Jatiya Party MPs, Ziauddin Ahmed Bablu and Kazi Firoz Rashid are coming in for flak after their comments on the proposed budget took personal aim at the Finance Minister. Even as senior stalwarts of Awami League began a belated defence of Mr. Muhith and a semblance of alternative propositions emerged, economist Abu Ahmed has brought up the issue that the individual's impact is taking precedence over the macro. If it has been a strategy to create smoke through apparent measures that are sure to hurt the citizen, it has almost worked. With less than a week, that too during the arid holidays, the government must come up with proposals that cool the heat served up.
The upshot is that more fundamental issues such as straightening out the stock market and spelled-out measures to both claw back the rise of delinquent loan from 10 per cent plus and ensure this stays down aren't being debated purposefully enough. Mr. Ahmed asked the pertinent question why not a word was said of bank-default in the budget speech. Other MPs are going a step further to ask why the Finance Minister proposes pumping in more capital in these dubious banks. While the answer is obvious -- that banks can't be allowed to go under - the question relates to why the offenders aren't being taken to task and being made to pay back. This takes the argument in to wooly territory: where the money went, whether assets mortgaged against them have or can be recovered. City Cell's office was put on sale by a bank to which it owed money and there have been no takers from media reports. Beximco's Bell Tower was also put on sale until a stay order prevented it. And through the years it has been repeated rescheduling for many businesses until public memory fades and there are the inevitable write-offs.
Panic withdrawal of deposits from banks and investments in the share markets has seen the index shoot up but if that leads to another crash confidence will be shattered completely. It appears investors are unwilling to take loans even though interest levels have been lowered. According to business it isn't good enough. If the trend continues, banks will have problems providing loans if and when asked to. Yet, the Bangladesh Bank's quarterly report tells us small and medium industries are growing and investing. Either they're doing something big businesses aren't or can't, or the problem is bigger than we know. A whole host of garments manufacturers are having problems in paying out festival bonus in the wake of less than expected exports. This could well be why, the low price of oil hasn't been passed on to the consumer and is propping up the growth in the 7.0 per cent plus region.
The return on investment (ROI), a crucial deciding point for investment, depends on demand, interest, taxation, regulatory friendliness and proper overall business plans. If interest and taxation become whimsically steered in yearly doses, the business plan gets scuttled. This brings into question the prioritisation of mega-projects that are resource hungry, causing the revenue crunch.
Delaying the new Value Added tax (VAT) law is just sweeping the problem under the carpet. Next year may or may not be a better one. But one thing is for sure, if India can find general sales tax (GST) a friendlier form, if the UK can have difference in VAT rates that means workable options exist and the finer brains can come up with solutions. But the loose ends of macro policies have to be tied up or else it continues to be short-fixes with after-effects far worse than the initial high.
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