Policy Research Institute - PRI Bangladesh

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Mobilisation, proper use of resources are key challenges

News Published: Tuesday, May 31, 2016

Posted : 31 May, 2016 00:00:00



Mobilisation, proper use of resources are key challenges

Incompetence of SoEs, PCBs flayed at PRI roundtable

Mobilisation, proper use of resources are key challenges

PRI executive director Dr Ahsan H Mansur and vice-chairman Dr Sadiq Ahmed at a pre-budget talk.— FE Photo

FE Report

Economists and experts find mobilisation of enough domestic resources and their proper utilisation as major challenges for the government in its task of implementing a 'mega budget' in the next financial year.

They were, at the same time, very critical of the incompetence of the state-owned enterprises (SoEs) and public sector commercial banks (PCBs), saying that a significant volume of domestic resources is being drained out annually due to operational failures and irregularities in those entities.

Suggesting privatisation of these loss-making entities to save a large amount of public funds, they also called for addressing some relevant issues, including stagnant private investment, weak performance of banking sector, poor ADP (annual development programme) implementation, growing income inequality and lower tax-to-GDP ratio.

For achieving sustainable economic growth, some participants at a roundtable discussion in the city recommended raising of the number of taxpayers rather than paying attention to the VAT law.

Quality expenditure and implementation, enhanced allocation on key sectors like health, education and social protection were also underscored at the discussion.

About implementation of the recently enacted VAT (value added tax) law, they blamed inadequate consultation with the stakeholders before enactment of the law that has stirred up serious concerns among the businesses.

The suggestions and observations came at a round- table discussion on 'National Budget 2016-17: Last Minute Thinking', arranged by the Policy Research Institute (PRI) at its office in the city.

Moderating the function, PRI Vice Chairman Dr. Sadiq Ahmed said the budget is going to be unveiled amid a stable macroeconomic situation. But there are some unresolved issues such as stagnant private investment, weak performance of banking sector and rising income inequality.

He said the size of budget has grown significantly over the years, which is a good thing, but mobilisation of domestic resources and its proper utilisation are key challenges as far as execution of the big budget of Tk 3.4 trillion is concerned.

Talking about low tax base, former NBR (National Board of Revenue) chairman Muhammad Abdul Mazid said the number of credit card holders has gradually been increasing in the country. These card holders must be made taxpayers.

"But the reality is majority of them do not pay taxes," he said.

Mr. Mazid, also Chairman of Chittagong Stock Exchange (CSE), said the ongoing hue and cry raised by the businesses regarding implementation of the VAT law is due to improper negotiation with the stakeholders.

"Most people still think that 15 per cent VAT has been imposed on all goods. It should be clarified," he added.

PRI Executive Director Dr. Ahsan H. Mansur said the country needs a flat rate of VAT as practiced in most countries of the world to avoid dodging of revenue in the form of misquotation of product by multiple VAT rate.

Traders having annual turnover within Tk 3.6 million are exempted from all kinds of VAT or taxes, businesses with turnover in between Tk 3.6 million to Tk 7.2 million will have to pay 3 per cent turnover tax quarterly and with turnover more than Tk 7.2 million they need to pay 15 per cent VAT, he said.

Criticising the government's subsidy on SoEs and state-owned commercial banks, he said the government has not been able to make state-owned entities economically viable even after spending a huge amount of money on them.

"Privatisation is the solution to save public funds. The process will not only help save money but also enhance export earnings and Adamjee could be an ideal example," he said.

According to the data of the Ministry of Finance, outstanding debt of SoEs and NPL of public sector banks stood at Tk 1920 billion and Tk 282 billion respectively in financial year of 2015.

Economist and former Director General of Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri said budget size increases gradually every year, which is not at all a problem. But the issue is whether it is being implemented properly or not.

"In fact the size of the budget is small compared to our demand for development. People will not be benefited from the budget, no matter how big it is, if it is not implemented appropriately," he said.

Suggesting enhanced budgetary allocation on health, education and social sector, former commerce secretary Suhel A Choudhury said quality of education has been deteriorating while healthcare is becoming costlier.

Talking about mega projects like metro rail, Paira deep sea port, LNG terminal, PRI operations director GM Khurshid Alam said the government cannot execute these big projects with only domestic resources.

PRI senior economist Dr. Ashikur Rahman stressed the importance of raising efficiency among bureaucrats to bring dynamism and acceleration in the implementation of ADP.