Bangladesh continued to see a low private investment growth, amid a crucial transition in its economic status.
A Finance Ministry report mentioned this, while economists also raised stagnation alarms.
The report, prepared by a think-tank for a division of the Finance Ministry, suggested that Bangladesh should have a decade-long high spell of private investment, as experienced by the East Asian comparators, to break out of the middle-income-country trap and move ahead to high-income-country status.
Bangladesh's private sector grew moderately, at a rate of 13.9%, between 2011 and 2022.
According to statistics in the report, private investment had steadily increased from 12.5% of GDP in 1981 to 17.3% in 2000, reaching a high of 25.3% in 2019.
However, the Covid-19 pandemic dented private-sector investment in 2020 and 2021, as the scourge upended normal life and business with people caged in lockdowns.
In the neighbouring competitor countries the total investment growth was accompanied by robust private-sector growth.
According to the think-tank report, several factors limited the robust growth of the private sector.
Investors face challenges such as limited land availability, unreliable energy supply, inadequate transport connectivity, burdensome regulatory processes, regulatory unpredictability, high corporate taxes, restricted access to long-term financing, and a shortage of skilled labour supply, said the confidential report submitted to the ministry.
It recommended that for rapid industrialization in the context of LDC graduation, Bangladesh would need further targeted policies, and certain "big pushes" to break this low-equilibrium status quo.
Bangladesh's investment-GDP ratio had increased from 17.2 in 1991 to 32 in 2022, but a large proportion of the total investment has always been constituted by public investment amounting to almost a quarter of the total investment.
In 2022, public investment as a share of GDP stood at 7.5%.
Such a large quantum of public investment can be attributed to higher expenditures on development projects under the annual development program.
In the presence of better institutional capacities, public investment ensures higher-quality infrastructures and trade logistics facilitating a robust growth of the private sector.
However, in the presence of weaker institutions, such as higher corruption, the quality of public investment falls as public investment is used as a vehicle of rent-seeking.
Despite increase in total investment ratio over the years, it is noteworthy that Bangladesh's decadal total investment growth remained almost stymied around 8% since the 1980s.
When compared to the other countries which attained newly industrialized country (NIC) status, such as South Korea, Malaysia, Singapore, Thailand, Vietnam, Hong Kong and Indonesia, each of them had episodes of very high investment-growth rates.
For the East Asian countries, these are the episodes when government and private sectors heavily invested in diversified industries.
