Noted economist Prof. Wahiduddin Mahmud has said tightened monetary policy will adversely affect exports of the country as some vital sectors such as knitwear, face hardship in importing capital machinery.
He said since Bangladesh has successfully overcome the difficulties of phasing out of textile and clothing quota system in the post-Multifibre Arrangement (MFA) era, the government must give priority to the knitwear sub-sector and also opt for policies that will facilitate smooth production of apparels, even by curtailing development expenditure in fiscal year (FY) 2006-07.
As demand for Bangladesh's products recorded a surge in the international market, argued Mahmud, the government should not ignore such an opportunity.
"The size of development budget could be made smaller (in the coming financial year). Construction of a road could be delayed, but, since there is a demand for our products, we should increase the capacity of our export base," the economist told a mix group of audience at a city hotel Thursday.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the Development Initiative, a non-profit organisation, jointly organised a roundtable discussion on "Budget, Business and Economic Prosperity" to converse on how should the upcoming budget look like. FBCCI President Mir Nasir Hossain chaired the discussion.
Prof Md Ali Taslim of Dhaka University who was a former chairman of Tariff Commission, moderated the round-table discussion.
In his observation, Prof Mahmud strongly criticised the poor operational performance of the Chittagong seaport, which he termed as the "most inefficient port" in the world.
"A vital infrastructure like the Chittagong port should not be a victim of local politics," Mahmud said, hinting at the disruptions and cancellations of projects aiming at increasing its efficiency and capacity.
Mahmud, also a former adviser to an interim caretaker government, strongly criticised the stagnating situation in power sector.
He said it is not clear why this government did not take any effective initiative to increase power supply. "We now see that the government has lately responded to the proposals for enhancing power generation even at high expenses. This is being done to reap political benefits," he observed.
Mahmud also said no political parties should blend politics and generation of power. "We have to keep power projects out of political purview. This should be a long term plan of any government."
The economist sought a clear guideline in the budget towards some imminent problems, such as recurrence of "monga" (or mild starvation) in parts of the rural areas in the northern districts.
He said many instant actions are generally taken to tackle the problem of "monga" but it has been taking place each year. "Those actions should be covered by budgetary measures," he observed, making a point that such a problem could be solved if comprehensive actions were taken.
Prof. Mahmud said the government might make an upward adjustment of oil price and downsize public expenditure to have a balanced budget. He said the government borrowing increased substantially to finance import of fuel oil and that caused less availability of fund to the private entrepreneurs.
Meanwhile, speakers at the roundtable discussion strongly criticised the government for inefficient expenditure of public money and corruption by tax collectors, and made it clear that citizens would not feel themselves encouraged to make payment of taxes until governance becomes efficient and corruption free, alongwith downsizing of the government itself.
They said none is now willing to bear the burden of an overbloated government and that people do not like to see wastage in the name of development budget.
The speakers, who ranged from traders to academicians, and exporters to chamber leaders, also criticised successive governments' nonchalant attitude towards the non-resident Bangladeshis, who are sending billions of dollars to the country, and said those workers must be rewarded and well treated.
"The net contribution of the development partners has now been dwindled to around US$ 500 million, much lower than what we are receiving as remittance," said Quazi Kholiquzzaman Ahmad, President of Bangladesh Economic Association.
He said it was unfortunate that the developed countries were not contributing as per their pledges to accomplish the much talked-about Millennium Development Goals (MDGs).
He criticised the government for, what he said, not taking proper measures in the light of its Poverty Reduction Strategy Paper in the budget.
Discussants reached a consensus that Bangladesh has one of lowest tax-GDP ratio in the world, but argued there is a huge leakage in the collection of tax and that the quality of public expenditure is poor.
"If the government is downsized, corruption is removed and no money is spent for the perennially loss-making state owned enterprises (SOEs), Bangladesh's existing tax-GDP ratio would go up to around 16 per cent," observed, A. Rouf Chowdhury, a noted businessman.
He criticised the successive governments for not reviewing their budgets after a financial year is gone. "What were the assumptions (of the budget), whether those assumptions worked properly, whether or not the budget goals were achieved and what had gone wrong with that budget, must be reviewed for a better budget in the future," he noted.
Former Securities and Exchange Commission chairman Mirza Azizul Islam advocated for broadening the tax base and bringing non-government organisations (NGOs) under tax net to help raise the tax-GDP ratio from its current 10 per cent.
A FBCCI director Abul Kashem Ahmed said it is a great problem that the government allocated a huge amount of funds for development of different sectors, but none of the sectors achieved even any modest progress.
"If the sectors such as power and water resources were not developed, then where did the money go? We need to know more about those accounts of expenses," demanded Kashem.
Prof. Abu Ahmed said it should not be a mandatory obligation to hold foreign exchange reserve at US$ 3.0 billion at a time when the country needs to support import operations for maintaining the growth tempo of the economy.
He said the International Monetary Fund (IMF) might have wanted to portray Bangladesh as a country capable of meeting the needs of foreign companies for outward flows of their profits. And that is why it might have suggested to the Bangladesh Bank to maintain the foreign exchange reserve at $3.0 billion.
Ahmed said the money could be lent to commercial banks who might pay higher rate of interest than what the BB was earning, putting the amount in foreign banks.
He was critical of the rate of interest as high as 14 per cent, which he said was detrimental to long-term industrial growth.
Former Sonali Bank chairman Mahbub Ullah said there was no option other than downsizing the government and increasing efficiency of public spending to ensure effective utilisation of tax payers' money.
He said if governance improves and corruption is substantially cut, the people will then be willing to pay more taxes.
"We need to stop wastage of public resources in the name of development projects," Mahbub said adding, construction of road islands and dismantling the same later were simply drainage of public funds.