Bangladesh's private investment as percentage of economic output has expanded at a slower pace this fiscal, hurt by unfavourable business climate and low-quality public investments, analysts say.
Private investment as percentage of Gross Domestic Product (GDP) in fiscal year 2018-19 recorded at 23.40 per cent, a mere 0.14 percentage point increase, according to preliminary data of the Bangladesh Bureau of Statistics. The ratio was 23.26 per cent in FY 2018.
In contrast, the public investment in terms of GDP is expected to rise to 8.17 per cent in fiscal year 2018-19 from 7.97 per cent a year earlier, the latest data showed.
Besides, the overall private consumption has dropped in the current fiscal, highlighting the need for boosting demand in the days ahead, the analysts said on Wednesday.
Economists said Bangladesh's poor-quality public sector investments, uncertain political climate, fragile governance, and regulatory and structural bottlenecks are preventing the country from tapping private investments.
Analysts said the country's overall investment-GDP ratio is estimated to go up to 31.56 per cent in the current fiscal from 31.23 per cent in the last fiscal, supported by higher injection of money into the development work and other expenditures.
BBS data showed the overall investment in the current fiscal year was recorded at Tk 8.0 trillion. It was Tk 7.03 trillion in FY2018.
Out of the total investments, the private sector invested Tk 5.93 trillion while that of the public sector was Tk 2.07 trillion in the current fiscal.
Lead economist of the World Bank in Dhaka Dr Zahid Hussain said that higher public investment alone could not improve the private investment scenario since government money is not maintained properly.
"Although the public sector investment has been showing an incremental growth over the years, it has not crowded in the private investments. So, we can easily say that the government's investment is not working properly to get return."
The lack of structural and regulatory reforms and poor business climate are the key factors why investment growth compared to the GDP remains lower, Dr Hussain told the FE.
Despite a higher economic growth over the years, private sector investment has failed to generate adequate employment opportunities, thus keeping inclusive growth elusive, he said.
President of the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka Barrister Nihad Kabir told the FE only public sector investment cannot push up private investment if the government does not work to improve the business environment.
"You know Bangladesh is at a bad shape in the World Bank's Ease of Doing Business Report. So, if the government does not work to address the infrastructural constraints, improve weak energy and power supply situation, and carry out tax and banking sector reforms, private investment will not go up" she said.
Ms Kabir said if the economy wants to maintain GDP growth momentum, private investment will have to rise to 33-35 per cent of GDP from the current level of nearly 23 per cent.
Former professor of economics at Dhaka University Dr MA Taslim said the government is busy injecting its money into boosting GDP, rather than supporting the private sector to raise investment.
"Over the years, we are observing that the public investment has been increasing. But why the private investment is not? It's a big question," he told the FE.
"Actually, fruitful results are not coming due to the lack of quality of development work, poor capacity of the public agencies, lack of good governance, political uncertainty and obviously poor business climate," Dr Taslim said.
Meanwhile, the country's overall consumption in terms of GDP has also fallen to 76.07 per cent in FY2019 from 77.17 per cent in FY2018.
The private consumption-GDP ratio in the current fiscal recorded slightly lower at 69.77 per cent, compared with 70.81 per cent a year earlier.
The public consumption-GDP ratio has also increased to 6.30 per cent in the current fiscal from 6.36 per cent in the previous year.
Analysts said the public consumption has got a boost mainly due to higher payment to government servants.
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