[🇧🇩] 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.​