AL govt win tempered by challenges in banking, income inequity
A number of economic zones, with necessary land and infrastructure, are in the pipeline this year, addressing the recent stagnation in private investment.
The new government of the Awami League expects economic growth to reach a magical 8 per cent mark if doing business could be made easier.
It faces the challenge of completing two big infrastructure projects – the Padma Bridge and Metro Rail – by this year to record a big score.
However, analysts say, the most difficult challenge for the government this year could be implementing of new VAT law from 1 July after withholding the process in 2017 for two years.
Also burdened with more than Tk 1 trillion default loans, the banking sector is yet to overcome the hangover of a number of major scams that took place over the past decade. The sector is plagued with nepotism and corruption and the government needs to imbibe it with discipline and regain public confidence in it.
Aother key challenge is the necessity to generate employment for millions of youth who are entering the job market every year and who have offered Bangladesh the demographic dividend.
Lead economist of the World Bank Dhaka office Zahid Hussain foresees a ‘transformational economy,’ provided investment increases, business climate improves and discipline is restored in the banking sector.
“Completion of economic zones may not be enough. One-stop services for the investment must be ensured and laws relating to customs, operation of companies, and skills development are amended and issues affecting the overall environment for doing business are addressed,” he said.
The economist insisted that the culprits – both lending authorities and loan recipients – should be brought to book to restore discipline in the banking sector.
The rate of private investment has been hovering around 21-22 per cent for quite a number of years, according to official statistics.
Of the 100 economic zones the government has planned to set up by 2030, only four may be completed this year. It is expected that plots will be ready for allotment during the period.
Despite economic growth which, planning minister AHM Mustafa Kamal forecasts, may exceed 8 per cent this year, there are concerns over widening disparity.
One in four persons in the country is still extremely poor and one in every eight lives below the lower threshold of poverty. Economists believe Bangladesh is close to the countries of high income inequality.
President of apex trade body Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Shafiul Islam Mahiuddin said the new government would be facing the burden of high expectations.
“Ensuring the ease of doing business, timely completion of projects with proper accountability, freeing the tax regime from harrassment, and bringing down the rate of interest to 9 per cent will be appreciated,” he added.
* This report, originally published in Prothom Alo print edition, has been rewritten in English by Khawaza Main Uddin