7pc growth possible
Bangladesh has to address infrastructure deficit, productivity gap and diversification of export base if it wants to move to a higher growth trajectory, Standard Chartered Bank said in its latest report.
The country has the potential to grow at more than 7 percent over the next decade if it can plug the infrastructure deficit alone.
The four-lane Dhaka-Chittagong highway is critical as this route links the main industrial zone to the country's main port, Radhika Kak, SCB's South Asia economist, said in the report, adding that congestion stretches the duration of the 260 kilometre-journey to 20 hours.
Only 49 percent of the work on the project has been completed since 2010, said the report, 'At a glance Bangladesh -- primed for growth'.
It also called upon the government to improve rail infrastructure. Only 12 percent of freight is transported by rail against 30 percent in India, which, it said, is a testament to the “poor state” of rail infrastructure.
As a result of the infrastructure deficiencies, the country's export costs are almost double those of other garment-exporting nations, it said.
Export cost is $1,025 per container in Bangladesh as opposed to $600 per container on average in other garment-exporting economies.
The report also found that the country lags behind other Asian economies when it comes to productivity -- and this gap must be closed at the earliest as the country's comparative advantage by way of wage will eventually wane.
It particularly highlighted Vietnam, which is poised to eat into the country's share of garment exports to the US.
The report also suggested the country diversify its export basket, which has seen next to no change over the past decade. Garment still accounts for 80 percent of the export basket, despite domestic optimism about the pharmaceutical sector, which makes up only 0.5 percent.
In light of this, it called for a comprehensive industrial strategy for diversification. Business environment and infrastructure must also be improved to provide impetus for other areas of manufacturing.
SCB also called for higher private participation in infrastructure projects, as public finances are already stretched and the country is struggling to raise the tax-GDP ratio.
To encourage private participation in infrastructure projects, which remains low at 1.1 percent of GDP, the country needs to improve the transparency and timeliness of government decision-making and ensure stricter enforcement of government commitments, it said.
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