The country is moving forward

For the last few weeks since the parliamentary election on  January 05, we have had an interval of sorts where violence, arson, strikes and blockades have been replaced by a degree of calm and publication of different and interesting reports in the media concerning the economic and trade situation in the country. In a manner of speaking, our economic scene appears to be going through a roller-coaster ride.
We are facing challenges that have risen because of the anarchy within the political matrix and having to overcome them and also the associated uncertainty. Nevertheless, as evident in the reports published in the media, the indicators are evolving towards a positive paradigm.
I will first touch on the unfinished agenda that is creating anxiety.
The row between the National Board of Revenue (NBR) and the cell phone operators has remained unresolved. It is believed that disagreement on this sensitive issue is affecting generation of government revenue. It needs to be mentioned here that collection of VAT from large companies has been relatively less during the first half of this fiscal year. Only Taka 107.49 billion could be collected against the target of Taka 131.33 billion set for this period.
There has been movement forward in power generation capacity but, at the same time there is now possibility of fresh power tariff hikes from March. The Power Division of the Ministry of Power, Energy and Mineral Resources has asked the electricity distribution companies to submit their respective proposals in this regard to the Bangladesh Energy Regulatory Commission.
The Commerce Minister has indicated his desire that total exports from Bangladesh rise to US$ 50 billion in the next five years. One also needs to point out here that despite the optimism, as expressed by the Commerce Minister, there was a declining spot-order scenario in the just-concluded month-long 19th Dhaka International Trade Fair.  He expressed hopes that Bangladesh will regain its US GSP (Generalised System of Preferences) to facilitate this process. The Commerce Secretary, according to newspaper reports, has however not confirmed whether GSP will figure in the Ticfa meeting, which is scheduled to be held in Dhaka on  April 07. In the meantime, US Assistant Secretary of State Nisha Biswal  and the US ambassador in Dhaka are reported to have commented that while Bangladesh has made some 'incremental' progress, 'still it needs to do a lot in regaining the GSP facility' and that 'Bangladesh still has not fulfilled the many commitments it made to improve working conditions'. I notice only slight encouragement in their remarks.
There has been another report that many well-known European and American brands are not sourcing apparel products in the same quantity (as in the past) from RMG (ready-made garment) factories located in shared buildings. This has resulted from their decision to upgrade their standards of compliance issues. The owners of the affected factories have already expressed deep concern and stated that this might lead to massive retrenchment and affect long-term sustainability. Relevant authorities of the government, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) should remove the anxieties of the importers.
In addition, concern has been reflected in the press about 400 potential industrial units with a possible investment potential of Taka 200 billion not being able to operate or take-off because of lack of adequate gas supply. The industries include ceramic, textile and ready-made garments mostly located in Dhaka, Savar, Gazipur and Sreepur. It may be recalled that new gas connections to the industrial sector and households were suspended in June 2009 and in July 2010 respectively, due to gas shortage in the country. The government withdrew the ban on new gas connections to households in May 2013, with an increase in supply, but that has not yet taken place for connections to the industrial and commercial sectors. One hopes that the problem of power connections will be resolved in the near future by tapping into our existing coal resources and also through import of electricity from India.
Despite all of the above, there is a belief that the functional economic growth in Bangladesh during 2013 has been positive and that this curve is moving forward despite constraints. This in-built resilience has been noted in the 2012-13 report released by the Bangladesh Bank. It has mentioned that using the 1995-96 base year, the Bangladesh economy achieved GDP (gross domestic product) growth of 6.0 per cent in FY 13 and 6.2 per cent using the 2005-06 base. The report has attributed this growth to substantial remittance inflows and export achievements.
Meanwhile, country's overall imports grew by 11.59 per cent in the first half (H1) of the current fiscal year 2013-14, despite political uncertainty. The increase in imports was due to higher import of food grains, capital machinery and industrial materials. The actual import in terms of settlement of letters of credit amounted to US $ 17.80 billion during H-1, an increase of US $ 1.85 billion over the corresponding period of last fiscal.
Despite this increase in imports, the surplus in current account has also soared. It was interesting to know that despite a decline by 8.5 per cent in inward remittance from our expatriate workers, the equation was not affected. The current account surplus rose by 124 per cent to $2.65 billion during this period. This was made possible through exports growing by 16.56 per cent during H-1. It would be heartening to note here that remittance inflow in January 2014 was US$ 1.25 billion - the highest since February 2013. However, economists apprehend that this trend might not continue in the remaining part of the current financial year. If this happens, it will cast a shadow on our balance of payments for FY 2013-14.
Another significant example of movement forward is that foreign net investments in the Dhaka bourse increased 328 per cent in January 2014, compared to a month ago. With some semblance of stability, foreign fund managers now consider our market lucrative for long-term investment. Their assumption has been based on favourable macro indicators as compared to US, Europe and other emerging markets. The continuance of the strong exchange rate between Taka and the US Dollar probably also helped to motivate such investment. Foreign investors bought shares worth Taka 4.03 billion, while they sold stocks worth Taka 1.24 billion in January 2014. According to the Dhaka Stock Exchange.
In keeping with this, good news has also surfaced about higher investment in the Bangladesh Export Processing Zones Authority (BEPZA) during the current fiscal 2013-14. Data released mentioned that investment had posted a 26.50 per cent growth in the country's EPZs. The total investment in H-1 was $ 190.23 million compared to $150.37 million for the same period during last fiscal. At present 425 industrial units are operating in the different EPZs and they have contributed US$ 2.598 billion worth of exports. It has been reported by the BEPZA authorities that the different EPZs employ about 381,200 Bangladeshis with 64 per cent of them being female. These are constructive and positive facts that are helping our socio-economic growth.   
The ready-made garment exports earned US$23.5 billion in 2013 with a 13 per cent year-on-year growth despite the sector witnessing dreadful accidents and condemnation from many international human rights activists. It would be pertinent to note here that total export was only US$6.8 billion in 2005. The country's low labour costs influenced this dynamics. The other factor has been the discovery of new markets and diversification of the products. In 2013, export to Turkey crossed US$ 1 billion and that included a significant percentage of RMG. Manufacturers are also identifying new export destinations in Africa, the Caribbean and Latin America. Nevertheless, one needs to be cautious at this point. Our future prospects in RMG exports will face a severe challenge if India is able to sign a FTA (free trade agreement) with the European Union (EU). That might ensure for them duty-free access which will counter our advantage through the EBA (Everything but Arms) process. It is consequently imperative that those associated with the RMG industry should undertake, with the assistance of the government, not only addressing issues regarding rights of workers and their privileges but also the continuance of our own duty-free and quota-free facility.
It is believed that we should be able to shake off our LDC (least developed countries) status before 2021. There is no reason why we cannot meet the requirements outlined in the Human Asset Index and achieve the minimum per capita income level of Gross National Income or GNI (US$ 1,190). This process will be hastened if our GDP growth is calculated on a re-based year of 2005-06.
All however need to remember that moving upward would require a commitment across the political divide to achieve democratic inter-active engagement, transparency, good governance, universal functional literacy and eradication of corruption. We should not rest with just trade privileges but also modernise our industries and raise productivity to overcome stiff competition.
Muhammad Zamir, a former Ambassador, is specialised in foreign affairs, right to information and good governance. mzamir@dhaka.net