An opportune moment for an infrastructure blitz

NO country in the world has a history of development that progressed in a mechanically linear fashion.  No country on earth could display a tide of development that came through typical five-year plans under the guidance of the state bureaucracy.  No country in Asia became an emerging economy without titanic investments in energy and infrastructure. A strong vision under an inspirational political leadership has always transformed a country's dream of rapid development into a reality.  And that came through remarkable spells of massive activity in building infrastructure along with sharpening governance. Now an opportune moment has come, beckoning Bangladesh to massive investment opportunities for infrastructure and energy.

I will illustrate why the time for colossal infrastructural buildup in this country is the most appropriate right now. China has been poor for hundreds of years. Hardly anyone living in the 50s and 60s thought that the country would overcome poverty so quickly and appear on the global stage as a giant actor of growth and development.  China made it happen within 33 years with double-digit growth on average, after embarking on liberalisation in 1978. China made it happen not by accident but by a deliberate focus on gigantic infrastructure and also by unleashing private entrepreneurs to spark the fire of growth. Communist China's venture in the market economy and consequent privatisation still remains unparallel when compared to the pace of infrastructural growth in both India and Bangladesh.  And this is enough to explain why India lags behind China and also why Bangladesh lags behind India in growth performance.  

More important is the sense of the totality of infrastructure, rather than a partial increase in infrastructure. The traditional method of supporting roads and highways, through the sluggish implementation of the Annual Development Programme (ADP) as part of the budget, is starkly inadequate to invigorate the economy so it can accelerate at 8 percent growth. If we make a flyover, that is welcome news.  But if we do not address the traffic flow of the approach roads, congestion at the two ends of the flyover will ruin the whole purpose of building a million dollar project.  

When a doctor puts a patient on an eight day course of antibiotics, taking the medicine for only four days does not give half the benefit which a proportionate calculation would suggest. Rather, the cure process is likely to worsen. The same medicine may not work in the future, since the patient did not complete the course to reap the full benefit of antibiotics. The same concept is applicable to the size of an infrastructural investment.  

If we build a bridge but approach roads are broken, or are narrower, or are subject to traffic anarchy, undertaking the multi-billion dollar project turns out to be a waste of resources. A good example could be Mymensingh's Brahmaputra Bridge which often turns into the hanging garden of the Babylon of the East. A beautiful building resembles a ruin without gas and electricity, or a structure in the Sahara, without water supply. While a full investment project fuels growth, a partial, incomplete investment project may erode growth by draining resources. We often fail to understand the totality of an investment package. When we say our ADP was 85 percent implemented, it does not guarantee 85 percent benefit of the total amount that would have been derived had the ADP been fully implemented. A car with only three wheels does not give 75 percent mobility of the vehicle. It is a total waste.

Paul Rosenstein-Rodan's concept of investment indivisibility has always been relevant while deciding on big projects. Bangladesh has reached an investment crossroads. Doubling our investment is imperative. Given that Bangladesh has the lowest debt-GDP ratio in the region (29 percent), when compared to Sri Lanka (73 percent), Pakistan (67 percent) and India (65 percent), we can easily afford investing another $10 to 20 billion in our hugely inadequate infrastructure. This can be done by issuing bonds, and many foreign parties are ready to buy our bonds, given the good country rating of Bangladesh (BB-).

The main objection of the idea behind a titanic public investment package is this: while our bureaucratic machinery cannot implement even 90 percent of the $10 billion ADP, suggesting a massive investment of another $10 billion makes no sense. Of course, implementing such mammoth infrastructure projects is not feasible within the existing state of management. But we cannot waste both time and opportunity. If we really want to be a developed nation by 2041, doubling investment in infrastructure and quality education is a must. The best way to overcome this argument of inadequate implementation capacity is to outsource the building of development projects. Even the mighty economy of United States gains from outsourcing. Although the government is already making headway in this regard, the pace and coverage of outsourcing must be redoubled.

Low implementation capacity should not be an excuse to prevent an investment blitz from happening.  Bangladesh passes through a special time of low tax-GDP ratio and low debt-GDP ratio. Foreign reserves are at a record high. All the numbers must be engineered aggressively to kickstart an infrastructure blitz, so that we can cement our growth potential for the future of a vibrant Bangladesh.

The writer is chief economist of Bangladesh Bank.