The budget of 2008-2009: fiscal, investment scenario
Karar Mahmudul Hassan | Monday, 9 June 2008
FINANCE and Planning Adviser Dr. Mirza Asizul Islam said (May 19, 2008) that the budget outlay for the next fiscal year (2008-2009) would be around Tk. 995 billion with widened deficit, but not beyond 5.0 per cent of gross domestic product (GDP). He said that the revenue estimates was based on the nominal GDP estimate of 6.5 per cent and inflation at 9.0 per cent during the next fiscal year. He, however, remained skeptical about the aid inflow during the next fiscal year. Concerned officials indicated that revenue earnings is estimated to grow by 17 per cent in the next fiscal year as compared to the target of the outgoing fiscal year (2007-2008).
This is a fact and has been discussed a number of times in several meetings of Executive Committee of the National Economic Council (ECNEC) during the last few months under the Chairmanship of Finance and Planning Adviser Mirza Azizul Islam who lamented for non utilisation of even 40-45 per cent of the development budget during the first eight months of the current fiscal year (2007-2008). During the last meeting with the Deputy Commissioners (DCs) meeting in the first week of April, 2008, he urged the DCs to see and monitor the implementation activities within their respective districts.
In spite of his lamentations followed by warnings given by the Finance and Planning Ministry including the Chief Adviser, the implementation scenario of development budget did hardly improve during the outgoing financial year. The reasons for the poor state of affairs are diagnosed by some as: poor and inefficient bureaucracy either general or technical, or both, in implementing development programmes. The Finance Adviser gave a little bit of better picture by stating that during first nine months of the current financial year, only 53 per cent of the budget allocation had been utilised but he hoped that at the end of June, 2008 the utilisation scenario of the budget would improve substantially.
Whether the forthcoming national budget is progressive or less progressive, the economic development of Bangladesh is substantially dependent on sound fiscal management system and its appropriate, efficient and timely application by both the private and public sector organisations. For many reasons, the fiscal and investment management issues did not get appropriate and reasonable attention from the concerned quarters until in the recent past. The industry, commerce or business world has transited to an era of remarkable fast changes towards the free market economy with establishment of the World Trade Organisation (WTO) with effect from January 1, 1995. With this, the free economy has heralded in greater force, brought about new opportunities along with challenges as well, creating the requirement for a new and progressive set of laws, rules and regulations to govern trade, business, and industries etc.
In case of Bangladesh, due to many reasons which include almost continuous (until December 2006) political turmoils, lawlessness, extortions of serious magnitude and grafts etc., all over the country particularly in the industrial belts, business houses and commercial centers since the mid-90s in particular, required urgent and proper attention, which could not be given by the concerned authority for the development of a sound, effective and pragmatic fiscal management system in the country. And for this poor state of affairs, successive governments' failure was no doubt paramount, but the responsibilities of different commerce and industrial associations in the private sector including banking sector operators, no doubt, were also substantial. Besides, lack of appropriate knowledge, ideas and expertise regarding relevant rules, regulations and proper understanding of the fast-changing fiscal and investment issues, the country's economic or fiscal backbone is yet to be put on a sound and efficient footing. We have still a long way to go.
During the recent years, news on different economic and fiscal issues in Bangladesh context along with anomalies in both public and private sectors, were being published in different newspapers of the country almost regularly, sometimes with valuable and appropriate suggestions for addressing related hurdles standing in the way of smooth operational works in different fiscal and investment management sectors. Some of the extracts of those news-items about one year old, are furnished below to facilitate making linkages between the present and the recent past.
"External indicators satisfactory, but problems exist in internal sector: Finance Adviser" captioned a news item in which Dr. A B Mirzza Azizul Islam was reported on April 20, 2007 said about 13 months back that "most of the external economic indicators are at a satisfactory level, but there are problems existing in the internal sector. Exports, remittances and foreign currency reserve are in good shape. At the same time, there remain some problems in the internal sector like poor revenue growth, inflationary pressure and a higher trend in the public borrowing." The Adviser further said, "one of the main objectives of the national budget (2007-2008) would be to enhance the tax GDP ratio through expanding tax net, instead of raising its rate. Simplification of tax payment procedures and reduction of discriminatory power of taxmen will also be high on reforms agenda in the coming budget", he added.
"Bangladesh needs to study market access promises" - captioned news item stated on April 20, '07: "The permanent representative of Bangladesh to the WTO has said Bangladesh needs to conduct a study as to how it can reap benefit from the changed scenario following the resumption of Doha round of the WTO talks. Developed countries are promising to wider market access, while some developing countries have come forward to allow a duty-free access of their markets to the least developed countries (LDCs). We need to analyse how we can utilise the promises."
Yet another news item on April 04, 2007 under the caption "Bangladesh lacks capacity to analyse FDI proposals" stated: "Bangladesh lacks the capacity to analyse foreign investment proposals and participate fully in international trade negotiations, deficiencies that weaken its ability to profit from globalisation", said Finance Adviser Mirza Azizul Islam. He further said: "Bangladesh should improve its capacity in analysing foreign investment proposals and other regional and bilateral trade negotiations process to reap benefits from globalisation". He stressed the need for the setting up of global governance institutions to oversee the problems arising out of globalisation as well as a global watchdog body to monitor the movement of financial capital, particularly cannot develop if it is constantly hampered by a poor service and publicly owned institutions that are no match for their competitors abroad, according to the same news item.
Earlier a newspaper stated on January 01, 2006: "Export diversification is typically a slow process. It needs to be supported by an appropriate strategy, characterised by a combination of vision and coordination. Export diversification is crucial to effective participation in the Global Trading System. Diversification process needs to be sustained by an appropriate, effective and coherent strategy. Constraints: Access to finance is identified as a major constraint; infrastructural constraint is another serious bottleneck to the expansion of export and investment augmenting activities.
"The official rules and regulations pertaining to exports are complicated and too much paperwork is needed. Valuable time and energy are exhausted with government officials over interpretations and revision/changes in laws and regulations. Side by side, most of the enterprises in Bangladesh are also badly unequipped; neither they have the in-house capacity nor the networking facility to access to information. Supporting exports, the government has been giving financial subsidies to the private entrepreneurs. But unfortunately, it has revealed that during Fiscal Year 2005-06 more than Tk 6.4 billion (640 crore) of cash incentive has been misappreciated by a number of established private sector industrial magnets,"
There are many other reasons which possibly include the extremely at higher levels involvement of government operators in non-economic agenda like politics of consensus and reforms of elections-related issues etc., which are seen every day in electronic and print media. The speeches of politicians and others, discussions round table or quarter table -- does not matter here -- of typical designated discussants numbering at least a dozen everyday, resulting in some sort of continuous confusions or apathy in different government sectors---in the secretariat or at upazila level, plus agriculture or power sector as well and so on. During the next weeks and months until the long waited general election, God willing, which is likely to be held in December, 2008, the majority of the advisers (including the Chief Adviser or CA) of the caretaker government will remain increasingly busy with election-related issues, leaving the development-related agenda in the hands of inept bureaucracy who are mostly, incapable of running the business of the government efficiently and smoothly for known or unknown reasons.
Furthermore, a newspaper carried a report in its issue on May 20, 2008 under the caption, "Next budget to focus on Agriculture, Power, Rural infestations: Finance Adviser says", This nature of announcements is not uncommon and in all past budgets, 'agriculture' topped the list with full of promises, hopes and aspirations from all Finance Minister/Advisers but the government or the ministry of agriculture is hardly aware of as to how the budgetary announcement can be materialised timely and appropriately.
Another news item under the caption, said: "New food godowns at upazila levels in three years" was published quoting the Food Adviser who declared that a number of new food godowns across the county will be built up spending more than Tk. 3.5 billion (350 crore) only. In this news item, it was stated that after construction of these godowns, the storage capacity of food grains will rise to 1.8 million (18 lakh) tonnes from the present capacity of 2.5 million (15 lakh) tons. At present, the government has 652 local storage depots (LSPs) and central storage depots (CSDs) all over the country.
Against this backdrop, amid high hopes of giving exemplary importance on agriculture etc., by the government, the new budget of the caretaker government for fiscal 2008-09 is going to be announced today (Monday) by Dr. AB Mirza Azizul Islam.
It may be recalled here the former World Bank Country Director, Mr. Frederick Temple, while addressing a workshop on "Good Governance and Accountability" on October 14, 2002 said: "Economic losses from poor governance of the public sector are enormous." He observed that the revenue loss to the government due to corruption and inefficiency in customs and income tax administration undoubtedly exceeds $ 500 million a year. He added, "it is difficult that a situation in which more than half of the total income tax collected comes from some 700 tax payers in a country of 130 million. About 35 per cent of the nationalised commercial banks (NCBs) loan portfolios are overdue, a large part of which can never be recovered, while stressing the need for efficient and accountable management of public finances. This, Mr. Temple said, is an area of great weakness in Bangladesh and the chain of accountability linking the public, the legislature and the executive has serious gaps.
Repeated documentation of waste, fraud and abuse of public funds have resulted in very little action thus encourages further corruption," he then added. Some one decade back, Dr. Wahiduddin Mahmud, in a article published in a national daily on June 02, 1999 said: "There is a widely held belief, supported by ample evidence, that a large part of development assistance in the past was wasted rather than contributing to economic growth and poverty alleviation in recipient countries" which includes Bangladesh.
The problem as narrated in the above paragraphs has hardly improved towards positive direction to the benefit of the country's economy and its people, except dozens of high-ups have been rounded up and a number of them (in both public and private sectors) have been awarded jail terms for different periods. But the different issues of broad economic nature as pointed out above have not been addressed by the government satisfactorily and with commitment and continuity. The caretaker government of 10 members, heavily burdened -- at least half of them are terribly busy with 'POLITICS & DIALOGUE' for the last few months -- could not find out to fill up the important post of principal secretary for last 16 months. This tends to confirm that there is no fit or competent bureaucrat in the government who could be found out, except the present incumbent manning both the posts concurrently.
The views expressed here the writer's own. The writer is a former secretary to the government
This is a fact and has been discussed a number of times in several meetings of Executive Committee of the National Economic Council (ECNEC) during the last few months under the Chairmanship of Finance and Planning Adviser Mirza Azizul Islam who lamented for non utilisation of even 40-45 per cent of the development budget during the first eight months of the current fiscal year (2007-2008). During the last meeting with the Deputy Commissioners (DCs) meeting in the first week of April, 2008, he urged the DCs to see and monitor the implementation activities within their respective districts.
In spite of his lamentations followed by warnings given by the Finance and Planning Ministry including the Chief Adviser, the implementation scenario of development budget did hardly improve during the outgoing financial year. The reasons for the poor state of affairs are diagnosed by some as: poor and inefficient bureaucracy either general or technical, or both, in implementing development programmes. The Finance Adviser gave a little bit of better picture by stating that during first nine months of the current financial year, only 53 per cent of the budget allocation had been utilised but he hoped that at the end of June, 2008 the utilisation scenario of the budget would improve substantially.
Whether the forthcoming national budget is progressive or less progressive, the economic development of Bangladesh is substantially dependent on sound fiscal management system and its appropriate, efficient and timely application by both the private and public sector organisations. For many reasons, the fiscal and investment management issues did not get appropriate and reasonable attention from the concerned quarters until in the recent past. The industry, commerce or business world has transited to an era of remarkable fast changes towards the free market economy with establishment of the World Trade Organisation (WTO) with effect from January 1, 1995. With this, the free economy has heralded in greater force, brought about new opportunities along with challenges as well, creating the requirement for a new and progressive set of laws, rules and regulations to govern trade, business, and industries etc.
In case of Bangladesh, due to many reasons which include almost continuous (until December 2006) political turmoils, lawlessness, extortions of serious magnitude and grafts etc., all over the country particularly in the industrial belts, business houses and commercial centers since the mid-90s in particular, required urgent and proper attention, which could not be given by the concerned authority for the development of a sound, effective and pragmatic fiscal management system in the country. And for this poor state of affairs, successive governments' failure was no doubt paramount, but the responsibilities of different commerce and industrial associations in the private sector including banking sector operators, no doubt, were also substantial. Besides, lack of appropriate knowledge, ideas and expertise regarding relevant rules, regulations and proper understanding of the fast-changing fiscal and investment issues, the country's economic or fiscal backbone is yet to be put on a sound and efficient footing. We have still a long way to go.
During the recent years, news on different economic and fiscal issues in Bangladesh context along with anomalies in both public and private sectors, were being published in different newspapers of the country almost regularly, sometimes with valuable and appropriate suggestions for addressing related hurdles standing in the way of smooth operational works in different fiscal and investment management sectors. Some of the extracts of those news-items about one year old, are furnished below to facilitate making linkages between the present and the recent past.
"External indicators satisfactory, but problems exist in internal sector: Finance Adviser" captioned a news item in which Dr. A B Mirzza Azizul Islam was reported on April 20, 2007 said about 13 months back that "most of the external economic indicators are at a satisfactory level, but there are problems existing in the internal sector. Exports, remittances and foreign currency reserve are in good shape. At the same time, there remain some problems in the internal sector like poor revenue growth, inflationary pressure and a higher trend in the public borrowing." The Adviser further said, "one of the main objectives of the national budget (2007-2008) would be to enhance the tax GDP ratio through expanding tax net, instead of raising its rate. Simplification of tax payment procedures and reduction of discriminatory power of taxmen will also be high on reforms agenda in the coming budget", he added.
"Bangladesh needs to study market access promises" - captioned news item stated on April 20, '07: "The permanent representative of Bangladesh to the WTO has said Bangladesh needs to conduct a study as to how it can reap benefit from the changed scenario following the resumption of Doha round of the WTO talks. Developed countries are promising to wider market access, while some developing countries have come forward to allow a duty-free access of their markets to the least developed countries (LDCs). We need to analyse how we can utilise the promises."
Yet another news item on April 04, 2007 under the caption "Bangladesh lacks capacity to analyse FDI proposals" stated: "Bangladesh lacks the capacity to analyse foreign investment proposals and participate fully in international trade negotiations, deficiencies that weaken its ability to profit from globalisation", said Finance Adviser Mirza Azizul Islam. He further said: "Bangladesh should improve its capacity in analysing foreign investment proposals and other regional and bilateral trade negotiations process to reap benefits from globalisation". He stressed the need for the setting up of global governance institutions to oversee the problems arising out of globalisation as well as a global watchdog body to monitor the movement of financial capital, particularly cannot develop if it is constantly hampered by a poor service and publicly owned institutions that are no match for their competitors abroad, according to the same news item.
Earlier a newspaper stated on January 01, 2006: "Export diversification is typically a slow process. It needs to be supported by an appropriate strategy, characterised by a combination of vision and coordination. Export diversification is crucial to effective participation in the Global Trading System. Diversification process needs to be sustained by an appropriate, effective and coherent strategy. Constraints: Access to finance is identified as a major constraint; infrastructural constraint is another serious bottleneck to the expansion of export and investment augmenting activities.
"The official rules and regulations pertaining to exports are complicated and too much paperwork is needed. Valuable time and energy are exhausted with government officials over interpretations and revision/changes in laws and regulations. Side by side, most of the enterprises in Bangladesh are also badly unequipped; neither they have the in-house capacity nor the networking facility to access to information. Supporting exports, the government has been giving financial subsidies to the private entrepreneurs. But unfortunately, it has revealed that during Fiscal Year 2005-06 more than Tk 6.4 billion (640 crore) of cash incentive has been misappreciated by a number of established private sector industrial magnets,"
There are many other reasons which possibly include the extremely at higher levels involvement of government operators in non-economic agenda like politics of consensus and reforms of elections-related issues etc., which are seen every day in electronic and print media. The speeches of politicians and others, discussions round table or quarter table -- does not matter here -- of typical designated discussants numbering at least a dozen everyday, resulting in some sort of continuous confusions or apathy in different government sectors---in the secretariat or at upazila level, plus agriculture or power sector as well and so on. During the next weeks and months until the long waited general election, God willing, which is likely to be held in December, 2008, the majority of the advisers (including the Chief Adviser or CA) of the caretaker government will remain increasingly busy with election-related issues, leaving the development-related agenda in the hands of inept bureaucracy who are mostly, incapable of running the business of the government efficiently and smoothly for known or unknown reasons.
Furthermore, a newspaper carried a report in its issue on May 20, 2008 under the caption, "Next budget to focus on Agriculture, Power, Rural infestations: Finance Adviser says", This nature of announcements is not uncommon and in all past budgets, 'agriculture' topped the list with full of promises, hopes and aspirations from all Finance Minister/Advisers but the government or the ministry of agriculture is hardly aware of as to how the budgetary announcement can be materialised timely and appropriately.
Another news item under the caption, said: "New food godowns at upazila levels in three years" was published quoting the Food Adviser who declared that a number of new food godowns across the county will be built up spending more than Tk. 3.5 billion (350 crore) only. In this news item, it was stated that after construction of these godowns, the storage capacity of food grains will rise to 1.8 million (18 lakh) tonnes from the present capacity of 2.5 million (15 lakh) tons. At present, the government has 652 local storage depots (LSPs) and central storage depots (CSDs) all over the country.
Against this backdrop, amid high hopes of giving exemplary importance on agriculture etc., by the government, the new budget of the caretaker government for fiscal 2008-09 is going to be announced today (Monday) by Dr. AB Mirza Azizul Islam.
It may be recalled here the former World Bank Country Director, Mr. Frederick Temple, while addressing a workshop on "Good Governance and Accountability" on October 14, 2002 said: "Economic losses from poor governance of the public sector are enormous." He observed that the revenue loss to the government due to corruption and inefficiency in customs and income tax administration undoubtedly exceeds $ 500 million a year. He added, "it is difficult that a situation in which more than half of the total income tax collected comes from some 700 tax payers in a country of 130 million. About 35 per cent of the nationalised commercial banks (NCBs) loan portfolios are overdue, a large part of which can never be recovered, while stressing the need for efficient and accountable management of public finances. This, Mr. Temple said, is an area of great weakness in Bangladesh and the chain of accountability linking the public, the legislature and the executive has serious gaps.
Repeated documentation of waste, fraud and abuse of public funds have resulted in very little action thus encourages further corruption," he then added. Some one decade back, Dr. Wahiduddin Mahmud, in a article published in a national daily on June 02, 1999 said: "There is a widely held belief, supported by ample evidence, that a large part of development assistance in the past was wasted rather than contributing to economic growth and poverty alleviation in recipient countries" which includes Bangladesh.
The problem as narrated in the above paragraphs has hardly improved towards positive direction to the benefit of the country's economy and its people, except dozens of high-ups have been rounded up and a number of them (in both public and private sectors) have been awarded jail terms for different periods. But the different issues of broad economic nature as pointed out above have not been addressed by the government satisfactorily and with commitment and continuity. The caretaker government of 10 members, heavily burdened -- at least half of them are terribly busy with 'POLITICS & DIALOGUE' for the last few months -- could not find out to fill up the important post of principal secretary for last 16 months. This tends to confirm that there is no fit or competent bureaucrat in the government who could be found out, except the present incumbent manning both the posts concurrently.
The views expressed here the writer's own. The writer is a former secretary to the government