Economic outlook is not promising
Md Mohsin Ali | Sunday, 3 August 2008
AT least a 6.0 per cent economic growth has been projected for the current fiscal year. Some donors, including the Asian Development Bank (ADB), also expect a similar growth prospect.
The hard-headed observers of the economy do not, however, share such optimism. In the reduced volume of business activities, declining rate of new investments and lower than expected rate of bank credits to real productive sectors, they see the symptoms of an economic slowdown continuing in the current fiscal. A six per cent growth would need more dynamism of the economy in different areas.
Such observers are pessimistic about the economy's performance in the current year. They fear that the growth rate could slide down to 5.0 per cent or a little more this fiscal while some others visualise even a lower growth rate. It would be good if these pundits are proved wrong. But the wishes can not change the ground realities, which seem to support the contention of the naysayers.
New investments are the keys to economic growth. Economic growth occurs when the private sector of a country takes interest to set up new industries or services. New investments create greater economic activities to expand the economic base and job opportunities for the people. But the investment operations from the private sector are decreasing when it should have gone up.
Besides a stagnation in domestic private sector investments, the rate of foreign investments are also reported to be declining. Furthermore, the latest developments in the overseas job markets, particularly those of Saudi Arabia and Kuwait from where a good number of Bangladeshi workers have been deported home and more are in the process of being sent back, do blur the prospects for a sustainable growth of remittance earnings. This has implications for the country's overall balance of payments position.
In this backdrop, one may contend that the public sector expenditures in the current fiscal year would be high. But a big part of the public spending would be consumptive such as various dole distribution to the poor or ultra-poor or for running social safety nets for them. How far such public sector spending does create the scope for sustainable physical capacities like industries and services -- that are needed for generating regular employment and income -- is certainly debatable. Thus, much of the public spending in the current fiscal is unlikely to contribute to 'economic growth'. The trend indicates the net investment from domestic and foreign sources is likely to remain modest in 2008-09.
The challenge before the government, therefore, is essentially the win over the confidence of the business classes. Generally, businessmen should be able to roll their monies or engage in business operations without fear. Only then the declining volume of investment would pick up to improve the economic growth prospects.
By targeting some businessmen, a scare was spread among many of them. So they consider it wise and safe to lie low or to wind up their operations wholly or partly. Real or perceived fear worked on many to do so. The fear psychosis must be overcome. For this the government has a role to play. Not that people are for going for deep-seated institutional reforms and not for chasing people for various sorts of irregularities that are largely the outcome of institutional malfunctioning. Only those who have grossly abused their official power for making private fortunes should be brought to book and proceedings should be drawn -- and drawn effectively and within a time-bound framework -- in the court of law. Minor offences for evasion of payment of stamp duty or registration fee or the like and that too for amounts not exceeding one or two million takas should be the concern of the related authorities when the government machinery itself provided the scope for taking recourse to such irregularities or petty offences.
The blatantly corrupt businessmen should, of course, be subjected to the legal processes but this must be done in a manner not to depress businesses in general. With good policies and their neat execution, it is possible to institutionalise sustained anti-corruption drive for better results without endangering the economy.
The hard-headed observers of the economy do not, however, share such optimism. In the reduced volume of business activities, declining rate of new investments and lower than expected rate of bank credits to real productive sectors, they see the symptoms of an economic slowdown continuing in the current fiscal. A six per cent growth would need more dynamism of the economy in different areas.
Such observers are pessimistic about the economy's performance in the current year. They fear that the growth rate could slide down to 5.0 per cent or a little more this fiscal while some others visualise even a lower growth rate. It would be good if these pundits are proved wrong. But the wishes can not change the ground realities, which seem to support the contention of the naysayers.
New investments are the keys to economic growth. Economic growth occurs when the private sector of a country takes interest to set up new industries or services. New investments create greater economic activities to expand the economic base and job opportunities for the people. But the investment operations from the private sector are decreasing when it should have gone up.
Besides a stagnation in domestic private sector investments, the rate of foreign investments are also reported to be declining. Furthermore, the latest developments in the overseas job markets, particularly those of Saudi Arabia and Kuwait from where a good number of Bangladeshi workers have been deported home and more are in the process of being sent back, do blur the prospects for a sustainable growth of remittance earnings. This has implications for the country's overall balance of payments position.
In this backdrop, one may contend that the public sector expenditures in the current fiscal year would be high. But a big part of the public spending would be consumptive such as various dole distribution to the poor or ultra-poor or for running social safety nets for them. How far such public sector spending does create the scope for sustainable physical capacities like industries and services -- that are needed for generating regular employment and income -- is certainly debatable. Thus, much of the public spending in the current fiscal is unlikely to contribute to 'economic growth'. The trend indicates the net investment from domestic and foreign sources is likely to remain modest in 2008-09.
The challenge before the government, therefore, is essentially the win over the confidence of the business classes. Generally, businessmen should be able to roll their monies or engage in business operations without fear. Only then the declining volume of investment would pick up to improve the economic growth prospects.
By targeting some businessmen, a scare was spread among many of them. So they consider it wise and safe to lie low or to wind up their operations wholly or partly. Real or perceived fear worked on many to do so. The fear psychosis must be overcome. For this the government has a role to play. Not that people are for going for deep-seated institutional reforms and not for chasing people for various sorts of irregularities that are largely the outcome of institutional malfunctioning. Only those who have grossly abused their official power for making private fortunes should be brought to book and proceedings should be drawn -- and drawn effectively and within a time-bound framework -- in the court of law. Minor offences for evasion of payment of stamp duty or registration fee or the like and that too for amounts not exceeding one or two million takas should be the concern of the related authorities when the government machinery itself provided the scope for taking recourse to such irregularities or petty offences.
The blatantly corrupt businessmen should, of course, be subjected to the legal processes but this must be done in a manner not to depress businesses in general. With good policies and their neat execution, it is possible to institutionalise sustained anti-corruption drive for better results without endangering the economy.