Introductory Remarks by Dr. Zaidi Sattar Chairman of Policy Research Institute:
Monday, 17 May 2010
'My predecessor has already done a fair introduction on Professor Papanek. I guess in my brief statement; I should say a little bit on the other part for which we are here- the investment challenge. However I cannot but say one or two things about Professor Papanek. He has been our Guru and mentor. He was the one who first thought that since civil servants in South Asia had to interact with the multilateral organizations and were responsible in a big way for determining economic policy, it was a good idea for them to be trained in economics so that they could interact much more effectively with the external advisors and make good policy decisions. So he moved from Harvard and started this Department of Economics at Boston University. You've already heard from Dr. Samad that it became the leading Development Economics Department of any university in the United States. He has this remarkable talent of maintaining excellent relations with civil servants across South Asia and not just in Bangladesh. But he has a special commitment to Bangladesh, because he was among the team of Harvard advisors, who came and set up this Institute of Economics first in Pakistan which later on became the Bangladesh Institute of Development Studies (BIDS) and his work focused on this part of the country.'
'Now Professor Papanek comes at a very crucial time for Bangladesh and I call it the biggest investment challenge that faces Bangladesh today. The facts speak for themselves. There has been stagnation; in a way you might describe it as a stagnation of investment. If you look at the Investment-GDP ratio, the Gross Domestic Investment has been static at around 23-24 percent of GDP since 2000. During the same period however, Gross National Savings have been increasing from about 23 percent of GDP to 32 percent of GDP. Somebody might say that, "you know there are resource constraints", but that doesn't seem to be the case as GNS tells a different story. We are faced with a sort of paradoxical situation where we have a huge savings surplus- a Savings-Investment surplus of about 8 percent of GDP. Now at the same time on the external balance, we see a growing Current Account surplus. For the last five years we have been running Current Account surplus reaching something like 2.5 percent of GDP in FY2009.
'I know of no other low-income country- and Professor Papanek has more knowledge of other countries in that situation- which is running this kind of a Savings-Investment surplus and Current Account surplus. Technically it means that Bangladesh is exporting capital. Again that's the other paradox. I hope there are some answers to this paradox. One answer points to data error in the National Accounts compiled by BBS. The Savings-Investment surplus cannot exceed the current account surplus by such a magnitude. So BBS is either over-estimating savings by under-estimating private consumption expenditures. Or it is under-estimating investment. We don't know which one is correct. All I can say is that it looks like Bangladesh is under-spending and under-investing, and so there is a sort of deadlock which needs to be broken. I am hoping that Professor Papanek would share some of his experience from other countries of Asia, where they have been able to come out of this sort of deadlock. Bangladesh needs some real answers and some real solutions on how to break out of this through any policy change perhaps. I know that we have to resolve the power constraint, but is there anything else that Bangladesh needs to do to come out of this deadlock? Is it going to be more of Foreign Private Investment, is it going to be more Domestic Private Investment, is it going to be more Public Investment or is it going to be a partnership of Public and Private Investment- which is the key to breaking this deadlock?
'Now Professor Papanek comes at a very crucial time for Bangladesh and I call it the biggest investment challenge that faces Bangladesh today. The facts speak for themselves. There has been stagnation; in a way you might describe it as a stagnation of investment. If you look at the Investment-GDP ratio, the Gross Domestic Investment has been static at around 23-24 percent of GDP since 2000. During the same period however, Gross National Savings have been increasing from about 23 percent of GDP to 32 percent of GDP. Somebody might say that, "you know there are resource constraints", but that doesn't seem to be the case as GNS tells a different story. We are faced with a sort of paradoxical situation where we have a huge savings surplus- a Savings-Investment surplus of about 8 percent of GDP. Now at the same time on the external balance, we see a growing Current Account surplus. For the last five years we have been running Current Account surplus reaching something like 2.5 percent of GDP in FY2009.
'I know of no other low-income country- and Professor Papanek has more knowledge of other countries in that situation- which is running this kind of a Savings-Investment surplus and Current Account surplus. Technically it means that Bangladesh is exporting capital. Again that's the other paradox. I hope there are some answers to this paradox. One answer points to data error in the National Accounts compiled by BBS. The Savings-Investment surplus cannot exceed the current account surplus by such a magnitude. So BBS is either over-estimating savings by under-estimating private consumption expenditures. Or it is under-estimating investment. We don't know which one is correct. All I can say is that it looks like Bangladesh is under-spending and under-investing, and so there is a sort of deadlock which needs to be broken. I am hoping that Professor Papanek would share some of his experience from other countries of Asia, where they have been able to come out of this sort of deadlock. Bangladesh needs some real answers and some real solutions on how to break out of this through any policy change perhaps. I know that we have to resolve the power constraint, but is there anything else that Bangladesh needs to do to come out of this deadlock? Is it going to be more of Foreign Private Investment, is it going to be more Domestic Private Investment, is it going to be more Public Investment or is it going to be a partnership of Public and Private Investment- which is the key to breaking this deadlock?