[🇧🇩] Monitoring Bangladesh's Economy

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The role of remittance in buoying economy

As problems continue to plague exports from Bangladesh, particularly on account of the ongoing protests, vandalism and closure of readymade apparel factories, the one good thing that helps keep the economy buoyant is remittance sent by expatriate workers. In fact, remittance is a huge driver for gr

thefinancialexpress.com.bd

The role of remittance in buoying economy
Syed Mansur Hashim
Published :
Oct 04, 2024 21:57
Updated :
Oct 04, 2024 21:57

As problems continue to plague exports from Bangladesh, particularly on account of the ongoing protests, vandalism and closure of readymade apparel factories, the one good thing that helps keep the economy buoyant is remittance sent by expatriate workers. In fact, remittance is a huge driver for growth for many other Asian countries including the Philippines and India to name but a few, as every nation requires hard currency to pay for imports. In case of Bangladesh, the ballooning foreign loan repayment is being met to a large extent from the remittances sent to the home country by Bangladeshi workers living and working abroad.

There has been a profound rebound in remittance coming in through official and unofficial channels to Bangladesh. There is a renewed hope amongst people that despite many short-term problems being faced due to the change in government, people at home need the extra cash and the economy can meet the need with dollars earned abroad. As one looks at the data, remittance earnings over the last quarter (July - September, 2024), the figure has jumped from US$1.91 billion in July to $2.40 billion in September, 2024. Sceptics are quick to point out that this is temporary and may fall anytime due to changed economic circumstances in destination countries where bulk of our workers are concentrated.

This is partly true. But the other side of the argument is seldom highlighted. People are sending more money through official channels regardless of the difficulties encountered in doing so. More and more expatriates understand the need to send it through formal financial channels because this will directly help the country to defray the costs of development. The remittance surge over the last quarter has only the second time it has happened over a 39-month long period.

Sustaining the momentum, however, will require a lot of work. According to information made available by the central bank (BB) and reported by the Financial Express, "This September receipt got enhanced by over 80 per cent year on year from $1.33 billion recorded in September 2023. Compared with the remittance earnings in August 2024 worth $2.22 billion, the September figure is around $200-million higher." Some constructive measures taken thus far are paying off. The depreciation of the national currency (BDT) against the greenback and expansion of the crawling peg mid-band, according to experts, have encouraged remitters to send home more money back home.

Despite the uptick in remittances, the net payments being made in foreign exchange (forex) for both imports and repayments on foreign loans together with interest are still in the negative. Much needs to be done to make it more difficult for business entities to launder money abroad. It is not only a question of employing 'hundi', but also addressing trade mis-invoicing. Despite protestations to the contrary by exporters, there is enough evidence available that puts the amount of foreign exchange laundered abroad at around $8.0 billion annually. That is a massive amount of forex the equivalent of which is not entering the local economy every year. These problems continue to pester because no political government in the past has worked to plug the loopholes, as it worked in their self-interest to move huge sums of money abroad. Getting back to inward remittance, banking insiders agree that tighter control over policy have helped. Today, the BB has lifted the restriction in controlling the exchange rate. So, remitters sending money through banking channels get their money's worth since the exchange rate is now more attractive. This has dealt a blow to the grey market, but are the measures enough? Certainly not!

Until now, all the focus has remained on banks and formal financial institutions. One has to remember that the bulk of Bangladeshi workers are blue-collar, not white-collar, i.e. they are not very comfortable with banking procedures and paperwork. As Bangladesh has spent considerable resources to upgrade its digital footprint, financial institutions and the central bank have also become online. It is necessary now to open up the various digital applications available to people globally so that they may remit money directly from their mobile phones. What has to be worked on are regulatory issues about precisely how people can send money using cellphone technology to cut through the hassle of formal banking.

Of course, such a step may face resistance from formal financial institutions as they will fear loss of business. On the contrary, this will help their business if Bangladeshi banks and BB work together to make mobile applications that will work with cell phones, and the money sent are disbursed through banks and / or non-banking financial institutions. Now that the technology exists, it is the mindset to make it happen. This is the only way to bring the so-called "un-bankable" on board and double the inward remittance basket. The Bangladesh Bank needs to start working on this policy framework without delay.​

 

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Wage growth still below inflation

Unskilled workers wage grew 8.01% in September this year when inflation was 9.92%

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Wage growth still below inflation
Unskilled workers wage grew 8.01% in September this year when inflation was 9.92%

Photo: Sk Enamul Haq

Many low-income and unskilled workers in the agriculture, industrial and service sectors of Bangladesh are being forced to reduce consumption as higher inflationary pressure is eating away their real income.

According to the Bangladesh Bureau of Statistics (BBS), inflation has outpaced wage growth in the country for more than two and a half years now.

The wages of low-income and unskilled workers across 63 employment categories grew by an average of 8.01 percent in September while the inflation rate was 9.92 percent, shows the Wage Rate Index of the BBS.

The situation was even worse in August as the inflation rate stood at 10.49 percent, thereby exceeding wage growth by 2.53 percentage points in a trend that has been continuing for the past 32 months.

The data also indicates that earning levels across all three of the economic sectors registered month-on-month growth of less than 1 percentage point in September.

Wage growth in the industrial sector was 7.61 percent that month, up by 0.07 percentage points from August, while that of the agriculture sector increased by 0.03 percentage points to 8.28 percent.

Likewise, wage growth in the service sector advanced by 0.05 percentage points to 8.29 percent.​

 

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ADB-funded projects face fresh hurdles

Many ongoing development projects, funded by the Asian Development Bank, is facing additional implementation challenges due to the current political climate and changes in the government, a document says.

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ADB-funded projects face fresh hurdles
Change in govt, political turmoil key reasons; review meeting starts today

Many ongoing development projects, funded by the Asian Development Bank, is facing additional implementation challenges due to the current political climate and changes in the government, a document says.

The ADB has also initiated a "rapid market assessment" to "better understand the impact of the prevailing socio-economic conditions", it said.

Against this backdrop, a three-day Tripartite Portfolio Review Meeting (TPRM) for the ADB-funded projects starts in Dhaka today.

The critical implementation issues, including additional challenges that projects have faced during the recent unrest and changes of the government, are on the agenda of the meeting.

The meeting was supposed to be held in July 2024 but got delayed due to the uprising, which led to the changes in the government.

Representatives of implementing agencies of all the projects will join the meeting virtually.

The third and final day of the meeting will be co-chaired by the secretary of the Economic Relations Division and the country director of the ADB's Bangladesh Resident Mission.

Currently, 53 investment projects in six sectors are being implemented with ADB's fund of $12.262 billion.

Of the projects, five are in the agriculture, food, nature, and rural development sector; 10 in the human and social development sector; nine in the energy sector; 12 in the transport sector; 11 in the water and urban development sector; and six in the finance, public sector management, and governance sector.

Implementation of all major projects, particularly the infrastructure ones, was halted or almost stopped amid the quota reforms protests, which eventually turned into a student-led mass uprising that toppled the Hasina-led government on August 5.

"Almost all work remained halted for two months [July and August]. Work resumed in September, but it is yet to get momentum," a director of a major ADB-funded project told The Daily Star yesterday.

"Situation of other projects were almost same, and I think ADB wanted to mention this problem as additional challenges," the director said seeking anonymity.

WHAT ADB SAYS

According to a background paper made ahead of the tripartite portfolio review meeting, awarding of contract achieved is $392.5 million (59.6 percent) against the annual target of $663.8 million this year.

The disbursement is $890.2 million (61.6 percent) against the annual target of $1,445 million, it says.

Insufficient financial and human resources to prepare projects, complex and lengthy approval process of projects and bid documents, challenges in land acquisition, limited experience and capacity of the project implementing agencies are major factors that led to poor project readiness and frequent extension of loan implementation periods, ADB said.

It said Bangladesh portfolio in general is composed of infrastructure projects, which are about 67 percent of the portfolio, and involve large and challenging procurement packages.

In 2023, all sectors exceeded their contract award targets except agriculture, food, nature, and rural development (73.6 percent) and energy (59.8 percent) sectors.

As of September 20 this year, the annual progress is 60.62 percent with 72 percent of the time elapsed, and the contract award and disbursement performances are "on track" as per year-to-date performance.

"However, we have observed additional implementation challenges in many ongoing projects due to the current political turbulence and changes in the government," ADB document reads.

The ADB, however, is committed to working even more closely with the interim government to ensure continuous improvement of Bangladesh portfolio management, it said.

The multilateral lender, with support from the project implementation units, initiated a rapid market assessment to better understand the impact of the prevailing socio-economic conditions.

The purpose of the assessment was to obtain information on the progress and quality of existing contracts, as well as the interest of potential companies to participate in future bidding opportunities in Bangladesh.​

 

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We must rethink our foreign reserve strategy

If Bangladesh is to safeguard its economic stability and ensure sustained growth, the time for reform is now.

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We must rethink our foreign reserve strategy
Foreign reserve strategy

VISUAL: BIPLOB CHAKRABORTY

In the intricate dance of international economics, Bangladesh finds itself at a pivotal crossroads. As we grapple with the challenges posed by dwindling foreign reserves and escalating project costs, the nation's ability to manage foreign reserves effectively and negotiate loans prudently has never been more critical. Yet, the glaring inefficiencies in our current approach to government-to-government (G2G) funded projects are cause for alarm. If Bangladesh is to safeguard its economic stability and ensure sustained growth, the time for reform is now.

The negotiation crisis

At the heart of the problem is a failure in negotiation strategy. Too often, we find ourselves locked into agreements that seem to serve everyone except Bangladesh. Project delays, cost escalations, and contracts signed under unfavourable terms have become the norm. These outcomes stem from a lack of expertise and patriotism among the negotiators representing our national interests.

Effective negotiation requires more than just a senior government official with academic credentials. What Bangladesh truly needs are skilled negotiators—successful businesspeople with substantial international experience who possess both the knowledge and confidence to engage with countries like the US, China, and India. Such individuals must be fluent in the language of international trade, able to protect not only their company's interests but, more importantly, those of Bangladesh.

Reassessing the management of foreign reserves

The interim government's foremost challenge is the preservation of our foreign currency reserves. Maintaining even the current levels will be difficult unless we renegotiate existing contracts with countries like Russia, Japan, China, and India. Such renegotiations must be conducted strategically, without animosity, but with firm resolve.

Bangladesh is not a minor player on the global stage. With a population of 170-plus million, we represent a significant market, and our geopolitical importance should not be underestimated. We are not in the business of begging for loans. Instead, we seek win-win agreements, ensuring that both Bangladesh and its lenders benefit equally.

Our immediate focus should be on renegotiating the terms of projects like the Rooppur Nuclear Power Plant and the Padma Bridge. These mega-projects, funded through G2G agreements, were often politically motivated, with large portions of the funds diverted to local agents and commissions. As a result, the terms were not negotiated in the country's best interest. This is evident in the case of the Rooppur project, where repayments are set to begin before the plant becomes operational—an inexplicable failure in negotiation.

Learning from the Adani Power deal

One glaring example of poor negotiation is the contract signed with Adani Power, rushed through in just 30 days under highly unfavorable terms. The rate at which Bangladesh buys power from Adani is nearly double that of other sources in India. Local entrepreneurs, who set up power plants with their own investment, offer electricity at better rates. This contract, like others, needs to be re-examined and renegotiated.

A skilled negotiation team can sit down with foreign governments and companies, making it clear that while they are our friends, the terms must change. A grace period of 5-7 years, as is standard practice, should be included in repayment terms. Extending the grace period by a few years without reducing the total repayment period can be achieved through proper dialogue.

Deferred payments: A potential lifeline

One promising solution to our foreign reserve crisis is the introduction of deferred payment systems for imports. For example, Bangladesh imports $23 billion worth of goods from China. To ease the immediate pressure on our reserves, if we could negotiate a deferred payment system with the Chinese government for $5-10 billion worth of industrial raw materials, to be repaid over 3-5 years, it would provide significant relief. Such deals are not only feasible but also beneficial for both parties. Deferred payments would allow Bangladesh to continue industrial growth without the immediate outflow of foreign currency, thus stabilising our reserves while simultaneously fostering job creation and increasing productivity.

Addressing project delays and cost escalations

One of the most significant obstacles to Bangladesh's economic growth is the repeated delays in completing foreign-funded projects. Extending a project's timeline from three years to five or seven years inflates loan commitment charges, worsening our already unfavourable terms.

A primary culprit in these delays is the practice of hiring consultants on a man-month basis, which incentivises them to prolong projects to increase their fees. This system must be overhauled. Consultants should be hired with a vision for the country's development, and project management teams should prioritise national interests over personal gain.

For 20 years, we have seen the same cycle of delays and cost escalations. A new approach is long overdue.

Reforming the G2G scheme

Finally, we must confront the inherent weaknesses in the G2G funding model. Lack of international competition, high-interest rates, and politically motivated contracts are just a few of the systemic problems. Worse, Bangladeshi companies are often excluded from joint ventures, preventing the transfer of technology that could benefit our economy.

Foreign reserves do not benefit either, as funds from these projects are repatriated directly. This must change. Bangladesh must negotiate terms that allow for joint ventures and local involvement, ensuring that our economy reaps the rewards of these mega-projects.

A call for reform

The path forward is clear—Bangladesh must take control of its future by engaging in more effective negotiations and selecting the right individuals to represent its interests. We need to introduce deferred payment systems and renegotiate existing projects to alleviate the immediate pressure on our foreign reserves. Above all, we must stop signing unfavourable contracts that burden future generations.

By taking these steps, Bangladesh can achieve economic stability, foster growth, and avoid the traps of cost escalations and project delays that have plagued us for far too long.

It's time for change, before it's too late.

Ghulam Mohammed Alomgir is a BUET graduate and chairman of a group of companies. He is the founder president of BUET Graduate Club Ltd.​

 

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Bangladesh economy to grow 7.1% in FY26: HSBC

Bangladesh’s economy is expected to clock a 7.1 percent growth in fiscal year 2025-26, driven by exports and remittances, according to an HSBC Global Research report.

www.thedailystar.net

Bangladesh economy to grow 7.1% in FY26: HSBC

Bangladesh's economy is expected to clock a 7.1 percent growth in fiscal year 2025-26, driven by exports and remittances, according to an HSBC Global Research report.

Both exports and remittances are showing positive signs despite the ongoing challenges in the global economy, the HSBC said in a statement following a webinar on economic outlook organised by the British multinational bank's Dhaka office recently.

At the event, Frederic Neumann, chief Asia economist and co-head of HSBC Global Research Asia, said even though Bangladesh's GDP growth rate for fiscal year 2024-25 was revised to 4.5 percent, it would jump to 7.1 percent in the following year.

The garment sector, which accounts for 83 percent of the country's exports, is expected to grow through an increase in demand from international markets, he said.

"At the same time, imports, which had been strained by rising global energy prices, are now stabilising reflecting a recovery in domestic demand and easing cost pressures," he said.

The official said remittances were anticipated to grow, driven by improved employment conditions in key overseas markets.

"This rise in remittances will not only support household consumption but play a significant role in sustaining the broader economic recovery," he said.

However, challenges remain, particularly with inflation, said Neumann, adding, "This will continue to affect both household spending and business costs."

Structural reforms in the banking sector and efforts to control inflation will be essential for unlocking Bangladesh's full economic potential and ensuring long-term, sustainable growth, according to the HSBC.

"Bangladesh is already well on its way to recovery. Macroeconomic adjustments undertaken in recent months, and robust economic fundamentals, should pave the way for growth to rebound over the coming year," said Neumann.

"A rapid implementation of reforms would help to speed up the process further," he added.

Md Mahbub ur Rahman, chief executive officer of HSBC Bangladesh, and Gerard Haughey, country head of wholesale banking for HSBC Bangladesh, also attended the webinar along with almost 300 clients and stakeholders.​

 

[Saif]

Accolade for business icons

A garment business tycoon, an owner of a local conglomerate, a celebrated local steel giant, a well-known bank and a woman entrepreneur were felicitated at the 22nd Bangladesh Business Awards (BBA) for their outstanding efforts and landmark achievements in their respective business fields.

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Accolade for business icons
Three individuals, two organisations get 22nd DHL-Star Bangladesh Business Awards

From left, SK Bashir Uddin, managing director of AkijBashir Group; Alihussain Akberali, chairman of BSRM; Kihak Sung, chairman of Youngone Corporation; Salehuddin Ahmed, finance and commerce adviser; Kyaw Sein Thay Dolly, managing director of Cloths “R” Us Ltd; Mohammad Ali, managing director and CEO of Pubali Bank PLC; and Miarul Haque, managing director of DHL Express Bangladesh, pose for a photo at the 22nd DHL-The Daily Star Bangladesh Business Awards ceremony at Radisson Blu Dhaka Water Garden last night. Photo: Star

A garment business tycoon, an owner of a local conglomerate, a celebrated local steel giant, a well-known bank and a woman entrepreneur were felicitated at the 22nd Bangladesh Business Awards (BBA) for their outstanding efforts and landmark achievements in their respective business fields.

The theme of this year's event is "Bangladesh on the rebound".

Finance and Commerce Adviser Salehuddin Ahmed handed the awards to the winners of the 22nd edition of the flagship annual event of DHL Express and The Daily Star held at the Radisson Blu Dhaka Water Garden.

Kihak Sung, chairperson of the Youngone Corporation, a Korean garment giant operating in Bangladesh for over three decades, was honoured with the lifetime achievement award for his contributions to exports, job creation and industrialisation in Bangladesh.

Sk Bashir Uddin, managing director of AkijBashir Group, was the Business Person of the Year, while Bangladesh's largest steelmaker BSRM was recognised as the Best Enterprise of the Year.

Pubali Bank, one of the oldest private banks in Bangladesh, got the Best Financial Institution of the Year.


"Be very transparent. Always be in the sunshine. Nothing should be done under the table. That's the best test of business."— Salehuddin Ahmed Finance Adviser.

Kyaw Sein Thay Dolly, managing director Cloths "R" Us, a garment buying house, got the Outstanding Women in Business of the Year award for her entrepreneurial zeal.

"Be very transparent. Always be in the sunshine. Nothing should be done under the table. That's the best test of business," said Salehuddin Ahmed, the finance adviser, at the event.

"As a country and business community, we have been facing a perfect storm over the past few months. Now, we stand at a pivotal juncture where we must reset our direction for the future. I am confident that we all aspire to lead this country toward prosperity," said Miarul Haque, managing director of DHL Express Bangladesh.

"As a country and business community, we have been facing a perfect storm over the past few months. Now, we stand at a pivotal juncture where we must reset our direction for the future. I am confident that we all aspire to lead this country toward prosperity."— Miarul Haque Managing Director DHL Express Bangladesh.

At the event, Kihak Sung, chairperson of Youngone Corporation, delivered a keynote speech.

Businessmen and industrialists have taken the country forward but they have not received their due recognition, said Mahfuz Anam, editor and publisher of The Daily Star.

People who do business with integrity and ethics, maintain corporate governance, put the country's interest at the heart of their operations and have not made money-making their only motto should be recognised because they would take the country forward in the coming days, he said.​

 

[Saif]

Fixing Bangladesh’s long-economic woes | The Daily Star

It is too soon to expect any significant economic changes, particularly as the previous government, led by Sheikh Hasina, left behind a fragile economy marked by high inflation, declining foreign exchange reserves, sluggish private investment, a growing debt burden, poor revenue collection...

thegreatwave.thedailystar.net

Fixing Bangladesh's economic woes
Fahmida Khatun

The beginning of 2025 fiscal year, starting from July 1, 2024, marked an unprecedented moment in Bangladesh’s history. What started as a demand for quota reform transformed into a powerful mass movement against discrimination, catalysing significant political change. The student-led mass uprising was a vivid reflection of the widespread discontent with a political system that had deteriorated over time. The fascist regime brewed on the broken political system that silenced public dissent and monopolised economic benefits, leaving a large section of Bangladeshis on the fringes.

It has been two months since the new interim government took responsibility for steering the country forward. It is too soon to expect any significant economic changes, particularly as the previous government, led by Sheikh Hasina, left behind a fragile economy marked by high inflation, declining foreign exchange reserves, sluggish private investment, a growing debt burden, poor revenue collection, inefficiencies in development project implementation, and weak governance in the financial sector. The economy now faces major challenges, including reducing poverty and controlling rising inequality, regaining growth momentum, and generating employment.

Therefore, repairing the fractures within the economy will require persistent and arduous efforts over an extended period. However, the right strategies and sustained efforts can improve the economy. While actions are needed in all areas of the economy, here are the top seven short- and medium-term issues that require the government’s immediate attention.

Curbing inflation

The interim government’s immediate economic action should be to stabilise and reduce the inflation rate, which will provide respite to low- and middle-income families and support economic growth. The point-to-point inflation rate increased to 10.49 percent in August 2024 compared to 6.15 percent in FY22. The food inflation was even higher at 11.36 percent in August 2024 compared to 6.05 percent in FY22. The repeated increase of electricity prices also pushed the non-food inflation rate to 9.74 percent in July from 6.31 percent in FY22. As wages did not increase, inflationary pressure increased the cost of living and eroded the purchasing power of low-income households.

The interim government has recognised the issue and initiated some measures. For example, the Bangladesh Bank (BB) has further attempted a contractionary monetary policy by increasing the policy rates from 8.5 percent to 9 percent from August 25, which is expected to reduce the money supply in the market. However, the contractionary policy cannot be successful without a complementary fiscal policy. The previous BB governor utterly failed to control inflation because he was reluctant to follow a tight monetary policy for a long time and could not stop printing money to underwrite expenditures. The government followed an expansionary fiscal policy as it neither reduced the size of the annual development programme (ADP) nor reduced operational costs and wastage during difficult times. The budget deficit for the FY25 was kept at 4.6 percent despite high inflation. The interim government has to revisit the national budget for FY25, as the targets and assumptions are far from reality.

Fixing external sector

The external sector has to be strengthened to restore macroeconomic stability. One of the major sources of macroeconomic challenges is the weakened external sector in recent periods. The forex reserve has been declining steadily and stood at 19.38 billion as of 18 September 2024. Under the previous government, BB undertook some measures to enhance the balance of payments and stop the decline in foreign exchange reserves. In FY23, it restricted imports of luxury consumer items to improve the balance of payment and reduce the current account deficit. This improved the trade and current account balances in FY24. However, this has restricted the imports of capital machinery and intermediate goods essential for production. If this trend continues, lower imports will have cascading negative effects on GDP through low investment, employment, and production.

With the objective of increasing liquidity in the interbank foreign exchange market and the volume of foreign exchange, BB has decided to increase the existing band for interbank foreign exchange transactions from 1 percent to 2.5 percent. BB has been following the crawling peg system to fix the foreign exchange rate, and the mid-value of the crawling peg was set at Tk 117, with the flexibility to increase up to Tk 118. Due to the bank’s new decision on August 18, the exchange rate of a dollar can increase up to Tk 120. It is expected that this measure will also help attract remittance through the banking channel. Though the number of migrant workers increased, remittance did not, despite a 2.5 percent incentive provided to remitters through the banking channel. This is partly due to a lack of sound exchange rate management. The policymakers also need to work towards tackling the hundi market, which runs through an international network.

Enhancing tax collection

Bangladesh’s tax collection should be enhanced through an efficient and corruption-free tax administration. The country’s tax-GDP ratio is very low compared to that of its peers. Though the target for tax-GDP ratio for FY2024 was set at 9 percent, the available data for FY24, up to April 2024, shows that the ratio for the first 10 months was 5.68 percent. In FY23, the ratio was 7.30 percent. As part of its $4.7 billion loan to Bangladesh, the International Monetary Fund (IMF) has suggested that the National Board of Revenue (NBR) increase its tax revenue by 0.5 percent every year. This requires improved tax policies and tangible administrative measures.

The interim government has changed NBR’s chairperson, who has announced that stern measures will be taken against tax evaders. The provision of black money whitening at a 15 percent tax has been partially blocked. The NBR has instructed its field officers of customs and VAT wings to formulate a time-bound automation plan by October 15, 2024. Reforms should be made in the NBR to strengthen anti-corruption measures within the tax administration, reduce leakages, and ensure that taxes collected are fully accounted for. Policy reforms are required to make the tax system more progressive, where higher-income earners pay a larger share of taxes. This will not only increase revenue but also address income inequality. The authorities have to ensure transparency in tax collection and expenditure to build trust among taxpayers. There should be independent bodies to monitor tax collection and public spending. E-governance initiatives should be in place to facilitate tax payments and management. Digital platforms can reduce administrative costs, make compliance easier, and increase overall efficiency. Simplification of the tax filing process can encourage voluntary compliance. There should be clear guidelines, user-friendly online platforms, and assistance services to make tax payments less burdensome for taxpayers.

Improving ADP’s performance

The performance of the Annual Development Programme (ADP) should be improved. While revenue collection is limited, government spending is also limited. ADP implementation remains unutilised.

The expenditure on the ADP as a percentage of GDP has been declining due to lower implementation of the ADP, which was 81 percent in FY24, a decrease from 85 percent in FY23 and 93 percent in FY22. Improving the implementation is crucial for ensuring that development projects are completed efficiently, within budget, and with the intended impact. Thorough feasibility studies that assess technical, financial, environmental, and social aspects should support all projects included in the ADP. This will help avoid delays and cost overruns. Additionally, prioritisation of projects based on national importance and alignment with strategic goals is vital. This will ensure that poorly conceived or low-impact projects are not included in the ADP.

The planning adviser has directed officials of the Bangladesh Planning Commission to categorise projects based on their economic contribution so that less important and politically-motivated projects can be identified. Projects undertaken on political considerations, which are not cost-effective, should be discontinued, and resources could be allocated for more productive purposes based on merit and strategic importance in the economy.

Rescuing banking sector

The banking sector has to be rescued from the corrupt business conglomerates that have syphoned out money from the banking system using political connections. The sector is grappling with high non-performing loans (NPL), which have increased to Tk 211,391 crore at the end of June 2024 from Tk 22,480 crore in 2008. Currently, the share of NPL is 12.56 percent of the total disbursed loans in the banking system, the highest in the past 16 years. The share of default loans at the state-owned banks was as high as 32.77 percent of their disbursed loans. The actual NPL figure would be significantly higher if distressed assets, loans in special mention accounts, loans under court injunctions, and rescheduled loans were considered.

The new BB governor has taken several measures to restore discipline in the sector. One was to dissolve boards of the troubled banks, which include Islami Bank Bangladesh, Social Islami Bank, Global Islami Bank, Union Bank, National Bank, First Security Islami Bank, Bangladesh Commerce Bank, Al-Arafah Islami Bank, United Commercial Bank, Exim Bank, and IFIC Bank. A task force has been formed to undertake reforms in the banking sector.

The Bangladesh Bank should also publish the report of the Criminal Investigation Department (CID), which has been probing the case of a heist in the central bank in 2016 when Tk 679.6 crore was lost from the treasury account of Bangladesh Bank with New York’s US Federal Reserve Bank by international cyber hackers.

Bolstering investments

Domestic and foreign investment should be enhanced to drive sustainable economic growth. Private investment has remained stagnant at around 23 percent of GDP for about a decade, while foreign direct investment (FDI) is less than one percent of GDP. Boosting private investment and FDI in Bangladesh requires a comprehensive approach that addresses the challenges faced by both domestic and international investors and leverages the country’s inherent economic strengths. The Bangladesh Investment Development Authority (BIDA) failed to attract investment due to various regulatory complications and corruption.

A multifaceted strategy is essential for fostering a more conducive environment for investment. Political and economic stability is a crucial factor that influences investment decisions. In the past, though one party ruled for about 15 years, economic stability gradually cracked due to corruption, bureaucratic red tape, inefficiency, and political interference in economic policymaking. Following the fall of the previous government and the formation of the interim government, potential investors are observing the current political and economic situation. The confidence of the investors must be regained by creating an enabling environment. There is an investor-friendly policy on paper, but the lack of an investor-friendly environment discourages prospective investors. Reliable infrastructure and a stable and adequate supply of electricity and other energy resources are crucial. Consistent monetary and fiscal policies are needed to avoid inflationary pressures and maintain stable exchange rates, both of which are important for investor confidence. Investors also require skilled human resources and technological adoption by the country.

Ensuring energy security

A comprehensive approach is required to ensure energy security and economic growth. To address the sector’s challenges, it is crucial to diversify energy sources, enhance energy efficiency, strengthen the regulatory framework, and improve governance. Expanding renewable energy by increasing investments in solar, wind, and hydroelectric power can reduce reliance on fossil fuels. Strengthening the regulatory framework is crucial for improving the sector’s governance. The Bangladesh Energy Regulatory Commission (BERC) must be strengthened to ensure its independence and capacity to enforce regulations. This includes regular updates to energy tariffs that reflect true costs and promote competition. A transparent and fair tariff-setting process that mirrors the actual cost of energy production and distribution while protecting vulnerable populations through targeted subsidies is necessary.

A few measures have already been taken by the interim government. A gazette to abolish Section 34(a) of “Bangladesh Energy Regulatory Commission (Amendment) Ordinance 2024” was issued. This implies that the government will no longer be able to determine the price of electricity and gas without a public hearing. The BERC will assume responsibility for setting jet fuel prices, a role previously managed by the Bangladesh Petroleum Corporation (BPC). The government reduced octane and petrol prices by Tk 6 per litre and diesel prices by Tk 1.25 per litre, effective from September 2024. The interim government has also postponed all negotiations, selections, and purchasing processes under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010.

Improving governance and reducing corruption are key to the energy sector’s efficiency. The power sector has incurred large financial losses, exerted fiscal pressure on the government, and contributed to the macroeconomic challenges. The previous government adopted a non-transparent procurement and bidding process to allocate power plants to favoured conglomerates. Those should be reviewed and renegotiated on fair terms. Publication of reports on the status of energy sector reforms, financial health, and environmental impacts regularly can help maintain public accountability and build public trust and support for reforms.

Finally, the overarching message for the interim government is that it must work on structural issues, such as improving the efficiency of regulatory bodies by establishing good economic governance at public institutions. The previous regime’s oligarchs captured these institutions to extract public resources. However, the youth and people of Bangladesh sacrificed their lives for an inclusive and just society. People have entrusted the interim government to change the broken political and economic system. Work has been initiated in a few areas, as mentioned above, while a lot more needs to be done within a finite time.

Dr Fahmida Khatun is the executive director at the Centre for Policy Dialogue and non-resident senior fellow of the Atlantic Council.

Views expressed in this article are the author’s own.​

 

[Saif]

Rightsizing pride projects

Development projects, particularly those involving building of big infrastructures, dubbed megaprojects by the media and commenced during the deposed Awami League (AL) government, were in most cases undertaken either to improve the image of those in power or to satisfy their and the con

thefinancialexpress.com.bd

Rightsizing pride projects
Published :
Oct 11, 2024 22:08
Updated :
Oct 11, 2024 22:08

Development projects, particularly those involving building of big infrastructures, dubbed megaprojects by the media and commenced during the deposed Awami League (AL) government, were in most cases undertaken either to improve the image of those in power or to satisfy their and the contractors' insatiable greed. As one would expect, the megaproject-building frenzy was driven more by desire for lining the pockets of those in power than to serve the public. As a result, those projects were mired in mega-corruption at the expense of the public exchequer. In this connection, the government's implementation, monitoring and evaluation division (IMED) of the planning commission(PC) is learnt to have identified some 3,325 projects initiated by the past government the fate of which is now hanging in the balance due to financial constraints. And 23 big projects worth Tk.2,380 billion are under the scrutiny of the interim government in light of their excessive costs which smack of dishonest dealings. These include, for instance, the Chattogram-Cox's Bazar Highway project, Chattogram-Dohazari railway conversion, Metro Rail Line-1 and Line-5 projects and others.

However, except the ongoing fast-track projects initiated during the deposed AL-government and which have the potential to serve vital public interest, the interim government has decided to drastically downsize other projects whose costs were irrationally inflated with ulterior motive behind those involved in project preparationin the immediate past regime. Included among those, as reported in this paper on Wednesday (October 9), are three megaprojects of the Bangladesh Railway (BR)-Dohazari-Ramu-Cox's Bazar-Ghundhum railway, the Padma-rail link and Jamuna rail-bridge construction projects. As for instance, of the first-mentioned project, the Dohazari-Ramu-Cox's Bazar-Ghundhum railway project, the 28.75 km Ramu-Ghundum part lacks any economic sense given the prevailing Rohingya crisis and absence of diplomatic rapport with the Myanmar's current military regime. Hence, by pruning the redundant part of the said ADB-financed railway project, a substantial amount of money could be saved and diverted to other public-interest schemes demanding urgent attention. Similarly, the BR is also considering substantial cost-cutting of the China-funded Padma rail-link project and the Japan-funded Jamuna railway-link project whose costs were increased and time schedule extended to suit the purpose of the powerful. Along with these megaprojects, all other projects including 29 ongoing ones are under the scanner of the railway ministry, it could be further gathered.

No doubt, such efforts at reviewing, slashing costs of conveniently inflated projects and, in some cases, outright exclusion of others are steps long overdue. That the interim government has started to deal with big and small corruption-ridden development projects undertaken during past government with all seriousness definitely testifies to its seriousness about the reforms it has promised to carry out within its limited term in office.

Though the money plundered from the megaprojects already completed such as the Padma bridge project which started in January 2009 and saw extension of timeline on several occasions and cost increase by Tk.11.17 billion raising the total project cost to over Tk.326 billion, cannot be retrieved, the government can at least try to cut costs, as much as possible, of the ongoing fast-tract megaprojects that must be completed. To be frank, being still one of the least developed countries (LDCs), Bangladesh cannot simply afford expensive pride projects to bolster the image of any individual. In this connection, the interim government's declared objective of prioritising less awe-inspiring human development-oriented health and education projects is exactly what the nation needs at the moment. In that case, the money saved from pruning unnecessary components and reducing the costs of megaprojects can well be channelled to human development projects.

In any case, to meet its broader objectives the incumbent government will have to be more dynamic and prompt to deliver the goods.​

 

[Saif]

FTA: the gateway for global market access

After five weeks of bloodshed, pain, fear and heartache, the mass uprising led by the students finally forced the autocratic government to step down as the then Prime Minister Sheikh Hasina fled the country to take shelter in India. The brave and indomitable students, who, amidst 'egregious k

thefinancialexpress.com.bd

FTA: the gateway for global market access
Manzur Ahmed
Published :
Oct 11, 2024 21:54
Updated :
Oct 11, 2024 21:54

After five weeks of bloodshed, pain, fear and heartache, the mass uprising led by the students finally forced the autocratic government to step down as the then Prime Minister Sheikh Hasina fled the country to take shelter in India. The brave and indomitable students, who, amidst 'egregious killings, torture, disappearances and mass arrests' stood firm and conquered death. So, the youths are now in charge of the country, and perhaps they have reason to be hopeful for the future for the first time.

This uprising, or revolution, as many have labelled it, is a clear message from youths to those who have long held on to and abused power, not only in Bangladesh but across the world. In this connection, it is not just necessary, but urgent to move away from a culture of corruption, nepotism, abuse of power, and discrimination and thus end patriarchy, re-establish law and order, revive governance and state institutions, and stabilise the economy.

One critical step in stabilising the economy is initiating the process of negotiating and implementing a series of bilateral and regional free trade agreements (BFTA) with various trading partners.

In line with the trends and practices of our competing exporting countries like India, Pakistan, Sri Lanka, Vietnam, Cambodia, China, Korea, Malaysia, Philippines, Indonesia and others, Bangladesh has no other option but to ensure predictable and sustainable destinations of its exports in goods and services within by entering into comprehensive free trade agreements in goods and services. There is no need to negotiate or sign any preferential trade agreements (PTA) on trade in goods only. Country-specific PTAs, in general, are not cost-effective. These are also highly complex and time-consuming and mainly account for limited economic potential.

Currently, RCEP is the only mega-regional FTA that is considered ASEAN-plus. This is because fifteen countries-Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Vietnam, South Korea, and Thailand-are involved in RCEP.

Russia-CIS (EAEU) block comprising Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan and also includes the CIS member states of Azerbaijan, Moldova, Tajikistan, and Uzbekistan, as well as other countries beyond Eurasia's borders.

Bangladesh needs to negotiate for RECP and EAEU membership. Moreover, the option for signing an FTA with the Gulf Cooperation Countries (GCC) should be explored. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are members of the GCC,

The European Union (EU), comprising 27 European countries, is the first economic union in the world. Though it is quite ambitious to think of signing an FTA with the EU at this moment, it is not impossible.

Bangladesh needs to seriously explore the possibility of signing bilateral FTAs with the United States (US), Canada and the United Kingdom (UK).

Non-reciprocal trade deals like GSP and multilateral and regional arrangements have been excluded from the US trade agenda, and accordingly, the US only prefers to make bilateral reciprocal trade deals. Bangladesh should, therefore, without spending time on GSP revival or the WTO framework, take a pro-active initiative in establishing a Strategic Trade and Investment Partnership (STIP) with the US, following the example of Kenya and Morocco.

The terms of STIP in goods, services and investment with the US must be without prejudice to the rights and obligations under the WTO Agreements and respective international rights and obligations as agreed in Bangladesh-US TICFA.

Again, developed and developing countries like Canada, China, India, Mexico, Singapore, South Korea, Australia, New Zealand, and ASEAN are negotiating free trade agreements with the post-Brexit UK. Bangladesh should also move forward in this direction.

Regarding the much-talked-about Bangladesh-India BFTA, it would be highly risky for Bangladesh to bypass the hard-earned SAFTA and negotiate again the proposed new Comprehensive Economic Partnership Agreement (CEPA) with India. It would be better to continue with the SAFTA terms of trade with India up to 2026, with or without an extension for three more years. After that, SAFTA terms of trade in goods and services may be applied to Bangladesh as a newly graduated developing country.

The terms of services trade as prescribed in the SAFTA Services Trade Agreement should apply on an MFN basis in mutual service trade in all four modes, subject to harmonised and mutually agreed-upon domestic regulations to be negotiated within a time-bound action matrix.

Bangladesh may also call upon trading partners to expedite reciprocal participation in services trade, including public procurements. Bangladesh has already opened its Services sector and Public Procurements to foreign participation on an MFN basis. In turn, Bangladesh should ask for reciprocal treatment from its trading partners.

Manzur Ahmed, Trade and Tariff Policy Adviser, FBCCI, 1980-2024.​

 

[Saif]

Interim govt moves to access RCEP

The interim government has strongly started processing to access the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region that represents one third of global GDP. The immediate-past ousted government halted the move to join the world's

thefinancialexpress.com.bd

Interim govt moves to access RCEP
Hasina govt halted move due to general election
REZAUL KARIM
Published :
Oct 12, 2024 00:27
Updated :
Oct 12, 2024 00:27

The interim government has strongly started processing to access the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region that represents one third of global GDP.

The immediate-past ousted government halted the move to join the world's largest trade regime due to the last general election.

But, the commerce ministry sent a summary of the RCEP deal and dos to the then prime minister for approval.

In August 2023, an inter-ministerial meeting under the then government recommended joining the trade bloc, as an assessment suggested that joining would increase Bangladesh's exports to the global market by more than 17.37 per cent.

When contacted, commerce secretary Md Selim Uddin said, "We've already started working on RCEP. As per an action plan, we'll go forward on inking an agreement with the RCEP."

An unconfirmed source said the commerce ministry has sent a summery to the Chief Adviser for required approval for starting formal processing with the bloc. But, an unconfirmed source said a summery note has already been prepared which will send shortly.

As soon as the approval comes, formal proceedings will kick-start at the forum headquarters for the country's membership in RCEP, a senior commerce official said.

"We expect to send formal proposal to the RCEP for joining the bloc after approval from the CA."

Bangladesh has started the process of joining mega trade bloc with a hope of a boost in export to the member countries, but it was postponed from October 2023, he added.

It expects to send a formal proposal to the depository and temporary secretariat of the world's largest trade bloc at the ASEAN headquarters for the country's membership.

Bangladesh decided in principle to join the emerging vast trade bloc at the workshop held at the commerce ministry on 01 August 2023.

The ministry has already completed necessary scrutiny and review in this regard, based on commitments fulfilled by Vietnam, a member of the China-mooted bloc.

A high official also said that the commerce ministry will have to take cabinet approval to move ahead. Vetting from the law ministry may also be required.

A study conducted earlier by Bangladesh Trade and Tariff Commission (BTTC) showed Bangladesh's trade with the RCEP member countries mostly concentrated on trade in goods.

Bangladesh's export may grow more than 17 per cent and gross domestic product (GDP) 0.26 per cent if free-trade agreement is signed with the bloc members, it mentioned.

The RCEP deal came into force in January 2022 and any country/customs territory is eligible for applying for membership.

As of now, 15 Asia-Pacific nations are party to the world's biggest free-trade agreement.

The ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, while its FTA partners are Australia, China, Japan, New Zealand and Korea.

An outstanding feature of the RCEP is that it represents the world's largest FTA, comprising about 30 per cent of global GDP and about one third of the world population.

The economic cooperation forum, spanning Asia-Pacific realm that covers 2.3 billion people, accounts for $ 25.8 trillion or about 30 per cent of global GDP.

Also, it accounts for $12.7 trillion or over a quarter of global trade in goods and services, and 31 per cent of global foreign direct investment (FDI) inflows.

In the fiscal year (FY) 2020-21, Bangladesh exported goods worth $3.9 billion to and imported goods worth $24.5 billion from these countries.

On the other hand, the services export was worth $1.8 billion and import worth $2.6 billion.

Bangladesh enjoys preferential market access to many of the RCEP member countries, either through preferential trade agreement (PTA) or through GSP facilities.

After graduating from the least-developed country (LDC) status in 2026, the duty-free access will no longer be available except for reciprocal general preference under the Asia-Pacific Trade Agreement (APTA).

In such a situation, sustaining the consistent progress achieved by Bangladesh in bilateral export trade with some of the RCEP countries as well as availing the opportunity to some potential destinations in RCEP will be a real challenge.

The study says RCEP includes some of the major export destinations as well as major import sources of Bangladesh.

"Considering the bilateral-trade scenario, RCEP remains more as an important partner from the Bangladesh perspective."

Import from RCEP contributes around 43.92 per cent of the total global imports by Bangladesh, 55.33 per cent of the total tax-revenue and 58.56 per cent of total revenue from customs duty collected under home consumption, as of FY 2020-21.

Thus, the probable accession of Bangladesh to RCEP may, however, have a negative impact on revenue generation from customs duty.

Since some major import sources of Bangladesh like China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved with RCEP, there is a threat of losing a certain amount of revenue from these countries.

More than 68 per cent of total merchandise exports to RCEP are under apparel-product category. Top twenty export items to RCEP mostly consist of apparel products and these products constitute 64 per cent of total exportable.

The study found that the average most-favoured nation (MFN) tariffs for Bangladesh had been comparatively higher than that of the RCEP members.

It says the probable increase in import along with a comparatively protective regime of Bangladesh estimated a probable high revenue loss for Bangladesh compared to that of the RCEP.

"However, as estimated trade creation would likely be higher than the trade-diversion effect for Bangladesh, it may generate additional revenue from other duties and charges, if not reduced due to a possible accession in RCEP," the study mentions as regards a tradeoff.

The BTTC recommends that the government may express its positive stand regarding the accession of Bangladesh to RCEP through weighing all the pros and cons. In that case, domestic rules and regulations may need to be changed in some cases, if a situation arises.

The RCEP negotiations were formally launched during the 2012 ASEAN Summit in Cambodia. India withdrew from the agreement in November 2019 despite participation from the beginning of negotiations.​

 

[Saif]

Increase in remittance: Let this flow continue, stop hundi

In September last year, there was a remittance flow of USD 1.33 billion (USD 133 crore). Compared to the same period last year, expatriates have sent 80 per cent more money to the country this time.

en.prothomalo.com

Increase in remittance: Let this flow continue, stop hundi
Editorial Desk
Dhaka
Published: 05 Oct 2024, 22: 30

It’s a matter of hope that the positive trend of remittance flow into the country continues even after the political transformation on 5 August. The total influx of remittance or expatriate income into the country exceeded USD 2 billion (USD 200 crore) in September this year. That means last month saw the second highest remittance flow of this year.

Records derived from the Bangladesh Bank showed that a total of 2.4 billion US dollars (USD 240 crore) arrived as remittance last month. Meanwhile in August, the country received USD 2.22 billion (USD 222 crore) as remittance.

In September last year, there was a remittance flow of USD 1.33 billion (USD 133 crore). Compared to the same period last year, expatriates have sent 80 per cent more money to the country this time.

After the fall of Awami League government, private research organisation, Policy Research Institute (PRI) executive director Ahsan H Mansur took charge as the governor of Bangladesh Bank on 14 August.

There’s nothing to be delighted about even though there has been an 80 per cent growth in remittance. Now the concern here is that whether this trend of growth can be sustained or not.

Right after taking charge as the governor, he increased the existing band of inter-bank foreign exchange transactions from 1 per cent to 2.5 per cent aiming at reducing the crisis of dollar or foreign exchange.

As a result of this decision from the central bank, banks are able to increase the intermediary rate of the dollar from Tk 117 to a maximum of Tk 120 taka in the crawling peg system of determining the exchange rate. Because of this, the banks are able to pay a little higher price for dollars when it comes to exchanging remittance.

According to the records of the central bank, a total of USD 4.13 billion (USD 413.79 crore) arrived in remittance during the first two months of the 2024-25 fiscal year. Of that, USD 1.91 billion (USD 191.37 crore) arrived in July and USD 2.22 billion (USD 222.41 crore) arrived in August.

Meanwhile, the country received USD 2.25 billion (USD 225 crore) as remittance in May. And, June saw the highest remittance flow in this year, which amounted to USD 2.54 billion (USD 254 crore).

In that case, there’s nothing to be delighted about even though there has been an 80 per cent growth in remittance influx. Now the concern is that whether this trend of growth can be sustained or not.

At a roundtable titled ‘Where do we want to see the banking sector’ organised by Prothom Alo recently, Bangladesh Bank governor Ahsan H Mansur said that efforts are on to solve the issues of the financial sector without printing money or selling dollars from the reserve.

If the dollar market continues running in the way, there won’t be any instability in this market. The current price of dollar against remittance in the banks is higher than the price available in the open market. And, this is helping stabilise the dollar market, he added.

People will feel reassured with the remarks of the Bangladesh Bank governor only when the channels to siphon off dollars out of the country will be sealed off and it becomes easier for expatriates to send remittance through legal channels.

If the expatriates do not find the opportunity to invest inside the country, they will obviously invest their money abroad. And, we don’t want that.
Apart from that, the drive against illegal hundi business has to be strengthened even more. Reportedly, there are several rings active in different countries to take away money from the expatriate Bengalis. They lure expatriates by promising higher exchange rates for sending money to the country through them.

But in reality, they just embezzle the hard-earned money of the expatriates and pay it back through their relatives and business partners living here. As a result, the country is deprived of some valuable foreign currency.

Various facilities and incentives need to be extended to the expatriates, who are sending remittance. This way, they will be encouraged even more to send remittance through legal channels. At the same time, expatriates should be given unrestricted opportunities of investment inside the country.

The limit of bond investment imposed on expatriates has been lifted already. Intentions of those who had taken this unilateral decision in the past were not noble at all. If the expatriates do not find the opportunity to invest inside the country, they will obviously invest their money abroad. And, we don’t want that.​

 

[Saif]

Economic output may expand 29% if more women employed: WB

Bangladesh could increase its output in the manufacturing, service and farming sectors by up to 29 percent simply by bringing more women into the workforce, according to the World Bank.

www.thedailystar.net

Economic output may expand 29% if more women employed: WB

Bangladesh could increase its output in the manufacturing, service and farming sectors by up to 29 percent simply by bringing more women into the workforce, according to the World Bank.

The increase would be the highest among South Asian countries due to Bangladesh's relatively higher initial labour productivity.

If more women were to access manufacturing jobs alone, output in Bangladesh could rise by as much as 21 percent, the Washington-based lender said in its South Asia Development update published last week.

Despite progress in the local garment industry, the report shows a sizable gender gap in employment across the broader manufacturing sector.

The report said the female labour participation rate in Bangladesh remained static at 37 percent in 2022 and 2023.

It identified supply-side constraints, restrictive laws and conservative social norms as factors deterring more women from joining the labour force.

Economists agreed with the World Bank's projection, citing the country's apparel might with female labour force at its core. However, they also listed demand-side factors that discourage more women from participating in the workforce.

"Employers are often hesitant to hire women," said Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem). "Many firms still do not have women-friendly production processes or workplace arrangements."

According to the report, if more women joined farming in Bangladesh, only modest gains of 0.63 percent could be expected due to low labour productivity and a smaller gender gap in employment.

However, closing the gender gap could lead to a gain of 8.12 percent in the service sector.

The Sanem executive director said the task of caring for children and elderly persons falls disproportionately on women, acting as a supply-side factor that limits employment opportunities.

"To increase women's participation in employment, both supply-side and demand-side constraints must be addressed," he remarked.

"Safety and security issues also contribute to the lower participation," the economist added. "The availability of transportation for women is also important. The government should take care of these issues."

The World Bank said Bangladesh has the least protective laws for women, leading to severe shortcomings in safety. According to the report, Bangladesh and Pakistan also have the most conservative social expectations for women.

Frustrating participation shadows promising outlook

The report said the female labour force participation rates in most South Asian countries are in the bottom quartile among emerging and developing countries and far below male participation rates.

"South Asia's female labour force participation rate of 32 percent is well below the 54 percent average in emerging market and developing economies," said Franziska Ohnsorge, World Bank chief economist for South Asia.

However, this contrasts with the share of female employment in a range of export-oriented sectors across South Asia, such as ready-made garments in Bangladesh, call centres in India, and textiles in Sri Lanka.

The multilateral lender said increased female participation in the workforce could boost India's output by 23 percent, Pakistan's by 21 percent, Nepal's by 22 percent and Sri Lanka's by 28 percent.

If more women were to access manufacturing jobs, output in India would rise by 9 percent, it said.

Low female employment means a substantial loss of aggregate and per capita incomes. Raising women's labour force participation rate to parity with men would increase regional GDP by 13–51 percent, with larger impacts if capital and labour markets are more flexible, it said.

"South Asia's outlook is undoubtedly promising, but the region could do more to realise its full economic potential," said Martin Raiser, World Bank vice president for South Asia.

World Bank Chief Economist for South Asia Franziska Ohnsorge said, "Increasing women's employment requires action from all stakeholders; a multi-pronged effort where governments, the private sector, communities and households all have a role to play."

Echoing these sentiments, Raiser said key policy reforms to integrate more women into the workforce and remove barriers to global investment and trade could accelerate growth.​

 

[Saif]

Inward remittance through MFS hits 5-year high in August

Bangladesh’s migrant workers sent home Tk 1,101.8 crore in remittances through mobile financial service (MFS) providers in August, marking the highest monthly receipts through digital channels in the past five years.

www.thedailystar.net

Inward remittance through MFS hits 5-year high in August

Bangladesh's migrant workers sent home Tk 1,101.8 crore in remittances through mobile financial service (MFS) providers in August, marking the highest monthly receipts through digital channels in the past five years.

This figure represents a remarkable 113 percent year-on-year increase from the Tk 515.4 crore that was sent home through MFS providers in August 2023, offering a glimmer of hope for bolstering the country's dwindling foreign exchange reserves.

Bangladesh currently has around $20 billion in its foreign exchange reserves, far lower than the record $40.7 billion it boasted in August 2021.

Industry people said remittance transactions through MFS were higher in August as there were banking disruptions and limited cash supplies to ATMs following the political changeover in that month.

Besides, they credited the increasing use of technology, a 2.5 percent government incentive on remittance through formal channels, as well as various cash benefits offered by the MFS providers for the remittance surge.

Currently, at least 13 MFS platforms, including bKash, Nagad and Rocket, operate in Bangladesh.

MFS providers facilitated 54.21 percent more remittances in August compared to the month prior, according to data from the Bangladesh Bank.

In July, expatriate workers had sent home Tk 7,144 crore through MFS channels.

An analysis of central bank data reveals that August's remittance inflow through MFS channels was the highest since December 2018.

The increase follows the recent political changeover on August 5, when former prime minister Sheikh Hasina resigned and fled the country amid a mass uprising.

With MFS channels contributing significantly, total remittances surged nearly 39 percent to $2.2 billion year-on-year in August.

According to the latest data from the Bangladesh Bank, overall remittance receipts continued to rise in September, jumping 80.28 percent year-on-year to $2.40 billion.

Moreover, September's receipts were 8.12 percent higher than the previous month's.

Apart from ease of access and cash benefits, various policies from the central bank and continuous efforts of MFS providers encouraged migrant workers to use the formal channel, industry insiders said.

At the end of last year, the Bangladesh Bank doubled the maximum single-transaction limit for sending remittances to individual MFS accounts from Tk 1.25 lakh to Tk 2.5 lakh.

Ali Ahmed, chief commercial officer of bKash, said the central bank had recognised the critical role of remittance inflows in bolstering the country's economy.

Through concerted efforts and technological and distributional support of MFS providers, they have successfully channelled remittances through digital channels, he said.

Over the years, bKash has built a robust partnership ecosystem for remittances whereby seamless cross-border fund transfers can be initiated from more than 130 countries through Money Transfer Operators (MTOs) and leading commercial banks, Ahmed said.

He added that remittances received through bKash could be accessed anytime, anywhere.

Families of the expatriates can utilise remittance to take various services through their bKash accounts, including paying for goods and services, utility bills, and educational and government fees. They can also send money, donations and many other services from the comfort of their homes, he said.

In addition to offering convenient, instant, and secure remittance transfers, bKash has lowered cash-out fees, he added.

Beneficiaries can now withdraw remittances at a minimal cost of Tk 7 per thousand from approximately 2,500 ATMs of 19 leading commercial banks, Ahmed said.

"Furthermore, bKash has collaborated with various organisations and launched regular campaigns with attractive offers to encourage the use of legal remittance channels among expatriates and raise awareness. These efforts have contributed significantly to the growth of remittance inflows in Bangladesh."

Muhammad Zahidul Islam, head of media and communications at Nagad, said they had witnessed significant remittance earnings in August.

"With the natural growth, we from Nagad have also given tremendous effort to bring more remittances, such as by onboarding world-class foreign partners. Currently, people from more than 200 countries can send remittances through Nagad to Bangladesh," he said.

He said Nagad has already started a Tk 100 cashback campaign on top of the 2.5 percent government incentive to further boost inward remittance, adding that it had garnered a huge response from non-resident Bangladeshis.

"We have observed that these efforts have regained respect for us and the number of transactions has grown rapidly over time."

Through such measures, top MFS providers like Nagad are playing a vital role in strengthening and elevating the country's foreign exchange reserves, he added.​

 

[Saif]

Bangladesh seeks $3.0b ITFC loan for 2025

Bangladesh has taken a fresh move to rebuild ties with the Islamic Development Bank (IsDB) as it sought a substantial US$3.0 billion credit from the middle-eastern donor to finance the imports of fuel, LNG and fertiliser in 2025, officials said on Saturday. The government has recently sought the l

thefinancialexpress.com.bd

Bangladesh seeks $3.0b ITFC loan for 2025
FHM Humayan Kabir
Published :
Oct 13, 2024 00:00
Updated :
Oct 13, 2024 10:09

Bangladesh has taken a fresh move to rebuild ties with the Islamic Development Bank (IsDB) as it sought a substantial US$3.0 billion credit from the middle-eastern donor to finance the imports of fuel, LNG and fertiliser in 2025, officials said on Saturday.

The government has recently sought the loan from the IsDB's commercial window ITFC for the next year, they said.

The Economic Relations Division (ERD) requested the ITFC (International Islamic Trade Finance) team, which visited Bangladesh last week, for extending the financial support in addition to its continuing lending in the next calendar year, ERD officials said.

"We have sought nearly an additional $1.0 billion for the next fiscal than the ITFC's $2.1 billion committed annual portfolio to Bangladesh in the year 2024. The lender has assured us of considering the additional financing," said a senior ERD official.

He said: "The last meeting with the ITFC team was the initial one for securing the fund commitment. If they agree, we will go for negotiations soon to confirm the next year's credit requirement."

Over the last few years, the support from the IsDB declined as the previous Sheikh Hasina's government maintained weak relations with the donors from the Islamic nations including the middle-eastern development, another ERD official said.

Securing the proposed loan will be a good gesture of rebuilding the fragile trust between the IsDB and Bangladesh, he added. Under an agreement in February this year, the Jeddah-based IsDB's ITFC provided $2.1 billion worth of funds for purchasing fuel oil and LNG from the overseas market during this calendar year 2024.

Now the government is looking to get funds from the IsDB for purchasing fertiliser as Bangladesh needs a significant amount of the agricultural inputs for increasing its crop production.

In the last year (2023), the ITFC provided $1.40 billion worth of loan for importing the fuel.

Under the credit agreement, the ITFC will finance state-owned Bangladesh Petroleum Corporation (BPC) to import petroleum fuels and state-owned Petrobangla to import liquefied natural gas (LNG).

According to the government's plan, some $1.6 billion out of the $2.1 billion credit will be utilised to import petroleum fuel oils, while the remaining $500 million for LNG.

Bangladesh is one of the top borrowers of the Gulf lender, ITFC, in the energy sector. According to the ITFC, it bankrolled Bangladesh with the highest amount of $1.16 billion in 2022.

Bangladesh mostly depends on the imports of fuel oil, LNG and fertilizer, spending the highest amount for fuel oil imports.

The country annually spends around $5.0 billion for importing refined and crude oil from the gulf and other oil supplying countries.

The ITFC has so far approved trade finance proposals totaling nearly $16.50 billion for Bangladesh since its inception in 2008.

The private sector, including banks, takes trade finance from the middle-eastern lender.

The repayment period for the $2.1 billion loan has been set for one year, with an interest rate to be calculated using the Secured Overnight Financing Rate (SOFR) plus 2.0 per cent spread. This 2.0 per cent includes a 1.80 per cent interest rate and a 0.20 per cent administrative charge.

This administrative charge must be paid before releasing the loan. On October 10, the SOFR was at 5.34 per cent, which fluctuates daily.

Government officials said the country's energy import bills, including petroleum and LNG, stood at around $10 billion in the FY2023, with a similar amount expected for the last fiscal year ending in June 2024.

Local experts forecast that if Bangladesh continues relying on imports in this way, the energy bill could double by the year 2030.

In the last FY2023, Bangladesh's oil company - Bangladesh Petroleum Corporation (BPC) - imported 1.307 million metric tonnes (MT) of crude oil spending US$836.744 million, government statistics showed.

It also imports 4.388 million MT of Jet A-1, SKO, Mogas and HSD; while 0.6608 million MT of furnace oil at a total Tk 461.704 billion cost from different overseas suppliers for catering to the demands for the local market, the BPC data showed.​

 

[Saif]

Current slow pace of economy in Bangladesh may lead to recession: Experts

Currently, regardless of the measures taken through fiscal policy, no significant results are expected to be achieved within the next six months, experts observed on Monday. Dr. Monzur Hossain, Research Director of the Bangladesh Institute of Development Studies (BIDS), made this remark during a s

thefinancialexpress.com.bd

Current slow pace of economy in Bangladesh may lead to recession: Experts
FE ONLINE REPORT
Published :
Oct 14, 2024 22:26
Updated :
Oct 14, 2024 22:26

Currently, regardless of the measures taken through fiscal policy, no significant results are expected to be achieved within the next six months, experts observed on Monday.

Dr. Monzur Hossain, Research Director of the Bangladesh Institute of Development Studies (BIDS), made this remark during a seminar titled "Current Economic State and Way Forward," held at the Bangladesh Institute of Social Research (BISR) Trust office in Lalmatia.

He further stated that the current sluggishness of the economy could lead to a recession.

“Although government spending has decreased, both public and private investment have significantly dropped. Additionally, the National Board of Revenue does not have a separate research cell. They create and implement policies, which is why there are no positive outcomes,” Monzur added.

Moreover, Bangladesh's tax-to-GDP ratio is the lowest in South Asia. Therefore, the current tax policy is unlikely to remain sustainable for long, he noted.

“The Bangladesh Bank is currently trying to provide liquidity support to fragile banks by arranging cash from other commercial banks. However, stabilizing the banks will still be difficult. During the previous government, there were no economic policies, which is why countries around us have been able to reduce inflation while we have not. Inflation cannot be controlled solely through monetary policy; if extremely high rates are imposed, all sectors, including industry and trade, will collapse,” Monzur Hossain stated.

He said maintaining reserves between $25-30 billion is sufficient. At one point, reserves reached around $48 billion because imports were restricted after the pandemic, while exports were performing well. He also advised focusing on quality investments.

In response to a question from Munem Ahmad Chowdhury, a research associate at BISR Trust, Monzur mentioned that even if autonomy is granted to the Bangladesh Bank, the country's central bank, it is crucial to fulfill such responsibilities. In that case, the governor must act impartially under this autonomy, and lobbying should not occur.

He added that the Bangladesh Bureau of Statistics is not very responsible, as accurate information is not always available.

The seminar was moderated by Khurshed Alam, Chairman of BISR Trust, who emphasized the need for data to accurately understand any developmental activity or issue.

“Many dismiss data from the previous government as baseless, raising the question of why people should still trust government data. Transparency and accountability are thus crucial,” he remarked.

Khurshid also noted a common issue in mega projects like the Jamuna Bridge, Padma Bridge, and Karnaphuli Tunnel: weak planning. He questioned whether spending on the Karnaphuli Bridge would have been more beneficial than spending on the tunnel.

Md. Murad Ahmed, Senior Researcher at BISR Trust, stated that enhancing the efficiency of the capital market would restore investor confidence, leading to diversified investments and profits. If certain instruments can be introduced to the country's economy, inflation will decrease, and the economy will move toward a more robust position.

AKM Riaz Uddin, Senior Research Fellow at The Hunger Project, remarked that just as abnormal symptoms arise when a drug addict stops using drugs, abnormalities will emerge if economic irregularities are addressed all at once. Therefore, patience is necessary to achieve sustainable solutions.

During the discussion, prominent businessman Swapan Kumar Das pointed out that previous agreements regarding loan contracts have caused millions in losses, placing investors in significant danger.

He noted that the system is being driven by words rather than actions. If this situation is not quickly resolved, investors will lose interest, potentially leading to an economic collapse, he added.

Mohammad Yakub, CEO of the All Bangladesh Research and Development Group, highlighted the importance of research in ensuring transparency in the financial sector.​

 

[Saif]

Chinese debt rescheduling, import credits seen imperative for BD economy

Leading economists and foreign-relations experts stressed debt rescheduling by the Chinese side raising the loan-repayment and grace periods to enable Bangladesh to absorb economic shocks, as closer cooperation between the two countries came into the limelight. Addressing an international seminar

thefinancialexpress.com.bd

Chinese debt rescheduling, import credits seen imperative for BD economy
FE REPORT
Published :
Oct 15, 2024 00:10
Updated :
Oct 15, 2024 00:10

Leading economists and foreign-relations experts stressed debt rescheduling by the Chinese side raising the loan-repayment and grace periods to enable Bangladesh to absorb economic shocks, as closer cooperation between the two countries came into the limelight.

Addressing an international seminar on 'Bangladesh-China Relations: A Future Outlook'" they also opined that if China provides credit arrangements to Bangladesh for its import from China, it would help the country address the fragile BoP situation.

Bangladesh Institute of International and Strategic Studies (BIISS) and the Centre for China Studies (SIIS-DU) jointly organised the meet to commemorate the 50th anniversary of the establishment of diplomatic relations between China and Bangladesh.

Md. Touhid Hossain, Adviser for Foreign Affairs of the current interim government, was the chief guest at the seminar which was also addressed by Yao Wen, Ambassador of China in Bangladesh, and Dr Debapriya Bhattacharya, Distinguished Fellow of CPD and Chair of the Committee on White Paper on the State of Bangladesh's Economy.

"Almost a quarter of our imports are coming from China, but the trade deficit is increasing. Trade deficit is increasing at a faster rate than the volume of the trade itself. China has been generous in order by providing us, first, the 97-percent duty- free and quota-free market access. Now it has gone up to 100 per cent, but we know by now in the world, trade does not depend on only market access based on tariffs and other regulatory or other forms of financial considerations. It also depends on the process through which it happens. It also depends on the non-trade barriers which are there," said Dr Debapriya.

"So I think if you look at the future of Bangladesh exports to China, then it is not tariff, it is the non-tariff barriers which we need to look at."

He also stressed the need to look at the lengthy processes. "Quite often it takes to dispute settlement."

Highlighting the need for debt rescheduling with China he said, "As I mentioned, almost 9.0 per cent to 10 per cent of the financial flows are coming from China. And, well, if you look at the debt situation of Bangladesh at this moment, almost 5.6 billion dollars are owed to China which is almost 10 per cent of the total debt of Bangladesh has overseas. So the debt per repayment is becoming an increasing challenge for Bangladesh."

The economist also points out that some of the loans come as supplier's credit.

And shorter repayment period, shorter grace period, and higher commitment charges than others show there are opportunities for streamlining them in the future.

He argues that Chinese loan and debt in Bangladesh definitely demand a bit much closer look.

He suggests making the debt situation more compatible with the upcoming development requirements of this country.

Mr Debapriya also observed that although the foreign-exchange reserves improved in the recent weeks, and the foreign-exchange flow stayed quite sustainable in the recent past, a debt rescheduling is not totally out of picture.

"At this moment, a debt-rescheduling issue may soon come up to look at how we really pay back some of these loans which are really maturing very fast," he told the cutting-edge function at an important crossroads in Bangladesh's political history following the July-August uprising.

About the importance of more Chinese investment in Bangladesh he said China can bring Bangladesh into the regional value chain through investing in the garment and manufacturing sector.

"What is becoming important now to have the Chinese investment more in Bangladesh over here, and where the Chinese investment can go in Bangladesh," he said, adding that it has to go to the Chinese economic and industrial zone which has been allocated in Anwara upazila in Chittagong.

He also argues that more investment in the Anwara EPZ is needed to make the Karnaphuli Tunnel economically viable.

The CPD economist stresses the need for Chinese credit to support Bangladesh's import from that country. Import from China is critical for Bangladesh, and given that Bangladesh does not have adequate foreign exchange now to pay up debt, it is important to get a financing from China in order to underwrite those imports.

"It is the old-fashioned open general licence system that you open up a credit line which can only go to finance the imports which are coming from China and support that one and create no less pressure on our balance-of-payments situation," he said.

He notes that China remains the single-largest provider of financial support to Bangladesh, as of last year (2023). The latest data show Dhaka received nearly US$4.0 billion almost in financial support which is about 9.0 per cent of the total flow which came to Bangladesh in that year.

The economist mentions that Bangladesh imports almost $25 billion of goods from China. It is about 23 per cent of the total imports coming to Bangladesh, and China's investment has now reached almost $1.5 billion.

"And what we see is important also in terms of human development. There're 20,000 students from Bangladesh currently studying in China at this very moment. So if this is one of the benchmarks and if you look at the future, why

Bangladesh should be looking at China as its major source of development cooperation and economic cooperation in the future."

Speaking on the strengths of China, he said, "China, as you may know, remains the driver of global economy at this moment, at least 30per cent of the global good is attributable to China. We make the joke that if China catches cold, then the whole world sneezes. That is the economic situation what we have now. So we are talking about a country which has generated $600 billion of trade surplus. We are talking about a country which has 3000 billion of foreign-exchange reserves."

Foreign Adviser Touhid Hossain said Bangladesh could not capitalise on the duty-free access that China has given for many reasons. "I would say that it's basically our lack of competitiveness in many areas and lack of diversification. I think we need to concentrate on these two. We need to enhance our competitiveness."

He agrees on the issue of debt rescheduling by the Chinese side.

The adviser said Bangladesh and China have very important defence cooperation. "As we all know, China is a major supplier of our defence equipment and the modernisation of our military services that we are looking forward to. I think we need a lot of cooperation in this respect, from China."

About the collaboration in the infrastructure-development sector, he said, "Of course, there are some limitations, as has already been mentioned, and we need to overcome those so that the infrastructure-development cooperation that exists between our two countries becomes more useful, more sustainable."

The foreign affairs' adviser of the interim government also stressed enhanced cooperation in the energy sector, both in green and traditional. Some projects are ongoing in various areas, and he hopes that these will be expedited so that they can be completed in time and become more useful for the Bangladesh economy.

One important area of cooperation between the two countries, as has been already touched by the ambassador, is technological know-how and communications, and Information and Communication Technology, he said.

Seeking Chinese cooperation in resolving the Rohingya crisis he said China has been cooperating in this respect for the return of the refugees. "We know that there is only one solution to this problem, which is that the people who are now in the camps in Bangladesh have to go back to their home. That is the only solution."

"China has been with us and there were trilateral dialogues, but, unfortunately, the previous initiatives have not resulted in any return of any of the Rohingya people to their homeland."

He notes that China has a lot of influence in Myanmar Dhaka looks forward to more active Chinese role in ensuring that these people, who are in a very deplorable situation, can be sent back.

"There their rights have been trampled upon, and they should be allowed to go back with rights and security so that we can get over this problem once and for all, and it is not repeated one again and again. Cash has been in the past," the foreign adviser opined.

He said both countries, from the very beginning, supported each other on the matters of core interest and work together on a path to realising the respective development.

"Now, in the current situation, as Bangladesh has witnessed the most significant political change in its national history, the future of Bangladesh in a post- revolution setting requires a more comprehensive approach," he said.

Ambassador AFM Gousal Azam Sarker, Chairman, BIISS, presided over the seminar where Major-General Iftekhar Anis, Director-General, BIISS, delivered the welcome address.

Dr Yang Jiemian, Professor, Director of the Academic Advisory Council, SIIS, made a special remark during the session.

There were three working sessions in the international seminar. The first working session titled 'The Impact of Bangladesh's Changing Political Landscape on Regional Dynamics' was moderated by Ambassador Farooq Sobhan, former Foreign Secretary. The second working session titled 'Bangladesh's Political, Economic, and Social Reforms and the Trends' was moderated by Dr Zhang Jiu'an, Associate Research Fellow, Academy of Contemporary China and World Studies. Professor Amena Mohsin, Department of International Relations, the University of Dhaka, moderated the third working session titled 'Strengthening China-Bangladesh Cooperation and Advancing the Comprehensive Strategic Cooperative Partnership'.​

 

[Saif]

Go-ahead given for RCEP dealmaking negotiations

A standing proposal gets the go-ahead from the interim government to begin formal negotiations towards signing on the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region, sources said. Commerce ministry Monday received the approved sum

thefinancialexpress.com.bd

Go-ahead given for RCEP dealmaking negotiations
Joining the bloc may boost BD exports by over 17.37pc: Study
REZAUL KARIM
Published :
Oct 15, 2024 00:13
Updated :
Oct 15, 2024 00:13

A standing proposal gets the go-ahead from the interim government to begin formal negotiations towards signing on the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region, sources said.

Commerce ministry Monday received the approved summary note sent to Chief Adviser Prof Muhammad Yunus for the nod, they informed.

Recently, the ministry sent the note to the interim government's premier for permission to starting off talks on striking the proposed agreement on the RCEP that accounts for a third of world GDP.

Contacted, commerce secretary Md. Selim Uddin said, "We have received the summary. We have got approval from the CA for starting process regarding signing the deal."

He expects that Bangladesh will be able to net significant trade facilities from a good number of countries if the agreement gets through.

"We in principle have taken a decision to prepare a detailed workout plan which will be formed within next one week," Mr. Uddin mentions.

The immediate-past government kept in abeyance the move to join the world's largest trade regime due to last general election. But, the commerce ministry had sent a summary of the RCEP deal and dos to the then prime minister for necessary approval.

In August 2023, an inter-ministerial meeting under the then government had recommended joining the trade bloc, as an assessment suggested that joining would increase Bangladesh's exports to the global market by more than 17.37 per cent.

The commerce ministry expects to kick-start formal proceedings at the forum headquarters for the country's membership in RCEP after completion of the workout plan, the commerce secretary mentioned.

He said, "We expect to send formal proposal to the RCEP for joining the bloc through the Foreign Affairs Ministry."

Bangladesh has started the process of joining mega trade bloc on hope of a boost to export to the member-countries, but it had been postponed since October 2023, they added.

It expects to send a formal proposal to the depository and temporary secretariat of the world's largest trade bloc at the ASEAN headquarters for the country's membership.

Bangladesh decided in principle to join the emerging vast trade bloc at a workshop held at commerce ministry on August 01, 2023.

The ministry already completed necessary scrutiny and review in this regard, based on commitments fulfilled by Vietnam, a member of the China-mooted bloc.

A high official also says the commerce ministry will have to take cabinet approval to move ahead. Vetting from the law ministry may also be required.

Bangladesh's inclusion in the RCEP will be positive although the existing regional deals with the South Asian Association for Regional Cooperation (SAARC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) have hardly made any visible outcomes, says Research Director of CPD Dr Khondaker Golam Moazzem.

He hopes that huge cross-border trade opportunities will be created for Bangladesh after getting membership in RCEP. Besides, Bangladesh can be able to enter important manufacturing hubs, including China. It will also be a part of value chain.

An earlier study conducted by Bangladesh Trade and Tariff Commission (BTTC) showed Bangladesh's trade with RCEP-member countries mostly concentrated on trade in goods.

Bangladesh's export may grow more than 17 per cent and gross domestic product (GDP) 0.26 per cent if free-trade agreement is signed with the bloc members, it mentioned.

The RCEP deal came into force in January 2022 and any country/customs territory is eligible for applying for membership.

As of now, 15 Asia-Pacific nations are party to the world's biggest free-trade domain.

The ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, while its FTA partners are Australia, China, Japan, New Zealand and Korea.

An outstanding feature of the RCEP is that it represents world's largest FTA, comprising about 30 per cent of global GDP and about a third of the world population.

The economic-cooperation forum, spanning Asia-Pacific realm that covers 2.3 billion people, accounts for US$ 25.8 trillion or about 30 per cent of global GDP.

Also, it accounts for $12.7 trillion or over a quarter of global trade in goods and services, and 31 per cent of global foreign direct investment (FDI) inflows.

In the fiscal year (FY) 2020-21, Bangladesh exported goods worth $3.9 billion to and imported goods worth $24.5 billion from these countries.

On the other hand, at the same time, the services export was worth US$1.8 billion and import worth $2.6 billion.

Bangladesh enjoys preferential market access to many of the RCEP countries, either through preferential trade agreement (PTA) or through GSP facilities.

After graduating from the least-developed country (LDC) status in 2026, the duty-free access will no longer be available except for reciprocal general preference under the Asia-Pacific Trade Agreement (APTA).

In such a situation, sustaining the consistent progress achieved by Bangladesh in bilateral export trade with some of the RCEP countries as well as availing the opportunity to some potential destinations in RCEP will be a real challenge.

The study says RCEP includes some of the major export destinations as well as major import sources of Bangladesh. "Considering the bilateral-trade scenario, RCEP remains more as an important partner from the Bangladesh perspective."

Imports from RCEP contribute around 43.92 per cent of the total global imports by Bangladesh, 55.33 per cent of the total tax-revenue and 58.56 per cent of total revenue from customs duty collected under home consumption, as of FY 2020-21.

Thus, the probable accession of Bangladesh to RCEP may, however, have a negative impact on revenue generation from customs duty.

Since some major import sources of Bangladesh like China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved with RCEP, there is a threat of losing a certain amount of revenue from these countries.

More than 68 per cent of total merchandise exports to RCEP are under apparel-product category. Top twenty export items to RCEP mostly consist of apparel products and these twenty products constitute 64 per cent of total exportable.

The study found that the average most-favoured nation (MFN) tariffs for Bangladesh had been comparatively higher than that of the RCEP members.

It says the probable increase in import along with a comparatively protective regime of Bangladesh estimated a probable high revenue loss for Bangladesh compared to that of the RCEP.

"However, as estimated trade creation would likely be higher than the trade-diversion effect for Bangladesh, it may generate additional revenue from other duties and charges, if not reduced due to a possible accession in RCEP," the study mentions as regards a tradeoff.

The Trade and Tariff Commission recommends that the government may express its positive stand regarding the accession of Bangladesh to RCEP through weighing all the pros and cons. In that case, domestic rules and regulations may need to be changed in some cases, if a situation arises.

The RCEP negotiations were formally launched during the 2012 ASEAN Summit in Cambodia. India withdrew from the agreement in November 2019 despite participation from the beginning of negotiations.​

 

[Saif]

Reform and the pressing needs of our economy

As the current political transition in Bangladesh stands, it presents a rare opportunity for massive reform that must not be missed. Navigating this pivotal time requires focus on changes that enhance governance, foster a business-friendly environment, and protect the rights and freedoms of our...

www.thedailystar.net

Reform and the pressing needs of our economy

As the current political transition in Bangladesh stands, it presents a rare opportunity for massive reform that must not be missed. Navigating this pivotal time requires focus on changes that enhance governance, foster a business-friendly environment, and protect the rights and freedoms of our people. This reformative era should aim to build a transparent, competitive ecosystem that boosts investor confidence and curbs corruption.

The challenges of our economy, particularly in the financial sector, cannot be overlooked. High levels of non-performing loans (NPLs) and liquidity crises arise from systemic flaws, a lack of protection, and insufficient accountability. These shortcomings have created opportunities for political interference, resulting in significant losses for our nation.

Our flawed financial frameworks hinder our pursuit of an economy driven by youth and small-and-medium enterprises (SMEs), primarily protecting the interests of lenders. The absence of an exit policy traps borrowers in uncertainty, denying them the chance to turn their situations around. This scenario is a significant drawback for young entrepreneurs. To overcome these constraints, we must create a system that prevents undue interference and upholds accountability and fairness; one where laws serve the greater good, leaders act as enablers of progress, and discrimination is actively addressed.

Political reform is a crucial step for a new governance paradigm -- one that emphasises transparency and accountability at every level. A political system that prevents vested groups from wielding undue influence and resists the politicisation of institutions is essential for progress.

At this critical time, businesses must not be victims of politics, particularly given the disruptions we've seen, like internet blackouts and political activities affecting supply chains. There must be a consensus that the economy should take precedence over politics and that industrial security must be prioritised.

A governance structure fostering inclusivity in decision-making is essential. Regulatory coherence, improved policy coordination, and greater accountability are needed to minimise the risks of arbitrary decisions that harm businesses. A clear separation of functions within government departments is equally crucial to address conflicting priorities effectively.

The failure to integrate plans across various government sectors undermines effective governance and transparency, affecting industries' day-to-day operations, whether in customs, port or tax-related activities. Dismantling siloed governance and embracing effective public-private partnerships are necessary steps.

A smoother transition from LDC status is also crucial for our economy; however, given our limitations in resources, time, administrative capacity and governance challenges, our position regarding this transition must be carefully considered.

An acute focus on infrastructure, logistics, supply chain management and long-term energy policies should take precedence in the reform agenda. Infrastructure development has been a cornerstone for countries like Malaysia, South Korea, and Vietnam, providing valuable lessons for Bangladesh in terms of industrialisation and economic growth.

As things stand, Bangladesh lags behind many of its competitors in the Global Logistics Performance Index. Even during recent floods, our national highway connecting to a major port was submerged, exposing our infrastructure's vulnerabilities and raising questions about our resilience and investment in infrastructure and sustainable energy.

In aligning policies with global competition, we must revisit trade and foreign policies to ensure they are responsive to market realities and position Bangladesh as a competitive player on the international stage. Developing strategic partnerships, enhancing trade agreements and promoting initiatives that attract foreign investment in niche sectors are essential steps.

While prioritising our economic agenda, attention must also be given to protecting SMEs, advancing the ESG agenda and promoting technology and skills adoption. Innovative approaches supported by thoughtful policy frameworks are needed to create synergies that drive meaningful impact.

This reformative era must inspire a collective vision that aligns with our people's hopes and aspirations. It is our moment to break free from past constraints and usher in a new chapter of growth and opportunity. The time for change is now.

The author is a director of the Bangladesh Garment Manufacturers and Exporters Association​

 

[Saif]

Diverse income streams needed for poverty alleviation

Households with diverse income streams, both farm and non-farm, are more resilient and can escape poverty faster, said experts yesterday.

www.thedailystar.net

Diverse income streams needed for poverty alleviation
Say speakers at a roundtable

Participants of a roundtable titled “Pathways to prosperity for extremely poor people” at The Daily Star centre yesterday. The Palli Karma-Sahayak Foundation, European Union, and The Daily Star jointly organised the event marking the International Day for the Eradication of Poverty. Photo: Star

Households with diverse income streams, both farm and non-farm, are more resilient and can escape poverty faster, said experts yesterday.

Research over the last 20 years on the impact of microcredit indicates, both nationally and internationally, that pure microfinance will not have a sustainable impact on poverty alleviation, said MA Baqui Khalil, professor and dean for the School of Business at the University of Asia Pacific.

This is because poor people need insurance, savings, health expenses and other non-financial services beyond credit, he said at a roundtable styled "Pathways to prosperity for extremely poor people (PPEPP)".

Palli Karma-Sahayak Foundation (PKSF), the European Union and The Daily Star jointly organised the event to mark the International Day for the Eradication of Poverty at The Daily Star Centre in Dhaka.

"People with multiple income opportunities are less vulnerable to poverty and can graduate out of it at a faster rate," Khalil said.

If a household has both farm and non-farm activities, it can absorb shocks, and income from multiple sources contributes to savings.

The creation of wage employment is important as an alternative to farm employment to reduce extreme poverty.

"These issues were reflected in the PPEPP project of the PKSF," he added.

In 2019, with lessons learned from various extreme-poverty projects, PKSF undertook a multi-dimensional initiative titled PPEPP with funding from the UK's Foreign, Commonwealth and Development Office (FCDO) and the EU.

The project aims to eradicate extreme poverty for approximately 250,000 households (about 1 million people) in selected poverty-prone districts across the northwestern char areas, the southwestern coastal belt and the Haor region.

The project also includes ethnic minority pockets in Dinajpur and Thakurgaon districts.

Since 2022, the PPEPP project has been funded by the EU and renamed PPEPP-EU, targeting 215,000 households.

It provides a carefully sequenced package of livelihoods, nutrition and primary healthcare, inclusive finance and community mobilisation interventions as the core components.

To address the multidimensional nature of poverty, the project also integrates climate resilience-building, disability inclusion and women empowerment with the core components.

"If we want to bring the issue of sustainable poverty reduction to the forefront, there needs to be a linkage between this project and a market-based linkage," said Mustafa K Mujeri, executive director at the Institute for Inclusive Finance and Development.

"If we can provide them with loans and create such enterprises, then it is possible to move them toward a sustainable livelihood. So, it is necessary to think about how we can link them with cottage, micro and small enterprises," he added.

Poverty and inequality are two different things and should not be conflated together, said Zakir Ahmed Khan, chairman of PKSF.

"What we are doing now is dealing with poverty, not inequality. Poverty is not only a lack of money -- it means many more things."

The PPEPP should be taken as a programme and not as a project, he said.

There must be a connection between sustainability and the market, said Mohammad Muslim Chowdhury, chairman of Sonali Bank.

"Otherwise, we may go from one project to another. If we don't link it with the market and create self-employment opportunities, it won't succeed."

Different projects and programmes should be linked to central policies and aligned with the national strategy.

The programme needs to be implemented comprehensively, he said, adding that the local government should also be linked.

The primary goal of PKSF is to eradicate inequality along with poverty, aiming for zero poverty and the creation of an inclusive and equitable society, said Md Fazlul Kader, acting managing director of PKSF.

Bangladesh has witnessed remarkable growth and development, but unfortunately, extreme poverty still exists, said Michal Krejza, head of cooperation at the delegation of the EU to Bangladesh.

For example, in the southern coastal belt, the incidence of extreme poverty is quite high and is increasing in some areas due to the impacts of climate change.

To make these people less vulnerable, better access is needed to basic public services such as education, health care, safe drinking water and sanitation, and safe and nutritional food, he said.

"They need skills development and jobs. Those for whom the need is the highest often have the poorest access."

Since its inception of the project in 2019, 72 percent of the extremely poor households covered by the project have risen above the international poverty line, he added.

Macroeconomic policies do have a significant impact on poverty reduction at the national level, said Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh.

"The impact on poverty comes from the kind of macroeconomic policies we have. Macroeconomic stability is essential and macroeconomic policies for economic growth are also essential," he added.

Bangladesh has done very well on many things including poverty, said Mahfuz Anam, editor and publisher of The Daily Star.

"But what remains is also a massive task. Let us not get into some sort of a comfort zone that we have done well."

As the most densely populated country, whatever the country achieved really stands threatened because of climate change and Bangladesh needs global support, he added.​

 

[Saif]

Gross forex reserves cross $25b in steady rebound

A steady rebound on the back of changed milieus helps Bangladesh see its gross foreign-exchange reserves climb over US$25 billion again amid tightfisted import payments and higher remittances, officials said. The forex reserves rose to $25.14 billion on October 15 from $24.97 billion on Octo

thefinancialexpress.com.bd

Gross forex reserves cross $25b in steady rebound
Lower imports-outflows, higher remittances help in changed milieus
Siddique Islam
Published :
Oct 17, 2024 00:37
Updated :
Oct 17, 2024 00:37

A steady rebound on the back of changed milieus helps Bangladesh see its gross foreign-exchange reserves climb over US$25 billion again amid tightfisted import payments and higher remittances, officials said.

The forex reserves rose to $25.14 billion on October 15 from $24.97 billion on October 08 as per traditional calculation method of the Bangladesh Bank (BB). It was $24.86 billion on September 30.

As per the International Monetary Fund (IMF) Balance of Payments International Investment Poisson Manual-six edition, generally known as BMP6, the reserves rose to $19.93 billion during the period under review from $19.83 billion, according to the central bank's latest data released Wednesday.

The IMF-calculated figure was $19.86 billion on September 30.

Forex reserves--one of the major macroeconomic indicators of an economy--fell to $24.53 billion in terms of gross calculation by the central bank after clearing $1.37 billion import payments to the Asian Clearing Union (ACU) on September 07 last while the amount stood at $19.46 billion as per IMF's BMP6 arithmetic.

"Higher inflows of remittances have helped the country see forex reserves cross $25-billion mark further," a senior official of the central bank told the FE while replying to a query.

He also said Bangladesh received $1.21 billion in inward remittances during the first 14 days of October.

Meanwhile, the flow of inward remittances grew over 33 per cent to $6.54 billion in the first quarter (Q1) of the current fiscal year (FY), 2024-25, from $4.91 billion in the same period of FY '24.

This surge indicates a growing trend of expatriates utilising formal banking channels to send money to Bangladesh, bankers said, adding that this increase is a shift away from informal methods like hundi since the formation of the new government.

Besides, the purchasing of the US currency from the commercial banks directly has contributed to growth in the forex reserves in recent days, another central banker explains.

Nearly $50 million has so far been bought from the commercial banks in October as part of the regulator's intervention in the market, the central banker adds.

On the other hand, the selling of the greenback from the central bank almost suspended recently as part of a move to build up the recently depleted forex reserves in Bangladesh.

"We've sold only $10 million so far to the commercial banks in the month of October 2024," the BB official adds.

However, the actual import in terms of settlement of letters of credit (LCs) fell by 5.58 per cent to $16.10 billion during the July-September period of the FY'25, from $17.05 billion in the same period of the previous fiscal year, due to political unrest as well as uncertainty associated with post-unrest regime.

On the other hand, the opening of fresh LCs, generally known as import orders, dropped by 8.44 per cent to $15.65 billion in the first three months of this fiscal from $17.09 billion in the same period of FY'24.

Bangladesh's forex reserves had surged to $48.04 billion on 24 August 2021, setting a new record, from $46.58 billion of the previous working day. The rise was propelled by the receipt of $1.45 billion from the IMF as general allocation of Special Drawing Right (SDR).​

 

[Saif]

Budget support from WB, IMF, ADB: Bangladesh may get $5.65b by this fiscal year

The government is expecting at least $5.65 billion in budget support this fiscal year from the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) to expedite reforms.

www.thedailystar.net

Budget support from WB, IMF, ADB: Bangladesh may get $5.65b by this fiscal year

The government is expecting at least $5.65 billion in budget support this fiscal year from the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) to expedite reforms.

Of the expected funds, the IMF is likely to provide $3 billion, the World Bank $1.5 billion and the ADB $1.15 billion.

Around $3 billion of the funds could come by December for stronger support to ensure good governance in banking and other sectors, according to officials at the finance ministry, Bangladesh Bank and the three development partners.

The global and regional lenders may impose several conditions for the loans, including some on revenue, public expenditure, and dissemination of data, finance ministry officials said.

A high-powered government delegation led by Finance Adviser Salehuddin Ahmed will visit the US from October 21-29 to attend the World Bank-IMF Annual Meetings.

They will sit with World Bank and IMF officials on the sidelines of the main event to discuss the fresh financings, their modalities, and reform conditions.

High-ranking officials of the World Bank and the IMF have assured the government of providing necessary funds to boost the depleting foreign currency reserves after the interim government took charge in August.

The IMF is likely to approve $3 billion in fresh loans under a separate programme, in addition to the $4.7 billion in funds approved in January last year, under which Bangladesh has got $2.3 billion in three tranches so far.

The IMF may disburse the fresh funds in multiple tranches as well. However, the modality of the loans will be finalised during talks in Washington this month.

A finance ministry official said they are hopeful about getting more than $1 billion under the two IMF programmes this year, subject to the IMF board's approval in December.

An IMF team is likely to visit Dhaka in November to set the reform conditions for the fresh funds and also review the existing loan programme.

The World Bank is expected to clear $1.5 billion in fresh funds in the ongoing fiscal year, including $1 billion under two programmes by December.

A finance ministry official said the World Bank will provide $750 million to strengthen economic governance and reform programmes.

Another $250 million will be provided for capacity building of the finance ministry, Bangladesh Bank, National Board of Revenue (NBR), and Bangladesh Bureau of Statistics (BBS), said the official.

From the ADB, the government expects $1.15 billion by the end of this fiscal year. The funds will include $650 million expected by December for a programme to strengthen economic management and governance.

The interim government also sought $1 billion from the ADB for the banking sector and another $1 billion for the energy sector.

Out of these, there has been significant progress in getting the $1 billion for the banking sector. The ADB could provide $500 million of the funds by June next year.

The Bangladesh delegation will also hold talks with officials of the World Bank Group's Multilateral Investment Guarantee Agency (MIGA) and International Finance Corporation (IFC), and the US Treasury Department during the WB-IMF Annual Meetings.

IFC in 2022 proposed to issue Taka-denominated bonds worth $4 billion among local investors, either through public issuance or private placement, to lend the proceeds to projects in Bangladesh.

There has not been much progress regarding the proposal, but recently the member of the World Bank Group has shown renewed interest in the matter.

MIGA has offered Bangladesh Bank $1 billion in guarantee facilities for international trade to reduce import costs.

MIGA and IFC's proposals will be discussed further during the Bangladesh delegation's visit to Washington, a central bank official said.

POSSIBLE CONDITIONS

Officials said the conditions for the fresh World Bank and IMF loans may include the separation of tax policy from revenue collection administration. The lenders have been raising the issue for a long time, but it could not be realised due to a lack of interest from NBR officials.

The lenders may also want the existing multiple VAT rates replaced with a uniform rate, and the introduction of a modern electronic VAT system to increase revenues and improve compliance.

The World Bank recommended these reforms in its latest development update for Bangladesh last week.

It suggested enhancing efficiency in expenditure by aligning national savings certificate interest payments with market rates and controlling subsidy spending.

The report recommended implementing market-based tariffs in the power sector and transitioning from fertiliser subsidies to a voucher-based programme. It suggested replacing emergency procurement with competitive bidding to reduce generation costs.

A finance ministry official said the lenders may impose a condition under which the BBS will have autonomy and publish data independently.

Currently, BBS sends data to government high-ups for approval before publication.​

 

[Saif]

Bangladesh Remittance Fair to begin in NY October 20

Two-day Bangladesh Remittance Fair will begin at Jamaica Performing Arts Centre in New York on October 20 to increase remittance flow from the USA to Bangladesh.

www.newagebd.net

Bangladesh Remittance Fair to begin in NY October 20
Bangladesh Sangbad Sangstha . Dhaka 18 October, 2024, 23:57

Two-day Bangladesh Remittance Fair will begin at Jamaica Performing Arts Centre in New York on October 20 to increase remittance flow from the USA to Bangladesh.

The theme of the fair is ‘New Opportunities, New Markets, New Partnerships’.

The Bangladesh-American Chamber of Commerce and Industry, Mukto Dhara New York and the US-Bangla Business Link are jointly organising the event powered by Dhaka Bank.

Islamic Bank, National Bank and Bank Asia will be honoured in the event as the top remittance-receiving banks.

Focusing on promoting legal remittance flows and sustainable growth, the fair aims to explore how to increase these foreign earnings and encourage expatriates to utilise legitimate channels for remittance, thereby further energizing the economy.

The participating institutions include banks, financial institutions, money transfer operators, remittance channel partners, mobile financial services, offshore banking service providers and expatriate small entrepreneurs.

Over 30 financial institutions from both Bangladesh and the United States, including IFIC Bank, Islami Bank, Standard Bank, Social Islamic Bank Limited, Dhaka Bank, Chevron Express and Standard Express, will take part in the event.

The fair will also feature seminars and symposiums on remittances, along with awards for the top 10 Bangladeshi-American remittance senders.

Moreover, awards will be given to the top three money exchange or remittance channel companies.

The fair will remain open from 4:00pm to 10:00pm NY time on both days at the venue where popular artists Pousali Banerjee and Shah Mahbub will enthral the audience through performances on October 20.​

 

[Saif]

High tax expenditure: A paradox in Bangladesh’s tax system

Bangladesh has an unusually high tax expenditure to GDP ratio despite having low revenue generation through direct tax.

www.thedailystar.net

High tax expenditure: A paradox in Bangladesh’s tax system
High tax expenditure in Bangladesh

VISUAL: ANWAR SOHEL

Revenue efforts—i.e., revenue generated from the national income or GDP, which is defined as tax to GDP ratio—have historically been low in Bangladesh. Between 2011 and 2023, the country's revenue efforts declined from 11 percent to 8.3 percent in 2023—a 2.7 percentage point drop over the 12-year period when the per capita GDP increased by about 200 percent. Since the trend in per capita GDP is increasing, suggesting that income is increasing (hence broader tax base), more revenue should be generated (even when the tax rates remain the same). Thus, the falling trend of revenue efforts point to an inefficient revenue system in Bangladesh.

A paradox in our tax system is maintaining a high tax expenditure ratio (or simply put, revenue forgone) when the revenue efforts are dismal. Tax expenditure refers to special provisions of the tax code, such as exclusions, deductions, deferrals, credits, and tax rates that benefit specific activities or groups of taxpayers. The outcome is a loss of revenue. Although data on tax expenditure in Bangladesh is not available every year, according to a recent study (March 2024) by the National Board of Revenue (NBR), the estimated total tax expenditure for direct tax in FY21 amounts to 3.56 percent of GDP. Although some of the tax expenditures may be justified on merit grounds, such a high level of tax expenditure against very low revenue efforts is clearly untenable. If one adds VAT and custom duty, the total tax expenditure may well be above five percent of GDP.

Furthermore, since the methodology to estimate tax expenditure is usually subjective, the final estimate is generally underestimated. The Global Tax Expenditure Database (GTED) progress report published in 2022 highlights this aspect. According to the report, over the past three decades, "the global average of reported revenue forgone from TEs was close to four percent of GDP and more than 24 percent of tax revenues. Yet, real numbers are probably significantly higher, since one of the main issues we encountered when building up the GTED was widespread underreporting." If this aspect is considered in Bangladesh, tax expenditure may be even higher, perhaps around seven to eight percent of GDP.

The GTED progress report compiled tax expenditure data of 95 countries who have been grouped into four categories: lower income countries (LICs); lower-middle-income countries (LMICs); upper-middle-income countries (UMICs); and high-income countries (HICs). The average tax expenditure of LICs (14 countries) in 2021 was 2.8 percent of GDP. In the same year, it was three percent for LMICs (20 countries), four percent for UMICs (23 countries), and 4.7 percent for HICs (38 countries). Compared to this data, Bangladesh's tax expenditure estimate (only for the direct tax) of 3.6 percent appears to be high.

Since transparency in this field has been limited, it is difficult to measure the benefits of this mechanism. Thus, a major concern with such high tax expenditure is uncertainty or ambiguity regarding its impacts on the economy and society. Since there has been no assessment to justify the existing tax expenditure, this practice should be limited. Consider a situation where a one percent cap has been imposed on the tax expenditure, which would release revenue of about four percent. In such a situation, revenue efforts will jump to 15 percent of GDP. The forgone revenue of four percent may be put to better use where one percent may go to social sectors, one percent may go to infrastructure, one percent to agriculture, and the rest to skills and productivity enhancement programmes.

Another justification for such an approach—i.e., enhanced public expenditure through realised revenue by capping the tax expenditure—is that expenditure allocations are usually subject to better transparency and scrutiny via the medium-term budget framework (MBTF) carried out by line ministries and the finance ministry, and the Annual Development Programme (ADP) conducted by the Planning Commission.

In 2023, the Policy Research Institute's (PRI) Centre for Domestic Revenue Mobilisation (DRM) carried out an exercise to justify the need to enhance expenditure in the merits sector through additional revenue mobilised through the direct tax system. Simulations were conducted to identify the impact of raising revenue from personal income tax with an analysis to understand the effects on the national economy. The simulations assume that the additional revenue raised is spent on infrastructure, social sector, social protection, agriculture and other public spending areas. Specifying public spending assumes the same proportional split between sectors, as is currently the case. The core finding from PRI's exercise shows that increases in personal income tax led to increases in GDP growth and labour income. This is primarily through the effect of allowing the government to invest more in public services. If revenue from personal income tax were to increase by two percentage points, economic growth would likely rise by 0.5 percent on top of the existing growth rates. Moreover, such a move may increase labour income by three percent.

The above analysis suggests that the practice of maintaining high tax expenditure is not feasible on grounds of forgone revenue, lack of transparency, and low value for money. Immediate action must be taken to improve the fiscal system in Bangladesh utilising this low-hanging fruit. Some strategic recommendations in this regard are: i) put a cap on the overall size of tax expenditure at the maximum level of one percent of GDP for the next two fiscal years; ii) form a high power committee to make decisions on who should be eligible for receiving tax expenditure benefits. The criteria may focus on employment generation, poverty reduction, productivity growth, and welfare of women, children and minority groups; and iii) the NBR/government should earn the right to provide tax expenditure. For instance, it could implement a formula where an additional 0.25 percent of tax expenditure is provided for every two-percentage-point gain in tax efforts. However, the overall ceiling should be around two percent of GDP.

Dr Bazlul Haque Khondker is chairman of South Asian Network on Economic Modeling (SANEM) and director at Policy Research Institute (PRI) of Bangladesh.​

 

[Saif]

Macroeconomic recovery for whom?

Fitch, the US-based global credit-rating agency, forecasts a good tiding for Bangladesh economy provided that the government pursues reform. The uncertainty arising out of the political changeover over the economy, the agency maintains, is likely to be short-lived and the country's mid-term macroec

thefinancialexpress.com.bd

Macroeconomic recovery for whom?
FE
Published :
Oct 23, 2024 22:13
Updated :
Oct 23, 2024 22:13

Fitch, the US-based global credit-rating agency, forecasts a good tiding for Bangladesh economy provided that the government pursues reform. The uncertainty arising out of the political changeover over the economy, the agency maintains, is likely to be short-lived and the country's mid-term macroeconomic outlook is positive. However, the rating agency duly recognises the adverse effects of the shockwaves of the violent movement that toppled the immediate past government. Thus it has downgraded the country's output growth from its earlier projected 5.3 per cent to 4.5 per cent following identical slashing of growth projection by the International Monetary Fund (IMF) from 6.6 per cent for the fiscal year 2024-25. The other Bretton Woods Institution, the World Bank, also revised the growth projection downward to 4.0 per cent last week. The rating agency, however, sees an economic recovery in 2026 when the country may witness an economic upturn riding on a 5.7 GDP growth rate.

This recovery is, however, conditional. If external metrics like that of remittance sent by workers abroad remain stable, only then can it experience a turnaround. Improved macroeconomic performance alone cannot guarantee a country's social progress because much depends on how the national wealth is created and distributed. Under oligarchy, plutocracy or kleptocracy, outsize wealth may be created depriving the majority of its benefits. International agencies may wax eloquent about developments of any such order but outrageous socio-economic inequality marked by abject poverty for a hapless segment of society can negate the macroeconomic success. As many as 41.7 million people in Bangladesh now live in extreme poverty, according to a report titled "2024 Global Multidimensional Poverty Index released jointly by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative of the Oxford University. Of them 6.5 per cent are particularly vulnerable to food insecurity.

Right now, inflation has been raging after a slight lull in the previous month. Earlier, disruption of the supply chain was thought to be responsible for the latest soaring inflation but it has proved wrong. Although the World Bank projects an easing of inflation to 9.0 per cent in the fiscal 2025, signs are to the contrary. Market manipulation and exchange of several hands all along the supply chain before agricultural produce and other commodities reach the consumers have now been blamed for abnormal price escalation. The low-income segments in society are increasingly becoming disillusioned with the administrative measures because they read in the anti-discrimination movement some relief was on their way. Many of the lower classes also felt prompted to join the movement with hope for better days. Now they are utterly disappointed.

The year 2026, when Bangladesh economy is expected to recover reasonably and create employment opportunities, is a long way off for the poor and the marginal and even the lower-middle class people. Their urgency is so pressing that any further wait for brighter economic prospects proves very painful. Yet another round of price rise of essentials including rice of late makes matters worse for them. It would be prudent to focus on microeconomic resurgence. The sector of small and medium enterprises (SMEs) has failed to avail of the stimulus packages meant for industrial recovery in post-pandemic period mostly because of a lack of collateral. If appropriate policies are formulated and effective monitoring along with support for marketing products of such enterprises is put in place, economy at the grassroots level can buoy up and create employment opportunities.​

 

[Saif]

Six priority areas up for reforms

Six priority areas are up for reforms under conditions binding a World Bank-offered budget-support credit, including an overhaul in fiscal, revenue, and public-welfare arenas, officials said. The World Bank is providing the development-policy credit under its Building Economic and Institutional

thefinancialexpress.com.bd

Six priority areas up for reforms
Syful Islam
Published :
Oct 26, 2024 00:06
Updated :
Oct 26, 2024 00:06

Six priority areas are up for reforms under conditions binding a World Bank-offered budget-support credit, including an overhaul in fiscal, revenue, and public-welfare arenas, officials said.

The World Bank is providing the development-policy credit under its Building Economic and Institutional Resilience programme for tidying these areas of finance.

The Ministry of Finance has formed a policy actions-implementation committee headed by an additional secretary of the finance division to push through the reforms.

As part of the spadework for such major changes, policy matrix has already been prepared in consultation with the ministries and divisions concerned, the officials said.

In the six-point reform recipe are rationalisation of tax expenditure, a new definition of non-performing loan (NPL) classification, establishment of bank-restructuring department in Bangladesh Bank, amendment of the statistics act, and the strengthening of Bangladesh Bureau of Statistics (BBS).

Officials concerned say Bangladesh's tax-to-GDP (gross domestic product) ratio is one of the lowest in the world and so needs a gradual raise. They see such low tax-revenue collection as a "big barrier facing economic development of the country",

Under this reform programme, the committee will work on implementation of policy actions aimed at finding potentials for broadening tax base, ways for additional revenue collection, and elimination of less-effective tax exemptions.

They say an updated definition of classified loans will also be prepared under this reform drive. Under the current definition loans which are at the stages of substandard, doubtful, or bad loan are called classified loans and they are considered NPL.

The banks and financial institutions fail to collect interest from the loans which fall in these categories. Recovery of both the interest and principal amount becomes uncertain when a loan is classified as bad loans.

Officials concerned have said the restructuring of some banks "has become very necessary as financial health of many public-and private-sector lenders has deteriorated following wanton plunder in the recent past".

The central bank, they say, will soon begin assessment of the asset quality of the banks before restructuring. Under the budget-support credit of the World Bank a bank-restructuring department is going to open in the Bangladesh Bank.

The central bank governor few weeks back sought some $270 million from the World Bank under Financial-Sector Support Project II from where some $70 million will be spent on strengthening Bangladesh Bank's technical capability and capacity for effective regulation and supervision.

Officials say the Statistics Act 2013 will also be amended under the budget-support programme of the World Bank. Also, the Public Procurement Act 2006 will be amended to make it more time-befitting.

The strengthening of the Bangladesh Bureau of Statistics (BBS) is also in the ambit of reforms under the Word Bank's budget-support credit to make statistics produced by the state agency more authentic and credible to remove a credibility gap.

Officials say in the past, the statistics produced by the BBS "used to be called in question home and abroad for a lack of accuracy".

Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, earlier told the FE that reform is necessary in various public institutions and acts in Bangladesh to make them fit in international best practices.

On a question over data accuracy, he said, "There is a common perception in Bangladesh for many years that the GDP data produced by the BBS are inflated. Also, the accuracy of many social-indicator data remained under question for years which the government did not pay heed too."

He underscored the need for strengthening the BBS and for generating accurate data for their well acceptance.​