Finance Minister Emphasises Government’s Commitment to Boost Agriculture, Energy and ICT Sectors at the CPD Budget Dialogue

Budget_dialogue2010

“Demands for the agriculture, energy, power and ICT sectors will be met no matter the amount allotted for them in the budget,” said A M A Muhith, Hon’ble Minister for Finance at the CPD budget dialogue titled State of Bangladesh Economy FY2009-10 and Analysis of Budget FY2010-11 on 19 June 2010 at the Dhaka Sheraton Hotel. He, however, felt that financing of power and energy sectors will be a formidable challenge and the government will have to depend largely on public-private partnership (PPP) for this. The Finance Minister was present as the Chief Guest while Dr Masihur Rahman, Economic Affairs Advisor to the Hon’ble Prime Minister attended the dialogue as the Special Guest. Dr A B Mirza Azizul Islam and Professor Wahiduddin Mahmud, both Former Advisors to the Caretaker Government, were present as Guests of Honour. Professor Mustafizur Rahman, Executive Director, CPD presented the keynote paper at the dialogue which was chaired by Professor Rehman Sobhan, Chairman, CPD.

While highlighting some of the significant features of the proposed National Budget for FY2010-11, Professor Rahman remarked that the size of the budget should not be perceived as too big if needs of the economy and the tasks ahead are kept in the perspective. He emphasised on the quality of implementation of the proposals, and the need for continued efforts to mitigate the adverse lagged impact of the global financial crisis. He stressed on the need for factoring in the regional dimensions of development in Bangladesh context. He appreciated the measures to widen the tax net but observed that the personal income tax ceiling could have been revised upward considering the inflationary pressure in the economy. He also felt that efficacy of the delivery of the ADP should be raised significantly. He underscored the need for formulating a comprehensive PPP Guideline to improve the investment scenario of the country.

Dr A B Mirza Azizul Islam remarked that while the size of the ADP was not overambitious considering the investment and infrastructural needs, however it was perceived so in view of the implementation capacity of the government. He urged for special attention in improving the power sector emphasising that the power is the most binding constraint to growth. Dr Islam also commented that the numerous tax exemptions and tax holidays in place in the fiscal system of Bangladesh should be revisited. He felt that the status quo on the Pensioner’s Saving Scheme should be maintained. He expressed his disappointment regarding the fact that no policy measures to reduce the regional inequality the country had been included in the budget.

Professor Wahiduddin Mahmud recalled government’s efforts towards implementing a progressive tax system in the country and its actions to alleviate the adverse impact of the global financial crisis. In this context, he underscored the need for acceleratise the pace of policy implementation. Professor Mahmud noted that the government should focus on the qualitative aspects of ADP implementation and not simply on fund disbursement. He remarked that there is a lack of synchronisation between the Industrial Policy and the Tax Policy, and also criticised the imposition of tax on saving certificates. He stressed on ‘innovative expansion’ to accelerate the growth of GDP by replacing the ‘replicating expansion.’ “We need to bring innovation in manpower, technology and all other potential sectors to reach the GDP growth of 7-8 per cent,” he maintained.

Dr Masihur Rahman noted that the structure of the budget has improved and emphasised the importance of the Medium Term Budgetary Framework (MTBF) in this context. He also recommended that the capacity of Bangladesh Bureau of Statistics (BBS) would have to be strengthened manifold. He reiterated government’s seriousness to move towards decentralisation of economic activities and to address regional disparity across the country.

The Finance Minister took a strong stand on raising tax particularly from the local sources. Referring to the RMG industry owners of the country, he said the tax paid by them is significantly low compared to the sector’s annual earning of USD 13-14 billion. He noted that people need to get used to the culture of paying more taxes, at least for the sake of public welfare. The Hon’ble Finance Minister agreed that greater emphasis should be placed on quality implementation of the national budget. He assured the audience that the quality of the projects will be monitored on a continuing basis. He further noted that major portion of the investment must come from the private sector. He maintained that the government would focus on rental power plants in order to meet the short-term demand for energy. He remarked that some of the debated proposals such as income tax on Pensioners’ Savings Scheme and vehicle tax may need to be reviewed before full passage of the budget.

Discussants from the floor emphasised the need for prioritising power sector investment and remarked that it has emerged as one of the major constraints to growth in Bangladesh. Implementation and monitoring was brought up by the participants as vital aspects of the budget. SME sector, employment generation, safety net measures and policies to mitigate the impact of the global financial crisis were also debated in detail.

Professor Rehman Sobhan, Chairman, CPD remarked that government should focus more on qualitative and institutional challenges that undermined the budgetary process in the country and its implementation. He also noted that measures should be taken to ensure that the farmers and workers receive the intended benefits from the budget.