Businesspeople and economists have urged the government to take steps to spur stubbornly stagnant investment by fixing infrastructure deficits and cutting bank lending rates. Businesses and industries are not being able to do their business amid double digit interest rates, said Syed Manzur Elahi, a former president of the Metropolitan Chamber of Commerce and Industry in Dhaka.
“If we can bring the banks' lending rates down to a single digit it would help immensely,” he said.
Elahi said the cost of doing business is going up in Bangladesh compared to China. “Bangladesh can't go far on the back of cheap labour. If we can give land, gas and electricity to investors, both local and foreign, there will be no dearth of investment.”
He spoke at a pre-budget discussion jointly organised by private television channel NTV and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) at Sonargaon Hotel in Dhaka on Friday.
Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue, said the government is enjoying six advantages in formulating the budget for the next fiscal year.
The advantages are: the inflation is within the central bank's target of 6-7 percent; banks' lending rates are on a downward trend; the exchange rates are stable; the budget deficit is within limits; the overall balance of payments is positive; and the lower prices of petroleum and fertiliser at international markets offer the scope to adjust subsidies, he said.
Bhattacharya also turned his attention to the challenges the budget will face. He said the government would have to work to bolster revenue generation, disburse and attract more foreign aid and augment public investment to spur private investment.
He also called for the need to implement big projects in time, as their implementation cost goes up if they are not finished timely.
Bhattacharya criticised the government for not strongly using the tools under its control to spur investment.
Because of the failure in administrative reforms, the allocation under the public-private partnership framework has remained unused, the economist also said.
“Besides, questions about financial transparency have surfaced over the PPP projects which have been undertaken to date.”
He said the government piloted district budget in Tangail, but nothing has been achieved as promised by the government.
“The budget has to be pro-reforms. Otherwise, it will be tough to come out the 6 percent GDP growth cycle.”
It is unfortunate that local farmers are not getting fair prices for their produce because of oversupply; but a lot of rice is being imported, Bhattacharya said.
“There is also doubt about the quality of the rice being imported. But the government is not using any regulatory measure to stop this import.”
Inam Ahmed Chowdhury, an adviser to the chairperson of Bangladesh Nationalist Party (BNP), said the government is silent about curbing the growth of population.
“If we can rein in it, people will not have to die in the jungle of other countries.”
He also said the budget should particularly look at how it can offer more opportunities to women to empower them.
AB Mirza Azizul Islam, a former finance adviser to caretaker government, said the government will have to raise the allocation for social safety nets as a huge number of people still live below the poverty line.
“The leakage in the safety nets also has to be stopped to take the benefits to the real beneficiaries.”
Finance Minister AMA Muhith said the GDP growth would be the highest in the tenure of his government, which has been ruling the country since 2009.
“We hope we will be able to move out of the 6 percent growth regime next fiscal year.”
The minister also said the government wants to turn the “districts into countries” as the country is too decentralised. “There is a psychological challenge here.”
Muhith said although there has been a gargantuan increase in power generation capacity, the production has not gone up as expected because of problems in transmission and distributions systems.
“We will pay attention to these two areas in the next fiscal year.”
He also said there has to be a change of expectation of profitability in the country. “On one hand, businesses want cuts in bank lending rates. On the other hand, when these businesspeople sit on the board of banks, they want profit.”
The minister also said the subsidy system has created a jungle over the decades. “We have to clean it.”
Water Resources Minister Anisul Islam Mahmud said the country has been unable to raise the GDP growth rate to 7 to 8 percent because of low investment, high bank interest rates and shortages of gas, power and land for industries.
“We have been able to more than double the power generation, but the quality of electricity has not improved,” he said.
Migrant workers are one of the major pillars of the economy, he said. “But we are not giving them anything in return for the contribution. We have to take rehabilitation programmes when they come back as well as use their remittance productively.”
The budget should give more attention to primary, secondary, vocational and nursing education, he said.
In a recorded interview aired at the discussion, Mustafizur Rahman, executive director of the CPD, said the budget should be in line with the goals of the Seventh Five-Year Plan.
He said the planned budget size of Tk 3 lakh crore does not seem big given the needs of the country.
“But we will have to raise revenue collection and use the resources efficiently.”
In the same recorded interview, Ahsan H Mansur, executive director of the Policy Research Institute, said the government would strengthen revenue collection efforts, as the implementation of the reforms in the area are gradually being delayed.
“As a result, the revenue generation is not going up as we expect.”
Muhammad Abdul Mazid, a former chairman of the National Board of Revenue, said there is scope to raise the tax-GDP ratio to 16 percent from 11 percent now.
“The gap here is equal to the budget deficit we normally have. There is money in the GDP but we are not being able to realise it. The NBR has to take up projects to increase revenue generation.”
Mahbubul Alam, president of the Chittagong Chamber of Commerce and Industry, said the investment would not pick up if there was no adequate supply of gas and power as well as available of bank loans at single digit of interest rates.
“The government will have to set up special economic zones as soon as possible to provide land to foreign investors,” he said.
Abdul Matlub Ahmed, chairman of Nitol-Niloy Group, said the government should not reduce supplementary duties on the imported finished items that are produced locally.
Shameem Ahsan, president of Bangladesh Association of Software and Information Services, demanded tax incentive facility for the ICT sector up to 2024 and also tax exemption for e-commerce.
Mohammed Raisul Uddin, a director of Junior Chamber International Bangladesh, the government should give special incentives, including low-cost funds, to young entrepreneurs and set up industrial parks.
Speaking from New York, Mahmud Hasan, a non-resident Bangladeshi, said the government would have to create an environment for wooing investment from Bangladeshis living abroad.
Shah A Sarwar, managing director of IFIC Bank, said the banks are facing a sort of bashing although the lending rates have come down to 12 percent.
Mohammad Hatem, former vice president of Bangladesh Knitwear Manufacturers and Exporters Association, said the factory owners still have to pay a lot of VATs, although the garment sector is out of the purview of VAT net.
He also called for withdrawal of duties on imported fire equipment.
FBCCI President Kazi Akram Uddin Ahmed moderated the discussion.