Private investment continues to remain obstinately stuck in the slow lane, putting a damper on the country's growth aspirations.

In fiscal 2016-17, private investment to gross domestic product ratio is expected to be 23.01 percent -- only 0.02 percentage points higher than the previous year, according to provisional data from the Bangladesh Bureau of Statistics.

The ratio has been stagnant for the past several fiscal years save for the last, when it edged up about 1 percentage point to 22.99 percent.

The ennui on the investment front is even more puzzling given the amount of excess liquidity that the banking system is sitting on and the lending rates.

As of November last year, Tk 277,956 crore is lying idle among banks, according to Bangladesh Bank.

The banks' lending rate decreased significantly in the past couple of years: the weighted average lending rate stood at 9.70 percent in March, down from 11.93 percent two years earlier.

“There are many reasons for private investment not picking up,” said Zahid Hussain, lead economist of the World Bank's Dhaka office.

For one, the cost of doing business has remained high in Bangladesh due to various regulatory complexities and uncertainties, he said, while citing the country's continued low ranking in the WB Group's Doing Business index.

The energy constraint has not eased despite improvements in electricity generation, and the physical infrastructure, particularly relating to trade logistics, has remained poor.

“We have roads but they are not well maintained. Ports are unable to handle import and export cargoes efficiently. Our railway system fails to deliver the services investors need to conduct their business, while the water transport system continues to depend on outmoded technology.”

The financial markets have not developed to keep up with the dynamism of the private sector, Hussain said.

“On the contrary, the banking system has moved in the opposite direction with large nonperforming loans and regulatory capture by vested interests.”

Investors find it difficult to access medium- and long-term credit at affordable interest rates.

Last but not the least, efforts to ease the access to land have not yet produced any visible results. “We have not succeeded in getting any special economic zone ready for operation yet.”

Hussain also remained sceptical about the slight pick up in investment last fiscal year.

“Last year it increased by nearly a percentage point of GDP, but there was no satisfactory explanation about where it went,” he added. It could have gone to the garment sector, according to Nurul Amin, managing director of Meghna Bank.

In recent times a big portion of the increase in import of capital machinery was safety equipment as apparel exporters look to please their Western retailers with their enhanced workplace safety measures.

Import has also been increasing as a result of the government's implementation of large infrastructure projects.

In the first nine months of the fiscal year, letters of credit opening and settlement for capital machinery soared 52.82 percent, according to data from the BB.

“The real industries that generate employment are not taking that many loans,” Amin added.

In the first nine months of the fiscal year, private sector credit growth stood at 10.08 percent, down from 10.76 percent recorded for this period a year earlier by the BB.

Khondaker Golam Moazzem, additional research director of the Centre for Policy Dialogue, said large business groups are putting emphasis on consolidating their existing business instead of expansion.

The challenge before the medium and small investors is that, on one hand they have to compete with cheap imports and on the other hand, existing big business groups have captured a big market, Moazzem said.

There are a lack of facilities like power, gas and infrastructure. “This is the biggest problem investors, especially the new ones, have been facing.”

Another reason is contraction of domestic demand arising as a result of sliding remittance. “This may have an adverse effect on increasing investment,” Moazzem added.

Planning Minister AHM Mustafa Kamal has acknowledged the fact that the private sector is not growing much.

The private sector will not come forward with investment plans if the necessary infrastructure is not there or if there are not enough profits to be made.

“We have not yet been able to provide the necessary infrastructure. This is very true.”

He also acknowledged that there is still a shortage of electricity. “We cannot provide power as soon as demand is placed.”

However, as per the government plan, the investors will have to wait for another one year. “After that the private sector will be given enough power as soon as demand is placed,” he added.