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Wednesday, October 17, 2012
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Economists call for better investment, regulatory regime

A group of economists yesterday called for an investment-friendly climate for the private sector and urgent actions to resolve infrastructure deficiency, to help the country achieve higher economic growth.

"There is no congenial environment for investment in the country. Not only do the political front pose threats, the regulatory regimes also do not work efficiently and professionally," said Salehuddin Ahmed, a former Bangladesh Bank governor.

Ahmed said the weakest part of the macroeconomic management has been the country's inability to generate enough jobs. Wages and salaries have remained static at all sectors except a few.

"Interpersonal inequality and regional disparity in income has gone up tremendously. It is not a good sign in the long-run if the economic growth benefits a part of the society and deprives the others.

Ahmed, also a professor at North South University, said the inflation, although on its way down, is still high -- and remains a challenge for the country.

He also said if there is any shock then the 7.2 percent GDP growth would not be possible to achieve.

Ahmed said the country's financial sector management has been a mess, with special mention to the Hall-Mark Group's scam.

Akbar Ali Khan, an adviser to a former caretaker government, said even if Bangladesh fails to achieve its targeted economic growth of 7.2 percent this fiscal year, the country will have satisfactory achievement.

He said when people talk about public investment, very rarely do they point to the efficiency of the investment.

"The government will have to raise the productivity of its investment. But it will not take place if the government cannot bring in major reforms in its administration.

He warned the government of fiscal indiscipline, as governments everywhere overspend as elections draw close.

The comments came at a programme on the state of the economy, organised by the BRAC Business School at BRAC University.

Khan, also a professor at BRAC University, said the country's rising dependence on imported energy is the Achilles' heel of the economy.

"This is a major problem. If we do not address it urgently we will have to pay in the long run."

He said the country might not be able to unleash the creativity of the private sector due to the high government borrowing from the banking sector.

AB Mirza Azizul Islam, an adviser to a former caretaker government, said it remains to be seen whether the government would be able to finance its budget deficit.

He said the government claims it has successfully put the deficit at 4.4 percent in terms of GDP in recent years -- and therefore, lower than the tolerable 5 percent-mark.

"But it is not because of our astounding success in revenue mobilisation, but because of our failure to undertake investment activity on the scale we needed, given the fact that we have tremendous shortage of infrastructure."

He cited administrative incompetence, regulatory complexity, lack of transparency and potential emerging of confrontational politics as some of the key challenges the country is facing at present.

He said 6 percent might be a respectable rate of growth for Bangladesh.

Shamsul Alam, a member of planning commission, said the state of the economy is healthy as almost all indicators of the economy are showing positive trends.

He however said the country needs to raise its investment-GDP ratio to 32 percent from the current stagnant ratio of 24 percent.

"The country will also have to woo in foreign direct investment upwards of $1 billion a year, as Vietnam attracts about $15 billion per year."

Zahid Hussain, senior economist of the World Bank, said sustenance of longer-term growth poses a challenge for Bangladesh.

Although Bangladesh has done well on the poverty reduction front, he thinks it has not well in terms of reducing vulnerability of the poor.

"Any shock can quickly bring them down to the poverty line.

He said serious policy action is needed to help the country solve its infrastructure deficiency.

"Otherwise, we will not be able to achieve development targets."

Quazi Mesbahuddin Ahmed, managing director of Palli Karma-Sahayak Foundation (PKSF), said the 7.2 percent growth seems to be completely unattainable under the present circumstances.

Prof Mamun Rashid, director of BRAC Business School, said most indicators of the economy are showing upward trend -- but politics is not keeping up with the economic successes.

"Positive political intervention is necessary to drive our growth," he said.

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