Acid test of the government in facing the impending economic crisis
Friday, 17 April 2009
Syed Fattahul Alim
At a World Bank (WB)-organised workshop the other day, the country's present state of the economy was portrayed in a rather positive light, despite the ongoing recession across the globe. Saying that the economy of Bangladesh is now in a better position than what it was at the end of 1980s or 1990s, it however, cautioned the government against becoming too complacent with its present scenario.
In fact, looking at the state of its main sources of earning such as the exports and the foreign remittance, there is no immediate reason to be overly alarmist. There are, however, some negative trends in the areas of export such as frozen food, leather, jute and pharmaceuticals during the first nine months of the current fiscal compared to their performance during the same period in the previous fiscal year. The fall in the volume of export in these sectors will certainly reduce the rate of foreign exchange earning for the country. However, the fall in the export of frozen food by 11 per cent in the last three quarters of the current fiscal is worrisome. For this is a highly sensitive traditional export sector of the economy and reflects the impact of the recession in the Western world on our economy clearly. The same is the case of leather, the export of which fell by 33 per cent in the period under review. But the export of jute, which fell by 18.1 per cent and that of pharmaceutical products by 15.5 per cent, reflect the general impact of global recession on our export. These exportable items have other destinations, apart from Europe and North America. Moreover, the volume of their export is also not as big as the flagships like the garment, knitwear and remittance. That is why the fall in their export will remain a lesser worry than such developments in the aforementioned big foreign currency earners of the country. Even then, the government needs to take due note of the developments in these sectors and try to address the constraints they are facing with due sympathy.
Jute demands especial attention in this respect. For it is not purely due to the current recession that it is suffering. It is a victim of wrong policy as well as lack of due attention of the successive governments after independence. It is still suffering. This particular agro-based product of the country deserves greater attention from the government not just for its export potential. Because, jute has also its wider application in the domestic market as well as abroad than as a universal packing material. It is also used in making carpet backing and particle boards. Being an agriculture-based commodity, jute employs millions of people from its cultivation phase to converting it into fibres in the rural areas to production of packing materials in the industries and for other purposes in the urban centres of the country. Even if one considers its domestic use only, this green plant can again be turned into a gold mine like it was in the past.
The Golden Fibre as we know was the biggest hard cash earner for the then economy in this part of the world. Now, far from its importance being diminished meanwhile, jute's potential has increased manifold in all these years that this agricultural product had fallen from its earlier grace. Most importantly, amid the concerns about the impending recession, this item, if properly addressed, can become a very reliable source of employment of both the rural and urban workforce of the country. It is worthwhile to mention another estimate of the World Bank on this score that during the period of recession-driven crisis in question, there will be need for 2 to 2.5 million local jobs. Jute can contribute in a big way to create employment opportunity for the population during this hour of need of the nation. Leather would also need attention of the government so that all those involved in the sector from the entrepreneurs big and small to the workers may at least remain in the trade and job until the days of crisis due to recession are over.
Though the remittance situation is still better, the threats are there if one turns one's attention from the volume of incoming remittance to the real source dictating the progressive growth of remittance, that is export of manpower, which has fallen by about 25.41 per cent during the first three quarters of the current fiscal as compared to the same period in 2007-08. This is something that demands serious attention from the government, for it would affect the flow of homebound remittance in the longer term in the future.
The government spending should focus more on the creating of jobs for the unemployed and safety nets for the very poor and the most vulnerable groups of the population. Infrastructure is another sector that should get priority in the public expenditure decisions both for creating the stronger basis for the development of trade, commerce and industry as well as for creation of jobs for the nation's workforce. The recent announcement of the prime minister is a cause for big encouragement in this respect. In that declaration, the prime minister unveiled her government's plans to develop the communications infrastructures of the country in a big way. Obviously, this huge programme of the government would imply involvement of both public and private expenditures on a massive scale creating a large number of employment opportunities for the unemployed and the semi-employed. The infrastructure building work will therefore be a way to face recession over a very long period of tine. The government's decision to go for such development of the physical infrastructure is well-timed and praiseworthy at this time when the nation is bracing for the impending recession.
But the bailout packages as proposed by the government in the face of the demands made by the major foreign exchange earning industries warrant a more cautious approach.
As observed at the workshop organised by the World Bank, the country's fiscal space is not roomy enough to accommodate many of the similar demands including subsidies to be made on the public exchequer. However, the government will still need to consider the demands with due sympathy and devise appropriate trade-off measures that suit the specific cases where implementation of the bailout packages would be made.
The fact that the most important indicators of the economy such as the foreign exchange reserves, remittance inflows and the current account situation are healthy, while the fiscal balances are well managed, the government should have the breathing space to prepare for the crisis in the making due to the downturn in the world economy in a more judicious manner. Taking the appropriate measures on this score would also be the acid test for the newly elected political government now in office.
At a World Bank (WB)-organised workshop the other day, the country's present state of the economy was portrayed in a rather positive light, despite the ongoing recession across the globe. Saying that the economy of Bangladesh is now in a better position than what it was at the end of 1980s or 1990s, it however, cautioned the government against becoming too complacent with its present scenario.
In fact, looking at the state of its main sources of earning such as the exports and the foreign remittance, there is no immediate reason to be overly alarmist. There are, however, some negative trends in the areas of export such as frozen food, leather, jute and pharmaceuticals during the first nine months of the current fiscal compared to their performance during the same period in the previous fiscal year. The fall in the volume of export in these sectors will certainly reduce the rate of foreign exchange earning for the country. However, the fall in the export of frozen food by 11 per cent in the last three quarters of the current fiscal is worrisome. For this is a highly sensitive traditional export sector of the economy and reflects the impact of the recession in the Western world on our economy clearly. The same is the case of leather, the export of which fell by 33 per cent in the period under review. But the export of jute, which fell by 18.1 per cent and that of pharmaceutical products by 15.5 per cent, reflect the general impact of global recession on our export. These exportable items have other destinations, apart from Europe and North America. Moreover, the volume of their export is also not as big as the flagships like the garment, knitwear and remittance. That is why the fall in their export will remain a lesser worry than such developments in the aforementioned big foreign currency earners of the country. Even then, the government needs to take due note of the developments in these sectors and try to address the constraints they are facing with due sympathy.
Jute demands especial attention in this respect. For it is not purely due to the current recession that it is suffering. It is a victim of wrong policy as well as lack of due attention of the successive governments after independence. It is still suffering. This particular agro-based product of the country deserves greater attention from the government not just for its export potential. Because, jute has also its wider application in the domestic market as well as abroad than as a universal packing material. It is also used in making carpet backing and particle boards. Being an agriculture-based commodity, jute employs millions of people from its cultivation phase to converting it into fibres in the rural areas to production of packing materials in the industries and for other purposes in the urban centres of the country. Even if one considers its domestic use only, this green plant can again be turned into a gold mine like it was in the past.
The Golden Fibre as we know was the biggest hard cash earner for the then economy in this part of the world. Now, far from its importance being diminished meanwhile, jute's potential has increased manifold in all these years that this agricultural product had fallen from its earlier grace. Most importantly, amid the concerns about the impending recession, this item, if properly addressed, can become a very reliable source of employment of both the rural and urban workforce of the country. It is worthwhile to mention another estimate of the World Bank on this score that during the period of recession-driven crisis in question, there will be need for 2 to 2.5 million local jobs. Jute can contribute in a big way to create employment opportunity for the population during this hour of need of the nation. Leather would also need attention of the government so that all those involved in the sector from the entrepreneurs big and small to the workers may at least remain in the trade and job until the days of crisis due to recession are over.
Though the remittance situation is still better, the threats are there if one turns one's attention from the volume of incoming remittance to the real source dictating the progressive growth of remittance, that is export of manpower, which has fallen by about 25.41 per cent during the first three quarters of the current fiscal as compared to the same period in 2007-08. This is something that demands serious attention from the government, for it would affect the flow of homebound remittance in the longer term in the future.
The government spending should focus more on the creating of jobs for the unemployed and safety nets for the very poor and the most vulnerable groups of the population. Infrastructure is another sector that should get priority in the public expenditure decisions both for creating the stronger basis for the development of trade, commerce and industry as well as for creation of jobs for the nation's workforce. The recent announcement of the prime minister is a cause for big encouragement in this respect. In that declaration, the prime minister unveiled her government's plans to develop the communications infrastructures of the country in a big way. Obviously, this huge programme of the government would imply involvement of both public and private expenditures on a massive scale creating a large number of employment opportunities for the unemployed and the semi-employed. The infrastructure building work will therefore be a way to face recession over a very long period of tine. The government's decision to go for such development of the physical infrastructure is well-timed and praiseworthy at this time when the nation is bracing for the impending recession.
But the bailout packages as proposed by the government in the face of the demands made by the major foreign exchange earning industries warrant a more cautious approach.
As observed at the workshop organised by the World Bank, the country's fiscal space is not roomy enough to accommodate many of the similar demands including subsidies to be made on the public exchequer. However, the government will still need to consider the demands with due sympathy and devise appropriate trade-off measures that suit the specific cases where implementation of the bailout packages would be made.
The fact that the most important indicators of the economy such as the foreign exchange reserves, remittance inflows and the current account situation are healthy, while the fiscal balances are well managed, the government should have the breathing space to prepare for the crisis in the making due to the downturn in the world economy in a more judicious manner. Taking the appropriate measures on this score would also be the acid test for the newly elected political government now in office.