Published in The Financial Express on Wednesday, 6 August 2014.
Services account deficit widening
Jasim Uddin Haroon
Bangladesh’s services account deficit gaped to US$ 3.8 billion in the fiscal year (FY) 2013-14, the largest at least in the last three fiscal years, mainly due to higher payments on account of international transportation.
The country’s services balance that estimates the net receipts and expenditures on account of transportation, travel, telecommunications, health and education-related services saw a deficit of US$ 3.8 billion in the last FY against $ 3.16 billion in the FY 2012-13, according to the central bank data.
In the FY 2011-12 the deficit stood at $ 3.0 billion. In the FY 2012-13 it widened to $ 3.16 billion, according to the data of the Bangladesh Bank (BB).
Bangladesh paid more than $ 6.6 billion while it received $ 2.8 billion in the last fiscal on various services.
The country paid $ 4.8 billion on account of sea and air transportation.
Md Shah Alam, vice chairman of Bangladesh Ocean-going Ship Owners Association, told the FE said Bangladesh had been paying a substantial amount of hard-earned foreign currencies each year, mainly because the country had no comparative advantage over others in shipping business.
He said the government so far had not taken any move to improve the comparative advantage.
Currently the country has 54 ocean-going vessels. “The fleet has declined to 54 from 66 vessels a couple of years back,” Mr Alam said.
Mr Alam, also managing director of the Continental Liner Agencies, said: “We are capable of competing with the international shipping firms as we have an adequate number of seamen.”
According to the statistics, receipts from both sea and air transportation stood at $436 million in the last fiscal.
Mr Alam said earnings from the shipping sector were growing but the pace was very slow.
“Look, we grew around 5.0 per cent in the shipping sector in the last fiscal,” Mr Alam claimed.
Payments for the travel purpose stood at $354 million. Of it, the health-related services accounted for $1.3 million.
But many people involved with the process of accounting believe that the payments for the health-related services could be much higher as many patients go out as tourists but spend a lot of money on treatment, mainly in India, Thailand and Singapore.
When it comes to education-related services, Bangladesh paid $110 million.
Zaid Bakht, director (research) at the Bangladesh Institute of Development Studies (BIDS), said Bangladesh could not develop in the shipping sector overnight as there are many multinational companies are operating in the trade.
Dr Bakht said government procurements from the international markets might be transported by Bangladeshi-owned ships.
He said: “We have some sort of inefficiencies, especially in the case of Biman.”
However, Dr Bakht said right at the moment Bangladesh’s sea and air transportation sectors needed policy supports for their growth.
Dr Khandker Golam Moazzem, additional director at the Centre for Policy Dialogue (CPD) said the government might introduce shipping bonds for development of the shipping sector.
“Actually, more support is needed for ensuring comparative advantages in the shipping sector,” Dr Moazzem said.
On the other hand, Bangladesh receives the highest amount of money from the government services consisting of earnings from peacekeeping forces and state-owned organisations serving in the international arena. Government services fetched $ 1.3 billion.
Receipts from the telecommunication, computer and information services sectors grew by nearly 28 per cent in the last fiscal to $ 411 million.
Fahim Mashroor, the immediate past president of Bangladesh Association of Software and Information Services (BASIS) said the software and outsourcing sector fetched more than $ 100 million in the last fiscal.