Raising investment big challenge for next govt

Staff Correspondent

Desperately in need of much higher investments for infrastructure building and job creation, the next government is set to face difficulties in financing domestic investments and attracting foreign direct investment, given the global recession, suggest the latest economic trends.
Major contenders for power, in their polls manifestoes, have made a huge number of pledges, which will require significant increase both in public and private investments but they have not pointed out the sources of funding for meeting the costs of new ventures.
The world’s three key economic triangles — Japan, the European Union and the United States — which have accounted for about 35–40 per cent of the foreign direct investment inflows to developing Asia in recent years, have been afflicted with the economic recession.
Already in view of shortfall in supply of electricity and natural gas, the Board of Investment has limited its targets of attracting investments in industries, such as information technology, which do not consume much energy, say officials concerned.
However, the officials say, the new government would have the scope to invite investment in exploration of gas, setting up power plants and building infrastructure like highways and ports, although the newly-emerged challenge of global financial crisis has made it uncertain whether foreign investors would come up with initiatives.
In 2007, the country witnessed significant fall in investments due largely to the state of emergency and political uncertainty, apart from other problems of doing business.
The outgoing finance and planning adviser, AB Mirza Azizul Islam, has stressed the need for mobilising domestic resources for meeting the investment needs in the days to come. ‘It will be essential to increase public investments in infrastructure, including power and gas, subject to availability of money,’ he told newsmen in the past week, leaving a number of challenges for the next government.
The finance adviser also acknowledged that it would be hard for the next government to get access to adequate foreign exchange through exports, foreign aid and remittances, should the current recession prolongs beyond 2009.
The next government will need to invest over $8 billion (approximately Tk 55,000 crore) for commissioning various power projects to reach a target of generating 9,000 megawatts of electricity by 2012, according to a recent estimate by the Centre for Policy Dialogue.
‘FDI investors are reluctant to venture out during economic recession,’ noted a policy paper of the centre on the state of Bangladesh economy, adding that conducive investment environment and investment opportunities could induce some of them to look for alternative opportunities in countries such as Bangladesh.
Foreign investment remains a major concern for a least developed country like Bangladesh as, an international research on ‘Sources of FDI Flows to Developing Asia’ says, international trade and foreign direct investment are key determinants of trade and growth in much of the developing Asian region.
The flow of foreign direct investment into the country dropped 16 per cent to $666 million in 2007 from $793 million in 2006. The decline saw Bangladesh losing its ranking by one notch to 121st in inward FDI performance index and slip to 119th from 117th in the inward FDI potential index among 141 economies, according to the recent World Investment Report 2008 prepared by the United Nations Conference on Trade and Development.
However, the private investment has registered a slow pace of growth in recent years – 17 per cent of gross domestic product in 2003-04 to 19.2 per cent of GDP in 2007-08.