Energy is the key

The World Bank yesterday said Bangladesh's economic outlook remained challenging and the country needed to energise the private sector to boost investment, now in decline.
The global lender came up with the observation in its economic outlook report on Bangladesh.
A persistent energy shortage presents a real threat to the country's economy and poses as much of risk to growth as do the global uncertainties centring on the European debt crisis, it said.
“The overall shortages of energy continue to deter fresh investments and expansion of projects,” read the report, released at The Westin Hotel in the capital yesterday.
It also said private investment had continued to slide due to energy crisis over the past several years. Private investment rate came down to 19.1 percent of GDP this fiscal year from 19.5 percent in 2010-11.
Apart from the energy crisis, volatilities in the global economic environment, high inflation and tighter credit conditions played a role to this investment deterioration.
Ellen Goldstein, WB country director of Bangladesh and Nepal, said Bangladesh's ability to provide adequate infrastructure, energy and a business friendly regulatory environment had also suffered in recent years.
“If these are addressed, we feel Bangladesh will be able to overcome the impact of a weak global economy without much difficulty.”
Sanjay Kathuria, lead country economist of WB, said Bangladesh was a very resilient economy, but there was a lot of room for growth.
On the stagnant local private sector and foreign investments, he said the government should act fast to set up special economic zones to accommodate some anchor investors.
“Land crisis is getting to be a bigger problem for investors.”
Despite all these setbacks, Bangladesh is likely to achieve 6.3 percent GDP growth in FY 2011-12, down from 6.7 percent a year ago. The WB attributed this slowdown to unfavourable external economics and internal supply constraints (energy and infrastructure).
Still, 6.3 percent growth is higher than the developing country average (5.5 percent) and slightly lower than the South Asia average (6.5 percent).
“Bangladesh has maintained this average growth over the last three years through strong manufacturing and remittance growth. Transport and financial intermediations have led growth in services,” said the WB report.
Zahid Hussain, senior economist of WB Dhaka office, said Bangladesh economy was facing four challenges -- three from external and one from internal aspects. And these are Euro crisis, turmoil in Gulf countries, oil price volatility and internal energy crisis.
Replying to a query on amnesty for black money, he said both reality and ideology should be considered before allowing it in the upcoming budget. “Impacts on revenue should also be considered.”
“We don't know what scheme is coming exactly to whiten black money. But there shouldn't be any scheme that will ultimately encourage black money generation,” he said.