About becoming a middle income country
Abul Quasem Haider | Saturday, 31 May 2008
According to a recent World Bank (WB) report, "Bangladesh: technique for earning sustained economic growth", Bangladesh will be in the middle income group by 2016. It states that if the country achieves a growth rate of 7.5 per cent from its own resources it would be possible to achieve the goal. A benchmark for 185 countries prepared by the WB, categories countries having per capita gross national income (GNI) of $905 or below as low income group, those of the $ 906 to $ 3,095 bracket as low-middle income group, $ 3596 to $ 11,115 as high-middle income group and $ 11,116 and above as high income group.
The yearly per capita GNI of the people of Bangladesh is above $3,000. In spite of droughts, floods and other natural calamities, the economists think that Bangladesh will once enter the global scenario on its own strength.
At its Golden Jubilee in 2021, it appears from the economic reviews that Bangladesh is going to be a country of the middle income category.
Like most other countries of the world, Bangladesh has been facing multiple social and economic challenges. The average income of the people of Bangladesh has increased by 75 per cent compared to that of 1990. Poverty has also dropped to below 40 per cent from 58 per cent in 1992. The small loan-giving organisations made a contribution to bringing down the poverty rate. But the role of these small-loan giving organisations is not sufficient enough to achieve economic breakthrough for a country like Bangladesh. The role of this sector alone is not sufficient to achieve the goal. To become a middle income country, all round measures have to be taken to create huge opportunities for employment, poverty alleviation, creation and distribution of wealth, welfare-oriented administration, transparency, accountability and overall development of manpower and its proper utilisation.
To become a country of middle income group, Bangladesh needs to increase production through rapid industrialisation. Its industrial growth rate has to be raised and the share of this sector in the gross domestic product (GDP) has to be increased to 40 per cent. At the same time, agricultural growth rate has to be increased. The contribution of service sector to the GDP has to be raised to 50 per cent.
Side by side with the ready-made garments (RMG) industries, the export of processed food, leather, medicine, ceramics, home textiles and small scale technologies should be boosted. Besides, other progressive export-oriented sectors should also be developed. Bangladesh is facing tough competition from China, Vietnam and India. In order to survive in the competitive market, new export-oriented industries must be set up.
The private sector has to be given absolute priority. Industrial development is never possible without the initiative of the private sector. Importance should also be given to small- and medium-scale industries to suit the needs of densely-populated Bangladesh.
Bangladesh is yet to take skill development programmes. It should send skilled and not unskilled workforce for jobs abroad. Entrepreneurs in the country could absorb manpower sporadically and they should arrange training for developing their skills. To develop skilled workforce, a long-term plan is required. The issue should also be included in the national budget because without skilled labour force production can not be increased. Budget allocation in education sector should be increased considerably to help raise, the standard and quality, and to expand the coverage, of mass education and vocational education. Technical, vocational and service-oriented training facilities should be developed.
The precondition for attracting foreign investment is the political stability of the country. To create a congenial atmosphere for investment, a permanent organisational structure, free from maladministration and interference, needs to be established to provided necessary facilities to the investors. The process of export-import activities should be simplified and protected from all sorts of harassment. The government has to take initiative to make a favourable environment for the capital market.
Industrialisation is not possible without infrastructural development. Developed infrastructure, uninterrupted supply of electricity, export aid scheme, availability of modern technology, trained manpower, increase of assistance to specialised technical personnel and compliance with the buyers' requirements have to be ensured. The main problems of our infrastructure are inadequacy of roads and highways, bridges and culverts, and insufficient supply of electricity and gas in the industrial belts. For the growth of business, we have to build a coordinated system of transportation. Ours is a country of rivers. To utilise this facility, we have to give importance to waterway transportation to increase trade with the neighbouring countries. The railways needs to be improved to facilitate easy transportation of containers between Dhaka and Chittagong. Now only 10 per cent of the containers are transported through the railways. The sea-ports do also need to be equally developed to facilitate trading. Of the total export-import trade, of the country, about 85 per cent are now handled at the Chittagong port. But this port suffers from negligence in loading-unloading and low productivity of the labourers, besides other problems. The problems are caused due to harassment in the name of trade unions. The caretaker government, however, addressed the issue to increase efficiency by about 30 per cent.
To be a middle income country, Bangladesh has to give extra emphasis on its agriculture. We could not, so far, derive the expected results from the agriculture due to scanty use of scientific appliances. Since the major portion of our workforce is engaged in agriculture, we have to increase investment in research-related activities and for, use of scientific methods and high technology and diversification of crops. This will help increase productivity needed for better distribution of income. Agricultural product-processing industries need to be established by improving the farming practices using high-breed seeds.
The National Board of Revenues (NBR) being an outdated organisation, the volume of revenue collection remains not up to the desired level. The total collection of revenue in 2006-2007 was only 10.7 per cent of GDP. The revenue earning has to be enhanced by widening the range of taxation. The caretaker administration has implemented the system of imposing tax on undeclared income. As a result in the current financial year, 2007-2008, revenue income in the first five moths has increased by 22.4 per cent.
Every year big allocations for the Annual Development Programme (ADP) remain unutilised. This year the government reduced the ADP size from $3700 million to $3200 million. To become a middle income country. Bangladesh has to expand further the base of taxation. Without increasing revenue earnings, the benefit for the masses is not possible.
A great hindrance to development remains the natural calamities like floods, droughts and cyclones. Every year the natural calamities cause staggering losses to the economy. In the year 2007, natural calamities occurred twice causing immense losses which almost brought the national economy on the verge of collapse. The Sidr alone caused a loss of $ 1600 million.
The state-owned enterprises sector is incurring huge financial losses every year. Among the top losers are Bangladesh Petroleum Corporation (BPC), Biman Bangladesh, Bangladesh Jute Mills Corporation (BJMC) and Bangladesh Power Development Board. Besides, some of the state-owned commercial banks and autonomous organisations are incurring losses. In the financial year 2006, the BJMC incurred the second highest amount of financial loss amounting to Taka 2.30 billion (Tk 230 crores). The BPC, due to selling oil at subsidised rate, is facing a heavy burden of debt. In the current financial year until February 6, 2008, BPC's debts to the Islamic Development Bank (IDB) stood at $512 million to Bangladesh Bank $299 million and to four state-owned banks, $446 million. As a result, the banking sector has been adversely affected. Financial management is far from sound due to increasing liability of subsidies. The policy for allowing subsidy is now required to be changed. The subsidy should be provided only to improve the facilities for people to offset the risks of being affected by the natural calamities. The payment of such subsidies should be stopped for running the organisations that have been incurring financial loss for years together for inefficiency and corruption.
To make Bangladesh a middle income country, permanent political stability and clear policies are needed immediately. The pace of development has many a to be undisturbed. The WB has suggested for competitive private sector, product diversification, commercialisation of agriculture, trade liberalisation, and building more city centres as dependable alternatives to the Dhaka city.
To become a middle income country, increased rapid growth rate on a sustained basis will be very critical.
The writer is a columnist, and former Vice President, FBCCI
The yearly per capita GNI of the people of Bangladesh is above $3,000. In spite of droughts, floods and other natural calamities, the economists think that Bangladesh will once enter the global scenario on its own strength.
At its Golden Jubilee in 2021, it appears from the economic reviews that Bangladesh is going to be a country of the middle income category.
Like most other countries of the world, Bangladesh has been facing multiple social and economic challenges. The average income of the people of Bangladesh has increased by 75 per cent compared to that of 1990. Poverty has also dropped to below 40 per cent from 58 per cent in 1992. The small loan-giving organisations made a contribution to bringing down the poverty rate. But the role of these small-loan giving organisations is not sufficient enough to achieve economic breakthrough for a country like Bangladesh. The role of this sector alone is not sufficient to achieve the goal. To become a middle income country, all round measures have to be taken to create huge opportunities for employment, poverty alleviation, creation and distribution of wealth, welfare-oriented administration, transparency, accountability and overall development of manpower and its proper utilisation.
To become a country of middle income group, Bangladesh needs to increase production through rapid industrialisation. Its industrial growth rate has to be raised and the share of this sector in the gross domestic product (GDP) has to be increased to 40 per cent. At the same time, agricultural growth rate has to be increased. The contribution of service sector to the GDP has to be raised to 50 per cent.
Side by side with the ready-made garments (RMG) industries, the export of processed food, leather, medicine, ceramics, home textiles and small scale technologies should be boosted. Besides, other progressive export-oriented sectors should also be developed. Bangladesh is facing tough competition from China, Vietnam and India. In order to survive in the competitive market, new export-oriented industries must be set up.
The private sector has to be given absolute priority. Industrial development is never possible without the initiative of the private sector. Importance should also be given to small- and medium-scale industries to suit the needs of densely-populated Bangladesh.
Bangladesh is yet to take skill development programmes. It should send skilled and not unskilled workforce for jobs abroad. Entrepreneurs in the country could absorb manpower sporadically and they should arrange training for developing their skills. To develop skilled workforce, a long-term plan is required. The issue should also be included in the national budget because without skilled labour force production can not be increased. Budget allocation in education sector should be increased considerably to help raise, the standard and quality, and to expand the coverage, of mass education and vocational education. Technical, vocational and service-oriented training facilities should be developed.
The precondition for attracting foreign investment is the political stability of the country. To create a congenial atmosphere for investment, a permanent organisational structure, free from maladministration and interference, needs to be established to provided necessary facilities to the investors. The process of export-import activities should be simplified and protected from all sorts of harassment. The government has to take initiative to make a favourable environment for the capital market.
Industrialisation is not possible without infrastructural development. Developed infrastructure, uninterrupted supply of electricity, export aid scheme, availability of modern technology, trained manpower, increase of assistance to specialised technical personnel and compliance with the buyers' requirements have to be ensured. The main problems of our infrastructure are inadequacy of roads and highways, bridges and culverts, and insufficient supply of electricity and gas in the industrial belts. For the growth of business, we have to build a coordinated system of transportation. Ours is a country of rivers. To utilise this facility, we have to give importance to waterway transportation to increase trade with the neighbouring countries. The railways needs to be improved to facilitate easy transportation of containers between Dhaka and Chittagong. Now only 10 per cent of the containers are transported through the railways. The sea-ports do also need to be equally developed to facilitate trading. Of the total export-import trade, of the country, about 85 per cent are now handled at the Chittagong port. But this port suffers from negligence in loading-unloading and low productivity of the labourers, besides other problems. The problems are caused due to harassment in the name of trade unions. The caretaker government, however, addressed the issue to increase efficiency by about 30 per cent.
To be a middle income country, Bangladesh has to give extra emphasis on its agriculture. We could not, so far, derive the expected results from the agriculture due to scanty use of scientific appliances. Since the major portion of our workforce is engaged in agriculture, we have to increase investment in research-related activities and for, use of scientific methods and high technology and diversification of crops. This will help increase productivity needed for better distribution of income. Agricultural product-processing industries need to be established by improving the farming practices using high-breed seeds.
The National Board of Revenues (NBR) being an outdated organisation, the volume of revenue collection remains not up to the desired level. The total collection of revenue in 2006-2007 was only 10.7 per cent of GDP. The revenue earning has to be enhanced by widening the range of taxation. The caretaker administration has implemented the system of imposing tax on undeclared income. As a result in the current financial year, 2007-2008, revenue income in the first five moths has increased by 22.4 per cent.
Every year big allocations for the Annual Development Programme (ADP) remain unutilised. This year the government reduced the ADP size from $3700 million to $3200 million. To become a middle income country. Bangladesh has to expand further the base of taxation. Without increasing revenue earnings, the benefit for the masses is not possible.
A great hindrance to development remains the natural calamities like floods, droughts and cyclones. Every year the natural calamities cause staggering losses to the economy. In the year 2007, natural calamities occurred twice causing immense losses which almost brought the national economy on the verge of collapse. The Sidr alone caused a loss of $ 1600 million.
The state-owned enterprises sector is incurring huge financial losses every year. Among the top losers are Bangladesh Petroleum Corporation (BPC), Biman Bangladesh, Bangladesh Jute Mills Corporation (BJMC) and Bangladesh Power Development Board. Besides, some of the state-owned commercial banks and autonomous organisations are incurring losses. In the financial year 2006, the BJMC incurred the second highest amount of financial loss amounting to Taka 2.30 billion (Tk 230 crores). The BPC, due to selling oil at subsidised rate, is facing a heavy burden of debt. In the current financial year until February 6, 2008, BPC's debts to the Islamic Development Bank (IDB) stood at $512 million to Bangladesh Bank $299 million and to four state-owned banks, $446 million. As a result, the banking sector has been adversely affected. Financial management is far from sound due to increasing liability of subsidies. The policy for allowing subsidy is now required to be changed. The subsidy should be provided only to improve the facilities for people to offset the risks of being affected by the natural calamities. The payment of such subsidies should be stopped for running the organisations that have been incurring financial loss for years together for inefficiency and corruption.
To make Bangladesh a middle income country, permanent political stability and clear policies are needed immediately. The pace of development has many a to be undisturbed. The WB has suggested for competitive private sector, product diversification, commercialisation of agriculture, trade liberalisation, and building more city centres as dependable alternatives to the Dhaka city.
To become a middle income country, increased rapid growth rate on a sustained basis will be very critical.
The writer is a columnist, and former Vice President, FBCCI