🇧🇩 Monitoring Bangladesh's Economy (3 Viewers)

[Saif]

Challenges on the road to becoming the 28th largest economy​

Investment, both domestic and foreign, plays a pivotal role in fostering economic growth. PHOTO: REUTERS

Bangladesh undeniably stands out as one of the most promising economies in the region. Despite facing resource constraints, the country has made commendable economic and social progress since independence. This success is a testament to the indomitable spirit of the Bangladeshi people, their relentless struggle for survival, and their remarkable commitment, determination, and entrepreneurial spirit. With an average annual GDP growth of six percent since the 2000s, Bangladesh currently holds the 35th position among global economies, and it is projected to become the 28th largest economy by 2030. However, this ambitious journey toward economic advancement is not without its challenges. The critical hurdles on our path include tackling poverty, addressing income inequality, managing high inflation and external debt burden, attracting foreign investment, improving resource mobilisation, addressing foreign exchange shortages, curbing corruption, ensuring the stability of the financial sector, and others.

In recent years, Bangladesh has borrowed heavily to finance various mega projects. Consequently, annual debt servicing has been on the rise, which now constitutes a substantial share of the government's expenditures. According to data from the Bangladesh Bank, the total government debt, comprising both domestic and foreign, reached around the $100-billion mark at the end of June 2023. While some of these projects may yield long-term benefits, the immediate requirements for debt servicing pose a challenge for the government's financial capacity. Currently, Bangladesh has to repay foreign loans ranging from $2-2.76 billion annually, and this amount is expected to rise in the coming years. According to a finance ministry projection, foreign debt repayments, including interests, will reach $4.5 billion in 2025-2026. The increasing external debt service payments are straining the country's foreign exchange reserves.​

​

With an average annual GDP growth of six percent since the 2000s, Bangladesh currently holds the 35th position among global economies. VISUAL: TEENI AND TUNI

Concurrently, debt-service payments are diverting already scarce fiscal resources from critical sectors such as healthcare, education, social assistance, and infrastructure development. While experts argue that Bangladesh's current debt-GDP ratio is not a cause for concern, it shouldn't be seen as a green light for indiscriminate loan accumulation. To secure the nation's economic future, it is crucial for policymakers to prioritise projects by carefully assessing payback periods, thus preventing potential debt traps. Ensuring the efficient utilisation of borrowed funds is paramount to sustaining the economic cycle in the face of challenges.

Investment, both domestic and foreign, plays a pivotal role in fostering economic growth, improving the skills of the local workforce through the transfer of technology, leading to job creation, higher incomes, and improved standards of living. Research shows that to transform Bangladesh into a high-income country, it would need to raise its investment-to-GDP ratio to around 40-44 percent of GDP. Regrettably, private investment has shown little growth, hovering at around 23-24 percent of GDP for the past decade, as reported by the Bangladesh Bureau of Statistics (BBS). We are also lagging behind in attracting foreign direct investment (FDI). While even during the pandemic (2020) FDI flow to developing countries in Asia increased by four percent to $535 billion, according to figures from the UN Conference on Trade and Development (UNCTAD), Bangladesh could not achieve the expected FDI. As per Bangladesh Bank's data for the fiscal year 2023, the nation attracted approximately $3.2 billion in foreign direct investment. The rate of FDI inflow in Bangladesh is only around one percent of GDP, one of the lowest in Asia.


ILLUSTRATION: Salman Sakib Shahryar

It's crucial to recognise that the level of convenience in doing business holds significant importance for foreign investors when deciding where to invest. The ease of doing business and global competitiveness are key factors influencing their investment choices. Investors assess various aspects, including the clarity of existing policies, reliability of government officials, taxation policies, adherence to rules and regulations and, most importantly, the security provided for their investments.

Regrettably, in the case of Bangladesh, investors often express frustration due to bureaucratic hurdles that impede smooth business operations. These challenges include bureaucratic red tape, inadequate socio-economic and physical infrastructure, inconsistent energy supply, corruption, underdeveloped money and capital markets, a complicated tax system, along with delays in decision-making processes. Furthermore, hidden costs related to procedures, policies, laws, and infrastructure significantly impact the overall cost of doing business.

Therefore, in light of the current economic challenges, it is essential to boost investment inflow by making timely adjustments to policies. The government should remove the impediments that are responsible for the high cost of investment and promptly take measures to improve public goods and services, including roads, electricity, gas, water, and sewerage. Additionally, the government should implement business-friendly policies safeguarding the rights of enterprises, workers, consumers, the environment and, most importantly, ensure a stable political environment to attract both domestic and foreign investments.


Bangladesh undeniably stands out as one of the most promising economies in the region. VISUAL: REHNUMA PROSHOON

Bangladesh's export portfolio is primarily dominated by its ready-made garments (RMG) sector. In the fiscal year 2022-2023, the total export from Bangladesh amounted to $55.56 billion, with RMG exports contributing $46.99 billion. Currently, the RMG sector accounts for 85 percent of the country's total exports, with primary destinations being the European Union and the United States. The RMG sector has played a transformative role in shaping our economy, job market, and income, but due to ongoing global geopolitical conflicts, energy price hike, domestic political unrests, currently, the RMG sector is in a sluggish state. Hence, for Bangladesh to sustain its growth trajectory, diversification of the export basket and tapping into new markets is imperative.

Industry insiders say that there are promising export sectors such as pharmaceuticals, bicycles, shipbuilding, leather and leather goods, frozen and live fish, terry towels, furniture, and agricultural products, if the government provides adequate policy support, similar to what is offered to the RMG sector.

According to a finance ministry projection, foreign debt repayments, including interests, will reach $4.5 billion in 2025-2026. VISUAL: TEENI AND TUNI

Foreign remittance is Bangladesh's lifeline. Despite an increasing number of Bangladeshis leaving for jobs abroad, in recent times, the remittance inflow has been decreasing at an alarming rate. In September 2023, migrant workers sent home $1.34 billion—the lowest since April 2020, according to data from Bangladesh Bank. Large remittances are sent through informal channels like hundi despite a 2.5 percent incentive for the remitters through the banking channel. Many argue that the widening gap between official and unofficial exchange rates, lack of motivation, and institutional barriers such as high transaction costs and formalities for sending remittances through formal channels hinder remitter's use of banking services. Currently, Bangladesh is struggling with a prolonged dollar crisis and is compelled to restrict imports due to falling reserves. Remittances play a vital role in growing foreign exchange reserves and economic growth. Hence, an urgent policy focus is required to shift remittances from informal to formal channels.

One of the biggest concerns for the economy is our ailing banking sector, which has, on numerous occasions, been tarnished by unwanted malpractices. It is now an open secret that the country's banking sector has been entangled in a series of scams and irregularities, such as the funnelling of loans worth billions of taka by violating banking rules and procedures to influential people known for lax repayments. Unfortunately, violators of banking norms and regulations are hardly ever punished, and they are allowed to continue to default on loans with impunity. As a result, at the end of FY 2022-23, defaulted loans in the banking sector stood at a record Tk 156,040 crore.

Banks are the lifeblood of the economy; therefore, regulators should take pre-emptive measures to control the current situation before it worsens and gets out of control. A combination of strong policy reforms and good governance in the banking sector is the need of the hour. Measures should include legal action against wilful loan defaulters, enhanced banking regulation and supervision, addressing banking sector weaknesses, tighter criteria for loan rescheduling/restructuring, and improved legal systems to accelerate loan recovery. If enforcement authorities take these measures with the right intentions, Bangladesh will embark on a path to creating a stronger economy.

A vendor sells fish at a market in Dhaka. PHOTO: REUTERS

Over the past decade, Bangladesh has consistently demonstrated impressive economic growth. However, one may ask: has everyone been able to share its benefits equally? The answer, sadly, is "no." The growth has, unfortunately, bypassed the majority of the population while higher-income groups have been its main beneficiaries. The country has experienced a rapid increase in income inequality, with 10 percent of the population owning 40 percent of the national income, while the bottom 50 percent possess only 19.05 percent of GDP. The primary factors which deprive poor and vulnerable people of their most elementary rights—and which lead to greater income inequality—are unequal access to education and employment opportunities, low-wage jobs, unchecked corruption and systemic irregularities (such as those enabling the various scams in the banking sector), tax evasion, money laundering, and so on.

The growing gap between the rich and poor not only hinders sustainable growth but also increases the risk of social and political unrest. As such, it's essential for our policymakers to stop favouring the wealthy and start focusing on fair treatment for everyone. The main goal should be to achieve inclusive growth. We need to address issues like wealth sharing, good governance, and social policies that promote fairness and equality. It may be noted that a society that is happy, equal, and just will always experience peace and prosperity.

Inflation has been adversely affecting the common people in Bangladesh. Prices of daily essentials, including eggs, chicken, onions, potatoes, sugar, and oil, have consistently increased, contrasting with the global trend of decreasing prices. Purchasing daily necessities has become increasingly challenging, as highlighted in a recent report by the World Bank. According to the report, 71 percent of families are being affected by rising food prices. This alarming statistic implies that out of the 4.10 crore families, almost 2.91 crore are facing food insecurity, a matter of grave concern. If the current trajectory of inflation and escalating living costs persists, there is a significant risk of more families falling into poverty.


VISUAL: STAR

Experts say that soaring food inflation rates in the country are linked to flawed government policies, poor market management and the profit-seeking behaviours of certain businessmen involved in syndicates. Moreover, the control of essential commodity imports by powerful businesses has resulted in market monopoly. The government has to address all the underlying reasons behind food inflation through a well-formulated action plan.

The need for continued investment in education and skill development is another challenge that Bangladesh must address. Over the past few years, numerous experiments have been carried out in the name of modernising and updating our primary, secondary, and higher secondary education. Yet, the existing education curriculum is not aligned with industry needs. While educational institutions worldwide emphasise soft skills like team-building, problem-solving, critical thinking, communication, negotiation, and decision-making, our education system is still stuck in the past.

So, often, we hear complaints from the business community about their inability to find skilled workers, leading them to hire foreign professionals due to a lack of efficient local human resources. This not only hampers the country's job market but also increases the strain on Bangladesh's depleting foreign-currency reserves.

Regrettably, our education budget doesn't reflect the urgency of developing human resources. The country spends around two percent of its GDP on education, which is the lowest among South Asian countries. It is high time for Bangladesh to focus on enhancing its education system, ensuring that the workforce is equipped with the skills necessary for the evolving job market. A well-educated and skilled population is not only vital for fostering innovation but also for attracting high-value industries and investments.

It's unfortunate that, even after 52 years of independence, the country's healthcare sector is in shambles. It is shameful that a nation on the path to becoming the 28th largest economy in the world still witnesses a substantial number of its citizens, including politicians, businessmen, and ordinary people, seeking medical treatment abroad each year. This trend reflects a lack of confidence in our own healthcare system. While individuals choosing overseas medical care may argue that they owe no public explanation, the scenario takes a more alarming turn when Bangladeshi leaders and politicians follow suit. Their decision to seek medical treatment abroad is not just a personal matter but a cause for concern, as they bear the responsibility for the development of a robust healthcare system for their fellow citizens.

This prevailing culture needs to be transformed urgently, given its detrimental impact on our hard-earned foreign currency reserves and the nation's image. The government should prioritise and guarantee equitable access to high-quality health services for all citizens. Failing to improve our health sector not only jeopardises the well-being of our population but also threatens to erode the significant economic gains Bangladesh has achieved over the years. Therefore, concerted efforts are imperative to instigate a paradigm shift and ensure that the healthcare system becomes a source of pride and reliability for every citizen, discouraging the need for seeking medical treatment abroad.

Corruption is a global problem, and Bangladesh is no exception to this pervasive issue. While the country holds the 147th position out of 180 countries in the Corruption Perceptions Index (CPI) for 2022, according to Transparency International, it is important to recognise that this ranking does not implicate every citizen in the web of corruption. I firmly believe that the majority of Bangladeshis are honest and possess integrity. Nevertheless, the harsh reality persists that a handful of people within key sectors such as government offices, businesses, healthcare, education, and political institutions are involved in corrupt practices such as bribery, embezzlement of public funds, bank loan scams, money laundering, under/over invoicing, adulteration of food and drugs, and various forms of cheating.

It is unfortunate that despite governmental claims of zero tolerance for corruption, there is a disconcerting trend where powerful individuals often escape accountability. It should be noted that instances of overlooking or condoning corrupt practices among associates, friends, and political supporters erode public trust, perpetuating a culture where dishonesty might be perceived as justifiable. The need to break free from this complacency is urgent. Holding wrongdoers accountable and instituting stringent measures against corruption are imperative. Currently, the absence of severe consequences for influential figures engaged in corrupt activities not only perpetuates a cycle of impunity but also undermines public confidence in the democratic process. It is time to revisit and reinforce our commitment to eradicating corruption.

Effective law enforcement is a critical pillar in ensuring that the corrupt face justice and that the culture of impunity is dismantled. However, punitive measures alone are insufficient, a comprehensive approach that includes legal reforms, institutional strengthening, and increased societal awareness is indispensable to combatting corruption. These measures are not only vital for sustained economic growth but are also fundamental for elevating Bangladesh's standing on the international stage.​

 

[Saif]

Decoding the social dynamics of Bangladesh’s rising middle-class

Bangladesh is rapidly reaching a tipping point, where the country’s middle-class will expand dramatically over the next several years. At present, more than a fifth or about 34 million of the country’s total population belong to the middle-class category (defined as having per capita income...

www.thedailystar.net

Decoding the social dynamics of Bangladesh’s rising middle-class​

Bangladesh is rapidly reaching a tipping point, where the country’s middle-class will expand dramatically over the next several years. ILLUSTRATION: BIPLOB CHAKROBORTY

Bangladesh is rapidly reaching a tipping point, where the country's middle-class will expand dramatically over the next several years. At present, more than a fifth or about 34 million of the country's total population belong to the middle-class category (defined as having per capita income ranging between $2 to $3 per day). This share is likely to reach 25 percent by 2025 and 33 percent by 2030. This means that the size of the country's middle class is likely to increase to around 44 million and 60 million in 2025 and 2030, respectively.

For a lower middle-income country like Bangladesh, one must also realise that the size of the middle-class alone is not what matters the most for economic growth and development. In addition to its demographic size, other dimensions of the distribution of income within the middle-class reflecting the internal heterogeneity and asymmetry of this income group are also important determinants of income growth across time and space. Empirical analysis shows that a "wealthier" middle-class is what positively impacts economic growth the most.

Given the low share of "wealthier" middle-class in Bangladesh, upward mobility between subcategories of the middle-class seems rather difficult. There is also the possibility of downward transition. Besides, an increase of the "floating class" size, which is composed of vulnerable middle-class households that have barely escaped from poverty, has negative impacts on growth. This suggests that, to take full advantage of the dynamics behind the expansion of the middle-class, Bangladesh should design policies that are consistent with the needs of the heterogeneous middle-class households and increase their resilience.

Growth dynamics and middle-class

Analysts identify at least three channels through which the size of the middle-class determines the growth experience of an emerging economy. The first is that the middle-class is where entrepreneurs that foster innovation and growth emerge from. The second highlights middle-class "values" that encourage accumulation of human capital and savings. The third channel emphasises the consumption power of the middle-class that leads to diversification and expansion of markets, which allow for the exploitation of economies of scale in production. In addition, the middle-class may play a key role in better governance. In comparison with the poor, the middle-class may have the ability and power to demand better public service delivery and greater accountability from public officials, and support growth-oriented policies. This suggests that the presence of a strong middle-class in a country should have a significant positive influence on economic growth.

Overall, the expansion of the middle-class is often regarded as a sign of development in a country, resulting in economic prosperity as well as a potential for more social security. Rapid growth of the middle-class clearly has economic consequences; it also has social ones. The middle-class is important for growth as income elasticities of demand of these people are usually greater, especially for durables. Their preference for product differentiation leads to value added in branding. They promote "middle class values" such as hard work, meritocracy, savings, and education. Their impetus to growth is more sustainable than export-led growth. And there is less risk of falling into the "middle income trap". Cross-country empirical evidence shows that a larger middle-class influences consumption growth primarily through higher levels of human capital accumulation.


Empirical analysis shows that a ‘wealthier’ middle-class is what positively impacts economic growth the most. VISUAL: STAR

In Bangladesh, the importance of the middle-class in growth dynamics is likely to occur primarily through its contribution to factor inputs, chiefly human capital. The relationship between the middle-class and the levels of human capital is likely to be robust, positive, and highly significant.

A large middle-class is also likely to be associated with higher levels of savings in the country. The middle-class thus matters for growth in Bangladesh on account of its investments in human capital that is facilitated by steady employment which seems to be a key characteristic of what it means to be middle-class. Thus, a strong middle-class is likely to lead to long-term development of the country by positively affecting the proximate causes of growth. In the process, robust positive impact on consumption growth through schooling will also support increased demand for human capital during the country's industrialisation process.

Specifically targeting the middle-class may help in the fight against poverty, compared with policies that solely aim to help the poor and impoverished. To the extent that the policy-makers would like to nurture the middle-class, the key question is: how should they do so? No doubt, there are many deeply embedded institutional and cultural characteristics that can present difficulties when trying to foster the middle-class. Specifically, existence of strong democratic culture, fair legal traditions, functioning institutions, and good governance can create a rapidly emerging middle-class. In addition, policies to spur the private sector are likely to lead to faster growth of the middle-class. Similarly, policies that promote urbanisation will boost the size of the middle-class. As such, strong evidence exists that a rising middle-class will boost consumption and investment, and be an important driver of economic growth.



Given the low share of ‘wealthier’ middle-class in Bangladesh, upward mobility between subcategories of the middle-class seems rather difficult. VISUAL: COLLECTED

The middle-class has growing expectations regarding quality healthcare, good education, social protection, affordable living, and other social services. They no longer remain satisfied with simply having access to public services; they are increasingly concerned with their quality. The middle-class would demand greater access to high-quality, inexpensive education and healthcare. Providing quality services that the middle-class demands is far more complicated than providing access and this can be a source of friction and conflicts. With rapid growth of the middle-class, the demand for public services soars, the capacity of the government to respond to them also expands, but at a slower rate. This, in turn, may have implications on poverty, assuming that the government is able to meet public demands—it is well-known that the causes of poverty include insufficient access to public services such as education and healthcare, especially for rural inhabitants.

Bangladesh's emerging middle-class can thus be a critical factor because of its potential as an engine of growth. History tells us that those belonging to the middle-class vigorously accumulate capital, both physical and human. So, a stable middle-class can provide a solid foundation for economic progress by driving consumption and domestic demand.

The experience of Brazil and South Korea illustrates major differences in the role of the middle-class. In the 1960s, both these countries had similar levels of income and economic growth rates; but by the 1980s, the middle-class made up only 29 percent of the population in Brazil due to high income inequality. In contrast, South Korea's share of middle-class was 53 percent. The high share of the middle-class enabled South Korea to shift away from export driven growth towards domestic consumption, a transition that did not happen in Brazil. And South Korea progressed rapidly afterwards, whereas Brazil stagnated.



The expansion of the middle-class is often regarded as a sign of development in a country, resulting in economic prosperity as well as a potential for more social security. VISUAL: REHNUMA PROSHOON

Harnessing investment opportunities

Investing in the middle-class in Bangladesh can be an exciting and potentially rewarding venture for investors. The economic opportunities emerge from high growth potential fuelled by various factors, including rapidly rising consumption, infrastructural development, and technological advancements. Investing early in these areas can lead to substantial returns as they mature. Moreover, investing in different lucrative markets provides an opportunity to diversify the investment range which can act as a hedge against potential risks in the investors' overall portfolio.

Moreover, Bangladesh's economy is still in its early stage of development. As the economy progresses, it presents opportunities for investors to expand and reach new, underserved markets. Above all, favourable demographics offer a young and growing population. This demographic trend can translate into increased demand for goods and services, driving further economic expansion and creating investment opportunities in various sectors.

One must also realise that, in the aftermath of the Covid-19 pandemic and adverse global and national developments that have followed afterwards, Bangladesh economy has suffered serious macroeconomic instability which has resulted in high inflation and financial and external volatility over the last two years. This, in combination with other factors, has slowed down economic growth and unemployment is more likely to have risen in the country. The ensuing slow recovery in investment has also cut the pace of structural transformation (from agriculture to higher productivity sectors) in Bangladesh.

Anecdotal evidence shows that productive structural transformation—the shift in employment out of lower productivity sectors into higher productivity ones—has slowed, weakening a key driver of job quality growth that is associated with poverty reduction, falling shares of vulnerable employment and growth of the emerging middle-class in the country. This shows a clear need for improvements in productivity, sustainable structural transformation and expansion of the social protection system to ensure a basic social floor for the poor and vulnerable middle-class of the country.

No doubt, investing in the emerging middle-class dominated Bangladesh economy offers enticing opportunities for growth, but it comes with its fair share of challenges as well. By understanding the potential rewards and risks, conducting thorough research, and maintaining a long-term mindset, investors can harness the growth potential of this dynamic economy. The key will be to invest with caution, along with a well-thought-out strategy to make the most of the emerging opportunities.

Middle-class and social transformation

The middle-class is not only a driver of consumption and domestic demand, its social role is equally important. The middle-class is usually progressive, supports democracy and moderate political platforms. A strong middle-class can, therefore, influence inclusive development through more active participation in the political process, expressing support for inclusive political programmes and electoral platforms.

Although a larger middle-class may imply a happier population—especially for the new entrants—this may also create pressures for better delivery of public services or for more democratic governance as middle-class citizens recognise their potential to bring about positive changes.

However, despite having incomes above the poverty line, some middle-class segments are quite vulnerable. Many of them work in the informal sector, their education and skill levels do not permit them to move up to better occupations, and social protection systems fail to reach these vulnerable groups. Their susceptibility to economic shocks is striking. This vulnerability is especially worrying, since if they have vulnerable incomes and unstable employment, their consumption levels may not support sustainable development and stable social progress.

Usually, the middle-class possesses rising expectations, which follow Hirschman's "tunnel effect". The tunnel effect highlights initial tolerance of increased inequality resulting from uneven economic growth processes on the part of relatively disadvantaged members of society, who, expecting to catch up and benefit in the near future, draw satisfaction from the improved income situation of others. If the moment of catching up does not arrive, initial tolerance may switch, giving way to feelings of falling behind, resulting in social upheaval.

The government's role is to put policies in place to fight the vulnerabilities of the middle-class and benefit from middle-class support. These policies should promote upward social mobility such as quality education, and provide safety nets that protect the vulnerable segments when facing life risks. If high quality of publicly provided services can be ensured, a constituency for comprehensive contribution-based social protection system can be built with support from the middle-class. However, if publicly-provided services are of low quality, the middle-class will perceive themselves as losers in the fiscal bargain and may not be willing to finance the public system.

Inclusive development and middle-class

While the middle-class is highly heterogeneous, its improved economic status could translate into greater ability for the middle-class to engage in public life, exercise their voice, and influence decision-making. However, the key issue is whether this middle-class, if truly empowered, will push for a policy agenda that is well-aligned with the interests of the poor and the vulnerable, disadvantaged and socially excluded communities in Bangladesh.

A larger middle-class is more likely to be associated with more robust democratic institutions, control of corruption, as well as higher public expenditure on education and health. In Bangladesh, the middle-class is promoting increased aggregate demand for higher quality domestic products, in particular processed and diversified food products, thus progressively transforming the economy from a global manufacturing centre (e.g., readymade garments) to a "consumption powerhouse".

A look at the characteristics of the middle-class by measures such as number of children, level of education and incidence of informal employment shows that the middle-class is considerably closer to the poor and near-poor households than to affluent ones in Bangladesh. This resemblance between middle-class and low-income groups could result in support from the former for a range of policies that would also benefit poorer segments of society. Investments in primary and secondary education, universal health coverage and the extension of social protection to the poor and informal workers are all policy areas where the interests of both the middle-class and those belonging to the bottom of the income distribution seem to converge. The question of social protection extension is particularly important, as low level of coverage in Bangladesh threatens large segments of the middle-class to fall back into poverty due to recurrent economic and social volatility.

There are, however, differences between the middle-class and poorer groups in several areas. In particular, participation of the poor households in agriculture is significantly higher than among the middle-class households. Related to this, the difference in urbanisation rates is also high: middle-class individuals are more urban than poorer households. These differences suggest that a number of pro-poor policies, such as investments in rural infrastructure and agriculture and support for small-scale farmers and local food systems, may not get strong support from the middle-class and affluent households. Thus, although a positive association between the growth of the middle-class and a series of positive institutional outcomes is often expected, it is not enough to address rising inequalities to address the specific needs of poorer communities.

People also cite evidence for representatives of the middle-class who are more likely to guard their relative privileges against the incursions of poorer classes than champion alternatives that would help to reduce poverty. The middle-class is often branded as being more concerned with retaining its privileges and remaining loyal to the government that made its social advancement possible than in greater social justice and equality. In fact, the middle-class often helps a regime to maintain the status quo.

Despite these structural limitations of the middle-class, the rising expectations of the expanding middle-class in Bangladesh signal its awakening. The key question is: will this middle-class be the country's agent of change for inclusive development?​

 

[Saif]

On the road to the trillionaire’s club

Today, Bangladesh boasts an impressive GDP size of $455.2 billion, estimated to be the 33rd biggest economy in the world in nominal terms, and is ranked 25th in the world in terms of purchasing power parity (PPP).

www.thedailystar.net

On the road to the trillionaire’s club​

Today, Bangladesh boasts an impressive GDP size of $455.2 billion. VISUAL: TEENI AND TUNI

Today, Bangladesh boasts an impressive GDP size of $455.2 billion, estimated to be the 33rd biggest economy in the world in nominal terms, and is ranked 25th in the world in terms of purchasing power parity (PPP). According to HSBC and others, Bangladesh looks to be on track to become the biggest mover in the economic rankings in the near future—to become the 28th largest economy by 2030 and the 25th in 2035.

In 2019, right before Covid-19 hit, the Asian Development Bank said that Bangladesh had achieved the fastest economic growth in the Asia-Pacific—comprised of 45 countries—in FY2018-19 at 7.9 percent, and could have possibly achieved a growth of 8 percent had the pandemic not hit.

Mastercard recently predicted that Bangladesh will be the second fastest growing economy in the year 2024 among 46 countries—from different regions—that are all fighting hard to recover post-pandemic. I can go on and on about the many impressive economic achievements we have made in recent years, or are on the cusp of making. However, one in particular may stand out from the others. And that is, Bangladesh's dream of joining the trillionaire's club.

As of 2023, the "trillion-dollar club" included only 19 countries of the world. In late 2022, a study released by the American consulting firm Boston Consulting Group (BCG) revealed that Bangladesh was on course to emerge as a $1 trillion economy by 2040 if the country grew at an average rate of 5 percent—powered by a surge in middle and affluent consumers, which could drive the domestic consumer market to become the ninth-largest consumer market in the world, as predicted by HSBC also. With an average annual economic growth of 6.4 percent between 2016 and 2021, achieving an average growth rate of 5 percent sounds more than doable for Bangladesh. And what sounds even more enticing—although perhaps somewhat unrealistic without significant reforms and even luck going our way—is the fact that Bangladesh could realise this impressive milestone by 2030 if it manages to achieve an average GDP growth of 10 percent.


Mastercard recently predicted that Bangladesh will be the second fastest growing economy in the year 2024 among 46 countries. DESIGN: FATIMA JAHAN ENA

Just prior to the 15th Brics Summit, Prime Minister Sheikh Hasina said (in August 2023): "I have a dream; the 170 million people of Bangladesh have a dream. And that is, to become a trillion-dollar economy and a fully developed smart nation by 2041." And that dream, surely, is shared by all Bangladeshis, as the prime minister rightly said. According to the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) president, Bangladesh can achieve that dream much before 2040 because of infrastructural developments, economic growth momentum and confidence and indomitable spirit of local entrepreneurs. And the word confidence is key here.


BCG in its previously mentioned report said that, "consumer optimism in Bangladesh is high. This vital optimism kicked off the virtuous cycle of high growth which Bangladesh has experienced over the last decade." And, similarly, this optimism will be crucial in continuing to turn the wheel of economic growth.

As with all stories, Bangladesh's economic story has not been without its ups and downs. The recent economic climate—both globally and domestically—has created a number of uncertainties. The liquidity challenges facing many of our banks and businesses, the ongoing foreign exchange risks and the tremendous inflationary pressures on ordinary people in particular are, no doubt, driving down confidence. And that is something that only good governance can rectify.



The liquidity challenges facing our banks is a direct result of bad governance. VISUAL: STAR

The liquidity challenges facing our banks, for example, is a direct result of bad governance. When the Awami League came to power in 2009, the amount of defaulted loans stood at Tk 22,481 crore. During its tenure in the government, that amount increased to a mammoth Tk 156,039 crore as of June 2023. This happened despite the government repeatedly providing scope for defaulters to reschedule their loans and allowing for the real amount of defaulted loans to be understated through accounting manipulation which, if calculated properly, might amount to more than Tk 2 lakh crore, according to Selim Raihan, executive director of the South Asian Network on Economic Modelling (Sanem).


Banks have repeatedly given scope and financing to wilful defaulters—directly under the noses of our regulators—many of whom, even a child could correctly guess, had no intentions of repaying their loans. As a result, the banking sector has not only failed miserably to optimise resource allocation—which, under ideal conditions, is a key function of the banking sector of any economy—but it has done quite the opposite by diverting resources towards the most unproductive and unrewarding (for the majority of people) ventures.


Bangladesh is now home to a younger population relative to most peer economies with a median age of 28 years. PHOTO: COLLECTED

Parallel to this, the immense capital flight that has happened from Bangladesh highlights that much of the funds have directly been siphoned out of the banking sector and straight out of the country, which is the worst thing that could have happened to the economy. The downgrading of Bangladesh's banking sector by Moody's as a spillover effect of this means financing for Bangladeshi businesses and investment becomes all the more difficult.

In 2022-23, private investment-to-gross domestic product (GDP) ratio stood at 23.64 percent. If the private sector is to deliver us into the trillion-dollar club, then private investment has to be considerably higher than that. However, the issues with our business environment such as too many government red-tapes, extremely high level of corruption, etc. along with the ease of doing business in the country due to a lack of infrastructure or shortage of energy, etc. are hindering the process of increasing private investment. And the fact that private investment has hovered around the same percentage for years suggest that the government has shown little to no interest in fixing most of the issues, except for improving some of our infrastructure.

Similarly, if we take a close look at the rising inflation, we see that the government has not been too keen in doing what is required to bring it down. Even though the initial inflationary pressure may have been driven by global factors, it has become clear now that the current inflation at the very least is down to domestic factors. Therefore, at a time when global prices are going down, prices in Bangladesh have continued to rise beyond control. Yet, officials of the government have continued to scapegoat external factors instead of taking responsibility for their failed policies that have allowed commodity prices to skyrocket. This is putting more and more pressure on not only lower income groups in Bangladesh, but also the middle-class—which accounts for around 22 percent of the country's total population, creating huge opportunities for investors. Should the middle-class continue to struggle and even shrink in terms of the total percentage of the population, investment would most certainly get discouraged.

Aside from existing businesses, to attract new generation businesses, the government must improve the regulatory environment, make policies consistent and modernise many business-related services. And this is particularly important given Bangladesh's demographic dividend—with a growing young population of earners and consumers. Given this growing population and the difficulty providing them with enough quality jobs, surely, we would prefer these young people and their innovativeness to give rise to new and pioneering businesses in Bangladesh.


PHOTO: REUTERS

A huge young workforce is ready to contribute to the high growth of Bangladesh. It is now home to a younger population relative to most peer economies with a median age of 28 years, and more than two-thirds of the total population or 68.4 percent is of working age, meaning around 114 million Bangladeshis are ready to create value through employment. How well we use this massive workforce which is at our disposal will be the most important factor determining our economic future. Hence, the focus of our policymakers will require a big shift.

The government has rightly focused on introducing much greater digitisation in the recent past. However, how that can be best utilised alongside our demographic dividend is yet to be seen. Startups have emerged in Bangladesh significantly over the last decade, with over 1,200 active startups currently providing services focusing on a wide range of industries, including financial technology (FinTech), logistics and mobility, and e-commerce. The government's active role to promote start-ups through the Information and Communication Technology (ICT) Division's flagship venture capital fund Startup Bangladesh is commendable in this regard.

In many ways, over the last decades, Bangladesh's economy has managed to mature quite a bit. One example of this is the industrial sector's share in GDP rising from 22 percent in 2010 to 37 percent in 2022. However, in terms of maturity, the economy still has a long way to go. In that regard, it cannot be forgotten how broadly the economy is actually related to other factors such as politics and institution building.

Despite the many progresses we have made, political maturity has undoubtedly lagged behind. The lack of political maturity in the country had led to democratic backsliding. We have also failed miserably at developing institutional capacity and independence, leading to poor governance. The economy often goes hand-in-hand with these elements, hence, if Bangladesh is to fast-track its journey into the exclusive and coveted trillionaire club, then these issues cannot continue to be ignored.

The lack of political maturity, institutional independence and good governance have led to a group of oligarchs to rise up. Naturally, oligarchical power leads to a rise in monopolies or oligopolies which act as barriers to entry for others and kill innovation and creativity. However, at this point in time, creativity and innovation are exactly what the country needs to go forward and prosper. Therefore, our leaders (whether they be political, business, or thought leaders) need to broaden their vision and realise the need of making (and accepting) changes that will not only benefit individuals at large, but society and the country in general.​

 

[Saif]

The rapid growth of Bangladesh’s economy, and what comes after

Growth has been the constant in the journey of the Bangladesh economy over the last two decades. Starting from 2004, excluding the outlier year of 2020 when the world economy was severely affected by the Covid-19 pandemic, Bangladesh has maintained a growth rate of over five percent or more.

www.thedailystar.net

The rapid growth of Bangladesh’s economy, and what comes after​

The story of economic growth in Bangladesh has two main characters—ready-made garments (RMG) and remittance. Photo: Star

Growth has been the constant in the journey of the Bangladesh economy over the last two decades. Starting from 2004, excluding the outlier year of 2020 when the world economy was severely affected by the Covid-19 pandemic, Bangladesh has maintained a growth rate of over five percent or more. Since 2011, this rate has stayed above six percent as well (excluding 2020), indicating rapid growth that puts Bangladesh in the category of one of the fastest growing economies in the world.

So, what has primarily driven this growth?​

​

The story of economic growth in Bangladesh has two main characters—ready-made garments (RMG) and remittance. Their contribution to the GDP in fiscal year 2023—10.35 percent by the RMG sector and 4.76 percent by remittance—shows that these sectors are vital cogs for the economy. But the picture of their pivotal role is better painted when these sectors' contribution as foreign exchange earners is considered. RMG makes up an overwhelming 84.58 percent of Bangladesh's total exports in FY23. Remittances made up 41.29 percent of export earnings and also contributed to 31.10 percent of import payments, indicating a net gain.

In the background is the steady contribution of the agricultural sector, which has made up 11.20 percent of the GDP in the most recently concluded fiscal year. Historically, especially in the last 20 years when Bangladesh has seen sustained growth, this contribution has slowly declined. This indicates a growth pattern in the economy that has slowly shifted towards industries over agriculture, and the data supports it as well, with contribution of industry (including construction) to GDP rising steadily during this time.

Bangladesh's sustained economic growth makes it one of the fastest growing economies in the region. The Asian Development Bank, in its Asian Development Outlook for 2019, said that Bangladesh achieved the fastest growth among economies in the Asia-Pacific during that fiscal year. In late 2023, according to the annual economic outlook of Mastercard Economics Institute (MEI), Bangladesh was predicted to be the second fastest growing economy among 46 countries, second only behind neighbouring India.


Growth has been the constant in the journey of the Bangladesh economy over the last two decades. VISUAL: STAR

But growth is only part of the picture. The fact that the Bangladesh economy has shown notable prowess in achieving sustained, rapid growth is beyond doubt, but what is its impact on the lives of people? Is this growth going to be enough to face the challenges in the near and distant future?

Dr Selim Raihan, Professor at the Department of Economics at Dhaka University, spoke to The Daily Star about what this economic growth has meant to Bangladesh in real terms.
​

"Growth is necessary, because without growth people's incomes won't grow, overall economic activity won't expand. But the more important question is how this growth is happening, what the sources of growth are. An even deeper question is how inclusive this growth is," he said.

"The sources of growth are heavily driven by export of RMG, remittance, and infrastructural development in recent decades. Agriculture sector development has also helped sustain this growth. But the base of this growth still isn't that strong. In export, we depend on a single commodity, the dependence on remittance is also an issue as the earnings fluctuate from year to year. The economic growth we have experienced in the last two decades will be quite challenging to sustain in the same way going forward. There has been little success in economic or export diversification, large scale foreign direct investment has not been attracted either. We have to find ways to make our economic growth broader based and find new sources of growth," he added.


Bangladesh’s sustained economic growth makes it one of the fastest growing economies in the region. PHOTO: COLLECTED

On the topic of making growth more inclusive, he said, "The story of job creation in Bangladesh is not as strong as the story of economic growth. While poverty alleviation has mostly been successful in our country, the speed at which it should have happened at this time of rapid growth in Bangladesh was never achieved. A big concern is that along with growth, income inequality has also become a bigger problem."

When asked about the future growth prospect of the Bangladesh economy on the back of the last few decades, Dr Rashed Al Mahmud Titumir, Chairman and Professor of Economics at the Department of Development Studies at Dhaka University, said that his models estimate that the Bangladesh economy would reach a trillion dollars in 2033, but only under certain conditions. He referred to the chapter titled, "Towards a Trillion-Dollar Economy: Reflections on and Prospects for Bangladesh at Fifty", from the hitherto unpublished book "Fifty Years of Nation Building: Political Economy of Bangladesh's Development" by the University Press Limited.

The chapter, authored by Dr Titumir and Wahid Haider, a PhD student at Southern Illinois University, Carbondale, "models the growth trajectory of the economy, suggesting Bangladesh would reach the trillion-dollar mark in the year 2033" using the ARIMA (Autoregressive integrated moving average) model. It discusses the conditions and the challenges that Bangladesh will face in making this shift, studying the cases of development in several East Asian and Southeast Asian countries whose economies have developed ahead of Bangladesh in the last few decades.


To achieve development in the mould similar to that of other Asian economies, investment in productive capacity expansion is another factor that needs greater focus. VISUAL: STAR

According to the paper, "...the conditions required for the country to move to the next stage of development remain a challenge. Both necessary and sufficient conditions are precursors for the transformation. Necessary conditions include productive capacity, capabilities, and entitlement, as well as social security. These conditions directly influence an economy's structural transformation. Productive capacity is achieved through industrialisation, diversification, competitiveness, and technological catch-up. Structural transformation is also affected by the capabilities of the labour force. Universal healthcare and education enhance the capability of the labour force. Social security is another factor that denotes structural formation as it is an indicator of healthy living conditions in a country."

The paper mentions the sufficient conditions for achieving the next stage of development as well, which are political settlement and sustainability. It reads, "Political settlement forms citizenship and augments the social contract in the society. Sustainability in the framework incorporates the issue of environment and biodiversity, as climate change threatens the future development of Bangladesh."

To achieve development in the mould similar to that of other Asian economies, investment in productive capacity expansion is another factor stressed upon in Dr Titumir's paper.

"Initial higher investment is required for technological catch-up, since most developing countries do not possess the technologies for the industrialisation. Capital is costlier in developing countries and private investment may fall short. Private investment may also slow down when the return is not high enough or there are certain risks in the economy, lowering the chance of getting the desired return. Hence, initial high public investment can offset much of the cost to private sectors. In Bangladesh, the ratio of private investment to GDP has been on the sluggish side," the paper reads.


Photo: Reuters

In their writing, Dr Titumir and Wahid Haider also focus on public expenditure for capabilities and entitlements.

In terms of where Bangladesh's education sector should be headed, they suggest, "Bangladesh has so far done well in primary education in terms of achieving its objective. It is now time to shift policies to secondary education, which remains below par compared to the countries mentioned here. Enrolment in secondary education in Bangladesh in 2018 was 61 percent whereas in South Korea the rate is 96 percent, and 80 percent in Thailand. The gap between enrolment in primary and secondary education or the drop-out rate currently is 36 percent in Bangladesh, meaning the country is correspondingly losing a skilled workforce. There has also been less focus on technical and vocational education in Bangladesh, evident from a low enrolment rate. The rate of enrolment in TVET (Technical and Vocational Education and Training) programmes in Bangladesh is just 3 percent, whereas the number crosses 15 percent for South Korea. The rate is double in Thailand and Malaysia."

Regarding universal social security, the research observes, "Economic progress becomes sustainable only when it can lift the living standard of the citizens. This has been particularly true for the East Asian countries. While the country was on its path to development, the government in each country simultaneously devised social security plans that would eradicate poverty. A lifecycle based universal social security programme that covers all the vulnerable population will lift the standard of living of the population."

Taking advantage of the growth achieved so far to put Bangladesh on the path of becoming a trillion-dollar economy will require active involvement on the part of the government, according to the paper. "The role of government and its partnership [with intermediaries] is instrumental in defining the development path for Bangladesh. However, that must be a moving process rather than a static one, where the groups that hold onto the power resist change," it reads.

Planning for an expansive economy with long-ranging foresight will be a challenge, and it is a challenge Bangladesh must overcome to sustain the growth it has become famous for, and in the process improving the lives of its huge population.

But at the same time, policymakers will need to ensure necessities are met on a sector-by-sector basis, and every industry with potential and promise needs to be nurtured to become productive. Dr Selim Raihan shared his view of a picture of economic growth that may work for Bangladesh in the future, one where specific industries, initiatives and infrastructural programmes are given proper treatment.

"We have to support products outside RMG so they might create export opportunities. The export zones that are being planned need to be implemented quickly, large scale foreign direct investment needs to be attracted so that it can be put towards diversified manufacturing and different types of services sectors. These things will change the face of the economy in my opinion," he said.

"Of course, the infrastructural development programmes we take on need to be looked at in a holistic fashion. Our tendency still is to go for big infrastructural programmes, but we need to look at some small-scale infrastructure for specific sectors. Many industries have their own problems that need to be fixed. Like the leather industry, and how the CETP (central effluent-treatment plant) in Hemayetpur, Savar is not properly functional.

Without the CETP, the leather sector in this country can't flourish. The agro-processing industry has many issues, with difficulty in acquiring investment, financial assistance from banks, and land acquisition for establishing processing plants, getting utility connections as well. In all of this, skilled manpower is a big issue as well."

"If these things can be addressed, then the face of growth in this country will change, it will become broader based, more inclusive, and more likely to create jobs, and reduce poverty and inequality," he added.

Economic growth is a metric that divulges information about the overall size of an economy, but many important details are left unsaid if the minute details are not studied. Bangladesh's rapid economic growth is a positive, yet relying solely on this metric and pushing for ever-improving numbers here may take attention away from more pressing concerns. Nurturing an inclusive economy, smart investment in necessary infrastructure as well as human capital, finding a political settlement that leads to enhanced productivity, prioritising education with the needs of the economy in mind—these are things that need to be done to grow our economy and for Bangladesh to have a brighter future.​

 

[Saif]

GDP grows 6.07% in July-September quarter

Bangladesh’s economy grew at 6.07 percent in July-September of the current fiscal year, the first time the government has published the quarterly growth figure of gross domestic product (GDP).

www.thedailystar.net

GDP grows 6.07% in July-September quarter​

Govt published the quarterly data for the first time



Bangladesh's economy grew at 6.07 percent in July-September of the current fiscal year, the first time the government has published the quarterly growth figure of gross domestic product (GDP).

The Bangladesh Bureau of Statistics (BBS), the national statistical agency, released the quarterly GDP data in line with the condition of the International Monetary Fund's $4.7 billion loan programme.

The first quarter's expansion was, in fact, a decline by 2.69 percentage points from the 8.76 percent growth recorded in July-September of 2022-23. It was 5.16 percent in the first quarter of 2021-22.

The agriculture sector witnessed a growth of 0.84 percent in July-September while it was 2.07 percent in the same period of FY23.

The service sector's growth fell to 3.96 percent from 12.87 percent while the industrial sector grew 9.67 percent from 7.17 percent.

"The growth slowdown is the reflection of the country's macroeconomic situation," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

"The country has been persistently facing the dollar crisis and an elevated inflationary pressure for a long time."

About the agricultural sector's slowdown, the economist said the seasonal factor has contributed to this situation as agricultural production has been hampered severely.

He pointed out lower production of Aman paddy, potatoes, onion and other vegetables.
"As a result, there is a shortage of supply."

When asked about the performance of the industrial sector, Mansur said exports did not increase as expected. Other manufacturing sectors also saw the same situation.

The economy grew 6.03 percent in the last financial year.​

 

[Saif]

Inflation shoots up to 9.86pc in Jan

Inflation in Bangladesh climbed 45 basis points to 9.86 percent in January, official figures showed yesterday, defying measures undertaken by the central bank recently to bring consumer prices under control.

www.thedailystar.net

Inflation shoots up to 9.86pc in Jan​

Design: Kazi Akib Bin Asad

Inflation in Bangladesh climbed 45 basis points to 9.86 percent in January, official figures showed yesterday, defying measures undertaken by the central bank recently to bring consumer prices under control.

The Consumer Price Index rose 9.41 percent in December, according to the Bangladesh Bureau of Statistics (BBS).

Non-food inflation pushed up inflation last month: it surged 90 basis points to 9.42 percent.

Food inflation fell slightly to 9.56 percent from 9.58 percent.

The higher inflation highlights the continuing cost-of-living crisis facing the poor and low-income groups.

Inflation has stayed over 9 percent since March and at an elevated level since May 2022, owing to the lingering impacts of the coronavirus pandemic and the Russia-Ukraine war.

Globally, central banks pushed their interest rates speedily and sufficiently – many to record highs -- to make loans expensive, thus bringing inflation largely under control. But the BB acted in a cautious manner and insufficiently.

The central bank visibly got down to work in June last year when it raised the policy rate to a record high, scrapped the lending rate cap of 9 percent, and put in place a new interest rate-setting mechanism.

Since inflation showed no signs of cooling, the central bank announced an array of measures in the middle of January.

The central bank raised the benchmark policy rate by 25 basis points to 8 percent to raise the cost of funds. This was the eighth straight spike since the tightening cycle began in May 2022.

It also lowered the private sector credit growth target.

All these measures are aimed at bringing down inflation to 7.5 percent by the end of the current fiscal year.

Analysts described the measures as inadequate.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the supply situation has not improved and the prices of basic items have remained at an elevated level.

"The items that have been seen import duty cuts have also witnessed a spike in prices. There is supply shortage and imports are also lower."

Mansur thinks the central bank's measures are yet to have an impact. "It will take time."​

 

[Saif]

Govt to promote value-added products for post-LDC era

The government is considering further incentives while emphasising ICT and advanced technology in order to increase the production of value-added products as part of preparations for graduation from least developed country (LDC) status, Chairman of the National Board of Revenue (NBR) Abu Hena Md...

www.thedailystar.net

Govt to promote value-added products for post-LDC era​

NBR chairman says


The government suspends an assistant commissioner of taxes (ACT) for allegedly helping taxpayers evade tax through forgery. Photo: NBR website.

The government is considering further incentives while emphasising ICT and advanced technology in order to increase the production of value-added products as part of preparations for graduation from least developed country (LDC) status, Chairman of the National Board of Revenue (NBR) Abu Hena Md Rahmatul Muneem said yesterday.

"The IT sector and car manufacturing sector benefited last year and more opportunities will be given in the future. The work of the government is to create the environment, but you have to implement it," he said.​

​

Muneem made the comments while addressing as chief guest a pre-budget meeting, organised by the Chittagong Chamber of Commerce and Industry (CCCI) at the Bangabandhu Conference Hall of the World Trade Centre in Chattogram's Agrabad area.

He also said that the industries of the country must become self-sufficient and proficient in order to confront the obstacles that come with transitioning from LDC status to the developing country status.

To this end, he emphasised the need for industries to become capable of not only confronting tax and VAT challenges, but also various other obstacles in order to compete in the global market.

He added that the nation would be unable to overcome these challenges if industries which require assistance through tax and value added tax (VAT) rebates were not adequately supported.

He also urged to move into more advanced sectors, saying: "Now is the time to turn our attention to the shipbuilding sector instead of the shipbreaking industry. Bangladesh cannot be the destination of foreign waste."

The CCCI earlier submitted around 12 proposals for the NBR for consideration in the next national budget.

CCCI President Omar Hazzaz, who chaired the meeting, proposed to raise the tax-free income limit for individual taxpayers from Tk 3.5 lakh to Tk 4 lakh considering the current global situation and persistent inflation.

He also proposed to reduce VAT on different goods from 15 percent to 8 percent since businesses and the general public are suffering due to the dollar crisis and inflation.

Managing Director of BSRM Group Aameir Alihussain mentioned that businesses face long delays in getting refunds after paying advance tax and VAT, underlining that businesses urgently need such refunds since they are currently facing a liquidity crisis.

In his speech, Muneem said they were working to solve these problems.

NBR member Md Masud Sadik said some traders were misusing government benefits.

"The government has given duty exemption of Tk 750 crore on various food products in the past year but the benefits have not reached the people. They (traders) have kept the price high, showing various reasons," he said.

Leaders of different business bodies, including the Bangladesh Garment Manufacturers and Exporters Association, Real Estate and Housing Association of Bangladesh, Bangladesh Frozen Food Exporters Association, Shop Owners Association, Clearing and Forwarding Agents Association, Rubber Garden Owners Association, and others also spoke.​

 

[Saif]

Walmart to source more from Bangladesh

Walmart's Executive Vice-President Andrea Albright says in meeting with Salman F Rahman

www.thedailystar.net

Walmart to source more from Bangladesh​

Walmart's Executive Vice-President Andrea Albright says in meeting with Salman F Rahman



Walmart today expressed its interest to work more closely with Bangladesh and procure more items as the US retail giant believes the country is a lucrative destination for sourcing, said Andrea Albright, executive vice-president for sourcing of the company.

Albright made the comment at a meeting with Salman F Rahman, the prime minister's adviser on private industries and investment, at the latter's office in Dhaka.​

​

The executive vice-president added that Walmart has been sourcing garment items from Bangladesh for many years although the volume reduced a bit during the Covid-19 pandemic.

However, the quantity of garment items sourced from Bangladesh will increase soon, she said, hoping that some other products would be added to the existing basket of goods.

Paul Dyck, vice-president of Walmart on global government affairs and business diplomacy, and other senior officials of the company were also present at the meeting, according to a statement from the adviser's office.

During the meeting, Rahman urged Walmart's top officials to source more from Bangladesh and include electronic products, agri products, packaged spices, jute goods, and also garment items made from man-made fibre.

Currently, Walmart is Bangladesh's second-largest international garment buyer after Swedish retail giant H&M. Walmart sources nearly $4 billion worth of garment items from Bangladesh annually while H&M sources more than $4 billion annually.

Rahman also said garment factories in the nation have been maintaining global standards of compliance and that workplace safety has been strengthened.

"Many of Bangladesh's garment factories have passed the world's highest standards of testing," he said.

The adviser briefed them as Bangladesh's economy has been rebounding from the severe fallouts of the Covid-19 pandemic and the Russia-Ukraine war.​

 

[Saif]

Turkish beverage giant Coca-Cola Icecek acquires Coca-Cola Bangladesh for $130m

In a strategic move to strengthen its presence in the South Asian market, Coca-Cola İçecek, the Turkish beverage giant...

www.newagebd.net

Turkish beverage giant Coca-Cola Icecek acquires Coca-Cola Bangladesh for $130m​

United News of Bangladesh . Dhaka | Published: 13:00, Feb 16,2024 | Updated: 22:05, Feb 16,2024

In a strategic move to strengthen its presence in the South Asian market, Coca-Cola İçecek, the Turkish beverage giant, has inked a deal to acquire Coca-Cola Bangladesh Beverages Limited for a whopping $130 million.

The share purchase agreement was signed between CCI, its wholly-owned subsidiary CCI International Holland BV and a subsidiary of The Coca-Cola Company.

The agreement outlines the acquisition of the entire 100 per cent shares in CCBB, with CCIHBV emerging as the primary direct shareholder.

CCBB holds a pivotal role in Bangladesh as one of the key players in the production, sale and distribution of both sparkling and still brands under The Coca-Cola Company umbrella.

As per the terms of the agreement, CCI is set to acquire the complete shareholding of CCBB at an equity value determined by subtracting CCBB’s estimated net financial debt as of the closing date from an enterprise value of $130 million. A post-closing price adjustment mechanism will come into play after a comprehensive closing audit to ascertain the precise net financial debt amount of CCBB as of the closing date.

The acquisition is anticipated to be funded through CCIHBV’s existing cash resources, and it is expected to have a modest impact on CCI’s net leverage. This strategic move not only expands CCI’s global footprint but also underscores its commitment to capitalising on growth opportunities in emerging markets. The acquisition is subject to regulatory approvals and customary closing conditions and is expected to further solidify CCI’s position as a major player in the beverage industry on the Indian subcontinent.
— UNB​

 

[Saif]

Bangladesh seeks DFQF in Swiss market until 2029

Foreign Minister Dr Hasan Mahmud has urged Switzerland to follow suit of the European Union (EU) in extending duty-free and Duty-Free Quota-Free (DFQF) trade preferences until 2029. The minister also invited Swiss investment in IT and agro-processing sectors in Bangladesh, reports UNB. He stresse

thefinancialexpress.com.bd

Bangladesh seeks DFQF in Swiss market until 2029​

FM also seeks Swiss investment in IT, agro-processing sectors​

FE ONLINE DESK
Published :
Feb 13, 2024 13:06
Updated :
Feb 13, 2024 13:06

Foreign Minister Dr Hasan Mahmud has urged Switzerland to follow suit of the European Union (EU) in extending duty-free and Duty-Free Quota-Free (DFQF) trade preferences until 2029.

The minister also invited Swiss investment in IT and agro-processing sectors in Bangladesh, reports UNB.
He stressed on the protracted Rohingya crisis and sought Swiss assistance and support in expediting the Rohingyas’ safe, dignified, and swift repatriation to Myanmar.

Ambassador of Switzerland to Bangladesh Reto Renggli met the Foreign Minister at his office on Monday and praised Bangladesh’s impressive value chain development journey from the 70’s to this day and flagged the scope of supply chain development where the Swiss side could chip in through their food processing machinery industry.

The ambassador reassured continued Swiss humanitarian support to the Rohingyas, recognising the recent border security issues as well.

The foreign minister and the Swiss ambassador shared their views on wars and conflicts in different parts of the world, including in Ukraine, Gaza and the Red Sea and their resultant negative impacts on the economies of the two countries.

Mr. Renggli congratulated Foreign Minister Dr Hasan on his appointment as the foreign minister.

The foreign minister termed the relations between the two nations as historic and strong.

The Swiss ambassador lauded the spectacular socio-economic development of Bangladesh over the last decade.
Mentioning Swiss President’s visit to Bangladesh in 2018 and Prime Minister’s visit to Switzerland in 2023, the envoy termed Bangladesh-Switzerland ties as ‘solid’.

He expressed hope for signing bilateral Air Services Agreement in March and holding the next Foreign Office Consultations in April to advance bilateral relations further.

Switzerland is a steady partner of Bangladesh in promoting key values - good business practices, multilateral cooperation and a vibrant civil society.​

 

[Saif]

Banking reform for whom?

In his speech at the launching ceremony of the fifth edition of the Banking Almanac held at the National Press Club on Saturday, eminent economist Wahiduddin Mahmud made quite a few critical observations on the much hyped banking reform and the recipes the multilateral lenders such as the World Ban

thefinancialexpress.com.bd

Banking reform for whom?​

FE

Published :​

Feb 12, 2024 21:41

Updated :​

Feb 13, 2024 21:45

In his speech at the launching ceremony of the fifth edition of the Banking Almanac held at the National Press Club on Saturday, eminent economist Wahiduddin Mahmud made quite a few critical observations on the much hyped banking reform and the recipes the multilateral lenders such as the World Bank (WB) and the International Monetary Fund (IMF) suggest for Bangladesh. By banking reform he was referring to the roadmap of banking reform the Bangladesh Bank (BB) unveiled last week. Although the roadmap has as many as 17 key issues for the authorities to decide action plans, they can broadly be encapsulated to five. These are reduction of defaulted loans, prevention of anonymous loans and fraudulent activities, developing mechanism for appointment of competent directors, appointment of qualified independent directors and merger of weaker banks with stronger ones.


Referring to his involvement with two bank reform commissions earlier, Dr Mahmud made it amply clear that banking rules and regulations of international order were formulated and had those been included in the Banking Company (amendment) Act, there would be no need for the roadmap. The action plans are mere words instead of strong measures. As for the guidelines put forward now cannot control the damage but may stem future rot. An analysis of the fault lines responsible for rendering the tougher rules and regulations inoperative is essential. Dr Mahmud's example of removal of 70 directors from bank boards, compelling some to repay loans and others opt for voluntary resignation in 2003 due to action by the BB and judiciary serves as a pointer. The question is why such tough measures were not followed up subsequently; rather banking regulations were rendered inoperative or made further relaxed to the advantage of motivated loan defaulters. Their undue influence not only stalled the inclusion of those rules and regulations in the Banking Company Act, but also helped establish their family monopoly in banking business by just purchase of shares of several banks.

How the rules and regulations were systematically tinkered with in the interest of certain coteries is clear from former BB governor Saleh Uddin Ahmed's reference to the advantageous manoeuvring by those involved and the authorities' submission to it. During his time, there was no provision for more than two family members on the board of a bank and their tenure was for three years. The number of family members was raised to four and the tenure to six years and lately nine years. Monopoly at its outrageous! The rescheduling policy that went from 10 per cent of the outstanding loans to 20 per cent and then to 30 per cent has now been slashed to just 2.0 per cent. Similarly, the scheduled time for writing off bad loans has been brought to two years from three years. All these are done purposefully to allow defaulters a leeway and give the balance sheet a fresh and clean look. But in the process loans amounting to billions of taka is gobbled up by the loan sharks.

Clearly, the banking conundrum is there for all to see but the areas requiring urgent attention have been ignored. The roadmap has bypassed the reconstructive surgery in favour of a cosmetic one. Dr. Mahmud stressed the need for inclusion of the written off bad loans in the Banking Almanac in the interest of receiving an authentic picture of the banking sector. His doubt that the merger theory will fall flat seems to be well founded. Why should healthy private banks accept liabilities of a sick one? Incorporation may be the right word in case the sick one is taken over on its asset value. If the national interests are given preference to coterie interests, the problem, however daunting it may look, can be solved.​

 

[Saif]

Saudi investors keen to set up SEZ in Payra

Saudi investors have expressed their interest in setting up a special economic zone (SEZ) at the Payra area in Kalapara upazila of Patuakhali district of Bangladesh. Salman F Rahman, private industry and investment adviser to the prime minister, said this on Tuesday in a press conference at Bangla

thefinancialexpress.com.bd

Saudi investors keen to set up SEZ in Payra​

FE ONINE REPORT

Published :​

Feb 07, 2024 18:13

Updated :​

Feb 07, 2024 18:13

Saudi investors have expressed their interest in setting up a special economic zone (SEZ) at the Payra area in Kalapara upazila of Patuakhali district of Bangladesh.


Salman F Rahman, private industry and investment adviser to the prime minister, said this on Tuesday in a press conference at Bangladesh Investment Development Authority (BIDA) premises in Dhaka after his three-day visit to Saudi Arabia (SA).

The government wants to offer the investment opportunity to the SA for establishing an Economic Zone in Bangladesh, he told the conference.

Their investment minister has also expressed willingness to set up the SEZ in Payra, he said.

Also, Bangladesh is willing to establish a urea fertiliser factory in SA under the ownership of both countries to ensure an uninterrupted supply of the major agricultural input, he said.

“A joint venture fertiliser factory is under consideration which Bangladesh would import entirely after production,” he said.

The Saudi government is interested in moving forward with the proposal and its feasibility study would be completed by March 2024, he added.

There is a scope for private sector investors to join the initiative too, he added.

Bangladesh has sought the cooperation of SA to resolve the ongoing dollar crisis in the country.

“We have requested to allow Bangladesh one year time span, instead of the existing 45 days, to foot the energy import bills due to the dollar crisis. The counterpart assured to consider the request,” he said.

In the IMTC meeting, both countries came to a consensus on several issues including curbing terrorism in the name of Islam, strengthening cooperation between the Islamic countries, condemning of attack in Gaza, and cooperating to resolve Rohingya issues in Bangladesh.

The SA is also keen to invest in food security issues such as the production of vegetables, fish and other food products and import those to their country.

The advisor also discussed on joint research by Bangladesh and SA Rice Research Institute to produce long-grade rice.

Mr Rahman joined the Islamic Military Counter Terrorism Coalition (IMCTC) on behalf of the PM and defence minister.​

 

[Saif]

Roadmap for banking reforms: Implementation is key

Although the roadmap drawn up to reform the banking industry of Bangladesh may seem attractive on the surface, there are questions regarding its efficacy in ensuring good governance in the scam-hit sector.

www.thedailystar.net

Roadmap for banking reforms: Implementation is key​

Although the roadmap drawn up to reform the banking industry of Bangladesh may seem attractive on the surface, there are questions regarding its efficacy in ensuring good governance in the scam-hit sector.

The Bangladesh Bank outlined 17 action plans under the roadmap released on February 4.

The initiative mainly aims to bring down the ratio of non-performing loans (NPLs) to below 8 percent and ensure good governance in the sector by June 2026.

The overall NPL ratio was 9 percent by the end of last year.

The state-run banks accounted for the bulk of the bad loans as 20.99 percent of their disbursed funds had soured by the end of 2023.

As such, the BB has included measures to reduce the NPL ratio of public banks to less than 10 percent within the deadline.

Although most of the action plans and policy reforms already exist while others were added in the Bank Company (Amendment) Act 2023, the governance in the sector is getting worse.

For example, the roadmap shows that the banking regulator will provide necessary instructions to prevent lenders from exceeding the single-borrower exposure limit.

However, the provision is not new as it has existed in the Bank Company Act for more than a decade. Still, exceeding the single-borrower exposure limit has become a regular practice in the banking industry.

Around 89 borrowers of four state-run banks, namely Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank, had exceeded the limit as of June last year, as per a central bank report.

Under the current single-borrower exposure limit, banks are allowed to disburse loans equal to 25 percent of their total capital to an individual client.

Against this backdrop, economists and financial experts said that implementing the existing policies is more important than introducing new ones.

Salehuddin Ahmed, a former central bank governor, recently said regulatory bodies are failing to adequately punish those who do not follow banking laws.

As per the first policy change included in the roadmap, banks are allowed to write off loans that remain in the "bad and loss" category for two years while it was three years previously.

The central bank expects that NPLs will be reduced by Tk 43,300 crore because of the policy change.

However, the fact is that when banks write off bad loans, the figure is hidden from the balance sheet but the liabilities still remain.

Usually, loans are written off only when they are 100 percent provisioned and there are no realistic prospects of recovery. These loans are transferred to the off-balance sheet records.

And although the practice of writing off loans is accepted worldwide, some analysts call it a "window dressing".

He criticised the policy change, saying it would not help reduce the volume of defaulted loans.

The banking sector's defaulted loans climbed 20.7 percent to Tk 145,633 crore in 2023.

A provision in the roadmap allowing weak banks to merge with financially sound ones was welcomed by experts. They, however, focused on visible actions to this effect.

"The central bank should restructure the board and management of the weak banks and conduct a comprehensive audit before allowing mergers," said Ahsan H Mansur, executive director of the Policy Research Institute.

Under the roadmap, the central bank toughened the rules for appointing both shareholder directors and independent directors by fixing age and educational requirements. The regulator also raised the allowance of independent directors.

Former central bank governor Ahmed said the central bank must have enough strength to tackle political interference and pressure from influential groups to implement the roadmap.

In a press briefing in January, BB Governor Abdur Rouf Talukder said the central bank's activities have never been influenced by outside forces.​

 

[Saif]

Lack of trust in financial sector adversely impacting economy

There is a lack of trust in the financial sector of Bangladesh, which is adversely impacting the country’s overall economy, according to economists at discussion.

www.thedailystar.net

Lack of trust in financial sector adversely impacting economy​

Economists say



There is a lack of trust in the financial sector of Bangladesh, which is adversely impacting the country's overall economy, according to economists at discussion.

Against this backdrop, they urged the government and related regulatory bodies to ensure good governance and take punitive measures on all who disobey the guidelines.

These recommendations came during a panel discussion, styled "Transformation of the financial sector: Adapting to constraints", at the Muzaffar Ahmed Chowdhury Auditorium of Dhaka University yesterday.

The discussion was organised by the Economics Study Center in collaboration with the International Labour Organisation as a part of its three-day 5th Bangladesh Economics Summit 2024.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the domestic financial sector comprising banks, the stock market, bond market, and insurance sector has seen less development compared to that of neighbouring countries.

"The financial sector cannot support the real economy due to a lack of good governance," he added.

The economist also said people have lost trust in the financial sector, and that is adversely affecting the overall economy.

"There is a lot of talk about reforms in the banking sector," said Mansur, adding that it is expected that mergers will take place and non-performing loans will reduce but no steps have been taken to this end.

He informed that the actual amount of bad loans accounts for around 24-25 percent of the total loans disbursed. This includes loan repayments that are being held up until the dismissal of related court cases and loan write-offs.

The liabilities of the bad loans are ultimately borne by depositors and good borrowers, Mansur said.

The economist suggested ensuring institutional governance, saying that plans for the banking sector will have to be introduced with political willingness.

Salehuddin Ahmed, former governor of Bangladesh Bank, said everything is now going backwards as the laws and regulations are not being followed but there is no one to punish the offenders.

Firstly, borrowers had to pay 10 percent of their loan to reschedule it but now, they have to pay only 2 percent. If this continues, then influential borrowers will not repay their loans, Ahmed added.

He criticised the latest banking sector reform roadmap, saying it would allow banks to write off bad loans in two years whereas it was three years previously.

Ahmed also urged to bring good governance and accountability to the financial sector.

Lila Rashid, financial inclusion specialist at the Centre for Research and Development, said the financial technology sector lacks a level playing field.

For example, licenses for forming digital banks have been awarded to a particular group, she added.

Kanti Kumar Saha, CEO of Alliance Finance PLC, said there are several laws and regulations in the financial sector, but implementation remains absent.

In response to a query, the PRI's Mansur said the practice of mergers is accepted worldwide and although it is possible in Bangladesh, it could be difficult given the country's political environment.

He said that before any merger, the central bank should restructure the board and management of some weak banks and it will have to conduct a comprehensive audit of the merging firms.

The discussion was chaired by Selim Raihan, a professor of economics at the University of Dhaka.​

 

[Saif]

BB introduces currency swap with banks

The Bangladesh Bank has introduced currency swaps with banks for the first time, a move that will enable the country to meet the net reserve condition set by the International Monetary Fund (IMF) with its $4.7 billion loan programme.

www.thedailystar.net

BB introduces currency swap with banks​

The move is designed to temporarily raise forex reserves


Photo: Star/File

The Bangladesh Bank has introduced currency swaps with banks for the first time, a move that will enable the country to meet the net reserve condition set by the International Monetary Fund (IMF) with its $4.7 billion loan programme.

Usually, the central bank has to buy the greenback if it needs to raise the reserve to meet the condition. Now, it may get foreign currencies from banks for a certain period in exchange for only interest.

A currency swap involves the exchange of interest -- and sometimes of principal -- in one currency for the same in another currency. Companies doing business abroad often use currency swaps to get more favourable loan rates in the local currency than if they borrowed money from a local bank.

A forex swap has two legs or stages: a near leg date and a far leg date.

On the near leg date, one swaps a currency for another at an agreed spot foreign exchange rate and agrees to swap the same currency back again on a future date (far leg date) at a forward foreign exchange rate.

For conventional commercial banks, the central bank said, the taka will be sold in exchange for approved foreign currencies at the spot rate at the near-leg.

At the far-leg, the deal will be settled by applying the same exchange rate with a swap point based on the interest rate differential considering the prevailing benchmark rate of foreign currencies. Here, the three-month term SOFR for US dollars and the policy rate of the BB for the taka will be applicable.


The secured overnight financing rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the Libor (London Inter-Bank Offered Rate).

The SOFR rate presently stands at 5.38 percent while the policy rate in Bangladesh is 8 percent, figures from the Federal Reserve of the US and the BB showed.

The treasury head of a private commercial bank said while the interest rate is flexible in currency swaps with other commercial banks, it is almost fixed in the case of the central bank.

"So, banks will analyse which one is more profitable."

For Shariah-based banks, at the near-leg, the taka will be sold in exchange for foreign currencies at the spot rate. At the far-leg, the deal will be settled by applying the same exchange rate, the BB said.

The swap deal will be executed within the counterparty limit to be set by the Forex Reserve and Treasury Management Department of the central bank.

Each deal will be in multiples of one million of foreign currency, starting from a minimum value of five million and equivalent taka with a tenure of seven days to 90 days.

The rollover may be allowed by applying the prevailing rates, the notice said.

"It seems that the central bank opened an alternative window to raise the foreign exchange reserve without buying dollars from commercial banks," said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

According to the IMF's conditions, the central bank was supposed to keep a net forex reserve of $17.78 billion in December.

However, there was a $58 million shortfall despite the central bank buying over $300 million from several commercial banks.

The reserve must stand at $19.27 billion by next March and $20.11 billion by June as part of the loan programme. However, the net reserve is still below the targets.

Hussain says if a bank had excess or idle dollars, there was previously no provision to keep it in the central bank. So, they had no interest income from it.

"Now, an option has been created to keep those idle dollars with the central bank in exchange for interest if the banks do not need it."

On the other hand, if a bank has excess dollars but a shortage of the taka, it can raise its liquidity in the form of the local currency through a currency swap.

At present, many banks have no excess dollars. On top of that, the demand for the currency is high.

However, there are questions about whether banks will be interested in engaging in currency swaps with the central bank as they can only avail the official rate exchange rate, which is much lower than the actual market rate, according to Hussain.

Banks also have the option to go for currency swaps between themselves and the rate is market-driven.​

 

[Saif]

Govt to promote value-added products for post-LDC era

The government is considering further incentives while emphasising ICT and advanced technology in order to increase the production of value-added products as part of preparations for graduation from least developed country (LDC) status, Chairman of the National Board of Revenue (NBR) Abu Hena Md...

www.thedailystar.net

Govt to promote value-added products for post-LDC era​

NBR chairman says


The government suspends an assistant commissioner of taxes (ACT) for allegedly helping taxpayers evade tax through forgery. Photo: NBR website.

The government is considering further incentives while emphasising ICT and advanced technology in order to increase the production of value-added products as part of preparations for graduation from least developed country (LDC) status, Chairman of the National Board of Revenue (NBR) Abu Hena Md Rahmatul Muneem said yesterday.

"The IT sector and car manufacturing sector benefited last year and more opportunities will be given in the future. The work of the government is to create the environment, but you have to implement it," he said.

Muneem made the comments while addressing as chief guest a pre-budget meeting, organised by the Chittagong Chamber of Commerce and Industry (CCCI) at the Bangabandhu Conference Hall of the World Trade Centre in Chattogram's Agrabad area.
He also said that the industries of the country must become self-sufficient and proficient in order to confront the obstacles that come with transitioning from LDC status to the developing country status.

To this end, he emphasised the need for industries to become capable of not only confronting tax and VAT challenges, but also various other obstacles in order to compete in the global market.

He added that the nation would be unable to overcome these challenges if industries which require assistance through tax and value added tax (VAT) rebates were not adequately supported.

He also urged to move into more advanced sectors, saying: "Now is the time to turn our attention to the shipbuilding sector instead of the shipbreaking industry. Bangladesh cannot be the destination of foreign waste."

The CCCI earlier submitted around 12 proposals for the NBR for consideration in the next national budget.

CCCI President Omar Hazzaz, who chaired the meeting, proposed to raise the tax-free income limit for individual taxpayers from Tk 3.5 lakh to Tk 4 lakh considering the current global situation and persistent inflation.

He also proposed to reduce VAT on different goods from 15 percent to 8 percent since businesses and the general public are suffering due to the dollar crisis and inflation.

Managing Director of BSRM Group Aameir Alihussain mentioned that businesses face long delays in getting refunds after paying advance tax and VAT, underlining that businesses urgently need such refunds since they are currently facing a liquidity crisis.

In his speech, Muneem said they were working to solve these problems.

NBR member Md Masud Sadik said some traders were misusing government benefits.

"The government has given duty exemption of Tk 750 crore on various food products in the past year but the benefits have not reached the people. They (traders) have kept the price high, showing various reasons," he said.

Leaders of different business bodies, including the Bangladesh Garment Manufacturers and Exporters Association, Real Estate and Housing Association of Bangladesh, Bangladesh Frozen Food Exporters Association, Shop Owners Association, Clearing and Forwarding Agents Association, Rubber Garden Owners Association, and others also spoke.​

 

[Saif]

Dollar, energy crises, NPL hold back growth

Businesspeople and economists said on Sunday that extortion, non-performing loans, the gas crisis, and dollar shortages were holding back the country’s private sector growth. They...

www.newagebd.net

Dollar, energy crises, NPL hold back growth ​

Staff Correspondent | Published: 00:12, Feb 19,2024

Businesspeople and economists said on Sunday that extortion, non-performing loans, the gas crisis, and dollar shortages were holding back the country’s private sector growth.

They also urged the government for sustainable policy reforms and a long-term roadmap for achieving the country’s target of a trillion-dollar economy.

The Dhaka Chamber of Commerce and Industry organised the seminar on ‘Bi-annual economic state and future outlook of Bangladesh’s economy: private sector perspective’ at its auditorium in the capital.

DCCI former president Shams Mahmud, also Shasha Denims Limited managing director, said that the government had to ensure energy at an affordable price and uninterrupted gas supply to the industries to boost private sector investment in the country.

‘After LDC graduation, we must look into establishing import substitute industries to be self-sufficient,’ he said, proposing a rationalised taxation system and continued special support for cottage, micro, small, and medium enterprises.

He said that the dollar crisis had created an adverse impact on the country’s private sector for doing business.

Policy Research Institute senior economist Ashikur Rahman said that macroeconomic instability was not good for the private sector.

‘NPL always has a negative impact on businesses. So it is time to take a serious decision against NPL,’ he said, adding that the country’s tax-to-GDP ratio, which is hovering around 10 per cent, is not up to the expected level.

He also said that the government should take the initiative to check the decline of the country’s foreign currency reserve and ensure that inflation comes down.

Bangladesh Institute of Development Studies research director Mohammad Yunus said that sometimes extortion at the retail market becomes one of the main reasons behind rising inflation.

He asked why the business had to pay extra money to do business in the market.

DCCI president Ashraf Ahmed requested that the government lower corporate tax, complete the automation of the taxation system, increase the tax net, and reform supplementary duty and value-added tax to promote private sector growth.

‘As NPL has an impact on increasing some intermediary costs for the private sector, I suggest reducing NPL. Reducing the cost of doing business, uninterrupted energy supply at an affordable price, and logistic sector development will help the private sector re-investments,’ he added.

He also urged the government to reduce the cost of doing business, ease doing business, improve regulatory efficiency, install appropriate infrastructure, ensure energy security, improve logistics, and ensure access to finance for the private sector for the long-term growth target of achieving a trillion-dollar smart economy.

He noted that the private sector investment target was 27.4 per cent of GDP in FY2024, while it was 21.8 per cent in FY2023.

‘Required policies considering the LDC graduation will expedite private sector investment,’ the DCCI president added.

Speaking as chief guest, the economic affairs adviser to the prime minister, Mashiur Rahman, said that the country’s economy had experienced fundamental changes during the past decade, and the private sector had also flourished remarkably.

‘Policies should be formed considering the problems and prospects of the private sector,’ he added.

He stressed export diversification and value addition to export products and acknowledged that reforms were needed in the taxation system as there are still some problems and challenges.

‘We should also tap into the huge potential of the blue economy,’ Mashiur added.

Bangladesh Bank chief economist Md Habibur Rahman said that due to global geopolitical instability, the price of essentials had increased, and the central bank had already taken the necessary measures to tackle the situation.

‘Bangladesh Bank will introduce a Clawing Peg system to keep the exchange rate under control. The central bank has underscored a roadmap to bring NPL in the industrial sector down to 8 per cent within the next 2 years,’ he said.

He also said that the Bangladesh Bank would maintain contractionary monetary policy until inflation came down to 6 per cent.​

 

[Saif]

Foreign Loan: Repayment crosses $4b for first time

Foreign loan repayment, which was hovering around $3 billion since fiscal 2012-13, crossed the $4 billion-mark for the first time last fiscal year on the back of high interest payments and short-term loans in the power and energy sector.

www.thedailystar.net

Foreign Loan: Repayment crosses $4b for first time​

Amount expected to soar in coming years



Foreign loan repayment, which was hovering around $3 billion since fiscal 2012-13, crossed the $4 billion-mark for the first time last fiscal year on the back of high interest payments and short-term loans in the power and energy sector.

In fiscal 2022-23, foreign loan repayment stood at $4.78 billion, up 32.8 percent year-on-year, according to the Economic Relations Division.

The repayment increased $1.18 billion from fiscal 2021-22. In previous years, the repayments increased between $100-$400 million.

Going forward, the repayments are expected to increase further because of exchange rate volatility and the possibility of LIBOR/SOFR and EURIBOR rates ticking up, the ERD said in its latest report.

Of the repayment amount last fiscal year, $2.67 billion was thanks to the government's loans and $2.11 billion was for the state-owned enterprises' borrowing.

Both the segment's loans increased by 32 percent, but the state-owned enterprises' increase is substantial as its total outstanding debt is only $8 billion. The government's total outstanding foreign loan is $62.4 billion.

As of June last year, the total public sector outstanding debt is $70.8 billion.

The state-owned enterprises took short-term loans in this fiscal year, whose interest rate is more than long-term loans, said finance ministry officials. As a result, the repayment amount went up.

"Even two years ago, the interest rate was below 1 percent on such loans. Now, it is more than 8 percent," they said.

Of the repayment amount, the interest payment was $1.3 billion, up 99.23 percent year-on-year, the ERD report showed.

The highest loan was repaid against short-term loans taken to import crude oil: $1.12 billion, which is an increase of 40 percent from the previous fiscal year.

The power sector's loan repayment increased by 27 percent to $679 million.

The government has paid $85 million for loans taken to purchase aircraft earlier, up 49 percent year-on-year increase.

However, the ratio of the government's external debt stock is 15.59 percent of the GDP while the threshold is 40 percent, indicating the foreign loan position is in the safe territory, the ERD report said.

The ratio of debt service to revenue and grant will cross 100 percent this fiscal year, said Zahid Hussain, former lead economist of the World Bank's Dhaka office, citing a recent report of the International Monetary Fund.

"It does not mean that there is no concern."

There are two main concerns now in the current context of historically low revenue collection and ongoing dollar crisis.

"The loan repayment pressure is still heavy and we can't see the pathway to get rid of the situation," he said, while calling for increasing the revenue collection and the foreign currency reserves.

Besides, the government should try to get low-cost foreign loans in the future, Hussain added.

The ERD report -- titled "Flow of External Resources" -- said few loans have recently been mobilised at variable interest rates.

"The interest rate risk is high when the variable interest rate-dominated debt portfolio exists," it added.

Though the report acknowledged the interest-related risks, it said all the other indicators are below the level of threshold.

"According to the present classification by the World Bank, Bangladesh is categorised as a 'less indebted' country."

Though the Bangladesh Bank has taken several initiatives, the foreign currency reserve has been declining in the last one and a half years.

As of February 14, foreign currency reserves stood at $19.9 billion.​

 

[Saif]

PM for doing business with India using taka, rupee

Prime Minister Sheikh Hasina today stressed the need for expanding business between Bangladesh and India using their own currencies

www.thedailystar.net

PM for doing business with India using taka, rupee​

Photo: BSS

Prime Minister Sheikh Hasina today stressed the need for expanding business between Bangladesh and India using their own currencies.

"We can do our business through exchanges of Bangladeshi Taka and Indian Rupee. It has already started, but we have to expand it further so that we can increase our businesses," she said while Indian External Affairs Minister S Jaishankar paid a courtesy call on her.​

​

The meeting was held on the sidelines of the Munich Security Conference (MSC) 2024 at Hotel Bayerischer Hof this morning.
Foreign Minister Hasan Mahmud briefed journalists about the outcome of the meeting upon its completion.

Hasan said the prime minister and Jaishankar attached importance to doing business between the two friendly countries through their own currencies to reduce dependency on other currencies like the US dollar.

He said Bangladesh and India have excellent bilateral relations and it has elevated to another height under the leadership of the prime ministers of the two countries.

"The relations between the countries are getting stronger day by day," he said, adding that the two leaders discussed the issues during the meeting.

Quoting Jaishankar, Hasan said, "Our relations will further be closer in the days ahead."

Bangladesh Ambassador to Germany Md Mosharraf Hossain Bhuiyan and PM's Deputy Press Secretary Md Noorelahi Mina were present during the briefing.

Hasina arrived in Munich on February 15 on a three-day official visit to join the Munich Security Conference 2024.

Upon completion of the tour, she will leave tomorrow night and is scheduled to reach Dhaka on February 19.​

 

[Saif]

Titu seeks Japan’s cooperation to make ‘One Village, One Product’ successful

State Minister for Commerce Ahasanul Islam Titu has sought Japan’s cooperation to make the “One Village, One Product” programme a success. “The prime minister has declared ‘Handicrafts’ as the product of the year. The government is working to increase employment

thefinancialexpress.com.bd

Titu seeks Japan’s cooperation to make ‘One Village, One Product’ successful
UNB
Published :
Feb 19, 2024 21:00
Updated :
Feb 19, 2024 21:14



State Minister for Commerce Ahasanul Islam Titu has sought Japan’s cooperation to make the “One Village, One Product” programme a success.

“The prime minister has declared ‘Handicrafts’ as the product of the year. The government is working to increase employment and export goods through the ‘One Village, One Product’ programme. We look forward to Japan’s cooperation and experience to make this programme a success,” he said, according to a press release.

The state minister said this when Japanese Ambassador to Bangladesh Iwama Kiminori paid a courtesy call on him at the former’s office on Monday.

At the time, the Japanese ambassador appreciated the programme, assured cooperation, and said Japan wants to strengthen relations with Bangladesh.

“Japan is keen to work as a partner in Bangladesh’s development journey. We hope that Bangladesh will participate in the ‘World Expo 2025’ to be held in Japan next year,” he said.

Titu mentioned the friendly relations between Bangladesh and Japan and said, “We hope to extend all cooperation to expand trade and commerce between the two countries.”​

 

[Lulldapull]

I meet Bangladeshi here in Japan every now n then and they pretty shy and keep to themselves. They talk to the Nepali community here a lot more than they talk to us the handful of Turkish/ Irani/ Pakistani here.

 

[Saif]

I meet Bangladeshi here in Japan every now n then and they pretty shy and keep to themselves. They talk to the Nepali community here a lot more than they talk to us the handful of Turkish/ Irani/ Pakistani here.

In that case, they are Awami supporters. When I was in America, I used to feel comfortable with mixing Muslims from all over the world(including Indian Muslims).

 

[Lulldapull]

W

In that case, they are Awami supporters. When I was in America, I used to feel comfortable with mixing Muslims from all over the world(including Indian Muslims).

Whats Awami?

 

[Saif]

W

Whats Awami?

Awami means Awami League.

 

[Saif]

Dhaka trade fair logs Tk 392 crore in export orders

The month-long Dhaka International Trade Fair ends today

www.thedailystar.net

Dhaka trade fair logs Tk 392 crore in export orders​

The month-long Dhaka International Trade Fair ends today



The 28th edition of the Dhaka International Trade Fair (DITF) has fetched export orders worth Tk 392 crore, up 17 percent from the previous year, according to the commerce ministry.

Additionally, it was found that customers spent around Tk 400 crore at the month-long event, indicating that sales have risen by roughly 15 percent year-on-year.

Organised by the Export Promotion Bureau, the DITF came to a close at the Bangladesh-China Friendship Exhibition Centre in the Purbachal area of Dhaka today.

Of the 304 stalls and pavilions set up at this year's fair, around nine were operated by foreign companies from five countries, namely India, Singapore, Hong Kong, Indonesia and Turkey.

Speaking as chief guest, State Minister for Commerce Ahsanul Islam Titu said the DITF will be diversified from next year to increase the country's exports.

"Seminars and symposiums will be organised next year to attract more foreign buyers," he added.

Titu also said they will ensure all necessary arrangements for foreign and local business representatives to increase their participation in the event.

"If we do everything right, the country's target of reaching $100 billion in export earnings by 2030 can be achieved faster," he added.

A total of 41 stalls were honoured with crests in different categories for their exemplary performance at this year's DITF.

Tapan Kanti Ghosh, secretary of the commerce ministry, chaired the closing ceremony.

Among others, Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry, and AHM Ahsan, vice-chairman of the Export Promotion Bureau, also spoke.​