A clear timeline should be set for industries to become productive while receiving incentives, and a scheme should also be established for phasing out and phasing down those incentives, according to Prime Minister's Economic Affairs Adviser Dr Mashiur Rahman.
"Without a timeline, industries might assume the incentives will continue indefinitely, while the government might believe they are profitable and reduce the benefits," he said at a seminar in Dhaka on Sunday.
Dr Rahman called for policy stability while speaking as the chief guest to the seminar titled 'Bi-annual economic state and future outlook of Bangladesh economy: private sector perspective', organised by the Dhaka Chamber of Commerce & Industry (DCCI).
According to him, policy stability is a must for a stable economy and attracting both local and foreign investment. He elaborated on the significant changes the country's economy has undergone over the past decade.
"During this period, the private sector has flourished remarkably, simultaneously benefiting the public sector," he said.
The adviser said policies should be formulated considering the challenges and opportunities faced by the private sector. He advocated for export diversification and value addition to boost overall export volume.
Dr Rahman identified leather, pharmaceuticals and light engineering as the most promising sectors for Bangladesh.
He added that the country needs to expedite the operationalisation of the active pharmaceutical ingredient (API) park to address potential setbacks following graduation from the least developed country club.
Acknowledging the urgency for tax reforms, Dr Rahman said that certain issues and challenges still persist.
Ashraf Ahmed, president of the Dhaka Chamber of Commerce & Industry (DCCI), delivered the keynote paper at the seminar.
He said achieving the long-term goal of a trillion-dollar smart economy requires concerted efforts in several key areas.
The areas Mr Ahmed mentioned include reducing the cost of doing business, improving ease of doing business, enhancing regulatory efficiency, developing appropriate infrastructure, ensuring energy security, improving logistics and facilitating access to finance for the private sector.
He also underscored product and market diversification for economic growth.
The DCCI president pointed out that private sector investment is targeted to reach 27.4 per cent of GDP in FY2024, compared to 21.8 per cent in FY2023.
"Implementing necessary policies in light of LDC graduation will further accelerate this growth," he added.
To further facilitate the private sector, Ahmed called for lowering corporate tax, full automation of taxation, expanding the tax net and reforming the special duty (SD) and value-added tax (VAT) acts.
He also suggested reducing non-performing loans (NPLs) as they increase certain intermediary costs for the private sector.
Besides, he said reducing the cost of doing business, ensuring an uninterrupted supply of affordable energy and developing the logistics sector will encourage private sector reinvestment.
Regarding the sudden withdrawal of incentives for readymade garment manufacturers, he commented that if entrepreneurs had been consulted on the guidelines, they could have planned accordingly.
Dr Md Habibur Rahman, chief economist of the Bangladesh Bank, pointed the finger at rising global geopolitical instability for surging commodity prices in the local market.
He said the central bank has already taken necessary measures to ease the inflationary pressure.
To maintain control over the exchange rate, the economist talked about the introduction of a crawling peg by the central bank. He also mentioned the central bank's roadmap to reduce NPLs in the industrial sector to 8 per cent within the next two years.
"The Bangladesh Bank will maintain a contractionary monetary policy until inflation falls to 6 per cent," he said.
Shams Mahmud, former president of DCCI, underlined proactive policies to ensure the sustainable future of the garments sector. He stressed that boosting private sector investment requires the government to guarantee affordable energy and uninterrupted gas supply to industries.
He advocated for expediting the development of local import substitution industries to achieve self-sufficiency after LDC graduation.
He also proposed a rationalised taxation system and continued special support for cottage, micro, small and medium enterprises (CMSMEs).
Dr Ashikur Rahman, senior economist at the Policy Research Institute (PRI) of Bangladesh, noted that macroeconomic instability is detrimental to the private sector.
As non-performing loans have a severe impact on businesses, he called for serious action against NPLs.
He also pointed out that Bangladesh's tax-to-GDP ratio remains below expectations, hovering around 10 per cent. Dr Rahman emphasised skill development and financial sector reforms.
Dr Mohammad Yunus, research director at the Bangladesh Institute of Development Studies (BIDS), said extortion in the retail market can sometimes be a major driver of inflation.
To attract foreign direct investment, he called for enhanced coordination between the Bangladesh Economic Zones Authority (BEZA) and the Bangladesh Export Processing Zones Authority (BEPZA).
He suggested utilising Bangladesh Small and Cottage Industries Corporation (BSCIC)'s industrial plots for cluster-based development.
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