Initiating the much-needed reforms in basic economic institutions, such as Bangladesh Bank (BB),should get priority in 2019 to steer the growth momentum of the country, opined business leaders and economists
Boosting sluggish investment in the private sector and employment generation for millions of unemployed youth are two pressing issues the new government has to fix, economists said.
Initiating the much-needed reforms in basic economic institutions, such as Bangladesh Bank (BB),should get priority in 2019 to steer the growth momentum of the country, opined business leaders and economists.
They said expanding the economic growth momentum in the new year, ensuring an investment friendly atmosphere to attract investment, and ensuring political stability will be great challenges for the new government, which will assume office soon.
According to Bangladesh Bureau of Statistic (BBS) data, in the 2018 fiscal year, total investment to GDP was 31.23%, 23.26% of which came from private investment and 7.97% from public investment.
In the last fiscal, private investment to GDP was 23.26%, which was 23.10% in the previous fiscal year.
Meanwhile, for the current fiscal year, the government has set target to increase investments to 33.54% of the total GDP. Of the total, private investment will be 25.15% of GDP, while 8.39% will come from public investment.
“For the last one decade, private sector investment is hovering between 22% and 23%because of infrastructure deficiency, lack of good governance and inefficient port services,” former caretaker government adviser AB Mirza Azizul Islam told the Dhaka Tribune.
He said the new government should focus on initiating reforms in basic economic institutions like BB, as only a strong role of the central bank can restore discipline in the banking sector, stem loan scams and tighten the soaring non-performing loans (NPLs).
How to increase cash flow in private sector
In Bangladesh, entrepreneurs are highly dependent on bank credits for new investment or business expansion. Getting credit from banks is expensive, while it is very difficult for the small entrepreneurs. So,creating alternative sources is a strong demand now.
“In making a new investment or expanding new businesses, there is now no alternative to financial institutions,which puts a bar on investment, especially for the SME,” former Dhaka Chamber of Commerce and Industry (DCCI) president Abul Kasem Khan told the Dhaka Tribune.
The stock market is considered a great source of fund, but there is a restriction for the small cap company and new entrepreneurs, which should not remain in place, said Khan.
If a project is good enough and has prospect, the regulator can think of new initiatives to bring them in to the stock market, said the business leader.
He also urged the stock market regulator to undertake initiatives in bringing businesses with small capitals to the stock market.
In 2017-18, Bangladesh’s economy showed a stability with better performance in export earnings, remittance inflow, foreign exchange reserve, and a 7.86% GDP growth.
The government has set a target of 8.25% GDP growth for the next fiscal year.
However, there are challenges for the economy in maintaining the economic growth, especially in attracting foreign direct investment (FDI) and local investment to create jobs.
“In the outgoing year, export earnings have exceeded the target, while remittance inflow and foreign exchange reserve were sound, along with good production of agricultural products,” Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) President Shafiul Islam Mohiuddin told the Dhaka Tribune.
This is because of political stability, infrastructure development and government policy support, Mohiuddin added.
In retaining the growth momentum and going further ahead in the new year, business people expect a predictable business environment with policy continuation. The government has to ensure how many days it would take to approve a file, and make the relevant official transparent and accountable in providing services, said the business leader.
On top of that, there is much more to do to stop corruption and harassment in receiving services, he added.
Meanwhile, economists suggested that establishing a favourable business climate is a key challenge for the government in achieving the targeted investments and employment generation.
“Ensuring a favourable investment environment for businesses will be the great challenge for the government in the new year,” Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem told the Dhaka Tribune.
To this end, the government has to bring changes in policy to take a quick decision and implement it within a short span of time, said Moazzem, adding that another challenge is to generate revenue as expenses have gone up due to big projects, while revenue collection remains lower than the target.
As of November, the revenue collection stood at Tk77,935.82 crore, against the target of Tk101,704 crore. Meanwhile, for the current fiscal year, the government has set a target of Tk296,201 crore.
Since the youth unemployment rate is increasing, the government has to focus on increasing private sector investment to generate huge employment opportunities in the country.
Mirza Azizul Islam said it is a big challenge to create jobs through investment by removing all the barriers.
According to Asia-Pacific Employment and Social Outlook 2018 report of the International Labour Organisation (ILO), youth unemployment rate rose to 12.8% in 2017 from 6.32% in 2010.
Banking sector a big concern
Private sector investments are also being disturbed by the huge default loans, which reduced cash flow to the market.
So, bringing discipline in the ailing banking sector through reforms is a quick recipe for the economy.
“Present status of the country’s banking sector is very fragile. Non-performing loans have mounted and reached the peak. This is because of lack of good governance and accountability,” said Mirza Azizul Islam.
In addition, the government has to take effective legal measures to reduce the NPLs, otherwise, the consequence would badly hit the economy, he added.