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Chief Representative's Speech

September 17, 2014

Launching Seminar of the Strengthening Public Investment Management System Project

Honorable Minister for Planning, Mr. A.H.M. Mustafa Kamal, Member of Parliament,
Mr. Bhuiyan Shafiqul Islam, Secretary, Planning Division,
Distinguished guests from the Government of Bangladesh and Development Partners, and
Ladies and gentlemen.

Assalam alaikum and good morning.

It is a great pleasure for me to attend the Launching Seminar of the Strengthening Public Investment Management System jointly organized by the Programming Division of the Planning Commission and JICA Bangladesh Office.

There is a widely-shared understanding among all the policy makers in Bangladesh that a key for jumping onto higher growth path and achieving the government's vision to become a middle-income country by the year of 2021 is to raise the investment rate. The current investment rate of Bangladesh is around 26% of GDP, while those figures of India and Vietnam are 35% and 40%, respectively.

Out of 26% of Bangladesh, public investment is around 7 percentage points. The public investment ratio has almost doubled during the last five years thanks to the government's efforts. On the other hand, private-sector investment has been stagnant at the level below 20% of GDP during the last decade. As shown in the low scores in "Doing Business Report" and "Global Competitive Index," both domestic and foreign private investment in Bangladesh are constrained mostly by an enormous deficiency of fundamental infrastructure. In sum, quality public investment is imperative to exploit the huge potential of private investment.

On the side of fiscal operation, Bangladesh has been going through critical time during the last five years to become a decent "tax state" by raising its tax revenue from 9% to 11% of GDP. This is remarkable, as the people seem to gradually start to trust the Government and pay their taxes with an expectation that they will in turn get benefit from the public services such as infrastructure, education, health and social safety nets. According to "Spring 2014 Global Attitudes Survey" of Pew Research Center, more than 70% of Bangladesh citizens, the rate of which is higher than those of most developing countries and even of some developed countries, have confidence in their current economy, its future prospects and the government deliveries. In order to accelerate and sustain a virtuous circle of the people's rising expectations, increasing tax revenue and more quality public investment, the Government of Bangladesh should take further steps without delay on better management of public investment, including further tax reforms.

Ladies and gentlemen,

Improvement of public-investment management has always been one of the most critical agenda in the history of reforms in Bangladesh. There have been series of attempts by the Government and Development Partners to analyze "what to do" for public-investment reform, arriving at similar recommendations. Though these recommendations seem to be well acknowledged by the Planning Commission and other concerned ministries, there has been little endeavor yet to materialize the desired outcome. As explained by the JICA Expert Team, the outline of comprehensive reform has been articulated mainly by the World Bank's PIM Roadmap. Without repeating the past, the Government is now to focus more on "how to do" the actual implementation of reform along with the Roadmap. That is the very reason why JICA is standing here today to provide full-fledged support to the Planning Commission through the Strengthening Public Investment Management System Project, or SPIMS, during the next three years.

Under SPIMS, the Planning Commission and JICA together will comprehensively address the full cycle of public-investment management. Anchoring the PIM Unit as a platform of the entire reform, SPIMS will first streamline the project-formulation and -approval process, secondly strengthen the strategic fiscal linkage, and thirdly functionalize the monitoring and evaluation framework. All of these reforms will be attained by capacity building of relevant officials and validation of outputs. I also expect that, through the implementation of SPIMS, some of entrenched structural issues, such as the dual budget system and the sectionalized bureaucracy, will be ameliorated as well.

As you are fully aware, Bangladesh is at a critical juncture facing mainly three challenges. First, primary energy. Bangladesh cannot depend solely on the domestic natural gas any longer and will have to substantially increase import of primary energy such as coal and liquefied natural gas. Thus you will have to earn a lot more foreign currencies for these imports. Second, large job demand. It is said that Bangladesh can enjoy a demographic bonus for quite some time. However, if you cannot provide sufficient job opportunities, the demographic bonus might turn into a demographic onus. Third, international competition. To be a middle-income country by 2021, Bangladesh will soon have to give up preferential trade treatments granted to Least Developed Countries. Then you will have to confront severe international competition.

Indeed Bangladesh has been long running on a runway accelerating its speed. I believe that whether Bangladesh can take off to be a middle-income country by 2021 and a developed country by 2041 will depend on your efforts to address the above challenges during the next decade. That is one of the reasons why the Government of Japan recently made a commitment to economic cooperation equivalent to US$ 6 billion for the next four to five years. The Government of Bangladesh should develop its absorptive capacity of such a big push, and JICA is willing to support it through SPIMS.

Finally, I would like to express my sincere appreciation for Honorable Planning Minister's strong initiative and leadership and Planning Commission's full commitment to SPIMS. This is the project which will extend substantial influence to every corner of the Government of Bangladesh; therefore, the Planning Commission alone cannot make it successful. Let us mainstream the public-investment management, aim for real impact on the quality of public investment and achieve not only the Vision 2021 but also the Vision 2041.

Shobaike Annek Donnobad. Thank you very much.

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