Data revealed recently suggest that Bangladesh has finally reached a point where there is a prospect of the economy to move beyond the 6.0 per cent GDP (gross domestic product) growth trap. It may reach 7.05 per cent in the current fiscal year (2015-16). The per capita income is expected to rise from US $ 1,316 to US $ 1,466. These data of hope were presented by the Planning Ministry to the National Economic Council on April 05, 2016.
The sectoral growth rate of GDP has been evaluated at constant prices. Statistics provided by the Bangladesh Bureau of Statistics (BBS) has pointed out that the agriculture sector will witness a 2.60 per cent growth in the current year (a marginal fall from the 3.33 per cent of last year). The industrial sector will have a 10.10 per cent growth against that of 9.67 per cent of last fiscal. The services sector is expected to grow by about 6.70 per cent in the current year against that of 5.80 per cent of last year. The growth in the fisheries sector has been estimated to reach 6.19 per cent, in manufacturing 10.30 per cent, in electricity, gas and water supply 11.15 per cent and in construction 8.87 per cent. The overall size of the GDP at constant market price for FY 16 stood at Taka 88305.44 billion (8,830,544 crore) as opposed to Taka 82486.24 billion (8,248,624 crore) in the FY 15. This trend of growth, according to economists, has taken place because of persisting political stability, continuous growth in the agricultural sector and also steady rise in export earnings. The Planning Ministry has underlined that this is consistent with a recently-concluded survey that showed that 73 per cent of those surveyed thought that the nation is heading towards the right direction.
The World Bank (WB) and the Asian Development Bank (ADB) have, however, disagreed with the assumptions of the Planning Ministry and have observed that that the likely growth in GDP will be around 6.7 per cent or less.
EXPORT PERFORMANCE: The country’s overall export volume has reached US$ 24.95 billion in the first nine months (July, 2015 to March, 2016) of this fiscal year. There was a growth of nearly 9.0 per cent from the figure of US$ 22.90 billion of one year earlier for the same period. The figure that has been achieved over this period was 2.12 per cent higher than the strategic target of US$ 24.43 billion. The export earning in March alone was US$ 2.83 billion – a rise of 9.2 per cent for this month compared to last year.
The contribution of the ready-made garment (RMG) sector was the highest with US$ 20.44 billion. This reflected a 9.74 per cent growth compared to one year ago. The woven sector earned US$ 10.76 billion, an increase of 12.64 per cent from last year. Knitwear earned US$ 9.67 billion, posting a 6.68 per cent growth. The BGMEA (Bangladesh Garment Manufacturers and Exporters Association) has pointed out that they are aware that the RMG sector needs to achieve a growth rate of more than 12 per cent if they are to reach their export target of US$ 50 billion by 2021.
FDI INFLOW: There was welcome news early in April that the annual inflow of foreign direct investment (FDI) crossed the US$ 2.0 billion level for the first time in Bangladesh last year. Provisional estimates indicated that the net inflow of FDI was US$ 1.89 billion in 2015. Updated statistics, released this April by the Bangladesh Bank (BB), enhanced the figure to US$ 2.23 billion. This amount was 44.10 per cent higher than the FDI figure of US$ 1.55 billion of 2014. The BB clarified that the gross inflow was US$ 2.69 billion but the amount of disinvestment (outflow) was US$ 463.66 million. The FDI sources included: USA- $ 573.77 million; UK- $300.80 million; Singapore- $ 175.27 million; Hong Kong- $ 141.58 million and Malaysia- $ 110.46 million. The composition data showed that 51 per cent or $ 1.14 billion of the net FDI came as reinvested earnings of multi-national corporations (MNCs) operating in the country. The latest data from the BB also showed that nearly $ 697 million came as equity capital in 2015, which was around 31 per cent of the annual inflow of FDI. The remaining amount, $ 394 million came in the form of intra-company loans. It may be mentioned here that though there has been some movement forward, FDI inflow was well below Vietnam (US$ 14 billion) and Myanmar (US$ 9.0 billion).
The development partners of Bangladesh have carried out a detailed study as to how the FDI inflow situation can improve. They have identified several major challenges which, they feel, need to be addressed for achieving our required Sustainable Development Goals (SDGs). The problems include: sluggish growth of revenue, infrastructure development, augmentation of allocation for education and healthcare, human resource development, improving child nutrition and further enhancing the involvement of women in economic activities.
There is sometimes absence of specific information on laws relating to foreign investment in the industrial sector. This and our unfortunate bureaucratic mindset tend to encourage corruption. Reference has been made to the complexities outsiders face in the mutation of land ownership and complexities that exist in obtaining the approval of Bangladesh Securities and Exchange Commission (BSEC). There is inordinate delay in getting trade license for beginning business, acquiring import-export registration certificate, clearance certificate from the Department of Environment, TIN registration, VAT registration, factory registration and fire security certificate. This is a long list that continues to not only undermine growth of FDI but also casts a shadow on our economic development. It also discourages our Bangladeshi diaspora from coming to Bangladesh and investing in our productive sectors. These are issues that need urgent resolution.
If the government and the relevant authorities ensure quick completion of all regulatory measures, along with the full handing over of possession of land of the Korean Export Processing Zone in Chittagong to Youngone, the South Korean conglomerate as already agreed upon earlier, the confidence of investors in the country’s investment environment will be boosted. This will be seen as a positive example by foreign multinationals interested in participating through FDI in the new EPZs being set in place by our government in different parts of the country.
CLIMBING THE LADDER OF ECONOMIC DEVELOPMENT: Meanwhile, it is encouraging to note that the government is taking steps to impart training to 55,000 students in the ICT sector. These persons subsequently can be the technological catalytic factor for facilitating confidence in our emerging manufacturing sector and the use of digitalisation in this regard. The initiative by the government to make Kaliakoir Hi-Tech Park an ICT city is consequently that much more welcome.
The efforts of Bangladesh to climb the ladder of economic development, despite challenges, are being monitored very carefully by global and regional institutions including the World Bank which created a fiasco several years ago over the construction of the Padma Bridge. Recently, the International Development Association (IDA), a lending arm of the World Bank, has decided to provide Bangladesh, which has made significant progress in energy management and moved 10 steps up in the major global energy index, with a US$ 217 million in credit for upgrading a unit of the Ghorashal power station. This is expected to transform the Ghorashal Unit 4 Repowering Project into a gas-fired steam unit. This conversion to combined cycle technology will increase the plant’s overall efficiency from existing 30 per cent while requiring only 18 per cent more natural gas. Generation of electricity will also improve from current generation of about 170 MW to an energy-efficient 409 MW. With this credit, the World Bank’s total support to the country’s power sector will cross US$ 1.7 billion. The Bank has also lately approved US$ 130 million to support the government’s initiatives to set up new economic zones in different parts of the country for boosting investment. The Bank’s Board has recently sanctioned another US$ 50 million for the Pro-Poor Slums Integration Project to pilot a community-based approach to improve living conditions in urban slums. It is understood that the UK Department for International Development (DFID) will also be associated with this last project.
Yes, we still have to overcome many challenges. Nevertheless, we have come a long way and our hard-working people have proven that Henry Kissinger was wrong when he stated that Bangladesh will be a “bottomless basket-case”. Given political and macro-economic stability, we will be able to remove the barriers to growth and eventually achieve middle-income status, sooner rather than later.