Special Correspondent :
Private investment has remained stagnant since financial year 2010-11, posing a big challenge for Bangladesh to achieve higher economic growth outlined in the Seventh Five-Year Plan (spans from financial year 2015-16 to 2019-20).
Implementing the plan requires total investment of 34.4 per cent of GDP by 2020, of which the share of private sector has been projected at 26.6 per cent. But the private investment was hovering between 22 and 23 per cent of the GDP in a period of last eight years.
“Private investment is a key determinant of economic growth and development. But it remains stagnant over the last few years due to poor infrastructure, unreliable energy supply, corruption, low-labour productivity, high cost of doing business, complicated tax-system, bureaucracy and political instability,” Dr AB Mirza Azizul Islam, a leading economist of the country, told The New Nation yesterday.
He said the economy has the potential to grow over 8.0 per cent per year but the growth is falling short of expectations due to lack of necessary investment.
Private investment as a proportion of gross domestic product (GDP) would stand at 23.25 per cent in the outgoing fiscal, according to the Bangladesh Bureau of Statistics (BBS).
“The GDP growth has been projected at 7.8 per cent for the next fiscal (2018-19) which is highly ambitious. Achieving the target is almost impossible under the prevailing investment climate,” said Mirza Aziz.
In the past ten years starting from 2009, Bangladesh achieved the average GDP growth rate of 6.6 per cent.
The Seventh Five-Year Plan has targeted 8.0 per cent GDP growth for financial year 2019-20.
“Private investment remains static over the years posing a formidable challenge on sustaining higher economic growth and job creation,” Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, told The New Nation yesterday.
He said several obstacles are blocking the revival of the investment. One major factor holding back the investment is the reforms regarding ease of doing business. Besides, bringing discipline in the banking sector and lending interest rate cut is also needed to boost investment.
When asked, Dr Ahsan H Mansur said, the prospect of pushing through tough reforms is bleak and it may further extend the period of investment stagnancy, ultimately affecting the GDP growth.
“Overall investment scenario particularly private sector investment continued to show a sluggish trend in the recent years due to lack of inadequate infrastructure, industrial plots and regulatory reforms. Political uncertainty, banking sector scams and high cost of doing business are also blamed for the situation,” Dr Zahid Hussain, Lead Economist, the World Bank’s Dhaka office told The New Nation.
“All these have created an unfriendly investment climate eroding the investors’ confidence. The government must ensure an investment-friendly environment to boost up private investment.”
Replying to a question, Dr Zahid Hussain, said, “Yes, public investment is increasing every year as proportion to GDP. But its effect is yet to be seen on private investment as the government fails to ensure qualitative expenditure.
He said the government is implementing mega projects to remove infrastructure bottleneck. But most of them are running with time and cost overrun ultimately harming the economy.
“Private investment would jump if the government implements the mega projects within the stipulated time and ensures quality ADP implementation,” he added.
Dr Zahid Hussain, however, observed that the government is pursuing a slow administrative reform to expedite the implementation of development programme and engaged in routine matters in an election year, which can slow down the economic growth.
“The current scenario suggests that the growth target outlined in the proposed budget will remain unrealized due to lack of reform measures by the government,” he added.
“Unfavourable business climate is the main reason behind the low investment in the country,” MK Mujeri, former Chief Economist of Bangladesh Bank told The New Nation.
He said private investment has to be raised to 26 per cent of the GDP from 23 per cent to achieve the growth targeted in the Seventh Five-Year Plan.
“We need massive private investment to sustain growth and create jobs. But attracting adequate investment remains an impossible task due to lack of necessary regulatory reforms,” said MK Mujeri.
