THE New Nation on Tuesday reported that as the private sector’s investment continues to show a sluggish trend due mainly to high lending rates, infrastructure bottlenecks and political risks. Economists and business leaders have therefore urged the government to devise strategic plans for accelerating private sector investment to end the stagnation in the economy. Everyone knows that private sector is the engine of economic growth and its revival from continued stagnation requires such plans to restore vibrant economic growth.
For accelerating private sector investment, government’s policy to provide ‘one-stop service’ to investors is very important, as everybody knows it. But in reality it remains only on paper without efficient service windows in place to encourage investors. The national economy could return to potential growth trajectory if sectoral targets could ensure quick delivery of inputs services to investors trying to set up new business.
Achieving 7 percent growth is the government’s immediate target and then to move upward to 8 percent in the next few years but higher lending rates are the main bottleneck to investment to achieve such target. Moreover, political stability is also a must to ensure macroeconomic stability and risk free investment climate. The GDP-investment ratio is much below 35 percent needed for a 7 percent growth. It is now around 28 percent and it must grow faster. Again the 16 percent or so high lending rate to business is not supportive for long term investment and experts expectations that the government should devise ways to encourage banks to reduce lending rates at single digit is quite rational in this respect. Positive business climate is also a must improve including law and order to lure local and foreign investment. Gas, electricity, infrastructure, ports, roads and railways need to be upgraded to provide support services to a fast growing economy and that is what experts meant when they suggested strategic plans for each and every sector. Mere tall talks will not work and it needs coherently consistent business policies; which are absent now beyond political rhetoric.
What is noticeable is that banks are overloaded with defaulted loans, which means they will have to make high provisioning against bad loans. But this in turn is going to reduce banks’ ability to reduce lending rates at single digit to expand investment and end stagnation. The government pressure on banks to write off loans or frequently extend undue rescheduling of loans to vested interest groups is not supportive to run banks on cost-benefit basis.
In fact, guidance is not coming from the government or the Finance Minister himself. The banks have all the arbitrary power to force defaulting borrowers to repay loans or face actions, why government should interfere.
We have become a leaderless country where everybody is free to be irresponsible in public affairs. Any sensible government will be anxious to use the talents of the nation for doing the right things. But here personal adulation is the road to our personal success.
