About 40% entrepreneurs did not opt for fresh investment in the current fiscal year due to political uncertainty that persisted in the country centring the January 5 election, said a new study.
On December last year, the Centre for Policy Dialogue (CPD), a local think-tank, carried out the study on the present state of investment by interviewing 11 entrepreneurs and businessmen from ready-made garments, pharmaceuticals, medical services, jute, IT, printing and publishing, light engineering, plastic and construction sectors.
According to the study, 60% of the interviewees made new investment during fiscal year 2014-2015 while the rest 40% did not do so fearing political instability.
The findings of the study titled ‘State of the Bangladesh Economy in FY 2014-15 (first reading)’ was shared at a briefing at the CIRDAP auditorium in the capital yesterday.
“This indicates that some entrepreneurs continue to have uncertainty in regard to business environment,” said CPD Executive Director Mustafizur Rahman.
The report said new investment was carried out by taking loan from the financial institutions although some sectors, such as jute, did not get loan as the sector was considered as ‘non-viable’.
Moreover, production growth of these enterprises during the first half of FY15 was not very impressive with only 30% respondents mentioning a rise in production while 50% reporting the same level of production. The rest 20% of respondents said production slumped in their enterprises.
In the backdrop of relatively calm environment of the first half of FY15, private investment was expected to pick up. But data shows only a modest rise in investment, the CPD said.
“Investors were unable to take the advantage of improved political stability after the election as uncertainty still persists,” said Rahman.
“Infrastructural bottlenecks coupled with lack of reform measures have held back private investment,” he added.
“Crowding in of the private investment will also depend on the speedy implementation of the major public sector infrastructure projects where pace of implementation has been rather slow.”
“For encouraging private investment and regaining the growth momentum, a conducive political environment that generates confidence, will be the key determining factor as the economy enters into the second half of FY2015,” he said.
The CPD executive director highlighted that Bangladesh was concerned only about the remittance inflow, but it was not aware about remittance outflow and money laundering. Quoting a survey of an Indian organisation, he said Bangladesh was the fifth largest remittance source for India.
Also present in the event, CPD distinguished fellow Debapriya Bhattacharya said the economy had remained stuck at 6% over the past few years due to the sluggish private investment.
He termed the existing 6% GDP growth as ‘Bangla Growth’ and said Bangladesh needed ‘Super Bangla Growth’ like 8% to 10%. And faster private investment growth was needed for that.
About Bangladesh Bank’s GDP growth estimation of 6.5% in the current fiscal year, Debapriya said it would be a daunting challenge for the government.
The CPD fellow said political uncertainty still looms large in the new calendar year, and the room for political coexistence and freedom of expression were shrinking day by day.
Identifying traditional hindrances like power, gas, land scarcity and corruption for sluggish private investment, he said, “these are nothing but uncertainty in the political front.”
Debapriya doubted the authenticity of many economic data and questioned industrial term loan, saying the government data produced on the industrial term loan and the classified loan do not reflect the true picture.
The CPD was critical of the growing non-performing loan in the banking sector and deceleration of the ready-made garment exports.
It said growth of export earnings, an important indicator of vibrancy in the manufacturing sector, had not picked up as yet.
On revenue target, it said the budgetary targets for FY15 needed to be reviewed at the earliest, and had to be matched with the reality.
“Without significant strengthening of institutional capacity, revenue collection will pose a greater challenge for the coming fiscal year as well,” it said adding that revenue generation targets for FY15 are already under serious strain.
The think tank also raised question over the role of Bangladesh Securities and Exchange Commission in giving IPO nod in 2014 saying the quality of initial public offering was questionable.
The early trends of macroeconomic aggregates in FY15 suggested that while positive trends are recorded in terms of declining inflation, stable exchange rate, higher foreign exchange reserves and recovery of remittance growth, a number of disquieting fault lines are emerging which could undermine the macroeconomic stability, the report said.