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Dhaka needs to speed up privatisation --Peregrine

DHAKA: Banagladesh, burdened with huge public sector losses, needs to speed up privatisation and check red tape to attract investment, Peregrine Capital Limited said.

"While the government is committed to reforms, investors have found resistance and red tape from middle-level bureaucrats," Hong Kong-based Peregrine said in a report.

The report, made available to Reuters on Monday, said the country's privatisation activity had lost considerable momentum over the past year with 46 companies earmarked by the government still waiting to be sold.

It said the total losses incurred by state-owned enterprises in fiscal 1994/95 (July-June) were estimated at $550 million or about 2.0 percent of the country's gross domestic product (GDP).

The report said the government's lack of political commitment, demonstrated by its offering for sale only loss-making firms with huge debts and at overvalued prices, was one of the major flaws hindering Bangladesh's privatisation process.

It said Bangladesh should also privatise its power sector to prevent drainage of electricity of more than 34 percent. Peregrine described drainiage as the "percentage difference between electricity supplied and electricity paid for".

"Although this figure fell over the last few years, it was enough to stop World Bank credits to the power generation sector," it said. "Power outages are still serious and impeding economic growth."

The report said Bangladesh announced industrial policy reforms in 1991 opening up most sectors except defence, nuclear energy, printing money, and air and rail transport to both local and foreign investment.

Foreigners are allowed to hold 100 percent equity stakes, repatriate profits and dividends without prior permission and have free access to local currency loans from local banks, it said.

It added that Bangladesh has made considerable progress in import policy reforms through trade liberalisation, allowing freer inflows of technology, capital goods and raw materials.

The maximum duty on the import of capital machinery is 7.5 percent, but the duty on imports of capital machinery for export-oriented ventures has been exempted, it said.-Reuter