Economy: Facing the challenges

Economy: Facing the challenges

 

Md. Joynal Abdin

The Independent on September 25, 2017

Bangladesh economy was flourishing during last couple of decades with on an average 5-6 per cent growth. As a result, we are hopeful that, Bangladesh could get place of middle income country from existing lower middle income country status by 2021, graduate from LDC by 2030 and finally become a developed economy by 2041. With this view in mind our political leadership offered vision 2021, vision 2030 and vision 2041 from respective platforms. More or less policy reforms have been initiated to align with the vision and create a pro-growth environment. Entrepreneurship development and private sector growth got attention of the government to be promoted and prosper.

As a least developed country (LDC) Bangladesh has few built-in barriers like poverty, unemployment, limited resources, shortage of technical knowhow, absence of good governance, corrupt bureaucracy, absence of true sense democracy etc. towards its development. But recently we are in front of few external barriers like recent flood in the northwest, Rohingya crisis in the southeast and upcoming national election in 2019. These three crisis could be well managed if concerned authorities play a respective role with dedication and neutrality. Each of the above mentioned crisis could create unrecoverable damage in the way of our economic prosperity if these are not being managed with professionalism and liability to the nation.

 Around 20 districts of the northern and northwest region of the country affected by the massive flood in 2017. This year flood has broken record of the historic flood of 1988. About 1 million people have directly been affected due to this flood. A good number of agro-farms including poultry, fisheries, and dairy farms has been destroyed by the flood. Exact monetary value of this damage is not calculated yet but no doubt that it is a severe damage to the economy of flood affected people. Poor people of the flood hit districts already loss their livelihood. Damage of will be more painful with the passage of time. This pain will be feeling more when water goes out and new irrigation season starts. Currently farmers are continuing with their savings of crops and cash, but his savings will be ended up if waterlogging period extended than that of the normal phenomenon. Government has to continue relief and other social safety net support in the flood affected area till new crops comes up. This is not less than a six months’ period. Providing relief to 1 million flood affected people for long six months is really a challenging tasks for the resource scarcity nation like us.

Military of neighbouring Myanmar (Burma) is operating a genocide against its citizen in Rakhine State (Arakan). This military operation aims an ethnic cleansing in Rakhine against the Muslim majority Rohingya community. Rohingyas were ancient citizen of independent Arakan in seventies. Burmies king conquered Arakan and made it a state of Burma (Myanmar) and rename as Rakhine. Burmies ruler never provided minimum humanitarian rights of Rohingya community as their citizen. Current military backed government of Myanmar is ignoring citizenship of Rohingya community and pointing out them as outsiders. They are operating an ethnic cleansing program against the Rohingya community. Myanmar military forces are killing Rohingya men, raping Rohingya women, burning their houses, destroying wealth without any causes. As a result, Rohingyas are fleeing out and became refugee in the neighbouring countries mainly in the Muslim majority Bangladesh to save their lives. Total 1 million Rohingya entered into Bangladesh in different times mostly (about 0.7 million) in last two months.

Bangladesh offered them food and shelter due to a humanitarian reason. But over populated and flood affected Bangladesh could not bear their liability for a long time. Ensuring basic needs of a human being for 1 million Rohingya is beyond the capacity of a least developed and already over populated country like Bangladesh. International community as well as regional powers like India and China is playing role of underworld don with this Rohingya crisis. Another big brother Russia is supporting the war criminals in this case. Global geopolitical stakes of these big brother could be motivational factor in this case. But we (Bangladeshi) are not responsible for this crisis we do not want regional or global geopolitical game with this humanitarian issue. We want that global community will come forward to ensure humanitarian needs of this largest number of refuses and get them back to their home with safety, security and dignity. This Rohingya crisis could be another big whole towards projected economic prosperity of Bangladesh.

Current legal government is ruling the country with 154 uncontested (without peoples voting mandate) members in the parliament. Legal validity of this government is declared by the court. But ethical standard of this government is still questionable in home and abroad. Therefore, current prime minister Sheikh Hasina wants an unquestionable election in 2019. Similarly, general people of the country is also waiting for a free, fair, credible and participatory election in 2019. But ensuring that free, fair, credible and participatory election is still a big challenge for the nation. Ruling party has completed all legal arrangements to hold the national election under their regime. But it is quite impossible to hold a fair election under any political party in the power. Dhaka city corporation election and elections of last few years proved this assumption. Therefore, same scenario of 2014 could be seen again in 2019. Government could use the law enforcement agencies to hold a partial election and oppositions may go for strikes and other damaging programs. Which may be cause of mass destruction of people’s wealth and life.

Finally; we could state that, massive flood, Rohingya crisis and upcoming national election etc. could be nightmare before the economic prospects of Bangladesh. Flood affected people have to be rehabilitated in time through ensuring their basic needs and rehabilitating supports. Rohingya crisis has to be resolved with support of international community, global platforms, and our friends in the Europe, America and Muslim worlds. Regional big brothers may not play a friendly role here in this regard. We may play the same role which was played by our great neighbouring friend India in 1971. If India have done a great job for the Bangladeshi in 1971 why not Bangladesh could adopt the same policy for the Rohingya community in 2017. Finally, we have to work out and reach into a way forward to hold the national election 2019 peaceful, free, fair, credible and participatory by leaving hock and cook instruments away. Otherwise, our vision 2021, 2030, and 2041 will remain in the paper and never be in practice.

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Trade Organisations in Sustainable Economic Development

Trade Organisations in Sustainable Economic Development

Md. Joynal Abdin

The Daily Sun on April 26, 2017

There is no alternative of individual and institutional income generation for economic development and poverty alleviation of a country. Ensuring employment is the most effective tool for facilitating individual and institutional income generation. There are about 162 million populations in Bangladesh and about 120.70 million of them are in workable age group. For providing employment to such a huge number of populations government has only 1.7 million positions in civil service, a mentionable percentage of this government positions remain vacant forever; for example 18% of government positions are vacant now in Bangladesh. As per a recent report there are 58.10 million people involved with private sector jobs.

There are no exact data regarding the total number of businessmen in the country but it is stated that, there are about 30 million businessmen in Bangladesh. From the above statements we could find out a summery that there are about 37.20 million unemployed people in Bangladesh now.

Another recent report shows that there are more than 3 million higher educated unemployed populations in Bangladesh with 2.2 million newcomers in the job markets every year. It is easier to manage and employment opportunity for a low educated or uneducated youth but difficult to manage a career opportunity for a higher educated one. Uneducated or lower educated manpower could migrate into Middle East as a labour but higher educated youth could not do so. Thus the number of unemployed higher educated people is rising day by day. If such a trend continues for next few years they could be another burden for the society as well as for the nation.

Before meeting a terrible situation of the above mentioned problem we must have to identify a way out of it. The government has to take the issue as a new challenge and come out with appropriate solutions. The government could mitigate this problem with professional education system, skills development through practical training, creating entrepreneurs through entrepreneurial education, creating entrepreneurship friendly policy regime, creating start-up friendly fiscal and economic policies, self-employment oriented education / training, hands-on training for creating freelancers etc. Such types of projects should get the highest priority in the upcoming national budget of the government.

There are few problems which are impossible to solve by individual or organisational initiative. These problems are subject to be dealt with collective power and unity. To apply that collective power of the business community, effective trade organisation is required. There are about five hundred trade organisations in Bangladesh; among these 101 are chamber of commerce (district chambers, metropolitan chambers, joint chambers, international chambers etc.) and about 379 sectoral associations are mentionable. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is the apex institution that represents all the trade organisations of Bangladesh.

FBCCI used to negotiate, cooperate and support the government in enacting trade related policies on behalf of the private sector of the country. It represents all the trade bodies in different committee forms by different ministries, agencies, departments, and other organs of the government. It assists all the 500 trade bodies of the country in holding election and other regulatory purposes. FBCCI used to negotiate budgetary facilities for different sectors, products and customs structures with the national board of revenue (NBR) on behalf of the private sector.

To perform all of the above mentioned duties an efficient and functional FBCCI is our national requirement. To make it functional and effective its current manpower has to be increased, professional skills of existing manpower has to be improved and financial capacity of the federation has to be uplifted. There are many countries in the world where federation / national chambers are getting budgetary support from the government.

But till now FBCCI has to depend upon its members’ subscription, building rental and donation of business community. It is not sufficient to employ and retain efficient professionals and expand its services to the economy of Bangladesh. FBCCI will get its new leadership through the upcoming election in next month. We are hopeful that the new management will take necessary initiative to take the organisation as well as its member bodies into new height and serve the nation better. Competing business leaders are supposed to declare respective election manifesto soon. We would like to offer few recommendations as follows for their consideration and include into the election manifesto for making the federation as well as other trade bodies (chambers and association) for functional and effective:

  1. Taking necessary initiative to get budgetary support for operating FBCCI from the government.
  2. Pursuing the government to involve district chambers closely with the development project implementing in respective district.
  3. Undertaking projects to ensure hassle-free visa facility for the business community in consultation with all the foreign missions working here in Bangladesh. It will increase movement of our foreign trade into a new destination.
  4. Increasing research based capacity of the federation through undertaking visible interventions along with a time bound action plan
  5. Increasing capacity of the federation to undertake projects for private sector development and pursue government and other development partners for funding.
  6. Making the initiative of establishing Entrepreneurship Development Institute (EDI) a reality (initiated earlier but failed to get finance). Indian model of EDI, located at Ahmedabad, could be replicated here in this regard.
  7. Capacity building of different trade bodies to provide business support services, registrations and licenses. Negotiating with the government to hand over trade license, small and cottage industry registration etc. responsibilities to the trade bodies.
  8. Participating in foreign investment / trade fairs with own stall of FBCCI to facilitate B2B business matchmaking.
  9. Establishment of product research and new product innovation centre, testing laboratory, and undertaking product diversification initiative to enlarge export basket.
  10. Perusing the central bank and other ministries of the government to inspire the corporate houses, banks, NBFIs to support FBCCI development 10fund from respective CSR budget.
  11. Developing a research fund for conducting a certain number of systematic researches by the FBCCI research team every year.
  12. Providing FBCCI Award to the best growing company, most employment creator company, most Donor Company, best exporting company etc. to recognise their contribution to the society and inspire them to donate most at FBCCI development fund.
  13. Establishment of FBCCI’s branches in important business hubs at home & abroad and fixation of an FBCCI contact point in relevant ministries.
  14. Opening a news department in FBCCI and all major chambers and associations to assist local entrepreneurs to get quality certification of respective products from respective international or foreign authorities. It will help to get more acceptances of Bangladeshi products to the foreign buyers.
  15. Establishing business incubation centre to support new entrepreneurs, perusing the government for start-up financing.
  16. Establishing technology and engineering institute to produce skilled manpower as per demand of different business sectors.
  17. Motivating government for creating an environment to commercialise local inventions.
  18. Undertaking regular research on different international trade arrangements under the WTO, RTA or BFTA to make local entrepreneurs aware about our trade benefits under different agreements and facilitating to utilise the benefits in international trade.
  19. Playing more visible role in creating freelancers and adopting outsourcing friendly infrastructure in Bangladesh by the government.
  20. Undertaking projects to facilitate adoption and utilisation of e-commerce and e-business facility to make the digital revolution fruitful.

Finally we could state that the private sector has to play a visible role to achieve SDGs by 2030. This role could be played more effectively from a common platform like trade bodies instead of personal or institutional level. Therefore the government has to play its due role for capacity building of the trade bodies. New elected panel of FBCCI leaders could play the role of catalyst here in this regard. A common vision of the business community, government and the development partners is required to ensure sustainable development of the economy and achieving a developed Bangladesh as per our national target.

Levelling Trading Field for SMEs

Levelling Trading Field for SMEs

 

Md. Joynal Abdin

 The Daily Sun on April 2, 2017

There is a common debate that Bangladeshi SMEs are “Missing Middle” or “Excluded Middle” categories of enterprises of the economy. The first phrase i.e. the Missing Middle is mainly used by the donor communities and few Bangladeshi economists closely working with the donors.

It means that the SMEs are the middle segment of the enterprises which are missing either microfinance facilities i.e. exclusively for the cottage, and micro enterprises operated by the NGOs. On the other hand upper medium to large enterprises are enjoying every facilities of the institutional support offered by the government agencies and other institutes like banks, leasing companies, and multinational or regional trade negotiation platforms etc. Similarly in the second phrase Excluded Middle the concept is the same but only different is that, missing middles are out of service by error or unknowingly.

On the other hand, Excluded Middle are the missing part who are deliberately excluded by the policy makers, decision markers, government, development partners etc. to offer more benefits to the other segments. I would like to be with the second groups i.e. SMEs in Bangladesh are “Excluded Middle” segment of enterprises. Manufacturing SMEs are not getting any extra privilege over the trading and service sector enterprises from any policy aspects. SME loan are draining away by the traders or defaulter large enterprises that are included in the SME categories by the new definition of SMEs mentioned in the National Industrial Policy 2016 of the government. They are destroying reputation of the manufacturing SMEs through becoming defaulters in repayment of bank loans in time.

That means including trading, service and large enterprises into the categories of SMEs through broadening its threshold in the definition became harmful for the real entrepreneurs, I mean manufacturing SMEs from both the sides. Firstly they are competing with the manufacturers to grab benefits and destroying their reputations by becoming defaulters. Not only for these two reasons but due to many other reasons time has arrived to examine whether we are providing policy support to the real entrepreneurs i.e. local manufacturing enterprises those are creating jobs for the unemployed population in mass scale or their benefit is going to somewhere else due to policy gap of the government. To ensure optimum use of the government incentives and benefits definition of the manufacturing SMEs should be revisited and redefined by the government of Bangladesh.

To ensure inclusive and sustainable development of the economy it is not enough that the government will be happy with the GDP growth and increased amount of export earnings.

But government has to ensure stakes of every segment in the growth and export earnings as well. Large companies have competitive advantage over the SMEs in terms of organisational capacity, technical ability, access to finance, and negotiation capacity etc. aspects. As a result they are dominating in the national as well as the global trade of a country. But it is proved that the SMEs could have a vital stake in national and international market if proper policy support is available from the government. Japanese large companies are outsourcing required tools and equipment’s from their SMEs whereas Bangladeshi large companies are importing these from abroad to assemble or manufacture their products for national or international market. It could be said that the SMEs in Bangladesh are not capable of producing quality goods for supplying to the large companies. The question is how Japanese SMEs are being capable to produce qualitative goods? Why large enterprises, donors and government are not helping Bangladeshi SMEs to overcome their limitations and produce qualitative products for supplying to the large companies?

Arguments could come up survival to the fittest, why government should offer them extra benefit? The answer is quite simple that SMEs are contributing two-thirds of formal non-agricultural private employment around the world. They are contributing 63% of the total employment in OECD countries. In most of the developing countries and LDCs, SMEs are contributing more to employment generation than that of their GDP contribution. It is because SMEs are mainly labour intensive and using traditional low productive machineries due to their inability of further access to technology. But In Japan, Korea, and China it is proved that the SMEs could play the role of feeder organisation and supply qualitative intermediary goods for boosting up mass production of the large entities. On the other hand export orientation of SMEs could increase demand for their products and help them to go for large scale production.

Export orientation of SMEs could be facilitating in various forms like direct exports, indirect exports, non-equity contractual agreements, and foreign direct investment (FDI) etc. A recent study shows that, only 7.6% of the SMEs involved with export around the world are mostly from developing countries. On the other hand 14.1% of the large enterprises of the developing countries (that means double of the SMEs) are involved with export business. In terms of LDCs SMEs export involvement is about 3%, but direct export of manufacturing SMEs is a negligible, where 0.09% of service SMEs are export linked, this figure is 31.9% in case of large enterprises. That means SMEs are missing a level playing field in terms of international trade around the world. But for fostering inclusive and sustainable development a level playing field has to be created for the SMEs in international trade.

In terms of direct export Bangladeshi SMEs have limitation in trade negotiation with the potential buyers, limited ability to go abroad for buyer searching, limited managerial knowledge to handle export procedures and documentation etc. Therefore indirect export through large companies or group wise export could be encouraged here in Bangladesh. For example, one or two SMEs are unable to bear initial export costs but if ten SMEs become united and export under on single brand name and export documentation then it could be worthwhile in terms of export cost bearing and procedure handling. But till now buyer searching and proper positioning of products remains as challenges. In this case all the Bangladeshi embassies located outside Bangladesh could organize Bangladeshi product fairs once a year and display our SME products by inviting local chamber of commerce and business leaders and play the role of match makers in this case.

SMEs participation in indirect export is much better around the world. About 90% of export earnings of developing countries are indirectly contributed by the SMEs. The same report shows that, 78% of global enterprises are SME representative but only 34% of these are involved with direct or indirect international trade. That means SMEs have ability to further contribute in international trade around the world. If a level playing field could be ensured. Major obstacles to create a level playing field for the SMEs are:

SMEs are facing high tariff even more than the large firms due to the existing market mechanism. They are facing double even triple taxation due to their inability to maintain or obtain required tax relevant documents.

Adverse effects of the Non-tariff measures imposed by the importing country hit the SMEs much. Because large companies could adopt newer measures to address NTM requirements and enter into the market as a compliance company. But due to their limited capacity SMEs could not.

Cumbersome boarder procedures and delay shipment or clearance effect the SMEs more due to their inability of bearing highly charged boarder storage cost.

Access to information and distribution channel development is also another major challenge for export orientation of SMEs. Difficulties in access to required amount of trade finance is another major challenge for SMEs export orientation.

Most of above challenges require government policy intervention for creating and maintaining a level playing field for SMEs in national as well as international market. Adoption of ICT, e-marketing, e-commerce adoption could give them advantage over few of the above mentioned challenges but finally it is the government who has to come up with kind heart to support SMEs to grow further and contribute more in employment generation, GDP growth, export earnings and ensure an inclusive and sustainable development of the economy. Otherwise they will remain Missing Middle or Excluded Middle as mentioned.

Creating Investment-friendly Business Environment

Creating Investment-friendly Business Environment

Md. Joynal Abdin

The Daily Sun on March 15, 2017

 

Bangladesh is a land of unutilised opportunities and untapped potentials. Traditionally Bangladesh was an agriculture driven economy but during last few decade it is shifting its agriculture dependency into industrial economy. At the same time a steadily growing service sector is backing the industrial development of the country. According to a recent report contribution of agriculture, industry and service sector to Bangladesh economy was 51.03%, 7.69 % and 41.28% respectively in the year 1971.  Contribution of agriculture decreases into 31.55% and industry increases into 20.63% in the year 1980. Service sector contributed 47.82% to Bangladesh economy in the same year. Since then contribution of industry and service sector to Bangladesh economy is increasing and agriculture is decreasing day by day. It does not mean that the agriculture sector is losing its importance but it indicates industry and service sector is becoming stronger but agriculture is contributing as before. Agro processing industry is fully dependent upon agriculture sector; therefore no way to underscore agriculture sector too. Currently (2015) contribution of the same sectors to the Bangladesh GDP is 15.50% (Agriculture), 28.14% (Industry) and 56.34% (Service). From the above discussion it is quite clear that the economy of Bangladesh is going through a transformation from agriculture dependent economy into industrialized economy.

Agriculture has a highest limit of production per acres of land. But industry and service sector have the liberty to produce unlimited number of units or value by using the same piece of land. Therefor government of Bangladesh took parallel initiatives for agriculture and industrial development.

Foreign Recognitions of Bangladesh:

Prospect of Bangladesh economy is not recognised by the Bangladeshis only. Today it is widely recognised by the global think-tank and investment Banks like Goldman Sachs. The Goldman Sachs Investment Bank described Bangladesh as one of the Next – 11 countries (N-11) due to its prompt growth potentials (Lawson, Heacock, and Stupnytska, 2007). Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam – identified by Goldman Sachs investment bank and economist Jim O’Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world’s largest economies in the 21st century.

Regulatory Environment for Investment in Bangladesh:

Indian subcontinent inherited the British legal system since the colonial period. As a result Bangladesh has a very structured legal system since its inception. It has about 45 laws relevant to the investment, business, trade and commerce in various sectors. There are more than 10 policies with different incentives and supports of the government to promote private sector investment in various sectors.

The foreign private investment (promotion and protection) Act, 1980 has been passed that ensures legal protection to foreign investment against nationalization and expropriation. It also guarantees repatriation of capital and dividend; and equitable treatment with local investors with regard to indemnification, compensation, restitution, or other entitlement as is accorded to investment. The government has made bilateral agreements for avoidance of double taxation with 26 countries and negotiations are going on with 23 countries.

Investment treaty for promotion and protection of investment between Bangladesh and twenty countries have been concluded and negotiations are going on with 9 other countries. Besides these, Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency), OPIC (Overseas Private Investment Corporation) of USA, ICSID (International Centre for Settlement of Investment Disputes) and a number of WIPOs (World Intellectual Property Organisation) a Permanent committee on development and cooperation related to industrial prosperity. Adequate provision is also made available for intellectual property rights, such as patents, design and trademarks and copy right.

The government has already enacted bankruptcy law. A law commission has been constituted with a view to identify the anomalies and weaknesses in the existing laws and legal system. One of the main tasks of this commission is updating the existing laws in relation to industries, trade and business.

All these are expected to improve general business environment along with the environment of FDI. Efforts are being made to reform the bureaucratic administration in order to make it efficient and supportive of better services for inflow of FDI and economic development oriented activities. Substantial modifications have been made to up-date the laws dealing with financial sector. The Companies act 1994 and labour Act 2006 have been enacted for facilitating inflow of FDIs in Bangladesh.

In order to improve the environment of private foreign investment and FDI, several EPZs have been established in Chittagong, Dhaka, Khulna under the Bangladesh Export Processing Zones Authority (BEPZA) in 1980. The private Export Processing Zones (PEPZs) Act has also been enacted to encourage the establishment of “Private Export Processing Zones” by the local and foreign investors. These EPZs are well enriched with the necessary infrastructural facilities and are completely protected from any law and order problems or union activities.

The BEPZA approves all projects to be located in the EPZS and offers “One window same day service” to the investors in the EPZs. The government has also approved the private power generation policy of 1996 and tax exemption on income of the company for 15 years from the date of commercial production is allowed.

The Government has undertaken several steps to make import liberalization and industrial deregulations more effective including announcing its strategy of reducing effective protection over the medium term, continuing its efforts to lower and simplify tariffs, publishing a clear tariff schedule, developing an action plan for legal reforms and a blue pint for deregulation, and putting an action plan for implementing its exports development strategy. These efforts have improved the investment environment in Bangladesh.

Bangladesh is one of the promising economies with a large domestic market, availability of labour with competitive price, low utility charges, two seaports and a potential deep seaport facility, long-term tax holiday, 100% repatriation facility, and easy access to largest regional market like India and China.

Investment Friendly Facilities and Incentives: 

Tax  exemption  on  royalties,  technical  knowhow  and  technical  assistance  fees  and  facilities  for  their repatriation, tax exemption on interests on foreign loans, tax exemptions on capital gains from transfer of shares by the investing company, remittances  of  up  to  50%  of  salaries  of  the  foreigners  employed  in  Bangladesh  and  facilities  for repatriation of their savings and retirement benefits at the time of their return, no restrictions on issuance of work permits to project related foreign nationals and employees, facilities for repatriation of invested capital, profits and dividends, provision of transfer of shares held by foreign shareholders to local investors, reinvestment of remit table dividends would be treated as new investment, and foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned ones etc. facilities are available for foreign investors.

Besides the above facilities Bangladesh is offering corporate tax holiday of 5 to 7 years for selected sectors, reduced tariff on import of raw materials capital machinery, bonded warehousing, accelerated depreciation on cost of machinery is admissible for new industrial undertaking (50% in the first year of commercial production, 30% in the second year, and 20% in the third year), tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange, reduced corporate tax for 5 to 7 years in lieu of tax holding and agricultural deprecation, Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the selected products, At best 90% loans against letters of credit (by banks), and permission  for  domestic  market  sales  of  up  to  20%  of  export-oriented  companies  outside  EPZ  (relevant duties apply) etc. fiscal benefits to the local or foreign entrepreneurs.

Additionally Bangladesh is offering 100% foreign equity allowed, unrestricted exit policy, remittance of royalty, technical know-how and technical assistance fees, full repatriation facilities of dividends and capital at exit, and an  investor  can  wind  up  investment  either  through  a  decision  of  the AGM  or  EGM, he  or  she  can repatriate the sales proceeds after securing proper authorisation from the Central Bank etc. benefits to a foreign investor.

Investment Friendly Factors of Production:

  • Largely a homogenous society with no major internal or external tension Bangladesh has a population with great resilience in the face of adversity.
  • The people of Bangladesh, a liberal democratic country irrespective of race and religion are living in harmony for years.
  • Bangladesh enjoys broad non-partisan political support for market-oriented reforms and offers the most investor-friendly regulatory regime in South Asia.
  • This country has a large trainable, enthusiastic, and hardworking low-cost labour force suitable for any labour-intensive industry.
  • A bridge between ASEAN and SAARC nations, the Geographical location of Bangladesh is ideal for global trades with very convenient access to international sea and air routes.
  • Bangladesh is endowed with abundant supply of natural gas, coal, water and very fertile soil.
  • Although Bangla is the official language. English is widely spoken as second language.
  • Increasing trend of per capita forecasting its purchasing power is increasing in the local market.
  • All Bangladesh products other than armaments enjoy complete duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. However, for apparel export to USA, Bangladesh has a quota regime which ended on 1st January 2005.
  • Export earning is continuously increasing.
  • Increasing trend of remittance earning.

Challenges and Recommendations:

With all of the above benefits Bangladesh have few limitations and challenges to attract further investments. Government could consider following recommendations to make the business environment sustainable and attractive to foreign investors:

  • Decreasing number of permissions / registrations / licenses requirements with a predetermined time frame / one stop investment services.
  • Ensuring hassle free and in-time delivery of industrial utilities like Electricity, Gas and water etc.
  • Making Bangladesh Investment Development Authority functional and effective with adequate resources.
  • Special investment attraction drive with specific project proposals to attract local and foreign investment.
  • Activating entrepreneurship promoters like better business forum or regulatory reform commission.
  • Developing infrastructure as per requirement of tomorrow’s business world.
  • Developing sector specific demand driven skilled manpower with specific technical knowledge.

Finally, we could conclude here with a statement that, Bangladesh has long lists of sectors and wide feature to promote local and foreign investment. But in absence of an effective and functional investment promotion agency (not regulator) Bangladesh is performing not as per the expectations. There are several entrepreneurship development, SME Development and Industrial Promotion agencies of / establish by the government. But due to lack of manpower, financial ability, technical and professional knowledge most of the organisations are less performing. Activating those organisations with right person at the right place could be one of the ways forward to strengthen investment attraction movement of Bangladesh.

Fighting Unemployment and Poverty

Fighting Unemployment and Poverty

Md. Joynal Abdin*

The Daily Sun on March 1, 2017

Bangladesh is a least developed country (LDC). With so many development requirements it is fighting to reduce unemployment and provide employment opportunity to all of its workable population. There are about 160.41 million people in Bangladesh. The median age of Bangladeshi population is 26. That means it is dominating by the young force. It is high time to take the population dividend for Bangladesh. But the matter of fact is that, there are about 3 million working age people unemployed; they are neither in education nor in job. Additional 2.2 million educated young forces are entering into job market every year. Another 10.6 million people are day labourer / doing odd job without any job security. Therefore till now 24.8% of the total populationis living below the poverty line and extreme poor people are about 6.5% of its total population.

Huge working age population, growing number of higher educated population and population dividend etc. issues are not matching with its 25% poverty affected people. It is because we have working hands but the government is failing to offer job to them. It is impossible for any government to offer job to its all population. But the government has a great responsibility to create such a congenial environment in which a person will go for self-employment through entrepreneurship development and employ another five persons in it. The government could inspire private sector for more investment and expansion which will lead to more employment generation, faster GDP growth, increased value addition and export earnings.

A decently employed person means a family is out of extreme poverty. On the other hand, an unemployed young man could create unaffordable situation for the society. Many skilled but low paid workers wanted to be entrepreneurs but cannot have access to high rated and complex bank loan. Bankers not coming forward due to the security of depositor’s money. In such a condition it is only the government that could play the game to move forward with the issue. Refinancing, pre-financing, credit guarantee, seed financing etc. could be the weapon for the government to fight with this tough condition. The government has limitations in terms of its treasury balance. But recent reports are not supporting its treasury balance argument. Because we have gone through the report that, Bangladesh has about USD 35 billion foreign aid in hand but failed to utilise it. We had to deposit back the foreign aids due to our inability to utilise funds. On the other hand, according to a Bangladesh Bank report idle funds with banks and non-banking financial institutions stood at Tk 1263.24 billion on January 31, 2017.

From the above two statements it is clear thatthe government could source the fund if a positive thinking is there. So it is the peak time for the government to take necessary initiatives for creating an entrepreneurship friendly environment for promoting self-entrepreneurship and expansion of existing ventures to increase employment generation. Along with the entrepreneurship development trained manpower export / formal migration of skilled workers could be another very fruitful tool for the government to fight unemployment and poverty. The following recommendations could be considered by the government and the central bank of Bangladesh i.e. the Bangladesh Bank for installing the following tools in this regard:

Easy Formal Channel to Receive Remittance:

Bangladesh received USD15.27 billion as remittance in 2015. In the years 2016 it reduced to USD13.60 billion. Does it mean the remittance earning is really reducing? No. It is only because sending remittance through formal banking channel is complicated, time consuming and complex to the illiterate or less literate expatriate workers. Whereas using informal channels like Hundi is much easier, quicker and safer. In such way government is losing revenue. Therefor the government and the central bank has to think with the issue of introducing an easy, quick and hassle-free way of sending remittance through formal channel by our workers from abroad.

Easy Formal Credit for Expatriate Labours and Professionals:

There is a bank to provide bank loan against a labour visa to help expatriate manpower of Bangladesh. But, what is their capacity? How many branches do they have? How much money is offering by them? How many expatriate workers are migrating from Bangladesh per year? In the year 2016 about 757,731 labours and professionals migrated from Bangladesh. If 5% of them want to get bank loan for three to five lakh per person then 38,000 probable clients are there to receive more than thousand crore taka.  How much money do they received from that single bank? Therefore it is time to think with the issue of offering bank loan to the second largest contributory sector of the country with hassle-free banks loan by the commercial banks and Bangladesh Bank has to come up with a new loan product for them.

Easy Formal Channel to Receive Freelancer’s Earning:

According to a recent report published there was about USD3.2 billion freelancing market in 2014. USA, India, Ukraine, Australia, Canada even Pakistan is earning a significant part of that amount. Bangladesh has every possibility to be a significant partner in the global freelancing market. But due to complexities in banking channel to receive freelancing earnings many qualified professionals and unemployed youths are becoming frustrated. Digital Bangladesh will be meaningfully digital while mass people of the country could easily receive their free-lancing earnings through their ordinary bank account here in Bangladesh.

It is Bangladesh bank who has the responsibility to mobilise this process and offer a great service to the local free lancers.

Startup Financing / Seed Financing for Entrepreneurs:

There are about 2 million educated people unemployed in Bangladesh. Another 2.2 million graduates are entering the job market every year. It is impossible for the government to ensure employment to this huge number of population without promoting entrepreneurship and industrial development. Entrepreneurship and entrepreneurship is the only solution to this unemployment problem. But till now there are no startup financing / seed financing mechanism for promoting entrepreneurship. So the government could rethink with the issue and come up with a mechanism to provide startup financing for the new / would-be entrepreneurs.

Promotional Package for Venture Capital Sector:

Venture capital is a proven tool for supplying interest free loan facility to the entrepreneurs. It is widely received by the entrepreneurs and potential entrepreneurs of Bangladesh as well. But due to shortage of adequate fund this sector is not booming up as expected. Therefore it is the pick time for the government to inspire venture capital sector for the sustainable industrialisation in Bangladesh.

Export Guarantee Scheme:

There are about 7.8 million industrial entities in Bangladesh. Most of these are cottage and small in categories. Few of these enterprises are producing excellent quality products having export potentials. But due to lack of knowledge and shortage of finance to operate international trade they are not going to export. To inspire such enterprises Bangladesh bank / government could introduce export guarantee scheme and boost up export earnings of the country.

Credit for Export Diversification and Market Expansion:

Bangladesh earned USD34.24 billion in last fiscal year (2015-16). It is almost 10% more than that of the previous year. But we have the capacity to earn even more than that. We have to diversify our export basket and explore new export destinations to do so. The government could offer credit facilities for export oriented product diversification (procurement of machineries) to the existing exporters. Thus Bangladesh’s export basket and increase amount of export earningscould be enlarged.

Credit Guarantee Scheme:

Commercial banks are offering loan by investing depositor’s money. All types of bank loan have risk of return. As a result commercial banks have a shyness to provide bank loan. In such a situation Bangladesh Bank could offer credit guarantee scheme for providing guarantee of loans so that commercial banks’ shyness goes down. Thus the government could promote the industrialisation movement of the country.

Security Issues in Online & ATM Banking:

Recent ATM scamming and Bangladesh Bank’s reserve issues spread up a panic among the mass people. As a result people are feeling insecure even to draw money from ATM booths and deposit money to a bank. Therefore, it is time for Bangladesh Bank to take necessary measures to stop ATM scamming and ensure security of depositors’ money. Online banking system should be 100% secured and people’s awareness could be developed to relief the panic.

Entrepreneurship Loan for Technical Graduates:

There are about 2 million unemployed graduates in the country. Additional 2.2 million graduates are entering the job market each year. Both the government and private sector does not have ability to offer such a huge number of jobs per year. Therefor the government / Bangladesh Bank could offer entrepreneurship loan for the technical graduates and developing them as entrepreneurs in respective fields.

Professional Management of Idle Reserve / Bank Deposit:

A recent report showed that the idle reserve / bank deposit is mounting up in the banking sector (BDT 1,140 billion) especially there are BDT 1420 billion statutory deposits to the Bangladesh Bank. No return is coming out from this huge amount of idle money in comparison with its opportunity cost. Therefor it is time for thinking to invest at least a portion of this money through professional money managers. Thus a reasonable return could be ensured out of this idle money.

Finally we would like to hope that, the government and the central bank along with other responsible agencies will consider the above recommendations and create a pro-entrepreneurship regime in Bangladesh for fighting unemployment effectively and create a poverty free middle income country before the end of SDG deadline.

* Writer is a Development Researcher, Columnist and Author. He is serving at SME Foundation as Deputy Manager. Could be reached through mdjoynal@gmail.com

Reform Is Required in Education System

Reform Is Required in Education System

Md. Joynal Abdin

The Daily Sun on January 18, 2017

Bangladesh is home to about 163 million people. Steady economic growth of the country during last decade attracted attention of the regional and global investors. Bangladesh is second largest exporters of readymade garments. A number of other potential industrial and service sectors are waiting to take off.

With 2.19% of world population Bangladesh has a large domestic market itself and enjoying duty free and quota free market access to most of the European countries and Canadian market. Strategic geographic location of Bangladesh offers to reach to half of the world population within 24 hours by road from Bangladesh. It is one of the low cost locations for doing business (identified by JETRO) around the globe. Government is encouraging local and foreign investment for further economic growth and becoming a middle income country before celebrating the Golden Jubilee of its independence.

With all of the above potentials Bangladesh has few barriers toward development as well. The most significant barrier toward Bangladesh’s development at this moment is to develop its young force with professional skills. About 40% of total populations of Bangladesh are young. A recent study shows that there are about 11 million youths of Bangladesh doing nothing just seating idle. It is a big threat for the society as well as for the development of the country. With this 11 million unemployed youth another 2.2 million jobseekers are entering into job market every year. If one third of this 2.2 million get job than the unemployment list is enlarging with another 1.5 million youth every year.

A separate study shows that about 47% of Bangladeshi graduates are either unemployed or under employed. It is a very significant threat for the society that university degree holders are not getting job. Recent passing rate of higher secondary level is about 3 million per year. If two third of this higher secondary pass students got graduation than the rate of jobseekers will further go up. If a graduate does not get placement how drop out I mean non-educated or less educated population will manage a job? How long our society could afford this 11 million and growing idle youth?

Let’s try to analyze why graduates are not getting job? Is it like that there are no scopes for job placement in Bangladesh? Practical scenario is not like that.

A newspaper report stated recently that there are about half a million foreigners working in Bangladesh. They are sending about USD 5 billion to respective countries per year. On the other hand about 8 million Bangladeshi expatriate are earning about USD 15 billion per year. That means we are earning less but paying more. But why? The only reason is that our manpower is not skilled. Local entrepreneurs are recruiting foreigners with more payment due to their efficiency and skills. We could not develop those saleable skills among our graduates? We are not getting qualified manpower as per demand of the private sector due to the existing education curriculum in undergraduate and post graduate level.

Most of the cases, education institutes do not have any sort of linkage with the job providing organisations of Bangladesh. Let’s try to have a look what we are mostly teaching at universities of Bangladesh. We are teaching history, literature, philosophy, psychology, religion studies, drama, theater, sociology, political science, social work etc. so on and so forth. I am not here to undermine any of the above mentioned subjects. But I would like to know what the practical application of these subjects without teaching is? Where the graduates of these subjects will apply for a job? How many posts are vacant? What is the growth rate of demanding positions? How many graduates should be produced per year for proper placement?

On the other hand who are providing jobs? Job providers are mainly banks and other non-bank financial institutions, insurance companies, telecommunication companies, NGOs, electronic and print media, pharmaceuticals companies, garment factories and buying houses, logistics companies and manufacturing factories / companies of agro-processing, light engineering, plastic, leather, electrical and electronics, cosmetics, fashion designing etc. sectors. What is the application of those organisations? How much philosophical knowledge do they need to operate this daily business? How many historical events have direct reflection in theses factories? Therefor we are producing super result holder graduates but job placement is not happening.

Every field of knowledge have importance but up to a certain number per year. Therefore it is the time to estimate the required numbers and limiting those non-applied fields up to the requirement. On the other hand Bangladeshi garment and buying house sector is leading by Indian and Sri Lankan professionals due to lack of skilled professional available at home. We are consuming Indian or Chinese products starting from morning Indian tooth pest ending into mid-night Chinese magic pillow under the head to sleep.

Bangladesh has to create employment opportunity for existing unemployed and upcoming jobseekers youth. None will employ a single person if he/she could not contribute into the advancement of that organisation. To offer contribution one needs applied skill/technical and vocation knowledge. We do not need labour to carry foreign goods to the door step of our houses but we are in need of a manufacturer of those products beside our houses.

From the early morning we need tooth pest and tooth brush. In which university/institute/training center in Bangladesh one could get the skill of manufacturing these items? Then we are in need of soap and shampoo in the shower. Do we have enough skill to manufacture soap and shampoo? Which institute is teaching to manufacture soap and shampoo in Bangladesh? Then we are in need of bread and butter for breakfast. Similarly I need a bread maker and a butter producer. How many institute in Bangladesh training up a raw hand youth to prepare bread from flour or produce butter from milk or other vegetable fats. Then we used to dress up ourselves before going out of the house. How many trims and accessories used in our dress? How many of those trim and accessories could be produced beside our houses? To identify the trim and accessories used to produce our dresses starting from fabric, to threads, button, zipper, cutting knife, designing knowledge, sewing machine, finishing iron, and hander or packet etc. which one of the dress we do know to manufacture? Thus we could identify that, there are 163 million consumers in Bangladesh but skilled manpower to manufacture or serve those consumer items are very limited in amount.  As a result we are becoming a nation free from applied knowledge or practical skills. It is resulting into the long list of unemployment every year.

Therefore we are in need of a serious revision in our educational system mainly in the curriculum. We are quarreling with unipolar, bipolar or tri-polar education system. But we are missing the point that school student, madrasha student, or maktab students are my brothers or sisters. I have to absorb everyone into my economy. So let’s train them up with a useful skill and let them perform the respective job. If every hand perform in respective position than the economic upliftment of Bangladesh will be a miracle for the entire world. The Bangladeshi miracle of development and prosperity will be identical and adoptable for rest of the globe. We are in need of a feed mill manufacturer rather than a scholar speaker or a robust leader.

Adopting the concept of multi-role projects

Adopting the concept of multi-role projects

 

Md. Joynal Abdin

The Financial Express on March 9, 2016

A programme is a plan of actions made in order to achieve a specific result. In other words, a programme is a plan of things aimed at achieving a clear objective, with details on what is to be done, by whom, when, and what resources to be used. On the other hand, a project is a planned set of interrelated tasks to be executed over a given period of time and within a certain amount of budget and other limitations. Main objective of this article is not defining programmes and projects with a few sweet sounding words, but to analyse the development projects now being implemented by the government, NGOs, development partners. We all know that Bangladesh passed 44 years of its independence. Bangladesh has earned the experience of implementing of hundreds of projects with billions of Taka either with local fund or donor grants and loans. The main objective of all the development projects is to empower people to eradicate poverty, overcome infrastructure limitations, and effect employment generation, entrepreneurship development, industrialisation, rehabilitation, education, healthcare, communication development and so on.

 We are happy to watch the country grow. But have we ever thought about the opportunity cost of all the projects and programmes implemented here in Bangladesh since independence? Bangladesh received about US$ 50 billion as foreign aid through government or non-governmental (NGO) channels. The sum is equal to US$3000 per head of our present population (160 million). Besides foreign aid, grants, loans internal funds were also being used in numerous development projects. Have we got optimum result out of this huge investment? The answer is obviously in the negative, because our earlier projects were not scientifically planned and designed with a broad vision.

Many plans, policies, targets and visions are now under implementation by 43 ministries and about 350 departments, directorates and agencies. Hundreds of development projects are approved by concerned authorities and implemented every year. Few projects have inter-ministerial coordinated components (combined efforts to address different needs).  As a result, a good project of one ministry/agency may cause huge damage to other ministry’s/agency’s role. For example, over-bridges and flyovers were built to reduce traffic jam in the city. But the same over-bridges and flyovers are identified by experts as one of the major causes of traffic jam in the city.

The above phenomenon has arisen due to single-purpose programme planning by our decision makers. Time has come to give up this one-eyed (single-purpose) planning and think about multi-role project/mega projects. For example, Dhaka is one of the worst cities to live in (as per a few recent research reports) owing to its environment pollution and unplanned urbanisation. Traffic jam, shortage of public transport, water pollution, and environment pollution of Dhaka city could be reduced if a ‘Back Home’ mega project could be implemented.

The idea of this project is not to send everybody to their respective native villages by force, but to create a situation whereby people will automatically leave Dhaka. For example, an office executive at present has to waste an hour and a half to attend his office at Motijheel from Uttara or Mirpur. The same person can attend his/her office from Comilla easily if there is a fast train service between Comilla and Dhaka with only two stoppages at Daudkandi and Bhoberchar. It will not take more than an hour. Similarly someone from Gopalganj, Rajbari or even from Mymensingh may not require more than one hour to reach Dhaka by a bullet train. So we need a six-lane road with double railway lines from Comilla to Dhaka, Gopalganj to Dhaka, Rajbari to Dhaka and Mymensingh to Dhaka. We already have highways in these routes which should be developed. These four routes will allow half the Dhaka dwellers to move back to Comilla, Munshigonj, Narayangonj, Madaripur, Faridpur, Gopalganj, Rajbari, Manikganj, Narsingdi and Mymensingh districts.

These six-lane routes will not be a matter of connectivity only. These routes will facilitate economic development through industrialisation of respective districts. As a result, new employment will be generated. One such multi-role project can offer multi-dimensional solution to our existing problems.

Construction of multi-lane roads has multiple effects. Other projects like development of existing SME (small and medium-sized enterprises) clusters could also help provide multiple solutions to existing problems. For example, a cluster development includes several segments of activities like skill development of existing workers and entrepreneurs, creating new workers and entrepreneurs, upgrading existing machineries, establishing training centres, testing laboratories, storage facilities, specialied transportation system, market linkage, new market searching, and expanding value chain for maximum value addition, etc. As a result, new employment will be generated in each of the segments of the chain. It will raise productivity, improve product quality, augment sales, increase profit and so on. All of these effects will cause poverty reduction and ultimately usher in economic development of the country. Critics may argue, why SME cluster development instead of Special Economic Zone (SEZ), or Export Processing Zone (EPZ)? The answer is simple. SEZ or EPZ requires huge cash investment for infrastructure, utility and land development. On the other hand, in case of SME clusters, these are already available there. Plot allocation, utility supply etc. of a SEZ or EPZ may be controversial in terms of political identity or corruption. SME clusters are free from these controversies. Therefore it is better to think about development of existing 177 SME clusters without going for expensive industrial estates, SEZ, EPZ, etc.

The concept of multi-role projects could be applicable in every other sectors. For example, existing ‘Sadar’ hospitals located at district headquarters could be transformed into nursing institutes, medical colleges, medical technology centres and hospitals. It would require huge money and premises to establish a separate nursing institute, medical technology institute, medical college and a ‘Sadar’ hospital in separate premises as separate programmes. All these institutions can be set up in the same premises, or in other words, existing Sadar hospitals can be transformed into such a multi-role organisation and much lesser allocation will be required. A co-located multi-sectoral technical education centre concept can drastically change our existing education system and turn it into a practical demand-driven, profession-oriented education system.

It is time to think about multi-role inter-related/inter-connected institutions both in case of public and private entities through implementing multi-role projects. It could be far more productive with lesser investment.