Private sector emerges as the engine of growth

The Global Competitiveness Report 2014-2015 of the World Economic Forum depicts an interesting picture of the current economic situation of Bangladesh. As per overall Global Competitiveness Index (GCI) 2014-2015, Bangladesh ranks 109 among 144 economies, moving one notch up from last year's (2013-2014) position. At the same time, in the sub-index of Macroeconomic Environment, Bangladesh ranks 72. And more interestingly, as for the market size, Bangladesh ranks 44 among 144 economies of the world. Such a state of affairs certainly projects Bangladesh as an emerging and developing economy, possessing the potentiality of transition from the 1st. stage of a factor-driven economy to the 2nd stage efficiency- driven economy.  
The report of the World Economic Forum also presents a list of major problematic factors of doing business in Bangladesh. The factors, to mention a few, include: inadequate supply of infrastructure, policy instability, inadequately-educated workforce, poor work ethics in national labour force and insufficient capacity to innovate. These prevailing factors are the major challenges that Bangladesh has to address to ensure economic advancement to a middle-income country.   
The year 2021 will mark the golden jubilee of the independence of Bangladesh. For a prosperous future of the country, the government envisions a Bangladesh which by 2021 will be a Middle-Income Country (MIC), where poverty will be drastically reduced and citizens of the country will be able to meet their basic needs.
In the meantime, Bangladesh is cited as an example in several key social and economic achievements such as female education, reduction in child mortality, effective disaster management, and increased economic participation by women. Facts speak for themselves. More recently, the resilience and potential of the economy of Bangladesh has been noted in many leading global economic scenario exercises.
According to Goldman Sachs research report, Bangladesh has been identified as one of the Next Eleven (N-11) countries having strong potentials for becoming one of the largest economies of the world, along with BRICS nations (Brazil, Russia, India, China and South Africa)). JP Morgan named Bangladesh as one of the Frontier Five (along with Vietnam, Kazakhstan, Kenya and Nigeria), a group of selected emerging countries having promising macro-economic performance, demographic trends and social development.
The economy of Bangladesh on an average has grown by 5.0 per cent to 6.0 per cent per year since 1990.  With one of the fastest-growing economically-active population in the world, Bangladesh can envisage crossing the US$ 1,000 per capita income mark without any noteworthy acceleration in its current growth rate. It is an indication that the country will be able to achieve its MIC status within the stipulated timeframe.
TRANSITIONAL STAGE: The economy of Bangladesh is in a transitional stage from a predominantly agrarian economy to an industrial and service economy. It is quite admirable that our private sector has come up in the last two decades and pulled the economy of the country to the level at which it is now. Almost 78 per cent of total investment in the country is contributed by the private sector. In the FY2010-11, total private investment in Bangladesh stood at Tk. 1,532.08 billion which went up to Tk.1,751.04 billion in FY 2011-12.
Identifying the role of the private sector as the prime engine of growth, the government recognises that in a market economy like Bangladesh where the bulk of the economy is privately-owned and managed, the role of planning is essentially indicative and strategic in nature. A key focus of the Sixth Five Year Plan (FY 11-15) therefore is set on strategies, policies and institutions to help guide the private sector in helping Bangladesh achieve the goals set in the Vision 2021.
A number of initiatives have been taken up by the government to create enabling environment for the private sector so that it can play its due role as a vital economic driver. As such, the government has taken up steps to generate Public-Private Partnership (PPP) for scaling up investment within the economy. Areas receiving priority under PPP initiative include Power and Energy, Transport, Information Technology, Air Transport and Tourism, Industry, Education and Research, Health and Family Welfare and Housing.
To foster private sector participation in the infrastructure development of the country, the government has formulated the Bangladesh Private Sector Infrastructure Guidelines. Detailed procedures for undertaking infrastructure projects in various sub-sectors on private initiative have been provided in the guidelines.  
The Board of Investment (BoI) acts as the major designated state sector agency for providing counseling to all private enterprises- local and foreign. According to a sample survey conducted by the BoI, it was observed that 68 per cent of the registered local investment proposals were either implemented or were at varying stages of implementation. The value of foreign and joint venture investment projects registered with the BoI during FY 2005-06 was US$ 3,353 million which increased to US$ 4,469 million in FY 2011-12. Engineering (82.99 per cent) was the largest sector registered during this period. Other major sectors include textiles (5.79 per cent), chemicals (3.84 per cent) and food and allied products (2.30 per cent). Actual Foreign Direct Investment (FDI) in 2011 was recorded to be US$ 1136.4 million.
FOREIGN INVESTMENT: A number of foreign investors and buyers from Germany, the Netherlands, the UK, Japan and Malaysia are moving in recent times to Bangladesh from Nepal, Pakistan, India, Vietnam and China. This is a great opportunity for us to strengthen our international trade capacity. In this light, we should be quite optimistic in achieving our envisioned goal of building a self-dependent economy by 2021. We need to utilise these prospects by improving the investment climate of the country.
Over the past few decades, global corporations have been entering China to open factories and launch businesses in the services industries. This was motivated by an eagerness to access a booming Chinese market while taking advantage of relatively low production costs and wages. These actions helped the Chinese economy expand to become the second-largest economy in the world, smaller only than the US economy.
But as the Chinese economy has matured, some of the advantages that proved so alluring to Western companies have diminished. China no longer ranks as one of the cheapest labour markets in Asia. In addition, some of the most meaningful tax incentives for Western companies have been eliminated. Since 2009, most of the tax privileges that foreign investment enterprises formerly enjoyed have expired.
To hold the line on the cost of doing business, some multinational companies are opening new facilities in China's interior, where wages continue to be lower than those on the coast. Still, while moving to the Chinese interior may help alleviate wage pressures, there is a tradeoff. It takes longer and costs more to ship products from the Chinese heartland to overseas markets.
Under the circumstances, many global corporations doing business in China have what is commonly referred to as a 'China plus one strategy'. Such companies will have the bulk of their Asian operations in China, but will also be active in at least one other Asian country to hold down costs or reduce over-dependence on China. Such companies are branching out by opening production facilities in other Asian countries, including Vietnam, Indonesia, Thailand and Myanmar. Bangladesh has high potentiality to utilise the opportunity of this 'China plus one' strategy.
ECONOMIC REFORMS: Market-oriented economic reforms were initiated as early as the late 1970s. But these gathered momentum only in late 80s and 90s. Trade liberalisation started in full swing in early 90s, when the importance of the private sector as the driving force of the economy was envisaged. Steps were taken towards private sector development and a process of de-regulation was initiated. Macroeconomic stability was restored due to market oriented policy reform. Investment and savings increased and dependence on foreign aid declined. Private investment increased significantly as a result of a pro-private sector policy environment.  Liberal policy towards FDI led to an increase in FDI inflows in mid-90s.
Reforms in foreign trade regime and liberalisation of protection since the early 1990s is reflected in the simplification of trade licensing, removal of quantitative restrictions, reduction in custom duties, and the implementation of a flexible exchange rate policy. As an outcome of a thriving private sector the trade to GDP ratio has more than doubled since FY91, reaching 40 per cent of GDP in FY10. This outcome of trade liberalisation has served us well in terms of growth, poverty reduction and human development like health and reduction of the gender gap. The UNDP Human Development Report 2014 places Bangladesh among 18 countries that have made extraordinary progress in human development. According to the report, Bangladesh has moved one notch up from previous year in human development, claiming   the 142nd position among 187 countries of the world.
In the Doing Business Report 2013 published by the World Bank and the International Finance Corporation (IFC) that benchmarked 185 economies on ease of doing business, Bangladesh is ranked 129. Sri Lanka ranks 87, Pakistan 107 and India 132 among other SARC countries. With the target of achieving the Millennium Development Goal (MGD) and the vision of driving the economy to a middle income level by 2021, with minimum per capita of $999, Bangladesh has a lot more reality-based focused initiatives to take to ease the business pathway farther and to improve the investment climate of the country.
The writer, a trade, business, IPR and ICT expert, is secretary-general
& CEO of AMTOB.
 [email protected]