Everything will stagnate if investment does not revive: Masrur Reaz

M Masrur Reaz, chairman of the private research organisation Policy Exchange Bangladesh, has said that restoring investment activity must be given the highest priority in overcoming the country’s current fragile economic situation.

If investment cannot be revived, then employment, exports, diversification, and productivity—everything—will come to a halt, he pointed out.

Masrur Reaz further said that the current investment situation has “hit rock bottom,” and that major reforms are essential to recover from it.

He made these remarks today, Thursday, at a roundtable discussion titled “Budget in a Time of Crisis and Public Expectations,” organised by Prothom Alo. The discussion was held at the Pan Pacific Sonargaon Dhaka in Karwan Bazar, Dhaka. The chief guest at the event was Amir Khasru Mahmud Chowdhury, the finance and planning minister.

Describing the current period as a time of multidimensional crisis, Masrur Reaz said, “The wheels of our economy have slowed down. Growth in private-sector credit flow has fallen to a historic low of 4.7 per cent. This is an alarming signal for investment.”

Masrur Reaz also stated at the event that no visible steps toward necessary reforms had been taken during the interim government’s 18 months in office.

He said, “The investment environment is now like a broken house. If we try to find tenants or investors without repairing the house first, they will return disappointed. During the past 18 months [under the interim government], some scattered reforms have taken place, which I would call ‘Mickey Mouse’ reforms. Such minor reforms cannot remove the major obstacles to investment.”

Masrur Reaz further said that the investment-to-GDP ratio has now fallen to around 22 per cent. Unless this stagnation is broken, inflationary pressure and exchange-rate instability will worsen further.

In his remarks, Masrur Reaz divided the current crisis into three main categories. First, the slowdown in the economy, which is obstructing investment, employment, and revenue collection. Second, the severe breakdown of financial good governance. Third, stagnation in reforms.

Under these circumstances, Masrur Riaz believes the upcoming budget framework must include three mandatory priorities: Reviving the fragile banking and energy sectors; Building the capacity to handle internal policy failures and global shocks; and Diversifying the drivers of economic growth.

Masrur Reaz said that Bangladesh’s productive capacity has stagnated over the past 15 years. Although spending on infrastructure has taken place, there has been no meaningful investment in skills, technology, or human resources to increase productivity.

“Tunnels have been built beneath rivers, yet there are no economic linkages on either side. Such investments do not contribute to economic prosperity. We lag behind India, Thailand, and Vietnam in productivity.”

Expressing concern over inflation and foreign-exchange reserves, Masrur Reaz said, “Our macroeconomic situation may be somewhat stable, but it is by no means in a strong position. We do not have sufficient reserves to withstand the import pressure required to sustain 5 per cent growth. If the upward trend in inflation continues, the taka will face major devaluation.”

Regarding budget implementation, Masrur Riaz outlined three specific measures.

First, since revenue collection is unlikely to meet targets next year as well, the government should rely more on public-private partnerships (PPP) and private investment.

He advised allowing the private sector to take the lead in projects that have the potential for commercial returns, instead of spending public funds on them.

Second, the government should strengthen the institutional capacity needed for budget implementation.

Masrur Reaz said that capacity-building is never given adequate importance in the budget.

Third, merely preparing ambitious or “aspirational” plans will not be enough; emphasis must be placed on implementation.

Masrur Reaz concluded, “We have many good plans, but if they are not implemented, they will remain only words. To bridge the gap between what the public and businesses expect and what they actually receive, we must demonstrate our promises through action.”