[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Chinese investments quadrupled, India’s doubled

Investments from China and India significantly increased during the last fiscal under the deposed Awami League government

en.prothomalo.com

Chinese investments quadrupled, India’s doubled
Shovongkor Karmakar
Dhaka
Published: 14 Dec 2024, 15: 07

Investments from China and India significantly increased during the last fiscal under the deposed Awami League government. In the 2023-24 fiscal, Chinese investment quadrupled while Indian investments doubled as compared to the previous fiscal. Still, the overall foreign direct investment (FDI) has not improved much. The 2023-24 fiscal saw the lowest foreign investments in three years.

These figures came in a Bangladesh Bank (BB) report which states the total amount of foreign investment in the outgoing fiscal was USD 1.47 billion. The amount is 8.8 per cent less than that of 2022-23 fiscal. Bangladesh received USD 1.61 billion in foreign investment in the 2022-23 fiscal, which was USD 1.72 billion in the previous fiscal. Meanwhile, the country’s foreign investment balance stood at USD 17.54 billion by the end of the last fiscal.

Investments from China and India saw a surprising rise in the last fiscal. Investments from China rose to USD 280 million in the 2023-24 fiscal from USD 68.1 million in the previous fiscal. As such, Chinese investments in Bangladesh have quadrupled or have increased by 316 per cent in the last fiscal. However, investment from China was the highest USD 428.1 million in the 2021-22 fiscal in three years.

In the meantime, investments from India have been rising for the last two fiscals. Indian investment to the country stood at USD 130 million in the last fiscal, which was 89 per cent higher than that of in the previous fiscal. Indian investment in Bangladesh was USD 70 million in the 2021-22 fiscal.

Apart from China and India, Bangladesh saw a rise in foreign investments from several countries including Norway, Singapore, Japan, Sri Lanka, Turkey and Malaysia. Of them, an investment of USD 90 million came from Norway, which was just USD 10 million in the previous year. Investments from Singapore also rose to USD 90 million in 2023-24 fiscal from USD 50 million in the previous fiscal.

A study published by the Centre for Policy Dialogue (CPD) last month says corruption has long been the main challenge in running businesses in the country. This year too, around 17 per cent of the business owners identified corruption as the main hindrance to run a business in the country
The United Kingdom has the highest investment in the country compared to other countries. Bangladesh received investments of USD 506.5 million in the last fiscal too, the highest from any country. However, it was slightly lower than the total UK investments in Bangladesh in the previous fiscal. Bangladesh received investments of USD 507.9 million from the UK in 2022-23.

According to the BB report, the readymade garment (RMG) sector draws the highest amount of foreign investments. However, foreign investment in the sector dwindled by 18.16 per cent to USD 440 million in the last fiscal.

The RMG sector is followed by the banking sector with an investment of USD 230 million, chemical and pharmaceutical sector with USD 120 million, gas and petroleum sector with USD 120 million, USD 100 million in the telecommunication sector, agriculture and horticulture with USD 60 million and the leather industry with an investment of USD 50 million. All these sectors, except the chemical and pharmaceutical and agriculture sectors saw a decline in foreign investments as compared to the previous fiscal.

As a consequence of the fall in the FDI, new investment (equity) and reinvestment also declined. Only 45 per cent of the total USD 1.46 billion of foreign investments last year was new investment. The rate of new investment inflows has been declining for the last two fiscal years.

Meanwhile, a total of USD 610 million was reinvested in the 2023-24 fiscal, which was USD 790 million in the previous fiscal.

Local and foreign businesspersons doing business in Bangladesh say it conveys a negative impression to investors when those who have been running businesses in the country for a long time are in trouble. If the overall business is improved, then it will be easier to draw more foreign investments.

A study published by the Centre for Policy Dialogue (CPD) last month says corruption has long been the main challenge in running businesses in the country. This year too, around 17 per cent of the business owners identified corruption as the main hindrance to run a business in the country.

Apart from corruption, the study identified some 17 major challenges, including limited finance, unstable foreign currency rate, high inflation, incompetent bureaucracy, high tax rate and arbitrary policy changes, to run a business in the country.

Speaking to Prothom Alo, chairman of Research and Policy Integration for Development (RAPID) MA Razzaque said, “Investments from China are shifting due to its trade war with the US. China already has vast investments in Vietnam. So there are not that many opportunities there. At the same time, due to geopolitical reasons, there won't be much Chinese investments in India. Even the Indian government won’t show much interest. So, considering everything, there is a good opportunity to increase Chinese investments in Bangladesh.”

MA Razzaque said, “Foreign investments will increase in the next two or three years if four or five things are done sincerely. First, the forex reserve must not decline any further. Second, an uninterrupted gas and electricity supply must be ensured. Third, instead of 100 economic zones, we should focus on the reform of one or two zones to convey a message to the investors that we are ready. Besides, a one-stop-service should be introduced to settle business related disputes.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu.​

 

[Saif]

Boosting trade efficiency through automation

In today's fast-paced global economy, automation and innovation are two major forces driving transformative changes in international trade and commerce. Regrettably, Bangladesh's trade ecosystem remains hamstrung by a lack of automation and bureaucratic inefficiencies, as highlighted in a recent st

thefinancialexpress.com.bd

Boosting trade efficiency through automation
FE
Published :
Dec 17, 2024 00:41
Updated :
Dec 17, 2024 00:41

In today's fast-paced global economy, automation and innovation are two major forces driving transformative changes in international trade and commerce. Regrettably, Bangladesh's trade ecosystem remains hamstrung by a lack of automation and bureaucratic inefficiencies, as highlighted in a recent study by the Bangladesh Institute of Bank Management (BIBM). The study conducted on banks involved in trade facilitation reveals that heavy dependence on physical documents (reported by 70 per cent of respondents) and a lack of automation (highlighted by 80 per cent) create significant obstacles for export-import trades from Bangladesh. The study underscores that the lack of digitalisation in trade services not only hampers efficiency but also increases the likelihood of errors and delays. Furthermore, manual operations provide opportunities for misuse and reduce the transparency necessary to attract and retain global trade partners. Other concerns include price verification for letters of credit (LC), complex regulatory frameworks, and restricted access to global trade finance networks - all of which erode confidence in the system and impede progress.

For example, one of the pressing challenges for exporters is navigating the complexities of the Harmonized System (HS) Code, a standardised classification system for traded goods. The lack of clarity in HS Code allocation has become a significant hurdle, often leading to unnecessary delays, financial burdens, and even harassment. Exporters allege that they often face demands for bribes from customs and tax officials under the pretext of HS Code compliance and document verification. These unethical practices not only create procedural bottlenecks for exporters but also tarnish the credibility of public institutions. The BIBM study pointed out that the taxation issues could be resolved by simplifying and harmonising tax codes and adopting automation. By integrating advanced technologies into customs and taxation systems, procedural complexities can be reduced significantly. For instance, an automated system could efficiently allocate HS Codes based on predefined parameters, minimising human intervention and the scope for corruption. Such systems could also ensure faster processing of export documentation, enabling businesses to meet tight deadlines and reduce costs associated with delays.

To this end, it is essential for the National Board of Revenue (NBR) and customs authorities to prioritise digital transformation. Simplified and automated processes can foster greater transparency and accountability, ensuring that traders are not subjected to undue harassment. Moreover, automation would align with global best practices, enhancing Bangladesh's competitiveness in the international market. However, automation alone cannot solve the problem. It must be accompanied by policy reforms that eliminate bureaucratic red tape and establish clear, unambiguous procedures. Stakeholders, including exporters, industry associations, and government agencies, must collaborate to design systems that address their specific needs while promoting fairness and efficiency. It will not only alleviate the burdens faced by traders but also pave the way for a more robust and business-friendly environment that benefits the nation as a whole.

Another critical takeaway from the BIBM study is the need to build capacity among stakeholders. Enhancing skills and knowledge is vital for effectively integrating technology and navigating evolving global trade dynamics. Small and medium enterprises (SMEs), in particular, stand to benefit significantly from improved access to trade finance through technological innovations, contributing to inclusive economic growth. Additionally, by fostering inter-agency cooperation and creating incentives to promote professionalism in trade services have been identified by the study as pivotal steps. Stakeholders, including financial institutions, regulatory bodies, and policymakers, would do well in coming forward to implement these reforms.
​

 

[Saif]

Hasina administration did not heed warnings on economy: Farashuddin

The previous government, led by Sheikh Hasina, ignored repeated warnings from experts on various economic issues in Bangladesh, according to Mohammed Farashuddin, a former governor of the country’s central bank..“The Hasina administration did not heed warnings from economists on the lack o

www.thedailystar.net

Hasina administration did not heed warnings on economy: Farashuddin

Mohammed Farashuddin, a former governor of Bangladesh Bank, speaks at a discussion on “World Trade and Bangladesh” organised by East West University in the capital today. Photo: Collected

The previous government, led by Sheikh Hasina, ignored repeated warnings from experts on various economic issues in Bangladesh, according to Mohammed Farashuddin, a former governor of the country's central bank.

"The Hasina administration did not heed warnings from economists on the lack of good governance in the banking sector or rampant money laundering and tax evasion in Bangladesh," he said.

"Rather, the people who brought up such issues became victims of rudeness," he said during a public lecture on "World Trade and Bangladesh" organised by East West University (EWU) at its auditorium in Dhaka today.

The former central bank governor informed that he was prohibited from entering Hasina's residence at Gono Bhaban for six years while he was also banned from Bangabhaban for four years for raising these concerns.

Farashuddin, also chief adviser of EWU, said he wrote to the Hasina administration several times, urging it to address corruption and other economic anomalies, but was ultimately ignored and banned.

Farashuddin further said that he was once one of the closest financial policy advisers to Sheikh Hasina's Awami League government.

Construction costs increased manifold because of corruption and nepotism within the previous administration, he said while demanding punishment for those responsible for cost-overruns in development projects.

He said he fell out of love with the last government because it created discrimination and anarchism.

Farashuddin, also a former vice chancellor of EWU, added that only 10 percent of the country's population controls 85 percent of its wealth, indicating serious discrimination in asset distribution.

He suggested that Bangladesh should develop its cheap labour-based garments industry and go for diversification of exportable goods and the highest level of value addition in the sector.

He said Bangladesh was facing problems with some big conglomerates like Grameenphone and Korean EPZ, but these challenges are being resolved now.

Moreover, foreign direct investment should be attracted with the right policies and strategies, he added.

Farashuddin pointed out that political and social stability are essential to attract foreign investments. He also stressed the need for fair competition in business policies and tax exemptions to create an equitable business climate in Bangladesh.

"Staying in power for 15 years does not mean political stability, which can only happen when all political parties reach a consensus on at least some vital issues," he said.

Addressing the lecture, renowned economist and former professor at Morgan State University in the US MG Quibria emphasised the need for Bangladesh to diversify its export markets beyond Europe and the USA, focusing on neighbouring countries like China and India.

He highlighted the importance of investing in health and education to develop skilled human resources and urged the government to address critical issues like oil, gas and electricity shortages.

Quibria said increased trade restrictions are leading to disrupted supply chains and fragmentation of global trade into US-leaning and China- leaning blocs.

An analysis by the International Monetary Fund suggests that global economies have virtually become separated in three blocs -- the west-leaning bloc, the China-leaning bloc and a tiny non-aligned bloc.

Pointing to how trade between two of these major blocs has fallen significantly, he said the non-aligned countries like Mexico and Vietnam, which are also called "connector countries", have stabilised global trade from falling precipitously.

"These developments may create a very vulnerable position for a small, trade-dependent country like Bangladesh, which has very little say in international discourse," he said.

"All the discussions are taking place between feuding parties outside the UN or WTO," Quibria added.

Shams Rahman, vice chancellor of EWU, also spoke at the lecture.​

 

[Saif]

Taskforce readies strategies to fix economic fault lines

The planning ministry’s taskforce for sustainable development has drafted a report with proposals to fix the economic fault lines identified by the white paper on the economic state of the country and achieve moderate economic growth.

www.thedailystar.net

Taskforce readies strategies to fix economic fault lines
Draft contains 16 chapters with sector-wise proposals

The planning ministry's taskforce for sustainable development has drafted a report with proposals to fix the economic fault lines identified by the white paper on the economic state of the country and achieve moderate economic growth.

The 12-member body, formed to help reshape the economic landscape by stabilising the macroeconomic turbulence, has identified 16 key sectors, including macroeconomic strategy.

The team is set to present short and mid-term recommendations to the interim government this month, according to its members.

The taskforce will also emphasise how the government can curb the existing elevated inflation to alleviate the excessive inflationary pressure on low and fixed-income households.

Led by KAS Murshid, former director general of the Bangladesh Institute of Development Studies (BIDS), the team was announced on September 11 to devise strategies for "re-strategizing the economy and mobilising resources for equitable and sustainable development".

The taskforce was given a three-month deadline to produce its report.

Recently, its members said they have completed their sectoral analysis.

These measures are seen as crucial in light of recent economic downturns complicated by political instability, industrial unrest and natural calamities following the August 5 political changeover.

Besides, the recommendations will come at a critical time for the country as the interim government has suspended the completion of the Eighth Five-Year Plan, scheduled to conclude in June 2025, and halted the preparation of the Ninth Five-Year Plan.

"We won't form any five-year plan. We will just propose a strategic plan for the future economy," said one of the taskforce members, who preferred to remain anonymous.

"The recently published white paper was backward-looking, mainly elaborating on economic mismanagement by the previous government. We, however, are focused on future strategies," the member added.

While the white paper assessed the previous government's actions, the taskforce's mandate is to lay out an economic roadmap for the short and mid-term future.

CHAPTERS IN THE DRAFT

The taskforce's first sector, titled "Rebuilding Economic Foundations: A Strategy for Macroeconomic Stability", outlines how the interim government can restore economic growth and stabilise the economy, which has been struggling with slow growth in recent years.

This chapter addresses pressing macroeconomic challenges, including the country's rising debt burden, which has put additional strain on the national economy.

In October, the World Bank (WB) slashed its forecast for Bangladesh's economic growth by 1.7 percentage points to 4 percent for fiscal year 2024-25 due to "significant uncertainties following recent political turmoil" and "data unavailability".

Similarly, the International Monetary Fund (IMF) also lowered Bangladesh's growth forecast to 4.5 percent by slashing it by 2.1 percentage points.

The multilateral lenders linked the lower growth forecast to political uncertainty, industrial unrest and floods, which have weighed heavily on economic activities.

This figure is the lowest since fiscal 2019-20, when the coronavirus pandemic began. In fiscal 2019-20, GDP growth was 3.4 percent.

The white paper, which was submitted to Chief Adviser Prof Muhammad Yunus on December 1, suggested that Bangladesh's growth figures have been inflated over the years.

The rebuilding economic foundations chapter analyses the debt burden as the country is reeling under pressure from debt servicing.

According to the finance ministry, Bangladesh's foreign debt servicing surged by nearly 31 percent year-on-year during the first four months of fiscal year 2024-25, reaching $1.44 billion in repayments.

The white paper predicted that debt servicing costs will double in the next three years.

Another chapter of the draft report, titled "Infrastructure and Connectivity: A Pathway to Economic Prosperity", evaluates the progress and future viability of mega infrastructure projects that have been central to the previous government's development narrative over the past 15 years.

With the interim government now reviewing whether to continue these projects, the taskforce is expected to recommend policies that can ensure that infrastructure investments contribute effectively to long-term economic prosperity.

The taskforce will also emphasise targeted policy reforms in the health and education sectors, areas identified as key to harnessing the country's demographic dividend.

"Recommendations will be made for both public and private sector improvements to these critical services," the taskforce member said.

The team will also address other issues sector-by-sector, such as trade potential, agriculture, industrial strategy, the potential of state-owned enterprises, climate policy and mitigation, energy policy, financial sector, structural inequality, poverty, vulnerability, social protection, youth, economic governance and digital economy.

The team comprises prominent economists and experts, including Akhtar Mahmood, a former WB official; Prof Selim Raihan of the University of Dhaka; Abdur Razzak, former head of research at the Commonwealth Secretariat; Prof Mushfiq Mobarak of Yale University; and Prof Shamsul Haque of the Bangladesh University of Engineering and Technology.

The other members are Prof Rumana Huque of the University of Dhaka; Nasim Manzoor, former president of the Metropolitan Chamber of Commerce and Industry; Monzur Hossain, research director at BIDS; Fahmida Khatun, executive director of the Centre for Policy Dialogue; AKM Fahim Mashrur, CEO of BDjobs; and Md Kawser Ahmed, member secretary of the General Economics Division of the Planning Commission.​

 

[Saif]

Bangladeshi card spending falls in India, rises in Thailand, Singapore

Credit card spending by Bangladeshi citizens in India has plummeted in recent months while it is rising in Thailand and Singapore, according to central bank data.

www.thedailystar.net

Bangladeshi card spending falls in India, rises in Thailand, Singapore

Credit card spending by Bangladeshi citizens in India has plummeted in recent months while it is rising in Thailand and Singapore, according to central bank data.

This trend, according to industry people, is linked to India's limited visa issuance, which has reduced the number of Bangladeshi patients and tourists visiting the neighbouring country.

In October this year, credit card spending by Bangladeshis in India declined by over 40 percent year-over-year, dropping from Tk 90.2 crore to Tk 53.8 crore, as per the latest data of the Bangladesh Bank.

India's share of total overseas credit card spending by Bangladeshis fell from 16.50 percent in October 2023 to 10.78 percent in the same month this year.

Meanwhile, credit card usage by Bangladeshis in Thailand and Singapore has increased.

Historically, India has been the top destination for Bangladeshi credit card spending abroad. From March 2023 to June 2024, India consistently held the top spot. However, in July this year, the United States surpassed India.

After the political changeover in August and the formation of the interim government, Indian High Commissioner to Bangladesh Pranay Verma in October clarified that India would not resume tourist visas for Bangladeshis anytime soon.

The envoy said that the Indian High Commission in Dhaka was issuing visas only for emergency cases.

In that month, Randhir Jaiswal, spokesperson for India's external affairs ministry, confirmed at a briefing that the country had limited visa operations in Bangladesh and was only issuing visas for medical and emergency reasons.

Consequently, credit card usage by Bangladeshis in India has declined. Instead of India, Bangladeshis are now opting for Thailand, Malaysia and Singapore for medical and travel purposes.

Thailand has now become the second-largest destination for Bangladeshi credit card spending abroad, according to central bank data.

In September, Bangladeshis spent Tk 42 crore through credit cards in Thailand while the amount surged to Tk 57 crore in October, elevating Thailand to the second position and pushing India to third.

Following Thailand, Singapore has seen significant growth in credit card spending by Bangladeshis. In October, Bangladeshis spent Tk 43 crore in Singapore, up from Tk 30 crore in September.

Syed Mohammad Kamal, country manager for Bangladesh at Mastercard, said that visits from Bangladesh to India have dropped by nearly 90 percent due to visa restrictions.

He said very few people are now able to travel to India for medical treatment as patients must obtain written permission from doctors under strict conditions.

Kamal said tourists who previously chose Kolkata are now heading to Cox's Bazar while those who used to visit Mumbai or other Indian cities are now opting for Thailand, Singapore and Nepal.

The Bangladesh Bank report, titled "An Overview of Credit Cards Usage Pattern Within and Outside Bangladesh", collected extensive data on credit card transactions from 44 scheduled banks and 1 non-bank financial institution in the country.

It showed that domestic credit card transactions increased by 7.41 percent in October, amounting to Tk 28.66 crore compared to Tk 26.68 crore in September.

Similarly, international transactions outside the country totalled Tk 498 crore in October, showing an increase of 18.56 percent from Tk 420 crore in September.

Concurrently, transactions made using credit cards issued by foreign entities but utilised within Bangladesh increased to Tk 129 crore in October from Tk 111 crore in September, indicating a considerable increase of 15.89 percent.​