Development challenges facing Bangladesh
Faridul Islam | Friday, 6 June 2008
DEFICIENCIES in key infrastructure such as power, railways and roads, seriously hamper export growth, investment, and opportunities for transport integration within Bangladesh and also regionally, where possible, for better business. Power is the biggest logjam in physical infrastructure. Per capita power generation of about 158 kilowatt-hours a year, is among the world's lowest. Only a third of the population in Bangladesh have access to electricity but they also get a poor, unreliable service, suffering from frequent outages and low voltage.
This stems from inadequate power generation capacity and poor transmission and distribution systems. In FY2007, maximum served generation was only 3,812 megawatts (MW) as against peak demand for 4,693 MW, resulting in up to 1,312 MW load shedding on 347 days. Most industrial manufacturers have to rely on costly generators. And small enterprises, that cannot afford backups, have no alternative but to shut down during the prolonged power outages.
Over the last decade, net energy demand in Bangladesh grew by 8.1 per cent a year. And, for an expected average annual GDP growth rate of 8.0 per cent over the next two decades, the needed average annual energy growth rate is 12 per cent, Bangladesh faces a momentous task in meeting this burgeoning energy demand which will need substantial investment with reforms in various areas, including an energy pricing policy to recover operating costs, reducing the government's outstanding dues to power entities, further corporatising power entities, and making the Bangladesh Energy Regulatory Commission (BERC) effectively functional.
The Bangladesh Railway (BR) is unable to carry containers efficiently and on time because of limited locomotive and freight-car availability, congested network on major corridors such as Dhaka-Chittagong and the corridor to India, lack of operational efficiency, and infrastructure constraints. The main constraints facing the road sector are inadequate maintenance funding and weak management.
As a result of weaknesses in transport operations, the country is tardy in exporting and importing, requiring 35 and 57 days, respectively, measured from start to completion of export or import procedures and shipment. This compares ill with neighbouring countries such as India 27 days for export and 41 days for import, Pakistan 24 days for export and 19 days for import, and Sri Lanka 25 days for export and 27 days for import. However, things at ports have shown some signs of marked improvement in the past several months, thanks to the drive made by the joint task force in this connection.
The costs of foreign trade operations have otherwise been high for Bangladesh. For example, the cost of export for each container in Bangladesh is $902, compared to $864 of India, $797 of Sri Lanka, $481 of Malaysia, and $335 of the People's Republic of China.
For Chittagong port, the focus should remain on contracting out operations to the private sector, on allowing private operators to invest in port infrastructure, and on restructuring its management. The caretaker government has, in fact, transferred the operations of Chittagong container terminal to the private sector, and has also signalled its intention to do the same for the New Mooring Container Terminal.
For the BR, the emphasis should be on ensuring greater commercial orientation, entrusting some of its businesses to private companies, and introduction of modern management and financial systems. For the roads, the priority should be on approving an integrated multimodal transport policy and creating a road maintenance fund.
Despite some progress, Bangladesh is yet to establish a healthy and efficient financial system. The on-going banking sector restructuring must be strengthened. In the capital market, the thrust should be on improving financial reporting and corporate governance, and strengthening monitoring and enforcement by the Securities and Exchange Commission (SEC).
This stems from inadequate power generation capacity and poor transmission and distribution systems. In FY2007, maximum served generation was only 3,812 megawatts (MW) as against peak demand for 4,693 MW, resulting in up to 1,312 MW load shedding on 347 days. Most industrial manufacturers have to rely on costly generators. And small enterprises, that cannot afford backups, have no alternative but to shut down during the prolonged power outages.
Over the last decade, net energy demand in Bangladesh grew by 8.1 per cent a year. And, for an expected average annual GDP growth rate of 8.0 per cent over the next two decades, the needed average annual energy growth rate is 12 per cent, Bangladesh faces a momentous task in meeting this burgeoning energy demand which will need substantial investment with reforms in various areas, including an energy pricing policy to recover operating costs, reducing the government's outstanding dues to power entities, further corporatising power entities, and making the Bangladesh Energy Regulatory Commission (BERC) effectively functional.
The Bangladesh Railway (BR) is unable to carry containers efficiently and on time because of limited locomotive and freight-car availability, congested network on major corridors such as Dhaka-Chittagong and the corridor to India, lack of operational efficiency, and infrastructure constraints. The main constraints facing the road sector are inadequate maintenance funding and weak management.
As a result of weaknesses in transport operations, the country is tardy in exporting and importing, requiring 35 and 57 days, respectively, measured from start to completion of export or import procedures and shipment. This compares ill with neighbouring countries such as India 27 days for export and 41 days for import, Pakistan 24 days for export and 19 days for import, and Sri Lanka 25 days for export and 27 days for import. However, things at ports have shown some signs of marked improvement in the past several months, thanks to the drive made by the joint task force in this connection.
The costs of foreign trade operations have otherwise been high for Bangladesh. For example, the cost of export for each container in Bangladesh is $902, compared to $864 of India, $797 of Sri Lanka, $481 of Malaysia, and $335 of the People's Republic of China.
For Chittagong port, the focus should remain on contracting out operations to the private sector, on allowing private operators to invest in port infrastructure, and on restructuring its management. The caretaker government has, in fact, transferred the operations of Chittagong container terminal to the private sector, and has also signalled its intention to do the same for the New Mooring Container Terminal.
For the BR, the emphasis should be on ensuring greater commercial orientation, entrusting some of its businesses to private companies, and introduction of modern management and financial systems. For the roads, the priority should be on approving an integrated multimodal transport policy and creating a road maintenance fund.
Despite some progress, Bangladesh is yet to establish a healthy and efficient financial system. The on-going banking sector restructuring must be strengthened. In the capital market, the thrust should be on improving financial reporting and corporate governance, and strengthening monitoring and enforcement by the Securities and Exchange Commission (SEC).