Bumpy road awaits exporters
The rise of mega trading blocs, potential adverse consequences of LDC graduation, growing competition in key markets and a weakened multilateral system will make Bangladesh's trade journey challenging during the eighth five-year plan period, a think-tank said yesterday.
Average tariffs facing Bangladesh's export are set to rise by 9 per cent, and potential shipment loss could be to the tune of 14 per cent following the graduation to a developing nation in 2024, the Centre for Policy Dialogue (CPD) said.
Following graduation, Bangladesh will lose 1 per cent to 4 per cent of its annual exports amounting to $7 billion, said Shamsul Alam, a member of the General Economics Division of the Planning Commission.
He spoke during a virtual discussion on "The Eighth Five Year Plan: Addressing Covid-19 Challenges and Sustainable LDC Graduation", organised by the CPD.
The government will try to boost exports after the graduation through signing of preferential trade agreement, free trade agreements (FTAs) and comprehensive economic partnership agreement (CEPA), Prof Alam said.
While presenting the keynote paper, Fahmida Khatun, executive director of the CPD, said if the ills of the banking sector were not cured, the economy would not fare well in the future.
"The banking sector needs to be strengthened by establishing good governance," she said.
The CPD paper said the loss of preferential market access as an LDC in major export markets, particularly in the European Union, would have an adverse impact on the price advantages of Bangladeshi products.
The possible fall in the export (around 5.7 per cent annually) could cause a loss in employment, particularly in the garment sector.
An estimated 538,770 jobs could be lost due to preference erosion.
Sectors such as the pharmaceuticals could lose the current flexibilities in terms of patenting and licencing requirements, the think-tank said.
"Bangladesh will need to pursue proactive negotiations to enter into CEPA with regional and key trading partners. This will require domestic policy reforms in areas of trade, e-commerce, intellectual property rights, non-tariff barriers, copyrights, certification and standards."
The CPD said in spite of achievements in some areas, the benchmark Seventh Five-Year Plan (7FYP) scenario was below the targets set for FY2019-20 in a number of key areas.
"Indeed, in many cases, the gaps have widened over the years. The 8FYP will need to revisit those targets and set the new targets in a realistic manner."
The think-tank said the LDC graduation would require Bangladesh to take adequate preparation so that "we can graduate with momentum and graduation is sustainable".
"This will mean that the 8FYP foresees needed steps in anticipation of significant preference erosion and demands on raising the competitive strength of the Bangladesh economy."
The 8FYP covers the midway journey towards attaining the goals and targets of the Sustainable Development Goals (SDGs) by 2030.
Accordingly, issues of inclusiveness and equity, and leaving no one behind, must be prioritised in the plan document, the CPD said.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the reforms in the financial sectors such as in the stock market and banks have not been made in the fifth, sixth and seventh five-year plans.
"So, I do not get the confidence that the reforms would be made in the eighth five-year plan."
"We need to take some fundamental steps in the eighth five-year plan for addressing the challenges," he said.
Planning Minister M A Mannan said the government was working to do justice to the people of low-income groups through ensuring fairness and justice and removing inequality.
In some cases, there is some inequality. "We regret it," Mannan said.
"However, our target is to enhance the degree of relief for the people."
Amir Khasru Mahmud Chowdhury, former commerce minister, said establishing economic inclusiveness was not possible without political inclusiveness, which is absent now in Bangladesh.
He criticised the Bangladesh Securities and Exchange Commission, the central bank and Election Commission for poor governance.
"Investors are not getting confidence," he said, adding that the country needs a credible election so that the people's confidence gets a boost.
Saber Hossain Chowdhury, chairman of the parliamentary standing committee on the ministry of environment, forest and climate change, said the government is planning for green recovery from the fallouts of the Covid -19 over the next two years.
He suggested preparing a scorecard of the 7FYP to identify the mistakes so that implementation can be better in case of the 8FYP.
"Otherwise, the same mistakes will take place in the ninth five-year plan."
Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, said if the business climate does not change, a lot of private sector investment would not take place.
The CPD said delays in forming a commission might lead to worsening of the state of governance in the banking sector.
Because of the excessive regulatory forbearance owing to the Covid-19, the performance of weak and poorly governed banks may get worse, it said.
Prof Rehman Sobhan, chairman of the CPD, said there were people in the country who had graduated from the poverty line but fall below it whenever they face shocks. One of the groups is informal sector workers.
There is no agenda for dealing with the large group of people who make up the informal sector, he said.
He urged the policymakers to address the challenges faced by the informal sector.
He called the failure to integrate the SMEs into the supply chain a crucial one.
"There is no coherent agenda for SMEs although they generate a large number of jobs," Prof Sobhan said, adding that the 8FYP must address the big sector.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said the country needs relief from the virus and the economic distress in the next two years.
The support measures unveiled by the government have to be implemented properly, he said.
Along with monetary support, the role of fiscal policies has to be strengthened as the former alone can't help the country ride out the crisis, Zahid Hussain said.
Shaheen Anam, executive director of Manusher Jonno Foundation, said the new five-year plan was stated to be business as usual and the challenges it raised had been going on for a long time.
One of the challenges is weak revenue collection.
"We all know that those who don't pay taxes always find a loophole to dodge it, whereas those who pay taxes regularly are made to pay higher taxes. This has been going on for many years," she said.
The five-year plan is closely related to achieving the SDGs by leaving none behind, she said.
"I do not have any doubt about the government's commitment towards the goals. But I doubt whether we would be able to achieve them."
While moderating the discussion, Mustafizur Rahman, a distinguished fellow of the CPD, said a lot of risks in the economy have widened, and the economy was getting weak because of the pandemic.
He called for introducing a universal pension scheme to take social safety net programmes to a greater number of beneficiaries.
Razequzzaman Ratan, president of the Socialist Labour Front, said the government should ensure permanent jobs for a large number of people who were still out of the formal sector.
A differently able Harun Ur Rashid said the new plan should properly include people like him.