Over the past five years, the average growth rate of Bangladesh was 6.1 percent. This growth has particularly been as a result of the population growth, increase in productivity and enlargement of labour force participation in foreign lands and growth of local businesses.
Though employment increased over the past couple of years, the employment rate remained stagnant for the country. The government's initial economic growth target was 7.2 percent for 2013-14 fiscal year, which has became unachievable due to the recent unrest that disrupted most of the services. The World Bank predicts, coupled with the unrest, the weak manufacturing exports, lack of growth in the agricultural sector and the increasing domestic consumption and investment demand would hold down the country's growth at 5.8 percent. However, the current fiscal inflation projection at 7.5 percent is still achievable, which is again dependent on the global commodity price stability and unchanged monetary policy.
A lead economist of the World Bank said that the Bangladesh had all the potentials to attract investments and generate adequate employment opportunities to boost the employment rate by 2 percent to 8 percent and enter the strata of the middle income country.
For investors, Pakistan is too risky for investments, while Nepal is not well located and India has too much of regulations, making Bangladesh a country of top choice. Furthermore, workers in Bangladesh are as much as productive as he Chinese workers, but labors in Bangladesh are five times cheaper than in China. This is a big opportunity for Bangladesh to grab which can ultimately help the country to increase its employment rate and achieve a higher economic growth.
The geographical position of Bangladesh puts it into an advantageous position; while the incentives offered to the investors, the duty free capital machinery import, the economic zones and the bonded warehouses, play a big role to attract investors. However, to boost and attract more investment, Bangladesh must, however, eradicate some of its old problems including lack of access to service land, gas and power shortage, and most importantly red tape. Even will all these potentials, investment in Bangladesh was stagnant at 25.5 percent; 6 percent lower than the Asian standard.
At present the economic zones require more lands. The government can allot land from the dysfunctional state-owned enterprises, tea gardens as well as from the coastal areas and convert them to service lands. Additionally, 5,000 MW of electricity is also needed, and adequate transport infrastructure should also be provided.
The current political violence might not create an immediate impact on the economic growth of the county, but it might have a long term impact if the government does not take the necessary steps.
Further readings:
Towards Accelerated, Inclusive and Sustainable Growth in Bangladesh
Bangladesh: Business Scenario
The Bangladesh economy: Prospects for the future
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