Staff Reporter :
The World Bank (WB) has said that the economy of Bangladesh is gradually recovering from prolonged disruptions, aided by political and macroeconomic stability but the challenge now is consolidate this by accelerating investment and restoring discipline in the banking sector.
“Private investment need to increase significantly along with improving the quality of public investment to accelerate economic growth in an inclusive and sustainable manner,” WB said this in a report tilted ‘Bangladesh Development Update.’ The report released on Tuesday through a media briefing at the WB’s Dhaka office.
It said the economic activities in FY14 suffered a setback due to political turmoil, declines in remittance and private investment. “Political uncertainty and weak competitiveness are dragging acceleration of private investment as well as economic growth. The slow implementation progress of ongoing development projects is also undermining the growth prospect of the country”.
“Political stability since January, increase in remittance inflows, expected recovery in exports following a weak start, and a buoyant consumption demand than last year, bode well for growth in FY15, which is projected at 6.2 per cent from 6.1 per cent in the last fiscal,” added the report.
The government of Bangladesh set a GDP growth target of 7.3 per cent for the 2014-15 fiscal year.
The global lender earlier this month, said Bangladesh found a way back to political stability and its GDP growth would recover and rise to 6.2 per cent depending on macroeconomic stability and domestic consumption.
Elsewhere in the economy, the agricultural growth of Bangladesh will be 2 per cent in contrary to what was 3.3 per cent in October last year, it said.
The growth in the industries sector is projected at 9.5 per cent for the current fiscal compared to the 8.4 per cent growth in this sector last fiscal. The growth in service sector is predicted at 6.1 per cent compared to 5.8 per cent last fiscal.
WB in its report said, the government should expedite implementation of mega infrastructure project to achieve an inclusive and sustainable economic growth to promote Bangladesh to middle-income country.
There is a need to focus on speedy completion of transformational ongoing projects in the road and energy sectors, particularly the Dhaka-Chittagong and Dhaka-Mymensingh highway; double tracking of Dhaka-Chittagong Railway; the Padma Bridge, the Dhaka metro rail and the two Bibiyana gas field based large power plants to reach a high economic growth path, the report said.
“The government should prioritize the most transformative projects and provide all necessary resources for completion within a specified timeline,” suggested the report.
Expressing concern over the loan irregularities in the country’s banking sector, the WB said, these incidents were the outcome of poor credit risk management by the respective banks.
It also observed that asset quality in the state-owned commercial banks (SCB) deteriorated in FY14 due to political unrest, poor lending decisions and change in loan classification standards. “BB has started implementing the new provisions related to lending and bank’s exposure to stock markets. This should prevent excessive risk taking by the bank,” it added.
The report also said that moving forward in the immediate future, stronger attention is needed to swiftly complete the transition in the garment industry, finish the critical ongoing road development projects, enact the Public Private Partnership (PPP) law, and award contracts to build Special Economic Zones (SEZs).
In garments, much more needs to be done for effective implementation of wage increases and the new labour legislations, recruiting more factory inspectors and complete building inspections followed by swift remedial measures such as relocation of closed factories.
It suggested for enacting the PPP law and equip the PPP office with staff having knowledge and experience in developing, negotiating and supervising PPP projects.
“A proper legal framework providing internationally attractive guidelines and incentive policies is essential. PPP cannot be managed as a part of the day-to-day bureaucracy,” the update said.
In addition, it said there is an urgent need for the government to finalize the awarding of contracts for the proposed economic zones to be developed under Bangladesh Economic Zone Authority (BEZA) while ensuring the related services such as power, gas, good road-connectivity, and security are available in the developed land.
The report acknowledged the progress in the fields of politics and economy after the January 5 national election, and suggested that the efforts of development need to be further consolidated in the near-term by sustaining GDP and remittances growth recovery, creating jobs, containing inflation, and making progress on improving the quality of service delivery in health and education.
Macroeconomic stability, improved governance in banking system, market development for long term financing, trade liberalization, and stronger attention to efficient implementation of infrastructure investments remain key factors in this process. Underlying inflationary pressures are expected to maintain a downward trend on continued policy restraint. Achieving this will depend on international price trends, domestic supply conditions and macroeconomic policies.
Bangladesh continues to make progress on human development and reducing extreme poverty. The country’s poverty rate is at 24.47 per cent now and Bangladesh is still under some risks, according to the report.
It also said progress in poverty reduction and shared prosperity is visible. The poverty incidence, based on national poverty line ($1.13 per capita per day), is projected to decline from 31.5 per cent in 2010 to 24.47 per cent by 2014. Employment and wage growth appears to have boosted shared prosperity – increased the income of the bottom 40 per cent.
