Hike in public spending must to boost private investment: CPD
Sunday, 7 June 2009
FE Report
Private investments will unlikely pick up steam unless the government increases public investments and revives its moribund development administration, the head of a local think tank said Saturday.
"Private investments have always suffered, due to the lack of a vibrant development administration," said Dr Mustafizur Rahman, of the Centre for Policy Dialogue (CPD).
"The focus should be on continuing and consolidating the reforms undertaken in the recent past to raise the efficiency of governance," he added.
His comments came as the annual development spending hit a new low in the outgoing fiscal year, with experts blaming the inefficient bureaucracy and project planning.
In the first ten months, only 48 per cent of the Tk265 billion development outlay was spent, dragging down the country's economic growth and slowing down poverty reduction.
Dr. Rahman noted that strengthening of local governments and bringing them under the budgetary process through broader participation in designing and implementing would be "critically important" to boost development spending.
Private and portfolio investments went into a negative territory as fallout of poor implementation of annual development programme, which has made attainment of higher growth difficult.
Although foreign investments were US$ 851 million in July-February period of the outgoing financial year, Dr. Rahman said portfolio investments witnessed a steep fall.
The portfolio investment was negative as a massive outflow of capital from the stock markets occurred, thanks to the global financial meltdown that has already blossomed into a full economic crisis.
He said foreign investment flow to export zones was also lower, due to the lack of interest from foreign investors to invest in export-oriented enterprises in view of the global crisis.
The CPD top executive said public investment continued to plunge-a historic low of 4.63 per cent of GDP (Gross Domestic Product) in the 2009 financial year.
Also, share of private investment in GDP increased marginally to 19.25 per cent in FY 2009 from 19.55 per cent in FY 08, he added.
Gross investments as percentage of GDP has declined for the three straight years, said Mr Rahman.
Public investment is critical but that should not provide a ground for reopening of losing state firms, said Dr Debapriya Bhattachariya, a fellow of CPD.
"It requires policy adjustment," Dr Bhattachariya, until recently with the Bangladesh UN mission in Geneva, added.
Currently, 25 state-run enterprises have been placed with the Privatisation Commission awaiting divestment.
Investment has also suffered from both lack of infrastructure and continuing uncertainty in recent times, he said.
He said Bangladesh cannot accelerate industrialization with higher interest policy.
The Bangladesh Bank will need to proactive role to reduce the spread between lending and deposit rates, if needed.
Private investments will unlikely pick up steam unless the government increases public investments and revives its moribund development administration, the head of a local think tank said Saturday.
"Private investments have always suffered, due to the lack of a vibrant development administration," said Dr Mustafizur Rahman, of the Centre for Policy Dialogue (CPD).
"The focus should be on continuing and consolidating the reforms undertaken in the recent past to raise the efficiency of governance," he added.
His comments came as the annual development spending hit a new low in the outgoing fiscal year, with experts blaming the inefficient bureaucracy and project planning.
In the first ten months, only 48 per cent of the Tk265 billion development outlay was spent, dragging down the country's economic growth and slowing down poverty reduction.
Dr. Rahman noted that strengthening of local governments and bringing them under the budgetary process through broader participation in designing and implementing would be "critically important" to boost development spending.
Private and portfolio investments went into a negative territory as fallout of poor implementation of annual development programme, which has made attainment of higher growth difficult.
Although foreign investments were US$ 851 million in July-February period of the outgoing financial year, Dr. Rahman said portfolio investments witnessed a steep fall.
The portfolio investment was negative as a massive outflow of capital from the stock markets occurred, thanks to the global financial meltdown that has already blossomed into a full economic crisis.
He said foreign investment flow to export zones was also lower, due to the lack of interest from foreign investors to invest in export-oriented enterprises in view of the global crisis.
The CPD top executive said public investment continued to plunge-a historic low of 4.63 per cent of GDP (Gross Domestic Product) in the 2009 financial year.
Also, share of private investment in GDP increased marginally to 19.25 per cent in FY 2009 from 19.55 per cent in FY 08, he added.
Gross investments as percentage of GDP has declined for the three straight years, said Mr Rahman.
Public investment is critical but that should not provide a ground for reopening of losing state firms, said Dr Debapriya Bhattachariya, a fellow of CPD.
"It requires policy adjustment," Dr Bhattachariya, until recently with the Bangladesh UN mission in Geneva, added.
Currently, 25 state-run enterprises have been placed with the Privatisation Commission awaiting divestment.
Investment has also suffered from both lack of infrastructure and continuing uncertainty in recent times, he said.
He said Bangladesh cannot accelerate industrialization with higher interest policy.
The Bangladesh Bank will need to proactive role to reduce the spread between lending and deposit rates, if needed.