BANGLADESH is no longer the marginal, poverty-ridden basket-case on the global economic stage as it perhaps was three decades ago. It is the 9th largest country in the world in terms of population, and the 58th largest economy in the world in terms of nominal GDP.
After a decade of consistent mid-single digit economic growth, Bangladesh can achieve a higher growth path and become a prosperous middle-income nation by 2016 by sustaining and accelerating its growth momentum, significantly reducing the incidence of poverty, and delivering better living standards for all its citizens.
However, political turmoil, poor governance, a weak banking sector, and unreliable power supply are major drags on growth.
The emerging priorities for the next elected government are quite clear: maintain political stability, and ensure macroeconomic stability through coherent and coordinated fiscal, monetary, trade, and exchange rate policies; focus on pro-poor growth, contain inflation, support private sector led economic growth by providing an enabling investment climate, attain a judicious balance between unbridled free-market capitalism and prudent regulatory oversight; support vulnerable groups through targeted programs, improve Annual Development Program implementation capacity to support the real sector, reduce dependence on foreign donor support, and exploit the public-private partnership model to inject greater dynamism into national and economic governance.
Small and medium enterprises (SMEs) need comprehensive support. Intelligent business-friendly policy-making and improved efficiencies in the service delivery mechanism of public institutions must be coupled with private sector driven growth with the government as facilitator.
To attract foreign investment, the "Bangladesh" brand should be promoted by the Board of Investment's newly approved Invest Bangladesh wing.
Going forward, enhancement in infrastructure and utility services provision relating to energy supply, water supply, road transportation, and communication are important elements to contribute to national efficiency, competitiveness, and productivity.
The recently developed energy infrastructure development master plan needs to be revised. Additional measures ought to be taken to contain population growth. Urban congestion should be alleviated through long-term planning and tactical actions.
With a growing service sector, which now contributes more than 52% to the country's GDP, people resources need more focus through a new human resource development ministry. Focus on skills development and universal education should be ensured through the newly formed National Skills Development Council. Annual remittances can potentially exceed $30 billion by 2016.
The financial sector in the country, although not destabilised by the global financial turmoil, requires progressive enhancement in governance. We need to embark upon a new financial sector adjustment project to qualitatively enhance the policy regime, and improve the depth, stability, resilience, transparency and integration between the capital market, money market, banking, and insurance sectors.
Key priorities include strengthening the foreign exchange and government debt markets, and improving the financial position of the state-owned banks. It is also necessary to improve the functioning of the Bangladesh Bank and the Securities and Exchange Commission as regulators of the banking sector and capital market institutions respectively.
Notwithstanding the recent progress, Bangladesh ranks near the bottom of Transparency International's corruption perceptions index; interest rate spreads exceed regional averages; and the World Bank estimates that power outages significantly reduce total factor productivity growth in manufacturing.
We need to develop a long-term "national vision 2020" with detailed analysis and practical roadmap for policy development and implementation, including a comprehensive private sector development strategy, through extensive dialogue with civil society members, business chambers, non-government organisations, and other stakeholders.
The PRSP II needs to be revised through a process of greater public-private partnership and civil society participation, and endorsed by the elected parliament through exhaustive debate.
Particularly since no formal assessment has been carried out by the caretaker government on the successes and failures of the first PRSP, and the limited public consultative process undertaken in its formulation. The PRSP II envisages a heavily foreign aid dependent economic plan, an assumption that is not tenable given the likelihood of lower levels of donor support in the future.
We need to enhance national competitiveness by eliminating infrastructure bottlenecks, and simplifying regulation. Bangladesh has dropped in the level of national competitiveness in the World Economic Forum Global Competitiveness Index from 107th place in 2007-08 to 111th in 2008-09. The country also slipped in the International Finance Corporation's Doing Business report 2009 (104th in 2008, and 110th in 2009).
Unfortunately, enhancing the level of national competitiveness has not fared in serious measure in the National Strategy for Accelerated Poverty Reduction.
The proposed competition act needs to be carefully reviewed before approval, since it appears to be overly restrictive on businesses, and confers undue authorities to the proposed competition commission.
According to the Joint Rivers Commission, India has been diverting more than the mutually agreed quantum of water from the Ganges river through Farakka during several months of this fiscal year. Since early 1970s, the Farakka Barrage has caused more than $10 billion of economic damage to the agricultural sector in the southwest region of Bangladesh. Therefore, we must mobilise national commitment for putting pressure on the Indian government to refrain from trans-boundary river water diversions.
The government should embark upon an investment climate improvement initiative with the objective of enhancing investor confidence.
The government should carry out a comprehensive reform of its public administration. In the current structure, only 6% of approx. 200,000 government employees are Class I officers. This ratio needs to be significantly increased.
The government should encourage the business community to pursue ethical business practices, fundamentals of corporate governance, and environmentally conscious industrialisation. We should ensure "e-commerce" as a viable electronic transaction processing medium for businesses and consumers. The National Productivity Organisation needs to be made effective under the Ministry of Industries.
The government should continue the functioning of the Bangladesh Better Business Forum (BBBF) and enhance its effectiveness through a stronger BBBF secretariat. The Regulatory Reforms Commission should be a permanent body, as in the UK, Japan, and Korea.
Boards of major public institutions ought to be reconstituted, bringing in private sector members with specialised subject-matter expertise. The Privatisation Commission should accelerate the transfer of target public corporations to the private sector. Respective ministries should implement the Right to Information Act. The Comptroller and Auditor General's Office should expand its enterprise-wide audit initiative across all public institutions.
On the economic front, the government needs to renew its momentum on the structural reform agenda. Macroeconomic policies should continue to be in line with external stability. The government should ensure that greater independence is provided to Bangladesh Bank. The Board of Directors of Bangladesh Bank needs to be made more effective.
Adjustments in monetary policy are recommended to rein-in inflationary pressures. The government's management of explicit and implicit contingent liabilities needs to be strengthened. In the medium-term, increased revenue is crucial to allow fiscal policy to return to a lower deficit path. The Medium-Term Budgetary Framework should cover all 42 ministries for the upcoming FY 2009-10 budget.
The next national budget for fiscal 2009-2010 must eliminate incoherent aspects of tax policy, and streamline the tax process by enhancing the institutional capacity of the National Board of Revenue. Given the country's exceptionally low tax receipts, revenue mobilisation and expenditure rationalisation are key.
Outward orientation and trade liberalisation should be continued. The government should actively pursue our trading partners, particularly India, to eliminate non-tariff barriers for Bangladeshi goods. The Bangladesh Bureau of Statistics should be made independent and operationally autonomous.
Economic policies that are deficient in fundamental ways and need to be updated include the PRSP II, Industrial Policy, Import Policy, Export Policy, SME policy, and Investment Board Act. The government should redefine "thrust sector" in the new industrial policy. The Ministries of Industries, Finance, and Commerce should, in a coordinated manner, encourage diversification of industry and exports, and formulate a national policy on "industrial cluster development," both within and outside Special Economic Zones.