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formulating
exchange rate policy
(From
page-1)
Minister
for Finance, Mr M Saifur Rahman, said that he
did not have a rigid stance on the exchange rate
regime but that the current exchange rate policy
is serving Bangladesh well - at least for the
time being. Referring to the weaknesses of the
country's financial markets he said that the depth
and strength of our money markets do not suggest
a shift towards a float just yet. The Finance
Minister pointed out that international agencies
had suggested Bangladesh to opt for free float
of the exchange rate. But he felt there were many
factors that had to be looked at before opting
for a free exchange regime. Even the social considerations
would have to be taken into account before this
particular policy shift. He felt that if the exchange
rate soars after free float of the currency, investment
would face a severe blow. Former Finance Minister
M Syeduzzaman mentioned
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that
the country should prepare itself for free float
of exchange rate, but not jump into it. The country
now has to balance its budget and correct the
market imperfections and wipe out weaknesses of
the institutions. He, however, said that a sort
of distortion in the country's exchange rate regime
is one of the reasons for the huge trade imbalance
with India.
Dr
Fakhruddin Ahmed pointed out that there is a US$200
million inter-bank market at present in Bangladesh
in foreign exchange trading. Referring to the
aftermath of the free float of exchange rates
in neighbouring countries, the BB Governor expressed
his belief that even in a free market situation
the central bank has a role to play. However,
former BB Governor, Dr Farashuddin Ahmed said
the volatility and risk associated with the full
float of exchange rate may have a negative impact
on the inward remittance. He also suggested the
inclusion of the currencies of trade competitors
in the current currency basket.
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Government
Committed to Providing
Necessary Support to Farmers
Food
Minister seeks private sector investment in the agriculture
sector
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CPD
organised a dialogue on Liberalisation of the
Crop Sector: Can Bangladesh Withstand Regional
Competition on January 8, 2003 at the BRAC Centre
Inn, Dhaka. Food Minister Mr Abdullah Al Noman,
MP attended the dialogue as the Chief Guest, while
former Deputy Speaker Professor Ali Ashraf was
the Special Guest. Head of Social Sciences Division
of Manila-based International Rice Research Institute
(IRRI) Dr Mahabub Hossain presented the keynote
paper.
In
his keynote presentation, Dr Mahabub Hossain mentioned
that India is subsidising exports of rice and
wheat and following a highly restrictive import
policy, leaving Bangladeshi rice markets as an
exposed dumping ground for Indian exporters.
Dr
Hossain in his paper said that in order to push
rice exports, the Indians have decided to release
stocks from the Food Corporation of India (FCI)
to private exporters at a subsidised rate of US$127per
ton while the economic cost was US$253. He explained
in his paper how India raised import duties on
various farm products to protect its domestic
crop production and market. India has clearly
turned backwards from the policy of liberalisation
initiated in the early 1990s. External trade has
been brought back under state trading agencies
from private traders. For staple grains, India
follows a policy of subsidised exports and highly
restrictive import policy.
Attempting
to identify coping strategies for Bangladesh,
Dr Hossain said that lowering production cost
could be another way of fighting the dumping.
Presenting a comparative picture, he said Bangladeshi
farmers have to spend about US$51 for irrigating
one hectare of land while that number is as low
as US$18 in Andhra Pradesh and US$32 in Punjab
in India, only US$18 in Thailand and US$26 in
Vietnam. In Indian Punjab, electricity is free
for tubewell irrigation and free water is given
from irrigation canals. In Bangladesh, the major
sources of irrigation are privately-owned shallow
tubewells and power pumps. Dr Hossain recommended
rapid expansion of rural electrification and subsidised
power for irrigation as long-term strategies for
Bangladesh.
Dr
Hossain pointed out that Bangladesh allows the
private sector to import rice but India imports
foodgrains only through the state-run FCI and
that
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Participants
at the dialogue on Crop Sector. From left to right:
Dr Mahabub Hossain, Professor Ali Ashraf, Mr M
Syeduzzaman, Mr Abdullah Al Noman, MP, Dr Debapriya
Bhattacharya and Mr Noel Magor.
this
year, private-sector importers in Bangladesh are
bringing in export subsidised rice from India
without even considering the availability of locally
grown rice. Against this backdrop, the dialogue
participants stated that Bangladesh should contemplate
imposing anti-dumping and countervailing duties,
aimed at protecting local producers, even though
the measure would go against WTO provisions. They
also suggested giving subsidies to rural electrification
programmes in a bid to help reduce the production
cost of farmers.
This
was an issue he felt that warranted some intervention.
In a related vein, A Rouf Chowdhury of the Federation
of Bangladesh Chambers of Commerce and Industry
(FBCCI), pointed out that India and Thailand have
institutionalised the irrigation systems to give
a boost to the agro-based industries but that
Bangladesh had failed in this area and should
focus on time and energy at this end.
Food
Minister Mr Abdullah Al Noman laid the emphasis
on increasing private and public investment in
the agriculture sector and cutting post-harvest
losses in order to ensure food security of the
country. Reacting to the issue of protectionism,
the Minister said that the government was ready
to undertake measures, such as the imposition
of anti-dumping duties to protect local agricultural
produce. "We will continue to support our
farmers till we feel they don't need government
assistance". In addition, he mentioned that
the government has proposed the restructuring
of the Public Food Distribution Systems to reduce
the fiscal consequences without sacrificing the
food security needs of the poor, vulnerable and
disaster-affected population of Bangladesh.
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