Cuts in 7th FYP investment targets

The government is set to cut the investment target drastically in the upcoming 7th five-year plan (FYP) following a sluggish growth over the last few years, officials said Tuesday.
Some economists, however, are of the opinion that even achieving the cut-down targets per annum under the long-term plan may be challenging unless the political ambience and other factors see a change.          
The officials said the government has decided to cut the targeted investment-GDP (Gross Domestic Product) ratio by 3.2 percentage points in the starting financial year (FY) 2015-16 of the FYP and in the terminal FY2020 by 2.6 percentage points.
"Since the investment growth has been poor over the years, we are forced to cut the target in the upcoming 7th FYP. We became more realistic on the impact of the recent domestic and external shocks on the economy," said a General Economics Division (GED) official.
The GED experts are working to finalise the 7th FYP, to be implemented between FY2016 and FY2020. In the process the investment-GDP ratio has been pared down to 30.1 per cent in FY2016 from the current target of 33.3 per cent in the Perspective Plan 2021.
The finance minister in his budget speech said despite taking several measures to improve the investment situation, it was not picking up to an expected level. He has also offered several incentives and benefits for attracting local and foreign investments.
GED Member Professor Shamsul Alam told the FE that they had revised the mid-term macroeconomic framework of the country in view of domestic and external shocks on the economy.
"Investment over the years is not picking up to an expected level. So we have been more realistic this time to set the macroeconomic targets," he said.
The investment-GDP ratio in the outgoing fiscal year (FY2015) slightly rose to 28.97 per cent from 28.58 per cent from the previous fiscal year with the share of public investment increasing to 6.90 per cent while private investment to 22.07 per cent.
According to the Bangladesh Bureau of Statistics (BBS) estimation, the investment ratio to GDP has been hovering over 26 per cent in the last couple of years.
Economist Dr Mirza Azizul Islam said boosting the current investment scenario will be "challenging for the government in the short term even after cutting the previous target as it has so far failed to improve the political scenario and other facilities in the country".
He suggested that the government should work to attract foreign direct investment (FDI) alongside local investment.
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