Bangladesh needs massive investments in almost all sectors and the sad fact is that the country is now experiencing serious investment crunch. 35 Thousand crore taka in country’s commercial banks is lying idle. potential investors are not feeling confident to infuse money in business mainly due to lack of proper infrastructure for gas and power and protracted decision making process of the government. Banks can not encourage investors even after offering soft term loans on lower interest rates.
Bangladesh is one of the poorest nations of the world. Millions of educated youth are jobless. Only rapid industrialization can create job opportunities for most of them. If majority of them remain jobless chances of poverty alleviation and achievement of millennium development goal will remain a far cry.
Standard Chartered Bank which usually lends for any investment at rates varying from 16-29% was compelled to invest in Bangladesh bank bills at a minimum rate last week. The situations of most of the commercial banks are more or less the same. Banks usually provide interest @ 13.5 % to the depositors but are now suffering loss due to lack of interest of the investors to borrow that money. The excess liquidity situation is almost turning chronic for the banks now. Sensing the rise in demand, Bangladesh bank also has reduced interest rate of its bill-bonds to almost half. Last year at corresponding time Bangladesh bank interest rate which was 7.5% and is now only 0.75%. Even after this drastic reduction, commercial banks have no options other than providing loan to the government.
Economists , business community , leading bankers opine that gas and power crisis and crisis of confidence are the main impediments to investment. The business community feel that how investors will dare to invest in new industries while existing industries are struggling for survival because of energy crisis. Non transparency of government policies is also considered another major impediment.
Leading economists Dr Wahiduddin Mahmud feels that apart from gas and energy crisis, the government must announce a transparent comprehensive plan to overcome all prevailing impediments for investment.
Investors are hesitant now whether the government will continue the existing incentives or what will be the policy of the government for sustained industrial production and encouraging new investment. The mid term policies of the government for disinvestment of state owned industries, lending, and protection of local industries and export incentives are not yet clear.
No significant investment has been recorded during the first 8 months of present government. Almost all banks have taken up projects to lend against fixed deposit. Banks are endeavoring to offer loans for small scale industry, medical loans; travel loans.
Stagnancy exits in investment over the last three years. Investment during 2007-08 was 24.94% which has gone down to 14.62% in 2008-09. Foreign currency reserves in the bank increased alarmingly to 921 crore dollars due to the massive fall in import of capital machinery and industrial raw materials. The reduction of price of essentials in the world market also contributed to the rise of foreign currency reserves.
The investment crunch will adversely impact on the economic development of the country. Achievement of desired GDP growth will become impossible. The government must immediately take actions to set up special economic zone and provide policy support for private sector investment.
What the government Can Do?
It is obvious that energy crisis- power and gas supply crisis is one of the main reasons for investment crunch. The government must wash off its hands completely from energy sector development and operation. Local and Foreign companies in private sector must be given all incentives without delay to develop and operate energy sector.
The nation must come out of cheap slogans and secure huge FDI removing barriers and impediments to investment.
Kh. A. Saleque (Saleque Sufi) is the ex-Director ( Operation) GTCL and writes from Australia.
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