Making the budget more vibrant
The budget is a seasonal music that hardly runs out of notes. Most people criticise it as ambitious although that is how it ought to be. Some people call it anti-poor and often call for a hartal that makes the poor even poorer. Some call it anti-business even though the business community always wins the last tug-of-war with the government. We are drawn into the whirlpool of these repetitive criticisms every year because the budget does not change its framework and taste. Time has come to change its structure and attitude to accelerate growth in a vibrant Bangladesh.
The budget follows a pentagon model with five steps and priorities of action. First, it decides current spending; second, development spending; third, revenue income and grants; fourth, the fiscal deficit, and finally the budget fixes its prime target of growth and welfare. While the budget is almost 17 percent of GDP, revenue income covers around 12 percent of national income, leaving a fiscal deficit of almost 5 percent of total output. The ratio between current spending and development expenses stands out to be roughly 65:35.
The existing structure of the budget is fine as long as the current spending is considered. But the dysfunctionality of the residual portion on the annual development programme (ADP) warrants a fundamental change in the budget structure to not only avoid enormous waste of infrastructure resources frozen in the pipeline, but also to empower the economy's graduation into upper middle-income level at a fast pace. Only 50 percent of ADP was implemented in the first 10 months of the last fiscal year of 2016. In the first 7 months of the current FY 2017, ADP's implementation made no less than a record, but still it is only 33 percent. Quality, of course, is another concern.
This progress in ADP happened when the bureaucracy is enjoying its honeymoon of incentives after the recent record salary-hike, ascertaining that something is wrong with the concept of ADP — and therefore it should be remodelled. Foreign unused resources in the pipeline have recently exceeded 35 billion dollars. In June 2016, the amount was no less than 22 billion dollars — enough to build 4 Padma Bridges and a world-class Patalrail network for Dhaka. The national loss we are incurring by stubbornly sticking to the old style of ADP under the bureaucratic apparatus and thereby eliminating all opportunities of competitive outsourcing is irreparable and self-damaging.
The best way to end the recurring dramas of ADP failures and the pipeline stories of unused foreign resources is to create an independent infrastructure part in the budget as soon as possible, before we start witnessing Greek tragedies on infrastructure repeatedly. Let us start a tripartite model of the budget from 2020 so that the government gets ample time for homework. Instead of a two-layer style, the budget should now have a three-layer approach: 1) current budget 2) development servicing budget, and 3) infrastructure budget.
It is not just the addition of the third part on top of the old one. The new approach will only take the current budget as usual, but the part with ADP should be entirely revamped. Only one-third of the existing allocation of 13 billion dollars may stay with this annual part only to regularly service the development projects already built. This part will also include project governance. For example, the Joydevpur-Mymensingh 4-lane highway has turned into the longest parking lot for trucks and buses and the safest freeway for Korimons-Nosimons-Kakras and rickshaws to roam in either direction whenever they wish to, impeding speedy vehicles and thus thwarting the purpose of its construction. We build highways and forget that spending for street governance is an integral part of it. Servicing and governance will be the principal tasks of the servicing budget. The rest of the amount will join the infrastructure part — the most crucial segment to transform the country's landscape.
The traditional ADP is not adequately serving the actual purpose of building the platform for boosting long-term growth. ADP does not go with the template of an annual budget while maintenance of the existing development projects does. And hence the necessity of splitting the old format of ADP into two parts is valid. The infrastructure part should be at least of bi-annual timeframe because of the longer gestation period of infrastructure investments. If we let the Seventh Five-Year Plan (7FYP) end in December 2020 and start both the budget and the 8FYP from the calendar year of 2021, the economy will be more benefited for various reasons economists had already interpreted. In that case, the infrastructure budget can follow odd-numbered years while revisions on the budget may be scheduled in even-numbered years.
The building of infrastructure should be outsourced and given to a internationally reputed firms through a fair competitive process. Tying top bureaucrats in most managerial positions will simply delay projects, and that is not how Singapore, Hong Kong, and Taiwan built their infrastructure in a fast and efficient way. Neither does India nowadays. Even sensible bureaucrats with patriotic spirits are not likely to relish this style of nonprofessional engagement. We made mistakes by making them managers of jute mills and sugar mills after independence. We paid a big price until we embarked on a market economy. Bureaucrats are primarily regulators and administrators to ensure national discipline and to serve the law for the noble cause of the republic.
We thank the government that has recently considered the BOOT (build, own, operate, and transfer) model of outsourcing the construction of the proposed Dhaka-Chittagong Elevated Expressway (DCEE). That is how it will be built for sure in a swift way. Even PPP (public-private partnership) models could not show expected results, because Bengalis never excel in partnership. This is more so when a party of the team is the government, which will bail out the private counterpart anyway.
This is a new age of thinking on infrastructure. Last June I was thrilled to visit AIIB (The Asian Infrastructure Investment Bank) in Beijing. Its president Jin Liqun placed a big stone at the gate to show its strong foundation on finance and its mission. When one of our teammates from Taiwan hurled a question to an AIIB boss on how they would contest the hegemony of the World Bank, I could not wait to hear the answer although the response gave me a new look. He said that their task is not to fight the WB, but to fulfil part of the funding demand for Asian infrastructure. As he added, many Asian countries do not even know how deficient their infrastructure is. I am sure we fall in that category.
The writer is Visiting Fellow at Bangladesh Institute of Development Studies (BIDS) and Guest Faculty of the Institute of Disaster Management at Dhaka University. E-mail: email@example.com