Poor access to long-term finance liable
Abu Sazzad: The government has set the private sector investment target to GDP (Gross Domestic Product) at 28.20 percent for the next five fiscal 2021-21 to 2024-25, according to the draft policy of the eighth seventh-five year plan.
Experts said, the Planning Ministry has set the ambitious target as the government fails to increase one percent investment in the last five years.
According to Bangladesh Bureau of Statistics (BBS), the private investment GDP was 23.40 percent in the last fiscal year 2018-19, followed by 23.26 percent in 2017-18, 23.10 percent in 2016-17, 22.99 percent in 2015-16 and 22.07 percent in 2014-15.
However, the private investments are constrained by a lack of land, reliability of energy supply, poor connectivity, cumbersome regulatory processes as well as regulatory unpredictability, high corporate taxes, limited access to long-term finance and shortage of skills, said experts.
Without removing the constraints, it will be difficult to achieve a sustained increase in the private investment rate, they opined.
They said private sector investment is crucial to reduce poverty and employment generation. The current credit flow to the private sector is not satisfactory because of the rising NPL in the banking sector.
However, the total amount of investment stood at Tk 8.0 trillion in the last fiscal year. Of which, the private sector investment contribution was Tk 5.93 trillion or almost 75 per cent which is indicating that the private investment is essential for the steady growth of Bangladesh.
Talking to Daily Industry, former Bangladesh Bank Governor, Dr Mohammed Farashuddin told that Bangladesh remained almost stuck in terms of private- sector investment-to-GDP ratio over the year which is a concern for the steady growth of the economy.
He recommended that the government should find out policies as to why the private sector is reluctant to come in a much bigger way and why illicit financial flows cannot be stopped.
Banks are failing to provide adequate fund to the productive sector which should be changed to increase the private investment to GDP as well as to expand private sector, Farashuddin added.
The former governor said, the country needs to examine the coordination between fiscal, monetary and exchange policies in this regard.
The trade rival countries like India, Vietnam, Indonesia and Thailand were able to appreciate their currency against US dollar for export growth but Bangladesh is lagged behind it.
Director of Policy Research Institute (PRI) Dr. Ahmad Ahsan said, the private-sector investment declined in recent times. He raised a question that why Bangladesh is receiving poor FDI whereas Vietnam and Indonesia get $8.0 or $9.0 billion.
Infrastructure deficit and political uncertainty are the two major reasons behind the reluctance of foreign investors.
CPD Research Fellow Towfiqul Islam said Bangladesh, while preparing for LDC graduation, should not only review the existing policy regime but also accelerating implementation of policies, plans, acts, strategies and initiatives.
Improving investment environment through financial-sector reforms, tax and legal reforms, better governance and business regulations are also important, said Islam.
A number of supply-side constraints in the form of weak infrastructure and the high cost of doing business are needed to be addressed to attract much foreign direct investment (FDI)
Apart from this, there is a need for faster and quality implementation of these projects, as delay in implementation, cost overrun, and sub-standard quality of projects are long-standing problems in Bangladesh which discourage private investment.
The current level and quality of human capital in the country discourage enhanced private investment. The public spending on education and health as percentages of GDP in Bangladesh is among the lowest in the world. The country, therefore, needs to attach vital emphasis on improving the existing low level of human capital by enhancing investment on education, skill development, and health facilities, said Prof Dr Selim Raihan, Department of Economics, Dhaka University.
Experts, however, improvement in business environment through ensuring of quality infrastructure, reduction in bottlenecks in doing business, removing corruption and ensuring good governance, advancing quality of human capital and reforming investment promotion-related policies should be main concerns for boosting the private investment.