An Evaluation on the Proposed Budget for 2017-18

On Proposed Budget for 2017-18

Md. Joynal Abdin

The Daily Sun on June 4, 2017

Honourable finance minister AMA Muhith has proposed the national budget for the 2017-18 FY in the parliament on June 01, 2017. The most experienced finance minister of Bangladesh has broken his own record of placing maximum budget in the parliament. The total size of the proposed budget is taka 4.26 trillion along with an annual development plan of about taka 1.55 trillion. The sizes of the total outlay and ADP are both the ever highest in Bangladesh budgets. Critics called it an election budget to manage everybody. Few criticisms came with crueller words like to cut mass peoples pocket and collect election expenditure of the party. In spite of all the political criticisms, we welcome this biggest budget in the national history. Before going into detailed evaluation, I would like to have a look on the development budget allocation.

As per the proposed development budget transportation and communication got the highest priority with about 27.4% allocation. Bangladesh economy is transforming from agriculture dependency into industrial economy. During this transformation stage transportation and communication sector got its justified priority. So no doubt that, the experienced brain committed a justified move. The second highest budgetary allocation goes to the education and technology sector. It is another wonderful step from the honourable minister. But it makes me sorry that the healthcare sector is just neglected in this budget with 6.1% budget that stood at the 6th position of the ADP. It could get the 2nd or 3rd highest priority. Because till now there is only one child hospital in Bangladesh for 160 million people. The capital city is the only way out for treating many serious diseases.   The government healthcare sector is overloaded to bear the demands of 160 million populations. Private healthcare facilities are just out of reach to 80% of the citizens. In such a situation healthcare sector deserves more budgetary allocation to establish more seats in the existing district level government hospitals. Establishing specialised hospitals at the divisional or district level is a justified demand of the mass people. Childcare is crying loudly in Shaymoli when a serious child needs ICU facilities to save his / her life.

The local government and rural development got 15.3%, Energy and electricity got 13.5% of the proposed ADP. To ensure a balanced development of the country local government and rural development deserves attention. Similarly, energy and electricity are the inputs to industrialisation and essential catalyst of mass people’s living standard. The honourable minister explained his achievement to bring 9,000 MW electricity generation capacities to 15,000 MW. But till now we are experiencing uncontrollable load shedding in the capital city especially during last two months. The experience of the rural people is even more agonising than that of the city duellers. At the same time a significant portion of the rural Bangladesh is still to get electricity connection. In this circumstance energy and electricity deserves extra attention.

Now we would like to have a look on the sources of this money. The finance minister has proposed to collect 62% of the revenue through the National Board of Revenue (NBR). It could be an extra pressure on the income tax and customs collectors. As a result, mass people especially the business community could face tough treatments from the NBR people. At the same time, single rate VAT collection has been proposed with a waiver list which is offering a relief to some identified groups but in general poor people have to be brought out from this VAT net. It is not clear how the government is planning to do so.

This budget has an over dependency on foreign aid and foreign loan. There are many examples of our inefficiency in utilising existing foreign assistance. But in the proposed budget these sources have shown a 3 times growth. How such a large amount of foreign assistance will be managed and how we could utilise those with our existing project implementation capacity remains a big question. Therefore, how the budget deficit of Tk. 1.12 trillion will be made up is remaining a very prominent grey area. If the government borrows unusual amount of money from the local sources than the private sector entrepreneurs could face credit deficit.

I am afraid of the proposal of imposing Tk. 800 as excise duty on bank deposits of Tk. 1-10 lakh. This decision is completely at variance with the government move for inclusive banking / financing. At the same time, it would be a pocket cutting decision for the low income group who are maintaining bank accounts with one lakh taka just to face any inconvenient situation or emergency. Therefore, this slab for imposing excise duty could be raised to Tk. 10-20 lakh. Less than Tk. 10 lakh should be exempted from imposing excise duty; otherwise poor people will lose interest in saving money and depositing them in banks.

As the number of unemployed higher educated youths in the country is rising day by day, we were expecting a special move from the government to address this issue through this budget. But relevant initiatives to generate employment or develop entrepreneurship are not visible in this budget though the honourable minister could defend himself by the GDP growth projection conducive to job creation. But still job creating projects deserve extra care in current situation of unemployment. Special allocation or mechanism is required for employment generation and entrepreneurship development.

A very good decision has been taken by reducing corporate tax rate and inspiring green industrialisation. But personal income tax slab also deserves to get hiked because people’s living cost is rising throughout the country due to inflation and other developmental effects. As the living cost of the mass people is rising, the personal tax-free income slab should be raised further.

Finally, we would like to conclude this brief evaluation on the proposed budget 2017-18 with a hope that, the honourable parliament members will evaluate the proposed budget and propose adjustments in some areas like increasing the slab of bank deposit to impose excise duty in line with the vision of inclusive banking, increasing the personal income tax slab due to rise of living cost of the mass people etc. And finally the most experienced finance minister will rethink few issues to make this budget more people-oriented, pro-poor and pro-development budget.

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Budgetary Measures for Economic Growth and Sustainability

Budgetary Measures for Economic Growth and Sustainability

Md. Joynal Abdin

The Daily Sun on 21 April, 2017

There are about 162 million populations in Bangladesh and nearly 127 million of them are workable. There are only about 1.7 million positions in government services 18% of those are vacant.

That means government could provide employment to nearly 1% of its total population in its existing setup. What about the employment opportunity of the rest 99% populations of the country? It is stated that, there are about 30 million businessmen in Bangladesh. So government service holders and businessmen are account for 31.7 million populations. Till now there are 95.3 million workable populations of the country. As per a recent report of the ministry of finance there are about 58.1 million people are employed in private sector. As per this statistics till now there are 37.2 million workable but unemployed populations in the Bangladesh.

That means workable but unemployed populations are about 23% in our society. The percentage of total unemployed population would be more than 40% if children and over aged citizens are counted here. Alarming news is that the number of higher educated but unemployed population is rising. Low educated or uneducated people are migrating abroad as labor force. But higher educated unemployed are mostly from the middle class family. They are not able to be labor in home or abroad due to the family status but remaining burden for the family, society and the nation as non-productive unemployed. In such a complex situation increased amount of unemployed populations would be a big burden for the society if government does not take the matter as a serious concern.

As per the constitution of Bangladesh it is the government who is responsible to ensure basic needs of every citizen of the country. Obviously government will not provide services to all but government will create such a congenial environment where surplus unemployed populations will be absorbed by the existing institutions or new institutes will be emerged. Government could facilitate policy and other environmental supports where people will become entrepreneurs (self-employment and creating employment for others), involving more labors in development projects through budgetary measures, increase investment in hands-on skill development programs / projects to facilitate the idle population to be productive, facilitating import substitutions and export orientation  so on and so forth.

Now come to the first point what government could do for creating self-employment / entrepreneurship development. First and foremost initiative would be increasing general levels of confidence / developing confidence of would be entrepreneurs through building hands on capacity to influence their decision making to start a new business through providing skills, industrial location, startup financing, mentoring and other financial & non-financial incubatory supports. Special initiative has to be taken to address and overcome their fear of failure. Mentoring is required for setting up a confidence building scenario to overcome existing cloudy condition about the direction of their business.

Developing their levels of creativity and capacity to innovate has to be strengthening through undertaking newer project like existing Learning and Earning project of the ICT division of the government of Bangladesh. Undertaking local demand based development plan in our national budget could be a way forward to engage more labor force with the government development activities. For example presently government is undertaking a road construction project and provides the tender through a national level tender. As a result the tender winner may not be a local citizen of that territory. He may not know other relevant expectations / priorities of local people with this contraction project. Finally contractors are not bothering about the quality of the project implementation but he is managing the line managers and drawing the bill.

If government takes a reverse initiative that, all the peoples representatives from the union even ward levels will prioritize development needs of their territory in consultation with the citizen and prepare a priority list of development initiative for that territory. They will send the list to concern authority for allotment. Then the decision maker justify the needs and provide the budgetary allotment to the local authority for implementation then the local representatives and administration both will be equally liable for proper monitoring and implementation of the project through using local resources. Such a demand driven budgetary system could help to ensure more peoples engagement in government development projects and create employment. Another more important issue is increasing capacity of the budget implementing agencies and relevant stakeholders to ensure qualitative implementation of government development projects.

Thus government could increase personal sources of earnings through its existing mechanism. We must remember that, personal growth will lead us towards a self-sufficient burden free society. Then institutional / organizational growth will lead us toward out of poverty and sustainability of development. Finally; by ensuring the above two condition we could have economic growth and it will lead us towards job creation and safeguarding the society.

Sustainable Development Goals (SDGs) could be the best guideline to select projects and shifting from existing generalized budgetary system into a specialized one. At the same time harmonization of existing taxation system and justification of the duty structure on CKD, SKD, and finished products is required to harvest a pro-growth environment in the Bangladesh.

We are getting big amount but poorly implemented budgets during last few years. Now we are in need of demand driven, project specific, motive oriented and duly implemented national budget for economic growth and sustainability.

The proposed budget: Issues, realities and possible impacts

The proposed budget: Issues, realities and possible impacts

Md. Joynal Abdin

The Financial Express on June 14, 2013

The Finance Minister has placed in the parliament the proposed 2013-14 budget. He was describing throughout his budget speech achievements and future targets of the present government. At the very beginning of his speech, he recalled a few economic targets set by this government for Vision 2021. But he wisely forgot to mention that the government failed to meet targets which were supposed to be met by 2013: the GDP growth to be raised to 8 per cent; every house to be equipped with a healthy sanitary toilet and supply of electricity to reach 7,000 megawatt by 2013. We know many specialists will say these indicators are irrelevant to the budget speech. But we can expect a brief explanation from the Minister before he re-set GDP growth at 8 per cent target from 2013 (stated in Vision 2021) to 2014 (stated in the budget speech).

In the digital Bangladesh part, the Minister has informed the nation that the government has established 4,000 union information centers and 24,000 web portals are going to be launched shortly. User-density of mobile phones and internet is rising. This is true but still the government is trying to regulate uses of internet by reducing its uploading speed.

The ceiling of tax-free income has risen to Tk. 2, 20,000; for women and the aged it is Tk 2, 50,000, for the disabled or physically challenged, it is Tk. 3, 00,000. A good initiative has been taken by proposing lower minimum income tax for the people living in upazila or villages. They get less civic services and will pay less. Therefore, it is a logical and justified initiative. But one of the bad decisions is minimizing the gap of income tax rate between publicly traded companies and non-traded companies. This initiative will discourage profitable companies to be listed in the stock market. As a result, the number of good companies in the stock market will be reduced. Good investors/profitable companies will not come to the stock market only to enjoy 5 per cent less income tax after facing so many hassles to manage listing procedures. By another decision of charging tax on dividend but withdrawing tax on premium on face value, the government will provide more favor to the rich people who are company owners than individual small investors.

By providing facility of black money whitening in land and real estate sector, the government is inviting a very dangerous social disparity. Its result will be that the black money holders will purchase lands and apartments to whiten the money and its prices will go up abnormally. General people or the white money owners will be unable to purchase lands/apartments. From another dimension, black money owners will acquire lands and build recreation houses instead of farming. General farmers will lose cultivable lands. Real estate companies are going to enjoy a boom at the cost of cultivation/agriculture production. In the long run, it will hamper balanced economic and social development of the country. This black money should have been whitened by allowing investment in manufacturing industries / education / health sector. These sectors will give us more output than that of the land or apartment sector.

Another good initiative of the budget is to reduce income tax payment documentation for professionals / salaried individuals. Now due income tax payment amount is adjustable with the income tax paid earlier (cut at source mode). The tax return form is going to be simplified. This initiative will encourage salaried people to come under the tax net. Import duty on capital machinery is going to be reduced to 2 per cent. But how much money will the government fetch a year following 2 per cent import duty on capital machinery? If the government withdraws import duty from capital machinery completely, how much the loss will be? All sorts of capital machinery should be allowed to be imported with zero duty.

A bad example of imposing duty on intermediary product is the duty on urea resin. It is the duty of the government to look for benefit of masses, not to protect one or two government-owned entities. How much revenue will the particular company be giving to the government? How many employment opportunities these will be generating? Why is the government not looking for the benefit of entrepreneurs in electrical, plastic sectors? There is a rumor that one of our ministers wrote DO letter to increase duty on urea resin. Why? It will reduce competitiveness of the whole sector.

Withdrawal of duty from alloy steel, reducing import duty on optical fiber cable, 60 per cent subsidiary duties on imported potato chips and reducing duty on inputs for biogas plant are good initiatives. But imposition of 10 per cent customs duty and 5 per cent regulatory duty on FEP/Teflon tube raw materials of medical equipment and instrument manufacturing industries is a bad decision. Because there is no import duty on the finished goods made by the FEP. The government should think about making a level-playing field here.

The budget is expected to address a few anomalies in different sectors. The duty on raw materials was higher than that of the finished goods. This budget has addressed these anomalies which is a good decision. But the Tk. 8 million turnover ceiling on SMEs is not enough. Because Tk. 8 million per year means Tk. 21,917 per day. If the value addition is 30 per cent, then the revenue of that firm is Tk. 6,575 per day. The firm makes profit of Tk. 6,575 daily which includes wages, bank interest, electricity and other charges which are too minimal. So the ceiling of turnover tax should be increased further.

Special incentive for small and cottage industry with plant machinery and equipment worth Tk. 4 million is very small in amount. According to the National Industrial Policy 2010, ” in manufacturing, small industry will be deemed to comprise enterprises with either the value (replacement cost) of fixed assets excluding land and building between Tk. 5 million and Tk. 100 million, or with between 25 and 99 workers” and ” for services, ‘small industry’ will correspond to enterprises with either the value (replacement cost) of fixed assets excluding land and building between Tk. half a million and Tk. 10 million, or with between 10 and 25 workers”. So, how can an industry having replacement cost of Tk. 5 – 100 million have plant, machinery and equipment not exceed Tk. 4 million in value? In such a case, this budget proposal is violating the definition mentioned in the National Industrial Policy 2010. The special incentive system will not work. This ceiling should be increased for small and cottage industries separately. The ceiling for cottage industries may be Tk. 4 million but the ceiling for small industries should be at least Tk 25 million to make it workable and follow the National Industrial Policy.

Finally we can say this is a good budget with so many commitments and high ambitions but it has to be revised on a few issues; otherwise this budget will not be workable / effective for balanced economic development. The government should not try to make a single losing state-owned enterprise profitable. Rather it should think for welfare of the whole sector. We hope that the government will be wise enough to revise the decision on investment of black money from lands or apartments to manufacturing / education / health care sector for ensuring optimum utilization of the money without harming any community or creating threat for the future. All sorts of basic metals and capital machinery may be allowed to be imported with zero duty to promote industrialization and there should be a significant gap between traded and non-traded companies’ tax rates to inspire non-traded company to be enlisted in the stock market.

Din bodoler budget

Din bodoler budget

Md. Joynal Abdin

The Daily Star on May 13, 2010

THE Awami League-led government is going to place its second budget in its current tenure. Last year, we saw the largest budget in our history. But the question is how much has our standard of living been raised. The people are passing through a difficult time due to the energy crisis. There has been no improvement in electricity and gas supply. Law and order situation has not improved either.

Although there has been a steady flow of remittances from Bangladeshis working abroad no effective government initiative has been made to expand the job market to sustain foreign exchange earnings from the source.

Foreign direct investment (FDI) in Bangladesh is one of the lowest in the world. This is because Bangladesh is yet to put in place the required infrastructure to attract the FDI. The industries in the country are struggling to maintain production because of the energy crisis. They are facing up to 12 hours of electricity load-shedding everyday.

Traffic jam in Dhaka city is getting worse. One-fourth of working hours are wasted on the streets due to the traffic jams. Under such conditions how can Vision-2021 be achieved?

The price hike of essential goods during the current regime has beaten all past records. Ordinary people are spending 80 percent of their income on food and their savings are falling. The prices of commodities are rising illogically in the market when they are falling at farmers’ level. If farmers do not get fair prices for their products they will be discouraged from growing crops. So, the new budget should outline proper a price management mechanism for the sake of the farmers as well as the economy.

The budget is the most important development document of a country. Currently, our policy makers are working hard to finalise the next budget, which is likely to be placed in parliament by the finance minister on June 10.

While preparing the budget the policy makers must take into consideration the water crisis, and electricity and gas shortage. Special attention should be given to ensure water supply to every house in the cities. Uninterrupted electricity supply is the prerequisite for industrial development. Without it digital Bangladesh will remain a daydream.

Under the circumstances the government can consider compensating the factories affected by load shedding. Though factories remain idle during the load shedding period, wages, salaries and utility bills have to be paid by the owners. Specific budgetary measures have to be taken for increased FDI flow into Bangladesh.

Development projects to be taken up in next financial year should get highest priority for implementation. The government must also see that its political agenda does not get preference over development agendas, because the people want to have better living and see the dream of digital Bangladesh come true.

National budget 2010-2011

National budget 2010-2011

Md. Joynal Abdin

The Daily Independent on May 12, 2010

The Awami League led government is going to place its second budget in its current tenure. Last year, we saw the largest budget in our history. But the question is how much our standard of living has been raised. The people are passing through a difficult time due to energy crisis. There has been no improvement in electricity and gas supply. Law and order situation has not improved either.

Although there had been a steady flow of remittances from Bangladeshis working abroad, no effective government initiative has been made to expand the job market to sustain foreign exchange earnings from the source.

The foreign direct investment (FDI) in Bangladesh is one of the lowest in the world. This is because Bangladesh is yet to put in place required infrastructure to attract the FDI. The industries in the country are struggling to maintain production because of the energy crisis. They are facing upto 12 hours of electricity load shedding everyday. Traffic jam in Dhaka city is getting worse. One fourth of working hour is wasted on the streets due to the traffic jam. In such a condition how can Vision – 2021 be achieved?

The price hike of essentials during current regime has defeated all past record. General people are spending 80 per cent of their income on food and their savings are falling. Currently, prices of commodities are rising illogically in the market when they are falling at farmers’ level. If farmers do not get fair prices for their products they will be discouraged to grow crops. So, the new budget should outline proper price management mechanism for the sake of the farmers as well as the economy.

The budget is the most important development document of a country. Currently, our policy makers are working hard to finalise the next budget, which is likely to be placed in the parliament by the finance minister on June 10, 2010.

While preparing the budget the policy makers must take into consideration the water crisis, electricity and gas shortage. Special attention should be given to ensure water supply to every house in cities. Uninterrupted electricity supply is the prerequisite for industrial development. Without uninterrupted electricity supply the digital Bangladesh will remain a day dream. Under the circumstances, the government can consider compensating the factories harmed by load shedding because factories remain idle during the load shedding period. But labour wages, salaries and other utility bills have to be paid by the entrepreneurs. Specific budgetary measures have to be taken for increased FDI flow into Bangladesh.

Development projects to be taken up in next financial year should get highest priority for implementation. The government must also see its political agendas do not get preference over development agendas. Because, the people want to have better living and see the dream of digital Bangladesh come true. 

National budget 2010-2011 and some basic issues

National budget 2010-2011 and some basic issues

Md. Joynal Abdin

The Financial Express on April 24, 2010

The Awami League led government is going to place its second budget in its current tenure. Last year, we saw the largest budget in our history. But the question is how much our standard of living has been raised. The people are passing through a difficult time due to energy crisis. There has been no improvement in electricity and gas supply. Law and order situation has not improved either.

Although there had been a steady flow of remittances from Bangladeshis working abroad no effective government initiative has been made to expand the job market to sustain foreign exchange earnings from the source.

The foreign direct investment (FDI) in Bangladesh is one of the lowest in the world. This is because Bangladesh is yet put in place required infrastructure to attract the FDI. The industries in the country are struggling to maintain production because of the energy crisis. They are facing upto 12 hours of electricity load shedding everyday.

Traffic jam in Dhaka city is getting worse. One fourth of working hour is wasted on the street due to the traffic jam. In such a condition how Vision – 2021 can be achieved?

The price hike of essential prices during current regime has defeated all past record. General people are spending 80% of their income on food and their savings are falling. Currently, prices of commodities are rising illogically in the market when they are falling at farmers’ level. If farmers do not get fair prices for their products they will be discouraged to grow crops. So, the new budget should outline proper price management mechanism for the sake of the farmers as well as the economy.

The budget is the most important development document of a country. Currently, our policy makers are working hard to finalise the next budget, which is likely to be placed in parliament by the finance minister on June 10, 2010.

While preparing the budget the policy makers must take into consideration the water crisis, electricity and gas shortage. Special attention should be given to ensure water supply to every houses in the cities. Uninterrupted electricity supply is the prerequisite for industrial development. Without uninterrupted electricity supply the digital Bangladesh will remain a day dream. Under the circumstances the government can consider compensating the factories harmed by load shedding. Because, factories remain idle during the load shedding period, but labour wages, salaries and other utility bills have to be paid by the entrepreneurs. Specific budgetary measures have to be taken for increased FDI flow into Bangladesh.

Development projects to be taken up in next financial year should get highest priority for implementation. The government must also see its political agendas do not get preference over development agendas. Because, the people want to have better living and see the dream of digital Bangladesh come true.