Dr. Md. Shairul Mashreque :
The National budget (2017-2018) needs to be revised in the light of suggestions from the experts keeping in view the state of Bangladesh economy. Doubtless government has been trying to bolster our economy claiming that Bangladesh is becoming emerging tiger. It is becoming middle-income country in global economy. The state tries its level best to nourish our economy to make it more vibrant and flourishing with micro-industrial development, seven percent growth and massive infrastructural development. At the social level the government endeavors to reduce income poverty, infant mortality and increase nutritional intake. Such lofty objectives could have been fulfilled by now. We are handicapped by vitiated political environment. To cite a report:
The fragile rule of law continues to undermine economic development in Bangladesh. Corruption and marginal enforcement of property rights drive people and enterprises into the informal economy, and poor economic management, worsened by repeated political crises, severely constrains economic dynamism. Despite some streamlining of business regulations, entrepreneurial activity is hampered by an uncertain regulatory environment and the absence of effective institutional support for private-sector development. The government’s inability to provide even minimal public goods further limits opportunities for business development and job growth. Property laws are antiquated, and property rights are enforced unevenly. The judiciary is not independent. Procedures for contract enforcement and dispute settlement are inefficient. Endemic corruption and criminality, weak rule of law, limited bureaucratic transparency, and political polarization have undermined government accountability. Anticorruption efforts are weakened by politicized enforcement and subversion of the judicial process.
Revenue collection with the dynamic role of NBR deserves mention. Its initiatives are all embracing raising consciousness of the taxpayers to become a recognized honorable citizen with certificate. Tax festival is also arranged for the convenience of the enthusiastic taxpayers. But the inefficiency of tax administration needs to be addressed. “The administrative and management capacity of the taxperson remains a major determinant in deciding the success of any new and automated system, not to speak of such a complex system as the VAT. Awareness building campaign in the form of training, conference, sector wise group consultations for business entities, which are also critically important determinants, have also remained inadequate till now. This is particularly important to make the end users at the periphery areas more comfortable about the new system. The strategy in the areas of regulation and monitoring as regards technical issues concerning the new VAT system are, however, not clear. NBR needs to integrate a number of government and autonomous agencies in the system for information sharing, but their capacity to comply with the system remains a concern.7 Taking cue from the concerns raised during preparation of the enforcement of the law, NBR should frame a comprehensive enforcement plan on an urgent basis, and make a public announcement of this plan prior to enforcement of the VAT law as of 1 July 2017. This will provide all relevant stakeholders including producers and consumers with clear information and guidelines about enforcement of the law. Business entities (which are vested with the responsibility of collecting the VAT from consumers) have voiced their opposition to the uniform VAT rate of 15 per cent on the ground that this was on the high side”.
Even then our economy bears the stamp of poverty. Rural urban disparity has multiplied. The share of the poor and low middle-income groups has shrieked. The skyrocketing prices of essentials hit the poor threatening them to become poorer. Added to it massive corruption and money laundering through alleged financial scam in banking sector contribute to the level of pauperization of the fixed and poor income segments of the population.
Development through private sector cannot be left out of equation. Private initiatives ought to be encouraged through budget. “While there is no denying that the causal relationship between policies and private sector investment patterns call for more rigorous and in-depth analysis, there are also other factors including infrastructure, overall business environment and regulatory regime which have important impact on entrepreneurs’ investment decisions. However, the need for better targeting and better deployment of policy tools in countries such as Bangladesh cannot be overemphasized. In the next section an attempt has been made to examine the efficacy of fiscal tools deployed to promote investment in the context of some selected sectors. 12 Major economic activities (in terms of establishments) are concentrated in weaving and finishing of textiles, manufacturing of wearing apparels, manufacture of knitted apparels, manufacture of luggage and handbag, foot wear, printing, plastic products, metal products, treatment of metals, metal furniture, packaging materials and jewelry etc. In order to facilitate local tiles industry, the government had raised SD on finished tiles and ceramic products. The policy met the objectives partially. Import of electrical appliances slowed down after the imposition of duty; on the other hand, automobiles sector showed some mixed results after the changes in the SD structure. No doubt, the pattern of correlations cited above should be interpreted with due care, since there are many other factors that tend to influence the import behavior, including relative (domestic/imported) prices, level and pattern of demand, change in consumer choices etc.”
Needless to mention declining trends in remittance vis-à-vis increasing boundary of indirect tax, the consumers will have lower disposable income. More a reduction in income tax rate for the lowest level of threshold can also help increasing disposable income for boosting domestic consumption. More importantly, the national budget for FY2018 will need to promote domestic-market-oriented industries. To this end, needed strategic protection to these sectors will be critical. Also, effective delivery of quality infrastructure to the manufacturing sector is of critical importance.’ More the rise in cost of production is expected to be accompanied by a decline in external earnings from exports and remittances. CPD recommends to “depreciating BDT to provide exporters some relief. The government must also continue to provide cash subsidies to export of non-traditional products and for non-traditional markets. Sixth, budgetary allocations for education and health sectors need to be coherent with the overall development needs of the economy. Targets of the 7FYP are very conservative compared to the requirement. Indeed, the recent rise in allocation is particularly attributed to the government salary scale adjustment. The government may opt for an early attainment of 7FYP allocation targets for education and health sectors (3.0 per cent and 1.2 per cent by 2020 respectively). However, such an effort is less restrained by fiscal constraint. Rather, developing a delivery mechanism (e.g. ADP projects) and ensuring an efficient implementation would be more challenging to this end. In this context, the forthcoming large projects for education and health sectors should be designed to achieve the aspired targets of 7FYP and Sustainable Development Goals (SDGs). It is thus important to ensure how an incremental allocation can be used to service the development needs. The government also needs to make a sincere effort to implement the NSSS; financial resource constraint should not be an excuse. Finally, the budget should come with a set of associated reform agenda, which would require high policy attention. CPD in earlier sections has urged for two commissions – an Independent Financial Sector Reform Commission (IFSRC) and an Agriculture Price Commission. Along with these two, setting up an independent Public Expenditure Review Commission (PERC) with the mandate to provide medium term policy guidelines to the government and formulate a concrete set of strategies in order to improve the current level of efficiency in budget delivery.”
Most vital point of our economy is escalation of income gap between the low middle/hard core poor class and the rising tycoons plundering resources. Rich is becoming richer and the poor poorer. This a natural order. But some blessed by the corrupt politico-administrative system are becoming rich with the increasing opportunities for unearned income. Fewer initiatives are reported to stem the tide of corruption and malfeasance. Development through smart implementation of budget to improve the state of our economy warrants elimination of corruption in politics and administration. Our budget must be poor and fixed income group friendly encouraging saving with a reasonable rate of interest. Tax on accumulated money out of saving is not a rational policy. They must be brought to an access point to housing policy through real estate development. Those among builders trying to provide houses for the low-income groups should be given rebate or tax holidays.
(Dr. Md. Shairul Mashreque is a Professor of Chittagong University)
The National budget (2017-2018) needs to be revised in the light of suggestions from the experts keeping in view the state of Bangladesh economy. Doubtless government has been trying to bolster our economy claiming that Bangladesh is becoming emerging tiger. It is becoming middle-income country in global economy. The state tries its level best to nourish our economy to make it more vibrant and flourishing with micro-industrial development, seven percent growth and massive infrastructural development. At the social level the government endeavors to reduce income poverty, infant mortality and increase nutritional intake. Such lofty objectives could have been fulfilled by now. We are handicapped by vitiated political environment. To cite a report:
The fragile rule of law continues to undermine economic development in Bangladesh. Corruption and marginal enforcement of property rights drive people and enterprises into the informal economy, and poor economic management, worsened by repeated political crises, severely constrains economic dynamism. Despite some streamlining of business regulations, entrepreneurial activity is hampered by an uncertain regulatory environment and the absence of effective institutional support for private-sector development. The government’s inability to provide even minimal public goods further limits opportunities for business development and job growth. Property laws are antiquated, and property rights are enforced unevenly. The judiciary is not independent. Procedures for contract enforcement and dispute settlement are inefficient. Endemic corruption and criminality, weak rule of law, limited bureaucratic transparency, and political polarization have undermined government accountability. Anticorruption efforts are weakened by politicized enforcement and subversion of the judicial process.
Revenue collection with the dynamic role of NBR deserves mention. Its initiatives are all embracing raising consciousness of the taxpayers to become a recognized honorable citizen with certificate. Tax festival is also arranged for the convenience of the enthusiastic taxpayers. But the inefficiency of tax administration needs to be addressed. “The administrative and management capacity of the taxperson remains a major determinant in deciding the success of any new and automated system, not to speak of such a complex system as the VAT. Awareness building campaign in the form of training, conference, sector wise group consultations for business entities, which are also critically important determinants, have also remained inadequate till now. This is particularly important to make the end users at the periphery areas more comfortable about the new system. The strategy in the areas of regulation and monitoring as regards technical issues concerning the new VAT system are, however, not clear. NBR needs to integrate a number of government and autonomous agencies in the system for information sharing, but their capacity to comply with the system remains a concern.7 Taking cue from the concerns raised during preparation of the enforcement of the law, NBR should frame a comprehensive enforcement plan on an urgent basis, and make a public announcement of this plan prior to enforcement of the VAT law as of 1 July 2017. This will provide all relevant stakeholders including producers and consumers with clear information and guidelines about enforcement of the law. Business entities (which are vested with the responsibility of collecting the VAT from consumers) have voiced their opposition to the uniform VAT rate of 15 per cent on the ground that this was on the high side”.
Even then our economy bears the stamp of poverty. Rural urban disparity has multiplied. The share of the poor and low middle-income groups has shrieked. The skyrocketing prices of essentials hit the poor threatening them to become poorer. Added to it massive corruption and money laundering through alleged financial scam in banking sector contribute to the level of pauperization of the fixed and poor income segments of the population.
Development through private sector cannot be left out of equation. Private initiatives ought to be encouraged through budget. “While there is no denying that the causal relationship between policies and private sector investment patterns call for more rigorous and in-depth analysis, there are also other factors including infrastructure, overall business environment and regulatory regime which have important impact on entrepreneurs’ investment decisions. However, the need for better targeting and better deployment of policy tools in countries such as Bangladesh cannot be overemphasized. In the next section an attempt has been made to examine the efficacy of fiscal tools deployed to promote investment in the context of some selected sectors. 12 Major economic activities (in terms of establishments) are concentrated in weaving and finishing of textiles, manufacturing of wearing apparels, manufacture of knitted apparels, manufacture of luggage and handbag, foot wear, printing, plastic products, metal products, treatment of metals, metal furniture, packaging materials and jewelry etc. In order to facilitate local tiles industry, the government had raised SD on finished tiles and ceramic products. The policy met the objectives partially. Import of electrical appliances slowed down after the imposition of duty; on the other hand, automobiles sector showed some mixed results after the changes in the SD structure. No doubt, the pattern of correlations cited above should be interpreted with due care, since there are many other factors that tend to influence the import behavior, including relative (domestic/imported) prices, level and pattern of demand, change in consumer choices etc.”
Needless to mention declining trends in remittance vis-à-vis increasing boundary of indirect tax, the consumers will have lower disposable income. More a reduction in income tax rate for the lowest level of threshold can also help increasing disposable income for boosting domestic consumption. More importantly, the national budget for FY2018 will need to promote domestic-market-oriented industries. To this end, needed strategic protection to these sectors will be critical. Also, effective delivery of quality infrastructure to the manufacturing sector is of critical importance.’ More the rise in cost of production is expected to be accompanied by a decline in external earnings from exports and remittances. CPD recommends to “depreciating BDT to provide exporters some relief. The government must also continue to provide cash subsidies to export of non-traditional products and for non-traditional markets. Sixth, budgetary allocations for education and health sectors need to be coherent with the overall development needs of the economy. Targets of the 7FYP are very conservative compared to the requirement. Indeed, the recent rise in allocation is particularly attributed to the government salary scale adjustment. The government may opt for an early attainment of 7FYP allocation targets for education and health sectors (3.0 per cent and 1.2 per cent by 2020 respectively). However, such an effort is less restrained by fiscal constraint. Rather, developing a delivery mechanism (e.g. ADP projects) and ensuring an efficient implementation would be more challenging to this end. In this context, the forthcoming large projects for education and health sectors should be designed to achieve the aspired targets of 7FYP and Sustainable Development Goals (SDGs). It is thus important to ensure how an incremental allocation can be used to service the development needs. The government also needs to make a sincere effort to implement the NSSS; financial resource constraint should not be an excuse. Finally, the budget should come with a set of associated reform agenda, which would require high policy attention. CPD in earlier sections has urged for two commissions – an Independent Financial Sector Reform Commission (IFSRC) and an Agriculture Price Commission. Along with these two, setting up an independent Public Expenditure Review Commission (PERC) with the mandate to provide medium term policy guidelines to the government and formulate a concrete set of strategies in order to improve the current level of efficiency in budget delivery.”
Most vital point of our economy is escalation of income gap between the low middle/hard core poor class and the rising tycoons plundering resources. Rich is becoming richer and the poor poorer. This a natural order. But some blessed by the corrupt politico-administrative system are becoming rich with the increasing opportunities for unearned income. Fewer initiatives are reported to stem the tide of corruption and malfeasance. Development through smart implementation of budget to improve the state of our economy warrants elimination of corruption in politics and administration. Our budget must be poor and fixed income group friendly encouraging saving with a reasonable rate of interest. Tax on accumulated money out of saving is not a rational policy. They must be brought to an access point to housing policy through real estate development. Those among builders trying to provide houses for the low-income groups should be given rebate or tax holidays.
(Dr. Md. Shairul Mashreque is a Professor of Chittagong University)
