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Experts: Investment friendly atmosphere crucial for smooth LDC graduation

  • Published at 10:36 pm May 13th, 2018
Experts: Investment friendly atmosphere crucial for smooth LDC graduation

In order to ensure a smoother graduation to developing country status, Bangladesh has to attract private investment from home and abroad by ensuring an investment friendly atmosphere, experts have said. 

Speakers made the observation at a roundtable discussion titled “Looking beyond LDC graduation,” organized by the South Asian Network on Economic Modeling (Sanem) n Dhaka on Saturday.

They added that private investment, which is currently stagnant, was also crucial to maintaining GDP growth and employment generation.

According to data from the Bangladesh Bureau of Statistics, the total investment in the country amounted to 30.51% of the GDP in the last fiscal year, with private investment amounting to 23.1% and public investment 7.41%. This marks a 0.75% growth in public investment as a percentage of GDP from FY2015-16, while the growth in private investment was just 0.11%.

Bangladesh also scored poorly in the World Bank’s Ease of Doing Business Index, ranking 177 out of 190 countries. Comparatively, regional export market competitor Vietnam ranked 68.

According to Apex Footwear MD Syed Nasim Manzur, one of the reasons for Bangladesh’s low ranking on the Ease of Doing Business Index and consequent lackluster private investment growth is the cost of leasing land, which is 20 times higher than in Vietnam.
Cost of construction, electricity and diesel is also much lower in Vietnam, all of which results in lower foreign direct investment (FDI) for Bangladesh, he added.

Bangladesh has repeatedly been outperformed by the leading growing economies of Southeast Asia and Africa.

“Vietnam, India and China have had way more economic growth than Bangladesh, despite scoring similar in different economic indicators in the mid-1980s,” said Dr Selim Raihan, executive director of SANEM and professor at the economics department of Dhaka University.

A gradual decline in manufacturing jobs for women, which reduced by 0.92 million from 2013 to 2017, is also a challenge to LDC graduation, as is the growing wage gap between men and women, and static female labour force participation.

“The growth of small and medium enterprises (SMEs) will help increase the female labor force participation rate,” said Dr Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies.

She added that women are willing to work in small businesses as well as undertake entrepreneurship initiatives, and hence SMEs need more support.  

Although the average annual growth in GDP is 6.6%, the growth rate for jobs is 0.9%. More than 85% of the jobs are informal. 

“We do not just want a developed Bangladesh, but also an inclusive Bangladesh,” said Dr Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, citing inequalities in wealth, income and consumption as worrying factors. 

Speakers at the roundtable also recommended focusing on higher quality exports rather than higher quantities.

 Dr Sadiq Ahmed, vice chairman of the Policy Research Institute, emphasized the poor condition of the tax-to-GDP ratio and the importance of improving it. He recommended a complete overhaul of the income tax system in Bangladesh, which he described as “broken”.

He further said that the implementation of a modern property tax system, overhaul of the trade policy taxation system, controlled liberalization of tax policies, and an overhaul of tax administration is necessary for greater tax audit productivity.

He added that banking reforms could provide a possible solution to the tax problem.