Bangladesh economy should invite more FDI, not loans
As Bangladesh is going to get the status of developing countries, dependency on
external aid has to be narrowed
Md Mazadul Hoque
After a gap of two years, the two-day Bangladesh Development Forum (BDF) organized by Economic Relations Division ( ERD) kicked off in Dhaka, the capital city of Bangladesh. The objectives of arranging such glorious programme is to portray the gained economic performances before the representatives of donor agencies coming from home and abroad. The programme began with highlighting overall socio-economic development across the country where participants were amazed at seeing the statistics that was displayed on the screen. BDF has been formed under the Local Consultative Group (LCG) , a platform of the development partners working in Bangladesh.
It is hoped that the message of BDF would be flooded worldwide that had been aired by policymakers seeking more support from donor agencies. In the programme, the government sought more external aid to take our economy forward within brief time. As an analyst of economic affairs, I want to say that to continue our development spree, grant and loans from donor agencies are required to address the current need. If ongoing development works fully or partially depend on foreign sources, the government is set to fall in a what-to-do situation.
As Bangladesh is going to get the status of developing countries, dependency on external aid has to be narrowed anyhow. Many challenges are awaiting before us in terms of repayment of the loans. According to published report in a daily, the average annual inflow of foreign aid has been equivalent to around 2.0 percent in recent years. It was more than 6.0 per cent a couple of decades ago. The total size of foreign aid rose to nearly US$6.54 billion in last FY from a paltry amount of $ 270.80 million in FY 1971-72.Despite enjoying high volume of aid and loans from development partners, the government used to seek specific aid commitments from the foreign development partners from the Aid Consortium , held in Paris earlier.
To materialize development plans and programmes undertaken by the visionary government, a huge capital is needed right now. It would be better if required fund is managed from domestic sources. Grants and loans are continuously being taken from development partners on condition of high interest rate. The development partners are Japan International Cooperation Agency (JICA), World Bank (WB), Asian Development Bank (ADB) among others. In recent times, the World Bank has pledged to provide loans more including 10 million US dollar for creating Export Readiness Fund (ERF) and the fund for Road Safety in Dhaka city. So, the grants and loans from donor agencies are notably being increased that might make us unable to repay in right time.
Foreign grants and loan were badly needed just after being free from Pakistani occupation during first five year plan (1974-1978). At that time, Bangladesh fell in a what-to-do situation with population who had no jobs. To address the demand, we had to seek grants and loans from donor agencies. The credit was $3531 billion. Currently, Bangladesh economy recorded significant growth in all sectors. Inflow of foreign remittance in recent decades is really admirable. Export income has been increased due to diversification of export products. Unemployment rate is now below 20 percent that was above 40 percent in ten years ago. So, in such a situation, our economy needed not to borrow more from development partners.
During sixth five year plan (2011-2015), Bangladesh showed highest growth performance next to worlds second largest economy, China. Then only $12.82 billion came from donor agencies as grants and loan. Bangladesh growth rate was 6.3 percent where 5.5 percent in India, 5.8 percent in Indonesia, 3.3 percent in Thailand, 2.9 percent in Latin America. Since Bangladesh has become a role model in the world in terms of growth rate, the development partners might contribute in our economy in alternative ways. In 2016 when Chinese president Xi Jinping visited Bangladesh, more than two dozen of deals were signed between two countries amounting to $ 2,053 crore dollars. For infrastructure development, the Chinese president pledged to give these loans.
What should be noted here that Government borrowing from banks already crossed Tk 50,000 crore side by side borrowing from sources. Many countries were forced to sell out their prime earning sources to loan providers due to failure of repayment of loans. So, the state has to decide in wise way about good and bad sides of foreign loans. Nevertheless, we always dream of getting grants and loans when any country heads visit here in Bangladesh. Rather, we have to try to make them understand to invest here with huge capital. In this moment, we have to create congenial business environment to woo foreign investors. The time has appeared to discourage loans from donor agencies. They might help us in many ways. Current GDP growth rate of Bangladesh represents that there now needs no foreign aid. FDI is badly needed for 100 Special Economic Zones (SEZs). We have to give our attention on FDI only if we hope to see sustained economy. But, why do we expect external aid after so many years of independence?
The writer is a banker and analyst of economic affairs. E-mail: [email protected]
