Impediments to GDP growth

The Metropolitan Chamber of Commerce and Industry (MCCI) in its July - September quarterly review of economic conditions in the country has pointed out some potentially impeding factors capable of derailing the government's projected annual growth rate of 7.0 per cent. A dilapidated physical infrastructure coupled with incessant shortage of power threatens to be the biggest stumbling blocks on the country's way to reaching the expected GDP growth rate of 7.0 per cent in the current fiscal year and 8.0 per cent next year. Though the government has incrementally been adding new power to the grid during its latest tenure, the sad reality is that demand far outstrips supply by a significant 1,500 megawatts during peak hours. The solution to this continual widening gap between demand for and supply of power can only be addressed if the administration wakes up to the need for establishing coal-fired large power plants. Again the problem here is that the country has yet to finalise a coal policy, without which, there can be no moving forward in the area of power generation. The MCCI's assessment also underscored the need to move away from oil-powered rental plants stating: "Fuel oils import increased by 130.49 per cent to US$815.50 million during the period against US$353.82 million of the corresponding period of the previous fiscal". It added that cost of producing electricity will vary widely subject to prices of fuel in international markets. A move away from import of primary fuel to exploitation of natural and proven coal reserves would pave the way for a new generation of power plants offering much higher production capacities. It would also save the government from considerable depletion of its foreign exchange reserves and bring down cost of producing power considerably. The other point of contention is the persistent negativity in the balance of payments. As things stand now with multilateral development partners, there is little possibility of getting any relief by way of loans from international agencies to balance the books. This naturally leaves the government with little choice but to raise tariff on electricity as a means of reducing the massive subsidies currently being given to it. Again the continued massive borrowing from the banking sector is not sustainable, not in the long run anyway. The only way out of this situation would be to increase revenue and that must come from foreign direct investment (FDI). However, for meaningful FDI to flow into Bangladesh, we need to focus on developing infrastructure, ensure adequate supply of power and energy, and prompt support to investors -factors now mostly conspicuous by their absence. No wonder, the lack of movement at policy level in overcoming bottlenecks of infrastructure development and supply constraints associated with gas and electricity are effectively holding up the normal growth of FDI in the country. Other issues that could in the foreseeable future be serious causes for worry include double digit inflation and political instability. While the latter is something that cannot be predicted, the government needs to rein in its borrowing from the banking system if it wishes to put a cap on hyperinflation the country is witnessing presently. What is evident at this point is that unless effective mid to long-term steps are taken to manage the power crisis in the country and develop infrastructure, Bangladesh is slowly but steadily heading for a slump in its economic growth.