Private sector faces burdensome business climate: IFC
The private sector in Bangladesh faces probably the most burdensome business environments on the globe, the International Finance Corporation (IFC) said in a written report yesterday.
"To improve the business environment and attract more local and foreign investment, the united states needs to embark on a new round of reforms," it said.
The report, the united states Private Sector Diagnostic, was launched at a virtual event.
The reforms would permit the country with an economy of $900 billion by 2030 from around $300 billion at the moment, it said.
While Bangladesh has been one of the primary development success stories in recent decades, it's now time to switch gears to meet up ambitions to transform into an upper-middle-income country in the next decade, said the report.
"The pandemic has hit Bangladesh hard, and as the united states recovers from Covid-19, the necessity for reforms can be a lot more compelling. Finding new resources of income and growth will be an urgent priority," said IFC Vice President for Asia and the Pacific Alfonso Garcia Mora.
The private sector, which already makes up about more than 70 per cent of most investments in Bangladesh, supported by a solid financial sector, should play a significant role in spurring the recovery in order that the united states can grow, export and create quality jobs, the IFC said.
Key priority areas for the reform agenda include creating a favourable trade and investment environment for domestic and foreign investors, modernising and expanding the financial sector and removing impediments for developing infrastructure.
Transport and logistics, energy, financial services, light manufacturing, agribusiness, healthcare and pharmaceuticals sectors are among people that have the strongest prospect of private investment that could play a substantial role in boosting economic growth.
Bangladesh has yet reached the limit of its current development model, it said.
"Moving to another stage of development will demand a fresh round of reforms to strengthen and modernise the private sector, which faces an economical policy environment that increasingly undermines its potential to operate a vehicle diversified, export-led growth."
High import tariffs and the discretionary utilization of regulations protect well-established businesses and sectors at the trouble of the rest, which impedes innovation.
Limited progress in opening the infrastructure sector for competitive private participation -- with the exception of power generation -- holds back investment and modernisation, the IFC said.
"Consequently, Bangladesh's private sector hasn't moved beyond its initial success and is now increasingly concentrated and inward-looking, wanting to maximise rents from existing markets instead of embracing openness and competitiveness."
The report said the financial sector lacks the capability to effectively channel domestic savings into a productive investment as a result of an increased ratio of non-performing loans and weak capital buffers, underscored by inadequate corporate governance, weak supervision, and too little breadth.
Because the private sector may be the engine of growth, the facilities which may have been directed at the garment sector also needs to be extended to other sectors in order that they can also succeed in export in a diversified way, said IFC Country Director Wendy Werner.
Currently, the garment industry contributes 84 per cent to the national export. Sectors such as for example leather and leather goods, footwear, agricultural products, jute and jute goods have a whole lot of opportunities to grow.
"For a far more resilient, inclusive and sustainable growth, Bangladesh needs to diversify its export basket and create a robust and complex private sector, relevant in the post-Covid-19 recovery phase when public resources will be needed most in the social sectors," said Mercy Tembon, country director of the World Bank.
Salman F Rahman, adviser to the prime minister on private industry and investment, said protectionism had not been always bad as, in some instances, it proved worthy.
For example, the pharmaceutical industry is meeting 95 % of the domestic demand and exporting products abroad because of protectionism. The same can be true for the primary textile industry, he said.
The infrastructures and power plants at Matarbari could possibly be the game-changer for Bangladesh, he said.
Ahsan Khan Chowdhury, ceo of Pran-RFL Group, said that investors needed funds from the federal government, local banks, debt markets, bond market, and international sources for the growth of the private sector.
Mamun Rashid, managing partner of PwC Bangladesh, said the foreign exchange regulation of 1947 would have to be amended since it acted as a obstacle for foreign direct investment in the united states.
Tofazzel Hossain Miah, secretary to the Prime Minister's Office, said the government had already formed six sub-committees with representation from businesses to simplify rules, improve logistics, facilitate trade, and create jobs.
The IFC report said challenges persist, with more than 40 million Bangladeshis still living below the poverty line today and practically half the population susceptible to falling back into poverty.
The private sector is in charge of 90 per cent of jobs in the developing world. "It really is, therefore, critical to boosting the development of a broad-based private sector."
