Budget implementation, a problem

Budget implementation, a problem

Md. Joynal Abdin

The Financial Express on June 30, 2009

THE national budget for fiscal 2009-10 has been placed by the finance minister for its approval. The proposals in the largest budget, so far, will get its approval by parliament on June 30, 2009, following its scrutiny. Hopefully, with some additions or deductions, the budget will be approved for implementation from July 01, 2009.

The finance minister stated in his budget speech that he set the targets, following the vision 2020 of the government, for the macro-economy to secure a sustained gross domestic product (GDP) growth of 10 per cent from 2017 and to raise the contribution of industry to GDP from 28 per cent to 40 per cent. Other goals include raising life expectancy to 70 years, reducing maternal mortality to 1.5 per cent and to scale down child mortality to 15 per thousand births. Reducing the rate of unemployment by 15 per cent and bringing down the population living below the poverty line to 15 per cent are also among the long term objectives.

For increasing of GDP growth to 10 per cent from 2017, Bangladesh has to develop its infrastructure. Export diversification and access to newer markets will be necessary to increase contribution of industry to GDP as projected.

Government can itself generate employment by employing people in vacant positions in different ministries, government colleges and hospitals. The government can also create a congenial business environment for the private sector to increase investment to create more employment.

The budget proposals provide no clear road map of how the government would increase revenue collection. For increased revenue collection, the government can introduce automated export-import system to link the bank accounts of the exporters and the importers with the National Board of Revenue (NBR), Bangladesh Bank and the Port authorities. The NBR can then deduct the tax at source.

For public private partnership (PPP) the government should make it clear who will be the private sector stakeholders. The modalities of implementation need to be explained. The government should remove the bureaucratic barriers to the implementation of the programme.

The use of information communication technology (ICT) pledge would be important to make digital Bangladesh. But automation of government agencies would be necessary to reduce corruption by the government bureaucracy. To digitise Bangladesh, the government should pay its attention to generation of electricity on a priority basis.

The government should identify and remove the barriers in the implementation of the Annual Development Programme (ADP). Otherwise, its vision 2021 would be difficult to achieve. The government needs to change the rules and policies that impede the ADP implementation.

The budget should pay special attention to rural development for poverty reduction. Rural development can increase the export earnings, facilitate product diversification and reduce migration to the cities.

Implementation will be the main challenge for the government. Action, not words, would be needed for achieving of the objectives.

Not a single budget could be fully implemented in the country. The government needs to find out why no budget could be implemented properly and fully so far.


Generally, delays in the implementation lead to partial budget implementation. Development projects must be scrutinised by the ministries before approval. For example when project implementation needs to start in July, the ministry does not release the first installment of the money until February. In three months, the fiscal year comes to an end and the project implementation remains incomplete. Delay in project implementation is caused by delayed approval of the project proposal by the ministry.

Often important projects remain unimplemented over the dispute which ministry will implement them. The government should identify and remove the barriers to implementation of the budget.


Advantages of bilateral free trade agreement (BFTA)

Advantages of bilateral free trade agreement (BFTA)

Md. Joynal Abdin

The Financial Express on June 19, 2009

Currently the world economy is experiencing a very serious economic crisis. World’s leading economies are suffering badly and working hard to overcome this crisis. Governments around the world offered special rescue packages to help the entrepreneurs so that the economic recession may not destroy their industrial sectors. The government of Bangladesh has also taken a comprehensive package to tackle the possible effect of recession. But we must remember that day comes after night. This recession may create opportunities for the growing economies to have newer market access around the world.

Presently countries are to share mutual strengths and overcome mutual weaknesses through combined efforts. As a result, countries are coming closer through various trade agreements like regional free trade agreements, bilateral free trade agreement even through cross-regional free trade agreements. Geographical distance is not an issue to act as a barrier today. ITC facilitates one touch connection between two cross-regional business interests.

Signing bilateral free trade agreement is not only creating the condition for closer relations among the nations but also providing a common platform to act in a united fashion in other multilateral platforms like, multilateral trade negotiation in the World Trade Organisation (WTO) and even in the global political arena under the UN. On the other hand, executing bilateral free trade agreement is comparatively easier than the regional or multilateral ones.

It facilitates resource sharing and to have a unique voice in the other forums. For example, during 11-17 May, 2009, this writer participated in an international workshop on “South Asian Economic Integration: Ways, Tools and Methods” in the Orchard Hotel, Singapore jointly organized the Asian Development Bank (ADB) and the Federation of Indian Chambers of Commerce and Industry (FICCI). During dummy trade negotiation session he found that, the young trade negotiators of Sri Lanka and India are talking from a common ground. Each of them is supporting strongly the argument of the other.

It is because they are now closer to each other than any other South Asian States. They have a bilateral trade agreement in action and they are going to further expand it into agreements on investment and labour movement very soon. So it is quite clear that they will act together in real trade negotiation table under the South Asian Free Trade Agreement (SAFTA) or in the WTO. As a result small Sri Lankan economy will get a strong support from giant India in these arenas.

The BFTAs also facilitate technology transfer and free flow of investment for the least developed countries (LDCs) like Bangladesh. These two are core elements of development of a country.

You may hardly get a single country except Bangladesh that is not having a bilateral free trade agreement with any neighbours. Not only neighbours, currently countries are signing cross-regional free trade agreements to ensure market access for their products abroad. This scribe may cite the example of the Singapore-USA free trade agreement here. Our neighbouring country India is also negotiating one bilateral free trade agreement with Singapore. Hopefully it may be concluded this year and will be executed from the next year.

Currently, Bangladesh has three proposals for signing bilateral free trade agreements. Those are Indo-Bangla FTA, Bangladesh-Sri Lanka FTA and Pak-Bangla FTA. It is not known why our government is in a state of indecision in connection with these BFTAs. From our past experience we can say that indecision is always harmful for us. For example, when submarine cable offer came, we neglected it or somehow avoided it. Similarly, the offer for the Asian Highway came. But we were dithering then and now it is depending on Indian and Thai decision, whether we may get connectivity with the Asian Highway. Usefulness of both the offers have been proved today and now we are ready to spend for the same.

Bangladesh’s experience regarding the regional trade agreements: Bangladesh is involved in four regional preferential trade agreements. Those are:

Asia Pacific Trade Agreement (APTA)

SAARC Preferential Trading Arrangement (SAPTA)

Trade Preferential System among the Countries of OIC (TPS-OIC)

Preferential Trading Arrangement among Developing-8 Countries (D-8 PTA)

We had one bilateral preferential trade agreement (PTA) with Islamic Republic of Iran i.e. “Preferential agreement Between Bangladesh and Iran”. We are a member of two Free Trade Agreements (FTAs). These are – South Asian Free Trade Area (SAFTA) and Bay of Bengal Initiatives for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC FTA)

None of the above is functioning well. So far as individual trade agreement is concerned, APTA is still in a negotiation stage, SAPTA has been transformed into SFTA, TPS-OIC and D-8 PTA would not be effective due to Turkey factor.

The only hope is AFTA, but until now intra-SAARC trade under SAFTA is less than 5.0 per cent and countries are not fulfilling SAFTA commitments as stated. A long negative list, some non-tariff barriers (NTBs), technical barriers to trade (TBTs) and geo-political factors are involved behind the ineffectiveness of SAFTA.

From the above discussion it is clear that, implementing RFTAs has involved a slow process and the progress may be halted by any country. On the other hand, implementing BFTA is quite easy and depends only on two signatory states. So we should give more concentration on BFTAs rather than waiting for multilateral or RFTAs.

The black hole between policymakers and businesses

The black hole between policymakers and businesses

Md Joynal Abdin

The Financial Express on June 11, 2009

THE Export Promotion Bureau (EPB) is making yet another list of products for duty-free access to the Thai market. Due to lack of knowledge about what our businessmen are producing, no list could be prepared by desk-bound people in two meetings.

I think there is a shortcoming in the way we are moving. The EPB has requested the chambers and associations to supply the list. But no trade organisation has HS code-wise list of products that their members are producing on a large scale. As a result, we rely on our general knowledge and newspaper reports to trace the product we can export. An actual HS code identification of that product is quite difficult for us. In the first meeting we proposed that let us request the trade bodies to sit with their members who are producing the products and are capable of exporting with HS code. We took the decision to sit with associations concerned. The associations sent its officials to attend the meeting. But the officials like us are not the producers. As a result, they were unable to supply the list of code wise products. We are wasting the facility of duty free access to Thai market.

The officials involved with the process as well as the business people are interested to avail the duty-free market access to Thailand. What then is the obstacle? We would term it as a black hole between our policymakers and the businessmen.

The black whole is the lack of information, and our mentality to hide information. No information is available on the website of any company which produces and can export with HS code. Not only that, we have a tendency to avoid answering survey questionnaires. So we should change such mentality in our own interest. A researcher will not take my information to his grave. He is working to create business opportunities.




Public-private sector collaboration within a multilateral framework among SAARC nations

Public-private sector collaboration within a multilateral framework among SAARC nations

Afsarul Arifeen and Md. Joynal Abdin

The Financial Express on June 3, 2009

THE South Asian Association for Regional Cooperation (SAARC) is mandated for poverty alleviation through trade and economic co-operation in the region. It did not gain momentum up to the desired level. Intra-SAARC trade remained low even after 23 years of SAARC’s inception. The foreign direct investment (FDI) among the SAARC region is very negligible. Intra-regional investment depends on the capability to pursue deep integration and economic connectivity.

Our previous efforts to boost intra-regional trade through South Asian Preferential Trade Arrangement (SAPTA) did not meet with success because of some factors like inter-country barriers to trade, rampant informal trade, high tariff, non-tariff barriers, absence of harmonisation of standards, non-simplification of customs clearance procedures, non-simplification of banking procedures, barriers to intra-SAARC investment and inadequate transport infrastructure.

Effective trade facilitation measures should be implemented as an obligation to ensure enabling trade policy and governance for smooth and speedy movement of goods across the borders.

We must activate the mandated agenda of South Asian Free Trade Agreement (SAFTA) in the face of the growing focus on bilateral free trade agreements among the SAARC member countries since bilateral free trade agreement provides a structured framework under which various issues such as rules of origin, harmonisation of HS Codes and technical standards, custom procedures and negative lists can be addressed with much higher degree of flexibility for the mutual benefit.

Here this writer would like to highlight some issues that need to be addressed properly for achieving effective trade facilitation measures in South Asia.

Visa regime: In order to ease cross-border movement of businessmen and for increasing business activities, the visa regime in South Asia needs to be more open. Restrictions for visas such as city specifications, police reporting, single entry and short-term visas hamper business development, so it should be removed.

The number of SAARC Visa Exemption stickers for the category of leading businessmen in the region needs to be enhanced for all SAARC countries on the recommendation of the SAARC Chamber of Commerce & Industry (SCCI).

Communication links: Effective communication links are prerequisite for regional integration, although we are well behind the expected scale. Deficiency in communications infrastructure and restrictive policies of the governments are hampering regional communication links. The region needs to improve its infrastructure and remove all its restrictive policies for enhancing communication network.

An ‘open sky’ policy should be adopted in South Asia for improving air connectivity between the SAARC countries. All kinds of telecommunications links should be uninterrupted and penetrable in the region. Cross-border free flow of information, free movement of journalists and media products including broadcasting of TV channels (government and privately owned) of all SAARC countries should be allowed.


Adequate infrastructure for transportation of goods is essentially needed. Weak infrastructure on land, sea and air links will lead to increased costs and delays in goods delivery.

Chambers of commerce and industries of these countries may be associated with upgrading the transport links among the countries.

Finalization and implementation of Regional Motor Vehicle Transport Agreement is urgently necessary for free movement of vehicles. It will save cost and time.

Technical Regulations and Standards: Member countries must harmonise technical barriers to trade (TBT) and Sanitary and Photosanitary Safeguard (SPS) measures to streamline flow of traded goods. In this connection, the SAARC/Regional Accreditation Body must be established.

Banking facilities are crucial to the smooth handling of business transactions and insurance is vital for risk management. Regional banking facilities should exist to expedite business transactions for increased business activity.

The customs and border officials should be more in number and trained so that they have the knowledge of agreements. It is essential to reduce the harassment faced by business people by the customs officials. The decisions made by the customs should be communicated promptly for ensuring smooth trading of goods.

The constraints at land border crossings would be significantly reduced, if protocols were established for unrestricted movement of cargo. Modernisation of ports is a priority for development.

Electronic Data Interchange facilities should be introduced at the land borders to computerise systems and issue documents immediately to save time and costs.

Import Licensing: Members must adopt and notify non-restrictive, locally administered, automatic and transparent import licensing procedures, at least, for the regional trade.

The agreement on SAFTA has a time-bound commitment for reducing tariffs, but has nothing specific to offer with regard to the other complements to facilitate trade, namely non-tariff barriers (NTBs) and para-tariffs.

SAARC members must adopt and notify non-restrictive, locally administered, automatic and transparent import licensing procedures at least for the regional trade by an end date.

The successful economic integration of the region can be achieved only through close government-private sector partnerships. The inter-governmental policy framework for expansion of trade and investment needs to be implemented. Trade reform and facilitation, market development, infrastructure development, enforcement of intellectual property rights (IPR) and conservation of environment require direct support and participation of the private sector. The private sector also has a critical role to play under SAFTA in several areas:

a)         Certification and management of rules of origin;

b)         Identification of non-tariff and para-tariff barriers;

c)         Preparation of negative list;

d)         Monitoring of the free trade agreement (FTA);

e)         Imposition of anti-dumping, safeguard and countervailing duties; and

f)         Dispute settlement procedures.

The SCCI has been trying to bring the South Asian states together on different issues through regular programmes. It has also been working on harmonisation of standards and promotion of investments. Through Tourism Council, Women Entrepreneurs Council, Construction Council, Tea Council and ICT Council, the SCCI has been trying to bring the South Asian private sectors together and enhance cooperation in these important areas.

There were six task forces set up between Federation of the Bangladesh Chambers of Commerce & Industry (FBCCI) and Federation of Indian Chambers of Commerce & Industry (FICCI). The Six areas are; bilateral trade, raising Indian investment in Bangladesh, trade related infrastructure, removal of trade disputes, NTBs and activating programmes of Bangladesh-India Chamber of Commerce & Industry. Six task forces are working on these areas and make recommendations. Bangladesh-Pakistan Joint Business Council meetings are frequently held in every year.

In order to ensure that all the countries involved benefit from closer cooperation, attention needs to be given to more balanced trade flows among these countries based on the development of greater complementary among their economies. Increasing joint ventures among the entrepreneurs of these countries can help achieve this objective. In this respect, there is an immediate need for private and public sector collaboration within a multilateral framework.




For tiding over the global crisis unhurt

For tiding over the global crisis unhurt

Md. Joynal Abdin

The Financial Express on May 29, 2009

THE current global crisis of capitalism originated from the financial meltdown in the United States of America (USA). The idea that the economies needed no regulation was abandoned after the great depression of 1930s. It was Keynes who pointed out the need for regulations to keep the economies in good health. The US policy-makers had, in recent years, deliberately abandoned regulations on the slogan of unbridled market economy. They allowed companies to go for profits without any checks until the economy came to verge of collapse. The US economic meltdown, in no time, adversely affected the other developed economies due to their close links with the US economy. Before long, it became a global economic crisis.

Unchecked greed for profit among big American companies and the American habit of spending more than their earning, even if it meant borrowing, were at the root of the economic crisis that engulfed the world. The crisis dried up the sources of credit in an opulent America. Now gone are the credit cards and credit without which the American consumers could not pull on for a day.

Despite its limited share in global trade, Bangladesh, too, like the other least developed countries (LDCs), has started feeling the heat of the global crisis. No country is immune to the impacts of globalisation, good or bad.

Readymade garments, Bangladesh’s principal export earner is likely to be affected as the entrepreneurs fear that the hard-pressed western buyers could buy less.

Despite the difference in opinions among the economists, there is an apprehension that the remittance from Bangladeshi workers abroad could fall if the global crisis continues for long.

Foreign direct investment (FDI), a source of industrialisation of the LDCs, could fall because of the global crunch.

The grants and other assistance from the developed countries could also decrease as a fallout from the global financial crisis.  Bangladesh needs to prepare itself to come out of the global crisis unhurt. 


Bangladesh: a good destination for foreign investment

Bangladesh: a good destination for foreign investment

Md. Joynal Abdin

The Financial Express on May 3, 2009

Economic supremacy is the dominant feature of the present-day world. In order to survive, we have no option but to attain economic development. Foreign investment is recognised as a key ingredient for economic growth for the least developed countries (LDCs) and for Bangladesh, being one of the LDC with a domestic savings rate — which in quite insufficient for investment after fulfilling its basic needs — the importance of foreign investment is undeniable.

Today investing in a developed country is not viable due to very high labour cost and other factors. As a result, global investors are seeking for opportunities to invest in the developing countries or LDCs for the best return. But as an LDC, we have a lot to do to attract such investments in our own interest. Foreign direct investment (FDIs) will create employment, increase efficiency of our labour, encourage technology transfer and develop new exportable sectors for us.

Foreign investment in Bangladesh unfortunately, is not satisfactory. According to the UNCTAD, in 2003 Bangladesh had achieved only 0.05 per cent foreign investment, while the proportion was 0.9 per cent in India, 0.52 per cent in Vietnam, 10.2 per cent in Indonesia and 70 per cent in China.

In Bangladesh, most foreign investments have gone into the energy sector (mineral resources / mining). Comparatively foreign investment in the manufacturing sector is not high. This may be due to the fact that Bangladesh has a small domestic market and is not fully capable of consuming quality goods due to low purchasing power.

Indian’s Tata group was expected to invest $2.0 billion in Bangladesh. The group had plans to set-up a $ 700 million basic steel industry in Ishwardi to produce hot rolled coil and other basic steel products. It also wanted to invest $ 700 million in two 500 megawatt power plants near Ishwardi. Its proposal also included investment of a $ 600 million fertiliser plant in Chittagong.

The Tata group would need 200 mmcfd gas per day in the initial stage, which would rise to 3500 mmcfd once the plants went into full operation. The group planned to invest $ 1.50 billion in the first phase and $ 0.50 billion in the next phase. Tata wanted a 20-year guarantee of gas supply at a price and an agreed formula which was considered not viable for the state. Till now Tata has no investment in Bangladesh, but it has strong trade relations with the country. Tata group’s $ 2.0 billion investment is expected to be at least five times the total foreign investment received by Bangladesh in the past few years. Now Tata may not be too keen to invest in Bangladesh but it was not our fault because they demanded what was not feasible for us.

Why would foreign investors come to Bangladesh? Because the government has given the highest priority to attract foreign investment, making Bangladesh otherwise an attractive location. The foreign investors has following advantages in Bangladesh:

a.      The country has cheaper labour force;

b.      Tax holiday up to 12 years;

c.       Bangladesh allows 100% foreign ownership;

d.      Permanent residentship for foreign nationals investing more than US $ 75000 or equivalent amount;

e.      Concessionary financial benefits similar to the local investors;

f.        Lower inflation rate compared to other Asian countries;

g.      A wide range of tax exemptions;

h.      Facilities for repatriation of invested capital, profits and dividends;

i.        Multiple entry visa facilities for visiting foreign investors;

j.        Reinvestment of reportable dividend treated as new investment;

k.       Bangladesh enjoys MFN and GSP facilities from a number of countries including USA; and

l.        Bangladesh has two seaports for export and provides relatively low cost establishment.

The potential areas for investment in Bangladesh include: agriculture, fisheries, agro-based industries, chemicals, light industries, natural gas and oil exploration, textile, tourism, energy sector, telecommunications, etc.

Although the prospects for foreign investment in Bangladesh are otherwise bright, we have at the same time some barriers to investment. Such barriers include, mainly, the following:

Political instability: a common problem in Bangladesh. Though we expected substantial change in our political environment, we are not observing any positive signs yet. This is a major disincentive for foreign investors.


Corruption: Corruption is the main problem in Bangladesh at present. It plays a negative role in attracting foreign investment here.

Lack of infrastructural facilities: Modern communication system is essential for foreign investment. But Bangladesh’s poor infrastructure hinders the prospect of foreign investment. Only one operational port and one Dhaka-Chittagong highway are not sufficient for industrialisation of Bangladesh.

Trade union: Most of the trade unions of the country have political ties with the parties in power and opposition. This hampers industrial production and pollutes the with environment. As a result, production targets fail, the industry incurs losses.

Long procedure: Redtapism, indecision, delays in decision making etc., are the common features of our bureaucracy which frustrate investors. Currently, the period for investment in China is six days, this is 166 days for Bangladesh.

Negative image: Bangladesh is known to the world as a country of corruption, political unrest, natural calamities and poverty. Militancy is now being added to create a negative image abroad.

The Nobel Laureate Mr. Amaryta Sen, however, was positive about our country. He said though there are problems and lackings in various sectors, the country very bright future it is going to attract some important foreign investment in the near future. Not only this Bangladesh has developed its manpower rapidly.

Our demand to our policy makers is ‘make Amaryta Sen’s word a practical scenario for Bangladesh.’


Need for research to look into falling sales trend

Need for research to look into falling sales trend

Md. Joynal Abdin

The Financial Express on April 25, 2009

CURRENTLY the world economy is experiencing a serious financial crisis. The largest economies of the world have failed to tackle it. Due to their inherent weaknesses, the smaller economies may face more problems than the highly industrialised and the rich ones. 
Bangladesh is a least developed country (LDC) and would like to be a middle income country within 2015. In this regard, it has no alternative, but to become industrialised. After its independence in 1971, its economy has advanced a little compared to that of Malaysia or Vietnam.
To develop an economy, it has to increase production to such a level that it can achieve the economy of scale. Because, the more is the volume of production, the less is the unit cost of goods produced. The total production of a country is not exported. Local consumption plays a vital role in increasing production.
In this case, retail sales are the key indicator of local consumption. If retail sale decreases, it is easy to understand that local consumers are not buying the products in a massive scale. This results is decline in production. This may affect gross domestic product (GDP) of the country and the economy may slow down as a result. 
The world is moving fast. The economies that can meet the demand of the competitive market are growing quickly. In this situation, we noticed gradual decline in retail sales, especially during last caretaker government period. It means our GDP is going down. This may hamper our long-term target of becoming a middle-income country within 2015. So immediate research is needed to identify its cause and actions have to be taken to overcome this problem.
Today the economy is becoming more competitive, but our local consumption is declining. If local consumption declines, then local production is bound to go down. So research has to be done to find out the following:
It is to be sure whether sales are decreasing or not. If it is decreasing, then to what extent? Will it hamper our GDP?
If retail sales reduce, then how can it affect local production? Generally, reducing local sales means reducing consumption. If consumption reduces then producers are bound to reduce production. Less production may be the cause of higher cost of production per unit.
The reasons for decreasing sales: this research will help to identify the causes of decreasing sales.
How to solve the problem: there should be some recommendations to overcome this problem.
This research has to be carried out in order to avoid any depression in the economy. This may be a major problem for market operators in the future. In the initial stage, marketers must evaluate the previous data to be sure whether sales are plunging or not.