| Salute to three drivers
A new government, a deep-seated recession, and yet a remarkable growth -- our kudos goes to farmers, workers and migrant labourers this year. Without them, Bangladesh could face different music in the year that rolled by.
Good agricultural production supported by sufficient injection of farm credit boosted domestic demand. A surprising spurt of remittance flow by a dwindling number of migrant workers also helped the cause. And garment workers chipped in cheap labour to keep the country's apparels floating in harsh times.
All this in turn kept domestic demand and the economy buoyant. We salute these three drivers of the economy, who helped navigate us through the turbulent waters of 2009.
There were many moments of glory for the government in the last-one year. The prudent economic policies helped achieve a macroeconomic and fiscal stability in a time of the worst recession since the World War II. Inflation was relatively low. Reserves and balance of payments were good.
The stimulus package that came belatedly was channelled in the right direction. Many might say Bangladesh handled its stimulus package even better than the US. The US was criticised for its Buy American clause in the package.
"It was a prudent stimulus package and directed properly. The good point was the government did not give in to pressure groups in allocating funds," said Dr Zahid Hossain, a senior economist of The World Bank.
Despite the undue pressure of the readymade garment exporters, the government kept the sector out of the first stimulus and only included it in the second package with a host of conditions.
Food security was another point of comfort in 2009 with a 13 lakh tonnes stock of grains and 17 lakh tonnes import of wheat until December. We had a good boro rice production and an aman too. The preparation for 2010 boro rice cultivation is satisfying too.
However, agriculture will remain a major challenge for 2010.
"How to ensure farmers a fair price to encourage them in production and how to provide consumers food at low price would appear as a matter of policy choice," says Dr Mustafizur Rahman, executive director of the Centre for Policy dialogue (CPD).
The answer lies in agricultural productivity enhancement through research and development. A major effort could be to welcome the second technological frontier where hybrid seeds and technologies would reduce production cost and increase agriculture growth.
"This now looks like the only answer to the riddle," Dr Mustafiz observes.
Despite this, the past year was one of entrepreneurial inactiveness -- businessmen yet had to recover from two years of regimented disciplining coupled with inadequate infrastructure. Also businessmen had yet to get a clear picture of who the real players in policymaking were.
Many would see the past year as a timeline of lost opportunities. This is more so when the government enjoyed an unusual patch of political calm -- there were no hartals, the opposition was too weak to even put up a political protest and the government overwhelmingly strong in parliament.
This all served the perfect recipe to accomplish some thorny and urgent missions. The key recommendations of the defunct Regulatory Reforms Commission and the Better Business Forum (BBF) could be implemented to improve the business environment and thereby jack up confidence of businessmen. Most recommendations remain unimplemented today.
The tax, VAT and business registration process could have been simplified and turned into a one-step procedure. Time for business registration could have been shortened.
Steps could have been taken to utilise the funds of the much-vaunted public-private partnership (PPP) scheme. Not a single penny of the Tk 25 billion fund has been spent and the major reason was saddling the Board of Investment with the task of implementing PPP. Successful records worldwide show it is the finance ministry that can handle such schemes successfully and Bangladesh could have been no different a case.
"The non-implementation of a promising scheme like PPP to address the crucial need of the economy is disappointing," says Dr Zahid Hossain of the World Bank. "This is one project that could have taken the government a long way into solving many crucial infrastructure needs."
The climate change fund remained unutilised while the country was ravaged by repeated cyclones. The glaring plight of the Aila victims could not pry the government's eyes open -- to motor its machinery into utilising the climate fund for meaningful mitigation of the Aila victims' miseries.
The port surfaced as another sedentary point after the initial bustle during the caretaker government and businesses are not at all happy about that.
"But the major challenge for 2010 would be how to translate macroeconomic stability into an accelerated growth rate through higher investment," says Dr Mustafiz.
In absence of a timely Quantum Index of Production (that measures industrial performance), proxy indicators such as capital machinery import, term loan disbursement and industrial use of electricity point to a sloth in investment.
The reasons for the slack are also understandable and a major challenge for 2010. When power supply is uncertain, gas fizzling out and roads and ports inadequate, investors would think twice before flashing out money.
Power was a special area that could have been better handled in the past one year. But the initiative came quite late and 2010 is going to be a victim of the lagged plans.
"Investment which stimulates further investment did not take place leading to the current hesitation of investors," says Dr Mustafiz.
The implementation of the annual development programme (ADP) is another region that requires better handling in 2010. The government planned a big ADP and the implementation so far is good, especially in relation to absolute amount of money spent so far.
But given its importance to crowd in private investment, the pace of implementation has to accelerate in the second half of the fiscal year that begins with the New Year.
"One vulnerability that Bangladesh is now exposed to is the volatility in its major earning sectors -- exports of goods and manpower," says Dr Mustafiz.
Exports posted positive growth and yet it had seen a topsy-turvy flight. The situation is likely to spike in 2010 as major garment export competitors such as India, Vietnam and China had offered stronger stimuli to their economies and gained competitiveness, Dr Mustafiz explains.
When the global economy recovers definitively, these countries would be in a competitive advantage to grab the opportunity of demand increase.
This is exactly why Bangladesh would have to be vigilant on its own competitiveness through aggressive policy instruments.
As the New Year comes, hopes now lie on tackling the quick implementation of a string of promises and plans, strategies and tactics to bring dynamism to the private sector to motor the economy. | |