Deliberations among representatives from business community, government officials, economists, former bureaucrats, advocacy and research organisation on the proposed FY2015 National Budget took place during a CPD dialogue on Analysis of the National Budget FY2014-15 held at Lakeshort Hotel on Saturday, 14 June 2014. Before the floor discussion, CPD Research Director Dr Fahmida Khatun presented The budget analyses on behalf of the CPD Independent Review of Bangladesh’s Development (IRBD) 2014 Team.
Published in Dhaka Tribune
Economists see political consensus key to economic development
Tribune Report
The parliament is given barely three weeks’ time to discuss while the volume of paper is increasing
Economists at a dialogue in Dhaka yesterday urged the major political parties of the country to ensure a political consensus, which they considered is the key to sustainable economic development.
“Political unity is needed for the economic development, economist Dr Akbar Ali Khan told the dialogue on the national budget for FY2015.
Centre for Policy Dialogue (CPD) organised the meeting, moderated by its Chairman Professor Rehman Sobhan. CPD Research Director Fahmid Khatun presented the keynote paper.
Dr Akbar said constitutional budget is no taxation without presentation. “But in Bangladesh, we hardly fine representatives of the people.”
He said now there is a question whether the parliament is elected on competitive basis, and there is a question whether any opposition is there.
“So, there would be no meaningful discussion, when there was no opposition. So for all these years, we are having budget but actually the budget procedures are not in line what it should be.”
There are also procedural flaws in the budget, Dr Akbar said, adding that the parliament is given barely three weeks time to discuss while the volume of paper is increasing.
“I do not think any member of parliament will digest it and then deliberate in the parliament. They should not follow the way the budget is presented.”
He suggested revising the sixth five year plan as the budget figures do not have any relevance with the plan.
Former Bangladesh Bank Governor said Dr. Salehuddin Ahmed said the present aggregate state of macro economy is reasonably good, but what is the major challenge I think right now is to contain inflation.
“There is a trend of going down non-food inflation but I have some doubt about the calculation. If it is up it might bring some pressure on the economy,” he said.
Public investment is going up but private investment, which is involved with job creation, remained sluggish over the years. So, for meaningful and sustainable development, we need private investment, he said.
Ahmed said the administration system should be decentralised. “For the last 40 years we have not been able to decentarlise development approach. The finance minister proposed to give district budget it does not make any sense without decertralised development. It will be controlled by the Dhaka office. It is an eye-wash.”
About revenue income, he said the target is ambitious but the challenge is to achieve the target. “But I don’t see NBR’s efficiency in tax collection has been developed yet.”
He put importance on brining reforms in the financial institutions as well as regulatory bodies, he said.
Underscoring the need for political stability for implementation of the budget, he said seemingly political stability is there but there is political uncertainty. “Public policy cannot be implemented if there is political uncertainty.”
About capital market, he said I am not comfortable for lowering tax for non-listed companies, which might discourage big companies to go public.
Companies should be less dependent on debt financing or borrowing from banks. They should go to the stock market for the big projects because banks have several limitations like single-exposure limit and other regulations.
He heavily criticized for allocation of Tk5000 crore into the state-owned banks. “This is absolutely waste of public money as the banks lost their money due to their inefficiency and corruption, and failure of internal governance and failure of whole system.”
Former FBCCI president said Mir Nasir Hossain said investment barrier have already identified. But pragmatic steps should be taken for increase of gas production and distribute it on priority basis.
Political stability as well as personal security is crucial to implement the budget and for attracting investment, he said.
Published on bdnews24.com
A budget of luxury targets: CPD
Sheikh Abdullah
The Centre for Policy Dialogue (CPD) has lauded the proposed budget for 2014-15 fiscal, but voiced doubts about the optimistic targets.
The research group said the budget was ‘average’ in quality, with very weakly estimated government finance structure but good tax reform.
The targets were ‘luxuriant’, they said.
“The budget estimates a 7.3 percent GDP growth. What is the logic behind this?” CPD’s distinguished fellow Debapriya Bhattacharya said at a news conference in Dhaka on Friday.
“It will be impossible to achieve this growth if private investment is not increased to 25 percent of the GDP,” he said.
“That means private investment will be raised by 4-5 percent. But that is impossible because it means another Tk 750 billion in investments.”
“But we don’t have all the facilities needed for that,” he remarked.
The economist said private investment had never grown by more than 1.5 to 2 percent in any fiscal year.
Annual Development Programme (ADP) has grown by 41 percent in the new budget. It allocates Tk 820 billion for 1,034 projects.
CPD expressed doubts about the implementation of this ADP, saying there had been no significant administrative reforms in the government to successfully execute it.
“Foreign resource mobilisation is targeted to be $4 billion, but there’s little chance that it will come by,” Bhattacharya said.
“The government hasn’t even utilised the funds that are in the pipeline.”
He raised questions about the base year of the GDP growth being 2004-05, while everything else was calculated on the base year of 1995-96.
“This will just create confusion.”
He expressed concerns over the increased interest payment, which is 12.4 percent of the budget this year.
He also observed that the subsidy was decreased to 2 percent of GDP.
But Bhattacharya praised the proposals on tax and VAT.
The CPD called for a tax-free income slab of Tk 250,000.
It said the tax-free slab of Tk 220,000 was unreasonable, considering the inflation and the increases in other sectors.
But it lauded the 30 percent income tax for high income groups.
The CPD recommended that the government form four commissions, for statistics, agricultural prices, local government financing and auditing government spending.
Published in The Financial Express
Fiscal targets of budget fail to reflect reality: CPD
Akbar Ali Khan for political consensus
FE Report
Macroeconomic correlates are pretty inconsistent and key fiscal targets do not reflect reality in the budget estimation for fiscal year (FY) 2014-15, a key note paper presented at a function, organised by the Centre for Policy Dialogue (CPD), said.
It said the budget has not provided for necessary institutional reforms towards better fiscal management and supportive policy environment creation.
The CPD organised a policy dialogue on ‘Analysis of the National Budget for FY 2015’ at a city hotel Saturday.
Speakers at the programme underscored the need for political stability and dialogues among parties concerned to attract investment and speed up the pace of the country’s GDP growth. They also found the budget not in tune with the Sixth Five-Year Plan.
Dr Fahmida Khatun, research director of the CPD, presented the keynote paper in the programme with some major observations. CPD chairman Professor Rehman Sobhan moderated the programme.
Representatives from business community, government officials, economists, former bureaucrats, advocacy and research organisation officials attended the programme.
Planning Minister AHM Mustafa Kamal, State Minister for Finance MA Mannan, former Finance Adviser to the caretaker government Dr. Akbar Ali Khan, former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed, CPD executive director Professor Mustafizur Rahman, and distinguished fellow Dr Debapriya Bhattacharya, among others spoke on the occasion.
Dr Bhattachariya said the budget should be framed on ground realities, not on vision.
“Vision and budget cannot be the same. The planning process may incorporate ambition. But the same cannot have a place in the budget,” he said.
For this reason, expenditure and allocation have a mismatch to the extent of around 13 per cent, he said.
“The financial sector will be disrupted and the market will get a different signal if the budget is prepared on vision,” he said.
Dr Akbar Ali Khan stressed the need for participation of major opposition parties in the budgetary process and reaching a political consensus.
He said poverty rates have come down on the basis of the government’s estimation that has taken into consideration the local factors. In international perspective, the poverty rate is still high.
Dr Khan maintained that the improvement in poverty situation is not sustainable as the situation could be on a reverse trend in the event of an increase in the price of essentials.
“The budget has failed to mention sources from where the government would collect the projected revenue in the upcoming fiscal,” he said.
Dr Salehuddin Ahmed underscored the need for attracting investment and monitoring infrastructure projects.
He recommended reduction of bank borrowing by managing soft loans in larger volume.
Dr Ahmed criticised the government’s support to the “inefficient” state-owned banks.
He also suggested institutional development of local government.
Former Finance Minister and member of CPD board of trustees, Dr M Syeduzzaman said the public administration has received the highest allocation, 15.3 per cent, in the budget for next fiscal.
“The nation would expect that the allocation will be justifiably spent by appointing skilled manpower following rules of business,” he added.
Outcome of the budget, in terms of GDP, will depend first on realising revenue targets, using the projected foreign aid in the pipeline, attitude of the private sector and effective use of available resources for implementing the private investment programmes, he said.
If private investment is at least 25 per cent of GDP and resources and infrastructure are available, then the budget targets will not be ambitious, he said.
Mr Syeduzzaman said the financial sector is facing serious problem.
“Single client exposure for building the Padma Bridge is not a healthy process. It will be give a big shock to the inclusive growth through the banking sector which we are expecting. And it would be a wrong signal to the private sector investment,” he added.
Planning Minister Mostafa Kamal said the revenue collection has achieved remarkable growth, around 20 per cent, in the last five years.
He said real investment has increased this year while private sector investment saw a nominal slide.
The State Minister for Finance said the government has proposed a wide range of incentives in the budget to attract investment.
There are some historical impediments but the government has proved it successful in many respects, he added.
Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy sought unified dollar rate for all exporters and simplification of bonded warehouse facility.
Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) president Kazi Akramuddin said the budget has rightly focused SME and women development issues.
Anis-Ud-Dowla, chairman of ACI limited and former president of the Metropolitan Chamber of Commerce and Industry (MCCI), sought proper justice for payment of proper tax.
Published in The Daily Star
Wealth tax: need of the hour
The planning minister recommends new law at CPD discussion; economists suggest improvement in political atmosphere, governance to keep up economic momentum
Star Business Report
A top government functionary yesterday called for imposition of wealth tax to discourage accumulation of unproductive assets.
“It is the demand of the day. It is necessary to make a law on wealth tax and impose tax,” Planning Minister AHM Mustafa Kamal said at a dialogue on an analysis of the proposed budget, organised by the Centre for Policy Dialogue.
He also touched upon the issue of black money, saying it is generated through concealment of the real transaction value of land. Kamal cited the high land-value in Gulshan and Banani areas as a case in point.
In practice, the real transaction value of land in those areas is not disclosed in the registration papers; a much lower figure is quoted to avoid tax.
“The system is helping create black money,” Kamal said, while suggesting confiscation of the land if a lower figure is put on the registration paper.
“Many would be scared of doing it if there is such a law.”
Discussants at the programme said the economy is unlikely to get a momentum without any improvement in the political atmosphere, governance and infrastructure.
“The private sector is the driver of growth in Bangladesh. But private investment will not rise if there is political instability, lack of good governance and infrastructure,” said Akbar Ali Khan, a former caretaker government adviser. Political consensus is necessary for economic development, said Khan, while urging the government to make efforts to that end.
Salehuddin Ahmed, former governor of Bangladesh Bank, said lower private investment and the sluggish pace of job creation remain major challenges to the economy even though some of the indicators such as inflation look favourable.
“Political uncertainty has to be really taken into account. If you believe in participatory development, you have to go for dialogue.”
But MA Mannan, state minister for finance and planning, said the increased public investment and tax benefits given in the upcoming fiscal year budget would lure in private investors. “We have received positive reactions.” Ahmed also warned the government about the risks of high borrowing from banks to finance the Tk 250,506 crore-budget.
“If business picks up, there will be dynamism in the economy, leading to increased demand for credit. So increased government borrowing may affect the credit flow to the private sector.”
Siddiqur Rahman Khan, former finance secretary, was in agreement with the former central banker in this regard.
Ahmed also criticised the government’s plan to recapitalise the state-owned banks.
“Why should we give money to banks for their inefficiency and corruption? This is the worst use of public money.”
He expressed doubts about the feasibility of the tax collection target for fiscal 2014-15. “Besides, tax officials resort to the shortcut to tax collections. Instead of putting in efforts to find new taxpayers, they chase those who pay taxes regularly.”
Kamal too called for reforms in revenue administration, while remaining optimistic of hitting the budgetary targets.
Kazi Akram Uddin Ahmed, president of the Federation of Bangladesh Chambers of Commerce and Industry, stressed the need for the rule of law, transparency, accountability and e-tendering to ensure proper use of public money.
Mir Nasir Hossain, a former president of FBCCI, said the increased supply of gas to industries will encourage investments. “We will have to prioritise where we will supply gas. Is it going to be households, vehicles or industries?”
Personal security has become a big question mark in recent times besides political instability, Hossain said. “Investment will be discouraged if investors are worried about personal security.”
About the surcharge on high-income people, Hossain said the tax authority imposes more taxes on regular taxpayers because of its failure and inefficiency to increase its tax net. Mahabub Hossain, former director general of the Bangladesh Institute of Development Studies, criticised the government’s reduced allocation for the agriculture sector.
“But we keep hearing from the government that agriculture will get priority,” he said, adding that increased fund is needed to develop improved seeds and farm technologies to ensure food security in the face of growing population and land scarcity.
Debapriya Bhattacharya, distinguished fellow of CPD, said budgetary targets should be fixed from the perspective of reality and implementation capacity. “Budgetary plans should be more rigorous and scientific.”
Shamsul Alam, member of Planning Commission, said constructive criticism does not come from the post-budget reaction.
“In the past, we have seen that the opposition party was absent in budget discussions and placed observations from the party’s point of view.”
Rehman Sobhan, chairman of CPD, chaired the discussion.
Published in New Age
PROPOSED BUDGET FOR FY 2014-2015
Policymakers, economic experts continue with differing views
Staff Correspondent
A number of government policymakers and economic experts on Saturday expressed divided opinions about the new budgetary proposals during a post-budget dialogue in the city.
The government policymakers led by planning minister AHM Mustafa Kamal and state-minister for finance and planning Abdul Mannan praised the measures in the proposed Tk 2.5 lakh crore budget for the next financial year 2014-2015.
They expressed their optimism of achieving the budgetary targets that included a mammoth revenue target and a lofty GDP growth target of 7.3 per cent during the dialogue organised by the Centre for Policy Dialogue at a city hotel.
The economic experts including former caretaker government adviser Akbar Ali Khan and CPD distinguished fellow Debapriya Bhattacharya expressed doubt saying that the budget was beyond implementation.
The government policymakers have been defending the proposed budget announced by the finance minister AMA Muhith on June 5 as most of the leading economists have said that many of the budgetary goals were unrealistic.
CPD chairman Rehman Sobhan chaired the discussion that was also attended by former finance minister M Syeduzzaman, former Bangladesh Bank governor Salehuddin Ahmed, lawmaker Tajul Islam, planning commission member Shamsul Alam, apex chamber FBCCI president Kazi Akram Uddin, former FBCCI president Mir Nasir Hussain and former BGMEA president Abdus Salam Murshedy.
CPD research director Fahmida Khatun read out the keynote speech.
Mustafa Kamal said the new budget was designed in line with the sixth five-year plan to transform the country into a middle income country by 2021. He said ambitious revenue budget was achievable because of past reform carried out by late finance minister M Saifur Rahman. Debapriya said there was wide gap between budgetary proposals and reality.
He said the newly proposed budget lacked reality. Giving example of the Dhaka-Chittagong four-lane road project, he said the gap was clear as the government could sanction paltry amount of funds for more than two dozens of development projects. He expressed doubt about implementation of the budget by the bureaucrats which might result in lower than expected foreign aids and frustration among the people.
Akbar Ali Khan said higher investment by private sector was needed in helping the government to achieve projected 7.3 per cent growth in the new fiscal year. He said problems like lack of political stability, good governance and age-old infrastructures had discouraged the private sector from fresh investment in the last several years. He said without political stability the implementation of the new budget was quite impossible.
The ruling party should come forward to establish the political consensus for the greater welfare of the nation, he suggested. He termed the revenue target in the new fiscal was ambitious. He found lack of clarification in obtaining the target as a major flaw of the budget speech by the finance minister.
MA Mannan said the present budget was a successful one in a sense that it was criticised more than ever. He lauded the present government’s efforts in increasing food production, electricity generation and encouragement for industrialisation outside the capital city.
Shamsul Alam said the proposed budget was pro-poor and pro- people. He highlighted that import duty on 777 items was proposed to be reduced. He, however, supported the view by Akbar Ali on political consensus for successful implementation of the budget. He hoped that the budget would be implemented although there might be some questions about its quality.
Mir Nasir said major challenge of the budget was to increase investment by private sector. He said focus should be given to solve the problem like gas and electricity supply and ensure political instability.
He noted that no private sector investor would go for new ventures amidst political uncertainty. Akram Uddin praised the budgetary proposal but said focus should be given on implementation and transparency.
Published in The Independent
Budget’s success hinges on political consensus: CPD
Staff Reporter
Renowned economists at a roundtable meeting yesterday again emphasised the need to bring about political consensus in the country to ensure that the proposed budget for the next fiscal year (2014–15) is successfully implemented. They also urged the government to remove the key barriers to investment, including political instability, a lack of good governance and inadequate infrastructure, power and energy, to stimulate the growth of private sector investment and pull it out of its existing stagnancy. This is a prerequisite for achieving the proposed 7.3 per cent growth in the gross domestic product (GDP) in the next fiscal, they pointed out.
The speakers came up with the demands at a roundtable meeting on ‘Analysis of National Budget for 2014–15’ at Lakeshore Hotel in the city yesterday. The Centre for Policy Dialogue (CPD) organised the meeting. Its chairman, Prof. Rehman Sobhan, was in the chair. Planning minister AHM Mustafa Kamal, state minister for finance MA Mannan, former Bangladesh Bank governor Dr Salehuddin Ahmed, CPD distinguished fellow Dr Debapriya Bhattacharya, CPD executive director Mustafizur Rahman, renowned economist and former adviser to a caretaker government Dr Akbar Ali Khan, Federation of Bangladesh Chambers of Commerce and Industry president (FBCCI) Kazi Akram Uddin Ahmed, former FBCCI president Nasir Hossain and others addressed the meeting. It will not be possible to implement the proposed budget without political consensus, Dr Akbar Ali Khan pointed out. “It is the government’s responsibility to implement the national budget while bringing about political consensus in the country,” he asserted.
In developing countries such as Bangladesh, growth in private sector investment is crucial for achieving the targeted GDP growth, Dr Akbar Ali Khan said. But growth of private investment has become stagnant in the last couple of years, mainly because of the political turmoil, a lack of good governance and inadequate development of infrastructure, he added.
“If these investment barriers are not removed, private investment will not be stimulated. Then the targeted 7.3 per cent GDP growth in the next fiscal will not be ultimately achieved,” the former adviser to the caretaker government said.
Two to three weeks are usually given for discussing the proposed budget in Parliament after the budget proposals are announced. But this time is not enough, he said, adding that the proposed budget should be finalised through discussions with think-tanks. “Though different countries carry out discussions with representatives of various think-tanks before finalising the proposed budget, this is not practised in our country,” he pointed out. Consequently, inconsistencies remain in the national budget, he observed.
Though the rate of poverty has come down to 24 per cent from Bangladesh’s perspective, the rate is still 80 per cent as per international standards, he said. People who rose above the poverty line will again fall into poverty if inflation increases even a little bit, the renowned economist observed. For ensuring long-term economic development, Akbar Ali Khan laid stress on bringing about political stability across the country.
Though the government has increased the revenue target in the proposed budget, it has not clarified the sectors from which the targeted revenue will be collected, he noted.
Published in Daily Sun
Analysts find budget tough for ‘planning-type nature’
Policy makers optimistic about implementation
Staff Correspondent
Analysts at a dialogue Saturday said implementation of the new budget would be tough for its “planning-type nature,” while policy makers in contrary said it would be achievable.
“Planning and budgetary process are not the same as budget is more scientific that deals with some specific targets under legal bindings, while planning lacks those,” Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD) said.
He made the remark at a post-budget dialogue organsied by the CPD at a city hotel. A number of economic analysts, business leaders and policymakers attended.
“There is a tendency to mix up the budgetary process with the country’s vision set in the perspective plan,” he added pointing to proposed budgetary measures. But Planning Minister AHM Mustafa Kamal, who was the chief guest at the event, said “The budget would be very much achievable and it has not been proposed to deceive the people.”
He said the proposed budget has definitely reflected the government’s vision of becoming a middle-income country, but the government’s budget implementation performance also increased remarkably in the recent years.
He mentioned that the government earned a tremendous achievement to register 20 percent growth in revenue earning for the last few years. CPD’s Trustee Board Chairman Prof Rehman Sobhan moderated the dialogue, where the research director of the private think tank Dr Fahmida Khatun presented a keynote paper.
Lawmaker, Tajul Islam, adviser to BRAC Dr Mahbub Hossain, planning commission member Abdul Mannan Howladar, among others, took part in the dialogue.
Speaking on the occasion, former adviser Dr Akbar Ali Khan said the main problem of the budget is that it missed the indication “where we’re going.” He called for lowering proposed fiscal measures as the budget speech lacked information of what would be the gains or losses from those.
He also termed the budgetary system bureaucratic as the process lacks proper representation from people and even the lawmakers.
Dr Akbar said the country’s growth must be private sector led, but private investment at present was low because of political instability, lack of governance and infrastructure.
Former central bank governor Dr Salehuddin Ahmed said soaring non-food inflation, current account balance and poor investments would be major problems in the coming days.
He stressed that policy continuation and political feasibility were the key factors in implementing the budget.
Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President Kazi Akram Uddin was somewhat optimistic about budget implementation.
Economist Abu Ahmed said the proposed tax structure for listed and non-listed companies would discourage multinational companies to come to the capital market.
On the other hand, it will help shoot up investments in saving certificates and non-productive purchases like land buying, he added.