An analysis by the International Monetary Fund (IMF) in their Inclusive Development Index (IDI) has indicated that Bangladesh has shown stable and qualitative improvement in major economic indicators during 2017.
Among 74 emerging economies, Bangladesh this year has secured the 34th position in IMF's Index compared to the 36th position last year. Bangladesh has performed better than India, Pakistan and Sri Lanka which are ranked at 62, 52 and 40 respectively.
The Index also includes 29 developed economies, led by Norway, Iceland, Luxemburg, Switzerland and Denmark. There are also Greece, Portugal, Italy, Spain and Israel. Lithuania topped the Index for the emerging economies, followed by Hungary, Azerbaijan, Latvia and Poland. Latin America accounts for three of top ten economies - Panama, Uruguay and Chile. Performance is mixed among BRICS economies - Russia (at 19) is ahead of China (at 26), Brazil (at 37), India (at 62) and South Africa (at 69). Mozambique, Lesotho, Malawi. Zimbabwe and Egypt were among the bottom five.
The IDI is an annual assessment of 103 countries' performance in 11 dimensions of economic progress in addition to gross domestic product (GDP). These include employment, labour productivity, household income, per capita income, net savings, life expectancy, poverty rate, wealth distribution, public debt and eco-friendly initiatives.
Bangladesh Development Forum: The month of January, 2018 has seen some very important financial initiatives undertaken in Bangladesh. The first was the two-day Bangladesh Development Forum (BDF) that took place on January 18 and 19. Development partners from abroad, government agencies and representatives from local private sector bodies and Chambers of Commerce took part in the meeting organised by the External Relations Division (ERD) of the Ministry of Finance.
The government, during meetings, called on foreign development partners to continue their cooperation even after Bangladesh graduates from Least Developed Country (LDC) status.
Participants, quite correctly, laid emphasis on the need to strengthen good governance, ensure the rule of law and create transparency in order to generate accountability. It was underlined that such measures would create sound public financial management systems. It was also underlined that there was need to have an effective judiciary. All these would facilitate the achievement of Sustainable Development Goals (SDGs).
Some economic experts stressed the need for improving domestic resource mobilisation by raising tax collection and widening the tax net of the country. This would raise tax revenue and help tackle emerging challenges during the difficult period of transition that would follow the eventual graduation from the LDC status.
This reference to increasing funding through effective taxation was important because of recent reports of how private sector business is now using innovative tactics to dodge taxation through the doctoring of bank documents. The Customs Intelligence and Investigation Directorate has with the help of the Chittagong Customs House detected that some importers have been tampering with Letters of Credit and changing the names, quantities and prices of goods to dodge tax. Several consignments with forged documents have been discovered. Such corruption cannot be condoned.
The BDF stressed the importance of strengthening infrastructure to improve connectivity. Some participants made useful suggestions. These included the need to focus on lifecycle-cost, safety and resilience to unexpected natural disasters and taking into account adequate environmental and social safeguards. There was also reference to the need to improve skills of the manpower base (which has assumed greater importance because of digitalisation) and create better rural-urban connectivity.
The BDF in the communiqué, issued at the conclusion of the meeting, agreed that strengthening social protection provision for the extreme poor, building human capital as a pre-requisite for growth and poverty reduction were important factors that Bangladesh would have to continue to focus on even if it graduates from their LDC status in the near future. The BDF drew attention to the need for enhancing investment in agricultural development and also for taking pre-emptive measures to handle the steep internal migration from rural areas to urban centres.
The suggestions of BDF need to be taken seriously if Bangladesh wants to attract increasing amount of foreign direct investment (FDI).
It would be appropriate at this juncture to draw attention to the fact that Japanese investors are slowly gaining greater confidence in investing in Bangladesh. A new survey carried out with regard to Bangladesh, India, Sri Lanka and Vietnam by the Japan External Trade Organisation (JETRO) has indicated remarkable improvement in Japanese business confidence pertaining to Bangladesh. It has been noted that in Bangladesh the prospect for business opportunities has grown due to - increased sales in local markets, improvement of productivity and increased sales due to expansion in exports. It may be noted that the number of Japanese companies operating in Bangladesh has more than tripled since 2008, reaching 253 as of May 2017. All of this is significant and will help to draw in other countries to our table.
OTHER SIDE OF THE COIN: All of this is positive. However, there is also the other side of the coin. The Policy Research Institute of Bangladesh in a separate seminar has drawn attention to an important aspect that is holding back the expected dynamism in foreign investment. They have referred to the continued high cost of doing business and the bureaucratic mindset that creates delay in taking required decisions.
This has become evident through the World Bank's ranking of "Doing Business" where Bangladesh has been ranked at 177 out of 189 economies in 2018 - down one notch from 2017.
This view about Bangladesh needs to be addressed immediately. The National Committee for Monitoring Implementation of Doing Business Reforms needs to be operationalised for stronger oversight of the required reforms. Attention needs to be given on a priority basis to the banking sector and streamlining of the tax laws as well as the taxation matrix. Both e-filing and e-payment need to be adhered to and encouraged. This will create greater accountability. At the same time steps need to be taken to facilitate one-stop service, remove non-tariff barriers, and improve institutional support and infrastructure related to the proposed economic zones.
Though Bangladesh is no longer dependent on foreign aid, it needs to be careful that the balance of payments does not deteriorate further. The country had to import in the first six months of this fiscal year more than 6.1 million tons of food grains (partially due to the unexpected massive flooding in 2017 and the influx into Bangladesh of more than 680,000 Rohingyas from Myanmar). In addition, the absence of required skilled manpower in the textile, ready-made garment (RMG), pharmaceutical and leather sectors have led to more than US $ 4.0 billion having been repatriated from Bangladesh to India and Sri lanka through formal banking channels. This has affected the growth in foreign exchange reserve. This needs to be addressed with seriousness.
BEPZA INTERNATIONAL INVESTORS SUMMIT, 2018: Finally, the BEPZA International Investors Summit, 2018 took place on January 24. During the last fiscal year, investment in the Export Processing Zones reached US$ 343.71 million and export from these zones reached US$ 6549.37 million. The zones also generated additional employment of 26,638 persons. They might have been able to do even better if there were greater coordination among the different stakeholders. There is immense scope to develop this sector.
Muhammad Zamir The writer, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.
