BSS, Dhaka :
Bangladesh needs to boost investment in infrastructure and skills development to raise the economy’s productive capacity if it hopes to upgrade economic growth to a 7%-8% trajectory, says a new Asian Development Bank (ADB) report.
The flagship annual report of ADB, Asian Development Outlook 2014 (ADO), released Tuesday, estimated a lower GDP growth at 5.6 percent for the current financial year 2013-14, owing to a decline in remittances and domestic demand last year because of prolonged political unrest before the January 5 national elections.
The report, however, forecast that the GDP growth would rebound to reach at 6.2 percent in the coming 2014-15 financial year, driven by higher remittance and export growth besides the spillover impact of the economic recovery in Bangladesh’s major export market including the USA and European countries.
The ADB noted that the investment, which remained “virtually stagnant at around 25%-26% of GDP over the past several years,” needs to be raised to the 32%-33% range, as envisaged in the Sixth Five-Year Plan to achieve the higher growth prospect.
“Clearly, more public resources should be mobilized to finance large infrastructure investment requirements in electric power, gas, ports, railways, roads, and urban services, and to enhance the skills base to strengthen the garment industry, help diversify the economy and raise global competitiveness and growth,” the Bank said.
The ADB also advised increasing the revenue resources by simplifying laws and procedures, improving logistics and automation, and reducing scope for evasion with the introduction of advanced auditing and enforcement techniques.
Moreover, fiscal space needs to be expanded by cutting subsidies, which requires raising electricity prices to reflect the cost of production vis-.-vis other options, and by aligning fuel prices with international oil prices, the Bank said.
For instance, the ADB said gas prices need to be set keeping in view gas prices on the international market and the cost of alternative fuels. The resources freed up could be allocated for infrastructure and human resource development.
Public sector capacity for project design and administration, procurement, audit, and financial management must be enhanced to make project implementation more efficient, the ADB said.
In addition, it suggested that projects under public-private partnerships need to be advanced by developing the capacity in line agencies to design, bid, and award such contracts.
The ADB saw weak governance in state-owned commercial banks undermined the strength and efficiency of banking sector, the main financing source for private investment.
“However, in line with the latest memorandum of understanding between these banks and the central bank, performance is to be improved by adopting stronger risk management and controls, and by placing ceilings on credit growth for each bank based on its performance and financial soundness”, the development bank said.
For stock market development, it advised that the ongoing capital market reforms to enhance market stability and governance need to be deepened through development of a liquid bond market to expand sources for private sector financing.
To improve the business climate, it said the trade regime needs to be liberalized through tariff and non-tariff reform. Import duties need to be cut, and the dispersion in rates and average level of protection lowered to boost competitiveness and reduce biases against exports.
Bangladesh needs to boost investment in infrastructure and skills development to raise the economy’s productive capacity if it hopes to upgrade economic growth to a 7%-8% trajectory, says a new Asian Development Bank (ADB) report.
The flagship annual report of ADB, Asian Development Outlook 2014 (ADO), released Tuesday, estimated a lower GDP growth at 5.6 percent for the current financial year 2013-14, owing to a decline in remittances and domestic demand last year because of prolonged political unrest before the January 5 national elections.
The report, however, forecast that the GDP growth would rebound to reach at 6.2 percent in the coming 2014-15 financial year, driven by higher remittance and export growth besides the spillover impact of the economic recovery in Bangladesh’s major export market including the USA and European countries.
The ADB noted that the investment, which remained “virtually stagnant at around 25%-26% of GDP over the past several years,” needs to be raised to the 32%-33% range, as envisaged in the Sixth Five-Year Plan to achieve the higher growth prospect.
“Clearly, more public resources should be mobilized to finance large infrastructure investment requirements in electric power, gas, ports, railways, roads, and urban services, and to enhance the skills base to strengthen the garment industry, help diversify the economy and raise global competitiveness and growth,” the Bank said.
The ADB also advised increasing the revenue resources by simplifying laws and procedures, improving logistics and automation, and reducing scope for evasion with the introduction of advanced auditing and enforcement techniques.
Moreover, fiscal space needs to be expanded by cutting subsidies, which requires raising electricity prices to reflect the cost of production vis-.-vis other options, and by aligning fuel prices with international oil prices, the Bank said.
For instance, the ADB said gas prices need to be set keeping in view gas prices on the international market and the cost of alternative fuels. The resources freed up could be allocated for infrastructure and human resource development.
Public sector capacity for project design and administration, procurement, audit, and financial management must be enhanced to make project implementation more efficient, the ADB said.
In addition, it suggested that projects under public-private partnerships need to be advanced by developing the capacity in line agencies to design, bid, and award such contracts.
The ADB saw weak governance in state-owned commercial banks undermined the strength and efficiency of banking sector, the main financing source for private investment.
“However, in line with the latest memorandum of understanding between these banks and the central bank, performance is to be improved by adopting stronger risk management and controls, and by placing ceilings on credit growth for each bank based on its performance and financial soundness”, the development bank said.
For stock market development, it advised that the ongoing capital market reforms to enhance market stability and governance need to be deepened through development of a liquid bond market to expand sources for private sector financing.
To improve the business climate, it said the trade regime needs to be liberalized through tariff and non-tariff reform. Import duties need to be cut, and the dispersion in rates and average level of protection lowered to boost competitiveness and reduce biases against exports.
