Gross investment in Bangladesh has fallen from over 32% of GDP to about 31%. With rising borrowing costs, private investment might drop further. To counter this, the government can implement key policy measures to stimulate private investment.
Understanding the decline in investment is crucial. Private investment is hindered by various uncertainties, particularly regarding infrastructure and energy. Despite progress, Bangladesh’s energy costs are significantly higher than neighboring countries, like India, and prices are expected to rise due to subsidy reductions. Moreover, the energy supply is unreliable, which further undermines investment potential.
Additionally, Bangladesh’s logistical infrastructure is inferior compared to its neighbors. For example, the World Bank ranked Bangladesh 88th in its logistics performance index, whereas India ranked 38th. This poor infrastructure impacts the import and export processes, deterring investors.
Bureaucratic red tape and inconsistent corporate taxation also contribute to investment uncertainty. High corporate taxes haven’t increased tax revenues but act as barriers. Financing issues further complicate matters, with high borrowing costs and a liquidity crisis in banks. The stock market is unreliable due to insider trading and manipulation, and foreign exchange shortages deter further investment.
To address these barriers, the government should:
- Improve energy sector efficiency and ensure a reliable power supply.
- Prioritize infrastructure projects to reduce transportation costs and time.
- Digitalize government services to streamline business operations and ensure accountability.
- Rationalize corporate income tax to encourage investment.
Allow market-determined foreign exchange rates to stabilize the market and provide incentives for expatriates to invest in various sectors.
These measures can enhance investment prospects, stimulate economic growth, and attract private investors.
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