Despite the single-digit interest regime, the private sector investment has remained stagnant because of both corruption and some weakness of the country's judicial system, an economist says.
"The government somehow managed to implement single-digit interest rate, but corruption and some weaknesses of the judicial system are main hurdles to higher private investment," Dr. Debapriya Bhattacharya, a distinguished fellow of the Centre for Policy Dialogue (CPD), told a webinar held on Sunday.
These were the survey findings they conducted on local businesspeople as part of the global competitiveness report, he said.
The International Business Forum of Bangladesh (IBFB) organised the webinar on "National Budget 2021-22 - Policy Recommendation."
Humayun Kabir, president at the IBFB, moderated the programme. Former chairman at the National Board of Revenue (NBR) Dr. Muhammad Abdul Mazid presented the keynote paper.
Former governor of the Bangladesh Bank Dr. Atiur Rahman, director general at the Bangladesh Institute of Development Studies (BIDS) KAS Murshid and chairman at the BSRM Alihussain Akberali spoke, among others, at the webinar.
The CPD economist maintained that the impact of COVID-19 will last for at least two to three years on the businesses and the economy.
"Many say coronavirus has gone, but its impact on the people and the institutions will last for two to three years more," he said.
Stressing the need for reforms in the tax administration, Dr. Bhattacharya said Bangladesh has failed to raise even 1.0 percentage point of tax-GDP ratio in the last decade.
In his speech, Dr Atiur Rahman said that the health sector should be given priority at least for the next two to three fiscal years considering the ongoing pandemic and its knock-on effects.
He said the government may even raise the budget deficit provided that quality development takes place.
Referring to the Tk 3.78 trillion tax target for the current fiscal year, Dr. Rahman said that tax administration needs to be reformed immediately. He also said that budgetary targets should be realistic and achievable.
He was critical of the 15 per cent target of the tax-GDP ratio in the eighth five year plan, which started from this fiscal year.
Dr Murshid said small business entities are not getting financial support from the stimulus packages.
"The micro and small entities have limited access to the stimulus cash," he said.
He said even the poor are not getting cash incentives due to the existing system.
He noted the local currency should have been appreciated, thanks to large volume of remittance inflows.
"But what we see is that the local currency has rather depreciated."
Mr Akberali said the NBR is taking time to clarify many tax-related issues, urging the board to expedite it for the interest of the tax mobilisation.
IBFB vice president MS Siddiqui said the clothing sector success in Bangladesh is nothing but availing of the bonded warehouse facility, where entrepreneurs get duty-free import of raw materials.
He said the NBR does not allow it for all sectors, arguing they lack manpower to administer the facility.
He said that the NBR may waive the tax on the primary raw materials for all sectors, which will help mimic the success of the clothing sector in other areas.
While presenting the keynote, Dr Mazid said the budget should be expansionary to achieve the developed nation status by 2041.
There is a need for reform in the banking sector also, he said, warning otherwise the crisis will be "dangerously bigger" than the pandemic.
The former NBR chairman suggested that a panel should be formed comprising both government and the private sector people to formulate the national budget.
Japan's success in this area is noteworthy, he added.
He also suggested the reintroduction of the post of a tax ombudsman.