Govt should begin talks to avoid return of unrest : MCCI

The government needs to immediately begin a meaningful dialogue with political parties with a view to reaching a lasting solution to the political conflicts that have resulted in chaotic law and order problems and virtually paralysed the economy.
Suggestions to the government on national economic issues came in the monthly publication of the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, dated February 2014.
It said the present calm after the January 5 elections has brought some respite, but unless the opposition political parties are taken into confidence, the unrest may flare up again.
"Dialogue with the opposition is therefore essential for restoring peace and stability in the country as well as for raising the country's image abroad," it said.
At the same time, the government needs to intensify diplomatic efforts to obtain support from major trade and development partners on whom Bangladesh heavily depends in respect of trade, aid, and investment, the MCCI monthly publication said.
It said: "We appreciate the government's readiness to work with opposition political parties toward a resolution of the political conflict as well as its firm resolve to adopt necessary steps to accelerate economic growth."
It also said: "We appreciate the government's pledges to increase GDP growth and per capita incomes, reduce poverty, ensure food security, create employment opportunities for the youths, develop physical infrastructure, enhance electricity generation, and take wide ranging measures to promote industrial expansion."
These promises are apparently difficult to materialise, particularly because the rehabilitation of the economy from the wounds of the political unrest will take a lot of time and resources, MCCI noted.
"We feel confident that the economy would move ahead and achieve accelerated growth once the political environment improves," MCCI hoped.
The MCCI publication said the private sector's appetite for investment is now low because of political instability, but high interest rates are also considered a major negative factor. In such a situation, an expansionary monetary policy by the central bank would be appropriate at the moment for propping up private sector investment.
The MCCI said problems confronting the Bangladesh economy are many, but given the strong gains the country achieved in various economic and social sectors in the recent past, and the resilience of the economy to unforeseen natural or man made disasters, the economy will definitely move forward by overcoming all impediments, and regain the growth momentum and advance further.
It said much would depend on how quickly the prevailing political unrest could be resolved through amicable settlement of disputes among the feuding political parties.
It noted the new government's immediate task is to address the fast deteriorating law and order conditions.
"The culture of impunity enjoyed by perpetrators of violence must be brought to an end," it said.
Bangladesh in the past one decade made commendable progress in terms of steady growth of GDP (gross domestic product), per capita incomes, export earnings, worker remittances and foreign exchange reserves, reduction of poverty, and impressive improvements in the social sector, the MCCI observed.
Violent programmes of shutdowns and blockades, particularly during the last three months in 2013, led to a virtual stoppage of all economic activities across the country, it said.
The monthly MCCI publication said revenue collection had gone down and remittances had also declined.
There was little new investment in the private sector, and the implementation of Annual Development Programme (ADP) remained below target, it noted.
"There was hardly any new employment in the past months, and what is even worse, a large number of workers lost their jobs," it noted.
It observes inflation rate has gone up because blockades and shutdowns disrupted the supply chain.
"The inflow of foreign aid and foreign direct investment has slowed down. Export prospects have turned uncertain, particularly at risk is the garments sector as foreign buyers are reportedly shifting their purchase orders elsewhere because garments producers are at times failing to make timely shipment of their exports," it noted.
It says political unrest has also created a lot of uncertainties for the economy in the immediate term.
The Global Economic Forum (GEF) in its latest report has warned that any prolongation of the ongoing political stalemate will have disastrous impact on Bangladesh's economy and bring down its growth in the medium term, it says.
"There is also the fear of rising inflation and serious declines in the growth of export incomes, remittances, foreign aid, investment, and fiscal revenues. The situation might worsen if the political stalemate continued longer," the MCCI monthly observed.
It said the government, too, has finally revised down the target of GDP growth to 6.3 per cent from the 7.2 per cent target due to the political deadlock in 2013.
Mainly because of corruption, a large portion of bank loans has become non performing.
It has noted that poverty reduction already occupies a high priority on the government's agenda.
It also observes poverty can be reduced only by creating opportunities for new employment, including opportunities for self employment.
The creation of such opportunities will require access to credit on concessional terms and easier repayment schedules, the report said.
Roads, highways, bridges and railways that were extensively damaged or destroyed during the days of shutdowns and blockades, will need to be repaired on a priority basis.
The government has rightly given a high priority to the development of the energy sector.
Existing policy supports to agriculture should continue. The high credit growth for the agriculture sector will need to be maintained.
Industry and services sectors will need to be given policy support to enable them recoup their losses.
Policy supports recently announced by the government for the industrial sector are all skewed towards the garments sector.
Supports should be extended to other sectors as well, e.g., agro based industries, transporters, and small entrepreneurs and businesses that were adversely affected by the political unrest.
"To promote exports, government will need to create adequate trade infrastructure and congenial investment environment and formulate sound policies to diversify the country's export basket as well as export markets instead of merely relying on cheap garments and a handful of traditional destination countries," the publication observed.
Besides exploring new export markets in emerging countries, Bangladesh will need to make regional cooperation in trade in South Asia more effective.
Most importantly, government and the garments industry must address compliance issues in order to regain the GSP facility in the US and avert the fear of cancellation of GSP by the EU.
In order to arrest the decline in remittances, the government    should intensify diplomatic efforts to persuade friendly Middle Eastern countries to recruit more workers from Bangladesh.
Government should continue with its ongoing reforms in tax policy.
Bangladesh's tax effort is generally very low, but yet the statutory tax rates, particularly the corporate income tax (CIT) rates applied to non listed companies and financial institutions are significantly above the CIT rates in comparable countries.
In order to shore up business and investor confidence, some tax adjustments ought to be given serious consideration.