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State of the Bangladesh Economy and Budget Responses 2008

14 June 2007
 

Finance Adviser AB Mirza Azizul Islam rejected outright the notion that the proposals in the budget for fiscal year 2007-08 are unrealistic or unattainable. The size and financing in the proposed budget are not unrealistic, he said while speaking as chief guest at a dialogue on the state of Bangladesh economy and budget responses. Centre for Policy Dialogue (CPD) organised the dialogue at Sonargaon hotel in the capital on 14 June 2007.

"I have talked to various agencies and also the people who are outside the government and become convinced that the growth target of GDP projected in the budget is not unattainable," said the finance adviser. He also reiterated his views regarding the rate of inflation, budget deficit, foreign aid, investment, bank borrowing, ADP implementations, revenue collections and other related issues responding to the views expressed by the speakers at the dialogue. He said the proposed budget tried to strike a balance among various conflicting situations and larger section of the people were given the most considerations. The people will now be allowed to send the comments regarding budget proposal until Sunday, he said, adding that giving importance to people's view, the government has opened up the scope for comments from the civil society regarding the budget proposals.

"The seven per cent growth target is quite achievable although the budget was set on a fragile structure," said Bangladesh Bank (BB) Governor Dr Saleh Uddin Ahmed, who spoke as a special guest at the dialogue. He expressed the hope that Bangladesh would be the next target for foreign direct investment (FDI) as a 'good environment' is prevailing in the country for private sector investment. Former finance minister M Syeduzzaman chaired the dialogue where Executive Director of CPD Debapriya Bhattacharya gave an overview of the state of Bangladesh economy and budget evaluation by the independent think tank. The BB governor pointed out that the rate of letter of credit (LC) opening increased recently.

He thanked the migrant workers for sending huge remittance as the foreign currency reserve of the central bank reached $4.75 billion mark.

Saleh Uddin Ahmed admitted that the BB has been facing some challenges including rising inflation but hoped to address it properly. He emphasised attracting foreign direct investment and portfolio investment instead of depending on bank borrowing. He also suggested that exporters be more competitive as the government fund for assisting them is very limited.

Political leaders, former lawmakers, former bureaucrats, and business leaders attending the dialogue emphasised maintaining zero tariff on computer import, power pump, reduction of duty on milk powder, giving attention to thrust sectors, special allocation for jute sector and reaching the agriculture subsidy to the farmers.

Responding to the speakers' demand for protection of domestic industries, Mirza Azizul Islam reminded them that all the export-oriented sectors get different types of subsidy and protection in other forms. The finance adviser said the money that has been extracted from corrupt people would help the government to meet the deficit in the budget allocation. He said the government has taken some short and medium term measures for curbing price hike of essentials.

Regarding implementation of annual development programme (ADP), the finance adviser said the officials were given instructions to start implementation process from the very beginning of the next fiscal year. He said the government's revenue expenditure has gone up due to interest payment of previous debts and salary hike of the government officials.

President of Federation of Bangladesh Chambers of Commerce and Industry Mir Nasir Hossain said the new tariff structure in the budget would make negative impact on the import of capital machinery. There are some anomalies in the budget that may hamper private sector development, he said, adding that poverty alleviation heavily depends on employment generation and private sector is the main tool for creating new employment. Metropolitan Chamber of Commerce and Industry President Latifur Rahman said the budget proposal gave attention to import of finished products but the import of raw materials should also get due attention for sustaining the economy. BGMEA President Anwarul Alam Chowdhury said the garments owners were almost ready to give minimum wages to the workers but the workers agitations last year harmed the sector and many orders were diverted to other countries due to it, he said. There is 25-30 per cent labour shortage in the RMG sector and it would be able to generate 10-12 lakh employment in next couple of years reaching the export figure to $15 billion, he said. The BGMEA president demanded permanent solution to the power crisis, tax holiday and bank loan with seven per cent interest for setting up effluent treatment plant in the textile sector for maintaining proper environment.

Former minister Dr Osman Farouque said this is for the first time people are evaluating the budget in an objective way unlike one-sided criticism in the previous years. Terming the budget highly ambitious, former lawmaker Dr Abdur Razzaq said it would be very difficult to implement. The revenue expenditure went up due to maintenance of many unnecessary agencies in the government, he added.

Debapriya Bhattacharya in his analysis said resource mobilisation and financing will be two major issues in the budget. He said a number of thrust sectors did not get attention in the proposed budget but the matter needs to be addressed. He also proposed imposing fine on garment factories that would not implement the minimum wage structure. Debapriya opposed the government fund for skill development of the garment workers, saying that it would be a mere wastage of public money.

Former commerce secretary Suhel Ahmed Chowdhury termed the budget a 'good document' but opposed the idea of market stabilising through import of essential items by public sector body Trading Corporation of Bangladesh. He proposed formation of a fair trade company in collaboration with private sector for import and selling of essential items.