ADP goal lofty

Mirza Azizul IslamStaff Correspondent

Renowned economists of the country yesterday said it would be a major challenge for the government to implement the proposed annual development programme (ADP) for the fiscal year 2009-10.

In immediate reactions to the budget placed by Finance Minister AMA Muhith they expressed their doubt over the implementation of the ADP, as it is bigger than the previous fiscal year.

The finance minister proposed an ADP of Tk 30,500 crore for the fiscal year 2009-10, up by 32.6 percent from the previous one, which was Tk 23,000 crore.

The economists, however, appreciated the government allocation to agriculture, safety net and small and medium-sized enterprises.

They also welcomed the government initiative for Public-Private Partnership (PPP) for which it gave an allocation of Tk 2,500 crore.

In his immediate reaction, former finance adviser to a caretaker government Mirza Azizul Islam said, “It will not be possible for the government to implement the proposed ADP, as it is bigger than the previous one.”

He said: “I support the spending on the basis of priority but I strongly oppose the idea of whitening money by paying 10 percent tax.”

“The scope for whitening money is unethical. An honest taxpayer gives 25 percent tax while a person can legalise his or her undisclosed money by paying only 10 percent tax,” he said.

The former adviser also expressed his doubt over the achievement of the revenue target.

Referring to the proposed allocation of Tk 2,500 crore in the PPP initiatives, Islam said implementation of the fund would be a matter of time, as there are some legal and provisional pre-conditions in implementing the PPP projects.

Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD) said, “It is a right decision to give priorities to agriculture, safety net and small and medium-sized enterprises.”

“The government's intention of maintaining consumers' interest and producers' interest will be a challenging issue. Attracting investment from the private sector under the PPP will also be a challenging job,” he added.

Rahman said the targeted economic growth in the budget seemed the government had set the target carefully and conservatively given the global financial crunch.

Regarding the stimulus package he said, “The government has proposed Tk 5,000 crore for different sectors but it is not clear which sectors will get how much.”

Tariff reduction in intermediary goods is a welcoming move, he said. “But the government should cut the capital machinery import duty too, given the low investment scenario this year” he added.

The CPD executive director also urged the government to continue with the reform programmes taken by the caretaker government earlier.

Economist Debapriya Bhattacharya at a budget discussion on Channel i said various sections of people in the society expect a lot from a budget but their expectations do not match all the time.

“Our capacity is limited. The aim of a budget is to maintain balance between people's expectations,” he said.

The finance minister's budget speech and the proposed allocations seem to reflect the ruling party's election manifesto, Debapriya said.

“The revised duty structure with imposition of new import duties will protect the domestic industry,” he said.

Commenting on whitening of money, he said it was not specified whether the scope applies to undisclosed or black money.

He said if the chance for whitening money is given time and again, its effectiveness would go down gradually.

“Why anyone will pay highest 25 percent tax? The person will keep it and whiten it later paying 10 percent tax,” he said.

Bhattacharya also expressed frustration over the economic growth target of 5.5 percent in the fiscal year 2009-10.

“In the last fiscal we achieved 5.9 percent growth amid global recession and price hike of essentials under the state of emergency,” he said.

Fixing of such a growth target with so many stimuli is frustrating, he observed.

On implementation of ADP, he said it is difficult for any government to implement 80 percent of the ADP.

Economist Zahid Hussain said the budget is business-friendly for domestic market, as the finance minister proposed a duty rise on import of luxury goods and a duty cut on import of basic raw materials.

But, the question remains whether such kind of protectionism for the domestic industry would be viable for the national economy as there is a chance of losing the competitiveness with external trades, he said.

“Giving the stimulus package for the RMG sector is a matter of further assessment,” he added.

Zaid Bakht, a research director at Bangladesh Institute of Development Studies, said, “It seems to be a good budget.”

He, However, said that the government would face challenges in revenue earnings and implementing the ADP.

Ifty Islam, managing partner of Asian Tiger Capital Partners, a financial institution focusing on private equity and venture capital, said the finance minister estimates an additional investment of $28 billion to be financed to achieve an 8 percent rate of growth by 2014.

“The strong commitment of the finance minister to PPP is very encouraging and having PPP budget management operational is admirable but ambitious,” he said.

The government may wish to consider a regular dialogue involving private sector experts, specialists from the World Bank and Asian Development Bank (ADB), the existing specialist infrastructure institutions, IIFC and IDCOL, to work together with the relevant key ministries to accelerate the challenging process of operationalising the three initiatives -- Infrastructure Fund, Viability Gap Fund and Technical Assistance Fund -- possibly through a working group, he said.

He said best practices from established PPP systems and cells from different countries should be carefully reviewed prior to recommending what may be appropriate lessons for Bangladesh in establishing its own PPP cell and institutions.

In regards to implementation of the ADP, he said, the commitment to 'Critical Path Method' to improve implementation is a welcome initiative.

It appears the government has listened to feedback on the need to improve execution. Though, there is an additional need for capacity building, incentivisation and time- bound targets for senior public sector officials, he added.