Finance Minister AMA Muhith said the upcoming budget will outline programmes for the next five years, which will boost confidence of businesses and give a ‘signal’ that political stability will prevail.
“I am sure that these plans will be implemented. This is supposed to be a sort of signal that still there is stability,” he said at a pre-budget discussion at the office of Metropolitan Chamber of Commerce and Industry on Friday evening.
The MCCI and Maasranga TV co-organised the discussion, around three weeks ahead of the announcement of the budget for fiscal 2014-15.
The finance minister’s remarks came after a number of businessmen said many shy away from making investment due to weak governance and the fear of political instability.
“The main reason behind stagnant investment is politics. Investment will rise if you can ensure political stability,” Apex Group Chairman Syed Manzur Elahi said.
Elahi, also a former adviser to a caretaker government, said foreign investment will not rise without an increase in domestic investment, which is also important for boosting the government’s revenue collection.
The issue of investment comes to the fore as the country’s economic growth has been stuck at around 6 percent for the past several years.
Centre for Policy Dialogue’s Executive Director Mustafizur Rahman said Bangladesh registered a 1 percentage point rise in economic growth in the past decade. In recent years, it has lost that pace due to sluggish investment.
He said private investment has got stuck at 18-19 percent of gross domestic product against 24-25 percent targeted in the Sixth Five Year Plan. “Private investment has to be increased to scale up economic growth,” Rahman said.
Md Saiful Islam, chairman of Western Marine Shipyard Ltd, said private sector investment fell 4 percent in the outgoing fiscal year, mainly due to weak infrastructure, high utility costs and a lack of efficiency.
He said political unrest in the second half of 2013 delivered a wrong message about Bangladesh for the rest of the world.
“We have come to a relatively stable situation after January 5 elections. Now the government will have to show that the situation is really stable,” he said.
Islam said businesses will feel encouraged to invest if the government improves governance.
Tapan Chowdhury, managing director of Square Pharmaceuticals Ltd, called for a level-playing field for businesses.
“Unfortunately, real businessmen who pay back bank loans regularly are penalised during the tenure of every government. But loan defaulters are encouraged and rewarded,” he said.
Chowdhury said interests on loans of defaulters are waived and principal amounts are rescheduled for a long period. “If these trends continue, private sector investment will not rise.”
Amir Khasru Mahmud Chowdhury, an adviser to the BNP chairperson, said political stability can be ensured only through a credible, free, fair and participatory election.
FINANCING THE BUDGET
The government plans to frame a Tk 249,000 crore budget in the next fiscal year. Of the amount, it aims to collect Tk 149,000 crore as revenue. The rest of the amount will come in the form of foreign aid and domestic borrowing at Tk 27,500 crore and Tk 31,000 crore respectively.
AB Mirza Azizul Islam, another former adviser to a caretaker government, said inflation will rise further due to huge borrowing from the banking sector.
He said inflation hit a record high in fiscal 2010-11 because of higher government borrowing from banks. “Domestic borrowing is costly. It will push inflation up.”
Zahid Hussain, lead economist at the World Bank’s Dhaka office, said speedy implementation of foreign-financed projects will facilitate faster disbursement of foreign aid.
“I don’t think public investment is not rising due to a dearth of funds. The main reason is a slow pace of implementation,” he said.
However, the finance minister said there has been progress in the implementation of the government’s annual development programme. The rate of ADP implementation is 96 percent and it will rise further if there is political stability, he said.
Ahsan H Mansur, executive director of Policy Research Institute (PRI), said revenue collection will not go up unless there is dynamism in the economy.
He suggested expediting reforms in the revenue administration to achieve higher levels of revenue.
PRI Chairman Zaidi Sattar said tariff protection given to safeguard industries catering for the domestic market acts as an impediment to export diversification.
Muhith said local industries will not get much protection once the new VAT law takes effect from July 2015. There are nearly 1,400 items that face supplementary duty; their number will come down to around 170, he said.
Bazlul Haque Khondker, a professor of economics at Dhaka University, said public investments in education and healthcare are on the decline.
He said the number of poor people under social safety net schemes has increased. “Misuse has risen at the same time,” he said.
Binayak Sen, research director at Bangladesh Institute of Development Studies, said the amount that the government pays as monthly allowances for elderly and destitute is not enough.
He also demanded imposing wealth tax.
– Star Business Report