Anti-corruption drive causes fall in investment in Bangladesh

July 3rd, 2008 - 2:28 pm ICT by IANS  

Dhaka, July 3 (IANS) The interim government’s drive against corruption has been cited by a report as one of the three main reasons for the slide in Bangladesh’s domestic and foreign investment. The other two reasons, as per the report of the planning ministry, are poor implementation of the annual development programme (ADP) and inflation.

The caretaker government headed by Chief Adviser Fakhruddin Ahmed has jailed over 200,000 people since January last year on charges of misuse of office and corruption.

Among them are two former prime ministers - Sheikh Hasina and Khaleda Zia - and their family members and political associates.

While not commenting on the anti-graft drive, donor nations, including the US, Britain and the European Union have urged the government to hold credible elections by this year-end, the Daily Star reported.

The failure would drive away domestic and foreign investors and cause political instability, they have warned.

The planning ministry report underscores the need to take a prompt decision with respect to major investment proposals. These include a foreign direct investment (FDI) offer from India’s Tata group worth $3 billion that remains undecided since 2003.

The ministry does not cite natural calamities as the reason for the economic slowdown.

Bangladesh experienced floods, landslides and a massive cyclone that caused heavy economic losses, forcing the country to import large quantities of rice.

Private investment in the last financial year has been calculated to be 19.2 percent of the gross domestic product (GDP), while it was 19 percent in the previous fiscal year.

Data showed public investment did not see any rise in the last six fiscal years with significant downtrend in the last three financial years.

Besides the downtrend in investment, quality of investment also took a downward dive and it was reflected in the incremental capital-output ratio (ICOR).

Recent ICOR trend calculated by The Daily Star shows it was 3.89 in 2007-2008, 3.8 in the previous fiscal, 3.72 in 2005-2006 and 4.09 in 2004-2005.

The total investment in the last fiscal year was 24.2 percent of the GDP, which was 24.5 percent in the preceding fiscal. The investment was 24.7 percent of the GDP in 2005-2006.

Public investment was only five percent of the GDP in the last fiscal, while it was 5.5 percent in 2006-2007.

The foreign investor, already here, has moved away. While foreign investment is on the wane, outward transfers of FDI-related investment also shows the dismal picture of the country’s FDI situation.

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