Published in The Financial Express on Monday, 17 March 2014.
Energy crisis affects investment seriously
Shah Alam Nur
Private sector investment in the country has dropped drastically in recent times due to power and gas shortage, people concerned said.
They said most investors have been displaying a lukewarm attitude towards making fresh investment.
According to the Board of Investment (BoI) data, in the first seven months of the current fiscal year (2013-14), the new investment or reinvestment proposals from local sources witnessed a decline to the extent of more than 42 per cent compared to that of the corresponding period last year.
While visiting the Titas Gas head office, the FE correspondent found a large number of owners of different industries and commercial enterprises pursuing top officials for gas connections, but they couldn’t get any positive response.
“Nearly all entrepreneurs across the country have been facing shortage of gas and electricity. That is why they are taking time for making any fresh investment”, Kazi Akram Uddin Ahmed, President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) told the FE.
“The year 2013 was not business-friendly due to unstable political situation. Now we are facing acute energy crisis which has been taking toll on fresh investment or expansion”, he said.
He said after the political uncertainty, energy crisis has now emerged as a major hurdle to fresh investment.
The BoI data showed that during the first seven months of the current fiscal year, the potential local investors submitted proposals for setting up 634 industrial units. The number was 1,094 in the corresponding period of the last fiscal.
Another FBCCI leader told the FE that due to shortage of gas and electricity, a number of ceramic, textile and readymade garment (RMG) units, mostly in Dhaka, Savar, Gazipur and Sreepur, are increasingly becoming uncompetitive.
A senior director of the BOI said the new investors naturally expect gas and power connections when they get their ventures registered. But shortage of energy has become a stumbling block to operation of their enterprises.
He said new investment in areas like glass and glass products, carpets and rugs, petroleum refinery, industrial chemicals, leather products, transport equipment, tobacco, pharmaceuticals, wood products, ceramic, cement and electronic goods, rice milling, dairy products, knitwear, leather products, footwear, embroidery, wooden furniture also has shown very slow growth.
Jahangir Alamin, President of the Bangladesh Textile Mills Association (BTMA) told the FE that many gas-based industrial units were already in place taking costly loans from banks. But those are yet to have gas connections, he said.
He said the factories like Esrak Textile and Panama Composite have been built more than two years back with combined investment of more than Tk 7.0 billion but both the units haven’t got gas connections yet.
In recent times, a large number of industrial units have remained idle due to energy problems. Some units are being run by diesel-run generators, leading to exorbitant cost of operation, he added.
A managing director of a private bank told the FE that after the January 5 parliamentary election, some of industrial groups submitted applications for loans for new investment or for expansion.
He said now all the banks have a substantial amount of idle money. But entrepreneurs are not taking loans from the banks mainly due to shortage of basic infrastructure including gas and electricity.
After the polls, potential investors started coming back for new investment but infrastructural problems now stand in their way, he added.
Center for Policy Dialogue (CPD) executive director Mustafizur Rahman told the FE that many entrepreneurs wanted to expand their businesses but they were facing shortage of gas, electricity and poor infrastructure for a long time.
He said when an investor wants to invest in any sector, primarily his or her requirements are gas and electricity alongside stable political environment. But those are hard to come by.