The growth of country’s manufacturing sector declined in the outgoing fiscal year (2016-17) after two years of rise as entrepreneurs are lacking in confidence to set up new industrial units due to dull business climate, said economists and experts.
According to the Bangladesh Economic Survey data released with budget documents on Thursday, the growth of manufacturing sector dropped to 10.96 per cent in FY17 from 11.69 per cent in FY16.
The growth of industrial sector stood at 10.31 per cent in FY15 and 8.77 per cent in FY14.
Economist Hossain Zillur Rahman told New Age on Friday that dull business climate was one of the major reasons for the decline in the share of industrial sector in the GDP in FY17.
A stagnant situation has been persisting in the country’s private sector for long that has ultimately put an adverse impact on the industrial sector, he said.
The economic survey data also showed that the growth of overall manufacturing sector fell mainly due to a fall in growth of large and medium industries sub-sectors (to 11.32 per cent in FY17 from 12.26 per cent in FY16). The growth of small industry sector, however, increased to 9.21 per cent from 9.06 per cent.
Zillur said, ‘Businesspeople are feeling nervous to expand their existing industrial units and to set up new industries as they think that political unrest would come back any time in the country.’
The government is yet to ensure the supply of gas and electricity to continue the production round the clock in the industrial sector, he said.
Bureaucratic complexity has also created an impediment to increasing the volume of the country’s industrial sector as businesspeople have to face corruptions at the government offices while setting up industries, he said.
He raised question about the achievement of GDP growth of 7.24 per cent in FY17, saying that how it was possible to attain such big growth despite a declining share of the industrial sector in the GDP.
Finance adviser to a former interim government Mirza Azizul Islam told New Age that the country’s export growth had not increased in recent months as expected, which might hit the industrial sector.
Unfriendly business environment in the last few years played a role in decreasing the import of raw materials that are usually used in the manufacturing sector, Mirza Aziz said.
Lower export earnings and decreased trend in the import of raw materials reflected that the country’s industrial sector did not perform perfectly, he said.
The economic survey data showed that the contribution of the financial sector-related services to the GDP further dropped to 7.67 per cent in FY17 from 7.74 per cent in FY16.
The share of the financial sector-related services in the GDP stood at 7.78 per cent in FY15 and 7.27 per cent in FY14.
About the decreasing share of the financial sector-related service in the GDP, Zillur said that the financial sector including the banking system was seriously suffering from lack of corporate governance.
The banks’ capacity continues to deteriorate to diversify their products as they are facing a burden of huge defaulted loans, he said.
The government has been recapitalising scam-hit state banks for long, but it (recapitalisation) failed to improve financial indicators of the institutions, he said.
Mirza Aziz also echoed Zillur saying that lack of corporate governance resulted in the increase in the defaulted loans in the banking system.
Defaulted loans have pushed up the interest rate on the lending products, which has discouraged the common people to take services from the banks, he said.
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