Centre for Policy Dialogue on Sunday said that investors were refraining from making new investments in the country because of absence of investment-friendly environment.
Investors are suffering from a lack of confidence in doing further investment in the absence of congenial political situation in the country, it said.It also said that the government’s projection on economic growth at 6.1 per cent for the current fiscal year might be slightly downsized in the final calculation as the projection was made on partial data.
The independent think-tank also raised questions on the government’s higher growth projection in services sectors though the sector suffered heavily in the first six months of the fiscal year due to political unrest in the country.
Evaluating the current fiscal year, the CPD said that the economy was somewhat stable, manifested in contained inflation, sustained exchange rates and high foreign reserves but structural weaknesses continued to persist.
The key challenges for the next fiscal year are to translate macroeconomic stability into accelerated growth, restore investors’ confidence, address the demand of infrastructure and reforms, it said.
‘Despite a respite in political unrest in post election period, uncertainties continued to adversely affect private sector investment in the country,’ CPD said at a press conference while unveiling its report ‘State of the Bangladesh Economy’ (third reading) in the fiscal year 2014.
Restoring investors’ confidence will be challenging for the government in the coming fiscal year of 2014-15, CPD observed.
‘There is a deep link between economy and compromising political system. So we urge the political parties to lead the country towards such a process where achieving higher economic growth rate, accelerating investments and transforming the country to a middle-income one will be possible,’ CPD executive director Mustafizur Rahman said.
While presenting the report, he said that a compromising, inclusive, participatory and stable political system along with consistent medium- and long-term policy support are needed for attracting new investment.
Entrepreneurs will not feel comfortable to make new investments until a favorable environment is ensured, he said.
The CPD said that the country would accelerate the rate of investment and productivity to ensure tapping potentiality in economic growth as there is a huge gap in potential and actual growth in the country.
The organisation termed the trend of government borrowing from the internal sources to meet the budget deficit as alarming.
‘The percentage of budget deficit at around 5 per cent remains under control but the way of deficit financing is going out of control which will create a problem for the government in future in financing for development works,’ Mustafiz said.
Out of Tk 100, the government borrowed Tk 91 from the domestic sources to finance budget deficit in the first three quarters of the current fiscal year, he said, adding that the contribution of foreign resources has been declining day by day.
Interest payments also emerged as one of the major sources of non-development expenditures which created interest burden for the government, he said.
The government should emphasize on foreign aid to finance budget deficit and properly utilise the foreign loans and grants that remained in pipeline through increasing project implementation capacity, he added.
The CPD also recommended the government for rationalizing the tax incentives, improving vigilance to curb tax evasion emerging from trade mispricing, misdeclaration and transfer pricing by multinational companies to increase revenue collection for financing development expenditures.
The CPD also said that non-reduction of interest spread rate was a major concern for investors as interest rate was not reduced due to high spread rate.
The CPD said that overall export performance in the first 10 months of the current fiscal year was better but a fall in export to US market emerged as a matter of concern as Bangladeshi competitors including India in that market did well in the period.
The research organisation also advised the government to adopt cost effective methods in electricity generation.
It projected that the revenue collection might fall short of Tk 4,000 crore to Tk 5,000 crore by the end of the fiscal year.
-With New Age input
