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ADB urges govt to cut cost of doing business

The lender releases quarterly economic update

Star Business Report
The Asian Development Bank has asked the government to take steps to make major progress in cutting the costs of doing business.
"Reducing costs of doing business and enhancing external competitiveness are essential to achieve high economic growth," the Manila-based donor said in its latest quarterly economic update.
Strong efforts are needed to enhance access to electricity and credit, reduce the burden of paying taxes and improve the trading environment, it said.
To increase the economy's external competitiveness, Bangladesh needs to raise the overall quality of infrastructure, including roads, ports, railways, electricity and water supply and sanitation.
Bangladesh needs to heavily invest in infrastructure to create conditions for higher and more inclusive economic growth, ADB said.
"Better infrastructure and higher connectivity can also contribute to diversifying the economy and increasing export competitiveness."
In addition, higher infrastructure investment is necessary to improve labour productivity, capital efficiency and total factor productivity growth to sustain longterm higher economic growth. For promoting higher private investment, skills shortages also need to be addressed.
ADB also stressed the need for mobilising more domestic resources by modernising the country's tax systems and streamlining tax machinery.
At 9.6 percent, Bangladesh's tax-GDP ratio is low compared with other countries in South Asia and also lower than the average of developing countries, the lender said.
“Bangladesh has made some progress in reforming tax systems but further reforms are needed to simplify tax laws and collection procedures, including strengthening risk-based audit to promote voluntary tax compliance."
To meet the large financing needs for infrastructure investment, significant private sector participation in infrastructure development through public-private partnerships will be needed, given the
inadequacy of resources available within the public sector.
A decline in remittances, low private credit growth and weaker consumer confidence ahead of the January 2014 elections contributed to the low growth in private consumption.
On the supply side, agriculture grew briskly and services growth was higher, although industry posted lower growth.
For faster poverty reduction, Bangladesh needs to lift its annual GDP growth rate to about 8 percent in the medium term.
Investment stood at 28.7 percent of GDP in 2013-14 following revision of the GDP series and associated national income data, while corresponding GDP growth came in at 6.1 percent.
Considering the implied efficiency of investment, investment will need to rise to 37.6 percent of GDP to attain 8 percent GDP growth, ADB said.
Economic growth will need to be more inclusive, providing people with access to productive opportunities, so that they are able to contribute to, and equally share the benefits of higher economic growth.
"Growth will also need to be environmentally sustainable."
Over the last four fiscal years, the economy grew at an average annual rate of 6.3 percent compared with 7.1 percent average growth targeted for the first four years of the five-year plan for FY2011 -FY2015.