Wednesday, May 22, 2019

Investment scene remains sluggish

  • Abdur Rahim Harmachi,
    Published: 2019-02-08 17:31:45 BdST


The import of capital machineries has decreased in the first half of the current 2018-19 fiscal year. Loan flow in the private sector also dropped, causing a slump in the investment sector between July and December.

The opening of Letters of Credit or LCs to import capital machineries from abroad fell by 27.58 percent to Tk 2.38 billion so far, down from Tk 3.29 billion at the same time in 2017-18.

But imports of capital machineries for the development of the industrial sector have seen a 35 percent increase from last year.

Expressing his concern over the decline in imports of capital machineries, Shafiul Islam Mohiuddin, the president of Bangladesh Federation of Bangladesh Chambers and Commerce Industries, said that Bangladesh ‘lacks’ an investment-friendly environment.

“Decrease in the import of capital machineries indicates less investment in the country. The banks are not coming forward with investment opportunities. The interest rate at 13 to 14 percent is high. Several initiatives were taken to bring interest rates down to a single digit without success.”

Bangladesh Bank’s monetary policy for the first half of the 2018-19 fiscal year targeted a 16.8 percent credit growth in the private sector but could only manage 13.2 percent growth at the end of December.

Announcing the monetary policy for January to June on Jan 30, Bangladesh Bank Governor Fazle Rabbi cited the ‘anxiety and uncertainty’ of businessmen over the 11th national election for the reduced flow of loans in the private sector.

But the national election is not the ‘main reason’ for the drop in imports of capital machineries or investment, according to FBCCI chief Mohiuddin.

“The political environment in Bangladesh has been quite stable over the past few years. There wasn’t any unrest before the national elections. The Awami League was more or less expected to remain in power.”

“I believe that the lack of an investment-friendly environment has caused the slump in the sector. It has stagnated.”  

The gross domestic product or GDP stood at 5 when the Awami League formed government in 2009. It has since increased to 7.86 over the last decade.

But investments have increased only slightly over the last seven years compared to the GDP, according to the Bangladesh Economic Survey 2018.

Fiscal year

Investment in proportion to GDP


31.47 percent


30.52 percent


29.65 percent


28.89 percent


28.58 percent


28.39 percent


28.26 percent

According to Mohiuddin, problems related to infrastructure have hampered investment in the country despite the numerous government initiatives. 

“There are problems acquiring land which is mostly overpriced. The power problem has been solved but there are still deficiencies in the supply of gas. Proper port facilities must also be ensured.”

“The government should address these issues in order to increase the overall investment. The entrepreneurs should be able to secure investment money not just from banks but also from the share market.”

The government is currently working on establishing 100 new economic zones around the country to attract local and foreign investment. But ‘visible initiatives’ must be taken before the economic zones are operational, said Mohiuddin.

“We should remember that the employment rate will not increase without greater investment. Boosting employment is our biggest challenge at present,” he said. 

Zaid Bakht, research director at Bangladesh Institute of Development Studies, has offered another explanation for the drop in imports of capital machineries.

“The imports in capital machineries increased last year because of the Rooppur Nuclear Power Plant, Padma Bridge and other infrastructural projects. Those machineries have hardly been to productive use.”  

“Businessmen and entrepreneurs were anxious before the national election. They were concerned by the prospect of political unrest in the country which is why they were cautious about importing capital,” Zaid Bakht said.

But there are no reasons to worry anymore, added the researcher.

“The development and investment will grow in a country if there is continuity in government. I believe the investment in Bangladesh will grow now,” said Zaid Bakht, also the chairman of state-owned Agrani Bank.