The government should increase investment in infrastructure, especially in the energy sector, and take a long-term fiscal policy to attract private investment, said experts and businesspeople ahead of the upcoming budget announcement.
They said this would be essential to generate employment - which the country is in badly need of as the government is set to announce national budget for the fiscal year 2017-18 in the first week of June.
They have called for measures to encourage private investment so the country can come out of long-time stagnation in the sector.
“Increased investment on infrastructural development, especially in power and energy, is a must for attracting investment from home and abroad,” Mir Nasir Hossain, former president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), told the Dhaka Tribune.
The government must speed up the construction of electricity transmission infrastructure as it is not allowing captive power at factories, said Nasir.
On the other hand, the government should continue to invest because if public expenditure increases, private investment also increases, he said.
In current budget, the government allocated Tk15,036 crore for the power and energy sector.
According to Bangladesh Bureau of Statistics data, in the first 10 months of the current fiscal year, the ratio of private sector investment to GDP was 23.01% and that of public sector investment was 7.26%.
“I have funds to invest that can create jobs for over 1,000 people. I will invest it if you can assure me of energy and electricity connections,” a businessperson, seeking anonymity, told the Dhaka Tribune.
“Also, it takes too much time to get permission for a new business venture,” the entrepreneur said.
In its latest report, the credit rating agency Standard and Poor’s (S&P) said it may upgrade Bangladesh rating if the government significantly reduces energy, infrastructure and administrative bottlenecks and boosts investment.
S&P affirmed BB- long-term and B short-term sovereign credit ratings on Bangladesh with a stable outlook.
“Investment is always planned with a set time-frame of return. When the fiscal policy changes frequently, investors feel uncomfortable about moving forward,” said Exporters Association of Bangladesh (EAB) President Abdus Salam Murshedy. “That is why a sustainable and long-term fiscal policy is needed in the budget.”
Murshedy said if the budget lacks measures to boost investment, which is a tool for employment generation, it will fail to attain the SDG goal of reducing poverty.
According to the World Bank data, unemployment rate in Bangladesh was 4.1% as of 2016. In the last budget speech, Finance Minister AMA Muhith said during the years from 2010 to 2015, a number of 4.7 million entered the workforce and 98% of them in the local market.
Ahsan H Mansur, executive director of Policy Research Institute, pointed at “lots of barriers” to attracting private investment in Bangladesh. Among the barriers are poor infrastructure and cumbersome registration process for new business project, he cited.
“Not everything can be addressed in a budget, but the government should focus on resolving specific obstacles,” Ahsan H Mansur said.
He added: “While some is paying 42% tax, some are outside the tax net. These inconsistencies in taxation need to be addressed.”
Babosayee Oikya Forum President Abdus Salam said further increase in corporate tax and new VAT rate will be a burden for the business.
“The implementation of the new VAT Act with 15% flat rate will adversely impact small businesses,” he said.
Both trade analysts and businesspeople stressed the simplification and easing of tax system to give a cushion to the investors.
Experts said garment sector, as a labour intensive industry, can create more jobs, and to tap this opportunity, the budget should offer incentives that would enhance capacity of business, especially in the export-oriented sectors.
BGMEA Vice President Mohammed Nasir said since the tax at source is on export value, “I think the government should cut tax at source and set the rate for next five years for the garment sector.”
“For the sake of new investment, the government should lower import duties.” he said.
“Physical infrastructure is very important, especially for export-oriented sector. The port capacity also needs to be increased.”
In FY 2016-17, the government allocated Tk1,01292 crore for physical infrastructure, which is 29.74% of total budget.
“We have a four lane-road to transport goods in Dhaka-Chittagong route for shipment, but what about the port capacity?” Nasir questioned.
“I think it is high time to concentrate on building a deep sea-port as our manufacturing capacity is growing every day,” he added.
He urged the government to complete power projects within the set deadlines, “otherwise it will push the cost up.”