Says CPD, apprehends capital flight going on in various forms
The Centre for Policy Dialogue on Saturday said that the private investment in the country did not pick up to the expected level in the first post-election year because of infrastructure shortage and political uncertainty. At a press briefing on its first report on the state of the Bangladesh economy in the fiscal year of 2014-2015 held at the CIRDAP auditorium in Dhaka, the independent think-tank also said that a conducive political environment and an inclusive politics would be the key determining factors in the second half of the fiscal year for stimulating private sector investment and regaining the GDP growth momentum.
The CPD also expressed apprehension about capital flight saying that capital flight was taking place in the forms of money laundering, trade mispricing and remittance outflow from the country.
Achieving of the revised GDP growth rate at 6.5 per cent set by the government for the year will be challenging if private investment remains sluggish, it said adding that relatively political calm did not remove investors’ uncertainty.
Increasing of private investment will be the key challenge for the government to transform the 6-per cent GDP growth to 8 per cent growth rate in the country.
It also opposed the government move to increase prices of electricity and gas right now.
‘Private investment did not get momentum during the period though national and international situation — calmness in the political arena, stability in macro-economy and fall in prices of commodity on the international markets — was favourable,’ CPD distinguished fellow Debapriya Bhattacharya said.
Traditionally, the post-election years witness upswing in private investment and economic growth all over the world and it was expected that investment in Bangladesh would also increase after January 5 elections, he said.
The CPD identified three major setbacks — traditional bottlenecks in infrastructure, electricity, gas and corruption, lack of reform measures particularly in financial sectors, and political uncertainty — for the sluggish private investment in the period.
Debapriya said that the scope of political consensus and freedom of expression were shrinking while apprehension of political violence was increasing.
CPD executive director Mustafizur Rahman said that the government needed to ensure political consensus and inclusive politics to generate confidence in entrepreneurs and increase predictabilities so that investors could go for medium- and long-term investment.
‘Current political situation could not remove uncertainty and investors’ worries. So they refrained from new investment,’ he said.
He said that a CPD perception survey found that 40 per cent entrepreneurs did not go for new investment in the year that indicated that their uncertainty over business environment while 60 per cent made new investment and 85 per cent of them carried out the investment by taking loan from financial institutions while the rest of them made it by self finance.
The share of new investment ranged from 15 per cent to 50 per cent of their existing investment, the survey showed.
Thirty per cent respondents said that production in their factories increased in the July-November period of the current fiscal year compared with that of last year while 20 per cent said it decreased and 50 per cent said it remained unchanged.
No new employment was generated in 80 per cent of the units in the period while 20 per cent respondents said that number of employees decreased in their factories, the survey showed.
The CPD also suggested that the government should form an independent banking sector reform commission to look into the anomalies, malpractics and to come up with remedial measures and strategic recommendations.
The government should also increase supervision and oversight activities on banks particularly state-owned ones to prevent scam in future, it said.
Regarding capital flight, Debapriya said that the amount of money being laundered from Bangladesh was more than total inflow of foreign aid.
‘The government should also carefully examine the remittance outflow to India to find out if citizens of that country work in Bangladesh with legal status or not,’ he said adding that in 2012 $3.8 billion remitted to India from Bangladesh.
Fearing capital flight through import of capital machinery, the CPD said that there was some doubtful growth in import of some machinery like base metals, electrical equipment parts, vehicles and aircraft.
The volume and value of the items increased tremendously compared with that of previous year and the government should examine the issue thoroughly whether there was any mispricing in trade or capital flight.
Debapriya said that many might be bringing back the laundered money in the forms of foreign investment and foreign loan.
Terming the prospect of the current fiscal year mixed, the CPD said that revenue collection, achieving export target, attracting foreign loans and grants, managing classified loans and liquidity situation would remain major challenges.
Revenue earnings may fell short of target by Tk 25,000 crore in the year, it said.
CPD additional research director Khondaker Golam Moazzem and senior research fellow Towfiqul Islam Khan spoke, among others, at the briefing.
-With New Age input
