BD needs \\\'big push\\\', not \\\'bit by bit\\\' for higher economic growth

I was listening to a lecture in my master's degree class on 'Development Economics' at Rajshahi University in early nineties. One of my favourite teachers, Professor Dilip Kumar Nath, was delivering his lecture on famous 'Big Push Model'. He cited an example to make us understand about the core concept of the model. An aircraft needs extra force for its takeoff, the professor mentioned. Although I could not understand much about the theory that time, the example that my professor referred to helped me a bit to get some ideas about it.
Recently, I tried to go into details about the model through internet. The originator of the big push model, according to Wikipedia, was Paul Rosenstein-Rodan in 1943. Further contributions were made later to it by Murphy, Shleifer and Robert W. Vishny in 1989. Analysis of this economic model ordinarily involves using game theory.
The theory of the model emphasises that underdeveloped countries require large amount of investments to embark on the path of economic development from their present state of backwardness. This theory proposes that a 'bit by bit' investment programme will not impact the process of growth as much as is required for developing countries.
When we try to see Bangladesh economy in the context of the Big Push Model, we can see its GDP (gross domestic product) growth rate has been at modest rate of around 6.0 per cent more than a decade. Despite having such a modest growth rate, Bangladesh has not yet been able to upgrade its status to a middle-income country.
Bangladesh has set a target of becoming a middle-income country (MIC) by 2021 to mark its 50th anniversary of independence. But attaining the targeted growth rate is not an easy task at all.
Finance Minister AMA Muhith himself the other day expressed his dissatisfaction over Bangladesh's prevailing GDP growth trend.
He said Bangladesh has been trapped in a 6.0 per cent GDP growth rate over the past few fiscal years. Mr. Muhith, however, expressed his optimism about reaching a 7.3 per cent growth projected by his government for the current fiscal year (2014-15).
However, the World Bank (WB) in its latest 'Bangladesh Development Update' said attaining of the government targeted 7.3 per cent economic growth could not be possible unless an "investment boom" takes place.
Bangladesh's gross domestic product growth can be around 6.2 per cent in the current financial year. But it is not possible to reach into the trajectory of 7.0 per cent growth with only 28.7 per cent investment-GDP ratio, said WB's principal economist Zahid Hussain recently while releasing the Bank's report in Dhaka.
The WB in its development update projected a 6.2 per cent GDP growth in the current financial year (FY) 2014-15, a 1.1 percentage points lower than the government's projection of a 7.3 per cent growth.
According to the WB, the FY'15 budget has set a very 'ambitious' 7.3 per cent growth target.  Achieving this will require the total investment to GDP ratio to rise by over 5.0 percentage points-from 28.7 percent in FY14 to 33.8 percent. This cannot happen without a major rise in the private investment rate.
The Bank further said Bangladesh could achieve an 8.0 per cent economic growth within next five years provided it makes the special economic zones (SEZs) investment friendly, major infrastructure like Dhaka-Chittagong 4-lane and expressway projects are implemented shortly.
The Washington-based multilateral donor --WB - also outlined a number risk factors, including ensuring macroeconomic stability, better governance in the banking system, development of markets for long term finance, further trade liberalisation, and stronger attention to efficient implementation of infrastructure investments with necessary institutional changes relating to regulation and policy formulation toward achieving a desired growth for Bangladesh.
The projection of GDP growth and the challenges outlined for Bangladesh by the Asian Development Bank (ADB) are almost similar to that of the WB.
Like the multilateral lenders - WB and ADB - economists, policymakers and development analysts often say there remain numerous challenges ahead for Bangladesh in achieving the status of a middle-income country.
Among those, the country's main challenge is to boost investment for the development of infrastructure, especially in the fields of road and communications, power, energy, human development and port facilitates etc.
The main purpose of such investment augmentation is to facilitate the growth of industrial sector for the sake of creating more employments, thus reducing poverty from the society. Although Bangladesh's per capita income has almost touched $1200, over 30 per cent of its 160-million population are living under poverty line.
Presently, investment-GDP ratio in Bangladesh, according to available data, is now estimated to be 25 per cent. And the rate should be increased to at least 32 per cent for Bangladesh to achieve the middle income status by 2021.
Economists suggest that attaining the MIC status by 2021would be a great challenge for Bangladesh, if it fails to attract substantial amount of investment.
At present, private investment accounts for about 75 per cent of total investment, and ratio of which to the country's GDP has been varying between 19 per cent and 20 per cent since fiscal year of 2005-06.  
Although most of the governments have been paying some attentions toward attraction of increased volumes of foreign direct investment (FDI) in the country, no visible progress has yet been noticed in this respect.
Experts say the constraints to private investment are many. According to them, major preconditions for both local and foreign investment are political stability, pro-investment policy, adequate infrastructure and good governance. But Bangladesh has not yet been able to make any positive progress in these fields, according to them.     
Inadequate supply of gas and electricity, poor capacity of ports, dearth of suitable lands, faulty transportation facilities and non-continuation of policy supports are often blamed for the less-than-expected-level of private investment in the country. Besides, the lack of a sustained political stability and poor governance are also responsible for the situation.
Apart from attracting private as well as foreign investment, there is an urgent need for raising the government's investment for facilitating the growth of private investment in the country.
But the main challenge for enhancement of government's investment is to raise internal resources, especially the tax-revenue. The tax-GDP ratio is one of the lowest in Bangladesh compared to that of many other countries, including the SARRC countries. The fact remains that many potential taxpayers are yet to come under the revenue board's collection net as nearly 1.0 million individuals now pay income tax.   
Because of its lower-than-expected level of revenue incomes, the government has to borrow a large amount of funds both from internal and external sources to meet its growing budgetary expenses. As a result, the government needs to spend a significant volume of fund every year for servicing such debts.
Taking the hurdles mentioned above into account, one can easily draw a conclusion that Bangladesh should take urgent steps, including mobilising more internal resources, ensuring a stable political environment, tackling corruption, improving the capacity and service delivery of government agencies, adopting investment-friendly policies, for the sake of attracting more private and foreign investment in the country.
So, there is no denying that a big effort is a must for Bangladesh's economic uplift.
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The writer is the Chief Reporter of the FE. He can be reached at Jahangir_fe@yahoo.com