[🇧🇩] Monitoring Bangladesh's Economy

[Krishna with Flute]

Next budget to focus more on revenue

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

www.newagebd.net

Next budget to focus more on revenue
Shakhawat Hossain 25 January, 2025, 23:24

View attachment 13648

Economists want curb on corruption in NBR

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

Finance ministry officials said that they had focused on half a dozen areas to increase the revenue generation in the coming financial year of 2025–26 beginning from July 2025.

Rationalisation of income tax waivers will get top focus along with imposing 15 per cent Value Added Tax on most of the consumer goods, they said referring to the proposed revenue mobilisation target at Tk 5.5 lakh crore in FY2025–26.

Economists said that the finance adviser should also come up with specific proposals to curb revenue leakages and corruption by the tax officials which, according to them, significantly contributes to the falling tax-GDP ratio.

The National Board of Revenue in a report released in December 2024 has calculated that Tk 1,15,056 crore was exempted in direct taxes during FY2021–22, almost 2.9 per cent of the GDP in that financial year.

Of that exempted amount, Tk 71,394 crore or more than 60 per cent is linked to the exemption of corporate income tax.

The overall amount of revenue losses due to exemptions reached over Tk 1,50,000 crore in the past FY2023–24, said the finance ministry officials.

The interim government like the ousted Awami League regime is committed to the International Monetary Fund to reduce the tax exemption under the on-going $4.7 billion loan programme.

Tax exemption has been identified as a major reason for the country’s tax-GDP ratio falling over the last ten years with it dropping below 8 per cent in FY2023–24 from 9 per cent in 2013–14.

The low revenue has been a persistent headache for the successive governments, said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development.

Resource crunch has constrained the government’s ability to allocate adequate fund for social protection amid high inflation prevailing persisting over the past three years, he said, adding that public expenditures on health and education were decreasing.

Revenue shortages also forced the government to rely on borrowing sending public debt to an unsustainable level, according to the ‘Medium-term macroeconomic policy statement from 2024–25 to 2026–27’ report by the finance division.

Economists said that revenue mobilisation measures were taken in the past also but failed to bring much results due to corruption by the tax officials and revenue leakages.

Unless the interim government could effectively curb corruption, there is no guarantee that the proposed tax measures would pay, said former World Bank Dhaka office chief economist Zahid Hussain.

He suggested automation of revenue collection as a step to check corruption helping generate more revenues.

The recently prepared ‘White Paper on the state of the Bangladesh economy’ calls the revenue board’s automation measures half-hearted and says that the half-baked steps are a major barrier to effective revenue generation, deepening inefficiencies and fostering a climate of non-compliance.

One of the most glaring examples in this regard is the lack of integration between the NBR and other relevant government agencies that severely limits the effectiveness of the taxation system, continues the White Paper prepared by the interim government to review the state of the economy for the period of 2009–2024, the tenure of the now ousted Awami League government.

The paper also identifies corruption and weak governance undermining tax revenue, stalling reform and service delivery.

Low tax revenue in the country is driven by weak governance, widespread corruption and a lack of trust in how tax revenue is used. Corruption, particularly in tax administration, has led to widespread tax evasion and poor compliance, adds the White Paper.​

That is one part but what about textile business quitting BD for India?

 

[Bilal9]

That is one part but what about textile business quitting BD for India?

What about it?

Back in August of last year - Indian trade rags were claiming

"India could gain 6-8% of Bangladesh’s monthly ready made garment (RMG) export orders in the short term and 10% in the long term, presenting an opportunity of increments of $200-250 million and $300-350 million respectively, rating agency CareEdge Ratings said Thursday."

Read more at:
India set for export order increase on the back of Bangladesh turmoil

But Bangladeshi exporters weren't sitting around.

"(Bangladesh) garment exports from July to November increased by 16.25 percent compared to the same period last year to $16.11 billion. According to industry insiders, garment exports will increase in the new year 2025."

2025 starts with a great vibe for Textile and Apparel industry - RMG Bangladesh

The year 2024 was a critical one for the country’s garment industry. As the market starts to recover, there is a new ray of hope in the new year. Energy and dollar crises, supply chain disruptions, workers’ demands for higher wages, political uncertainty, and lax law and order—all of these...

rmgbd.net

In fact the pent up demand for Bangladesh apparel exports caused a bounce back beyond expectations. There is a reason why Bangladesh has second place globally in all this, and India has 7th place. Apparel Factories in Bangladesh are huge places, their scale surpasses India's sweatshops in any state. India does not have the wage structure to compete with Bangladesh.

"Despite the unrest and dissatisfaction, Bangladesh’s ready-made garment sector has achieved growth in production and exports in the last 6 months. In the first half of the current 2024-25 fiscal year (July-December), garment exports from Bangladesh were worth $19.8877 billion."

Apparel exports exceed $19bn in July to Dec’24 - RMG Bangladesh

Despite the unrest and dissatisfaction, Bangladesh’s ready-made garment sector has achieved growth in production and exports in the last 6 months. In the first half of the current 2024-25 fiscal year (July-December), garment exports from Bangladesh were worth $19.8877 billion. Earlier, apparel...

rmgbd.net

 

[Saif]

Foreign loan surge in December brings some relief

A big chunk of foreign funds was provided as budgetary support from the World Bank and the Asian Development Bank (ADB) in December released $1.1 billion, leading to a rise in foreign aid disbursement and providing some relief to the government.

www.thedailystar.net

Foreign loan surge in December brings some relief

A big chunk of foreign funds was provided as budgetary support from the World Bank and the Asian Development Bank (ADB) in December released $1.1 billion, leading to a rise in foreign aid disbursement and providing some relief to the government.

In the last month, the government received around $2 billion while the average for the previous five months was only around $309 million.

In the six months from July to December, total foreign loan disbursement amounted to $3.53 billion whereas it stood at $1.54 billion at the end of November.

The highest amount of loans during the six-month period came from the ADB, amounting to $1.05 billion, of which $600 million came as budget support in December. The World Bank also provided $800 million, of which $500 million came as budget support in December.

Besides, Russia disbursed $532 million, mainly for the Rooppur Power Plant project, while Japan disbursed $441 million, China $268 million, and India $72 million during the six months.

However, despite such a big chunk being disbursed in December, it was not enough to stave off a year-on-year drop of 13 percent in foreign loan disbursement from $4.06 billion.

However, the rise was somewhat offset by the fact that Bangladesh's foreign debt servicing rose 27 percent year-on-year in the first six months of FY25.

From July to December of FY25, the country paid $1.98 billion in principal and interest, up from $1.57 billion in the same period of FY24 due to an expanded foreign loan portfolio and higher global interest rates.

In local currency, the payments increased to Tk 23,675 crore from Tk 17,240 crore, intensifying pressure on public finances.

According to the breakdown, the value of principal payments climbed 33 percent to $1.23 billion while interest payments rose 16 percent to $747 million.

Adding to the fiscal pressures, foreign assistance commitments have fallen precipitously.

In the first six months of FY25, total commitments for grants and loans fell sharply, plunging 67 percent to $2.29 billion compared to $6.98 billion in the previous year.

Loan commitments fell from $6.58 billion to $2 billion while grant commitments reduced to $289 million from $410 million.

With the obligations mounting and foreign commitments diminishing, economists called to renegotiate repayment periods and interest rates as well as prioritise foreign-funded projects.

This combination of rising debt obligations and declining foreign commitments is presenting a huge challenge for Bangladesh's fiscal management amid the lower domestic revenue collection.

"The debt-servicing cost was expected as we are approaching the loan repayment since the grace period is ending," said Mustafuzur Rahman, a distinguished fellow at the Centre for Policy Dialogue, a local think-tank.

"This will definitely create pressure on the foreign currency reserves," he said.

"Although it will be challenging, we should try to renegotiate in terms of both interest rates and repayment periods. The government is also trying to address the issue now," he said, mentioning recent negotiations with China.

However, Rahman added that a more sustainable route was to attract foreign direct investment alongside strengthening the negotiating capacity.

However, Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh, does not believe the burden of debt servicing will pose any risk for the country.

"The debt servicing scenario still does not pose any serious risk as exports and remittances offer a safe cushion that can help the treasury meet its immediate international debt obligations," he said.

As things now stand, payments for the first six months only account for 5.6 percent of foreign exchange earnings from exports and remittances in the corresponding period, which should not be a cause for concern for the interim government, he said.

In the current fiscal year, foreign exchange earnings from exports and remittances are likely to cross $75 billion, which means even if debt servicing obligations reach $4-5 billion, it poses no significant debt default risk for Bangladesh, he said.

Nonetheless, given that the exchange rate is likely to depreciate against the US greenback, the domestic fiscal burden of additional international debt servicing is going to increase, which necessitates that the Ministry of Finance keeps streamlining domestic resource mobilisation initiatives that can offer the government more fiscal space to manage this additional pressure.

However, domestic revenue mobilisation does not offer much hope.

During the July-December period of FY25, revenue collection logged nearly a 0.98 percent negative growth year-on-year, according to sources at the National Board of Revenue.​

 

[Saif]

Bangladesh badly needs economic reforms: Salehuddin

Bangladesh badly needs economic reforms at this moment, said Finance Adviser Salehuddin Ahmed yesterday.

www.thedailystar.net

Bangladesh badly needs economic reforms: Salehuddin

Bangladesh badly needs economic reforms at this moment, said Finance Adviser Salehuddin Ahmed yesterday.

"We are talking about reforms in areas like political reforms, economic reforms, and the electoral process. All are important. But at this moment, we badly need economic reforms," he said.

He made these remarks while speaking at an event marking International Customs Day at the National Board of Revenue (NBR) headquarters in the capital's Agargaon.

Acknowledging the "complexity" of implementing economic reforms, Ahmed said while the task was difficult due to numerous procedural laws and regulations, their proper and transparent application was critical for progress.

"We have some updated systems, but we can't use them properly," he said, pointing to inefficiencies in governance.

The adviser also expressed dissatisfaction with the delayed implementation of the National Single Window, a project initiated in 2017 but only partially launched last month.

He also urged businesses to actively cooperate in enabling revenue collections.

"We don't expect any illogical or illegal demands from you (businesses). You just pay your taxes. I assure you, no one will make unjustified or illegal demands, either officially or through unofficial means under the table," he said.

Ahmed called on the NBR officials to strengthen their efforts to meet revenue collection targets.

"This year is a challenging one, so we want to move forward," he said.

Addressing criticism over rising commodity prices, Ahmed said, "When rice prices increase, it is as if people think they have reached Tk 1,000."

"Prices of some items go up while others decrease. The government is putting in the efforts to address these issues," he said.

Ahmed urged for balanced criticism, adding, "Criticise our shortcomings, but also acknowledge the good work we do."

NBR Chairman Md Abdur Rahman Khan highlighted the agency's use of customs as a trade facilitation tool.

Khan pointed out the reluctance of businesses to maintain proper transaction records to avoid paying the full amount of taxes.

"While rural people and RMG workers have swiftly adopted mobile financial services, businesses are avoiding automation to evade value added tax (VAT) and tax by not keeping transaction records," he said, criticising businesses for their reluctance to adopt automation.

Addressing import-related challenges, Khan highlighted concerns over widespread misdeclaration at the import stage, describing it as a persistent issue.

"Misdeclaration during imports is a significant problem, and we are determined to eliminate this malpractice," he said.

Khan also acknowledged reports of misconduct among some revenue officials and assured that strict measures would be taken to address such behavioural issues.

"We are committed to ensuring accountability, and any misconduct by officials will be met with firm action," he added.

The event was attended by Md Hafizur Rahman, administrator at the Federation of Bangladesh Chambers of Commerce and Industry, and Finance Secretary Khairuzzaman Mozumder.​

 

[Saif]

Experts urge policy reforms to position Bangladesh as regional business hub

Speakers at a dialogue on Sunday expressed optimism that Bangladesh could unlock its full potential as a regional business hub and continue to build on its impressive economic trajectory with the right policy alignment. They sought joint efforts both from the government and private sector to

thefinancialexpress.com.bd

Experts urge policy reforms to position Bangladesh as regional business hub
UNB
Published :
Jan 26, 2025 22:02
Updated :
Jan 26, 2025 22:02

Speakers at a dialogue on Sunday expressed optimism that Bangladesh could unlock its full potential as a regional business hub and continue to build on its impressive economic trajectory with the right policy alignment.

They sought joint efforts both from the government and private sector to collaborate in creating a more favorable environment for Foreign Direct Investment (FDI).

The American Chamber of Commerce in Bangladesh (AmCham) hosted the dialogue on "Policy Alignment to Enhance the Trade and Investment Climate" at a city hotel.

They observed that Bangladesh has made significant strides in improving its trade and investment climate; there is still room for further reforms.

The speakers stressed the need for enhanced coordination between the private and public sectors to address challenges and capitalize on emerging opportunities, especially in sectors like technology, manufacturing, and infrastructure.

Key discussion points included payment issues/compliance between the government and stakeholders, improvements in investment policy, return on investment, turnover tax, tax redemption at the source, the needs of the recycling industry, and creating a more favorable tax environment compared to virgin material imports.

During the discussion, they shared their challenges and suggestions for policy alignment in the foreign trade and investment climate.

Finance Adviser Dr Salehuddin Ahmed, who spoke as the chief guest Chairman, National Board of Revenue (NBR) Md Abdur Rahman Khan attended as special guest.

Executive Director of the Centre for Policy Dialogue (CPD) Dr Fahmida Khatun presented the keynote paper at the dialogue.

The event was consisted with a high level panel discussion with the Finance Adviser, NBR Chairman, Forrest E. Cookson, economist and former AmCham President, Ala Uddin Ahmad, Director - FICCI and CEO, MetLife Bangladesh, Sabbir Ahmed, Country Manager, Bangladesh, Nepal and Bhutan, VISA Worldwide Singapore Pte. Ltd. , Shah Mohammad Mahboob, Executive Member, BIDA, Syed Nasim Manzur, MD - Apex Footwear Ltd. and President, LFMEAB.

Senior officials from Ministry of Power, Energy and Mineral Resources, Ministry of Foreign Affairs, Ministry of Commerce, Ministry of Environment, Forest and Climate Change, Information and Communication Technology Division, NBR, Bangladesh Trade and Tariff Commission, EPB, Petro Bangla, Bangladesh Bank, Dhaka Mass Transit Company Limited, BIDA, BSTI, Bangladesh Power Development Board, BEI, and other regulatory bodies, distinguished guests from the international organizations, and renowned economists attended the roundtable.

AmCham Vice President Eric Walker, Treasurer Mr. Al Mamun M. Rashel and Executive Committee Members Md. Moinul Huq, Rubaba Dowla, and Mirza Shajib Raihan attended the dialogue event, along with several other AmCham members.

Vice President of AmCham Bangladesh and President, Chevron Bangladesh mentioned Bangladesh needs to improve its business environment, infrastructure, and policies to enhance trade and investment competitiveness and align with global sustainability trends.

Fahmida Khatun emphasized revising policies, simplifying taxes, ensuring exchange rate stability, and improving infrastructure to boost trade and prepare for LDC graduation.

Dr Ahmed, in his opening remarks, emphasized the interim government's commitment to fostering an exclusive environment conducive to investment, particularly focusing on FDI.

He outlined how aligning policies across sectors can simplify processes and create a more predictable business environment that attracts international investors.

Khan stressed the NBR's efforts in streamlining tax policies and improving the ease of doing business in Bangladesh, emphasizing ongoing reforms to attract foreign investment and foster an entrepreneurial ecosystem for economic growth.

Additionally, he recommended shifting the focus from customs revenue as the primary income source to more sustainable taxation systems, such as income taxes and VAT.

Ala Uddin Ahmad, Director FICCI and CEO MetLife Bangladesh highlighted that as global trade relationships realign after the new US administration taking office, Bangladesh should look for new opportunities that could never be imagined before.

He also called for treating existing foreign investors equitably so that they do the investment promotion for Bangladesh.

Sabbir Ahmed, Country Manager for Bangladesh, Nepal and Bhutan at VISA Worldwide Singapore Pte, highlighted the need for policy changes to promote digital transactions suggesting that the NBR should align proof of tax return submission requirement with consumer loan and credit card limits above 300,000 BDT.

During the roundtable, Muhammad Imrul Kabir, Corporate Affairs Director at Chevron Bangladesh, highlighted Chevron's 60% contribution to the country's low-cost natural gas and 80% of condensate, addressing a significant amount payment shortfall and seeking support for Petrobangla payment and their onshore development proposal.

The dialogue focused on key topics such as the need for transparent, consistent, and well-coordinated policies across various industries.

Experts and business leaders discussed how policy misalignments often create barriers to investment, particularly for foreign enterprises.

The conversation underscored the importance of aligning fiscal, trade, and regulatory policies to ensure that Bangladesh remains competitive in the global market.

Syed Mohammad Kamal, Country Manager of MasterCard Singapore Holding Pte. Ltd. and former Vice President of AmCham Bangladesh moderated the discussion.​

 

[Saif]

Pathways to economic resilience & growth

Bangladesh, once hailed as the "Next Asian Tiger" and having made remarkable progress in poverty alleviation, export growth, and social development, now faces unprecedented challenges ranging from global economic uncertainty to domestic structural inefficiencies. Over the last 15 years under the pr

thefinancialexpress.com.bd

Reimagining Bangladesh
Pathways to economic resilience & growth
Mahmud Hossain
Published :
Jan 27, 2025 21:13
Updated :
Jan 27, 2025 21:13

Farmers carry bundles of rice grain stalks during the rice harvesting season in Natore, Bangladesh on May 4, 2024 Photo : Xinhua

Bangladesh, once hailed as the "Next Asian Tiger" and having made remarkable progress in poverty alleviation, export growth, and social development, now faces unprecedented challenges ranging from global economic uncertainty to domestic structural inefficiencies. Over the last 15 years under the previous regime, rising inflation, a widening trade deficit, declining remittances, and vulnerabilities in key sectors like RMG and agriculture have placed the economy at a crossroads.

Critics argue that excessive government intervention, protectionist measures, and a focus on large-scale infrastructure projects at the expense of social welfare programs hindered private sector development and limited competition. Furthermore, allegations of corruption and cronyism within the government and its associated businesses are said to have diverted resources away from productive sectors, hindering economic efficiency and discouraging foreign investment. This, coupled with a lack of transparency and accountability in economic decision-making, is seen as having contributed to a less-than-optimal economic environment for Bangladesh.

Amidst these challenges, there lies a promising opportunity to rethink and restructure Bangladesh's economic model for a more sustainable and inclusive future. By embracing innovation, fostering public-private collaboration, diversifying exports, and investing in human capital, Bangladesh can turn adversity into a platform for transformative growth. This article focuses on three major areas to revitalise the economy in this connection, offering a beacon of hope for the future.

SMARTER FARMERS, STRONGER NATION: Being an agrarian country, Bangladesh has made commendable strides in food production over the past few decades. Yet, challenges such as population growth, shrinking arable land, and climate change pose significant threats to achieving long-term food security. Thailand, on the other hand, has emerged as a global leader in agricultural efficiency, leveraging science, technology, and collaboration to transform its farming sector. Bangladesh can benefit immensely by learning from Thailand's experience to achieve self-sufficiency in food production and boost agricultural exports.

Agriculture contributes around 13 per cent to Bangladesh's GDP and employs approximately 40 per cent of the labour force (Bangladesh Bureau of Statistics, 2023). Despite being the fourth-largest producer of rice globally, Bangladesh still relies on imports for key crops such as wheat, pulses, and edible oils. Moreover, inefficient farming practices, limited access to modern technologies, and post-harvest losses-estimated at 25-30 per cent annually (FAO, 2022)-undermine the sector's potential.

Lessons from Thailand's Agricultural Success. Thailand has earned global recognition as the "Kitchen of the World," exporting various agricultural products, including rice, fruits, vegetables, and seafood. The country's success stems from scientific cultivation, innovation, and market-oriented policies. Key lessons for Bangladesh include:
Embracing Technology and Innovation. Thailand's farmers widely use precision farming techniques, a modern farming approach that involves using technology such as satellite imagery, drones, and IoT-enabled sensors to monitor soil health and optimise water usage. In contrast, only 12 per cent of Bangladeshi farmers have access to advanced farming tools (World Bank, 2023). Introducing affordable precision agriculture tools in Bangladesh can increase yields by 20-30 per cent.

Diversification of Crops. While Bangladesh primarily focuses on rice, Thailand has diversified into high-value crops like fruits (durian, mangoes), spices, and flowers, boosting export revenues. Encouraging Bangladeshi farmers to diversify into cash crops such as jute, fruits, and spices can enhance incomes and reduce overreliance on rice.
Public-Private Partnerships. Thailand's government collaborates closely with private enterprises to provide farmers access to markets, financing, and training. In Bangladesh, scaling up PPP initiatives could address infrastructure and supply chain management gaps, making business leaders feel engaged and integral to the economic development process.

Export-Oriented Policies. Thailand has established robust quality control, branding, and certification systems to meet international export standards. Bangladesh's agricultural exports accounted for only 3 per cent of total exports in 2023. This figure could increase significantly by investing in quality assurance and global market access.
Collaboration Opportunities with Thailand. Bangladesh and Thailand share similar agro-climatic conditions, making technology and knowledge transfer highly feasible. Potential areas of collaboration include joint research and development, farmer training programs, agro-processing and value addition, and investment in agribusiness.

ENHANCING FOREIGN CURRENCY REMITTANCE: Our economy relies heavily on remittances from its labour force working abroad, which is a critical foreign currency source. However, most of these workers are unskilled or semi-skilled, and their limited proficiency in English and Arabic often places them at a disadvantage compared to labourers from neighbouring countries. Consequently, they typically earn minimum wages, which reduces their potential contribution to the country's foreign currency reserves.

According to data from the Bureau of Manpower, Employment, and Training (BMET), over 70 per cent of Bangladeshi migrant workers fall into the unskilled or semi-skilled category. While they are industrious and willing to work hard, their lack of communication skills in English or Arabic makes it challenging to secure better-paying jobs. In contrast, workers from countries like India, the Philippines, and Sri Lanka often earn significantly higher wages due to their proficiency in these languages and better training.

For example, a 2022 report by the International Labour Organization (ILO) indicated that Bangladeshi workers earn approximately 20-30 per cent less than their Indian or Filipino counterparts in the Gulf Cooperation Council (GCC) countries. This wage disparity stems largely from the lack of language and soft skills, making it harder for Bangladeshi workers to transition to higher paying roles or to negotiate better terms of employment.

A mandatory three-month condensed training program for outbound workers could bridge the gap. The program would focus on three core areas:

(a) Basic Language Skill. Providing essential communication training in English and Arabic enables workers to communicate effectively with supervisors and co-workers. (b) Skill Refinement. Including a refresher course to polish basic technical or trade-related skills relevant to their job categories, such as construction, caregiving, or hospitality.
(c) Etiquette and Manners. Teaching workplace etiquette, cultural sensitivity, and professional conduct to help workers adapt better to foreign environments.

Since we have a decent facility in our Hajj Camp adjacent to our International Airport, which remains unoccupied during most of the other months of the Hajj season, thee training program could be arranged in the Hajj Camp immediately, leveraging the facility unstill separate institute with proper infrastructure is built.

A well-designed training program could significantly increase the earning potential of Bangladeshi workers abroad. For instance, if such a program helps raise average monthly earnings by 50 per cent, the cumulative impact on national remittance figures would be transformative. In 2023, Bangladeshi migrant workers sent home approximately $22 billion in remittances, according to the Bangladesh Bank. With a 50 per cent increase in average wages facilitated by improved skills and language proficiency, annual remittance inflows could rise to $33 billion.

REVAMPING BIMAN: Bangladesh, with its burgeoning economy and rapidly growing aviation infrastructure, stands at a pivotal moment to transform its national airline, Biman Bangladesh Airlines, into a symbol of national pride and a key regional player. Drawing inspiration from the resounding success of Ethiopian Airlines, this article outlines a roadmap for Biman's revitalisation by leveraging strategic alliances, enhancing operational efficiency, and tapping into nationalistic and diaspora sentiments.

Bangladesh's aviation market is experiencing unprecedented growth. With the completion of new terminals at Hazrat Shahjalal International Airport and other ongoing infrastructure upgrades, the nation is poised to handle approximately 250 million international passengers annually, with an expected annual growth rate of 10 per cent.
However, Biman's market share remains underwhelming, with many passengers opting for foreign carriers due to perceived shortcomings in service quality, fleet modernisation, and network connectivity. So, a comprehensive reform plan centred around aligning with Star Alliance and following the Ethiopian Airlines model could be designed.

Assuming a 10 per cent annual increase in passenger numbers and a gradual market share capture from foreign carriers, Biman's financial outlook over the next five years could be lucrative. For instance, if the market share grows from 20 per cent to 25 per cent within a year, Biman will handle 50 million passengers and its revenue will reach at $1.25 billion (average revenue per passenger of $250).

CONCLUSION: Addressing these key areas requires a multi-pronged approach, encompassing government policies, private sector investment, and international collaboration. Bangladesh can overcome current challenges by embracing innovation, fostering public-private partnerships, and investing in its human capital and embark on sustainable and inclusive economic growth.

The lessons from global success stories-Thailand in agriculture, the Philippines in labour export, and Ethiopia in aviation-provide a roadmap for Bangladesh. With decisive action and a collective vision, Bangladesh can solidify its position as a thriving regional and global economic hub, ensuring prosperity for generations to come.

Mahmud Hossain is CEO, Millennium​

 

[Saif]

Unlocking Bangladesh’s trade and investment potentials

Bangladesh must design and implement robust policy measures to encourage increased trade and investment.

www.thedailystar.net

Unlocking Bangladesh’s trade and investment potentials

VISUAL: REHNUMA PROSHOON

Trade and investment are interlinked, and they can reinforce each other, fostering economic growth, creating employment opportunities, and driving social progress. They also act as critical components of economic framework by generating higher revenues, which can be channelled into developmental initiatives and social protection programmes for underprivileged communities. Therefore, countries must design and implement robust policy measures to create conducive environments, that encourage increased trade and investment.

Bangladesh has transitioned from an aid-dependent economy to a trade-dependent economy over the past decades. The share of foreign aid has declined to less than two percent at present while the shares of export and import are 13.1 percent and 15.7 percent, respectively. However, the opportunities for higher trade remain largely untapped. On the other hand, despite claims of high economic growth by the previous government, investment levels have stagnated over the last decade.

In the fiscal year (FY) 2023-24, private investment constituted 23.5 percent of GDP—lower than the 23.7 percent in FY 2015-16. Public investment showed a modest increase from 6.5 percent of GDP in FY 2015-16 to 7.5 percent in FY 2023-24. Foreign direct investment (FDI) remains a critical concern, as it has consistently accounted for less than 1 percent of GDP since FY 2015-16. In FY 2023-24, FDI was little over 0.3 percent of GDP. These figures highlight the need for urgent actions to unlock the full potential of trade and investment in Bangladesh.

A broad spectrum of factors, that determine export competitiveness and economic attractiveness for investors, influence Bangladesh's trade and investment climate. These factors include the soundness of macroeconomic policies, the strength of economic and political institutions, the functioning of the legal and regulatory framework, the quality of infrastructure and services, the skill sets of human resources, and the level of technological adoption.

The lack of sound macroeconomic policies, a cornerstone for creating a stable and conducive environment for trade and investment, has weakened Bangladesh's macroeconomic stability over the years. It is currently reflected in the country's fiscal and monetary policies, exchange rate, financial and debt situation, affecting growth performance. Governments stimulate aggregate demand and economic activity through a well-managed fiscal policy; for instance, generating employment and enhancing logistics through public infrastructure projects, thus contributing to overall economic efficiency. However, in Bangladesh, the effectiveness of fiscal policy has eroded because of the abysmally low tax collection and mostly questionable, inefficient government spending.

Monetary policy is another vital component. Effective management of money supply and interest rates is crucial for controlling inflation and promoting sustainable economic growth. However, the previous governor of the Bangladesh Bank did not use monetary policy tools to control inflation. He decided to keep the interest rate fixed even when the inflation rate was high to benefit a certain group of businesses and express loyalty to them by sacrificing professional duty. Additionally, exchange rate policies by the Bangladesh Bank during the ousted government's regime were wrong and inadequate, which significantly impacted trade competitiveness and foreign investment. Stable currency management, particularly through a market-driven exchange rate, is crucial to reduce uncertainties, bolster investor confidence and increase exports.

Financial stability is indispensable for macroeconomic resilience. But Bangladesh's financial sector, dominated by banks, has been grappling with various inefficiencies and poor governance. It is reflected in the sector's overall poor performance and high non-performing loans. Currently, the banking sector is undergoing various reforms, but it will take several years to overcome the challenges of the sector. Besides, there is also a lack of diverse financing options and products, including venture capital and credit for small businesses, which can enable economic participation across all sectors.

Moreover, prudent debt management is critical for Bangladesh as its domestic and external debt are increasing. Megaprojects' implementation through foreign loans has not followed the rationale spending path, but has instead led to high corruption, and wastage. As a result, projects became much more expensive than in other comparable countries and the economic return is costly.

All these impact economic growth, which was illogically inflated by the previous government, leading to the weakening of the macro fundamentals, reflected in the lower growth of gross domestic product (GDP). The World Bank has projected Bangladesh's growth to be 4.1 percent in FY 2024-25. Sustained economic growth is essential for job creation and poverty reduction. Therefore, without addressing these issues, Bangladesh's macroeconomic foundation will continue to erode, hampering its trade, investment and development.

Bangladesh also faces significant institutional weaknesses that hinder trade and investment. Institutions such as the Bangladesh Bank and the National Board of Revenue, the Bangladesh Investment Development Authority, the Bangladesh Securities and Exchange Commission severely suffered from political interference all these years, reducing their efficiency and independence. Political institutions captured these economic institutions preventing any meaningful reforms. Besides, overlapping regulations, bureaucratic delays, high compliance costs and a complex, multi-layered legal system deter new businesses and foreign investors and cause inefficiencies.

There are also issues of policy consistency and alignment. Unified and coordinated policies are needed to improve the trade and investment climate. Existing trade and investment policies should be revisited to address gaps and redundancies. There is an anti-export bias in Bangladesh which is reflected through high tariffs. On the other hand, the National Industrial Policy 2022 protects the import-competing industries through various tax exemptions and tax holidays—facilities that are provided even to inefficient sectors. This policy should be reviewed for proper trade promotion.

In addition, the complexity of tax laws should be reduced, so that their predictability would attract long-term investments. Also, Bangladesh should now transition towards a market-based exchange rate system to boost trade competitiveness. Access to finance should be enhanced by diversifying financial products and ensuring affordable interest rates to support both domestic and foreign investors. The infrastructure deficits must be met by increasing energy availability, improving port operations, and upgrading road networks to reduce logistical challenges. As Bangladesh is set to graduate from the least developed country category in 2026, preparation for a smooth graduation should be expedited. The National Tariff Policy 2023 should be implemented to streamline tariff structures and rationalise tariffs.

The export sector should be strengthened through compliance improvements, green transitions, and continued support. The stabilisation of law and order and protection of both domestic and export-oriented industries are urgently needed. Investment in education and skills development is required to overcome the shortage of skilled labour. E-governance through digitalisation should be enhanced in public services and logistics to reduce costs and improve efficiency. It is also important to establish clarity, consistency and continuity of policies to build investor confidence.

Finally, businesses do not start and cannot thrive in an environment lacking sound regulation and market-supporting laws, that are implemented fairly. These are essential "public goods"—which the government must provide to enable trade and business. Corruption, which has become all-encompassing, must be eradicated. Public offices should not be used for private gain—rather they should enable a conducive business environment and meet the needs of the economy and people.

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

 

[Saif]

Growth of economic units slows amid capital shortages

The growth in the number of economic units in Bangladesh has slowed over the past decade, primarily due to capital shortages among rural entrepreneurs, according to the latest Economic Census of the Bangladesh Bureau of Statistics.

www.thedailystar.net

Growth of economic units slows amid capital shortages

The growth in the number of economic units in Bangladesh has slowed over the past decade, primarily due to capital shortages among rural entrepreneurs, according to the latest Economic Census of the Bangladesh Bureau of Statistics.

An economic unit is defined as a single establishment or economic household engaged in economic activities for profit, household gain, or indirect benefit to the community.

The total number of economic units in the country stood at 1.18 crore in 2024, marking a 52 percent increase from 78 lakh units in the previous census, conducted between 2001 and 2013.

This is significantly lower than the growth rate of 110 percent that was reported in the previous census, according to the preliminary report of the Economic Census 2024, released yesterday.

This was driven by a slowdown in the growth in the number of economic units in rural areas over the last decade, which dropped by nearly two-thirds compared to the previous decade.

Between 2013 and 2024, rural economic units grew by 49 percent, reaching 83 lakh. In contrast, the previous census saw a much higher growth rate of 141 percent.

Meanwhile, urban economic growth remained almost unchanged, standing at 58.38 percent in 2024 compared to 58 percent in 2013, reflecting stagnation.

The share of economic units in the manufacturing industry saw a downturn, reducing from 11.54 percent in the past census to 8.77 percent in the latest. In turn, the share of economic units in the services sector saw an uptick, increasing from 88.46 percent to 91.23 percent.

Additionally, the latest survey found that around 94 percent of the unit heads are male while just 6.46 percent are female, down from 7.21 percent in the previous survey.

For the first time, the BBS has introduced some new indicators that highlight problems faced by economic units.

Among the nine challenges identified, nearly 86 percent of entrepreneurs cited a lack of capital as a major problem.

Additionally, 34 percent reported difficulties in accessing easy loans.

"The number of entrepreneurs is higher in rural areas than in urban areas. But rural entrepreneurs face discrimination in accessing capital," Planning Adviser Wahiduddin Mahmud said while speaking as the chief guest at the report launch event in Agargaon.

He explained that while urban business tycoons secure loans and often default, rural entrepreneurs struggle to access financing for their businesses.

He used Beximco Group as an example.

"They have grown rich overnight based on loans. They have nothing other than loans. Now most of the factories are closed. The government is running their operations," he said.

"There is no shortage of entrepreneurs in Bangladesh, but access to capital remains a real challenge," he added.

Furthermore, job opportunities in rural areas have shrunk over the 11 years since 2013, reflecting a lack of growth in non-farm activities.

The census reveals that 56.82 percent of 3.07 crore people were engaged in economic activities in rural areas in 2024, down from 61.23 percent in 2013.

However, the number of people involved in economic activity increased overall during this period as the economy expanded, leading to an increase in the number of economic units, the BBS stated while launching the census at its office yesterday.

On the other hand, urban areas have created more economic opportunities since 2013. The BBS reported that 43.18 percent of people were engaged in economic activities in urban areas in 2024, up from around 39 percent in 2013.

In urban areas, the number of people involved in economic activities stood at 1.32 crore in 2024, with Dhaka Division accounting for 89 percent of the total. Chattogram ranked second, followed by Rajshahi.

Overall, the BBS found that 70.27 percent of economic units operate in rural areas, while 29.73 percent are located in urban areas.

Dhaka Division hosts the highest number of economic units, totaling 32.1 lakh, contributing 27.03 percent of the total in 2024, up from 24.23 percent in 2013.

Additionally, the country has 116,978 e-commerce economic units, with Dhaka hosting the largest portion of around 47.42 percent or 55,474 units.​

 

[Saif]

‘Economy was more dire than people thought’

Finance adviser talks about govt’s 3 strategies to ease economic strain

www.thedailystar.net

‘Economy was more dire than people thought’
Finance adviser talks about govt’s 3 strategies to ease economic strain

Photo: Prabir Das/Star

The interim government has an uphill task of fixing the economy it inherited from the Awami League government of 15 years, said Finance Adviser Salehuddin Ahmed.

"When the interim government assumed power, it inherited a problem-driven economy -- the situation was more dire than people thought," he told The Daily Star in an interview on Monday.

There were external problems, but the underlying domestic issues were even more acute: the foreign exchange reserves were depleting rapidly, inflation was stubbornly high and the balance of payments was negative.

"Even though we are not in the situation where we want to be, things are improving."

The new government inherited another big problem: outstanding letters of credit dues of upwards of $4.5 billion.

"Without touching the foreign exchange reserves, the new government repaid it, and the outstanding amount dropped to $400–500 million."

The foreign reserves are stable now, said Ahmed, also a former governor of Bangladesh Bank.

The interim government has adopted a three-pronged approach to steadying the ship: raising the buffer stock of food, ensuring steady stream of liquidity for businesses and creating jobs through realignment of the annual development programme (ADP).

He said the government has been able to steady the wobbly banking sector and ward off a complete collapse of the system.

"The situation was so dire that there was widespread fear that banks could run out of money anytime. It is rare for a bank to be emptied by a few individuals -- no country in the world has experienced such a phenomenon."

Some banks are rebounding, including Islami Bank and Social Islami Bank. The two banks were controlled by the Awami League-affiliated S Alam Group.

The strong remittance inflow has provided some relief to the Shariah-based banks, helping them to revive their health.

"We have implemented targeted measures for the banking sector so that savers do not lose confidence. The central bank provided over Tk 20,000 crore to the banks and now people are no longer struggling to get their money back."

The new governor is trying but the mismanagement and poor decisions of the previous regime have created a deep-rooted problem that is hard to fix, Ahmed said.

For instance, a huge volume of defaulted loans has been stuck in the courts for a long time.

"The backlog in the courts is enormous. If this continues, the situation will only get worse."

Immediate actions such as a special judicial bench are needed to resolve the pending cases quickly.

"But this requires focused attention and significant effort. I will sit with the law adviser and the chief justice soon and urge them to launch a special bench for clearing these backlogs."

The government has stopped the provision of giving amnesty to black money though the system still contains ways to legalise undeclared wealth.

For instance, people are selling properties for prices far higher than their registered value.

This creates massive amounts of unaccounted money, which are funnelled into buying cars, appliances or other assets.

"This creates a system where black money thrives -- we will try to address this."

Regarding corruption in government projects, he acknowledged that the menace still remains.

"We are trying to tackle this, but it's not easy. The same old players remain in the system under new names, making real changes difficult."

Asked about the grievances of the White Paper Committee about the government's failure to implement the recommendations, he said: "We will review their suggestions within the next two to three months, but some of them have been addressed."

For example, the government has established task forces to bring back billions of dollars siphoned out of Bangladesh and has sought international support where necessary.

The interim government is also trying to fix the tax system, which is responsible for one of the lowest tax-to-GDP ratios in the world.

The previous government has issued several statutory regulatory orders to benefit certain firms and individuals, Ahmed said.

"After coming to power, we cancelled the SROs. We are separating the tax policy from the tax administration. In 2008, the government tried to do this but failed. I know some officials are standing in the way -- who wants to give up power? But I will implement it before I leave."

Ahmed blames the persistently high inflation on supply-side issues.

"It's not that essentials are unavailable -- they get stuck in one place without being distributed."

He pointed out that even officials like consumer rights officers or magistrates can't bring about meaningful changes alone. Extortion during transportation of goods is also raising costs, which is fuelling inflation.

Regarding the recent increase in value-added tax and supplementary duties, he said the tax rate has already been brought down for several goods and services that are widely consumed by the general public.

"The rest do not affect the general population. For instance, the VAT on biscuits priced above Tk 200 per kg is logical. Whoever buys biscuits that cost Tk 200 per kg has the ability to pay VAT."

Asked about the ADP, he said the interim government will focus on local roads and culverts to boost rural job creation.

It will not take on any sophisticated project but continue with existing mega projects such as the deep-sea port, he said, adding that the ADP budget may be pruned by about Tk 50,000 crore.

"Some people criticise us for not revising the budget introduced by the previous government. Actually, it is difficult to revise the budget in such a short period. Though the budget was not revised, we have cut government costs except for the necessary expenditures."

One such necessary expenditure was vehicle purchase for the Bangladesh Police as 300 of their vehicles were burnt down during the July uprising.

"The next budget will be pragmatic -- it won't be an unpopular budget."

Yet, the much-maligned power sector subsidy will continue. "Otherwise, people and businesses will suffer."

The main targets of the budget will be macroeconomic stability, containing inflation, ensuring energy supply and taking steps for the agricultural sector so that farmers do not suffer, Ahmed added.​

 

[Saif]

Service sector unit growth higher than manufacturing

The country’s service sector-based units grew more than manufacturing units over the past one decade that was also marked by a decrease in female employment...

www.newagebd.net

Service sector unit growth higher than manufacturing
Staff Correspondent 29 January, 2025, 23:32

The country’s service sector-based units grew more than manufacturing units over the past one decade that was also marked by a decrease in female employment.

The past decade also shows dominance of rural area in overall units.

The information was revealed by the Bangladesh Bureau of Statistics at its release of the preliminary findings of the Economic Census 2024 at its office at the city’s Agargaon.

The previous census was done in 2013.

The overall economic units—permanent, temporary and economic households—increased by 40.48 lakh nationwide to 118.77 lakh in between the two censuses.

The service sector-based units grew by a whopping 56 per cent to 108.35 lakh in 2024 from 69.15 lakh in 2013, compared with only 15 per cent growth in manufacturing units to 10.41 lakh in 2024 from 9.02 lakh in 2023.

The share of manufacturing and service units in the 2024 census stood at 8.77 per cent and 91.23 per cent respectively against 11.54 per cent 88.46 per cent respectively in 2013, according to the BBS preliminary findings.

Former World Bank Dhaka office chief economist Zahid Hussain called the trend as ‘not good’ for a country like Bangladesh where formal sector employment is low.

Referring to other countries, he said that the service sector flourished on the back of successful industrialisation.

But the preliminary findings showed that the country was at a crossroad, he said, adding that the findings also proved the emptiness of the development narrative harped by the Awami League regime ousted amid a mass uprising six months back on August 5.

Planning adviser Wahiduddin Mahmud who addressed the ceremony as chief guest said that clearer pictures of the country’s economic status would be available with the release of the final census report.

Referring to the finding that economic units in rural areas are dominating with 70.27 per cent share against 29.73 per cent in urban areas, he said that it was not clear whether the growing business activities in rural areas were linked to poverty or whether employment opportunities were diversified to areas other than agriculture.

He lamented at the findings that 75.812 lakh economic units faced challenges of capital shortage, lack of access to easy loan facilities, want of infrastructure, growing production cost, lack of skilled workers, energy shortage and lack of access to the market.

Respondents identified capital shortage, lack of access to easy loan facilities, want of infrastructure as top challenges with 48 per cent identifying lack of capital as the main problem, while 19 per cent identified lack of access to easy loan facilities and 10 per cent mentioned lack of infrastructure as their main challenges.

The planning adviser remarked that it was an irony that while many entrepreneurs suffered from severe capital shortage, the immediate past regime led the plunder of the country’s banking sector.

The statistical bureau’s preliminary findings also showed that the share of female participation in economic units decreased to 6.4 per cent in 2024 from 7.21 per cent in 2013.

Some 1.1 lakh economic units out of total 1.5 lakh respondent units in the census said that they were involved in e-commerce.

Of those, 37.11 per cent units used e-commerce facilities for customer service, 29 per cent for sales of products and 12 per cent for online transaction.​