Investment yet to pick up

The government is yet to bring both public and private investments
out of their sluggish mood although an ambitious budget was announced
for the current fiscal year. Only four percent of the big Annual
Development Programme (ADP) was implemented in the first two months
of the current fiscal year, according to latest information. At the
same time import of capital machinery and industrial raw materials
showed negative trend, meaning private investment is yet to pick up.
Research Director at Bangladesh Institute of Development Studies Zaid
Bakht said the GDP growth target of 5.5 percent will not be
achieved if the public and private investment does not increase.
Meanwhile, the World Bank Economic update also said Bangladesh
continues to face several risks that affect its short-term prospects
for growth and poverty reduction. The risks include slower ADP
implementation, power shortage and global recession. According to a
report of the planning ministry's Implementation, Monitoring &
Evaluation Division (IMED), Tk 1 ,347 crore out of the total ADP
outlay of Tk 30 ,500 crore was implemented in the July-August period
of the current fiscal year. In FY 2007-08 and FY 2008-09 the
implementation was Tk 874 crore or 3 percent and Tk 1 ,086 crore or
4 percent respectively in the first two months. ADP implementation
witnessed its slowest pace during the caretaker government' regime.
The implementation in the current year was comparatively better, but
if the rate is compared with that in FY 2006-07 , it is frustrating.
In the first two months of FY 2006-07 the implementation was Tk 1
,553 crore or 6 percent. The ADP size of Tk 30 ,500 crore in the
current year is about 56 percent higher than last year's real
expenditure. An IMED official said the implementation rate during the
first two months does not match the ADP size. According to Bangladesh
Bank's Letter of Credit ( L/C) settlement statistics, capital
machinery import dropped by 22.36 percent in the July- August period
of the current year over the same period a year ago. Import of
industrial raw materials also fell by 20. 81 percent, while the rate
of L/C opening for industrial raw materials went down by 12.56
percent. Call money rate was 1.76 percent on October 6 , which was
9.13 percent on the same day last fiscal year. This means there is
no credit demand in banks now. Import and export also showed negative
trend in July this year when import dropped 16.63 percent and export
6.80 percent. Zaid Bakht said: "The government took the strategy of
increasing public investment to make domestic economy vibrant. But the
strategy did not work." As the public investment did not increase,
the private investment also did not roll in, he said. Another cause
for sluggish private investment is shortage of power and gas, he
added. The WB has recently prepared an economic update on Bangladesh,
which is yet to be released. The report said power shortages are the
most serious and immediate of the infrastructure constraints with
damaging impact on productivity and investment. The WB report said
the implementation of the ADP, which is 56 percent more than the
real expenditure of the previous fiscal year's ADP, is a big
challenge. It said: "Experience has shown that the ADP utilisation
has been slow and never exceeded Tk 200 billion in the past."
However Finance Minister AMA Muhith on Sunday said the finance
ministry and the planning ministry have been continuously putting
pressure on other ministries to expedite ADP implementation. However,
he admitted that public investment might not increase much. So the
government would lay emphasis on increasing foreign and domestic
investment in the private sector to improve investment.