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Wednesday, June 12, 2013

Stagnant private investment !

The 6th Five Year Plan (SFYP) rightly drew attention to stagnant private investment situation while reasoning issues related to investment climate and infrastructure for such trend (Page 54, Part 2). The SFYP envisaged reducing the investment gap through basically acceleration of public investments in major infrastructure projects (e.g. Padma Bridge, Elevated Expressway) and implementation of PPP projects (Page 55, Part 2). To achieve the target GDP growth rate of 8.0% by the end of SFYP (FY15), it targeted to achieve the rate of gross domestic investment equivalent to about 32.5% of GDP. In which, the target private investment for FY15 is 25.0% of GDP (Page 74, Part 1).  

In reality, private investment (as a share of GDP) remains stagnant around 19.0%-20.0% during the last half decade (FY07 - FY13). And gross domestic investment reached to 26.8% of GDP in FY13.

Certainly, the government couldn’t realize the envisaged large public investment projects. But some criticism must go to the policymakers who were involved in SFYP formulation. Others have the right to know, what sort of policy prescriptions those policymakers provided to the government to boost up private investment. In reality, private investment didn’t boost up at all; rather it was quite stagnant throughout their policy implementation period. The government should be also responsible for not providing enough credit flows to the private sector because a large portion of bank credit was taken by it to spend for its annual expenditure. The relevant question would be: whether the restrictive policies for restraining private sector credit growth taken by Bangladesh Bank have been reasonable over the last few years, while at the same time, BB’s support has been quite impressive for the fiscal authority.   

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