The country’s economic growth prospects are badly hurt by the ongoing political uncertainty as entrepreneurs are not encouraged to make fresh investment, said Metropolitan Chamber of Commerce and Industry. In its quarterly economic review for April-June 2014 released on Wednesday, the chamber said foreign investors have adopted a ‘go-slow’ strategy in making fresh investments since 2013.
‘The damages inflicted by political unrest last year to the national economy also dented the confidence level of the intending investors causing a slower growth in investment in the private sector,’ it said in the review.
The MCCI said maintaining macro-economic stability, restoring momentum in economic activities and improving law and order conditions in the country will be the major challenges for the government.
The MCCI said foreign direct investment fell by US$ 158 million in the first eleven months of FY14 compared to the corresponding period of the previous fiscal year.
‘According to industry insiders, the investors are still to get back the confidence, fearing further political turmoil,’ it said.
High bank interest rates and ineffective tax regime are also affecting the FDI flow.
It, however, said Export Processing Zones of the country witnessed a growth in investment in FY14 as the country’s eight EPZs posted a 22.54 per cent increase to US$ 402.58 million in FY14 compared to US$ 328.53 million in the previous fiscal.
It said remittance inflows recorded a decline for the first time in 13 consecutive years in FY14.
‘The decline was variously due to a shrinking outflow of migrant workers, falling receipts from Middle Eastern nations, appreciation of the Taka against the dollar, and prolonged political turmoil in some of the major labour employing countries,’ said the chamber in the review.
In June 2014, exports grew by 3.51 per cent month-on-month to US$ 2.800 billion from US$ 2.705 billion.
‘But the figure is 8.79 per cent below the strategic monthly target of US$ 3.07 billion as the country was yet to fully recover from the fallout of the political unrest,’ the review said.
Exports rose 8.34 per cent to US$ 7.934 billion in April-June period compared to the corresponding quarter of FY13.
The MCCI said growth of manufacturing industries plunged to 8.68 per cent in FY14 from 10.31 per cent in FY13.
‘Manufacturing industries, which held 19.45 per cent share in the GDP in FY14, have long been experiencing difficulties due to power and gas shortages and also insufficiency of land for setting up industries at appropriate locations,’ it said.
It said that the services sector witnessed a better performance in FY14 compared to the previous fiscal year.
‘Although political violence gripped the country in first six months of FY14, the services sector growth increased by 0.32 percentage point to 5.83 per cent in FY14 from 5.51 per cent in FY13,’ it said.
It said that despite political unrest, the agriculture sector recorded an impressive 2.46 per cent growth in FY14 compared to 1.47 per cent in FY13.
‘The performance of agriculture was contributed by steady growth in crop production and output in fisheries and horticulture sub-sectors,’ it said.
The MCCI review said that stocks gained 9.16 per cent in FY14 amid a series of bearish trends caused by bouts of pre-election violence across the country.
‘The average daily turnover was higher at Tk 4.71 billion in FY14, compared to Tk 3.70 billion in FY13. Healthy corporate declarations by listed companies and optimistic investors pushed the market into positives, according to the capital market analysts,’ it said.
-With New Age input
