Putting the shattered economy back on track

The economy that has suffered the effects of political turbulence, is now showing signs of return to health. Many things, however, still remain unpredictable and, thus, uncertain. A relative calm has apparently returned to the polity and the national highways are again busy. Supply chain in terms of essential goods, imports and exports has been restored.
But it is still not certain whether the stability of the polity will sustain. No one really knows what will be the fallout from the 'controversial' elections of January 05. The election was not at all participatory with 53 per cent voters failing to cast their votes as 153 Members of Parliament (MPs) were elected unopposed. Rest of the MPs in a 300-seat parliament got elected without facing any real challenge in an election where voter turnout was low.
The ruling circles seem to have realised the gravity of the situation. They say the January 5 elections were held only to uphold and maintain constitutional continuity. Now they will have to reach a consensus with the mainstream opposition if they want to see a stable political situation which is needed for economic development. Even the World Bank has projected this fiscal year's growth rate at 5.7 per cent or below as against the targeted 7.2 per cent rate of growth of the country's gross domestic product (GDP). This is because of staggering losses the economy have suffered in different sectors.
The losses have to be recouped at the earliest in order to keep the wheels of the economy running.
It is against this backdrop that different business groups have asked for an incentive package of Tk 150 billion. It is time for the government to take up their cause in right earnest without causing any disruption in the flow of credit to the private sector. The demands should be examined case by case and relief given
accordingly.
Since the external impetus to growth remains weak due to declining inflows of official development assistance (ODA) and foreign direct investment (FDI), prospects of GDP growth seem to depend on increased domestic demand, stepped up through appropriate monetary and fiscal
policies.
Domestic demand is no doubt getting a big boost from increased remittances, but there are visible signs of decline in the growth of domestic demand owing to lower income of farmers due to lower prices of rice, sluggish activities in the capital market and slower pace of private sector operations in construction.
Notwithstanding the fact that the apparel export growth has remained largely unaffected in the months following tragedies such as Tazreen Fashions fire and Rana Plaza collapse, there are still risks associated with the 'damaged image' of Bangladesh's major manufacturing success story — the apparel sector. The government has to attach top importance to the enforcement of the actions suggested by the foreign buyers, international agencies and domestic regulatory bodies. But the way the country's politics is moving now, it is hard to believe that the administration would be able to set its eyes on its priority jobs in the apparel sector for a considerable period of time.
Acceleration of the economy's growth performance will depend mainly on effective adoption of prudent macroeconomic policies in a sound domestic economic environment, along with global economic recovery. Large investment projects will have to be undertaken by both the government and the private sector as well as through joint ventures. In the field of employment, the country needs to create 2.3 million jobs annually in view of its existing unemployed workforce, estimated at a total of 25 million people in a situation where over 1.8 million youths are entering the job market every year.
The private investment activities, too, have remained at a low level due to weak as well as inefficient physical infrastructure (roads, ports, etc.), malfunctioning administration that has failed to deliver the desired services to investors, and deteriorating law and order situation. Foreign direct investment (FDI) inflow has remained small due to the same problems faced by the local investors. FDI inflows have never reached the level of even one per cent of GDP, despite the presence of a good number of lucrative incentives.
In particular, foreign investors complain about governance difficulties like policy flip-flops, red tape, administrative hassles, corruption in public services, ineffective legal system, high and growing investment-related costs, high corporate tax rates, non-competitive internet tariffs, an uncertain political environment, shortage of skilled labour and trade policy-related impediments. These problems will need to be solved to attract investment, whether domestic or foreign.
The government has to create and ensure an industrialisation-friendly environment. The government has to do its best to remove bottlenecks, particularly regarding policy-making, taxation, infrastructural facilities.
 arjayster@gmail.com