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The Centre for Economics and Business Research (CEBR) located in London has at the end of 2018 ranked Bangladesh 41st among the largest economies in the world-- up from the 43rd position a year ago. This means that Bangladesh has moved up two notches and has now become the second biggest economy in South Asia.
According to the World Economic Table published by CEBR, the other South Asian countries are in the following positions: India is ranked 5th, Pakistan 44th, Sri Lanka 66th, Nepal 101st, Afghanistan 115th, the Maldives 156th, and Bhutan 166th. It may also be noted that at this point of time United States is at the top of the table followed by China, Japan, Germany and India. These are the top five economies. It has also been noted that "despite global uncertainty and tightening in US monetary policy, which has pushed down some of the emerging market currencies, the 21st century is still likely to be the Asian century."
It has also been observed by CEBR that like many of the Asian countries, Bangladesh is set to witness a significant economic growth in the next 15 years -- to 36th position by 2023, 27th by 2028 and 24th by 2033. They are expecting Bangladesh's "annual rates of GDP growth to average 7.0 per cent between 2018 and 2033. This will see the country climb 19 places in the World Economic League Table and become the world's 24th largest economy by 2033”. Current gross domestic product (GDP) of the country in terms of constant prices at USD 280 billion in 2018 should increase to USD 396 billion in 2023 and to USD 553 billion in 2028. According to their analysis, Bangladesh has benefited from garments exports, strong increase in remittances, domestic consumption expenditure and government spending.
However, the CEBR as well as a few other think-tanks have also observed that Bangladesh "runs the risk of negating gains from its successful export sector through its growing appetite for imports. The current account tipped into a deficit in 2017, and this is expected to widen in 2018." Bangladesh has consequently been urged to explore options on how to increase revenues in order to finance upgrades for infrastructure while maintaining the social safety net.
In this context one needs to refer to a few other financial reports that appeared in the first week of January, 2019. Apparently, Bangladesh's overall balance of payment recorded USD 837 million in deficit during the July-November period of the fiscal year 2018-19 compared to the corresponding period of the previous fiscal. The overall deficit in balance of payments (BOP) was USD 479 million during the same period of FY 2017-18. The Bangladesh Bank has noted that the sharp fall in the country's financial account and capital account surplus were primarily responsible for the widening of BOP.
It would also be worthwhile to point out that Bangladesh's aggregate exports grew by 16.75 per cent to USD 16.77 billion during the first five months of FY-19 compared to USD 14.36 billion in the corresponding period of the last FY. On the other hand, country's overall imports posted a 6.64 per cent growth to reach USD 23.43 billion in the first five months of the current fiscal against USD 21.97 billion in the same period of last fiscal.
It is clear that over the last five years the Bangladesh economy has moved forward but continues to face several challenges.
NEW FINANCE MINISTER: The new finance minister AHM Mustafa Kamal has a tough task ahead. A successful minister in charge of Planning in the previous term of Prime Minister Sheikh Hasina's government and an active lover of sports, he has correctly decided to start his new assignment with full commitment. This has been exemplified by some of his observations about different financial dimensions after assuming his new Office.
The Minister has expressed optimism that the country's gross domestic product (GDP) growth rate in the current fiscal year would reach 8.5 per cent, exceeding the fiscal target of 7.8 per cent. He has also urged the concerned authorities to come forward and adopt necessary measures for reforms pertaining to non-performing loans. He has mentioned that the existing rate of NPL is around 13 per cent and has suggested that efforts need to be made to reduce it to around 7.8 per cent. If this plan of recovery can be achieved, it will increase cash flow to private sector investors and definitely take our economy forward.
In his recent exchange with the media the Minister has drawn attention to a few other pertinent issues that need attention.
He has observed that only about 1.5 million people in Bangladesh pay income tax although nearly 25 per cent of the population has entered the middle income category. He has suggested that "we have to be tough on persons who dodge tax payment". We have seen efforts by the National Board of Revenue in the past two years to broaden the tax base. This process will have to be taken to all the districts.
Interestingly, he has also correctly pointed his finger at some unscrupulous traders who misuse existing privileges. He has drawn attention in this regard to some cases where corruption is complicating the existing situation. He has mentioned that some traders have been exporting soil or sand instead of manufactured goods. Subsequently, these traders have "taken advantage of cash incentives from the government" after showing fabricated export receipts. He has asked the relevant officials to take necessary steps to eradicate this problem swiftly.
In his meeting with the media he has also referred to the need to revisit the issue of VAT so that existing controversies regarding VAT are removed. He has correctly asserted that if this is done, confidence will grow among the citizens and they will feel encouraged to pay the required amount. This will facilitate collection of VAT from all points in Bangladesh. He has also proposed that this paradigm will require not only appointment of more revenue collectors but also the wider use of electronic cash register machines in business. This will ensure accountability. Many have observed that this will be difficult to accomplish. Nevertheless, one needs to try with greater determination.
In keeping with the 13-point election manifesto pledges of the Awami League for reforming the ailing banking sector, the Finance Ministry has already sought active intervention of the Bangladesh Bank to tackle illegal capital flight to foreign destinations and money laundering. It may be recalled that in 2017 a report of the Global Financial Integrity, a Washington based research and advisory organisation stated that unrecorded capital flow from Bangladesh stood at USD 61.63 billion between 2005 and 2014 -- mostly through the use of over and under-invoicing. Relevant branches of the Finance Ministry have now been asked to coordinate their action and formulate an effective and sustainable strategy to stop such illicit flight of funds. The banking sector has also been asked to put their house in order in this regard.
The ministry of finance and the ministry of planning will have to have greater inter-active engagement. This is required to rebuild trust not only within the business and manufacturing sectors but also among the foreign community who might be interested in investing and doing business here.
Success in this sphere will strengthen the efforts to be carried out in the future by diplomatic Missions abroad with regard to economic diplomacy and branding of Bangladesh. The new foreign minister A K Abdul Momen has underlined the particular importance of such activity. He has in this regard drawn attention to the need for the Missions to get more engaged with expatriate population of Bangladeshi origin and urge them to invest in different sectors. The diplomatic Missions through monitoring of the local markets should also help the ministry of commerce to boost exports by identifying new markets for our evolving diversified manufactured products.
If these areas can be addressed successfully, Bangladesh will be able to eliminate the negative denotations that have surfaced with the latest Forbes report at the end of 2018. It contained a list of "Best Countries for Business for 2019". Bangladesh has fallen behind most of its neighbours in the list. It has been ranked 109th among 161 countries. This was far below the rank achieved by most other economies in the region: India was at 63, Sri Lanka at 78, Bhutan at 106 and Pakistan at 102. Forbes acknowledged Bangladesh's notable improvements in GDP growth, foreign exchange reserve and energy infrastructure, but at the same time has also drawn attention to potential political instability, poor infrastructure, endemic corruption, prevalent bureaucratic mindset and slow implementation of economic reforms. They have observed that improving factory safety conditions need to be accelerated.
There should also be active planning with regard to enhancement of skill development to enhance opportunities for not only job opportunities abroad but also in attracting investment into Bangladesh.
In this context, it may be mentioned that according to the latest report of the Economist Intelligence Unit, Bangladesh has gained four places in the latest Democracy Index. This is the recognition of participatory engagement. As a citizen, one feels confident that further proactive efforts by the new government will enable the country to reach new heights.
Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.