Investment rebounds

http://www.thedailystar.net/newDesign/news-details.php?nid=174913

Investment rebounds
Sajjadur Rahman

After a prolonged slowdown in demand, import of capital machinery and industrial raw materials has bounced back strongly in the current fiscal year, reflecting a bright prospect for the country’s manufacturing sector.

A jump in export orders for readymade garments (RMG) and the demand for equipment to set up power plants have fuelled the import splurge, according to bankers and industrialists.

Bangladesh Bank statistics show the letters of credit (LCs) settled for capital machinery import were worth $975 million during the first half of the current fiscal year, up by 35 percent from $722 million for the same period a year ago.

The import of industrial raw materials grew by 45.61 percent to $5.84 billion during the period under review, compared to $4 billion in the same period of the pervious year.

But the demand (LC opening) for machinery and raw materials was much higher than the rate of settlement. During the July-December period of the current fiscal year, the LCs opened for capital machinery import were up by over 85 percent to $1.6 billion from $864 million in the previous year.

“Entrepreneurs now hope for better business, as they think the global financial crisis is over,” Anis A Khan, managing director and CEO of Mutual Trust Bank, said, reasoning out the increase in the flow of investments into machinery and raw materials.

According to Khan, imports of power plant equipment and raw materials for the garment factories are fuelling the spending.

“Lots of investments are taking place in the garment and spinning factories to cope with the rising export orders,” said Shahjahan Bhuiyan, managing director of United Commercial Bank.

Bhuiyan said investments are also directed to the spinning sector that provides the much-needed fabrics to the RMG producers.

Both the bankers said the existing factories, which have gas and electricity, either of the national grid or captive, are investing for expansion.

The manufacturing sector has been witnessing a declining trend since early 2007 when an army-backed caretaker government took over the power. Many businessmen were in hide at that time. When an elected government assumed the power in 2009, the energy crisis came to the front as a major barrier to the growth of the sector. Still, gas and electricity connection is kept off.

Mahmud Hasan Khan, managing director of Rising Group that produces readymade garments to spinning, said the export orders are on the rise.

“We’ve are receiving 10-20 percent more orders this year than the last year,” he said.

Spinning mills, which are on expansion, must have surplus gas, according to Khan, a former vice president of Bangladesh Garment Manufacturers and Exporters’ Association.

Bangladesh’s overall imports grew by nearly 40 percent to $15 billion in the first half of the current fiscal year, mainly because of a jump in import of food grains (over 91 percent).

sajjad@thedailystar.net

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