Bangladesh's claim to its rightful position among the middle income countries (MICs) has got stronger with its Gross Domestic Product (GDP) registering constant growth over the years. Now that the timeline for MIC graduation is also in sight, the government needs to clear the decks for a rapid transition of the economy to the next level. To that end, the most important task before the government is to remove the existing roadblocks to the financial sector reform. True, a rigorous reform process for the country's financial sector started more than three decades ago between 1990 and 2000. As an outcome, many positive changes have meanwhile taken place in the sector. Expansion in the size and number of the private banks with their capacity for extending better quality loans to the private sector is definitely a proof of the strength the financial sector. For example, the contribution of the Readymade Garment (RMG)-which is a direct beneficiary of the financial sector reform measures-to the economy is for all to see. Also, the market is now to some extent able to play a better role in the financial system such as in determining interest rates with its positive ramifications on the deposit behaviour and inflation rates. However, the market is yet to be fully enabled to maintain flexibility of bank interest rates.
In this context, the increase in the awareness level about the bad and non-performing loans (NPLs) and their harmful impact on the economy is also an outcome of the reform. Despite these instances of progress, it has, at the same time, to be admitted that the financial sector reform has still remained an unfinished agenda. To this end, the central bank should be able to play a stronger role in enforcing the rules and thereby establishing discipline in the financial system. It is to be noted at this point that a robust and thriving financial sector provides what is called the proper 'investment climate' for drawing sufficient Foreign Direct Invest (FDI) in the economy. Given the FDI to GDP ratio of Bangladesh compared to some of its South and Southeast Asian neighbours is rather low, it is urgent that necessary measures were taken to improve the investment climate of the country. Speakers at a workshop organised recently in the city by the apex investment promotion body of the government, the Bangladesh Investment Development Authority (BIDA), did focus on these issues pertinent to increasing the inflow of FDI in the country.
These included, for example, developing infrastructure, introducing modern technology and new financial instruments with special emphasis on sustainable and environment-friendly, green growth. Notably, BIDA organised the meet as a follow-up of the International Investment Summit 2021 (IIS 2021) held in November last year where local and global participants also came up with a list of suggestions on reform measures to be undertaken to this effect.
Obviously, organising such events involving potential international investors is a commendable effort towards promoting FDI in the country. So, side by side with holding such discussion events, the BIDA and other departments concerned need also to implement the suggestions on reforms made at these various investment promotion forums. Since the pandemic seems to be on course of ceasing, the government should make the most of the situation to complete the needed reforms to improve the investment climate of the country.
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