Foreign aid, investment in private sector need scrutiny
Says BB governor
BDNEWS, Dhaka
Central bank Governor Salehuddin Ahmed yesterday said the role of foreign aid and investment in private sector has to be critically examined to ensure that the country's interest is not harmed. "Aid may be used as a leverage to promote the interest of donor countries and multinational companies to the detriment of local private sector development," the Bangladesh Bank (BB) Governor said at a seminar on "Aid and Public-Private Partnership in Bangladesh." He said in some cases the modalities through which one seeks to assist private sector may not meet the felt needs. Salehuddin referred to direct assistance to the private sector through the development financing institutions (DFIs) and investment, with partial or total counter guarantee provided by the government, calling for a scrutiny of such funding. "...an important negative consequence of aid is that it can create perverse incentives for the private sector in the sense of excessive dependence on state patronage," he said. This can seriously undermine sustained growth of genuine entrepreneurship and private sector efficiency may be compromised by the unhealthy race for access to state patronage, he added. He also said some aid conditionalities may hurt private sector, giving example of rapid trade liberalisation. The seminar organised by the Financial Management Academy of the Bangladesh Comptroller and Auditor General (CAG) at its auditorium was also addressed by Asif Ali, comptroller and auditor general, and high officials of the academy and CAG. Salehuddin said NGO governance will be discussed in future to find ways to ensure their accountability and stop wastage of foreign aid. He referred to the success of his previous organisation, Palli Karma Sahayak Foundation (PKSF), and said the share of this organisation in the revolving loan fund of the micro finance institutions (MFIs) rose from 9 percent in 1996 to 24 percent in 2002. Asif Ali said many donors, such as the World Bank (WB), Canadian International Development Agency (CIDA) and Danish International Development Agency (DANIDA), are interested to finance human resources development initiative in the accounting field. But the government will not negotiate another aid before completion of the ongoing donor-funded projects in the area, he added.
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