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Domestic failures overshadow external feats

Nazmul Ahsan

Stagnation of domestic economic activities have largely overshadowed the external economic achievements in the past five years because of the government’s failure in managing financial governance and wooing investments.
Analysts and economists say that the government has failed in making the use of favourable environment that has been out there nationally and internationally as no flooding took place and petroleum product and industrial raw material prices had been stable on the international market.
Large scams in banking and the stock market have only betrayed flaws in economic management which encouraged accumulation of assets and illegal money, they said.
Investments in the local economy remains largely static, resulting in the stagnation in business for the past four years although export and remittance earning nearly doubled in the financial year 2013 than in 2008–2009, according to government data.
Export earning in the financial year 2013 rose to $27.02 billion from $15.65 billion in 2008-2009 while remittances stood at $14.97 billion in the past financial year from $9.68 billion in 2008–2009.
‘National and international environment had largely been favourable for
five years which the country failed to make use of for the lack of policy direction and absence of proper financial governance,’ MA Taslim, chairman of the economics department in Dhaka University, told New Age.
Investments in the gross domestic product showed no growth in the period which frustrated outlook in employment generation.
The investment-to-GDP ratio slowed to 26.84 per cent in the financial year 2013 compared with 29.07 per cent in 2008-2009. The ratio had increased to 29.42 per cent and 30.79 per cent in the next two years before it declined to 26.54 per cent in the financial year 2012, according to the Bangladesh Economic Review 2013.
‘It is a bleak picture as local and foreign investors are shying away,’ AB Mirza Md Azizul Islam, a former caretaker government finance adviser told New Age.
Weakness in economic governance, mishandling of major financial institutions and the government’s too much dependence of on bank borrowing are some major hindrances to investments, Azizul Islam added.
According to the Economic Review, foreign direct investments in the country in 2011–2012 was $495.02 million, which was $700.16 million in 2008–2009 followed by $913.32 million in 2009–2010 and $436.52 million in 2010–2011.
Investment officials said that the FDI inflow in 2012–2013, to be finalised soon, could be as low as $400 million.
‘Government machinery are more concentrated on politics rather than attracting foreign direct investments,’ a Dhaka University economics professors told New Age.
The government also failed to tap optimum project aids in the period although aid commitments above $11 billion from major bilateral and multilateral lenders have been in the pipeline, a high official in the Economic Relations Division said.
The disbursed amount of foreign aids (loans and grants) in 2012–2013 was $1.86 billion compared with $1.84 billion in 2008–2009, followed by $2.22 billion in 2009–2010, $1.17 billion in 2010–2011 and $2.12 billion in 2011–2012, ERD officials said.
The government could not implement large infrastructure projects such as the Padma bridge, Sonadia deep-sea port and metro rail involving billions of dollars mainly because of corruption, capacity constraints and lack of adequate management skills in economic governance, Azizul Islam said.
He said that as the government’s long-term vision in the past five years appeared largely ineffective, the exchange rate of the taka against the dollar depreciated as the government had to pay a hefty amount of foreign exchange to establish fuel-fired quick rental power plants.
Azizul Islam said that the domestic economy had suffered in the period for lack of investment caused by poor economic governance although the external sector — export and remittances — did relatively well.
Earning from exports stood at $27.02 billion in the financial year 2013, which was $15.65 billion in 2008–2009. Export maintained a modest growth in the period, according to Export Promotion Bureau statistics.
Exporters said that they had made some strides in the first three years of the Awami League-led government amidst high bank interest rates, lack of adequate infrastructure and lack of policy directions.
But they said that such achievements were not sustainable as doing business had not been viable for the next two years, with the last six months being marred by political strife.
‘We are now about to collapse as recent political conflicts made us handicapped,’ Anwar-Ul-Chowdhury, a former Bangladesh Garment Manufacturers and Exporters’ Association president, said. ‘Who will invest in a country where the state fails to ensure the security of the lives and property of entrepreneurs?’
Taslim said that no flooding or draught had taken place in the five years,  prices of petroleum products remained almost stable and bumper crops for consecutive years and low import had helped the reserve position.
‘We have failed to benefit from the favourable environment as the GDP has not grown,’ Taslim said.
The International Monetary Fund predicted the GDP growth for the current financial year to be as high as 5.5 per cent, which was 6.03 per cent in 2012–2013, 6.23 per cent in 2011–2012, 6.7 per cent in 2010–2011, 6.07 per cent in 2009–2010 and 5.74 per cent in 2008–2009.
‘The GDP growth remains almost static as the investment-to-GDP ratio is not growing,’ Azizul Islam said.
Taslim, focusing on the poor economic growth in the period, blamed law and order slide, disruption in communications, increase in precautionary saving and the collapse of business confidence.
He said that remittance earning would have been much more if relations between the government and the Middle Eastern countries had been better.
‘If economic governance had been up to the mark, the country would have had an economic growth from 8 to 10 per cent in the five years,’ Taslim said.
Economists said that financial irregularities and banking frauds such as the embezzlement of Tk 3,600 crore by the Hallmark Group from the state-owned Sonali Bank, share market collapse and the plundering of thousands of crores of takas by the Destiny  Group had tarnished the image of the government.

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