Current account deficit and BOP concerns  

Marksman     | Published: September 11, 2018 21:55:26 | Updated: September 12, 2018 21:23:22

On two broad macro-economic   parameters, there has been   a certain    break with trends exercising the minds of the economists a good deal. The first one relates to  national  investment  poised   to  outstrip  gross national savings; and the second    centres around the FDI inflow  curving downwards.  

The hitherto   known    trend  of  gross   national savings-public and private- keeping   above gross national  investment  is  found to be on a  reverse gear! Gross investment  stood above  gross national savings  in the past two fiscal years-FY 2017 and FY 2018. In fact, according to an IMF  country staff report, 'the gross investment is projected to stand at 32.3 per cent  of the gross domestic product  in FY 2018-19, up by 2.3 percentage points  than that of  gross national savings.' The reversal of trend is  being  ascribed to two factors: One, a  rise in public investment  owing to  implementation at various stages   of  a number of   mega projects  in   the last few years; and  two, as Zahid Hussain, the lead economist of the World Bank  suspects the unusual trend   is exacerbated by a spike in   capital flight out of the country.

The Bangladesh Bank  is said to have recently   told  newsmen that 'a group  of  businesses  were reportedly  involved in capital flight  amounting to TK 40 billion in the guise of import and export.

Surely, as they say, "Knowledge is  responsibility", so that we  find  the central bank  'asking the tax authority to take necessary actions  regarding the matter by probing it.' Such proforma exhortation can't do , a  mechanism based on best practice method will have to be  followed to  freeze attempted capital flight on its track.

The central issue is  such  a rise in investment  is widening the economy's current account deficit.

Ironically as  we  encounter    negative / upset    current account equations,  a balance of payments (BOP) figures,  in the shape of a downslide in the  FDI inflow. According to BoP  data of Bangladesh Bank the gross inflow of FDI declined by 9.90 per cent   between FY 2016-17 and FY 2017-18-from $ 3.03 billion to $2.79 billion over the period in question.

It is relevant to note that the country  had  last  experienced a  decline in FDI inflow  in FY 2014  so   that it may not  have been a  mere coincidence  that   we  have been going through  another round of downward  FDI flow  as the election  approaches. It may be on hold  till  general election is held credibly  ushering in a stable  government.

At any rate, we may not  sit idly by as the   factors that stood in the way of our  matching other countries in  garnering FDI  cry out for urgent attention. 'The corporate tax in Bangladesh  is one of the highest in Asia' -ours averaging  40 per cent  vis-à-vis between 17 and 25 per cent in Thailand, Indonesia,  Vietnam and India. Let's examine the proposal of the entrepreneurs to  be accommodated  there. 

Our selling  points  of quick returns on investment and cheap labour  are  outweighed by underdeveloped  infrastructure, port-handling delays, scarcity of land for industry (special zones may ease the problem), land-related litigations, etcetera.

We believe, the impediments are not insurmountable, and that the government in cooperation with the business community  will remove them  realising  that  we are in a race with time. Indeed, we  can't afford to fall behind  after traversing such a long distance.


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