The two-day Asia-Pacific Business Forum (APBF) concluded in the city last week with a clarion call on the private sector to play a greater role in implementing the country's Sustainable Development Goals (SDGs).
Asian Development Bank (ADB) vice-president Wencai Zhang, who was on an official visit to Dhaka last week, also suggested that Bangladesh should enhance private investment for expediting the economic growth and achieving the goal of becoming a developed country by 2041.
The country will thus get 24 years to reach the target of reaching status of a developed country. This period is very critical. Investment is the engine of higher growth and the present investment scenario is not up to the mark.
Besides, challenges facing Bangladesh are many. Private sector investment, improving governance, easing the cost of doing business, boosting SME financing and improving the capital market are some of the issues that need to be confronted with due diligence. If the country wants to keep pace with its over 7.0 per cent growth, it must address the emerging challenges.
Slow project execution rate is one of the key bottlenecks to development. The country needs to accelerate the pace of execution rate. The urbanisation process, especially the traffic jam in Dhaka city, is a big problem. This problem must be addressed expeditiously.
Bangladesh is located in an important geo-political position. It links the South Asia, South-East Asia, East Asia and even the West Asia. As such, development partners are interested to improve its infrastructure for boosting regional connectivity. The ADB will extend its support to establish the cross-border and regional power connectivity and road connectivity under the South Asian Sub-regional Economic Cooperation (SASEC) initiative. The bank will also provide all sorts of cooperation so that Bangladesh can get benefit from hydropower from Nepal and Bhutan through establishing the regional transmission grid.
The businesses of our country have a crucial role to play in implementing the SDGs. There is a need for promoting foreign direct investment (FDI), improving infrastructure and facilitating cross-border trade to ensure that the private sector contributes to achieving the SDGs.
The government has already taken some measures to ensure greater public-private partnership, but much more is needed to be done, especially for the implementation of SDGs. It may be mentioned here that the SDGs have been designed in such a manner that private sector participation is essential to achieve these goals.
Although the finance minister recently claimed about restoration of business confidence, it is, unfortunately, still weak. This is mainly because the structural impediments to investment, such as infrastructure bottlenecks and the cost of doing business have not been removed. Also, distrust between the government bodies and the business people is an irritant.
Infrastructure constraints in energy, connectivity, telecom and urbanisation, coupled with the difficulties in property registrations and contract enforcement, are still posing hindrances to private investment.
Many entrepreneurs are failing to get gas and electricity after setting up industrial units. They have to seek alternative ways to get their units running. This pushes up the costs of doing business. High bank lending rate is also responsible for sluggishness in private investment.
Although many state-owned commercial banks did approve many big loans, those could never be disbursed as the gas and power connections were not available for the projects. Such a situation depicts the pitiable scenario surrounding the energy sector of the country.
However, the finance minister did acknowledge that there were a number of impediments to attracting private investment. These are: a lack of adequate energy, scarcity of land and poor communication infrastructure, he said.
In a recent report, the International Monetary Fund (IMF) said the weakness in financial sector and infrastructure deficit are the major factors affecting the Bangladesh's private sector investment and growth. These constraints stem in part from low public investment and inadequate infrastructure maintenance, it added.
An economic survey report of the finance ministry said the country's private sector investment has been sluggish for some years, hovering at 22 per cent of the gross domestic product (GDP )since 2011-12 fiscal years.
The Centre for Policy Dialogue (CPD), a private think tank, in a recent study, said investment in the country remains sluggish on one hand and, on the other, a large amount of capital is siphoned off, mainly through over-invoicing. The latest amount of capital flight is higher than the net foreign aid, it said.
There is no denying that the sluggish global economic scenario is affecting investment in Bangladesh. But the government in its part has failed bring more investments for energy crisis, scarcity of land and absence of necessary policy reforms.
In order to stimulate private sector investment and regain the growth momentum, a conducive political environment which generates confidence in entrepreneurs, and inclusive politics that ensures predictabilities and business-friendly environment, is the key determining factor for economic growth.
One of the sources of private investment is the long-term borrowing from the financial system. But such borrowing from the financial system is very inequitably distributed. Inequality in the distribution of private investible assets is itself a stumbling block to accelerating private investment.
All said and done, efficient public investment and regulatory reforms are urgently needed to get the private investment rate out of the 21-22 per cent of GDP trap. For this to happen, there is a need for fixing the underlying problems that hinder private sector investment in the country.