Will the budget help develop productive sectors?

The recent verdict of the International Tribunal for the Law of Sea demarcating 19,467 sq.km of international water of the Bay of Bengal to Bangladesh has given the country an undisputed excess to rich natural resources of the ocean. And the latest sub-regional connectivity has created for Bangladesh a unique scope to transform its economy to unprecedented heights. But it is unclear why the proposed budget 2015/16 lacks the necessary sense of direction to capitalise these big opportunities.
In the world of global competition, with technology and connectivity racing with time, no door of mutual opportunity should remain shut. The sub-regional connectivity was unimaginable even a year ago but it is now going to be a reality since it is a necessity. Similarly, connecting Kolkata, Dhaka and Beijing via Myanmar by railway and road is set to be yet another reality in the process as India's trade with China is expected to grow from $64 billion to $100 billion. China-Bangladesh trade volume has reached a record high of $10.3 billion with a growth rate of 21.9 per cent compared to that of 2012. Moreover, China offers the opportunity of future gains as it is estimated that in the next five years, Asia's economic powerhouse will invest an additional $500 billion in other countries, import over $10 trillion products and send 400 million tourists abroad.
Since these developments are taking place speedily, Bangladesh has to have a pragmatic view and prepare for this whole scenario of  sub-regional connectivity, blue economy, upcoming regional connectivity and even of a trans-continental connectivity. Our planners and entrepreneurs must be able to visualise these.
The investment to GDP (Gross Domestic Product)  ratio of Bangladesh stands at 28.99 per cent of which the government's share is 6.6 per cent and the private sector's 22.39 per cent. The Bangladesh Bank data shows private sector credit growth nosediving to 10.85 per cent in fiscal 2012-13 and it stood at 12.29 per cent in fiscal 2013-14.
For Bangladesh, the essential need of the hour is to acquire latest technology to improve its efficiency. It is equally essential to ensure increase in private savings for its availability for abundant local investment. It should be followed with highly competitive interest rates and sharply reduced income and corporate taxes to make investment in Bangladesh not only competitive, but also profitable so that more Bangladeshi business houses can be the beneficiaries of these massive developments. In case of failure, these opportunities will be availed by overseas entrepreneurs.
While our planners may well look into revising the age-old land valuation for effective inflow of substantial capital, the budget should provide more incentives to encourage the real estate sector. The sector will remain a major source for inflow of white money to the economy, while it will employ directly and indirectly about 30 million people.
To encourage exports, local industries and the farmers, the government should provide more incentives to them like reduction of electricity rate in off-peak hours and offering special interest rates now that the government is receiving loans at 1.0 per cent to 1.5 per cent from India and China respectively. Growth of effective cooperatives should be promoted to train farmers on green economy and fishermen on blue economy. Crop insurance should be launched through these cooperatives with  required storage facilities arranged. There must be joint efforts to help the farmers learn marketing skills and boost productivity.
At the same time, as our foreign remittance has increased, special incentives should be provided to our non-resident Bangladeshis to participate actively in these opportunities as they remain a potential and a major source for technology and capital flow to Bangladesh.
The state-owned enterprises (SoEs) are incurring huge losses each year and until December 2014 are reported to owe Tk 330 billion to the four state-owned banks, which is about 11.18 per cent of the projected budget. These debts not only hinder credit flow from the state-owned banks to the private sector but the losses of the SoEs also create a significant leakage in the economy each year. While the audited accounts of the SoEs are scarce, only from the Bangladesh Power Development Board's loss of Tk. 85 billion in the 2011/12 fiscal year, one can one assess the amount of losses of the SoEs.
However, in spite of all this adverse situation prevailing as it is also in most developing economies, Bangladesh has been maintaining a steady 6.0 per cent growth rate for several years. The country's per capita income tripled from an average U$251 in the 1980s to U$851 by 2012. The GDP growth rose by 1.7 percentage points in each of the last four decades. Bangladesh has been able to preserve export competitiveness substantially. Macro-economic stability was maintained consistently with only occasional slips. Inflation was contained well below double digit most of the time.
As Bangladeshis, we have to hold our own image high, to be respected in the world. After all, we have delivered and duly earned our respectable position. It is time we acknowledged, awarded and provided incentives to our own countrymen and prepare for the coming opportunities and challenges with the equal dynamism in every sphere.

The writer is Managing Director of Unipex Consultancy Ltd and Hay Electrical Industries Ltd.
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