Three 'painful' reforms urgent for recovery

Immediate undertaking of three major 'painful' reforms is a must-do for Bangladesh economy to navigate current turmoil that may last couple of years ahead, a noted economist told economic reporters Tuesday.
Some sort of 'shock-therapy' has to be given by the government, instead of its current 'crawling steps', to leave the exchange rates and rates or bank interest to the market, said Prof Mustafizur Rahman.
Addressing a programme with the economic reporters, the distinguished fellow of the Centre for Policy Dialogue (CPD) said proper implementation of reform steps, and market-based exchange and interest rates are the immediate steps the government must take to stem any further deterioration in the odds facing the economy.

"Such painful reforms may affect some people for the time being as savers may not get higher returns but it would help to increase remittances, export-competitiveness and reining in subsidy," he said, based on the think-tank's latest thinking.
The Economic Reporters Forum (ERF) organised the programme on its premises as part of initiative to hold conversations  with economists to elicit their views about ways of resolving problems facing the economy.
Professor Rahman feels it cannot be predicted right now whether or not the United States would impose trade sanctions but Bangladesh should not sit idle to improve labour rights and skill-development situation.
Responding to queries on recent CPD report on the banking sector, he said data were compiled from newspaper reports with no rejoinders on the siphoning of Tk 922 billion in 15 years. If it is on the tip of the iceberg the government also knows very well.
"A vicious cycle is behind the banking-sector instability. We have suggested mergers and acquisitions and reform (to remove) the legal loopholes," he told the economic reporters.
The central bank should be allowed to work independently to bring discipline in banking sector, he added.
Dr Rahman suggests transforming the 'transport corridors' into 'economic corridors' for making best use of current infrastructure development to get its returns.
"Unless the country ensures economic returns in the form of revenue generation, of the existing investment on infrastructure development, it would fall in a debt-trap," he said on a note of alert.
The non-reciprocal trade benefits would not last after the country would get up-scaled from the Least Development Country (LDC) club, he said. Several challenges would appear before second-generation businesses from labour-and environmental-compliance issues.
On their oft-advocated banking reform, the CPD distinguished fellow said enforcement of 'bankruptcy act' could help check siphoning money from banks.
Responding to a question, Dr Rahman said Bangladesh may not see decline in inflation in price slab although it is being tamed down in other countries.
"Depreciation of local currency would continue but pressure on consumers would mount due to higher prices of products by that time," he added.
Dr Rahman expressed frustration over non-functional Active Pharmaceutical Ingredients (API) park and leather industrial park for want of Effluent Treatment Plant (ETP).
"I wonder why the ETPs could not be established spending Tk 1.0 to 1.5 billion for the Tk 60 billion industry. What is the political-economy behind this?" he said, pointing at some vested-interest quarters active to keep the country import-dependent for raw materials.
He also suggests decent employment in readymade-garment sector has to be prioritised as mechanization is eating up employments.
The economist also recommends prioritising intra-RMG and extra-RMG exports to grab huge international-market demands.
"I observe some anti-FDI sentiments in the country, though some changes in mindset are visible in recent times," he told the meet.
Professor Rahman suggests that the law-enforcing agencies and anti-graft watchdogs find out the bloated wealth accumulation by election candidates.
President of ERF Refayet Ullah Mirdha chaired the programme on 'Conversation with Professor Dr Mustafizur Rahman while ERF Secretary-General Abul Kashem moderated the talk.
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