Bangladesh debate: Bangladesh gears up for growth

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The country faces many challenges as it prepares to make itself the global growth leader of tomorrow, not least in infrastructure, capital-market development and up-skilling its workforce. Part of the solution is to make itself more attractive to foreign investors.

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EXECUTIVE SUMMARY

• The central bank is forecasting growth of 8%

• Barriers to that include poor infrastructure and low-skilled workers

• Bangladesh has won awards for bottom-up development

• Now is the time for top-down solutions

• The government wants to open 100 special economic zones

• Privatization successes so far include the power sector

Euromoney Bangladesh’s economy is performing well, growing at between 6% and 7% on a regular basis and set to pass more than $200 billion in size during the current fiscal year. What can be done to convert strong growth into quality growth: the sort that attracts new foreign direct investment?

Abdul Maal A Muhith-39

AMM The challenge is to push economic growth to a higher level. We have been stuck at an average of 6.2%, 6.3% for the past 15 years, and moving out of that bracket is the challenge. One headwind that has been removed is the political uncertainty, which gives me hope that the economy will grow at more than 6% in the current fiscal year to June 2016. Our longer-term target is 7%, which should be realistic in the next full fiscal year. One of the impediments to investment is that there are so many licences and approvals needed to secure land or get permission to build a factory. We are getting better at apportioning land in export-processing zones (EPZs) and special economic zones (SEZs). There are 44 public-private partnerships either approved or in the process of being built, ranging from hotels and highways to high-tech parks and port terminals. But we need to attract more investment and more skilled workers into those zones – that is the key to our economic future. On the plus side, tax revenues have risen by an average of 10% a year over the last six years. 

Atiur Rahman debate-39

AR, Bangladesh Bank Our latest five-year plan envisages an 8% growth path. For that, we have prioritized power, energy, infrastructure and land management. The government has already launched the first 10 of our planned 100 privately run SEZs. Under-construction mega projects – expressways connecting Dhaka with the port city of Chittagong; the Dhaka metro; the deep-sea port – will transform our infrastructure. Let me share some good news: exports are growing by 8% a year, defying global gloom and a strong currency, and outstripping our regional peers, all of which is a testament to our competitiveness. Foreign direct investment is rising, as companies relocate factories from China, Thailand, Japan and elsewhere. We expect FDI to make up a quarter of total investment in the coming years. Remittances, now running at $16 billion annually, comprise 8% of GDP, supporting domestic demand and laying the foundations for social inclusion.

Muhammed Aziz Khan-39

MAK, Summit This is an amazing time for the domestic private sector. Materials – copper, metals, plastics, materials to build power plants – have become so inexpensive. But we face some challenges. First, we need to educate our workforce: to create a generation of skilled workers able to take the economy to the next level. Second, we need to cut the taxes we levy on business. A 37% corporate tax is not a reasonable tax; nor is a 20% dividend tax or a 30% personal income tax.

Matlub Ahmad

MA, FBCCI The world’s big multinationals are coming here. Their fears surrounding Bangladesh’s erstwhile political unrest are more or less over. But we need to make it easier for companies to list shares in their firms, both domestically and overseas, and to be able to decide when they want to pursue a listing. Business people want to be able to pay their taxes far more simply and easily, preferably online. The process should not be a chore. That is one cancer eating away at Bangladesh, the other being how to deal with the level of non-performing loans in the banking sector. 

Sohail Hussain-39

SH, City From my conversations with local and foreign customers, I can tell you that 8% to 9% annual GDP growth is considered realistic and sustainable. But we do see the low rate of investment in infrastructure as a key impediment to growth. Bangladesh needs to spend $100 billion over the next 10 years on infrastructure, including $7.4 billion to $10 billion each year until 2020 on power grids, roads and water supplies – sourcing capital from government and from local and foreign private investors – to bring those services up the level required to service our growth momentum. We should target sourcing a quarter of all capital injected into PPP [public-private partnership] projects from external sources; for that to happen, foreign investors will need to see a certain level of infrastructure already in place. 

The PPP Authority of Bangladesh has identified 39 PPP projects worth $10 billion, with another $15 billion-worth in the pipeline over the next five years. But we are always looking for ways to get more private local and foreign investment involved. It’s vital to note that FDI is about more than just equity; it’s also about the transfer of technology and standards; improving compliance to international standards; and improving corporate and project governance. 

We have a genuine demographic dividend in play – the average age of our workforce is 24 years – but we need to convert this workforce into a technologically skilled set of workers, and that requires more investment in education. 

Foreign investors want to see facilities in place before they put their cash to work, along with skilled workers, good vocational training, and better infrastructure. Bangladesh may be a bright spot in the emerging world, but we need to consolidate our strength, usher in more FDI, improve our sovereign rating further, and improve our position in the World Bank’s Doing Business rankings.