CPD-IRBD (Independent Review of Bangladesh’s Development) study on “State of the Bangladesh Economy in FY2014 (Third Reading)” presented during a media briefing at BRAC Centre Inn on Sunday, 1 June 2014.
Press reports [pdf ~4.92 MB] and Editorials [pdf ~462 KB] published between 1-3 June 2014.
Published in The Financial Express
CPD questions BBSs GDP growth figure
‘Service sector growth shown higher despite political turmoil’
FE Report
Local think-tank Centre for Policy Dialogue (CPD) questioned Sunday the country’s economic growth estimation prepared by the Bangladesh Bureau of Statistics (BBS) recently for the outgoing fiscal year.
The CPD said Bangladesh’s gross domestic product (GDP) cannot grow at so high rate at a time when the economy had faced political turbulences almost all the time in the first half of the fiscal year 2013-14.
The CPD’s question regarding the real GDP growth came at its third review briefing for the outgoing fiscal year held at the Brac Inn Centre in the city.
The review was titled ‘State of the Bangladesh Economy in Fiscal Year 2014′.
CPD executive director Dr. Mustafizur Rahman read out the review while its research director Dr. Fahmida Khatoon, additional director Dr. Khandker Golam Moazzem and its other high officials were present.
Dr. Rahman said it is a surprise that the service sector that had faced the worst during the political turmoil in July-December period grew by 5.8 per cent in 2013-14 against 5.5 per cent in 2012-13.
“It’s a really a surprise that the service sector grew by 0.3 percentage point over its previous year which was comparatively peaceful,” Dr. Rahman said.
The CPD executive director said all sub-sectors under the service sector that comprises more than 50 per cent of the economy were affected adversely during the first half of the fiscal year due to the restive political programmes over the poll-time government issue.
Dr. Rahman said according to the latest BBS estimate, the agriculture sector has grown at 3.4 per cent. “It is nearly 1.0 per cent higher than that of the last fiscal year,” he said.
He said the BBS estimation showed lower growth only in the manufacturing sector at 8.4 per cent against 10.3 per cent last fiscal year.
Dr. Rahman said the construction sector was sluggish in the first half of the fiscal year but the BBS showed its growth at 8.6 per cent, 0.6 percentage point higher than that of the last fiscal year.
The CPD, however, hoped that the BBS would adjust its figures with real data in its final measurement later.
The BBS will finalise the provisional GDP growth at 6.1 per cent for the outgoing fiscal year sometime in May in 2015.
Focussing on budget deficit, the CPD suggested that Bangladesh should take a move to get more foreign aid to fund its budget deficit.
“There is around US$19 billion aid in the pipeline. We should utilise it as its cost is low,” Dr. Rahman said.
He said borrowing from the domestic sources leads to higher interest payment.
He said currently around 91 per cent of the total deficit is being funded from the domestic sources.
The CPD observed that the Bangladesh Bank has been buying dollars from the local market to keep exchange rate stable. It might cause inflationary pressure on the economy, the think tank said.
The CPD also observed that capital flight has been continuously going on from the country through under-invoicing, over-invoicing or mis-pricing.
Dr Rahman said the government has formed a cell to combat it. He said it should be strengthened further as different studies show that a significant amount of money is being siphoned off out of the economy.
He said around $1.5 billion are being taken out of the country each year.
The CPD doubted capital flight through mis-invoicing as import of some items jumped abnormally in the first nine months of the current fiscal year, compared to the previous fiscal year.
To investigate the sources of the recent rise in import at a more disaggregated level, the CPD examined the detailed import shipment data for the July-March period.
It was found that 17 import items accounted for about 40 per cent of total import and 93.5 per cent of incremental growth during July-March period in the current fiscal year.
During July-March of FY14, import of tanks, casks, drums cans or iron/steel (50-300 litre) stood at $329 million, which was only $1.0 million a year ago, according to the CPD report.
During the period, transporter cranes, gantry cranes, bridge cranes and overhead travelling cranes cost $466 million, which was only $7.0 million in the previous fiscal year and aeroplanes and other aircraft of an unladen weight (2000kg) was $326 million, which was $2.0 million, it said.
“There is a possibility of illicit financial outflow from the country as import growth was abnormal on items having low or zero duty,” said CPD executive director Dr. Rahman while briefing on the Bangladesh Economy in FY2014.
He urged the Bangladesh Bank and the National Board of Revenue (NBR) to scrutinise the matter.
It said data received from the Bangladesh Bank shows that these cranes were imported from France in the month of March 2014 which accounted for about $433 million.
“Import of such a large number of cranes in a single month warrants a double check,” the CPD said adding that such an exceptional pattern of import figures calls for appropriate scrutiny on the part of the NBR.
It is worth mentioning that customs duty on crane product was only 2.0 per cent while on aeroplanes and other aircraft, it was zero.
According to the latest report of Global Financial Integrity (GFI), a Washington-based research and advocacy organisation, the annual average money laundering through manipulation of commercial invoices hit $1.2 billion during a period between 2002 and 2011 in Bangladesh.
The figure of trade mis-invoicing was slightly down from $1.4 billion estimated between 2001 and 2010.
Trade mis-invoicing involves the deliberate manipulation of commercial invoices in order to misreport the value of a transaction, thereby illegally shifting money across international borders without detection.
According to the report, cumulative amount of illegally siphoning off of money stood at over $11 billion during the period and over $1.7 billion was drained out of Bangladesh in 2011.
“It is a matter of great concern,” he noted. The government should enforce the anti-money laundering act properly to check siphoned off money.
The CPD said restoring investors’ confidence and addressing the ever-increasing infrastructure demand in a cost-effective manner will be major challenges for the country’s economy in next fiscal year 2014015.
The CPD reiterated that participatory politics could be ensured and confidence of investors restored.
“It’ll be possible to bring back pace in the economy,” Mr. Rahman said.
While talking about public finance, He said during the first 10 months of the fiscal 2014, the NBR attained 9.2 per cent growth over the same period of fiscal 2013 against the annual target of 25.3 per cent.
He said the NBR collection will need to grow at 34.4 per cent in May and June of the current fiscal to attain the revised target.
Published in Dhaka Tribune
CPD raises eyebrows over GDP growth estimate
Kayes Sohel
The projected GDP growth was shown so high at a time when the economy went through turbulent political stage atmosphere in the first half of the fiscal year 2014
The Centre for Policy Dialogue has raised questions about the 6.12% economic growth projected by the national statistics agency for the outgoing fiscal year.
According to the CPD, the projected GDP growth was shown so high at a time when the economy went through turbulent political stage atmosphere in the first half of the fiscal year 2014.
Bangladesh Bureau of Statistics (BBS) has recently come up with the provisional estimate of 6.12% GDP growth in FY2014. This was 1.1% lower than the target of 7.2% set in the FY14.
Many analysts including the World Bank and the Asian Development Bank expected the economic growth in FY 14 to be between 5.5%-6% in view of political unrest in the first half of the fiscal year.
The CPD in January 2014 also predicted that the GDP growth rate in FY2014 would be ranging between 5.6% and 5.8%.
CPD Executive Director Professor Mustafizur Rahman said the BBS estimated that the service sector – worst sufferer during political unrest – grew by 5.8% in FY14 against 5.5% in FY13.
“This is quite surprising that the service sector grew by 0.3% over its previous fiscal when the political field was relatively peaceful,” he said.
The service sector that contributed more than 50% of the total GDP was adversely affected due to restive political programmes in the run up to the national election on January 5, according to the CPD.
Prof Mustafizur Rahman said: “All subsectors under service sectors were affected by the political turmoil, but have shown higher growth which we call into question.”
“We want detailed data and I think the BBS will meet our queries.”
The CPD raised the question on the BBS estimation yesterday in its third review of the state of economy in FY14.
The executive director of the think tank said the growth projection was important as the next budget would be formulated based on it.
The CPD said according to the BBS latest estimate, the agriculture sector grew by 3.4%, which is nearly 1% higher than that in the last fiscal year.
The BBS estimation shows a slightly lower growth only in the manufacturing sector which is 8.4% against 10.3% in the last fiscal.
The construction sector witnessed a sluggish growth in the first half of the fiscal year, but the BBS showed its growth at 8.6%, which is 0.6% higher.
The CPD executive director said in the last ten years, the final GDP growth estimates were six times lower than provisional estimates.
“Indeed, a number of adjustments need to be made during finalising the GDP estimate for FY14.”
He said the provisional estimate of growth rates for crop sector would need to take into account the production of Boro, the most important crop.
In FY 14, domestic savings as a share of GDP experienced a significant increase – from 22% in FY13 to 23.4%.
The CPD also suggested more foreign aid for budget deficit.
“There are around $19bn aid in the pipeline, so we should utilise it,” Prof Mustafizur Rahman said.
Bangladesh Bank has been buying dollars from the local market to keep exchange rate stable, saying it might cause inflationary pressure on the economy, observed the CPD.
It also recommended restoring the investors’ confidence and addressing the ever-increasing infrastructure demand in a cost-effective manner.
The local research organisation suggested institutional strengthening, targeted reform and good governance at all levels, plus an inclusive and participatory political culture to address challenges.
“If the participatory politics is ensured and the confidence of investors restored, the pace will come back to the economy,” said Professor Mustafizur.
Published in Dhaka Tribune
CPD suspects huge capital flight in FY14
Kayes Sohel
The money laundering would have taken place through misinvoicing
A substantial amount of capital flight might have taken place from the country in the first nine months of the current fiscal year as reflected by abnormal jump of imports in few items.
The money laundering would have taken place through misinvoicing as Center for Policy Dialogue (CPD), a civil society think-tank, spoke of the apprehension at a briefing on Bangladesh Economy in FY2014 in Dhaka yesterday.
They examined the detailed import shipment data for the July-March period and compared it to the figures of the consecutive period of last fiscal and found the recent rise in imports at a more disaggregated level.
Seventeen items accounted for about 40% of the total imports and 93.5% of incremental growth during the period this fiscal year.
Import of tanks, casks, drums cans or iron/steel (50-300 litre) stood at $329m, which was only $1m a year ago, according to the CPD report.
Transporter cranes, gantry cranes, bridge cranes and overhead traveling cranes was of $466m as compared to only $7m in the previous fiscal year and, aeroplanes and other aircraft of an unladen weight (2,000kg) was $326m, which was $2m, it said.
“There is a possibility of illicit financial outflow from the country as the import growth is abnormal on items having low or zero duty,” said CPD Executive Director Mustafizur Rahman while addressing the briefing.
He urged the Bangladesh Bank and National Board of Revenue to scrutinise the matter.
Three of the 17 items which include tanks, casks, drums, cans, made of steel or iron (50-300 litre), different types of cranes and aeroplanes and other aircarft6s, contributed about 73% of the incremental growth in imports during the period, the report said.
It said data received from Bangladesh Bank shows that these crane items were imported from France in the month of March 2014, which accounted for about $433m.
“Import of such a large amount of cranes in a single month warrants a double check,” the CPD said, adding that such exception pattern of import figures will call for appropriate scrutiny on the part of the NBR.
Costumes duty on crane product was only 2%; on aeroplanes and other aircrafts, it was zero.
According to a recent report of Global Financial Integrity (GFI), a Washington-based research and advocacy organisation, the annual average money laundering through manipulation of commercial invoices hit $1.2bn during a period between 2002 and 2011 in Bangladesh.
The figure of trade misinvoicing was slightly down from $1.4bn estimated between 2001 and 2010.
Trade misinvoicing involves the deliberate manipulation of commercial invoices in order to misreport the value of a transaction, thereby illegally shifting money across international borders without detection.
According to the report, cumulative amount of illegally siphoning off money stood at over $11bn during the period and over $1.7bn was drained out of Bangladesh in 2011.
Published in The Daily Star
CPD suggests quick steps to arrest falling investment, growth
Mustafizur Rahman of CPD stresses importance of participatory political and electoral process
Star Business Report
The Centre for Policy Dialogue yesterday called for an action plan to boost the declining investment and economic growth.
The plan should look to restore investor confidence, undertake and enforce regulatory reforms, enhance service delivery capacity of institutions, take advantage of global market integration and address the ever-increasing infrastructure demands and political uncertainties.
The observations were disclosed yesterday at a press briefing on the think-tank’s analytical review of Bangladesh’s macroeconomic performance for the outgoing fiscal year.
The analysis focused on five broad issues: overall macroeconomic scenario, public expenditure and its financing issues, power sector development and exports.
During the first half of the fiscal year, the economy was confronted with severe disruptions in production, transport and service delivery that afflicted both domestic and export-oriented activities, CPD said.
In the second half, in the backdrop of the political uncertainties, a deceleration in the investment growth, particularly that of private sector investment, constrained efforts to translate the relative macroeconomic stability into higher economic growth.
“In the context of these twin developments, reinvigorating the investment environment to regain the lost momentum of accelerated GDP growth has emerged as a major concern from the perspective of macroeconomic management in fiscal 2013-14 and particularly in view of the upcoming budget.”
Mustafizur Rahman, executive director of CPD, who presented the analysis, said political uncertainties continue to dampen investor confidence.
Rahman stressed the importance of participatory political and electoral process; otherwise, the country would not get rid of the prevailing economic concerns, which have forced investors to shelve their big investment plans.
Private investment’s share in the GDP saw a “distinctive” fall this fiscal year: 21.4 percent compared to 21.7 percent in fiscal 2012-13.
CPD said the government’s provisional GDP growth estimate of 6.1 percent for fiscal 2013-14 is optimistic and expects it be revised down.
“As can be recalled, final GDP growth estimates were lower than provisional estimates six times in the last ten years.”
The growth rate of the industry sector is estimated to come down to 8.4 percent from 9.6 percent in fiscal 2012-13, while the agriculture sector is projected to achieve a much improved performance (3.4 percent growth in fiscal 2013-14).
The government expects the service sector growth to be 5.8 percent, up from previous fiscal year’s 5.5 percent.
“It comes as a surprise that each of the nine sub-sectors under the services sector is expected to attain higher growth amidst political turmoil.”
On the fiscal front, the think-tank said it has become important to readjust the parameters in line with the resource mobilisation and expenditure.
The National Board of Revenue continues to struggle for the second consecutive year in fiscal 2013-14, Rahman said.
In the first ten months of the fiscal year, NBR attained 9.2 percent year-on-year growth against the annual target of 25.3 percent. The report said the NBR collections will need to grow at 34.4 percent in the last two months to attain the target.
Domestic interest payment accounted for a significant incremental share of net non-development revenue expenditure, which increased by 10.1 percent in the first three quarters of the fiscal year.
“Out of every Tk 100 in budget deficit, Tk 91 is being financed from domestic sources,” Rahman said, while advising keeping the high-cost domestic borrowing within the manageable limit.”
The fact that about 49.8 percent of the annual development programme budget was spent during the July-April period of the fiscal year is another cause for concern.
Average annual inflation stands at 7.5 percent as of April, while the target for June is 7.0 percent. Of the 7.5 percent inflation in April, 5.3 percent was contributed by food inflation and 2.2 percent by non-food inflation.
Private sector credit growth nosedived to slightly over 11 percent in March this year, down from the monetary policy target of 16.5 percent. On the other hand, banks are sitting on huge idle funds, which, according to CPD, is Tk 135,000 crore at the moment.
The think-tank said the export sector is witnessing extreme volatility, though the country registered over 13 percent growth during the first ten months of the current year.
Exporters are facing setbacks in doing business with the US, it said, adding that the country needs to focus more on south-south exports.
The CPD also questioned the rapid rise of imports in the last couple of months. Imports were negative during the first half but it rose by over 11 percent afterwards. “Was there any flight of capital in the name of imports?”
The slowdown in inflow of remittances and manpower export has also become a concern, as more jobs have to be created within the market.
CPD said balance of payments, exchange rate, healthy foreign exchange reserve, declining inflation and recovery in global economy are some good sides of the domestic economy.
Fahmida Khatun, research director of CPD, and Khondaker Golam Moazzem, additional research director of CPD, also spoke.
Published in New Age
Unfriendly business environment deters new investment: CPD
Staff Correspondent
Centre for Policy Dialogue on Sunday said that investors were refraining from making new investments in the country because of absence of investment-friendly environment.
Investors are suffering from a lack of confidence in doing further investment in the absence of congenial political situation in the country, it said.
It also said that the government’s projection on economic growth at 6.1 per cent for the current fiscal year might be slightly downsized in the final calculation as the projection was made on partial data.
The independent think-tank also raised questions on the government’s higher growth projection in services sectors though the sector suffered heavily in the first six months of the fiscal year due to political unrest in the country.
Evaluating the current fiscal year, the CPD said that the economy was somewhat stable, manifested in contained inflation, sustained exchange rates and high foreign reserves but structural weaknesses continued to persist.
The key challenges for the next fiscal year are to translate macroeconomic stability into accelerated growth, restore investors’ confidence, address the demand of infrastructure and reforms, it said.
‘Despite a respite in political unrest in post-election period, uncertainties continued to adversely affect private sector investment in the country,’ CPD said at a press conference while unveiling its report ‘State of the Bangladesh Economy’ (third reading) in the fiscal year 2014. Restoring investors’ confidence will be challenging for the government in the coming fiscal year of 2014-15, CPD observed.
‘There is a deep link between economy and compromising political system. So we urge the political parties to lead the country towards such a process where achieving higher economic growth rate, accelerating investments and transforming the country to a middle-income one will be possible,’ CPD executive director Mustafizur Rahman said.
While presenting the report, he said that a compromising, inclusive, participatory and stable political system along with consistent medium- and long-term policy support are needed for attracting new investment.
Entrepreneurs will not feel comfortable to make new investments until a favorable environment is ensured, he said.
The CPD said that the country would accelerate the rate of investment and productivity to ensure tapping potentiality in economic growth as there is a huge gap in potential and actual growth in the country.
The organisation termed the trend of government borrowing from the internal sources to meet the budget deficit as alarming. ‘The percentage of budget deficit at around 5 per cent remains under control but the way of deficit financing is going out of control which will create a problem for the government in future in financing for development works,’ Mustafiz said.
Out of Tk 100, the government borrowed Tk 91 from the domestic sources to finance budget deficit in the first three quarters of the current fiscal year, he said, adding that the contribution of foreign resources has been declining day by day.
Interest payments also emerged as one of the major sources of non-development expenditures which created interest burden for the government, he said. The government should emphasize on foreign aid to finance budget deficit and properly utilise the foreign loans and grants that remained in pipeline through increasing project implementation capacity, he added.
The CPD also recommended the government for rationalizing the tax incentives, improving vigilance to curb tax evasion emerging from trade mispricing, misdeclaration and transfer pricing by multinational companies to increase revenue collection for financing development expenditures.
The CPD also said that non-reduction of interest spread rate was a major concern for investors as interest rate was not reduced due to high spread rate.
The CPD said that overall export performance in the first 10 months of the current fiscal year was better but a fall in export to US market emerged as a matter of concern as Bangladeshi competitors including India in that market did well in the period.
The research organisation also advised the government to adopt cost effective methods in electricity generation. It projected that the revenue collection might fall short of Tk 4,000 crore to Tk 5,000 crore by the end of the fiscal year.
Published in Daily Sun
Restoring investors’ confidence a major challenge for FY15
CPD report reveals
Staff Correspondent
Restoration of investors’ confidence as well as meeting the ever-increasing infrastructure demand are some of the major challenges that the country’s economy is likely to face in the next fiscal year.
The economy is somewhat stable with contained inflation, sustained exchange rates and high foreign exchange reserves, but structural weakness continues to persist, and the key challenge for fiscal 2015 is to translate microeconomic stability into an accelerated growth.
The Centre for Policy Dialogue (CDP) made the observation in a report titled, ‘State of the Bangladesh Economy in Fiscal Year 2014’, released at a media briefing at Brac Centre Inn in the capital on Sunday.
Disclosing the findings of the study, CPD Executive Director Prof Mustafizur Rahman said many of the concerns identified in the report are medium to long-term ones in nature and will not be providing the benchmark of fiscal 2015, but will be shaping its outcomes.
He said the evolving situation may be addressed by strengthening the institutions, reforming targets and establishing good governance at all levels and by putting in place an inclusive and participatory political culture.
“If the participatory politics could be ensured and confidence of investors is restored, it’ll be possible to bring back pace in the economy,” Mustafizur Rahman said. About the country’s microeconomic scenario, the report reveals that Bangladesh Bureau of Statistic (BBS) provisionally estimated the GDP growth to be 6.1 percent in fiscal 2014, which is 1.1 percent lower than the target of 7.2 percent set for fiscal 2014.
The growth rate in the industrial sector is estimated to come down to 8.4 percent in FY2014 from 9.6 percent in FY2013 while the agriculture sector is projected to achieve a much-improved performance — 3.4 percent in FY2014. The service sector rate is estimated to be 5.8 percent in FY2014 from 5.5 percent in FY2013.
Prof Mustafizur Rahman said the provisional estimate of GDP for FY2014 is expected to be revised at a later date based on data for the full fiscal year.
About public financing, the report says during the first 10 months of the FY2014, the National Board of Revenue (NBR) attained 9.2 percent growth over the same period of FY2013 (against the annual target of 25.3 percent). “NBR collection will need to grow at 34.4 percent in the last two months to attain the revised target,” the report mentioned.
On making up budget deficit, it shows that 91 percent of the total deficit was financed from the domestic resources during the first three quarters of the current fiscal while the utilisation of foreign finances (in terms of both foreign grants and loan) were not encouraging.
Published in The Independent
Political uncertainty afflicts private investment: CPD
The first half of current fiscal experienced significant disruption in macroeconomic management while political uncertainty in the second half continues to affect the private sector investment adversely.
The civil society think tank ‘Centre for Policy Dialogue (CPD) made the observation at a press briefing on disclosing its third interim evaluation report on “State of the Bangladesh Economy in FY 2014” at Brac Centre Inn in the city on Sunday. The domestic growth rate, according to CPD, is being dragged down mainly due to weakness in implementing public projects, poor oversight of rules of law, democracy and mitigating corruption, and lack of regulatory, administrative, legal and institutional reforms.
These traditional factors have been further accentuated by lack of participatory democratic polity, which is badly affecting the investor’s confidence in making mid-term and long-term investment, said the CPD report.
During the first half of the current fiscal (2013-14), the economy was confronted with severe disruption in production, transport and service delivery that afflicted both domestic and export-oriented activities, said CPD’s executive director Prof Dr Mustafizur Rahman while presenting the paper.
Besides, in the backdrop of political uncertainties and a deceleration of private sector investment growth in the second half of 2013-14 constrained the efforts to translate the relative macroeconomic stability into higher economic growth, he added.
These factors had undermined the performance of key macroeconomic performance indicators and attainment of mid-term development targets of the economy, he added.
Structural weakness continue to persist and afflict the economy despite the economy has been able to demonstrate a modicum of stability, contained inflation, sustained exchange rate and high foreign exchange reserves, he observed.
“Although the country phased out from the political violence after the 10th national election, political uncertainties continued to adversely affect private sector investment,” said the CPD’s executive director. “Investors’ confidence will not be restored unless the country returns to a participatory democratic polity,” he pointed out.
Dwelling on these dismal performances, the CPD executive director expressed his surprise over the rosy statistics provided by the Bangladesh Bureau of Statistic (BBS) that claimed that all the nine sub-sectors under the services sector is expected to attain higher growth in the current fiscal compared to last year.
But, all the sub-sector of the services sector, including land transport, wholesale and retail trade, hotel, restaurant, real estate, renting and business activities, were relatively more affected during the political violence, he said.
In this backdrop, the key challenge confronting macroeconomic management in the upcoming fiscal (2014-15) will be to ensure accelerated growth through reinvigoration of the investment scenario, he added.
Restoring investor’s confidence, undertaking and enforcing regulatory reforms, enhancing service delivery capacity of institutions, taking advantage of the window of opportunities of strengthened global market integration, addressing the ever increasing infrastructure demand in cost-effective manner and realising the ambition of attaining the status of a modern middle-income country will become more challenging if the existing political uncertainties continue, he noted.
Mustafizur, however, said the evolving situation may be corrected and addressed only through concerted efforts at institutional strengthening, targeted reforms, good governance at all levels and by putting in place an inclusive and participatory political culture.
In addition, the civil society think tank placed several recommendations to come out from the prevailing economic concerns.
The recommendations included: setting up of a task force to address pending reform measures, local governments to be vested with more effective devolution of power and fiscal autonomy, enhancement of capacities of agencies involved with implementation of major public investment projects, reduction of transaction costs of contract enforcement and concrete initiatives towards promotion of a participatory and pluralistic democratic polity driven by inclusive and credible national elections.
Dwelling on the GDP growth rate in the current fiscal year, the CPD said the country might achieve lower six per cent GDP growth in this fiscal 2013-14, mainly due to the weak implementation of major public projects, lack of proper framework regarding financing in budget deficit and weak capacity for regulatory and institutional reforms.
In its report, the CPD said, “Although the country set a target to become a middle income country by 2021, the country could not move ahead in other categories except per capita income.” The country is still lag behind in terms of infrastructure development compared to other middle income country, it said.
The country has to maintain 8 to 10 per cent GDP growth rate for becoming a middle income country, the CPD said adding that thus, the country has to increase investment in every sectors of the national economy through ensuring adequate infrastructural improvement and enhancing institutional strengths.
Dwelling on the revenue collection in the current fiscal, the civil society think tank said, although the National Board of Revenue (NBR) set a 25.3 per cent higher growth in its revenue collection than that of the previous fiscal, the board attained only 9.2 per cent growth in the first ten months of FY 2013-14.
The revenue collection will need to grow at 34.4 per cent in the last two months to attain the revised revenue target, which is not possible, it said. Besides, interest spread has continued to remain high at 5 per cent in February 2014. Due to the high interest rates of bank loans, the entrepreneurs are not borrowings from banks, it said adding that thus, liquidity in the banks is increasing day by day.
To come out from this problem, the CPD suggested that the banks should allow credit to the small and medium enterprises with low interest rates.
On making up budget deficit, it shows that 91 per cent of the total deficit was financed from the domestic resources during the first three quarters of the current fiscal while the utilisation of foreign finances (in terms of both foreign grants and loan) were not encouraging.
Mustafizur Rahman said foreign aids should be used to cut budget deficit to reduce domestic burden.
About money-laundering, he said about US$ 1.5 billion is being siphoned off abroad each year. “The government should enforce the anti-money laundering act properly to check siphoned off money.”
Published on UNBconnect.com
Restoring confidence, addressing infrastructure demand major challenges: CPD
UNB
Restoring the investors’ confidence and addressing the ever-increasing infrastructure demand in a cost-effective manner will be major challenges for the country’s economy in the upcoming fiscal, according to a report of the Centre for Policy Dialogue (CDP), a civil society think tank.
The report says the economy is somewhat stable, manifested in contained inflation, sustained exchange rates and high foreign exchange reserves, but structural weakness continue to persist, and the key challenge for fiscal 2015 is to translate microeconomic stability into an accelerated growth.
The report titled, ‘State of the Bangladesh Economy in Fiscal Year 2014’, was revealed at a media briefing at Brac Centre Inn in the capital on Sunday.
Disclosing the findings of the study, CPD executive director Prof Mustafizur Rahman said many of the concerns flagged by this report are medium to long-term ones in nature and will not be providing the benchmark of fiscal 2015, but will be shaping its outcomes.
He said the evolving situation may be addressed through institutional strengthening, targeted reform, good governance at all levels and by putting in place an inclusive and participatory political culture.
“If the participatory politics could be ensured and confidence of investors is restored, it’ll be possible to bring back pace in the economy,” Mustafizur Rahman said.
About the country’s microeconomic scenario, the report reveals that Bangladesh Bureau of Statistic (BBS) provisionally estimated the GDP growth to be 6.1 percent in fiscal 2014, which is 1.1 percent lower than the target of 7.2 percent set for fiscal 2014.
The growth rate in the industrial sector is estimated to come down to 8.4 percent in fiscal 2014 from 9.6 percent in fiscal 2013 while the agriculture sector is projected to achieve a much-improved performance — 3.4 percent in fiscal 2014. The service sector rate is estimated to be 5.8 percent in fiscal 2014 from 5.5 percent in fiscal 2013.
Prof Mustafizur Rahman said the provisional estimate of GDP for fiscal 2014 is expected to be revised at a later date based on data for the full fiscal year.
About public financing, the report says during the first 10 months of the fiscal 2014, the national Board of Revenue (NBR) attained 9.2 percent growth over the same period of fiscal 2013 (against the annual target of 25.3 percent). “NBR collection will need to grow at 34.4 percent in the last two months to attain the revised target,” the report said.
On making up budget deficit, it shows that 91 percent of the total deficit was financed from the domestic resources during the first three quarters of the current fiscal while the utilisation of foreign finances (in terms of both foreign grants and loan) were not encouraging.
Mustafizur Rahman said foreign aids should be used to cut budget deficit to reduce domestic burden.
About money-laundering, he said about US$ 1.5 billion is being siphoned off abroad each year. “The government should enforce the anti-money laundering act properly to check siphoned off money.”
The CPD in its report emphasised setting up of a task force to address the pending reform measures, including enactment of the Civil Service Act, enactment of capacities of agencies involved in implementation of major public investor projects and taking concrete initiatives towards promotion of a participatory and pluralistic democratic polity driven by inclusive and creditable national elections.
Published on BSS Online
CPD urges govt to investigate abnormal rise in import of some items
BSS
Expressing concern over the abnormal rise in import of some items, Centre for Policy Dialogue (CPD) today said it is urgently needed to investigate whether capital is being siphoned off the country through manipulating commercial invoices.
“Import of some items has jumped abnormally in the first nine months of the current fiscal compared to the previous fiscal year . . . government should investigate the sources of the recent rise in import at a more disaggregated level,” said the think- tank examining the detailed import shipment data for the July- March period of the current fiscal.
“There is a possibility of illicit financial outflow from the country as the import growth is abnormal on items having low or zero duty,” said CPD executive director Mustafizur Rahman while briefing on Bangladesh Economy in FY2014.
He urged the Bangladesh Bank and National Board of Revenue to scrutinise the matter.
It was identified that 17 import items accounted for about 40 percent of total import and 93.5 percent of incremental growth during July-March in the current fiscal year, said the think- tank.
During July-March of FY14, import of tanks, casks, drums cans or iron/steel (50-300 litre) stood at US$329m, which was only one million a year ago, according to the CPD report.
Import of transporter cranes, gantry cranes, bridge cranes and overhead traveling cranes was US$466m, which was only US$7m in the previous fiscal year and aeroplanes and other aircraft of an unladen weight (2000kg) was US$326m, which was US$2m, it said.
Three of the 17 identified items which include tanks, casks, drums, cans, made of steel or iron (50-300 litre), different types of cranes and aeroplanes and other aircraft, contributed about 73 percent of the incremental growth in imports during the period, the report said.
It said data received from Bangladesh Bank shows that these crane items were imported from France in the month of March 2014 which accounted for about US$433m.
“Import of such a large amount of cranes in a single month warrants a double check,” the CPD said adding that such exception pattern of import figures will call for appropriate scrutiny on the part of the NBR.
It is perhaps worth mentioning that costumes duty on crane product was only 2 percent; on aeroplanes and other aircraft it was zero.
According to the latest report of Global Financial Integrity (GFI), a Washington-based research and advocacy organisation, the annual average money laundering through manipulation of commercial invoices hit $1.2bn during a period between 2002 and 2011 in Bangladesh.
The figure of manipulation of trade invoices was slightly down from US$1.4bn estimated between 2001 and 2010.
Trade misinvoicing involves the deliberate manipulation of commercial invoices in order to misreport the value of a transaction, thereby illegally shifting money across international borders without detection.
According to the report, cumulative amount of illegally siphoning off money stood at over $11bn during the period and over US$1.7bn was drained out of Bangladesh in 2011.
Mustafizur raised question about the claim of achieving 6.11 percent economic growth in the current fiscal year by BBS and said it will unlikely be possible to achieve target of gross domestic product (GDP) this fiscal.
Replying to a question, he said the government should look for external sources to meet growing deficit of budget.