Stimulus package to spur Bangladesh economy
Sunday, 3 May 2009
Salahuddin Ahmed
THE government goes for the option of stimulus package when a certain sector of the economy or industry is in the doldrums or facing stiff challenge for survival. As the global recession set in last year in the developing countries, we have seen many countries declaring their own packages to boost their economies. As we expected before, Bangladesh is now facing some consequences of this global economic turmoil. The economy of this country may suffer a great deal as a result.
The government of Bangladesh announced a stimulus package worth Tk. 34.24 billion (USD 500 million) to cushion the industry from the blow of global economic downturn. Of the allocations, Tk 4.50 billion will be spent as cash subsidy for the export sectors, Tk. 15 billion for agriculture, Tk 6.0 billion for power sector, Tk 5.0 billion for re-capitalisation of agriculture loans and Tk 3.74 billion for social safety net programmes. With this allocation, it is clear that the government is trying to include the priority areas under this special package right before formulating national budget for the fiscal 2009-2010.
It is very much important for the government to analyse where exactly we stand as far as our development process is concerned. Right now in Bangladesh there is unprecedented scarcity of electricity and water. People have been suffering due to the scarcities of these basic amenities. In these circumstances, do we actually believe that we are in the development process? At this crucial moment, the government has decided to launch this stimulus package which is expected to boost the power and agricultural sectors to some extent. The bottom line is that the government should have anticipated this huge power deficit much earlier and now they are required to fix this problem as soon as possible. Dhaka city dwellers are having problem of power cut every hour. That surely diverts our country from the mainstream development process.
Another concern comes in mind how the government will execute this package right before the national budget. There is no doubt that the budget of this year is going to be really challenging for our government. Global recession, BDR mutiny in Dhaka-all these factors led to economic meltdown in Bangladesh. In this circumstance, the government is up against formulating a comprehensive budget that should address all issues to stimulate the national economy. But right now the government needs to show commitment to fully utilise this stimulus package. It should be appreciated that the government has include power and agriculture in the stimulus package. The government can announce stimulus package anytime if they see some sectors needs to be stimulated. It is conceivable that the power sector is becoming vulnerable and this package should fully be effective in boosting this sector to stir the national economy as a whole.
Through this special package it is expected that jute and jute products will see cash incentives rise to 10 per cent from 7.5 per cent, leather and leather goods to 17.5 per cent from existing 15 per cent, frozen foods and other fish export to 12.5 per cent from 10 percent. It is quite amazing that the readymade garments (RMG) sector is not getting cash incentive through this stimulus package. The developing nations will definitely have fewer demands from Bangladesh and the best way to address this crisis is to reduce the production cost, so that we can retain the same demand from the USA, the UK and so on. Not only utilising this stimulus package, the government should also be strategic while dealing with other nations as far as trade and export is concerned. We need to remember that the USA offers a huge market and remains the export destination for nearly 20 per cent of all internationally traded goods.
We also need to focus on whether we can learn something from this global meltdown to take better steps in the future. Andrew Horvat, an expert on Japan and visiting professor at Tokyo Keizai University says: "The crash -- because it is a crash -- will bring us to our senses and will remind us that there has to be a relationship between productivity and value." . . . . "The idea that value consists of what someone is willing to pay for something is a bit too cynical because prices are subject to market psychology which may or may not have anything to do with what a product is actually worth in terms of its value to the economy or to an end user."
Instead of focusing on stimulating the export sector, we have other doors open that can take us to the way where we can reinvent our economic potentiality. This global recession can shift the focus on consumers to a new direction. It will allow companies to find out the new consumers. The Chinese government and manufactures are for the first time "turning to Chinese villagers rather than American consumers" to solve the economic woes.
Other than these strategies, the challenge for the government of Bangladesh would be to fully utilise this stimulus package as soon as possible. It has been a great attempt to include power and agriculture in this package. The whole nation is now looking forward to see whether these priority sectors are reorganised at the earliest to keep Bangladesh on the track of achieving Millennium Development Goals.
The writer is an MBA Student & Graduate Assistant, at Ashland University, OH Ashland, USA. He can be reached at Email: sahmed@ashland.edu)
THE government goes for the option of stimulus package when a certain sector of the economy or industry is in the doldrums or facing stiff challenge for survival. As the global recession set in last year in the developing countries, we have seen many countries declaring their own packages to boost their economies. As we expected before, Bangladesh is now facing some consequences of this global economic turmoil. The economy of this country may suffer a great deal as a result.
The government of Bangladesh announced a stimulus package worth Tk. 34.24 billion (USD 500 million) to cushion the industry from the blow of global economic downturn. Of the allocations, Tk 4.50 billion will be spent as cash subsidy for the export sectors, Tk. 15 billion for agriculture, Tk 6.0 billion for power sector, Tk 5.0 billion for re-capitalisation of agriculture loans and Tk 3.74 billion for social safety net programmes. With this allocation, it is clear that the government is trying to include the priority areas under this special package right before formulating national budget for the fiscal 2009-2010.
It is very much important for the government to analyse where exactly we stand as far as our development process is concerned. Right now in Bangladesh there is unprecedented scarcity of electricity and water. People have been suffering due to the scarcities of these basic amenities. In these circumstances, do we actually believe that we are in the development process? At this crucial moment, the government has decided to launch this stimulus package which is expected to boost the power and agricultural sectors to some extent. The bottom line is that the government should have anticipated this huge power deficit much earlier and now they are required to fix this problem as soon as possible. Dhaka city dwellers are having problem of power cut every hour. That surely diverts our country from the mainstream development process.
Another concern comes in mind how the government will execute this package right before the national budget. There is no doubt that the budget of this year is going to be really challenging for our government. Global recession, BDR mutiny in Dhaka-all these factors led to economic meltdown in Bangladesh. In this circumstance, the government is up against formulating a comprehensive budget that should address all issues to stimulate the national economy. But right now the government needs to show commitment to fully utilise this stimulus package. It should be appreciated that the government has include power and agriculture in the stimulus package. The government can announce stimulus package anytime if they see some sectors needs to be stimulated. It is conceivable that the power sector is becoming vulnerable and this package should fully be effective in boosting this sector to stir the national economy as a whole.
Through this special package it is expected that jute and jute products will see cash incentives rise to 10 per cent from 7.5 per cent, leather and leather goods to 17.5 per cent from existing 15 per cent, frozen foods and other fish export to 12.5 per cent from 10 percent. It is quite amazing that the readymade garments (RMG) sector is not getting cash incentive through this stimulus package. The developing nations will definitely have fewer demands from Bangladesh and the best way to address this crisis is to reduce the production cost, so that we can retain the same demand from the USA, the UK and so on. Not only utilising this stimulus package, the government should also be strategic while dealing with other nations as far as trade and export is concerned. We need to remember that the USA offers a huge market and remains the export destination for nearly 20 per cent of all internationally traded goods.
We also need to focus on whether we can learn something from this global meltdown to take better steps in the future. Andrew Horvat, an expert on Japan and visiting professor at Tokyo Keizai University says: "The crash -- because it is a crash -- will bring us to our senses and will remind us that there has to be a relationship between productivity and value." . . . . "The idea that value consists of what someone is willing to pay for something is a bit too cynical because prices are subject to market psychology which may or may not have anything to do with what a product is actually worth in terms of its value to the economy or to an end user."
Instead of focusing on stimulating the export sector, we have other doors open that can take us to the way where we can reinvent our economic potentiality. This global recession can shift the focus on consumers to a new direction. It will allow companies to find out the new consumers. The Chinese government and manufactures are for the first time "turning to Chinese villagers rather than American consumers" to solve the economic woes.
Other than these strategies, the challenge for the government of Bangladesh would be to fully utilise this stimulus package as soon as possible. It has been a great attempt to include power and agriculture in this package. The whole nation is now looking forward to see whether these priority sectors are reorganised at the earliest to keep Bangladesh on the track of achieving Millennium Development Goals.
The writer is an MBA Student & Graduate Assistant, at Ashland University, OH Ashland, USA. He can be reached at Email: sahmed@ashland.edu)