News Published: Tuesday, Jun 02, 2015
Posted : 02 Jun, 2015 00:00:00
Plea to raise more investment to get out of 6pc 'growth trap'
Economists call for widening tax net
A discussion on the upcoming budget, organised by Policy Research Institute (PRI), in progress at its office in the capital on Monday. 1— FE Photo
The country needs to boost investment, widen tax net and reduce cost of doing business to come out of the 6.0 per cent growth trap, economists and experts said Monday.
Taking part in a pre-budget discussion in the city, they identified administrative reform as one of the key areas for achieving that objective. They listed high bank interest, inefficiency, lack of power and energy, good governance and underdeveloped infrastructure as major obstacles to investment growth.
A private think-tank -- Policy Research Institute of Bangladesh (PRI) -- organised the discussion meeting on the upcoming budget for fiscal 2015-16 at its Banani office in collaboration with the private TV channel Ekattor, where a number of experts stressed the need for removal of roadblocks to trade and investment.
They said although the size of the ensuing budget is not very big, mobilisation of revenue for the next budget might prove to be a daunting task for the government. The government is likely to set a revenue target for the NBR at Tk 1.76 trillion for the upcoming FY.
"The revenue target might create an extra pressure," said former NBR Chairman Md. Abdul Mazid terming it highly ambitious.
If the target is unrealistic, the government will have to depend on heavy bank borrowing and reduce the size of the annual development programme (ADP). "Expenditure
should be determined on the basis of possible revenue collection," he added.
However, most economists and experts in their deliberations underscored the need for reforming the NBR saying that the present system of tax collection is very complex and cumbersome.
Questions were also raised regarding the progress in the implementation of the ADP. The ADP implementation in most cases remains sluggish at the beginning of a fiscal year, but the same suddenly picks up speed at the end of the year, they added.
Typically, a large portion of the development project funds is spent in the last month, a practice that always draws flak from the economists.
The Financial Express Editor Moazzem Hossain suggested activating the Implementation Monitoring and Evaluation Division (IMED) to check irregularities, stop misuse of funds and improve quality of project execution work.
Split in four segments -- overall economy, revenue collection, expenditure and good governance -- the programme was aired live on Ekattor TV.
PRI executive director Ahsan H Mansur moderated the discussion that continued for two and half hours.
The programme was addressed among others by PRI Chairman Zaidi Sattar, ex-finance secretary Siddiqur Rahman, former commerce secretary Suhel A Choudhury, former customs (NBR) member Ali Ahmed, Bangladesh Women Chamber of Commerce and Industries (BWCCI) president Selima Ahmed, PRI directors Dr. Bazlul Haque Khondker, GM Khurshid Alam and Dr. Ashikur Rahman.
The speakers felt that stimulating investment will be one of the key challenges during the next FY.
They also stressed the need for increasing the tax-GDP ratio and ensuring an integrated trade policy to promote export-led growth.
"To achieve 7.0 per cent growth, the country would have to push the stagnant investment-GDP ratio up to 35 per cent from the present 28.0 per cent," said Dr. Ashik. "Why has the number of income taxpayers remained stuck-up at one million only?" asked the economist stressing the need for netting more untapped tax-payers.
BWCCI president Selima Ahmed pointed out that the government allocates Tk one billion for women entrepreneurs almost every year but the latter have been failing to utilise the money because of bureaucratic hassles and corruption by government officials.
Mrs Selima also urged the EPB to conduct a research to find out new sectors viable for export and new markets for Bangladesh products.
Speakers, however, welcomed the government decision to cut yield rates of its savings instruments which they said would help lower the cost of doing business and reduce the public sector debt liabilities.
But they urged the government to look after the interests of small savers, pension holders and insolvent families whose livelihood is mostly dependent on the profit earned from such instruments.
"The government's savings scheme is no longer benefiting the intended low-income groups. Instead, rich people are reaping a windfall from these instruments", said PRI executive director Ahsan H Mansur.
"In the name of widows, we cannot distort the fiscal management," said the PRI executive director adding that the national savings scheme should be abolished.
However, many of the speakers said the family savings certificates and pensioners' certificates should continue as they depend mostly on these.
They urged the government to impose higher duties on tobacco products in the 2015-2016 budget to discourage their use. "The government can easily earn as much as Tk 30-40 billion from this sector," said former Customs (NBR) member Ali Ahmed who urged the government to levy more tax on cheap cigarette, especially the Bidi.
The economists also urged the government to take initiative for utilising the substantial unused foreign fund in the pipeline.
PRI Chairman Dr Zaidi Sattar pointed out that the country's per capita income stood at US$ 1,314 which will help to graduate the country to the status of a middle-income country within a few years. "But it must be sustainable and needs to be maintained at least for three consecutive years", said the economist.
Sattar also pointed out that tariff protection given to industries catering to the domestic market acted as an impediment to export diversification. According to him, trade and domestic policies have an anti-intermediate goods bias which needs to be changed.
"Industries that produce import competing goods for the domestic market see tariffs on imports too high," said the economist. He also stressed the need for protecting the consumers' rights. The domestic industries, he said, are getting more profits than the export- oriented industries because of the protection.
PRI director Khurshid Alam urged the government to undertake quality and priority projects and stressed the need for quick implementation of priority mega projects like Dhaka-Chittagong 4-lane highway.
Dwelling on poverty alleviation scenario Dr. Bazlul Haque said many people still live on the threshold line. So the government should take more care about their welfare.