PRIVATE initiative is, no doubt, the main feature of a market economy and successive governments in Bangladesh have been progressively adopting and practicing market economy principles. But private initiative is not automatically created. Although deregulation, decontrol and the least governmental intervention are the characteristics of a market economy, there is also the other side pertaining to the government's role in motivating the private initiatives that lead to the proper functioning of the market economy.
The government needs to contribute towards the creation of a favourable investment climate through its fiscal and monetary policies so that the members of the private sector feel inspired to engage in entrepreneurship in the first place. Not only policies seen as supportive by the private sector, the government also significantly helps to retain the interest of private entrepreneurs by continuing these policies for a sufficiently long period of time. An entrepreneur who feels confident about the continuity of favourable governmental policies will also feel assured about the viability or profitability of his enterprise. But if he cannot feel so sure about government's policies and finds reasons to doubt that sudden policy changes may be carried out that would render his enterprise unprofitable, then he may not feel motivated enough to set up his enterprise in the first place. Policy continuities on the part of the government, therefore, are important for encouraging the taking of investment decisions and to this need the business leaders drew the attention of the government through a report in this paper on Saturday.
How policy continuity is vital for enterprising and hence for more economic activities and the consequent economic growth, can be seen from the 'tax holiday' policy of the government. Successive governments in Bangladesh have been providing long term tax holidays or tax exemption facility for new industries and this has been a major factor that worked in favour of the industrialisation of the country. A move was noted two years ago to withdraw this facility or to shorten it. In the face of much persuasion, government retracted the decision it was about to take and retained the tax holiday scheme for five years. But businesses have been shaken up by the earlier contemplation of the government to withdraw the tax holiday concession and they now aspire that the government should indicate in rather clear terms its willingness to maintain the tax holiday scheme long into the future. They view this as a major fiscal incentive on the part of the government and without it the rate of investments in industries could fall drastically. Businesses are also for a bipartisan unity of views among the main two political parties in the country in continuing policies considered as critical for business expansion regardless of changes in government.
Many things are required for building up an investment climate that should earn the appreciation of investors as an investment-friendly one. The same include good law and order conditions, sound state of infrastructures, adequate energy availability, bearable costs of borrowing, etc. But even if all of these conditions are perceived to be positive, still the investors may be reluctant to investment in new enterprises or expand the old ones if they feel that they cannot rely on the government's fiscal and monetary policies to be steady or favourable in relation to their enterprises. Thus, there is no way for the government to underestimate the very great importance of not only taking fiscal and monetary steps that would be regarded as helpful by the private sector but also to keep them unchanged over a reasonable length of time to successfully persuade the investors.