Contacts: In Dhaka: Mehrin A. Mahbub (880-2) 8159001, mmahbub@worldbank.org In Washington: Erik Nora (202) 458 4735, enora@worldbank.org Bangla Version Dhaka, October 27: Continued growth in Bangladesh has put a pressure on certain key resources – electricity, finance, land, and skilled labor – which are essential for private sector growth. The micro, small and medium firms are particularly constrained by poor allocation of resources, despite their significant potentials for productivity gains, employment growth, and poverty reduction. The report “Bangladesh Second Investment Climate Assessment (ICA): Harnessing Competitiveness for Stronger Inclusive Growth”, evaluates the constraints faced by the private sector and assesses the competitiveness of firms in Bangladesh. The report jointly launched by the Board of Investment, the World Bank, BICF / SEDF, and DFID discusses how a more enabling business environment would promote stronger and faster economic development. ‘The GDP of Bangladesh has grown at a rate of around 6 percent per annum in the last five years. For continued growth and prosperity, Bangladesh must focus on issues such as adequate electricity supply, flexible financial services for smaller firms, strengthened access to serviced land and building better-matched labor skills to meet business needs” said Zafrul Islam, Acting Country Director, World Bank Bangladesh. “Of particular concern are the pervasive power outages that rob the country of an estimated 2 percentage points of national growth.” Currently only the big well-established companies are able to adequately procure basic facilities. Smaller and younger firms are frequently left behind. So are most businesses outside of the Dhaka-Chittagong corridor. Weak financial markets also prevent resources from flowing to more productive smaller firms. The 2nd ICA Report indicates that public-private partnership for power generation and distribution would lead to faster economic growth. Modernized lending methods combined with diversified lending instruments would boost growth for smaller and upcoming entrepreneurs. Improvements in land administration would increase access to serviced land and help new firms enter the market. Addressing labor skill shortages and mismatch to business needs would improve competitiveness, including on the international arena. Further, to sustain growth, FDI and export competitiveness must be stimulated. “Women are worst off in terms of labor skills and wages, though their employment growth is highest” said Ms. Tatiana Nenova, Senior Economist, World Bank and author of the report. “Promotion of female employees’ labor skills and encouraging the access of women entrepreneurs to finance and business support services will be a major step in utilizing the full potential of the labor force.” A particularly promising area for economic growth is the non-farm sector in areas outside Dhaka and Chittagong, which can improve the livelihoods of the poorest. This sector could be stimulated by linking it to existing markets, providing services and infrastructure. The most effective support to rural non-farm activities would focus on forming business and growth clusters, at first only a few well-endowed locations, those with the highest potential for growth. The first ICA was done in 2003. The Second ICA takes a more comprehensive look at the business environment by extending beyond Dhaka and Chittagong. For the first time, the 2nd ICA report looks beyond manufacturing to the services sector. For more information on the World Bank in Bangladesh, please visit: http://www.worldbank.org/bd
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