Minister's assurance, not very reassuring

Authorities should've prepared better ahead of Eid rush

The Road Transport and Bridges Minister's insistence that there would be no traffic congestion this year during the Eid rush if everyone simply complied with traffic rules fails to comfort us. Rather, it sounds like the minister is asking travellers to prepare for the worst, while trying to escape the blame for the continuing failures of his ministry and other concerned authorities to address the problems in advance of the height of the rush that leads to the chaos in the first place.

But why should they? The authorities should have anticipated the massive movement of people and vehicles during this time of the year and taken corrective measures ahead of time to reduce the suffering that people have sadly grown accustomed to. And despite the rhetoric, it is well known that the conditions of the roads and highways are well below par, as the media has widely reported. 

The authorities should have acted on these reports, ensured that the different choke-points leading out of the city were capable of handling large movements of vehicles, and increased capacity to deal with accidents which, as we have seen in previous years, take ages to deal with. The number of water-borne vehicles to ease pressure on the roads could have also been increased. Yet, as this newspaper reported yesterday, the limited number of ferries available to travellers has already become a worry.

The excuses given ad nauseam need to stop. The authorities should instead do their job properly and not expect people to accept their failures repeatedly.

• Courtesy: The Daily Star/ Editorial/ June 11, 2018

Why silent on troubled banks?

MPs slam Muhith for keeping mum on scams, irregularities in banking sector; some allege proposed budget favours 'bank looters'

“You [finance minister] must bring the looters to book to restore people's confidence [in the banking system].... You must ensure good governance, you'll have to do these things with an iron hand.”

Awami League Lawmaker  Ali Ashraf, addressing AMA Muhith in parliament 

In a rare show of anger and frustration, some ruling party and opposition lawmakers blasted the finance minister in parliament yesterday for his complete silence on the widespread irregularities in the banking sector during his budget speech.

Six of the seven Awami League and Jatiya Party MPs who took part in the discussion on the supplementary budget for 2017-18 came down hard on AMA Muhith for his poor handling of the scam-hit sector.

A growing number of loan scams and mismanagement have plagued the banking sector in the past few years, but the finance minister keeps mum about it, they said.

They also criticised Muhith for backtracking from his earlier position of forming a commission to reform the banking sector. Those who looted money from banks could have been identified if the commission was formed, they noted.

Muhith, who placed his 10th budget in a row on Thursday, was present in the House but made no response. House leader and Prime Minister Sheikh Hasina was not present as she is in Canada now.

DEFAULTERS GIVEN EXTRA BENEFITS

Defaulted loans are rising and have reached nearly 11 percent of the total outstanding loans. If the rescheduling is taken into account, it would be about 20 percent, industry insiders said.

Surprisingly, many borrowers are willful defaulters. Big borrowers -- of Tk 500 crore and above -- were given extra benefits in the name of restructuring their loans in 2015. Many of them have already become defaulters and are now lobbying hard to reschedule their loans again.

BASIC, once a healthy state bank,is now all but destroyed thanks to Sheikh Abdul Hye Bacchu, who was chairman of the bank from 2009-2013.

State-run Sonali, Janata, Agrani and Rupali banks have also been hit by big loan scams and are now being recapitalised with taxpayers' money.Now this “disease” has spread to private banks, such as Farmers Bank that is failing even to pay off depositors' money.

In parliament yesterday, lawmakers slammed Muhith for favouring “bank looters” instead of going tough on them for financial irregularities, as the finance minister in the latest line of mercies slashed corporate tax for banks and financial institutions by 2.5 percentage points in the proposed budget, a move they said would benefit the banks' directors.

In 2018-19, the corporate tax rate for non-publicly traded banks, insurance and financial institutions would be 40 percent and for publicly traded ones 37.5 percent. The corporate tax rates for the other sectors have been kept unchanged.

In recent years, the banking sector has been struggling to survive from the rising defaulted loans, capital shortfall and financial scams that mainly emerged from a lack of corporate governance, corruption in loan disbursements and growing influence of directors of private banks in the banks' affairs.

“MUHITH RESTORE DISCIPLINE”: MPs

Taking part in the discussion yesterday, ruling Awami League MP Prof Md Ali Ashraf demanded that Muhith restore discipline in the banking sector.

“Loan defaulters have looted hundreds of thousands of crores of taka from the banking sector. But from their physical condition, the luxurious cars they ride in and the houses they live in it does not seem that they are loan defaulters,” he said.

He urged the finance minister to catch the money launderers and loan defaulters. Otherwise, the sector will collapse, he warned.

When the AL took office in 2009, the size of the defaulted loans was Tk 22,482 crore. By March this year, itsoared to Tk 88,589 crore.

“If we cannot restore discipline in the financial sector, we will not be able to attract foreign investments,” said Ali Ashraf.

Another treasury bench MP, Sohrab Uddin from Kishorganj-2, also criticised Muhith for the sorry state of the banking sector. “People are afraid of keeping money in banks. That's why money laundering is taking place,” he said.

Jatiya Party MP Kazi Firoz Rashid said the looting in the banking sector in Bangladesh is the second biggest incident after the looting of Somnath Mandir of India by Sultan Mahmud of Ghazni (971-1030).

"Why do you give them protection?" he asked Muhith. “Today you are in power. But power is not permanent. You will be tried someday,” he warned.

Firoz Rashid, elected from Dhaka-6, said the bank robbers looted Sonali Bank and Farmers Bank. "What justice have the people got? You have given the permission [for Farmers Bank], people deposited their money in it and their money has been looted."

He questioned why the finance minister didn't put Farmers Bank's assets on auction for plundering people's deposit. “Why don't you confiscate Farmers Bank's assets when a farmer has to face arrest warrant for defaulted loan of only Tk 24,000?

“Thousands of crores of taka have been laundered from the banking sector. But you didn't take any action because all those people are close to you,” he said.

‘MAKING RICH PEOPLE RICHER’

He also said instead of taking actions against bank looters, the finance minister has protected the bank owners in the proposed budget.

“It means that you take sides with the moneyed men. You are making rich people richer. But it is the poor and deprived people who will cast votes for you in the next elections.”

Firoz also said: “I can guarantee that you will not find the well-off people before the polls as they will leave the country ahead of the election.”

Claiming that there is no good governance and rule of law in the country, he said the government often spoke of huge development. But the reality is that just an hour-long rain submerges the city roads.

Another Jatiya Party MP, Pir Fazlur Rahman, sharply criticised Muhith for not forming the commission for the banking sector.

Independent MP Dr Md Rustum Ali Faraji said money from banks was being siphoned off. "People used to keep their money in banks for security, but people are now afraid of depositing money in banks...millions have been siphoned off abroad."

Nine banks, which include six state banks and the trouble-hit Farmers Bank, have failed to meet the minimum regulatory capital needs, is a worrying development for the government.

According to Bangladesh Bank data, during the final quarter of 2017, the nine banks saw their capital shortfall swell by Tk 1,766 crore to Tk 19,466 crore.

The lack of corporate governance and financial scams have eroded the capital base of the banks.

"There's a provision [in the banking law] that allows four people from a single family to become bank directors; and they can be directors for three terms... Now you're proposing lower taxes for them. If this sort of patronisation continues, there will be nothing called bank."

JP MP Nurul Islam Omar and AL MP Romesh Chandra Sen also participated in the discussion.

• Courtesy: The Daily Star /June 11, 2018

প্রধানমন্ত্রীর কার্যালয়ের বাড়তি খরচ সোয়া তিন হাজার কোটি টাকা!

প্রধানমন্ত্রীর কার্যালয়ে বরাদ্দ বেড়েছে ৩ হাজার ২শ’ ৭৭ কোটি টাকা।

বৃহস্পতিবার, জুন ৭, জাতীয় সংসদে চলতি ২০১৭-১৮ অর্থবছরের সংশোধিত বাজেটে এই তথ্য উঠে এসেছে। 

চলতি অর্থবছরে প্রধানমন্ত্রীর কার্যালয়ে বরাদ্দ ছিল ১ হাজার ৪শ’ ৫৬ কোটি টাকা। যার মধ্যে পরিচালন ব্যয় ছিল ৪৮৬ কোটি টাকা এবং উন্নয়ন বরাদ্দ ছিল ৯৭০ কোটি টাকা। উভয়খাতেই খরচ বেশি হয়ে তা দাড়িয়েছে ৪ হাজার ৭শ’ ৯৯ কোটি টাকা। এর মধ্যে পরিচালন ব্যয় ৫৮৫ কোটি টাকা এবং উন্নয়ন ব্যয় ৪ হাজার ২শ’ ১৮ কোটি টাকা।

তথ্যসূত্র —  amadershomoy.com । লিঙ্ক — https://bit.ly/2HChcFs 

Finance minister’s volte-face on banking commission

WITH the banking sector obviously not running well, the volte-face of the finance minister Abul Maal Abdul Muhith on the institution of a banking commission, which has been in discussion for the past quarter of the year, is worrying. The minister, in his proposal for the budget for the 2019 financial year in the parliament on Thursday, conveniently remained almost silent about the ailing state of the banking sector. 

Yet the minister proposed the spending of an unspecified amount of the allocated fund on bailing out banks such as Sonali, Janata and BASIC, which have been mired in politically-linked loan scams for quite some time because of irregularities that have brought down the whole banking sector, in the next financial year. Now, at a briefing post the budget proposal on Friday the finance minister’s saying that there would be no commission on the banking sector is concerning. He is reported to have saved the task of the institution of the banking commission for the next elected government. Having a banking commission could help the country get out of the problems that have for some years been eating away at the banking sector.

The Bangladesh Bank data show, as New Age reported early June, that classified loan in the banking sector soared by 19.22 per cent or Tk 142.86 billion in three months and the central bank has instructed all the scheduled banks to monitor the use of loan proceeds. Banks are reported to have faced problems in liquidity management, which has forced the central bank, as New Age reported on Saturday, to sell $2.7 billion to stabilise the market. Janata Bank is mired in loan scams of Tk 12 billion and Tk 55 billion given to two business groups, Sonali Bank of Tk 35 billion, BASIC Bank of Tk 60 billion and Farmers Bank of Tk 1.6 billion. Besides the six state-owned banks Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Development Bank and BASIC Bank as media reported in March, account for the largest share of classified loans at the end of 2017, with the amount standing at Tk 293.96 billion in private commercial banks, Tk 21.54 billion in foreign commercial banks and Tk 54.26 billion in state-run specialised banks. Yet the government, despite expert opposition, has been all willing to shelve out money for the bank without attending to the problems, and holding to account people responsible for such a situation, that have largely been inherent.

An effective banking system is essential to the working of a modern economy and an independent banking commission is required to emerge from the financial crisis, a manifestation of a deep-rooted set of problems plaguing the banking sector persistently. It is time that the finance minister, and the government, realised that putting more capital into the ailing banks and then returning to the business as usual will not be enough. A situation like this calls out the government on not delaying the institution of the much-talked-about banking commission so that financial irregularities could be redressed.

• Courtesy: New Age/ Editorial/ June 10, 2018

Monitor mega-projects strictly before polls

SANEM urges authorities

A think-tank has called for strict monitoring of ongoing mega projects ahead of the national elections.

"Instead of focusing on spending, we need to focus on the quality of the projects," said the head of the Dhaka-based South Asian Network for Economic Modeling (SANEM).

"It is very likely that spending on mega projects would increase manifold in the next six months to make them visible before the elections," executive director Selim Raihan said.

He was speaking at a post-budget briefing in the capital on Saturday.

"However, strict monitoring is required to measure how much of this spending is aimed at ensuring the quality of the projects", he added.

Researchers at the SANEM also called for introducing "reward and punishment" measures for ensuring the quality of development projects.

"Spending is often synonymous with project implementation in our country. But that should not be the case," Dr Raihan said.

"Rather, we need to focus on the quality of the development work," he said.

"Those who cannot ensure that quality should be held accountable."

Experts at the SANEM noted although the government has set an ambitious target for revenue generation, there has been no 'radical improvement' required for attaining the goal.

"Attaining the targets like Sustainable Development Goals (SDGs) will require big budget. And a big chunk of that big budget would come from tax collection," he said.

"The sort of regime change that is required for better tax collection is totally absent."

SANEM also said that no specific measures were taken to increase the capability of those involved in revenue collection.

"Although, the new VAT law is set to be implemented in 2019, there has been no specific direction in this regard in the budget speech," Mr Raihan said.

Noting the time and cost overrun in implementing the mega projects, the SANEM said that such stagnation in mega projects could hamper private investment.

"Although a total of 10 mega projects have been declared fast-track, there has been no specific direction for their implementation in the new budget," the SANEM chief said.

The SANEM identified the prevailing debacle in the banking sector, lack of confidence in private investment and stagnancy in employment generation as major signs of worries.

"If we cannot take appropriate measures to address these problems immediately, the future would be uncertain for us," Mr Raihan warned.

• Courtesy: The Financial Express/ June 10, 2018

BD’s outbound investment more than triples

Inflow of FDI drops by 7.8pc in 2017: UNCTAD

The outflow of foreign direct investment (FDI) from Bangladesh to other countries surged by more than three times in a year.

The outward flow means Bangladeshi business entities or Bangladesh-based multinational companies are investing in other countries across the world.

The country's outbound FDI reached $170 million in 2017, according to the Word Investment Report (WIR) 2018 statistics.The amount was $41 million a year ago.

The United Nations Conference on Trade and Development (UNCTAD) released the report last week globally.The WIR also showed that the stock of FDI outflow stood at $362 million at the end of 2017.

The UNCTAD report, however, did not provide any detailed data on the outflow like the destinations and sectors of the investment.But the inflows of FDI to Bangladesh dropped by 7.8 per cent last year, the UNCTAD's flagship publication noted.

The inflows reached around $2.15 billion in 2017, which was $2.33 billion in 2016.

"Following a record level in 2016, FDI flows to Bangladesh also slowed... as investment in energy and telecom levelled off," said the report.

"Progress in major public-financed infrastructure development has been slowed," it added.

Among the Least Developed Countries (LDCs), Myanmar received the highest amount of FDI from the multinational companies (MNCs). The amount was $4.30 billion, which was 45.20 per cent higher than the previous year, according to WIR 2018.

Ethiopia received FDI worth $3.60 billion followed by Cambodia.

The Southeast Asian nation got foreign investment worth $2.80 billion in 2017. Mozambique received FDI worth $2.30 billion, which is the fourth-highest amount among the LDCs. Bangladesh was the fifth-highest recipient of FDI in the LDC group.

The UNCTAD report also mentioned that FDI inflows to the group declined for the second consecutive year.

In South Asia, FDI to India decreased from $44 billion in 2016 to $40 billion in 2017. "FDI inflows to South Asia contracted by four per cent to $52 billion, owing to a drop in inflows to India," the report explained.

FDI inflows to Iran were estimated at $5.01 billion last year, the second highest in the region.The UNCTAD includes Iran in the South Asia region.

Iran was followed by Pakistan in the region that received $2 .80 billion as FDI in 2017. Bangladesh became the fourth-largest recipient of FDI in South Asia.

The report further mentioned that last year Bangladesh and India signed the Joint Interpretative Notes for the Bangladesh-India Bilateral Investment Treaty (BIT 2009).

"The Notes add clarity to a number of BIT provisions, including the definitions of investment and investor, the exclusion of taxation measures, expropriation and essential security."

On the global trend, the UN agency said that FDI flows across the world slipped by 23 per cent in 2017 to $1.43 trillion from $1.87 trillion in 2016.

"The decline is in stark contrast to other macroeconomic variables, such as gross domestic product (GDP) and trade, which saw substantial improvement in 2017," the WIR added.

The United States (US) received the highest amount of FDI worth $275 billion, followed by China. China's FDI amounted to $136 billion.

• Courtesy: The Financial /Express /June 10, 2018

Without reforms in the system, tax money will be spent in vain

Nahela Nowshin

Dr Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue, talks to Nahela Nowshin of The Daily Star about what the budget FY2018-19 addresses and, more importantly, what it doesn't.

What's your take on the FY19 budget, particularly in light of an election year?

If you listen to the budget speech, it becomes obvious that it is a lot of stocktaking of the last decade relating achievements of the government in power. You try to remind people what you have done—the finance minister has tried to do that. And he has also tried to point out that a number of things that are under implementation.

What the finance minister conveniently did not mention was what promises were not addressed at all. For example, in its 2008 election manifesto, the party in power promised to produce a comprehensive employment strategy. It also promised to appoint a tax ombudsman and digitise the land management system. All these issues did not make any progress.

The budget has, as usual, tried to reach out to a larger section of disadvantaged people by extending the safety net, introduced the idea of launching a national social security system. Promise was also made to have a pension scheme for the private sector. These are laudable initiatives.

What is also observed is that the budget correctly sought to reach out to certain sections of the domestic-market-oriented industries by enhancing the customs and regulatory duties for goods produced in the country e.g. mobile phones and motorcycles. The budget also tried to look “green” by putting supplementary duty on polythene. It has tried to support differently-abled people by putting five percent tax on medical centres if the latter fail to ensure that they are friendly for the physically challenged. For the larger community of farmers, the budget has rightly put 25 percent customs duty and three percent regulatory duty to discourage import and enhance local farmers' competitiveness.

There is also a large number of rural development projects in the annual development programme (ADP) which are easy money to spend. There is also a sizeable unallocated fund provided in the budget. From the point of view of the upcoming elections, the budget has socially targeted measures and there is also money allocated beyond fiscal discipline which may be released fast. Allocations have been made to make progress in visible landmark projects. 

There are also some important tax measures which try to, as you know, mollify the upper class by giving them certain benefits. The banking sector is a case in point. Provisions for continuation of “making black money white” are another issue.

You had previously dubbed the banking sector as an “orphan”. How will the measures in the budget impact the ailing industry?

The orphan banking sector is now being abused. Given the need for addressing the anarchy in the banking sector, it is now evident that the government is going in exactly the opposite direction. It has increased the number of family directors and their tenure in private banks through amendment of the Bank Company Act, and slashed the cash reserve ratio in the central bank to get more money into the banks. And now banks have gotten their corporate tax reduced by 2.5 percent. Without taking any measures for reforms within the misgoverned banks these steps are sending wrong signals. The government has also stepped back from the idea of putting a Bank Regulation Commission. It only shows who really calls the shots in deciding on measures relating to the banking sector.

It also brings up other issues. Are we giving bank licences to the right people? Are they being supervised properly by the central bank? And is the finance ministry providing proper oversight? What is happening with the corporate governance within the banks? The proposed corporate tax reduction of the banking sector will possibly not have any effect on the lending and deposit rates as well as on the liquidity.

More than a third of the youth labour force with tertiary education remained unemployed in the last fiscal. Does the budget adequately address issues related to job creation?

First of all, we see that a decade back, every fourth young person was out of job. Now, every third person is. So the share of youth unemployment has gone up. Secondly, we have now established that the quality of education in the country is not being recognised by the market. That means the more educated you are, the higher the possibility of remaining unemployed. In fact, the cut-off point is intermediate level education—that is what the numbers say. We also noted that the possibility of remaining unemployed has increased within the young female population, and the likelihood of being out of job is higher in rural areas. 

Whatever growth in employment we are observing is not bringing in as much remuneration as even five years ago. It essentially means that whatever jobs are being created largely do not fall into the category of decent work, are less remunerative, and in the informal sector. Regrettably, there is no recognition of and sensitivity to this problem in the budget philosophy or in the budgetary measures. It is assumed that the business-as-usual approach will anyway create some jobs for the youth. This is a totally misunderstood issue.

Mismatch between budgetary targets, revenue and implementation of ADP has always proved to be a challenge. What are some major reasons for this consistent trend? Do you foresee this happening this time around too?

Absolutely. The old trend will persist. The government has to put up an ambitious revenue target on the income side so as to sustain the expanding public expenditure programmes. But the government lacks the capacity to gather the resources from those who are supposed to pay taxes. A large portion of the eligible population are either evading paying taxes or paying less than the proper amount. Along with that, the government does not have the capacity to spend these huge amounts of money, thus a large part of the ADP remains unutilised.

Our major suggestion has been that the government needs to have a detailed and effective plan to deliver the budgetary targets. How are we going to raise these resources and on what accounts? How are we going to improve the capacity to deliver on the ADP? And even if they spend the money, will the projects deliver the necessary quality of outputs? There's also no guarantee that this spending will reach the targeted population. New methods are needed to assess the impact of spending of the scarce public resources—for that we need a results-based monitoring system and an assessment of how the targeted people have benefitted from the public expenditure programme. Without reforms within the system, we will be spending scarce tax money to no avail.

There is an additional concern this time regarding polls-time activities hampering the progress of implementation.

This is a valid concern because we may witness slowdown of the whole administrative machinery towards the end of the year, till a new government is put in place. So at least two to three months will be a downtime in this fiscal year. This will, unfortunately, coincide with the peak period of ADP implementation—that is the winter season.

Going by recent commentary on the budget, it seems that it's far from being "pro-people". How will the different sections of society be affected by the measures in the budget?

The budget has gone easy on the high-income people and also, to some extent, the low-income people. What the budgetary measures will do is create spending pressure on the emerging middle class of the country—they will be carrying the burden of a large portion of the incremental tax collection pressure. If the value of Taka weakens vis-à-vis foreign currencies, because of the growing deficit in the balance of payment, then import will become costlier. At the same time, if the interest rate remains high, then these two factors together will have an impact on the inflation rate. Food inflation is already moving upward. Given the fact that the global economy is picking up, commodity prices will go up—particularly for oil, food and fertiliser. 

All these things combined will increase our import bill and will have a downstream effect on the price situation. I worry that Bangladesh's emerging middle class along with the young population will possibly carry the brunt of the many budgetary measures in the coming days. Indeed, the emerging middle class in Bangladesh is yet to learn how to exercise its social power in influencing the allocative decisions of national budget.

•  Courtesy: The Daily Star/ June 10, 2018

Bangladesh Economy: IMF sees three key risk factors

Rohingya crisis to create pressure

Rejaul Karim Byron

The IMF has identified risk factors in Bangladesh economy, including political unrest related to national elections, the Rohingya situation and further deepening of crises in the state owned banks.

Slow progress in resolving the Rohingya crisis would create a fiscal pressure on the country, it said in a report yesterday.

The report, based on a discussion of the board of International Monetary Fund on May 30, said the international community should continue their support to Bangladesh regarding the Rohingya situation.

The precise impact of the crisis on the budget will depend on the comprehensiveness of relief efforts and the extent to which donor support continues, it said.

In the outgoing fiscal year, the government was confident that the situation could be addressed with external financing and additional spending pressures could be met without exceeding the budget deficit target, the report observed.

In the mid and long term, the economic, social, and environmental impacts of the crisis can be huge if repatriation does not proceed as swiftly as planned. Moreover, donor support can wane, it added.

SOCIAL UNREST LIKELY

Refugees are now based in an already densely populated area, where the poverty rate is well above the national average and where there is considerable pressure on natural resources. These factors could lead to rising social tensions between the Rohingya refugees and host communities, underscoring the need for investments in key social services, economic infrastructure, and environmental rehabilitation, the IMF said.

In Thursday's budget speech, the finance minister did not say anything about the Rohingyas. In his post-budget press conference the next day, the finance minister said over Tk 400 crore was put aside for the Rohingyas.

But the amount may not need to be spent as there is hope of getting grants from development partners, he said.

A finance ministry official earlier said the government earmarked Tk 414 crore in the Annual Development Programme for moving one lakh Rohingyas to Noakhali's Bhashan Char. The total project cost would be Tk 2,312 crore.

In 2017-18, Tk 1,898 crore was allocated for the project.

In the coming fiscal year, ministries of health, relief and disaster management will continue to spend from their own budget. The ministries have spent around Tk 70 crore in the outgoing fiscal year, said a finance ministry official.

IMF WARNS LOOMING BANKING RISKS

The IMF also warned of political turmoil before and after the next election, raising security concern and adversely affecting confidence, investment and growth.

Balance of payments (BOP) pressures could emerge from lost export production and inflation could go up, the IMF said.

The banking sector, especially the ill-health of the state owned commercial banks may create a risk for the economy next year, the IMF said.

The government allocated around Tk 2,000 crore in the coming year for recapitalisation of the state owned banks.

The IMF said recapitalisation should be tied to reforms to improve the long-term viability of state banks. The reforms should improve governance, ensure stricter controls over lending activities and aggressive recovery of bad loans.

The IMF said the recent amendment to the Bank Company Act had raised governance concerns as it increased the number of family members allowed to sit on private bank boards from two to four. The tenure of directors has also been extended from six to nine years. Additional banking licenses under consideration could further challenge banking supervision and regulation.

• Courtesy: The Daily Star/ June 10, 2018

Budget 2018: Suffering from the Ostrich Syndrome?

Major challenges remain unaddressed

Analysis of this year's budget by experts and the media does not give the sense of optimism to ordinary citizens as expressed in the Finance Minister's budget address. This is because it has not addressed some of the major challenges that impede real economic growth and development. On the contrary, the budget seems to have made major concessions to defaulting sectors while providing very little relief to the fixed income middle class and lower income groups. The biggest challenge, moreover, is how the government will finance this huge budget in the wake of an abysmal rate of ADP implementation and a poor rate of revenue growth.

Experts have called the budget unrealistic and maintaining the status quo which is hardly encouraging for the public plagued by soaring inflation, deteriorating quality of healthcare, education and other public services. Corporate tax for listed and non-listed banks and insurance companies have been cut which seems quite illogical as it will only benefit the owners of these institutions with no affect on depositors or borrowers. This is especially jarring in the backdrop of the major crisis in the financial sector riddled with nonperforming loans, liquidity crisis and corruption scandals. Meanwhile the income tax ceiling of Tk 2.5 lakh has not been raised hence real income of people, which has dwindled due to inflation, has not been protected. In addition VAT on smaller apartments has been raised while on larger ones reduced which defies logic as it will only make it less affordable for lower income groups to buy a flat and cheaper for higher income groups.

Although the government has placed great emphasis on mega projects with a budget allocation of Tk 32,555 crore to speed up implementation, especially before the elections, the track record has not been good. Inefficiency, corruption and negligence of project officials have caused inordinate delays in implementation, hiking up the cost of projects even more.

There have been some positive sides in the new budget. Twelve lakh more people will be brought under the social safety net programme, introducing electronic transfer of funds to avoid irregularities. It is laudable that the government is prioritising projects targeting the poor and most vulnerable sections of society. The energy sector has also been allocated a bigger chunk of the budget to meet the ever increasing demand.

Overall, there has been little change in the budget and little indication that the problems of poor implementation of projects, the crisis in the banking sector, poor quality of education and health services and the burden of rising costs for lower income groups, will be solved anytime soon.

• Courtesy: The Daily Star /Editorial /June 09, 2018

Achieving target will be tough

Says Centre for Policy Dialogue

The additional requirement of Tk 117,000 crore for private investment in the coming fiscal year may not be fulfilled, the Centre for Policy Dialogue said yesterday.

In the proposed budget, private investment has been estimated to be 25.1 percent of the GDP, a 1.9 percent increase from the outgoing year.

Attaining such a fiscal target will be tough, the think-tank said at a press conference in the capital's Lakhshore Hotel.

Investors desire a one stop service to run their business smoothly, but that has not materialised, Mustafizur Rahman, distinguished fellow of the CPD, said.

“A law has been enacted to implement a one stop service, but that is still on papers,” he said.

The cost of mega projects involving Tk 260,000 crore, meanwhile, would shoot up if implementation gets delayed, he pointed out.

Many entrepreneurs do not invest in the absence of the one stop service, he added.

Khondaker Golam Moazzem, CPD research director, said new investments that are linked with the mega projects may not take place.

“We have not observed any rapid measure to implement the mega projects. Investment would boost if the government implement the mega projects in the shortest possible time. It will also give a positive impact on the economy,” he said.

Quick implementation of the LNG terminal is one of the projects that could boost investment, he added.

“But we have not seen the tendency to implement the projects that are directly connected to creating jobs and industries.”

Towfiqul Islam Khan, CPD research fellow, said among the mega projects taken in last 10 years, only Dhaka-Chittagong four-lane highway was implemented.

But, the highway now needs repairing, he said.

The achievement of private investment to GDP ratio for the coming fiscal year will be difficult as the country did not attain such targets in recent years. 

TARGET APPEARS TOO HIGH

According to Bangladesh Bureau of Statistics data, the provisional private investment to GDP ratio stood at 23.25 percent in fiscal year 2017-18, up from the achievement of 23.10 percent in 2016-17.

The share of the private investment in the GDP was 22.99 percent in 2015-16, 22.07 percent in 2014-15 and 22.03 percent in 2013-14.

In the coming year, a total of Tk 147,000 crore will be required to achieve the investment (private and public) to GDP ratio.

The government set an investment to GDP ratio target of 33.54 percent for the coming fiscal year.

• Courtesy: The Daily Star /June 09, 2018