Staff Reporter :
Corruption is the main factor that increases microeconomic risks in Bangladesh and also acts as a risk multiplier for other distortions, a joint UK and US study revealed recently.
The study titled ‘The Inclusive Growth Diagnostic Study’ was jointly funded by UK Aid and US Agency for International Development [USAID].
The British government and the USAID produced the study surveying the investment climate in Bangladesh and identifying the importance of addressing energy availability and protecting property rights.
A media release issued by the British High Commission in Dhaka on Tuesday said the potential investors might take into account when making investment decisions in Bangladesh seeing analysed data and information in the report.
However, there was no recommendation in the report how the country could overcome the problems.
Although the study did not reference education as a major investment issue, it noted the importance of education policies – particularly in tertiary education – to support Bangladesh’s future economic potential.
The study identified the importance of addressing energy availability and protecting property rights. Besides, it assessed the challenges faced by investors in the garment and textile sectors, including power supply, labor skills, and access to finance.
It also analysed the constraints facing women entrepreneurs, looking in particular at social norms that restrict opportunities, educational attainment and limits to economic empowerment that come from owning fewer valuable assets in the first place.
The study suggested that Bangladesh needs sustained and inclusive growth for decades to “escape from poverty”. It mentioned that Bangladesh has made remarkable progress over the past two decades, lifting millions out of poverty and sustaining expanding levels of economic growth.
“These achievements have been realised despite major internal and external challenges, including global economic downturns, natural disasters and periods of political uncertainty,” the study said.
Making comment on the study, DFID Country Representative Sarah Cooke said, “It is vital we create a detailed, shared understanding of the challenges facing investment in Bangladesh. This supports work across the development community, the Bangladesh government and the private sector to speed up inclusive economic growth.
“The report adds valuable new insights, benefitting from the input of both UK and US analysts, building on what we already know. I hope it will be widely read and support further collaboration,” she said.
USAID Mission Director Janina Jaruzelski also pointed to this effort as “an opportunity for additional collaboration between the donor community and the government of Bangladesh, as it develops its economic policy priorities, including the next Five Year Plan.”
Meanwhile, the study identified the importance of addressing energy availability and protecting property rights. It found governance and power issues “the most binding constraint” for economic growth of Bangladesh.
It found the process of contract and property rights enforcement “costly, cumbersome and uncertain”. This combining with an “inefficient and ineffective” land tenure system constrains private sector investment and growth.
The Bangladeshi business environment is one in which Bangladesh firms face “high temporal and administrative costs” in doing business, the study report said, and added, “Corruption seems to underpin all microeconomic risks in Bangladesh by acting as a risk multiplier for other distortions.”
“The combination of inefficient land administration and management system, and poor contract and property right enforcement combined with persistent corruption is increasingly impeding growth in Bangladesh.”
It said the long-term growth prospects for Bangladesh depended heavily on its ability to overcome a series of interrelated micro-level distortions, particularly poor contract enforcement and corrupt, costly and ambiguous land tenure system.
“Electricity is the most binding constraint to economic growth as the shadow price of electricity is extremely high. The unserved energy cost is many times higher than that of paid bulk tariff rates for electricity.”
“Moreover, the firms and the government itself attempt to bypass the difficulties caused by lack of electricity access by using private generators and building export processing zones (EPZs) with reliable electricity infrastructure to attract both foreign and domestic investment,” it added.
The report said, “Unless strides can be made in bridging the current electricity supply gap, Bangladesh’s economic growth rate will continue to under-perform relative to its potential.”
