Bangladesh’s investment to gross domestic product (GDP) ratio rose in the just-concluded fiscal year, data from the Bangladesh Bureau of Statistics showed on Tuesday, in what can be viewed as an inexplicable development as most indicators were pointing towards a contrary scenario. The finance ministry itself projected a far lower investment to GDP growth in fiscal 2019-20 as the economy came to a screeching halt in the last quarter for the coronavirus outbreak in the country. It had revised down the investment target to 20.8 per cent for the last fiscal year from the 32.8 per cent initially targeted. Private investment target was re-fixed at 12.72 per cent from 24.2 per cent and public investment target was re-set at 8.1 per cent from 8.6 per cent. But BBS data showed the overall investment rose 18 basis points to 31.75 per cent last fiscal year, which was 31.57 per cent in fiscal 2018-19. Private investment went up nine basis points to 23.63 per cent and public investment advanced by the same amount to 8.12 per cent last fiscal year, even though businesses and industries were shut for at least two months before the easing of the nationwide lockdown in June. “The investment estimate for fiscal 2019-20 is perhaps the hardest to understand,” said Zahid Hussain, a former lead economist of the World Bank Dhaka office. Real private investment increased 6.3 per cent and public investment increased 7.9 per cent. “The figures would look baffling if one looks at other investment-related data.” Most of the materials Bangladesh uses in investment are imported, the economist said. Construction uses a lot of imported iron and steel. Import of iron and steel declined 4.8 per cent in fiscal 2019-20. Investment in building new factories or expanding existing, one requires capital equipment. The import of capital goods decreased 18.9 per cent. “How then were the reported increases in private and public investment made possible?” Private investment trends were weak even before the coronavirus pandemic. This was evident from capital machinery imports and credit growth data during the July-February period. Private sector credit growth, one of the key indicators of the investment climate, was 8.61 per cent in the last fiscal year, down from 11.32 per cent a year earlier. Gross foreign direct investment contracted 36.17 per cent and net FDI flow shrank 31.35 per cent in fiscal 2019-20. Capital machinery imports plummeted 8.51 per cent and intermediary goods imports slid 17.59 per cent, data on the letters of credit settlement of the central bank showed. Implementation of the annual development programme (ADP), the government’s main investment initiative, also fell to a 27-year low last fiscal year. The ministries and divisions managed to spend Tk 161,857 crore in fiscal 2019-20, which was 80.45 per cent of the total allocation for the year. The coronavirus reduced the returns and increased the riskiness of investments. The global economy plunged into a kind of radical uncertainty never experienced before, Hussain said. The pandemic also slowed drastically the implementation of reforms aimed at improving the investment climate. Explaining the increase in public investment is equally problematic. Implementation of most megaprojects slowed. “It is hard to imagine that the state-owned enterprises and local governments made up what the central government was unable to do on the investment front,” Hussain added.
