Bottlenecks in energy, infrastructure derailing investments: World Bank

Continued bottlenecks in energy and infrastructure, combined with disabling regulations and financial sector weaknesses, are derailing investments, said the World Bank in its Bangladesh Development Update released recently.
The Bank also identified a number of risks that may hamper Bangladesh’s development in the coming days.
Among the risks, a key one—governance weakness in the banking sector—could undermine credit and growth prospects, and affect fiscal discipline, the global lender said.
WB echoed the concern over sustainability of the present ‘strong’ growth, saying that private investment is still stagnant.
Lead economist of World Bank, Dr Zahid Hussain, said there is need for plenty of investments from home and aboard.
He pointed out that weak governance has undermined the financial discipline of the state banks, including asset quality.
The WB said disabling regulations and continued bottlenecks in critical infrastructure, particularly in energy and transport, may have become more binding in recent years, as the economy becomes more market-oriented. This is reflected in the non-enviable rankings Bangladesh gets in international benchmarking exercises.
These constraints stem in part from low public investment and inadequate infrastructure maintenance, the update said.
To meet the country’s infrastructure development needs, the Seventh Five Year Plan envisages a total financing requirement of about US$ 410 billion. This is about twice the size of Bangladesh’s GDP, the WB said.
It also said a sound Public Private Partnership (PPP) framework can assist in improved risk allocation between the private and public sectors.
Ideally, the private partner should bear the commercial risk of the project, whereas government should address political risks, including those related to appropriately addressing social and environmental concerns.
Government should also address the viability gap, often resulting from the fact that private investors cannot fully appropriate the benefits from infrastructure investments.
A majority of investments in transport, or in river management, will require public funding, the Bank said, adding, “But, this is bound to be challenging in a country where tax revenue amounts to less than one-tenth of the GDP. To address this constraint, it is necessary to focus on both indirect and direct taxation.”

 

Bottlenecks in energy, infrastructure derailing investments: World Bank

Continued bottlenecks in energy and infrastructure, combined with disabling regulations and financial sector weaknesses, are derailing investments, said the World Bank in its Bangladesh Development Update released recently. The Bank also identified a number of risks that may hamper Bangladeshs development in the coming days. Among the risks, a key onegovernance weakness in the banking sectorcould undermine credit and growth prospects, and affect fiscal discipline, the global lender said. WB echoed the concern over sustainability of the present strong growth, saying that private investment is still stagnant. Lead economist of World Bank, Dr Zahid Hussain, said there is need for plenty of investments from home and aboard. He pointed out that weak governance has undermined the financial discipline of the state banks, including asset quality. The WB said disabling regulations and continued bottlenecks in critical infrastructure, particularly in energy and transport, may have become more binding in recent years, as the economy becomes more market-oriented. This is reflected in the non-enviable rankings Bangladesh gets in international benchmarking exercises. These constraints stem in part from low public investment and inadequate infrastructure maintenance, the update said. To meet the countrys infrastructure development needs, the Seventh Five Year Plan envisages a total financing requirement of about US$ 410 billion. This is about twice the size of Bangladeshs GDP, the WB said. It also said a sound Public Private Partnership (PPP) framework can assist in improved risk allocation between the private and public sectors. Ideally, the private partner should bear the commercial risk of the project, whereas government should address political risks, including those related to appropriately addressing social and environmental concerns. Government should also address the viability gap, often resulting from the fact that private investors cannot fully appropriate the benefits from infrastructure investments. A majority of investments in transport, or in river management, will require public funding, the Bank said, adding, But, this is bound to be challenging in a country where tax revenue amounts to less than one-tenth of the GDP. To address this constraint, it is necessary to focus on both indirect and direct taxation.