Pvt sector has huge potential for investment in Bangladesh's public infrastructure: IFC country manager

The private sector has significant potential to increase investment in public infrastructure to meet the growing demand based on the country's over 35 million middle-class people, said Martin Holtmann,  country manager for the International Finance Corporation (IFC) in Bangladesh.

To leverage this advantage, he believes that initiatives should be taken on a priority basis in matters such as speeding up reforms in the financial sector, diversifying exports, prioritising renewable energy, boosting electricity transmission infrastructure, and creating trained manpower through proper education.

He made the remark on Monday while presenting a keynote titled "Role of IFC as a Development Partner in Bangladesh" at the monthly luncheon meeting of the American Chamber of Commerce (AmCham) in Bangladesh at a Dhaka hotel.

Martin Holtmann said the reform initiatives for the financial sector in Bangladesh have been moving in the right direction. However, there can be a discussion about whether they are progressing at an appropriate speed.

Citing an example, he pointed out that there are many banks in Bangladesh, and they could be consolidated similarly to what has been done in Nepal to reduce operational costs. Currently, due to the inefficiency of the banks, customers have to suffer, having to pay interest on their loans at an increased rate.

The IFC high official said the exchange rate is also going in the right direction, as recently some initiatives were taken by the government regarding the foreign currency exchange to bring normalcy to the volatile forex market during the time of the Russia-Ukraine war.

Entrepreneurs from both Bangladesh and the US participated in the event chaired by Syed Ershad Ahmed, president of the AmCham.

The AmCham president said the significance of the Bangladeshi private sector lies in its ability to drive economic growth, create employment opportunities, attract investment, and foster innovation.

Competitive advantage leads to increased foreign direct investment (FDI) by offering profitable business opportunities and, in creating a favourable investment climate, putting the economy on a path to cross the $1 trillion mark by 2040, according to the World Bank and BCG Analysis, he added.

He also said that Bangladesh is on its way to becoming a developing nation with an impressively steady annual GDP growth rate, a unique geopolitical location, and a solid and skilled workforce that's attracting global attention, labelling us as an FDI-friendly country.

Ershad Ahmed said while the economy was eyeing double-digit growth, joining the journey of the developing nations, the whole world was hit hard by Covid for two years in a row, followed by economic sanctions and a war-induced supply chain that disrupted markets, leading to global financial instability, creating inflationary pressures, and curbing forex reserves that impacted the whole world except for a few wealthy ones.

Holtmann praised the private sector's participation in infrastructure development and said, many of the private sector entrepreneurs have already invested in the power generation sector as well, which is praiseworthy.

"Hospital and medical services are massive sectors for investment by the private sector in Bangladesh," he said. Bangladesh has the opportunity to participate in the global food processing value chain as the country is trying to diversify its exports, he added.

Whatever the reason, he was depressed over the lower rate of tax collection considering the size of the GDP. "Bangladesh's tax collection ratio is one of the lowest ratios in the world, at only 7.0% of the GDP," he added.

Highlighting his experience working in about 70 countries, he said Bangladeshi workers work harder and longer, which is also an advantage of the country. Some countries do not have many national resources, but they are still performing well. Bangladesh is also such a country.

Martin Holtmann highlighted and presented the key function of the IFC and said it is the private sector arm of the World Bank Group that provides investment, advice, and resource mobilisation. The agency, owned by 184 countries, has a presence in more than 100 countries worldwide.

The IFC committed support worth $43 billion in FY23, a 33% increase from FY22.

The IFC is the largest global development institution focused exclusively on the private sector in developing countries.

He highlighted the major operations of the IFC in Bangladesh following its incorporation here in 1972.