investment and inadequate infrastructure maintenance, the Fund observed.
A good number of the country's economists hold the view that perception about uncertainties of the Bangladesh polity and governance-related problems are failing to tap in private investments. Private investment in terms of the country's gross domestic product (GDP), according to them, dropped in the current fiscal for an unsure business ambience, coupled with its troubled polity.
Overall private consumption in the country did also show a downtrend, tending to sap the vitality of its economy. The government faces a challenging time in its bid to spur demand and to drive economic growth through new investment activities.
The latest provisional data of Bangladesh Bureau of Statistics (BBS) -- an agency of the government -- show that the private investment-GDP ratio at current prices has fallen by 0.39 percentage points to 21.78 so far during this fiscal year (FY), 2015-16.
In last FY2015, the private investment in terms of GDP was 22.07. The country's overall investment-GDP ratio will increase to 29.38 in the current FY from 28.89 in FY2015 mainly due to a higher level of money injection by government into development works and other expenditures, as reports in the media indicate.
Although public investment has been on the rise over the recent years, the people are yet to get the expected positive results from it. Despite investment of a large amount of public sector money in projects like Dhaka-Chittagong four-lane highway, no appreciable result is yet visible. This is cited here as an example to illustrate how inefficiencies on the part of the government agencies are failing to net in private sector investments to the desired level.
Lack of quality public investment, as the analysts believe, is one of the major reasons for an inadequate level of private investment. Government investments have recorded a rise but their desired benefits have continued to delude the people primarily for reasons of questionable quality of the development works on many counts as well as poor capacity of the public agencies, they noted.
An otherwise sluggish global economic scenario has furthermore impacted the investment situation in Bangladesh. The government has not yet been able to tap the potential for bringing more overseas investments, in the absence of energy security, scarcity of land, transportation bottlenecks, and lack of necessary policy reforms.
Due to the long-lingering constraints to ensuring access to power and gas connections, private investment is failing to pick up. There are examples that many industries that were set up in the country some years back, are still waiting in the wings to go for commercial operations due to lack of power and gas connections. Many applications for new ventures are still pending. Banks are sitting on tonnes of money. As of now, Tk 175 billion are reportedly lying idle in the country's banking system. But the economy continues to be in a state of stagnating investment.
Electricity generation, as the functionaries of the government are quite often heard to say, has reached its peak in recent times. Then why are these industries not getting its supply? Gas crisis is a matter of great concern. Private entrepreneurs are waiting for years to get its supplies, notwithstanding the repeated assurances by the government about providing connections sooner than later. Moreover, the country's natural gas reserve is depleting fast. If new reserves are not found now in both its offshore and onshore areas, industrial growth performance will be adversely affected.
Then there is a severe scarcity of land. Entrepreneurs are not getting the required land for their new ventures. The government is committed to offering land to both foreign and local investors by creating several economic zones across the country. But the process is being delayed due to bureaucratic procedural tangles about the operationalisation of such zones.
According to the official data, the country's private sector investment has been hovering around 22 per cent of the GDP since FY 2011-12. Crippling regulations and bottlenecks in ensuring critical infrastructural facilities have led to a stagnant situation about private sector investment.
The government is endeavouring to give a modern facelift of the country's economy and also to make it more market-oriented. For this to happen really, the administered prices of electricity and gas should be set rationally. The cost of production and thus of doing business should also remain low as far as possible. Otherwise, it will be too much to hope for an accelerated momentum of investment-related economic activities.
While domestic private investment has remained sluggish, capital flight, as the observers note, has been taking place on a higher scale, mainly through mispricing of both imports and exported merchandise.
Besides infrastructure deficit, the sluggish pace of reforms in financial, institutional and administrative sectors been putting a damper on business confidence of both actual and potential investors.
The country's labour market witnesses 2.0 million new entrants every year. Creation of jobs for those new entrants will present yet more daunting challenges, if the pace of industrialisation is not accelerated and new private investments do not pick up to the desired level. New job creation in the domestic economy has now become all the more important, against the backdrop of falling external outflow of migrant workers.
Furthermore, private investment is the single most important driver to help accelerate the country's growth towards attaining the sustainable development goals (SDGs).That is precisely the reason why all-out efforts do need to be made in a concerted way through a synergy of actions to promote, facilitate and encourage new private investments, particularly in the productive sectors of the country's economy.
[email protected]
- Saturday, 20 April 2024 |
- Today's FE |
- e-Paper |
- Beta Website
