Investment in doldrums
THERE is an intrinsic connection between economic growth and investment. Growth without investment is quite unthinkable. The government aims to attain two-digit growth definitely through long-term plans as reflected in AL's election manifesto based on Vision 2021. The national budget (20082009) is supposed to build a platform for transformation with "a vision of a happy and prosperous nation."
So there is a glimmer of hope for a change as there are lots of optimistic notes projecting astounding progress of the nation in the years to come. Of course, private-public partnership (PPP) is ready for implementation, but all infrastructural development projects under the new paradigm (PPP) have to be efficiently handled
An apparently rosy list of priorities does not match with a black list of the ghosts. Exorcising these ghosts vitiating the investment environment is an insurmountable challenge. The chief among them are slow-paced administration, overstuffed bureaucracy, rampant corruption, dysfunctional procurement process, lack of co-ordination, bureaucratic tangles, politicisation, cronyism, formalism and so fourth.
The crisis arising out of extortion, political influence in the tender process and illegal occupation, vitiating the investment-friendly environment, has become a matter of serious concern. Implementation will be difficult given the contextual realities. On the other hand, implementation of lofty goals of development through investment will be an acid test of the performance of the government.
The main problems regarding investment include among others: unwillingness to invest, acute shortage of gas, frequent disruption in power supply, dilatory procedures in approving projects coupled with unnecessary regulations, and global recession -- to mention a few.
The main concern of those willing to invest has been the acute crisis of gas. Although the recent recovery trend in global economy is boosting confidence of investors, the gas crisis continues to dampen their mood. While existing industrial units are facing an inadequate supply of gas, new ones are not getting gas connection.
A columnist wrote that "advances to the manufacturing sector increased by 48 percent in the current calendar year. Investments of banks in the country's manufacturing sector stood at Tk.78,672.40 crore as of March 2009. Advances of the private commercial banks increased by 65 percent in March from 2005 figures, while state-owned commercial banks lent 11.36 percent higher to industries. Economic growth was 6 percent or a little more for the past five years before slowing down to 5.8 percent in the last fiscal year as impacts of global financial turmoil caused some decline in export demand."
A marked reduction in investment threatens to stymie macro economic growth. The result is likely to be concentration of idle money. Credit demand in the private sector is showing downward trend. Now banks are offering credits to the investors, investors are not hankering after bank loans. This is really a strange situation.
Bangladesh Bank said that credit to the private sector declined to 14.6 percent in the last fiscal year from 24.9 percent a year ago. According to Dhaka Bank: "Gas has become the most vital issue for industrial development. Everything will collapse if no new gas sources are explored and adequate supplies ensured."
It is a high time for the government to steer the investment situation out of the woods. Everyone believes that investment is a pace-setter for the long cherished pro-active moves towards prosperity. We want to see prosperity through guarding the frontier of investment. Investment from foreign countries, even with cheap labour force in Bangladesh, will be in the dock if the local investors do not come forward to buttress the private sector.
A well-conceived paradigm PPP augers well for co-operation between government and the private sector. The government is looking to establish Digital Bangladesh. Besides, there are ambitious communication projects taken up for "urgent implementation" under the PPP budget. They include Dhaka city access control highway, construction of a sky railway around Dhaka city, elevated express railway, Dhaka-Narayanganj-Gazipur elevated express, 4-year gas or coal fired 450 megawatt power stations and construction of a deep-sea port in Chittagong.
One may well predict that if the public and private sectors do not sit together in the spirit of partnership to combat this crisis, implementation of a plethora of important projects under ADP and PPP will be stymied.
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