Policy support for the private sector
Amirul Islam | Sunday, 10 August 2008
Bangladesh desperately needs faster economic growth. The growth has to be led by the private sector. The smaller the role of the government, the better the prospect of efficient use of scarce resources for economiSc growth.
Following this principle, Bangladesh has been striving to achieve private sector-led economic growth for over three decades. This has led to the transformation of its economy. The state sector has considerably shrunk and the economy has added substantial sinews. It has been diversified under the private sector. Nonetheless, the private sector entrepreneurs in different fields feel that they could achieve more with better policy support from the government and better facilities in place.
A statement by a multilateral capital donor, issue sometime ago, called for properly aiding the private sector. Indeed, the government can consider the related prescriptions for faster private sector led growth. The government can take a fresh look at them with seriousness and attempt whatever needs to be done in line with these proposals. The concerned donor agency identified poor power supply as the single-most important infrastructure constraint to private sector development. Power, the life-blood of any economy, essential for running industries or the services. But the gap between the demand for, and supply of, power has been widening alarmingly in the country with negative consequences for productivity and growth. Many industrial investments, on stream, could hit snags after going into operation unless power generation increases.
New industrial investments would be adversely affected by the dwindling power supply. It is imperative for the government to go for large scale power generation at the fastest. All government-sponsored plans to this end must be speedily completed. Private sector initiative though allowed, on a limited scale, generation of power by it remains on hold with the government not extending due assurances about the sale of power produced. This uncertainty must be overcome at the soonest to increase private sector involvement in power generation.
The availability of natural gas, the other main source of energy, needs to be increased. Gas supply to existing industrial areas needs to improve much. Gas supply to areas, not covered yet, would help the private sector to rapidly industrialise those regions.
Other infrastructural bottlenecks hampering industrialisation include inadequacy of roads and telecommunications. Improvement and expansion of needed infrastructure would be supportive of private investment. Faster expansion, modernisation and improvement of the ports' handling capacities, are needed badly. Quicker progress would positively motivate entrepreneurs as well as investors.
Private initiative can be encouraged by favourable long-term government policies. Withdrawal of tax-breaks, high lending rate, skewed tariff structure that favour imported products over domestic producers, high rate of corporate taxes and unstable fiscal and monetary policies act as disincentives to entrepreneurship. The government, therefore, needs to create a sustained policy environment to keep the private sector interested in entrepreneurship.
Following this principle, Bangladesh has been striving to achieve private sector-led economic growth for over three decades. This has led to the transformation of its economy. The state sector has considerably shrunk and the economy has added substantial sinews. It has been diversified under the private sector. Nonetheless, the private sector entrepreneurs in different fields feel that they could achieve more with better policy support from the government and better facilities in place.
A statement by a multilateral capital donor, issue sometime ago, called for properly aiding the private sector. Indeed, the government can consider the related prescriptions for faster private sector led growth. The government can take a fresh look at them with seriousness and attempt whatever needs to be done in line with these proposals. The concerned donor agency identified poor power supply as the single-most important infrastructure constraint to private sector development. Power, the life-blood of any economy, essential for running industries or the services. But the gap between the demand for, and supply of, power has been widening alarmingly in the country with negative consequences for productivity and growth. Many industrial investments, on stream, could hit snags after going into operation unless power generation increases.
New industrial investments would be adversely affected by the dwindling power supply. It is imperative for the government to go for large scale power generation at the fastest. All government-sponsored plans to this end must be speedily completed. Private sector initiative though allowed, on a limited scale, generation of power by it remains on hold with the government not extending due assurances about the sale of power produced. This uncertainty must be overcome at the soonest to increase private sector involvement in power generation.
The availability of natural gas, the other main source of energy, needs to be increased. Gas supply to existing industrial areas needs to improve much. Gas supply to areas, not covered yet, would help the private sector to rapidly industrialise those regions.
Other infrastructural bottlenecks hampering industrialisation include inadequacy of roads and telecommunications. Improvement and expansion of needed infrastructure would be supportive of private investment. Faster expansion, modernisation and improvement of the ports' handling capacities, are needed badly. Quicker progress would positively motivate entrepreneurs as well as investors.
Private initiative can be encouraged by favourable long-term government policies. Withdrawal of tax-breaks, high lending rate, skewed tariff structure that favour imported products over domestic producers, high rate of corporate taxes and unstable fiscal and monetary policies act as disincentives to entrepreneurship. The government, therefore, needs to create a sustained policy environment to keep the private sector interested in entrepreneurship.