The New Nation - Internet Edition

M. Zakir Hossain Khan

An ongoing global financial crisis, considered as a financial tsunami, has devastated the capitalized economy global economic giants. It is told that after 1931, this is the most devastating financial crisis of those structured economies; consequently, the so-called 'revolutionaries or promoters of the open market economy' have criticised the privatized financial institutions for the failures of the economy as well as the state. This has opened up the inherent weaknesses of the capitalist economy and recommends to review the whole economic policies as well as the frequent suggestions or intervention of the international financing agencies such as World Bank, IMF in the economic decision making process of the developing countries by keeping them under instantaneous pressure for the unbridled privatization. Bush administration have declared the bail-out plan to recover the crisis and the president elect Obama has also announced several policy options to boost the share market and bring the confidence over the market, but still the situation is not out of danger. Though the financial sector of Bangladesh is not linked with developed economy at large scale but, its export, remittance and foreign employment and their wage earnings are heavily linked with world economy.

Unfortunately, the policy makers of Bangladesh usually not rely on the expert opinions on each sector including economic issues; rather, they feel more comfortable to adopt the so-called suggestions from soc-called development partners. In this situation, if the current global financial crisis continues, in the long run, it would adversely affect the export, foreign aid, FDI and remittance of Bangladesh.

The key mitigation measure would be to prepare the own development and economic agenda and implementation strategy based on the own demand of the citizens and taking lesson from China and existing all types of economic and financial policy should be researched to replace so-called open market economy with the efficient and sustainable financial policy. The following remedial measures can be undertaken to mitigate the crisis.

In case of the sustaining the export market, the major focus of the export strategy would be to enhance the product and market diversification of the exportable commodities along with the incentives for the import substitution products (like palm oil, liquid milk, cell phones, transport vehicles etc.) and also increasing both the volume and existing exportable goods.

To adopt the effective policy, some significant steps should be adopted at Policy making level that includes the urgent implementation of the feasible/applicable strategies stated in Export Promotion Strategy Paper 2006-2009; evaluating the performance of the National Committee on Export and Import Monitoring Group, with the capacity building of local experts and staff introduce the comprehensive modeling exercise (said CGE modeling) to forecast the prospect and upcoming risks of local and global economy, export potentials and availability of future inputs; declare the special 'export award' for the businessmen in two category (such as volume of export and innovation in adding new item in the export), to empower EPB to act as a key policy-making body with the sole responsibility of the monitoring the trends and updates of the global financial crisis and recommending necessary policy options, and also to ensure the standard and quality of exporting products; immediate establishment of the World Trade Center both at Dhaka and Chittagong; regular invitation of the policy makers as well as business people of other prospective countries and appointment of high powered international lobbying group to motivate them. Immediate setting up of display center at all embassies and high commission offices as well as diplomatic offices of foreign missions in Bangladesh would add extra value for potential importers of other countries.

Besides, the policy makers should provide immediate effort for the bi-lateral contracts with prospective countries for withdrawal of tariff and non-tariff barriers on exports; review of the effectiveness of the tax holiday option along with the other provision and incentives in export and import and readjust the existing policies toward non-traditional and labor intensive exportable goods; impose progressive as well as 'green tax' on luxury goods; regrouping the list of Priority and Special Development Sectors in below categories -

Highest priority : Ship-building, agro-processed products, pharmaceutical products, light engineering products (including auto-parts and bicycles); software and ICT products, handicraft products, footwear and leather products; home textiles.

Higher Priority: finished leather products, jute products, uncut diamond; herbal medicine and medicinal plants, hand-woven textiles from hill areas

Special Development Sectors: frozen fish production and processing, electronic products, fresh flower and foliage, education and health services, tourism

To restrict abuse of the current crisis by dumping of the competitive countries the efficient policies and countervailing measures should be practiced, appoint special speedy tribunal to settle the tax refund related cases soon.

To mitigate this type of ongoing or upcoming crisis, the Special crisis management fund to provide assistance to labor, exporter or industries and to should stop the step to increase of electricity and gas tariff rate for industrial and commercial units.

To sustain the growth it is already proved by several studies the infrastructure sector play vital role to improve the infrastructural facilities and improving services. Regarding the steps, the steps should be taken to withdraw the license fee for users of captive power generator by BERC; a rapid and dynamic policy to meet the energy crisis and to focus simultaneously to use both renewable traditional and modern sources including solar and nuclear plant; immediate incentives or subsidies at progressive rate for utility services such as electricity, water and gas compatible with WTO agreement; to collect capital for energy sector by selling shares to Bangladeshi citizens with the sound public-private partnership to tackle the management crisis. To reduce operational cost and increase competitiveness more of the industries, more funds to encourage SME at rural areas and immediate construction of cold storages in some potential areas by BOOT process, special economic zone for NRB with the provision of tax holiday for the time being (may also establish public-NRB partnership in energy and power, infrastructure and bigger bridges, agro-product), accelerate full automation in NBR and port authority.

It is noted here that, a major effort is to be given to reduce the rampant corruption and harassments in getting tax refund from DEDO office and auto refund system for VAT for C&F services, telephone, electricity, insurance premium and shipping agent commission/ bill.

Taking the learning of the crisis, a central Bank has key role to protect any financial crisis and as a precautionary measures Bangladesh Bank should have own plan to control financial market and direct private banks to disburse loan at a reduced or low interest rate to real sectors.

To increase the capacity of the real sector, immediate training should be provided and introduce of the latest technologies to increase productivity and ensure competitive price.

Several economists have already warned about the squeeze of the market as well as potential for low end products. But, if the recession would be continued the potential of low end products may be another cumbersome an whatever the policy is adopted in changed situation that should longer in period and dynamic in nature.

Unfortunately, the Govt.'s has formed a management committee which is heavily constituted by the bureaucrats. In this situation, the diversification and the expansion of the export and product markets/diversification to extract the market share in developing, poor and neighbor/regional countries. Besides, appointing an internationally reputed advertising firm to adopt strategies for marketing of the existing and new Bangladeshi products such as ships, leather, agro-based products, handicrafts and education and health services and other traditional products such as dry fish, ceramics etc.

But to maintain the standard of the product and services at international level strict monitoring of the standards and ensuring the exemplary punishment to the dishonest exporters and officials should have to follow.

Due to shrinking of capital in the crisis prone developed countries, the aid providing countries may not meet their commitment, therefore we may have to readjust or rationalise our ADP through prioritizing the needs. Internal revenue generation has to be expanded through judicious review of tax net.

Due to the fall of USA and European economy, many Bangladeshi, working in those countries, may loose their jobs and ultimately, it will affect the remittance flow. Besides, due to fall of oil price the overall revenue of major oil-exporting countries will fall, though OPEC has decided to cut down the production but, it would not really work due to break down of cartel.

Any decline in the current income would cartel the creation of new markets along with the risks of offering poor salary and consequently, the overall wage earning from foreign countries, where a large number of Bangladeshi works, will deteriorate,. In this situation, the govt. should explore new markets for manpower export; under the guidance of the Chief Advisor, a special mission should be sent to the prospective countries, should provide tax or other incentives to the manpower agencies who will able to show the mentionable performance in manpower export, should provide capital machineries and technical support to the institutions providing training to the prospective manpower.

Besides, explore the right policies to export the required skill professional for the countries where Bangladeshi Peace Keeping Mission are working.

We believe that due to global linkages Bangladesh has to determine its own pathway to overcome the economic shocks and any ongoing and upcoming crisis can be managed through wishful political commitments and taking right decision at right moment. General people expect highest level of consciousness from policy makers and a dynamic policy and strategy can protect the affect.