Continuation of the existing political stability over the next five to 10 years, lower interest rate and ensuring the security of lives and assets are a must to accelerate private investments which is essential for achieving a higher
economic growth, said a leading economist here on Sunday. “The most important precondition is not only the current political stability but also an assurance that the stability will continue for at least five to 10 years,” Dr AB Mirza Azizul Islam, a former finance adviser to a caretaker government, told a post-budget discussion in the city.
He said, nobody will go for private investment as long as there is an ‘uncertainty’ over the political climate.
“In an ultimate analysis, the objective is to accelerate (GDP) growth, and to do that we’ve to accelerate private investment. I’m sure whether the budget will address all the concerns and determinants related to private investment,” Aziz said.
Reducing the rate of corruption, improving the efficiency of the administration to avert delay in project implementation and lowering lending interest rate which is on the rise will have to be ensured to boost investment for achieving a higher economic growth, he said. Metropolitan Chamber of Commerce and Industry (MCCI) in collaboration with Policy Research Institute (PRI) arranged the discussion titled ‘Budget 2014-2015: Views of the Business Community’ at its auditorium in the city. State Minister for Finance MA Mannan, MP spoke as the chief guest at the programme held with MCCI President Rokia Afzal Rahman in the chair. PRI Executive Director Dr Ahsan H Mansur and MCCI committee member Adeeb H Khan made two presentations at the discussion.
PRI Chairman Dr Zaidi Sattar, MCCI Vice President Anis A Khan, Managing Director of AK Khan & Co Ltd Salahuddin Kasem Khan and former MCCI President M Anis Ud Dowla also spoke on the occasion. Business leaders and prominent personalities, including UNB Chairman Amanullah Khan, were present. Mirza Aziz said the country has witnessed a rise in total investment-GDP (gross domestic product) ratio but it has been drivenby public, not private investment.
“To accelerate growth, private investment to GDP ratio has to go up substantially. To achieve a 7.3-percent GDP growth will require 33 percent of investment to GDP ratio,” he said.
Explaining the determinants of boosting private investment, he said well-developed and relatively inexpensive infrastructures are an important determinant. “The budget has tried to address the problem through increased allocation for transport, energy and power.”
Mirza Aziz, however, mentioned that the increased power generation has come through rental power plants which are very expensive. “We don’t see any mention about the use of domestic coal in the budget statements. There’s a paradox. We’re going for coal-based power generation, but not using our own coals,” he said.
He mentioned that delays in implementing large projects now have become a usual feature, and this is also a matter of concern. Mirza Aziz also said fiscal incentives or tax benefits will encourage private sector investment but it is not enough to boost investment. “Fiscal incentives play a role, but it plays relatively a minor role if other determinants don’t work properly,” said the former finance adviser.
He said, an easy access to credit with a lower interest rate on lending are a must for increasing investment. “If the interest rate isn’t reduced, investment won’t increase which will ultimately hamper the economic growth.” Mirza Aziz also said this is not an encouraging situation for investors if the sense of insecurity over lives and property is not removed. Speaking as the chief guest, MA Mannan said the lack of confidence is the major barrier, and the government is trying to boost investors’ confidence to increase private investment. “We think we’re in the right direction.”
He said, the government this time focused on a number of areas in the proposed budget which had remained uncovered in the past. “This can be done only by a government which is sensitive towards people’s needs.” The State Minister said their objective is to ensure people’s welfare, and sought cooperation from all in implementing the budget.
About criticisms by the Centre for Policy Dialogue (CPD) over 7.3 percent GDP target, he said, “We can’t say for sure the 7.3 percent will be achieved or you (CPD) can’t say achieving the 7.3 percent growth is impossible.” Mannan assured that he would convey the recommendations of the discussants to the Finance Minister for reconsideration. Rokia Afzal said, the size of this year’s budget is amply big and MCCI supports that. “We look forward to a period of stability and economic prosperity.”
She urged the government to take appropriate measures for the capacity building of the administrative system enabling it to implement the budget. Zaidi Sattar said, “At the end of the day, we’re all consumers who have to bear the burnt of tariffs through higher prices. However, pre-budget consultations were not held with consumers.
