The national budget for 2010-11: Can the FM deliver?
Wednesday, 9 June 2010
Kingshuk Nag
Finance Minister Mr AMA Muhith will present the Budget for fiscal 2010-11 on June 10. For the 59 per cent of Bangladesh's population who can't read and write, this Budget wouldn't offer much value to them, for the rest it would be a significant day. If you have been keeping up-to-date with the latest issues affecting Bangladesh, you would know that eight issues among many others could have a significant bearing on Budget 2010-11.
Pushing for a stronger capital market
As the budget day approaches the people involved in share trading are increasingly wary of fiscal punches that might hit them below the belt. A couple of months back , the National Board of Revenue as part of its plan to widen tax net wanted citing of TIN (Tax Identification Number ) in every BO account. Panicky investors dumped stocks due to the uncertainty and unclear policy of NBR. Also recent reports that the government would impose 5 per cent gains tax on profit of over Tk 0.5 million can set a lingering bearish trend. Capital market has long been considered as the engine of economic growth and any unwanted interference or unfriendly move can have a severe impact on the economy and can cause significant erosion of shareholder wealth especially those of retail investors.
It's not also a rosier situation either for those not involved with the stock markets. Frustrations over spiralling food prices could subvert the stability of Bangladesh. As per the latest data released by Bangladesh Bureau of Statistics food inflation surged to 12.32 per cent and 10.34 per cent in urban and rural areas respectively, which could raise a serious doubt over the monetary and fiscal measures taken by the government.
Bangladesh currently has a shortfall of more than 2000MW of power and 500 million cubic feet of gas, which has severely impaired the progress of the country. To make matters worse, our Finance Minister Mr AMA Muhith commented that the present energy situation is similar to an "Energy Famine".
Addressing
infrastructure deficit
While in the west driving is about A or acceleration, in Bangladesh driving is about B or brakes. With rickshaws plying in almost all major roads coupled with potholes, traffic jam is something which every Bangladeshi old or young is aware of. It's not uncommon to see building materials lying on either side of the roads causing the already narrow roads to suffocate with the insurmountable load of vehicles and pedestrians. Apart from these, situation at ports and poor transportations continue to plague Bangladesh's growth prospects. The Chittagong port has long been considered as one of the most expensive ports in the world for carrying out international trade marred by incompetent management and labour problems. Overall infrastructure deficit continues to be a major drag for Bangladesh's economy and will render the 5-6% growth as unsustainable in the near future.
Boosting manpower exports
Life of a Bangladeshi worker in traditional job markets like UAE and Malaysia has not been facile for the past 12 months or so. Recently reports of six Bangladeshi workers who were released from UAE after the government paid blood money worth 9.5 million taka, highlights the not so positive image of Bangladeshis in the Middle East, which has severely slowed down manpower exports to the Gulf region. While in FY 08-09, close to a million Bangladeshis left their motherland for greener pastures abroad, the story seems bleak this year as only about 25% of that are expected to fetch jobs abroad. Although recessionary trends loomed large throughout 2009, more than 6.5 million Bangladeshis working overseas added over $10 billion to the burgeoning foreign exchange coffers, which constitute more than 10% of Bangladesh's GDP. Remittances are a major lifeline for the country and any drastic fall in the supply of greenbacks can set back Bangladesh's economic upsurge by some years.
Attracting FDI
Crippling power shortages and other negative factors resulted in a severe 52% drop in FDI during the first half of FY09-10. Bangladesh received $297 million in comparison to $603 million it received for the same period of FY08-09. This compares with $843 million in FDI, which Bangladesh received in 2005, it will be highly unlikely that FDI in 2010 will reach the same level Bangladesh achieved 5 years back. While the global financial meltdown has been attributed as a significant factor to lower FDI inflows, one cannot deny that a country's existing infrastructure and energy situation are also responsible for driving away the investors.
Pushing for
privatization
When will Janata Bank IPO see the light of the day? This question has been circling the minds of almost all investors for quite some time now ever since the news of five state owned enterprises offloading their stake through equity offering surfaced about 2 years back. Top officials of DSE and SEC are advising SOE bosses to expedite the process of listing the companies as soon as possible. It's an open secret that privatization of SoEs leads to greater profitability and efficiency. Furthermore in FY 06-07, Bangladeshi SoEs clocked a net loss to the tune of Tk 99.828 billion and the situation is not expected to improve in the near future as well. While India has benefited enormously by either offloading equity stake or selling a portion of it's public enterprises to strategic investors, Bangladesh is yet to make any significant decisions on the 35 SoEs it has considered for privatization.
Tackling climate change
Bangladesh is among the few countries in the world which not only faces the wrath of floods but also severe bouts of drought. Scientists predict that due to climate change, Bangladesh might experience a 3-foot sea level rise by 2050, which threatens to displace more than 3 crore Bangladeshis. Bangladesh took pole position in the 2009 Global Climate Risk Index which ranks 170 countries most susceptible to global climate change. While a $100million Climate Change Fund has been set up, it remains to be seen whether our generation will witness any fruitful developments as far as combating climate change is concerned.
Over the past months, entrepreneurs and prominent economists have been raising their voices on a multitude of economic issues. Will the finance minister do something to bring smile on the faces of the people by keeping inflation under check.
The writer works for a
multinational company
Finance Minister Mr AMA Muhith will present the Budget for fiscal 2010-11 on June 10. For the 59 per cent of Bangladesh's population who can't read and write, this Budget wouldn't offer much value to them, for the rest it would be a significant day. If you have been keeping up-to-date with the latest issues affecting Bangladesh, you would know that eight issues among many others could have a significant bearing on Budget 2010-11.
Pushing for a stronger capital market
As the budget day approaches the people involved in share trading are increasingly wary of fiscal punches that might hit them below the belt. A couple of months back , the National Board of Revenue as part of its plan to widen tax net wanted citing of TIN (Tax Identification Number ) in every BO account. Panicky investors dumped stocks due to the uncertainty and unclear policy of NBR. Also recent reports that the government would impose 5 per cent gains tax on profit of over Tk 0.5 million can set a lingering bearish trend. Capital market has long been considered as the engine of economic growth and any unwanted interference or unfriendly move can have a severe impact on the economy and can cause significant erosion of shareholder wealth especially those of retail investors.
It's not also a rosier situation either for those not involved with the stock markets. Frustrations over spiralling food prices could subvert the stability of Bangladesh. As per the latest data released by Bangladesh Bureau of Statistics food inflation surged to 12.32 per cent and 10.34 per cent in urban and rural areas respectively, which could raise a serious doubt over the monetary and fiscal measures taken by the government.
Bangladesh currently has a shortfall of more than 2000MW of power and 500 million cubic feet of gas, which has severely impaired the progress of the country. To make matters worse, our Finance Minister Mr AMA Muhith commented that the present energy situation is similar to an "Energy Famine".
Addressing
infrastructure deficit
While in the west driving is about A or acceleration, in Bangladesh driving is about B or brakes. With rickshaws plying in almost all major roads coupled with potholes, traffic jam is something which every Bangladeshi old or young is aware of. It's not uncommon to see building materials lying on either side of the roads causing the already narrow roads to suffocate with the insurmountable load of vehicles and pedestrians. Apart from these, situation at ports and poor transportations continue to plague Bangladesh's growth prospects. The Chittagong port has long been considered as one of the most expensive ports in the world for carrying out international trade marred by incompetent management and labour problems. Overall infrastructure deficit continues to be a major drag for Bangladesh's economy and will render the 5-6% growth as unsustainable in the near future.
Boosting manpower exports
Life of a Bangladeshi worker in traditional job markets like UAE and Malaysia has not been facile for the past 12 months or so. Recently reports of six Bangladeshi workers who were released from UAE after the government paid blood money worth 9.5 million taka, highlights the not so positive image of Bangladeshis in the Middle East, which has severely slowed down manpower exports to the Gulf region. While in FY 08-09, close to a million Bangladeshis left their motherland for greener pastures abroad, the story seems bleak this year as only about 25% of that are expected to fetch jobs abroad. Although recessionary trends loomed large throughout 2009, more than 6.5 million Bangladeshis working overseas added over $10 billion to the burgeoning foreign exchange coffers, which constitute more than 10% of Bangladesh's GDP. Remittances are a major lifeline for the country and any drastic fall in the supply of greenbacks can set back Bangladesh's economic upsurge by some years.
Attracting FDI
Crippling power shortages and other negative factors resulted in a severe 52% drop in FDI during the first half of FY09-10. Bangladesh received $297 million in comparison to $603 million it received for the same period of FY08-09. This compares with $843 million in FDI, which Bangladesh received in 2005, it will be highly unlikely that FDI in 2010 will reach the same level Bangladesh achieved 5 years back. While the global financial meltdown has been attributed as a significant factor to lower FDI inflows, one cannot deny that a country's existing infrastructure and energy situation are also responsible for driving away the investors.
Pushing for
privatization
When will Janata Bank IPO see the light of the day? This question has been circling the minds of almost all investors for quite some time now ever since the news of five state owned enterprises offloading their stake through equity offering surfaced about 2 years back. Top officials of DSE and SEC are advising SOE bosses to expedite the process of listing the companies as soon as possible. It's an open secret that privatization of SoEs leads to greater profitability and efficiency. Furthermore in FY 06-07, Bangladeshi SoEs clocked a net loss to the tune of Tk 99.828 billion and the situation is not expected to improve in the near future as well. While India has benefited enormously by either offloading equity stake or selling a portion of it's public enterprises to strategic investors, Bangladesh is yet to make any significant decisions on the 35 SoEs it has considered for privatization.
Tackling climate change
Bangladesh is among the few countries in the world which not only faces the wrath of floods but also severe bouts of drought. Scientists predict that due to climate change, Bangladesh might experience a 3-foot sea level rise by 2050, which threatens to displace more than 3 crore Bangladeshis. Bangladesh took pole position in the 2009 Global Climate Risk Index which ranks 170 countries most susceptible to global climate change. While a $100million Climate Change Fund has been set up, it remains to be seen whether our generation will witness any fruitful developments as far as combating climate change is concerned.
Over the past months, entrepreneurs and prominent economists have been raising their voices on a multitude of economic issues. Will the finance minister do something to bring smile on the faces of the people by keeping inflation under check.
The writer works for a
multinational company