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Creation of better paying jobs should be ensured: Prof Mustafizur Rahman

Published in Dhaka Tribune on Sunday, 31 December 2017

2017 in review: Investment, financial reform were biggest challenges

Shariful Islam

Dhaka Tribune’s Shariful Islam talks to four economists about the economy as it was in the last year, and the challenges it faces in the next

Dr AB Mirza Azizul Islam, former finance adviser to caretaker government

Top three challenges Bangladesh economy faced in 2017:

# The growth of export earnings and remittance inflow has slowed down drastically in the year 2017. The export growth decreased by 1.72% compared to 10% in the previous year, while the remittance inflow went down by 14.5% compared to 2.5% in 2016.

# The investment ratio to the private sector did not increase.

# There is a new challenge in the economy, especially in financial sector, as some banks have been hit hard by scams, which resulted in liquidity crisis and increase in Non Performing Loans (NPL) to Tk80,000 crore.

Top three achievements in 2017:

# The growth of export earnings and remittance inflow has shown a positive trend in the last three-four months. This trend should be sustainable.

# Maintaining the pace of poverty reduction. Although the rate of reduction has fallen.

# According to the government announcement, GDP growth has hit 7.2%. But there have been controversies about the figure.

Top three suggestions for 2018:

# Increase the growth of exports and remittances.

# Keep disbursing credit. Officials concerned should realise that this sector should be free from political consideration. Besides, legal action should be taken against any and all financial irregularities in a speedy manner.

# Completing the ongoing construction projects on time, with an aim to mitigate the infrastructure crisis. There has been a recent media report about a design flaw of the eight spans of the Padma Bridge. Such oversights should be avoided in the future.

Professor Mustafizur Rahman, distinguished fellow, the Centre for Policy Dialogue (CPD)

Top three challenges Bangladesh economy faced in 2017:

# Food inflation. The price of rice skyrocketed due to floods.

# The implementation speed of major infrastructure projects, especially the first track projects, is notably slow. For which the benefits related to the projects could not be enjoyed.

# The reform efforts, especially in the banking sector and to ease cost of doing business, have yet to gain any success. Bangladesh has slipped down a rank in global ease of doing business index in 2017, from 176 to 177. Meanwhile, the banking sector faced several challenges, such as governance crisis, increase in defaulted credits and ineffective managements.

Top three achievements in 2017:

# Maintaining the macroeconomic stability, including the performance of Balance of Payment (BoP), exchange rate management and GDP growth.

# Despite slowdown, the export earnings slightly increased in the last six months in 2017.

# Considering the status of the import sector, especially the rise in capital machinery imports, it could be assumed the private sector investment had picked up pace.

Top three suggestions for 2018:

# Giving importance on ensuring good governance.

# Job creation, especially creation of good or better paying jobs.

# Increasing overall economic competitiveness, so that Bangladesh can compete in both global and domestic markets. For this, the country has to emphasise boosting skills, productivity and use of technology.

Dr Sultan Hafeez Rahman, executive director of Brac Institute of Governance and Development (BIGD)

Top three challenges Bangladesh economy faced in 2017:

# Capital flight

# Inflation

# Fiscal deficit

Top three achievements in 2017:

# Handling of Rohingya refugees

# Upazila and Union Council Elections

# Infrastructure development (completion of Dhaka-Chittagong four lane highway)

Top three suggestions for 2018:

# Curbing corruption

# Establishing discipline in banking sector

# Curbing political violence

Dr Selim Raihan, professor, Department of Economics, University of Dhaka and executive director, South Asian Network on Economic Modelling (SANEM)

Top three challenges Bangladesh economy faced in 2017:

# A rising GDP growth rate since 2012-13 had been largely driven by factor accumulation and government expenditure. However, the sluggish pace of private investments and rise in public investment continued. Meanwhile, the share of public investment in total investment became one-fourth by 2016-17 from around 16.5% in 2008-09. Stimulating the private sector investment still remains a big challenge.

# Estimates made using economic models show that there is likely to be a rise in headcount poverty rate by 0.32% due to rice price increase this year. This means, 520,000 people have fallen into poverty due to rice price hike this year.

# The country witnessed a falling growth rate in exports and remittance in 2016-17. However, during 2017-18 (July-November) both exports and remittances had positive growth. Despite the fact that the leather industry was declared as the ‘Product of the Year’, this sector performed poorly.

#The prospect of the rising export growth in 2018 depends on both the domestic and external factors. On the domestic front, there are problems of policy-induced and supply-side constraints. The real effective exchange rate of Bangladesh is still highly appreciated compared to its competitors.

# During 2012 and 2016, Bangladesh Real Effective Exchange Rate (REER), with respect to US$ was appreciated by 22.3%. Further adjustment in the nominal exchange rate will be obvious given the scenario of high import demand and slow down of export and remittance growth.

# However, mere devaluation of the nominal exchange rate will not be enough for getting the REER right. There is a need for necessary measures for export growth by addressing the domestic competitiveness issues as well as for product and market diversification.

Top three achievements in 2017:

# Robust economic growth

# Both export and remittances growth bounced back during the second half of the year

# Some progress in infrastructure. Progress in development of few SEZs

Top three suggestions for 2018:

# Bangladesh needs to tackle six challenges for Bangladesh economy in 2018. These are:

(1) Political uncertainty that looms centring the national election

(2) Further slowdown of private investment

(3) Rising food inflation

(4) Being on track with respect to SDGs

(5) Challenge of growth of exports and remittance

(6) Governance issues plaguing the banking sector

# The business-as-usual scenario will not help when it comes to generating productive employment, making growth inclusive, accelerating the reduction in the poverty rate, developing human capital, and achieving the SDGs by 2030.

# There is a need for ‘getting the priorities right’, which requires prioritising education, health and social sector investment, speedy complementation of the infrastructure projects (including SEZs) within justifiable cost estimates, and undertaking reform measures with respect to trade, industrial and macro policies and institutions.

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