Economic outlook
Photo: AFP
Efforts to achieve Bangladesh's macroeconomic goals have been problematic mostly due to corruption within the government. The privatisation of public sector industries has proceeded at a slow pace--due in part to worker unrest in affected industries--although on June 30, 2002, the government took a bold step as it closed down the Adamjee Jute Mills, the country's largest and most costly state-owned enterprise. The government also has proven unable to resist demands for wage hikes in government-owned industries. Access to capital is impeded. State-owned banks, which control about three-fourths of deposits and loans, carry classified loan burdens of about 50%. The IMF and World Bank predict that GDP growth over the next 5 years will be about 6.5%, well short of the 9-10% needed to lift Bangladesh out of its severe poverty. The initial impact of the end of quotas under the Multi-Fibre Arrangement has been positive for Bangladesh, with continuing investment in the ready-made garment sector, which has experienced annual export growth in excess of around 20%. Downward price pressure means Bangladesh must continue to cut final delivered costs if it is to remain competitive in the world market. Foreign investors in a broad range of sectors are increasingly frustrated with the politics of confrontation, the level of corruption, the slow pace of reform and privatisation and deregulation of the public sector and the lack of basic infrastructure e.g. roads. While investors view favourably recent steps by the interim government to address corruption, governance, and infrastructure issues, most believe it is too early to assess the long-term impact of these developments.
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