The conundrum
Friday, 3 April 2009
Mahmudur Rahman
The global economic meltdown has provided an interesting conundrum for the government. Massive subsidies have to be ensured for the farmers, food safety ensured for the poor-meaning more subsidies in food and -- essential items while on the other hand the nemesis of world wide recession is bound to have an impact on the country.
So far, international agencies and the government have been robust in their assurances that the effect on Bangladesh is likely to be imminent. However, a few factors that have emerged of late suggest there may be more to it than meets the eye.
After Pakistan seeking a massive dose of funds from the IMF, India decided to pump $ 800 million into banks to prevent a fall in economic growth. The worry for Bangladesh could well be in the fall in exports and a slow-down of remittances. These two areas provide for the main earnings for the country but with international currency valuation going south, any mismatch in exchange rate adjustment mechanism and likely and slow-downs in the countries that are main destinations of our labour exports, there is some cause for concern.
Major companies in the USA and Europe are announcing massive layoffs, Japan has begun by severing links with part-time and contracted employees and the International Labour Organisation (ILO) has said that up to 150 million jobs could be at stake world-wide. There are moves in the USA to put salary and increment caps, especially in the financial sector in the USA and the construction industry has already slowed down in the Gulf States.
The Bangladesh Garments Manufacturers & Exporters Association (BGMEA) has earlier said that as most of their products are aimed at the lower end of the western world economy, their performance is likely to be the least effected. If so, good. Unfortunately, indications from the US and Europe suggest otherwise. Most European countries and the US are in recession -- the like of which has not been seen since the depression of the 1930s. Germany, the powerhouse of the EU economy has seen its growth engine slowing down alarmingly and the UK has been in the doldrums both in terms of the weather and the economy.
The US government dug deep into government funds to prop up one of the biggest employers, the auto-industry.
France has followed suit. But the protests in France and some other European countries are clear indication of a public discontent simmering dangerously. The French are furious that the same banks whose recklessness has led to this crisis are being bailed out whereas the common person's livelihood is at stake.
Bangladesh has to prepare now for the possibility of sharp falls in its key exports leading to job-cuts. Of interest also, will be the government's approach to next year's budget. The National Board of Revenue (NBR) Chairman has said tax policies will be friendly to employment generating enterprises and not so for luxury items. The tax-man will have to develop strategies to find more money for subsidies, pay reviews and there is no prize for guessing that either tax rates will need to go up or something remarkable will have to happen in collection of taxes. Not easy, not pretty-but then reality hardly ever is. (The writer is a former Head of Corporate & Regulatory of British American Tobacco Bangladesh, former Chief Executive Officer of Bangladesh Cricket Board.)
The global economic meltdown has provided an interesting conundrum for the government. Massive subsidies have to be ensured for the farmers, food safety ensured for the poor-meaning more subsidies in food and -- essential items while on the other hand the nemesis of world wide recession is bound to have an impact on the country.
So far, international agencies and the government have been robust in their assurances that the effect on Bangladesh is likely to be imminent. However, a few factors that have emerged of late suggest there may be more to it than meets the eye.
After Pakistan seeking a massive dose of funds from the IMF, India decided to pump $ 800 million into banks to prevent a fall in economic growth. The worry for Bangladesh could well be in the fall in exports and a slow-down of remittances. These two areas provide for the main earnings for the country but with international currency valuation going south, any mismatch in exchange rate adjustment mechanism and likely and slow-downs in the countries that are main destinations of our labour exports, there is some cause for concern.
Major companies in the USA and Europe are announcing massive layoffs, Japan has begun by severing links with part-time and contracted employees and the International Labour Organisation (ILO) has said that up to 150 million jobs could be at stake world-wide. There are moves in the USA to put salary and increment caps, especially in the financial sector in the USA and the construction industry has already slowed down in the Gulf States.
The Bangladesh Garments Manufacturers & Exporters Association (BGMEA) has earlier said that as most of their products are aimed at the lower end of the western world economy, their performance is likely to be the least effected. If so, good. Unfortunately, indications from the US and Europe suggest otherwise. Most European countries and the US are in recession -- the like of which has not been seen since the depression of the 1930s. Germany, the powerhouse of the EU economy has seen its growth engine slowing down alarmingly and the UK has been in the doldrums both in terms of the weather and the economy.
The US government dug deep into government funds to prop up one of the biggest employers, the auto-industry.
France has followed suit. But the protests in France and some other European countries are clear indication of a public discontent simmering dangerously. The French are furious that the same banks whose recklessness has led to this crisis are being bailed out whereas the common person's livelihood is at stake.
Bangladesh has to prepare now for the possibility of sharp falls in its key exports leading to job-cuts. Of interest also, will be the government's approach to next year's budget. The National Board of Revenue (NBR) Chairman has said tax policies will be friendly to employment generating enterprises and not so for luxury items. The tax-man will have to develop strategies to find more money for subsidies, pay reviews and there is no prize for guessing that either tax rates will need to go up or something remarkable will have to happen in collection of taxes. Not easy, not pretty-but then reality hardly ever is. (The writer is a former Head of Corporate & Regulatory of British American Tobacco Bangladesh, former Chief Executive Officer of Bangladesh Cricket Board.)