Bangladesh needs $120bn annual investment to sustain 7% GDP growth
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SATURDAY, JULY 02, 2022
Bangladesh needs $120bn annual investment to sustain 7% GDP growth

Economy

Mohsin Bhuiyan & Tarif Tahmeed Khan
27 September, 2021, 10:55 pm
Last modified: 28 September, 2021, 04:05 pm

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Bangladesh needs $120bn annual investment to sustain 7% GDP growth

Bangladesh’s average investment requirement is the highest among all 46 least developed countries (LDCs), which will in total need to invest $462 billion annually to achieve 7% GDP growth, target 8.1 of the SDG

Mohsin Bhuiyan & Tarif Tahmeed Khan
27 September, 2021, 10:55 pm
Last modified: 28 September, 2021, 04:05 pm

Bangladesh will have to invest $119.9 billion annually during the post-pandemic decade from 2021 to 2030 to meet the Sustainable Development Goal (SDG) target of achieving 7% annual GDP growth. 

The revelation was made by the UNCTAD's Least Developed Countries Report 2021 released on Monday.

Bangladesh's average investment requirement is the highest among all 46 least developed countries (LDCs), which will in total need to invest $462 billion annually to achieve 7% GDP growth, target 8.1 of the SDG. 

According to the Bangladesh Bureau of Statistics (BBS), Bangladesh's total investment at the current market price stood at $106.24 billion in the last fiscal year 2020-21, of which private investment accounted for $75.45 billion and public investment $30.79 billion.

Dr Zahid Hussain, former lead economist of the World Bank office in Bangladesh, said, "Comparing our current GDP with the actual investments, we are not on track. 

"Public investments contribute only 8% to our GDP, which is not sufficient for efficient growth. Even if we consider the rest of the 22% private investments, it would not be enough to achieve the 7% annual growth by 2030," he added. 

He further said, "Investments should be between 36-40% to achieve this growth and we were not on track even during the pre-pandemic period.

Hussain said that most of Bangladesh's investments were for replacements, repairs, and maintenance, but to sustain the required growth level, more money needed to be put into new sectors. 

"At first, we must get back to the pre-pandemic level, and then plan out new investments," he said, adding, "But the question is, what needs to be done from both the policy side and the private sector so that these investments take place in Bangladesh?"

Hussain addressed three key challenges to these investments. 

"At first, our current infrastructure is yet to change. Secondly, credit complicated regulation must be addressed. 

"Samsung wanted to invest and produce chips. They did not get an appointment with the Board of Investments, so they eventually went to Vietnam. Even Tata and Adidas failed to invest due to capital-related regulations," he added.  

He finally pointed out that while the country's labour was cheap, it was unskilled. 

"The local labour market is not ready for modern technology, for which we have been unable to utilise our demographic dividend.

"We have been unable to produce graduates who can meet modern demands," he said.

The UNCTAD report also estimated that the average annual investment requirements to end extreme poverty in Bangladesh was $85.8 billion.

Additionally, it said the country would need to invest $240.7 billion annually to double the share of manufacturing in GDP, which is also the highest among the 46 LDCs. 

According to the report, investment needs to reach key priorities to achieve the SDGs in 2021-2030, including eradicating extreme poverty (Target 1.1) and doubling the share of manufacturing in GDP (Target 9.2).

Among the South Asian LDCs, Bhutan's annual investment requirement is the lowest with $1.8 billion, followed by Afghanistan and Nepal with $3.7 billion and $13.7 billion respectively.

Bangladesh set for LDC graduation, but vulnerabilities persist

In the end of February 2021, the UN Committee for Development Policy (CDP) made final recommendations for Bangladesh's transition into the status of a developing country after reviewing the country's position in three indices -- per capita income, human resource development, and economic and environmental vulnerability.

Earlier in 2018, Bangladesh met these three criteria for the first time and the country is scheduled to graduate from the category in 2026.

Despite this achievement, the report recommended Bangladesh to aggressively pursue global value chain (GVC) diversification, as the LDC graduation would cause preferential treatment loss and domestic infrastructural constraints would also pose a threat to continued export revenue and investment flows.

Due to the country's supply-side bottlenecks and logistical inefficiencies, its transport costs are higher than other regional LDCs, which could result in a slower pace of trade growth.

Bangladesh can expect a lower degree of concessionality in accessing development finance, with resulting reductions in available policy space, it said.

The country will need to ramp up domestic resource mobilisation efforts as external development finance decreases, it said.

Top News

GDP growth / GDP / investment / Sustainable GDP Growth

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