Published in The Daily Star on Friday, 1 January 2016
Jump-start private investment in 2016
The New Year rolls on with the hope that the business and investment climate will finally pick up after almost nine months of false starts.
There is now a universal consensus that the economy will attain higher growth only if private investment can be augmented, said Towfiqul Islam Khan, research fellow of the Centre for Policy Dialogue.
“Regrettably, it was not possible in the year that ended. So, the government needs to mark 2016 down as the year of private investment in Bangladesh.”
Over the last three years, private investment remained around 22 percent of gross domestic product, which is way below the requisite level to propel the economy to a higher growth path.
If the government does not take some drastic steps, businesses will continue to face the same challenges in 2016 as in 2015: infrastructure deficit, slow implementation of reform agenda, high borrowing costs, tepid global recovery and political uncertainty.
However, Nazneen Ahmed, senior research fellow of Bangladesh Institute of Develop-ment Studies, said the overall business and investment environment in 2015 was slightly better than that of 2014.
She cited factors such as political stability, downturn in interest rate in banks, stable inflation rate and better supply of electricity.
“Overall, the economy performed well given the gloomy start to the year because of political unrest,” she said, adding that if political stability continues the business environment will improve further.
Khan said 2015 dished out an important lesson: that apparent political stability is not enough to drum up confidence for private investment.
“I hope there will be no instability in politics in 2016,” said Raisul Kabir, chief executive of Brain Station 23, a software firm that received the BASIS Outsourcing Award for three consecutive years to 2015 and the HSBC Export Excellence Award in 2013.
Tania Wahab, managing partner of Karigar, a leather goods company, echoed the same.
“We need to show that we can make quality footwear and leather goods. At the same time, it is vital to ensure that Bangladesh is safe for foreign investors and buyers.”
Political instability wards off foreign investors, she added.
For revitalising private investment, political stability will be equally important, Khan said, adding that the government will also have to ensure that the law and order situation is in favour of the businesses. “The rising militant activities must be dealt with strong hand. This is important for both foreign and domestic investment,” he added.
Nazneen, however, was in agreement with Khan about infrastructure: it continues to be a big challenge.
But, there had been progress in implementation of some important infrastructure projects such as the Dhaka-Chittagong highway and the Padma bridge in 2015, she said.
Khan called for reforms and quick implementation of infrastructure projects to ensure higher level of economic growth. “An accelerated growth path can create more jobs and alleviate poverty,” he said.
Nazneen said 2015 was not in reality a write-off: there was some good news.
Bangladesh achieved the status of lower-middle income country, healthy foreign exchange reserve, improved balance of payment situation and reasonably good agricultural output.
The year 2015 also saw a wave of entry of start-ups, particularly in the IT sector, said Kabir, adding that many more will come in the New Year.
“More youths will sign up for business with ideas,” he said, adding that the falling interest rate is a good sign.
It will bring in increased investments, he added.
Tania called for relocation of all tanneries from Hazaribagh to the leather industrial park in Savar to ensure environment friendly production in 2016. It will open huge potential for Bangladesh, she said.
“Otherwise, it will be a threat for the entire leather sector. It will be very frustrating in that case.”