Investment rate needs to ‘rise by 5pc of GDP’

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FE Report
Bangladesh needs to increase its investment rate by more than five per cent to 30 per cent of the Gross Domestic Product (GDP) from the current level of 25 per cent for accelerating further its development process, World Bank (WB) Country Director Xian Zhu said Sunday.
He underscored the need for concerted efforts to improve Bangladesh's capacity to attract Foreign Direct Investment (FDI), the level of which, he said, has been quite low at less than 0.5 per cent of the GDP for the most part.
"… Bangladesh needs to move faster just to stay in the same place and to catch up. Concrete, coherent and immediate actions to improve the investment climate are urgently needed," Zhu said.
He, however, suggested that Bangladesh should also employ its resources -- labour and capital - more productively, and the bulk has to come from the private sector, including FDI.
He was speaking as the guest of honour at the monthly luncheon meeting of the Foreign Investors' Chamber of Commerce and Industry (FICCI) at a city hotel. FICCI's Executive Committee members Rafi Omar and Anis A Khan also spoke on the occasion.
Describing FDI and foreign investors in Bangladesh as crucial for the country's development process, the WB representative said, " It (FDI) is a story of promise, but still too few successes."
Zhu, who took charge of the WB office in Bangladesh in February last, also identified the existing poor infrastructure as one of the critical constraints to attract FDI in Bangladesh.
"Infrastructure bottlenecks related to power, trade facilitation and transport networks are severe in Bangladesh and imposing significant costs on exporting and importing firms," Zhu said.
He also observed that FDI had recently picked up in extractive industries like coal and gas, telecommunications, and energy production, which raised the FDI's share in GDP to about 1.0 per cent.
But the inflow of FDI is still poor in the country's manufacturing sector, he added.
"One of our survey results shows that firms with any level of foreign ownership are 10 per cent more productive on average than firms that are wholly domestically owned," the WB official observed.
He, however, said the World Bank Group is more than willing to ramp up its technical and financial assistance in order to augment infrastructure and improve the investment environment in Bangladesh.
Zhu told the meeting that beyond improving the investment climate, Bangladesh needed to open up its economy to survive in a post-MFA (multi fibre arrangement) world.
Terming Bangladesh 'the most protectionist economy' in South Asia, he said prolonged high protection breeds inefficiency, inhibits competition, and stifles productivity growth.
"In a highly competitive post-MFA world of today, there is no option but to strengthen export competitiveness by phased and transparent liberalisation of the trade regime," said the WB official.
Bangladesh has made remarkable economic and social gains, despite the widely held perceptions of weak governance, he observed.