Local and foreign entrepreneurs are not encouraged to make new investment because of political uncertainty, badly hurting the growth prospects of the economy, said Metropolitan Chamber of Commerce and Industry on Wednesday. The main challenge for the government is to restore political stability, without which GDP growth will falter and it will be difficult to reap full gains from the global economic recovery, said the MCCI in its January-March review of economic situation in Bangladesh.
Foreign investors have adopted a ‘go-slow’ strategy in making fresh investments since 2013 in Bangladesh, the metropolitan chamber said.
The inadequate infrastructure and shortage of power and energy along with the political instability have become serious impediments to the growth of the economy, it said.
Not only industrial sector but also almost all sector have faced setback to attain their desire growth in the recent months, the MCCI said.
Against the backdrop, all donor agencies have revised down their forecast of Bangladesh’s GDP growth to between 5.4-5.6 per cent against the government’s original growth target of 7.2 per cent and the revised target of 6.5 per cent for the present fiscal year, the chamber organisation said.
The government had initially set a revenue collection target of Tk 1,36,090 crore for the FY14 but the target was later downsized to Tk 1,25,000 crore, it said.
In July-February of the FY14, the NBR collected only 54.7 per cent of the downsized revenue target. In July-February of the FY14, NBR’s revenue collection grew only by 8.6 per cent, the report mentioned.
The reason behind this slow growth was dull economic activities particularly in export and import amid political unrest, the MCCI said.
The rate of implementation of the Annual Development Programme in the first nine months of the FY14 was 43 per cent, 6 percentage points below the implementation rate achieved in the corresponding period of the FY13 when it was 49 per cent, it said.
The recent political unrest badly hit the government’s development works, which affected overall ADP implementation, the MCCI said.
Farmers suffered substantial losses during the political turmoil of October-December months of the FY14 because they could not procure necessary inputs nor could they easily market their products during that period, it said.
In the third quarter under review, the disbursement of agricultural credit and non-farm rural credit by banks increased by 5.7 per cent or Tk 216 crore over the corresponding period of the previous FY.
The disbursement of Q3 in the FY14 was much lower than in the previous two quarters (11.2 per cent and 24.8 per cent) due to a decreased credit demand from the agricultural sector amid political unrest, the MCCI said.
The construction sector is still bearing the brunt of sluggish sales despite an improvement in the political situation in the aftermath of the January 5 elections, said the review report.
Continued downtrend in sales in the quarter under review severely affected the realtors as well as their employees and associated firms, it said.
The problem further intensified as the flow of bank credit to the sector almost stopped, the MCCI said.
Along with developers, the associated backward linkage industries were also in difficulty as demand for their products fell by over 50 per cent, the chamber organisation said.
According to REHAB, 22,572 flats worth around Tk 215.06 billion remained unsold over the last one year, the MCCI report said.
The country’s exports grew by only 1.05 per cent month-on-month in March 2014 as the country is yet to fully recover from the fallout of the political unrest as well as from the image crisis of the country’s major export, garments, the report said.
In March, export earning stood at $2,414 million, 10.19 per cent below the monthly target of $2,660 million, it mentioned.
Foreign direct investment fell drastically in the first two months of the calendar year 2014, although in the first eight months of the present FY the FDI inflow rose slightly by 3.7 per cent, the MCCI report said.
The investors are still to get back the confidence, fearing further political turmoil, it said.
There is no alternative to raising the level of investment, if Bangladesh is to attain the status of a middle income country by 2021, the MCCI observed.
-With New Age input
