The New Nation - Internet Edition

The CNG price hike

THE Government has refixed the price of Compressed Natural Gas (CNG) with effect from 24th April. The earlier price per cubic metre of CNG was Tk. 8.50 which was fixed in mid -June of 2005. The price has been refixed at Tk. 16.75, that is a hike of more than 100 per cent. In 2005 the price of a litre of octane was Tk. 35. Its price has risen to Tk. 67. Petro Bangla has been sustaining losses. International hike of price of petroleum has burdened the corporation much. Therefore, a refixation of price of CNG could logically be thought of. But refixation by doubling the price is not considered rational at a time when the poor and middle income sections of the people are hard pressed by the unusual rise of prices of essentials.

The government has said that to reduce the loss incurred by Petro Bangla the government had to refix the price of CNG. Even if the government's point is accepted the rise of price by 100 per cent may not significantly reduce the loss of Petro Bangla. CNG was introduced as fuel for vehicles since 1980s as a cheap and easily available alternative. Nearly 1.25 lakh vehicles of Dhaka city have been turned to CNG. Now either on an argument of rising price of octane or lowering the loss of Petro Bangla doubling the price of CNG goes against the premise on which it was introduced. Similarly, if tackling of loss of Petro Bangla is the target doubling the price is not necessary.

The government has announced that the private transport companies will not be allowed to raise their fare or freight. But many of them have already done it from 24 April. The government should also keep in mind the fact that the cost of increased fare would ultimately have to be borne by the poor people.

Power crisis and business

A SEMINAR organised in the city the other day only reflected great anxieties and fears gripping more and more of the country's businesses due to power crisis which is not getting any better. The gap between power demand and its actual supply is now some 1,500 mw. Industries and services are reeling from the shortfall in supply and they maintain that production losses have climbed to as much as 30 per cent due to this factor. They apprehend even higher losses in the coming days and that would be unbearable.

Clearly, the way things are now, even the conservative projection of a 5.5 per cent economic growth in 2008 from donor agencies, looks difficult to achieve. Growth could plunge far lower than the projected figure. Some analysts are predicting stagnancy, the first time that could happen after the independence of Bangladesh. Realistically looking at it, things may not be so bad in the end. But one thing can be said with certainty that growth will very likely be squeezed hard in the present year and an outcome of this will be more joblessness and aggravation of poverty.

The government must engage in hard thinking and prompt doing of things 'immediately' to improve power supply. The tight fist should be eased to enable the fastest acquisition of power generation capacities by private operators. Currently, a set of regulations discourage the private sector from developing their own power source. The regulations need to be cut down to ensure duty-free import of generators. At the same time, PDB authorities should do their very best to increase generation from present units and supply the same in a planned manner to business-oriented consumers. For the medium and the long terms, increased generation of power from coal must be made a reality at the fastest.

Aggressive deposit hunting may be counter productive

Maswood Alam Khan

Too many bankers in Bangladesh have been chasing too few prospective savers to build up their deposit portfolios, the lifeblood of a bank for investment. Prime banks which used to bask in their surplus liquidity of cash have of late started feeling the crunch as they are finding it strenuous to maintain their statutory requirement of minimum deposits for smooth functioning of their banking business. Promoters of banks have already been fielded for aggressive deposit hunting with their innovative products to motivate depositors to save their disposable income with them, but not with much success.

Small depositors are crushing their savings to meet rising prices of their daily necessities. Clients who developed a smooth saving habit by setting aside a small amount of their disposable income every month to build their pension funds through a variety of pension plans of different banks are either going for premature encashment of those schemes or are loath to start afresh the same scheme on maturity of the previous ones. On the other hand, people belonging to big and medium income groups are finding investments in stock market or in real estate more lucrative than in any deposit product of a bank---in an attempt to hide their black cash from the glare of tax and anticorruption authorities.

As inflation exceeds interest rates offered by our banks, genuine holders of cash, especially wage earners with their savings made out of their hard labour abroad, opt for buying lands, shops or apartments with a view to protecting their savings from being eroded by inflationary pressures.

But, a majority of intending buyers of real estate properties in Bangladesh land themselves in the traps of unscrupulous estate dealers in the absence of any strict punishment against manipulators and cheats who foist defective titles of real estate upon naive buyers.

With an expectation of making quick money a number of people belonging to small and medium income groups having no expertise or experience on technical and fundamental analyses on stock picking are of late blindly following in the footsteps of their peers or a frequenter to the corridors of stock markets to play with equities---landing themselves into another booby trap if they don't know how to distribute investment risks by not putting all their nest eggs in one basket.

In short, people in general are distancing themselves from banks for their investments if their disposable income or cash savings exceeds a limit that is too glaring. They also apprehend the bankers no more can guarantee maintaining strict confidentiality of their transactions the banks once in the distant past had a reputation to uphold, especially after strict enforcement of Money Laundering Act.

'Saving' differs from 'savings'. 'Saving' connotes to an increase in one's assets, an increase in net worth, whereas 'savings' refers to single part of one's assets, usually cash deposits in his/her savings account with a bank. Saving refers to an activity occurring over time, a flow variable, whereas savings refers to something that exists at any one time, a stock variable.

Saving is closely related to investment. By not using income to buy consumer goods and services, if the resources are instead invested as fixed capital to buy, for instance, machinery, the saving thus derived contributes directly to economic growth.

Savings with a bank is also not always a good sign for a vibrant economy, especially when savings far exceeds investments for a long time---foreboding a general glut and recession. So, to discourage long term savings, interest rates are adjusted with an abnormal rise in savings to divert idle money out to stimulate investment in the market.

But, when depositors withdraw their savings from banks en masse to stash the same under a mattress or to deploy the fund in fixed and silent assets like land and apartments which are not directly so much related to day-to-day business cycles banks get dried up of their lifeblood---an ominous signature of stagflation. Savings taken out from banks and kept hidden elsewhere may mean no decrease in total savings, but may result in a decrease in investment through banks in economic activities causing a shortfall of demand rather than to economic growth---a situation often termed as the 'paradox of thrift'.

Given the poor health of most of the companies enlisted with our stock markets the windfall gains and profits from the shares changing hands are ephemeral in nature that may at one stage hit a holder of a share with a real hard time at the end of the day. Although experts report success in determining future gains from a share through 'Technical Analysis' and 'Fundamental Analysis' of the companies concerned many economists suggest that because of 'efficient market theory' it is also unlikely that any amount of analysis can help an investor make any gains above the stock market itself. In a normal distribution of investors it is always ironically the richest, the outliers, who in a game of chance have always flipped the heads and the poorest the tails.

The poor people, especially the farmers who are permanently living in rural areas, set aside and preserve in their indigenous warehouses a part of their harvests for future use, for personal consumption as well as for sale to meet their future cash requirements. They are not really interested in holding money in a bank's savings accounts for future needs as interest rates offered by banks are not commensurate with the gain they expect from future sale of their hoarded harvests, though they incur a substantial amount of loss from pilferage and wastage of their hoards due to unscientific way of preservation and thievery.

They however save their disposable income with some NGOs who offer them much higher rates of interests compared to government-owned banks who offer only one percent more interest than in urban areas. And the NGOs to cover their cost of fund lend the savings to intending borrowers at abnormally high rate, thereby making the poor in need of loans utterly bereft. Moreover, exploiting the gullibility of the rural people some mushrooming NGOs, as we often find in newspaper reports, offer the lure of high return on deposits only to flee away with the poor's money on a future date.

The rural people who toil in the fields to grow crops for our survival will have to gradually leave their profession of cultivation if their stay in the villages and engagement in the fields are not made attractive and financially rewarding and if the government fails to protect their savings from losing their value. It is only the government-subsidized banks that can help a cultivator shield his savings of hoarded crops if the cultivator finds his sale proceeds not eroding in a bank---a scenario possible, if the bank offers him insurance against inflation.

There is already a disturbing symptom visible as we find women working in the fields as cultivators and also in the construction sites as haulers of heavy loads they are not at all physically fit for instead of taking care of their in-house chores and rural men pulling rickshaws and driving locally fabricated 'nasiman' vans (a hotchpotch made of unscientific parts perilously plying on roads and highways) instead of working in the fields they are bodily fit for.

Such trend of women shunning their time-honored and feminine roles inside homesteads and men shying away from their traditional and masculine roles as cultivators does not really augur well for our future. Tons of money our government spends to subsidize fertilizer or power for the poor pass a plethora of intermediaries who take cuts to line their own pockets and only a minuscule amount of the subsidy ultimately percolates to the pockets of the rural poor. Stopping all kinds of present subsidies in cash or kind if only savings and loans offered by banks for the rural poor are heavily subsidized by the government---to the extent of two percent above inflation for savings and two percent below bank rate for credits---a broad base of national savings with the banks could thus be developed easing the present crunch of liquidity and a wider rural population could enjoy all kinds of banking accommodation.

Such subsidy of savings in the rural areas will encourage our cultivators to sell their produces immediately after harvest instead of taking risks of hoarding their food grains in their homesteads once they would learn that their savings with a bank will always be guarded by an interest rate above inflation which means a cultivator will enjoy 12 percent of interest rate for his savings with a government-owned bank, if the present rate of interest is 10 percent.

Poor people in the rural areas are not as fortunate as rich people in the urban areas who buy government bonds like 'savings certificates' at rates higher than the inflation rate. Because, village people cannot really accumulate enough money to buy those certificates of high denominations and there is no scheme floated by the government that may allow a rural saver to save a small amount of money every month to earn as high as 12 percent interest like that of a 'savings certificate'.

Moreover, a cultivator does not also get much opportunity to buy those 'savings certificates' of high denominations from a rural outlet of a bank even if he can manage money by selling their harvests, as bankers serving in rural areas feel loath to sell those government-issued 'saving certificates' out of fear that their banks would be deprived of their own deposits they have garnered once the rural people get the taste of high-interest bearing government-issued certificates.

Duel interest rates for savings---higher rates for government-issued savings certificates and lower rates for bank-issued fixed or savings deposits---have made bankers dubious about counselling their clients with better ideas on savings. If the banks were allowed to retain sale proceeds of 'savings certificates' for lending to cultivators---instead of transferring the proceeds forthwith to the central bank---the bankers would have been more encouraged to motivate the rural people to buy those 'savings certificates', thereby also enriching the deposit bases of the banks. And the banks cannot afford to offer to the cultivators interest rates for their own deposit products as high as that of 'savings certificates' unless the government heavily subsidizes the deposit products meant for rural poor.

The reason behind huge subsidization in agricultural sectors in any developed country is not merely for currying favours with the rural people to win votes. The amount of money defrayed to cultivators in Japan or in any western country as subsidies for agricultural produces is more than enough to import many times the same quantity of the produces from countries where cost of labour is too low.

Still, peasants in any developed country are guaranteed to enjoy perpetual agricultural subsidization. One of the reasons behind agricultural subsidy is to keep the community of farmers engaged in their cultivating profession so that people, in case of a war or any natural calamity when importation of food from abroad may not be possible, don't die from hunger due to lack of farmers on fields.

Once a farmer gets the taste of working in the comfort of shades inside a factory or in an air-conditioned office---we must remember---he won't go back to the fields under the scorching sun to toil whatever the incentives offered in the event of a war. His progeny too would be too used to sedentary professions in the towns to hold ploughs in villages in a future emergency.

So, for our own interest we must keep our farmers happy and content. Subsidizing their savings in a bank is a novel way to help the cultivators feel pleased with their disposable income kept in a rural bank branch the way government-owned banks offer loans to farmers at a rate of interest lower than their cost of fund. Of course, the government in that case have to defray the banks with the cost of funds thus incurred for subsidizing interests on both savings and loans for rural people.

Asia and the Pacific pays high price for progress

Nairobi, 25 October: Asia and the Pacific, home to 60 per cent of the world's people, are making "remarkable" progress in reducing poverty, a UN report says. The region is also improving its ability to protect the environment, energy efficiency is increasing in many places, and drinking water provision has advanced considerably in the last decade. But progress has come at a price. Increases in consumption and associated waste have contributed to the exponential growth in existing environmental problems. Serious challenges remain, including urban air quality, fresh water stress, agricultural land use (a threat to food security) and increased waste. The illegal traffic in electronic and hazardous waste is a new challenge affecting human health and the environment.

Environmental and economic policies have not been fully integrated, a major obstacle to establishing an effective system of environmental management. The warnings come in Global Environment Outlook 4, GEO-4, the latest in the series of flagship reports from the Nairobi-based United Nations Environment Programme. GEO-4 is published 20 years after the World Commission on Environment and Development (the Brundtland Commission) produced its seminal report, Our Common Future. It describes the changes since 1987, assesses the current state of global atmosphere, land, water and biodiversity, and identifies priorities for action.

GEO-4 salutes the world's progress in tackling some relatively straightforward problems, with the environment now much closer to mainstream politics everywhere. But despite these advances, there remain the more persistent issues for which existing measures and institutional arrangements have systematically demonstrated inadequacies and where solutions are still emerging. Failure to address these persistent problems, UNEP says, may undo all the achievements so far on the simpler issues, and may threaten humanity's survival. The report adds - "There are no major issues raised in Our Common Future for which the foreseeable trends are favourable." But it insists: "The objective is not to present a dark and gloomy scenario, but an urgent call for more stringent action."

GEO-4 says the well-being of billions of people in the developing world is at risk, because of a failure to remedy the relatively simple problems which have been successfully tackled elsewhere.

It says the world as a whole is living far beyond its means. The human population is now so large that "the amount of resources needed to sustain it exceeds what is available…humanity's footprint [its environmental demand] is 21.9 hectares per person while the Earth's biological capacity is, on average, only 15.7 ha/person… ".

GEO-4 says ecosystems and human health in Asia and the Pacific continue to deteriorate, while population growth and rapid economic development have driven significant environmental degradation and loss of natural resources.

However, the report also recognizes the region's achievements in protecting its environment, key to tackling poverty. Several countries have already achieved many of the MDG targets and have set themselves new and more demanding goals, called MDG Plus. This is the first GEO report in which all seven of the world's regions emphasize the potential impacts of climate change, which GEO-4 says is likely to mean more severe droughts and floods in the region, as well as soil degradation, coastal inundation and salt water intrusion caused by sea level rise. Agricultural productivity is likely to decline substantially, because of warmer temperatures and shifting rainfall. South Pacific island states are extremely vulnerable to climate change and associated sea-level rise, and some may have to consider migration and resettlement. Health problems are likely to worsen, with higher rates of cholera, dengue fever and heat-related illnesses.

The climate change threat is now urgent. Some experts have identified a 2°C increase in the global mean temperature above pre-industrial temperatures as a threshold beyond which climate impacts become significantly more severe, and the threat of major, irreversible damage more plausible. This implies emission reductions of 60-80 per cent by 2050 in developed countries.

Negotiations are due to start in December on a treaty to replace the Kyoto Protocol, the international climate agreement which obligates countries to control anthropogenic greenhouse gas emissions. Although it exempts all developing countries from emission reduction committments, there is growing pressure for some rapidly-industrializing countries, now substantial emitters themselves, to agree to emission reductions.

GEO-4 says climate change is a "global priority", demanding political will and leadership. Yet it finds "a remarkable lack of urgency", and a "woefully inadequate" global response.

On air quality, the region's growing energy needs and the "exploding" growth in motor vehicles are causing serious damage, with haze pollution from forest fires in South East Asia making matters worse.

Excessive use of surface and underground water, industrial pollution, and inefficient use of fresh water all contribute to water stress. There are also indications of unprecedented glacier retreats in the Himalayan-Hindukush region.

South East Asia has set aside 14.8 per cent of its land for protection, above the world average for 2003 of 12 per cent. But elsewhere in Asia and the Pacific less than 10 per cent of land is protected.

Arable land is being degraded in all sub-regions; some countries appear to have taken counter-measures sufficient to overcome the impact on agricultural production such as substituting new arable land for degraded land.

Since 1987, Asia and the Pacific has become the world's fastest developing region, imposing enormous pressures on its ecosystems, such as mangrove forests and coral reefs.

This development, the region's greater affluence and new lifestyles, have led to changes in consumption patterns and the generation of large quantities of waste. Unsanitary landfills contaminating land and groundwater are of particular concern.

More than 90 per cent of the 20-50 million tonnes of electronic waste produced globally every year-ends up in Bangladesh, China, India, Myanmar and Pakistan. But Asian workers are reported to be "using obsolete technologies to process 21st century wastes".

Effective waste management strategies and systems are either completely lacking or else inadequate in many Asia and the Pacific countries, posing a serious threat to human and environmental health.

The future will be largely determined by the decisions individuals and society make now, GEO-4 says: "Our common future depends on our actions today, not tomorrow or some time in the future."

For some of the world's persistent problems the damage may already be irreversible. GEO-4 warns that tackling the underlying causes of environmental pressures often affects the vested interests of powerful groups able to influence policy decisions. The only way to address these harder-to-manage problems requires moving the environment from the periphery to the core of decision-making: environment for development, not development to the detriment of environment.

Regional Highlights: China's sustained growth and the acceleration of India's economy have contributed to the reduction (between 1990 and 2001) by nearly 250 million, of the number of people living on less than US$1 a day. Efforts at reducing malnutrition, however, have been less successful.

Across the region, 17.6 per cent of the people (655 million) still lack access to safe water. South Pacific states have made no progress, and Central Asian countries have fallen back.

The World Health Organization estimates that more than a billion people in Asia are exposed to outdoor air pollutant levels above WHO guidelines, causing the premature death of about 500 000 people a year.

There is evidence of significant adverse effects from tropospheric (ground-level) ozone on staple crops in some developing countries, including China, India, Pakistan.

Fertilizer application in the East China Sea's catchment area has risen by up to 250 per cent and the number of harmful algal blooms in coastal waters, often caused by fertilizer pollution, has also risen dramatically. Properly conserved ecosystems support human well-being: the large mangrove forests in Phang Nga, the most tsunami-affected region in Thailand, gave significant protection in the 2004 disaster.

Nearly 120 square kilometres of mangroves planted in Viet Nam at a cost of about US $1.1 million have saved $7.3 million a year in dyke maintenance.

Between 1987 and 2004 energy use in Asia and the Pacific increased by 88 per cent, compared with a global average rise of 36 per cent.

During the 1990s the number of cars and two-wheeled motorcycles in China and India rose by more than 10 per cent annually. Orange roughy stocks off New Zealand were fished to 17 per cent of their original spawning biomass within eight years.

-GEO4