White Paper outlines strategies to revive pvt investments

Private investment in Bangladesh has remained stagnant – 23-24% of GDP – over the past decade, hindered by an unfavourable business climate and systemic challenges, according to a draft White Paper on state of the economy.

The report, which was submitted to the chief adviser today (1 December), stresses the need for a comprehensive policy response to address these barriers and revive both domestic and foreign investment. 

Such measures, it suggests, are critical to unlocking the country's economic growth potential.

The suggested measures are listed below:

Encouraging a competitive business environment

Crony capitalism, which distorts the competitive environment and restricts genuine investors from entering the economy, is one of the biggest impediments to investment. The government needs to put in place stricter anticorruption measures and clearly spell out transparent policies with regard to the operation of businesses. A competitive environment can be encouraged by strict application of antitrust laws, improvement in the regulatory framework, and reduction of political interference in business decisions.

Tax reforms for all-inclusive business support

The present tax regime has favoured a few, but for the rest, especially the SMEs, it has remained oppressive. Reforming the tax system to make it fair and business-friendly should be a priority. This would include revisiting the corporate tax rates, introducing tax incentives for new businesses, and offering tax relief to SMEs. Additionally, ease of doing business can be facilitated by simplifying the process of tax compliance through digitization.

Developing the capital market

One of the major impediments to private investment is the underdeveloped capital market, which limits the access of enterprises to capital. The government should adopt a mechanism that promotes the capital market by enhancing transparency in the markets, increasing investor protection, and promoting institutional investment. This will also develop a bond market for firms, especially SMEs, to source funds for expansion.

Reforming investment promotion agencies

Despite the fact that IPAs play a very critical role in attracting and facilitating investment, they have been dysfunctional in Bangladesh. These agencies need to be made functional through restructuring mandates to offer specific support for respective sectors, coupled with capacity building for operational efficiency. A dedicated task force could identify the bottlenecks and provide clear guidance on the incentives provided to businesses.

Addressing SME challenges

SMEs disproportionately bear operational challenges and constraints to growth. This enabling environment of SMEs needs to be facilitated by policymakers in respect of access to finance, technical support, and access to markets at both national and international levels. Special p programs for reducing regulatory burden will go a long way toward empowering SMEs.

Enhancing trade facilitation

In general, trade facilitation measures are wanting, which negatively impacts investment and international trade. Rationalisation of customs procedures should be undertaken, modernisation of port infrastructure, and development of logistic networks will provide an enabling environment for trade and investment. Special attention would also have to be paid to digitizing customs procedures, reducing obstacles in trade, and enhancing efficiency in export-import operations.

Building capacity to face new challenges

Bangladesh urgently needs to be prepared for such new challenges as climate change, disruption of technology, and shifts in global trade dynamics. Innovation, research, development and technological adoption are fittingly equipping business competitiveness in the fast-growing changing world economy. The need to invest more in developing human capital for modern and technologically-based demands has been mentioned to the government as well.

The role of the chambers of commerce and trade associations

Their role in Bangladesh is that of investment promotion, improvement of policies, international linkages, and dialogue between business and the government. However, some issues challenge their effectiveness: crony capitalism, bureaucratic delays, and uncertain legal environments. Among the pre-conditions are the proper strengthening of public-private partnerships and fairness in representation within the chambers to attract FDI for inclusive growth.

The white paper says the way to break the stagnation in private investment is for Bangladesh to develop a more transparent, competitive, and inclusive business environment. These policy reforms will enable the government to create an enabling investment climate that will promote economic growth, innovation, and job creation. In doing so, the country will realise its full potential and attract the national and foreign investors it urgently needs to drive development processes.