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Asian Development Bank (ADB) report released yesterday. The
Manila-based development partner said Bangladesh has to address its
infrastructure and business environment constraints, including acute
energy crisis if it is to attract greater investment, particularly
foreign direct investment (FDI). "A matter of considerable concern is
the stagnation in the investment to GDP ratio within a range of 24.2
percent to 24.7 percent over the past five years," said the ADB
quarterly economic update for June 2009. It said although private
investment rose marginally to 19.6 percent in fiscal year 2008-09
riding on the improved business confidence following the return to an
elected government, the fallout of the global economic slowdown is
evident in lower disbursement of industrial term loans. Import of
capital machinery has also slowed down significantly. Letter of
credit for such imports fell by nearly 30 percent in FY 2008-09
from that in the previous year. Bangladesh attained 5.9 percent GDP
growth in FY 2008-09 , down from 6.2 percent a year ago. "Slowing
private consumption and investment activities are expected to exert
further downward pressure on GDP growth in FY 2009- 10 ," says the
quarterly economic update. Private consumption, which rose by 6
percent in the past fiscal year, accounts for about 75 percent of
the country's GDP. The consumption growth was slightly higher in FY
2007-08. Industry sector that contributes about 30 percent of the GDP
declined to 5.9 percent in the immediate past fiscal year from 6.8
percent the previous year. The ADB attributes this growth decline to
slowdown in exports in the second half of the fiscal year following
the global recession. "Weak investor sentiment also affected
manufacturing growth; as did slow implementation of power and energy
projects, despite the new government's high priority on power
generation and gas development, and weak construction activity," the
report pointed out. Growth in power and gas sub-sectors dropped by
over 2 percentage points to 4.5 percent. The services sector growth
also slowed slightly to 6.3 percent in FY 2008-09 , due to the
slowdown in remittance inflows, lower trade activities and moderation
in industry growth. Slower export growth and a fall in import
volumes affected trade and transport services. The agriculture sector
grew by 4.6 percent, up from 3.2 percent a year ago, owing to high
growth in food grain production (8.1 percent) aided by favourable
weather and strong government support, including delivery of inputs.
Revenue collection also remains a challenge for this year, the ADB
said. Revenue from the National Board of Revenue sources increased by
10.7 percent, far below the budget target of 18. 6 percent and the
27.4 percent growth the previous financial year. On inflation, the
ADB is agreed with Bangladesh Bank's target of 6.5 percent for the
current fiscal year. The overall balance of payments surplus
ballooned to $2.1 billion in FY 2008-09 from just $331 million in
FY 2007-08 due to substantial decline in import, it says. The
lending agency hailed the government for placing a budget with a
prudent balance between the need to stimulate the economy against
the backdrop of the financial crisis worldwide. "In view of the
widening infrastructure gap, the new budget also unveiled bold
initiatives to create a framework for PPP to enhance private
investment and streamline project approval processes to accelerate
ADP utilisation," says the ADB.
