FE Today Logo

Boost private investment to create more jobs

BB in its annual report says higher public investment alone fails to create enough employments

Siddique Islam | February 03, 2018 00:00:00

Bangladesh must increase the stymied private investment to boost economic growth and help generate enough jobs for its burgeoning workforce, the central bank recommends.

"To reach the next phase of growth, Bangladesh needs to increase the level of private investment to create jobs and support growth. Public investment can crowd in private investments by easing infrastructure bottlenecks," the Bangladesh Bank (BB) said in its annual report for the fiscal year (FY) 2016-17.

Its observations came against the backdrop of a rising trend in public investment in the gross domestic product (GDP) while private investment almost stayed static in the recent years.

Public investment showed a gradual rise from 6.6 per cent in 2013 to 7.4 per cent of GDP in 2017, whereas private investment kept hovering around 22-23 per cent of GDP, according to the BB report.

Actually, Bangladesh needs to increase private investment-GDP ratio up to 28 per cent and total investment within the span of 35-38 per cent to achieve an 8.0 percent economic growth by 2020.

Former Bangladesh Institute of Development Studies (BIDS) Director-General Mustafa K Mujeri suggests the authorities concerned should take effective measures to expedite the implementation process of proposed 100 special economic zones across the country to woo investment.

"It will help boosting both local and foreign investment in Bangladesh that will also contribute to creating employment opportunities," said Mr. Mujeri, also former chief economist of the central bank.

He feels that the government should ensure a congenial investment environment immediately to rope in both local and foreign investors.

The government has set a target of establishing 100 special economic zones and 28 hi-tech parks across the country.

"Public investment has increased gradually following implementation of different mega-projects," a BB senior official told the FE Friday while replying to a query on upward trend in public investment.

Currently, the government is implementing nine projects under a Fast Track Project Monitoring Committee, headed by Prime Minister Sheikh Hasina, for quick implementation.

The BB also sees the near-and medium-term outlook of Bangladesh economy broadly positive, driven by favorable domestic and external factors.

Looking ahead, global growth is expected to accelerate in 2017 and 2018. The improved outlook reflects faster growth both in advanced economies, and emerging and developing economies. Growth is projected to be stronger in developing Asia also.

Based on the prospects and the potential risks in the context of global and domestic economic perspectives, Bangladesh has already set GDP growth rate at 7.4 per cent and inflation 5.5 per cent for the current FY18.

The central bank of Bangladesh has been pursuing a monetary-policy stance on maintaining macroeconomic stability and keeping inflation at the programmed level.

Average inflation, as measured by consumer-price index (CPI), rose to 5.70 per cent in the country last December from 5.64 per cent of the previous month. Higher food prices heated up the barometer.

However, point-to-point inflation fell to 5.83 per cent from 5.91 per cent in November 2017.

The central bank's projections show average inflation to be around 5.7- 6.0 per cent in June 2018, assuming no further domestic or external shocks and a relatively favorable global inflation outcome.

During the remainder of the fiscal, food-inflation pressure will ease from imports and boro-rice harvests, according to the latest monetary policy statement (MPS), announced by the BB on January 29.

"The risks to the growth outlook from the modest global growth and weaker remittance flows and the inflation risks from any rise in food price and its spillover into non-food inflation need to be closely monitored," the annual report noted.

As part of the circumspection, the BB will update its forecasts on a regular basis.

However, pragmatic policy support, along with low and stable inflation accompanied by a favourable macroeconomic environment, helped Bangladesh become what is billed as a role model of sustainable finances.

Regarding this, BB's motivational efforts and supervisory surveillance will continue to focus on inclusive, productive use of credits, with particular attention to adequate credit flows to agriculture, SMEs, and environmentally caring 'green' output initiatives. "These schemes would make finance and growth more sustainable," the report explained.

From a macro-perspective, domestic demand growth is expected to remain robust over the near and medium terms reflecting demographics, investments and improving infrastructure and cost of doing business.

"As Bangladesh continues its middle-income transitions, continued focus on easing infrastructure bottlenecks, improving cost of doing business and skills, increasing investment will help create more and better jobs in the years ahead," it noted.

[email protected]

Share if you like