The government should turn the state-owned banks (SoBs) into only deposit-receiving banks to stop loan concentration and prevent accumulation of non-performing loans (NPLs), a leading economist has said.
At the same time, the government should rationalise the current protection regime for the domestic industries to make the local manufacturers more export-oriented, said Dr. Zaidi Sattar, Chairman of Policy Research Institute, Bangladesh (PRI), the country's leading economic think-tank.
His views came at a seminar on the state of Bangladesh economy, held in the city on Tuesday.
Focusing on the bulging of NPLs in the banking sector, Dr. Sattar observed that 'big borrowers are essentially holding the banking system hostage'.
"This problem has not been created in a day. Banks and borrowers together have created the situation through loan concentration. The state-owned banks have been a major contributor to this," he said.
In this context, the PRI chairman called for turning the SoBs, expect one or two, into deposit banks.
"With only seven SoBs, why not make five of them just deposit banks and stop giving any loans by them?"
"Then these banks will provide banking services through taking deposits from grassroots people, who do not usually have access to banking facilities."
"May be only top two banks, like - Sonali Bank or Agrani Bank, will do the treasury functions. But the rest of the SoBs should not be engaged in any lending," he opined.
"There are so many private sector banks in the country now, and more private banks may come in the coming years. So, competition in the banking sector will not be an issue."
The veteran economist also called for rationalising the country's protection regime to promote export-oriented manufacturing.
"The incentive for our non-RMG (ready-made garments) sectors is to sell (their products) in the domestic market. So, they do not want to take all the troubles to go to the overseas market," he observed.
"They have become complacent, and feel no need to be competitive in the world market."
"Protecting domestic industries is ok. But how long (will we continue doing it)? We need to decide whether we should give them unlimited protection or time-bound protection," he added.
Noting that all the major development partners as well as research organisations depend on the state-run Bangladesh Bureau of Statistics (BBS) data, Dr. Sattar also called for increasing its capacity.
Speakers at the event termed slow implementation of the Annual Development Programme (ADP) as a major challenge.
"With a fixed ADP budget, we allocate resources thinly for too many projects, many of which would take 100 years to be completed," said former finance adviser Dr. A B Mirza Azizul Islam.
Noting that the tertiary enrolment ratio in Bangladesh is one of the lowest in the region, Dr. Islam observed that proper combination of skill and education is necessary for tapping the present demographic dividend of the country.
Planning Minister M A Mannan, who attended the programme as the chief guest, said the government is looking to address the slow implementation of ADP and find ways to accelerate it.
Speakers at the seminar also observed that various legal and judicial reforms are necessary for addressing the bulging of NPLs.
"Around 75 percent of the non-performing loans in the country are stuck due to a large backlog of cases in the courts," said Ghulam Rahman, President of Consumers Association of Bangladesh (CAB).
Speakers at the event also called for establishing a banking commission to address the NPL issue and to carry out necessary reforms in the banking sector.
"At the same time, there should be two separate authorities for taxation - one for tax collection and another for formulating tax policies," said Asif Ibrahim, former president of Dhaka Chamber of Commerce and Industry (DCCI).
Noting that the VAT Act 2012 is likely to be implemented from next fiscal year, 2019-20, the speakers also opined that the government should provide a clear direction and motivate the people concerned to carry out the necessary reforms (in this regard).
PRI Director Dr. Ahmad Ahsan and Executive Director Ahsan H Mansur also spoke at the event.
