Bangladesh needs to further raise investment, develop infrastructure and increase overall productivity for achieving the expected level of economic growth, the Asian Development Bank (ADB) said as it found the rates of progress far below the mark.
"For faster poverty reduction, Bangladesh needs to lift its annual GDP growth rate to about 8.0 per cent in the medium term. To achieve this growth, investment needs to rise to 37.6 per cent of GDP," said the development financier.
The evaluation of the country's latest state of development came in the Manila-based Bank's Bangladesh Quarterly Economic Update released in Dhaka Wednesday.
During 2011-2014 period, the economy had grown at an average annual rate of 6.3 per cent against 7.1 percent growth targeted for the first four years of the Sixth Five-Year Plan (FY2011- FY2015).
"Lower-than-expected level of investment was the principal reason for the growth deficit," says the update on the economy, which reflected a slowdown in this field for a prolonged political unrest in the country over the election issue.
The ADB suggested giving the economic growth a humane face, as it said growth needs to be more inclusive, providing people with access to productive opportunities, so that they are able to contribute to, and equally share the benefits of higher economic growth.
The Asian Bank noted that macroeconomic management continued to remain prudent. "A cautious monetary policy together with a supportive fiscal policy contributed to slowing down inflation, with a more rapid deceleration in nonfood inflation," according to the economic update.
In respect of lessening the cost of doing business, it said strong efforts are needed in the areas of enhancing access to electricity and credits, reducing the burden of paying taxes, registering property and enforcing contracts, improving the trading environment, improving law and order, and strengthening public- sector management.
To increase the economy's external competitiveness, Bangladesh needs to raise the overall quality of infrastructure, including roads, ports, railways, electricity supply, and water supply and sanitation.
Terming higher investment in infrastructure vital for inclusive economic growth, the economic update said better infrastructure and higher connectivity can also contribute to diversifying the economy and increasing export competitiveness.
In addition, it observes, higher infrastructure investment is necessary to improve labour productivity, capital efficiency, and total factor productivity growth to sustain long-term higher economic growth.
"For promoting higher private investment, skills shortages also need to be addressed."
Suggesting mobilizing more domestic resources to finance higher public spending, the ADB said the country requires to mobilize more domestic resources by modernizing the country's tax systems and streamlining tax machinery.
"Subsidy spending will need to be contained by improving the design and targeting of subsidies, and minimizing leakages through strengthened delivery of social safety-net programs."
The Bank suggests a more effective results-based monitoring and evaluation system to strengthen project outcomes.
About investment in both private and public sectors, Bangladesh needs to significantly increase productivity to attain sustained high growth.
Terming the country's existing tax-GDP ratio (9.6 per cent of GDP in FY 2014) lower compared with other countries in South Asia, it noted that Bangladesh made some progress in reforming tax systems but further reforms are needed to simplify tax laws and collection procedures, including strengthening risk-based audit to promote voluntary tax compliance.
The tax coverage of income taxes and value-added tax could be significantly broadened by bringing new taxpayers under the tax net and reducing exemptions and exclusions, it suggested.
About PPP (Public-Private Partnership), the economic update says significant private-sector participation in infrastructure development, including through public-private partnerships (PPP), will be needed.
It's an imperative, given the inadequacy of resources available within the public sector.
About the sustainable growth of the readymade garment (RMG) industry, it said the government needs to address major challenges like improving the supply of electricity and transport-related infrastructure and logistics, upgrading safety standards to maintain strong market access.
Developing skilled employees for middle and senior management are also needed to raise production efficiency through better quality control, labeling and shipping.
Agriculture grew briskly by 3.4 per cent in FY2014 than the last year and the growth was aided by good weather and continued government support, it said.
Industry growth was affected due to supply disruptions during political unrest before the elections, it is noted in the ADB update. The growth dropped to 8.4 per cent in FY2014 from 9.6 per cent a year earlier.
Within manufacturing, large-and medium-scale industries grew by 9.2 per cent compared with 10.7 per cent in FY2013.
Likewise, the growth rate of small-scale industries declined to 6.6 per cent from 8.8 per cent in FY2013--indicating that they were likely more affected by political unrest than large-and medium-scale enterprises.
About the capital market, the ADB said the reforms undertaken by SEC to improve market discipline and strengthen market monitoring have helped stabilise the stock market.
"Tax incentives provided in the FY2014 budget and a respite from the political unrest improved the atmosphere for daily transactions," it said.
Dwelling on the role of the securities regulator, the ADB said, "SEC enhanced surveillance of brokerage houses and merchant banks to ensure compliance with SEC rules."
ADB sees Bangladesh growth below mark
FE Report | Published: September 04, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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