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Funding infrastructure development  

Wasi Ahmed   | Published: November 05, 2019 22:16:53


Sometimes the odds considered to be the main impeding elements in doing business in Bangladesh are identified as those that need government intervention by way of facilitation. It is here that the role of infrastructure comes to play an extremely crucial role.

Putting in place the required infrastructure is both time and cost-consuming. Successive governments resorted to this negative rationale to shield their positions while in power, and whatever that was in place could barely match the soaring demands for, say, electricity, gas, roads, specialised industrial parks and so on. As a result, the cost of doing business has always been on the rise. Coming to corruption and inefficient bureaucracy, one may find that these are but the same side of the coin, each complementing the other. While corruption breeds inefficiency, inefficiency may not necessarily breed corruption. But in our case, it is a vicious mix. It is not only instrumental in routinely harassing business people but the common people as well who may have no links to business at all.

Inadequate infrastructure, corruption and inefficient bureaucracy were found to be the key bottlenecks in scores of studies and surveys conducted at home and abroad. According a World Economic Forum (WEF) survey, 21 per cent of businesses in Bangladesh identified inadequate infrastructure as the top barrier in doing business. Corruption was identified as the second problem by 20.7 per cent of the respondents, while 15.3 per cent of the respondents found inefficient government bureaucracy severely affecting business environment. Now, looking at the percentage of the stakeholders who rated these problems as the top three, one may tend to see that the sequence may change depending on the nature of businesses to which the respondents belong. However, the fact that poor or inadequate infrastructure has featured most prominently among these three goes to show how this deficiency cuts across all business segments as a common malady.

Viewed from this perspective, it is the government that at the end of the day remains answerable for not doing what it had to do to help businesses to grow and at the same time take steps to do away with harmful practices. It is commonly believed that much of the inadequacies and accompanying vices are, for the most part, augmented by inactivity of the government or its lackluster moves.  

Of the other deterrents to doing business in the country, political instability, inadequate access to financing, discontinuity in government policies, lack of trained workforce figured prominently. In this context, it may be pertinent to argue that the impact of much of these inadequacies could have been felt less had infrastructure been in place, at least in critical areas such as electricity and gas, transport and communication, specialised industrial parks and economic zones etc.

For sometime now, experts have been stressing the urgent need to make Public Private Partnership (PPP) functional and to attract increased foreign direct investment and quality investment in infrastructure. They opine that the country's allocation for infrastructure development should be increased to 6-8 per cent of GDP from the existing 2.85 per cent. In this regard, one important instrument to push funds into the ongoing and future PPP projects could be creation of infrastructure fund with both government and private resources.

Lately, there is a piece of good news on this. Newspaper reports say the government is working to create a sizeable infrastructure fund to ease financing of projects under PPP. The fund amounting to $500 million will primarily be financed by the private sector with the initial seed money worth $100 million or 20 per cent of the total funds to be availed from government sources. The Prime Minister's Office has reportedly formed a committee to make recommendations on the creation of the infrastructure fund and introduction of an effective financing solution for PPP projects. A concept paper on this has been prepared by the Public Private Partnership Authority (PPPA) under the PMO. The fund will raise long-term capital from private investors while the government will support the fund's structural framework, seed capital, risk guarantees and regulatory support, including investor incentives.

It has been learnt that the fund will be created from money raised through issuance of fund units, contribution certificates, bonds or other debt instruments from the capital market and from private sector institutions such as insurance, pension funds, mutual funds and banks. To attract institutional investors like insurance and banks, it is important that the government provided loss guarantee and liquidity support up to a reasonable level. Also there should be fiscal incentives by way of tax exemption.

This, no doubt, is an inspiring move to energise the country's ailing infrastructure. However, all stakeholders should put in their best in a concerted manner to ensure that the fund-creating mechanism works well.  

 

wasiahmed.bd@gmail.com

 

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