The proposed budget did not focus on how to improve business and investment climate, analysts said yesterday.
Political instability came to the fore only last year, but investor confidence started to erode long before, due to inadequate gas, infrastructure and lands, they said.
The erosion of business confidence began with the stockmarket debacle and then came the scams of Hall-Mark, Sonali Bank and multi-level marketing companies involving thousands of crores of taka. The BASIC Bank scam added to the woes early last year.
“Only tax incentive is not enough to jack up private investment. The government has to devise plans to improve the overall investment climate,” AB Mirza Azizul Islam, a former finance adviser to the caretaker government, told a post-budget discussion organised by Economic Reporters' Forum (ERF) at the National Press Club.
Besides political uncertainty, constraints of land, gas, electricity and transport are hampering economic activities and obstructing fresh investments, he said.
Prof MA Taslim, chairman of economics department at Dhaka University, said the country has been witnessing a declining trend of economic growth over the last several years mainly due to an unfavourable investment climate.
“I don't think political instability is the only reason for low GDP growth,” he said, adding that the country has been witnessing lower economic and investment growth since fiscal 2010-11 when there was no political unrest.
Taslim said a number of issues, such as the stockmarket debacle in 2010, frauds by multilevel marketing companies in 2011 and Hall-Mark loan scam in 2012, have affected the private sector.
Zaid Bakht, research director at Bangladesh Institute of Development Studies, said the proposed budget has offered some fiscal incentives to encourage businesses, but there is nothing in the budget that will trigger fresh investments. The budget did not address the crises in the financial sector, he said.
“Banking scams have created a crisis in inter-bank business,” said Bakht, also a director of Sonali Bank, the largest state-owned bank from where Hall-Mark and five other companies took away more than Tk 3,500 crore on forged documents. The scam has affected Sonali Bank's loans and advances, he said.
“Like other banks, Sonali is also sitting on idle money. We are pushing managers to provide more loans,” Bakht said, adding that the central bank has failed to oversee the banking sector properly.
Khondaker Golam Moazzem, additional research director of Centre for Policy Dialogue, said attracting investment will not be possible unless the government addresses the problems of gas, roads, lands and the overall investment climate.
Citing a CPD study, Moazzem said Bangladesh requires additional private investment worth Tk 75,000 crore in fiscal 2014-15 to achieve the target of a 7.3 percent economic growth.
Economists and business leaders are also doubtful about the government's capacity to implement the budget.
Faruq Ahmad Siddiqi, a former chairman of Bangladesh Securities and Exchange Commission, said the targets in the budget may not be too ambitious, but the question lies with the implementation capacity.
He said tax breaks have been given to stock exchanges, but these will not benefit small investors.
Mirza Azizul Islam is also sceptical about the implementation of the budget. “I don't think the country will see any revolutionary improvement in capacity of the government employees to implement the budget next year,” he said.
The government would not be able to achieve the revenue collection target next fiscal year. In the current year, it can collect at best Tk 120,000 crore from the National Board of Revenue against the actual target of Tk 136,090 crore, Islam said.
Selima Ahmad, president of Bangladesh Women Chamber of Commerce and Industry, and Tashfeen Ahmed, a director of IFAD Group, also spoke at the discussion, chaired by Sultan Mahmud, ERF president.