Bangladesh's central bank chief said on Thursday the country needed to boost foreign and domestic investment to sustain fast economic growth and limit its dependence on foreign aid.
Salehuddin Ahmed told an investment conference the country's economy, which grew 6.7 percent in the fiscal year to the end of June 2006, had potential to expand markedly faster in years to come if a high rate of investment is sustained. "Bangladesh can grow by around 8 percent during the present decade, for which at least 20 percent investment rate is needed," he said.
At present investment, both foreign and domestic, equals 18.7 percent of the country's gross domestic product, officials said. The government has forecast growth of 7.0 percent in the current fiscal year, thought the central bank cut its forecast earlier this month to 6.6 percent citing worse-than-expected crops.
Salehuddin said declining foreign aid inflows and the country's continued dependence on exports of few commodities to a limited number of destinations meant that it was important to tap other sources of funding, such as foreign investment.
Several promising sectors, currency convertibility in current account transactions and a lack of limits on the repatriation of profits made Bangladesh potentially attractive for foreign investors, he said.
But he said the country had to do more to remove barriers such as red tape, political instability, poor infrastructure, weaknesses of the legal system and corruption. "Hidden cost incurred due to corruption and delay in procedural matters, which may also increase cost, should be removed," Salehuddin said.
Lack of political stability was also hurting foreign investment, he said. "Due to domestic political problems and some policy constraints the amount of foreign direct investment in the current year may be lower," the central bank chief said.
Foreign investment totalled $745 million in the fiscal year to the end of June 2006, down from $804 million a year earlier. Bangladesh has been under emergency rule since early January after the outgoing Bangladesh Nationalist Party government and the opposition Awami League failed to reach agreement on holding a parliamentary election.