Businesses hope for reaping dividends of political calm

Country's export-import trade and inward remittances may increase in the first quarter of the current fiscal year (FY) as a relatively calm political situation is expected to last further, a leading business chamber predicts.    
The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, struck the note of optimism in its review of the 'Economic Situation in Bangladesh' for the April-June 2014 quarter, evidently as there have been no disruptive opposition political programmes so far this year.        
However, it says, the foreign-exchange reserve might register a downtrend in July and September due to the payments to the Asian Clearing Union (ACU) against imports.
Besides, the rate of inflation could be up in July because of increased demand during the Ramadan and Eid-ul-Fitr festival. But it could fall slightly thereafter, says the MCCI review.
According to the review, country's export earnings could reach US$2,890 million in August 2014 and $2,920 million in the next month.
Overall import might amount to $3,630 million in August and $3640 million in September.
On the other hand, inflow of remittances could be $1,485 million in August while the amount could come to $1,490 million in September.
"The rate of inflation might decline to 7.20 per cent in August and 7.10 in September of the first quarter under review," it says.
According to the MCCI review, the foreign-currency reserves are expected to decline to $20.53 billion in September from an expected $21.70 billion in August.
The growth prospects of the economy are being badly hurt by political uncertainty, it said, adding: entrepreneurs, whether local or foreign, are not encouraged to make any new investment in the present political environment.
"Foreign investors have adopted a 'go-slow' strategy in making fresh investment since 2013. While public investment has increased, it cannot be an alternative to private investment, which is crucial to accelerating economic growth," it is stated in the review.
The influential chamber noted that the damages inflicted by political unrest last year on the national economy also dented the confidence level of the intending investors, causing a slower growth in investment in the private sector.
"Maintaining macroeconomic stability, restoring momentum in economic activities, enhancing revenue collection, achieving the export target, containing inflation, and above all, improving law-and-order conditions in the country will be the major challenges for the government, which has set itself the target of achieving 7.3 per cent GDP growth in the current fiscal," it said.
The MCCI mentioned major challenges the government is facing in the current fiscal, including boosting private investment, bringing momentum in economic activities, achieving a higher gross domestic product (GDP) growth, and containing inflation.
It says there is the need to establish and sustain political stability, which is an essential precondition for reaching middle-income-country status for Bangladesh by 2021.
About foreign direct investment (FDI) the review said to attract more FDI there is a need for continuation of the existing facilities and incentives offered by the government.
"High bank interest rates and ineffective tax regime have been thwarting investment, including FDI, which need to be rationalized," it said.
The trade body pointed out that the one-stop service meant to be provided by the Board of Investment (BoI) should be made truly effective. And for that purpose the BoI needs to be strengthened, bringing all relevant agencies under its ambit.
The proposed economic zones authority and the public-private partnership cell should be brought under its umbrella rather than allowed to function as separate entities, it further recommended.
"Moreover, the government will have to solve problems of infrastructure bottlenecks, including the scarcity of land, the lack of policy continuity, bureaucratic red tape, weak governance, political instability, poor skills of the labour force, administrative impediments and inadequate utilities, including gas, electricity and water," said the review.
The shortage of energy, both power and gas, was taking its toll on production in the country's industrial sector, even before the sector suffered the worst impact of shutdowns and blockades during the first half of FY14, it said.  
Many industrial units were running well below their production capacity following the political violence, labour unrest in the garment sector, insufficient private investment and shortage of industrial lands in export-processing zones with required facilities, it revealed.