Business leaders, foreign investors and economists on Sunday said Bangladesh needs a predictable, transparent and credible fiscal policy, along with efficient public expenditure, to revive its investment climate and restore confidence among both domestic and foreign investors.
They also stressed the need to prioritise infrastructure development and human capital to improve competitiveness and attract fresh investment.
The observations came at a luncheon meeting titled "Conducive Fiscal Policy for a Better Investment Climate" held at a city hotel, organised by the Foreign Investors' Chamber of Commerce and Industry (FICCI).
The high-level event focused on the importance of a stable and transparent fiscal framework in strengthening the country's investment environment.
Founder and Chairman of Policy Exchange Bangladesh Dr M Masrur Reaz delivered the keynote speech.
Among the panellists were World Bank Division Director for Bangladesh and Bhutan Jean Pesme, Country Economist at the Asian Development Bank's Bangladesh Resident Mission Chandan Sapkota, Executive Director of the Centre for Policy Dialogue Dr Fahmida Khatun, and Chairperson of Business Initiative Leading Development (BUILD) Abul Kasem Khan.
Shams Zaman, member of the FICCI Board of Directors and country managing partner at PwC, moderated the discussion.
FICCI President and Managing Director of Berger Paints Bangladesh Limited Rupali Haque Chowdhury, FICCI Executive Director TIM Nurul Kabir and Senior Vice President Deepal Abeywickrema also spoke.
Speakers said the current investment climate is being affected by high and unstable tax rates, complex compliance procedures, weak logistics and policy uncertainty, many of which are worsened by political influence and administrative inefficiencies.
They called for corrective measures in the upcoming fiscal policy.
Dr Masrur Reaz pointed to relatively high corporate tax rates, lengthy compliance procedures, fragmented administrative structures, complex dispute resolution systems and frequent mid-year policy changes as major barriers to investment.
He said these factors create uncertainty and discourage long-term business planning.
He emphasised the need for a predictable fiscal policy to create better and more productive jobs and to enhance productive capacity through investments in infrastructure, technology, energy, human capital and institutional strength.
"Fiscal prudence is extremely important to ensure the country can maintain lower interest rates, reduce the cost of capital and enable more predictable planning for capital utilisation," he said.
Dr Fahmida Khatun said the fiscal policy framework often focuses more on expenditure than on available resources.
She called for macro-fiscal frameworks aligned with resource availability and institutional capacity.
She also stressed introducing sunset clauses for tax incentives based on performance and productivity, and said any mid-term budget corrections should be discussed in Parliament to ensure accountability and predictability.
Jean Pesme said restoring a strong investment environment is essential for achieving economic growth targets, creating jobs and utilising resources effectively.
He said domestic investors are as important as foreign investors and stressed the need for fundamental tax reforms to increase revenue collection.
He also warned that the fiscal deficit was moving in the wrong direction.
"When you start with a tax-to-GDP ratio as low as it is, you have zero ability to compute proper policy," he said.
Abul Kasem Khan highlighted the need for institutional reforms in tax collection and better coordination among government agencies to remove policy conflicts and inconsistencies.
He said Bangladesh struggles to attract new foreign direct investment (FDI), as most inflows currently come through reinvestments rather than new investments.
He also suggested raising investment in infrastructure and logistics to 7.0-8.0 per cent of GDP to create new opportunities for investors.
smunima@yahoo.com