More FDI can expedite economic recovery from Covid: MCCI

The Metropolitan Chamber of Commerce and Industry (MCCI) has said the government should address the present bottlenecks in business to attract more foreign direct investment (FDI), which will accelerate economic recovery from the ongoing Covid-19 pandemic.

In a publication titled “Bangladesh’s Economy in FY21” released on Monday, it noted the growth rates of both savings and investment had been very slow in the fiscal year 2020-21.

“Gross investment, as a percentage of gross domestic product (GDP), was 29.92 per cent in FY21, down from 30.47 per cent in FY20. The share of private investment in GDP was 21.25 per cent in FY21, down from 22.06 per cent in FY20,” the publication said.

It said the share of public investment had risen to 8.67 per cent of GDP in FY21 from 8.41 per cent in FY20.

To bring the economy back to the pre-pandemic level would be a challenge until the coronavirus disappears permanently, the report said. It said the low levels of private investment, both local and foreign, had largely resulted from underdeveloped infrastructure and other impediments, such as a lack of adequate energy and weak transmission infrastructure, a lack of consistency in policy and regulatory frameworks, a scarcity of industrial land, corruption, and non-transparent and uneven application of rules and regulations.

“The government needs to address these impediments to attract more FDI into the country in order to accelerate economic recovery from the ongoing Covid-19 pandemic,” it added.

The trade body also noted that although net FDI in FY21 had increased by 39.37 per cent to $1.77 billion from $1.27 billion in the previous fiscal year and gross FDI inflow in FY21 had also risen by 8.36 per cent to $3.5 billion from $3.23 billion in FY20, Bangladesh’s FDI inflow was still lower compared to that in many countries at similar levels of development.

Bangladesh’s low labour costs are generally believed to be attractive to foreign investors, but still they hesitate to make fresh investments in the country because of the various bottlenecks, it said.

Food inflation

Food inflation increased in FY21, but non-food inflation decreased, compared to the previous fiscal year, the report said.

Food inflation increased by 0.17 percentage points to 5.73 per cent in FY21 from 5.56 per cent in FY20 while non-food inflation decreased by 0.56 percentage points to 5.29 per cent from 5.85 per cent.

But both food and non-food inflation increased in June this year compared to the previous month.

Foreign reserve

The Bangladesh Bank estimated that the current foreign exchange reserve (less ACU liability) is sufficient to pay import bills for 8.2 months. According to experts, the reserve would help foreign investors gain confidence when considering Bangladesh as an investment destination, said the report.

Remittance

A pro-active attitude along with technology-based services of some banks helped the country achieve higher growth of inward remittances.

Currently, 29 exchange houses are operating across the globe, setting up more than 1,348 drawing arrangements abroad, to expedite remittance inflow.

Efforts needed to grow exports

Export earnings from major markets, including the US, Germany, the UK, Spain, France, Poland, Italy, India, the Netherlands, Canada, and Denmark, increased in FY21.

Exports of 17 selected products, including antibiotics, electronics, furniture, ceramics, leather goods, footwear, frozen fish and crustaceans, woven fabrics of jute and jute yarn, sacks and bags and jute articles, pharmaceuticals, plastic goods, toys, bi-cycles and motorcycles, fruits and vegetables, paper and cardboard, and information technology (IT) and IT-enabled services can be enhanced significantly if the required policy support is given, the report said.

“Efforts need to be given to enhance export by providing as much policy support as needed and removing all obstacles,” it added.

Capital market

The regulatory decision to keep the stock market open amid the countrywide strict lockdowns and provide the opportunity to invest undisclosed money in the market worked behind market growth.

On June 30, the last trading day of FY21, the DSEX, the prime index of the Dhaka Stock Exchange (DSE), rose by about 108 points or 1.78 per cent to settle at 6,150, which was the highest in 41 months.

Agriculture

The contribution of agriculture to GDP fell by 0.24 percentage points while the share of the industrial sector in GDP increased by 0.21 percentage points in FY21.

The industrial sector recorded a growth of 6.12 per cent in FY21 compared to 3.25 per cent in FY20.

The agriculture sector achieved a lower growth of 3.45 per cent in FY21, down from 4.59 per cent in FY20.

The service sector witnessed a growth of 5.61 per cent in FY21, up from 4.16 per cent in FY20.