To ensure an overall business and investment friendly environment in the country, it is essential to raise the credit flow to the double digit level in the private sector, bring good governance and transparency in the financial sector and reduce the interest rate on loans, continue policy support to enhance local and foreign investments, develop integrated development in the infrastructure sector.
It is also necessary to improve market management to reduce inflation and reduce VAT on essential commodities and formulate a long-term supportive energy pricing policy for the industrial sector.
Taskeen Ahmed, President, Dhaka Chamber of Commerce & Industry (DCCI), made the observations at a seminar on “bi-annual economic state and future outlook of Bangladesh economy-private sector perspective for July-December, 2024” organised by the Chamber on Saturday, says the chamber in a statement.
The DCCI president presented the keynote paper on the overall scenario of the economy during the July-December period of FY 2024 at the seminar. In his presentation, he highlighted the global economic situation, monetary policy, inflation, private investment, FDI, agriculture, industry and services sector, CMSME, energy and power, logistics infrastructure, skill development and financial sector. He also suggested curbing public expenditure through more austerity measures as the revenue generation is now a concern.
He suggested increasing the credit flow to the double digit level in the private sector, vigilance to reduce non-performing loans, ensure good governance and transparency in the financial sector, and reducing the interest rate on loans to restore the confidence of the entrepreneurs. The DCCI president also proposed improved market monitoring to reduce inflation, strict enforcement of law and order to tackle syndicates and increasing VAT on luxury goods in addition to reducing VAT on essential commodities.
He also emphasised continuation of policy support to expand local and foreign investment, integrated development of the infrastructure sector. He also termed African and Latin American markets as one of the most potential export destinations for Bangladeshi products. For smooth industrial operation he sought safety and security as well as low cost finance and uninterrupted power & energy supply to the industries.
For development of the SME sector, it is necessary to simplify the existing policies for obtaining loans, introduce alternative financing systems for low-cost financing and expand the digital financing system, said Taskeen Ahmed.
He stressed the need for long-term planning in the energy sector, as well as development of network management and the setting of affordable energy prices for the industry and the general consumers.
Speaking as the chief guest, Md Abdur Rahim Khan, Additional Secretary (export), Routine Charge of Secretary, Ministry of Commerce, said that USD 40 billion revenue in an economy of USD 500 billion is nothing but a mismatch and also unacceptable.
He also said, “We do not see full automation of all government services and proper implementation of the National Single Window which is a concern for all of us.”
He said it is possible to reduce the cost of trade by 10 to 15% if the logistics policy and trade facilitation agreement of WTO are fully implemented. Mentioning the light engineering industry as a game-changer for the economy, he said the Ministry of Commerce has taken an initiative to set up a ‘Technology Centre’ in Gazipur to build the capacity and support the entrepreneurs of light engineering sector. He also stressed improving export competitiveness to face the challenges of LDC graduation.
Dr M Masrur Reaz, Chairman, Policy Exchange of Bangladesh, said due to central bank’s delay in taking necessary measures and printing extra money coupled with several other national and international factors back in 2022, the inflation went high but later the central bank took several positive initiatives by the end of 2024 leading to a positive impact on the economy. As a result the inflation slightly came down.
He also said that due to reserve crisis and import restrictions on raw materials and capital machinery, “We saw a shortage on the supply side that actually affected the overall economy and it helped fuel inflation.” But once the reserve increases up to USD25-27 billion within the current fiscal, “We will be able to see the improvement in import in the industrial sector and supply side as well.” To contain inflation and price manipulation, he opined that it was necessary to strengthen the capacity of Bangladesh Competition Commission and other concerned agencies of the government for a strong market monitoring. He later expressed his high hope that uninterrupted energy supply to the industries and control of industrial unrest would help raise export by USD 5-7 billion more this year.
Dr Mohammad Abu Eusuf, Professor of Department of Development Studies, University of Dhaka, said that the government should not go for declaring a traditional budget with a huge deficit for the next fiscal. To meet up the deficit budget, the government has to take loan from the banking sector and that creates a negative impact on private sector credit flow. He also said that coordination of budget, monetary policy and market mechanism is very important to control inflation. He later said that there is no alternative to automation of the existing VAT system to increase revenue collection. He also said that despite the poverty decreasing, inequality is increasing in the society. He also stressed increasing the tax-GDP ratio in Bangladesh as it is still very low in the region.
Research Director of BIDS Dr. Mohammad Yunus said to meet the post-LDC challenges, “We need to increase compliance in the industry and enhance public-private coordination based on extensive research.” In order to increase the revenue, he suggested widening the tax and VAT net. He also emphasised foreign direct investment and joint ventures with foreign investors especially in the leather and pharmaceutical sector as these two sectors have much potentials after RMG.
Bangladesh Bank’s Executive Director (Research) Dr Sayera Younus said due to supply side factors the inflation increased but the central bank intervened in the right time to address the problems through its monetary policy, increasing policy rates and other mechanism. Additional Secretary of ERD, Ministry of Finance A H M Jahangir said Bangladesh is fully prepared for graduation from the LDC status, but the final call should come from the government upon consultation with all stakeholders. He also said a committee has already been formed led by the ERD Secretary and the committee will sit with all relevant stakeholders including the private sector at a regular basis. And after detailed discussion and brainstorming the committee will prepare a position paper with a final recommendation based on which government will finally take the decision. But he stressed a comprehensive and well-covered smooth transition strategy (STS) plan to be prepared both by the public and private sectors.
DCCI Vice President Md. Salem Sulaiman and members of the board of directors were also present on the occasion.