Policy Research Institute - PRI Bangladesh

The Policy Research Institute of Bangladesh (PRI) is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of the Bangladesh economy, its key policy challenges, domestically, and in a rapidly integrating global marketplace.

Economists call for higher investment

News Published: Thursday, Oct 04, 2012

Thursday, October 4, 2012
Economists call for higher investment

Star Business Report

The government's aspiration for higher economic growth

could be met with setbacks if the country fails to court both domestic and international investors, top economists said yesterday.

The comments come at a time when Bangladesh's investment to gross domestic product (GDP) ratio has been stagnant at 24 percent, much below the government's Sixth Five Year Plan target, for several years now.

The biggest concern for the sustainability of the growth target is the substantial shortfall on the investment front, Sadiq Ahmed, vice-chairman of Policy Research Institute (PRI), said in a policy briefing on the economy at the think-tank in Dhaka.

"Unless the challenges pertaining to infrastructure and investment rate are tackled upfront, there is a substantial risk that the growth targets will not be achievable," he said.

Ahmed said the outcome of the first two years of the plan suggest a mixed record of performance.

"Slower GDP growth and higher inflation relative to the plan targets, unless tackled forcefully, will likely to have adverse implications for employment and poverty reduction targets."

ABM Mirza Azizul Islam, a former caretaker government adviser, said the GDP growth target enshrined in the plan may not be achieved due to bleak export growth prospects, stagnant investment and low level of foreign direct investment.

He said he does not think that the USA and the European Union -- Bangladesh's two biggest export destinations -- would come out of the current economic crisis by 2013.

About low investment-GDP ratio, he said: "From my experience, I can say that FDI [foreign direct investment] does not flow to a country where the level of local investment is low."

The economist said although foreign aid worth between $12 billion and $16 billion are lying in the pipeline, the government is failing to use the fund due to sheer administrative incompetence.

"So foreign aid utilisation target will not be met," said Islam, while suggesting that political uncertainty might hold back domestic investment.

Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies, said although many indicators of the economy are performing well, there are some areas of concern.

“The economy seems ill-prepared to achieve the 7 percent growth under the Plan," he said.

Mujeri, also a former chief economist of the central bank, said there are dangers that poverty reduction and social development goals of the plan might be unattained.

He also said investment should be higher than savings in a country like Bangladesh to prevent export of the savings.

Former ambassador Inam Ahmed Chowdhury, however, said that the state of the economy could not be better given the circumstances at global and national level.
Wahiduddin Mahmud, a former caretaker government adviser, said Bangladesh would have to improve the sluggish investment scenario to reach the desired economic growth.

He said the utilisation of foreign aid and the FDI flow remain unsatisfactory, but National Board of Revenue's collection receipts paint a heartening scenario.

Mahmud also said there are problems in case of investment climate, infrastructure and bureaucracy, with political instability being a major risk factor.

He also said it would be meaningless to assess the economy if politics races to conflict.

PRI Executive Director Ahsan H Mansur said Bangladesh has been extremely successful with tax collection in recent years, with NBR exceeding their targets for three successive budget years.

In spite of the recent gains, Bangladesh still remains an inefficient tax administration, Mansur added.

Nasiruddin Ahmed, chairman of NBR, said Bangladesh is way off mark when it comes to tax efficiency, despite ongoing efforts to reform the sector.

He said about Tk 2,000 crore in tax money has been stuck in legal tangles.

"So we have introduced alternative dispute arrangement to realise the money."

Hiroyuki Minami, minister of the Embassy of Japan, Zaidi Sattar, chairman of PRI, Hassan Zaman, economic adviser to the governor of Bangladesh Bank, and Shamsul Alam, member of general economics division of the planning commission, also spoke.