Poor governance and weak public institutions are among the country's most significant obstacles to growth, according to a World Bank country brief updated last month. Law and order and issues of personal and economic security are of major concerns to people, economists say.

GROWTH
Although the medium-term macroeconomic framework of the government forecasts the GDP to grow at a rate of 7 percent in FY 2008, an outlook of the International Monetary Fund (IMF) puts the rate at a flat 6 percent for the three years.

The GDP growth clocked 5.5 percent in FY 04, 5.3 percent in FY 03 and 4.4 percent in FY 02. The government projection of GDP growth for the next three fiscal years are 6.5 percent in FY 06, 6.8 in FY 07 and 7 percent in FY 08.

Worse still, the Planning Commission, World Bank (WB) and the Asian Development Bank (ADB) say the target of 6 percent growth rate will remain elusive in the current financial year, the first year of the forecast period, because of the three spates of devastating floods and excessive rainfall. Moreover, the poor will be at a greater risk of ending up being poorer, the report warns.

The government is relying on faster growth to halve the figure of population living in poverty from 59 percent in 1990 to 30 percent by 2015.It however aims to reduce poverty to no more than 25 percent of the population by 2015 and for that, it would need a reduction of 3.3 percent a year, compared to 1.5 percent during the 1990s.

A Planning Commission report prepared by its General Economics Division says growth of per capita income may also fall from 4.5 percent to 3.7 percent due to income loss. The fall in per capita income may be more for the poor and non-poor households very close to the poverty threshold. Some of the non-poor household groups over 5.5 to 10 percent of the poverty line may slip into poverty because of income loss unless they are protected under appropriate safety net programmes, the report observes.

Although last year saw some improvements on the macroeconomic front, those were not reflected according to expectation in the GDP growth for the poverty reduction target. Economists put the below-expectation poverty reduction down to non-economic factors such as rising crime and raging political violence.

Dr Zaed Bakht, senior research director of Bangladesh Institute of Development Studies, said the growth rate would have been higher if the infrastructure barriers including inefficiency in the ports and utility services could be removed.

Economist Dr Atiur Rahman incompetent bureaucracy, widespread corruption, poor governance and political intervention in the implementation of government decisions are holding back the growth and slowing the progress in cutting poverty.

INFLATION AND LIVING COST
Inflation has been on the rise in the past three years and is seen to shoot further on the back of floods, hitting the poor hard.

The annual inflation rate on an average basis has risen to 5.83 percent in FY 04 from 2.79 percent in FY 02, the ruling coalition's first year in office. It was 4.38 percent in FY 03 and stood at 5.88 percent in the first month of this fiscal year. The Planning Commission report warns that inflation may shoot up to 6-6.5 percent this fiscal year due to floods.

Independent civil society think-tank the Centre for Policy Dialogue in a report released in last June said the recent price hike will hit the poor more, particularly those who spend relatively more on food, especially in the rural areas. As many as 49.3 percent of the respondents of a CPD survey said the present rate of inflation is affecting their production costs.

Rising utility charges, house rents and prices of essential commodities have pushed the cost of living higher in the three years. For instance, the prices of rice, soybean oil and egg have seen a 20-30 percent rise. According to the Consumers' Association of Bangladesh, soybean oil sold at Tk 40.83 a litre in 2001 but the price rose to Tk 51 a litre last month.

RESERVES, REMITTANCE
One of the biggest successes of the incumbent government is the healthy foreign exchange reserves. The government pushed the reserves to $1.58 billion in its first fiscal year in office after the reserves plunged to as low as under $1 billion immediately before the coalition took over from the previous government. The reserves have touched $3.03 billion in the current week.

Increased remittance inflow and budgetary support by the WB and IMF have helped grow the forex reserves. The WB provided $400 million in additional budgetary support and the IMF approved $490 million, of which Bangladesh has received some $ 210 million.

Remittance grew by 22 percent on average each year of the incumbent government to stand at $3.37 billion in the last fiscal year, which in the last fiscal year of the previous government stood at $1.88 billion. Expatriate Bangladeshis sent some $3 billion in additional remittance in the three years of the BNP-led government.

Stringent measures by governments to curb worldwide laundering after the September 11 terror attacks spurred remittance inflow.

The export sector also received a much-needed boost. In the beginning of its term, exports clocked a negative growth of 7.44 percent but grew from the second year to close at 16.10 percent in FY04. The growth stands at 26 percent in the first two months of the current fiscal year.

Another achievement of the government has been the narrowing of the fiscal deficit. The deficit widened to an alarming 6.1 percent in FY00, but the coalition government gradually closed it down to below 4 percent in FY04.

However, government borrowing both from the banking and non-banking sources has risen to Tk 54,882 crore in June last year which was Tk 45,291 crore at the start of its term. This can be attributed to a slide in concessional foreign aid, as net foreign aid plunged 72 percent last fiscal to $323 million.

INVESTMENT AND EMPLOYMENT
The investment scenario is gloomy if the available data and statistics are anything to go by. Investment rate has been stagnant at 23 to 24 percent to GDP. Government investment rate has declined to 6.12 percent of GDP although private investment has slightly increased.

Excess liquidity in the banking sector, which stood at Tk 12,046 crore in last July, has been a major headache for the government, as banks are finding it difficult to invest the money.

A CPD report released in last June quoting their survey said a little over 20 percent of the respondents admitted to investing in new businesses during FY03 and FY04.

The lack of investment is depriving about 10 lakh people who enter the labour market each year of jobs. Besides, the government has remained indecisive in two and a half years about what to do with the Adamjee Jute Mills, Chittagong Steel Mills, Khulna Newsprint Mill and Chittagong Chemical Complex, which it closed down.

These four big state-owned industrial units, that together have some 1.000 acres of land in suitable locations with modern roads and amenities, were to be replaced with private ones. But nothing concrete as been done to this day.

The government also axed some 70,000 jobs at the suggestion of the WB and IMF in the last two years, but did not create the scope for a significant job generation.

"Government investment would not rise until private investment increases. The unemployment problem is getting acute by the day in the absence of investment," Dr Atiur Rahman observed.

"The government's foot-dragging on taking crucial decisions and implementing key policies are proving to barriers to new investments and job generations," Dr Zaed Bakht said.

The World Bank in its country brief on Bangladesh last month said although data show that even among the very poor there has been significant income growth and improved nutrition, poverty rate remains high. With nearly half of its 135 million people living below the poverty line, Bangladesh still has the highest incidence of poverty in South Asia and the third highest number of poor people living in a single country after Indian and China.