Attracting new investments and creating employment opportunities are some major challenges Bangladesh is likely to face in the forthcoming fiscal year as the proposed national budget for FY2018-19 lacks specific directives in this regard, according to experts and analysts.
Placing the budget in parliament on Thursday, Finance Minister AMA Muhith said the government had set a target of achieving a 7.8% GDP growth in the fiscal year and bringing down the inflation rate to 5.6%.
It has also set a target to increase the share of investments in GDP to 33.54% from 31.47% in the outgoing fiscal year. Private sector investments are expected to contribute 25.15% and public sector will contribute 8.39% to the GDP.
In their reactions to the budget, trade analysts and businesspeople, who contribute over 23% to GDP, said it would not be possible to achieve the GDP growth target, as there is no “specific directive” about attracting new investments and generating employment opportunities.
“To meet the GDP growth target of 7.8%, the investment ratio to gross domestic product should be 35%. At present, the figure is slightly over 31%,” AB Mirza Azizul Islam, former advisor to a caretaker government, told the Dhaka Tribune.
It will be quite impossible to increase the investment rate by 4% in a year and to reach the 7.8% GDP growth target, he observed.
In attaining the target, the economist, however, suggested increasing capacity to implement the budget and undertaking projects to attract more investments home and abroad, by creating a conducive business environment for investors.
Echoing him, Exporters Association of Bangladesh President Abdus Salam Murshedy said: “Bangladesh is moving towards its goal of becoming a developing country. In order to retain the development pace and economic growth, and
reaching the GDP growth target, there is no alternative but to attract new investments.
“The government’s proposal to increase the corporate tax rate for the apparel industry will discourage potential investors from investing their money in the sector,” he said.
As a result, new jobs will be not created as expected, said Salam, a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Last year, the unemployment rate of Bangladesh was recorded at 29 million, which is about 4.4% of the total population, according to International Labor Organization (ILO),
Abul Kasem Khan, president of Dhaka Chamber of Commerce and Industry, said the government should reconsider cutting the corporate tax rate in all categories in order to encourage businesspeople to invest in Bangladesh.
“At present, private sector investments constitute about 23% of the total GDP. If we want to increase it by 1%, we will need additional investments of Tk25,000 crore in a year,” he said.
Increasing the private sector’s investment ratio to GDP to 25.15% will be a challenging task if the corporate tax rate is not reduced, he added.
Shafiul Islam Mohiuddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, said: “In order to improve the private sector’s contributions to GDP, we will have to enhance our capacity and ensure a conducive investment climate.
“I don’t want to say the budget is a pro-investment one, as there are challenges ahead.”
