Finance Minister AMA Muhith is all set to present the national budget for 2014-15 explicitly aiming to bring private investment back from the brink.
The private investment is in tatters, which weakened the economic growth over the years at around 6%.
Bangladesh has been passing through a zone of 6% to 6.7% growth rate for the last one decade as compared to 4% for the initial decades after independence.
As an individual, Muhith can genuinely take pride in presenting six budgets in a row. This Thursday’s new budget is expected to be different than his previous seven both in sizes and investment climate.
For the upcoming fiscal year, the budget size might be around Tk2,50,000 crore, which is significantly higher than the revised budget of Tk2,11,220 crore of the outgoing financial year.
The finance minister already said the size of the national budget would be ambitious as it is the first budget in the current tenure of the government.
Analysts remained skeptical about the implementation of the ever biggest budget due to its poor revenue earnings trend and political situation still shrouded with cloud to threaten another bout of instability that the country faced in first half of the last fiscal in the run up to the national election on January 5.
“It will be too tough to implement such a big budget,” said AB Mirza Azizul Islam, a former finance adviser to the caretaker government.
He said it should not be more than Tk235,000 crore considering the income and implementation capacity of the government.
The implementation of the new budget will be a daunting task in the midst of political situation that still deters entrepreneurs to take new venture, he said.
“The bottom line is to infuse confidence among the investors ensuring to keep the political situation free from risk,” he said.
For sustainable and meaningful growth private investment is much needed and to take the growth to over 7%, private investment needs to increase more than 28% to the GDP in the next fiscal.
The finance minister hinted that the GDP growth target would be 7.3% in the next fiscal. The outgoing fiscal year’s growth target was initially set at 7.2%, but was revised down to 6.5%.
The Bangladesh Bureau of Statistics estimated the GDP growth in the outgoing fiscal would be 6.12%, beating the estimates of analysts and donor agencies earlier.
Policy Research Institute Executive Director Ahsan H Mansur said it will be very difficult to take the growth from 6% to over 7% as private investment and remittance earnings that support the growth is not in good shape.
“The political concern is still hovering above the head,” he said.
About the budget size, he said, large budget is not a problem. “But the question is how the government will finance it. The government will have to give clear outline of revenue earnings and reform measures.”
From the way the finance minister is talking these days, it seems to boost falling private investment is going to be the biggest challenge for him.
Muhith recently said the government plans to raise investment as percentage of GDP to 30% in five years, from around 24.5% now, to speed up the growth. “Industrialisation is my biggest challenge and our biggest weakness is in the area of job creation.”
The most disconcerting note for the last decade is that the rate of private investment centered round 25% of GDP. Private investment stagnated while public investment showed a marginal upward trend.
“Bringing back investor confidence is crucial for the revival of the private investment,” said Mir Nasir Hossain, former President of the Federation of Bangladesh Chambers of Commerce and Industry.
After the national election, investor is yet to regain full confidence, he added.
Moreover, he said, personal security is still at risk, which is something the government needs to address on priority basis.
The entrepreneur said traditional problems like shortage of land and energy, and infrastructure bottleneck, which hold back investment over the years, should be solved to attract investment.
Effective public governance, lower cost of doing business and policy continuity are also critical to support the private sector growth, he said.
In a 2007 World Bank survey, 15% of the sample enterprises viewed political instability as the main concern of the private sector, but in 2013 survey, it rose to the extent of 45%.
While electricity was considered a big constraint by 45% of sample enterprises in 2007, it declined to 28% in 2013. Similarly, access to finance appeared as a major concern by 40% in 2007; it reduced to 15% in 2013.
