In the first half of the current fiscal year, the country's economy has significantly bounced back from pandemic shocks, but there still lie some problems in the private sector that need to be resolved through public-private collaboration, economists and entrepreneurs say.
The government's policy support and stimulus packages are playing supportive roles in the economic recovery by making liquidity available, they add.
The measures taken to overcome the current economic crisis should also be sustainable for taking the country ahead, they said at a webinar titled "Current state and future outlook of Bangladesh's economy: Private sector perspective – July-December FY2020-21", organised by the Dhaka Chamber of Commerce and Industry (DCCI) on Tuesday.
The economists and business leaders also emphasised making necessary preparations prior to graduating to a middle-income country.
Dr Mashiur Rahman, economic affairs adviser to the prime minister, was the chief guest at the discussion. Former Bangladesh Bank governor Prof Dr Atiur Rahman, Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur, Chairman of Policy Exchange M Masrur Reaz, and Business Initiative Leading Development (BUILD) Chairman Abul Kasem Khan spoke at the event.
DCCI President Rizwan Rahman presented the keynote paper.
Dr Mashiur Rahman said the government is focusing on the rural economy and the agriculture sector. The government has successfully handled the Covid-19 crisis.
"The policies are on the right track and the growth momentum is sustained. But the full benefits of policy support will depend on how private sector entrepreneurs work," he added.
Dr Atiur Rahman said Bangladesh's economy is in a much better position even amid the global stagnation caused by the pandemic. This has been possible because of leadership qualities and timely bold decisions and policy support.
"If we can sustain above 6% growth even in the midst of a global economic contraction, it will be a great achievement. The economy is now breaking out of its shackles," he said.
"The government and the Bangladesh Bank have boldly eased policies with a view to ensuring adequate liquidity. The money flow has increased because of bringing more people under the social safety net. There is no need to bring any changes in policies until the end of the current fiscal year," Dr Atiur added.
As growth engines, cottage, micro, small and medium enterprises, and the agriculture sector should get more importance, he said, adding, "We must have sufficient liquidity in banks. And the liquidity should go to the manufacturing sector."
He also urged for long-term inclusive development despite the tax-GDP ratio is quite low.
"Besides, revenue generation is crucial for us and for that the National Board of Revenue should focus on increasing the tax net. Besides RMG, the ICT sector can be a big earner for the country and we have every potential in this sector. By the end of this year ICT alone has a target to achieve $5 billion export earnings," he mentioned.
To get investors' confidence, investment in infrastructure development should be increased along with speedy implementation.
Dr Ahsan H Mansur said, "We should not only focus on restoration rather we have to be prepared for the future challenges."
Putting an emphasis on reducing the poverty rate, he said the government needs to give support for boosting production and generating employment.
"But to create investors' confidence we need to work more. Otherwise, due to a lack of investors' confidence, even in the pandemic time, most foreign direct investments went to China and Vietnam," Dr Ahsan pointed out.
He said incentive structure should be compliant with the WTO. Moreover, the inflation rate should be reduced in line with the international rate.
Dr Ahsan said Krishi Bank, Shilpa Bank and a few others are underutilised. These institutions can be enough for the development of CMSMEs, he said. Banks should be more flexible in lending to small ventures.
Besides, the loan guarantee scheme of the Bangladesh Bank is not implemented yet. But, resource mobilisation, big data management, less physical control and efficient management system are essential to improve the tax-GDP ratio, he added.
Dr Masrur Reaz, chairman of the Policy Exchange, said during the Covid-19 time, supportive measures to the agriculture supply chain worked well. Export is slightly subdued as its market is going through uncertainty. But vaccination across the world starts and hopefully within the next six months, the situation will improve.
Unctad projected that global FDI might fall by 30-40% due to Covid-19, but in reality, it is about 42% in the last six months.
Industrial growth is a bit slow, business confidence slightly lowered. But business dynamism and business confidence, and domestic demand need to increase, he said suggesting that employment protection should be addressed in the next level of stimulus.
Abul Kasem Khan, chairman of BUILD said, "Economy is at a recovery stage but there are some challenges. In the taxation policy, we need to be competitive with other countries. Our tax-GDP ratio is one of the lowest in the region. The NBR should go after people who are not giving taxes to widen the net."
In the keynote, DCCI president Rizwan Rahman highlighted the present situation of the Covid-19 impacts on the economy, performance of fiscal and monetary policies, macroeconomic factors – inflation, private investment, international trade and skills and employment.
He also presented some recommendations referring to the current situation of agro and agro-processing sector, manufacturing and energy and power sector, service sector and its various sub-sectors.
He said due to the covid-19, in the first six months of FY21, GDP value reduced to $330 billion from $343.55 in the same period of FY20 while national poverty rose by 9% to 29.5%.
Foreign investment declined by 72.16% in July-September.
"We recommend attracting foreign investment and relocation of industries from China, Japan and South Korea to Bangladesh," said Rizwan Rahman.
He also suggested rationalising corporate tax and facilitating the cluster development of backward and forward industries in special Economic zones.
"In the agro and agro-processing sector, agriculture employs 40% of the total labour force. In July-January of 2020, the sector earned $591 million. But there are lack of health quality and packaging, testing lab facilities, sanitary and phytosanitary conditions.
"So in the sector, we recommended enabling an efficient distribution system of agriculture inputs, easing access to finance, making Bangladesh Krishi bank fully oriented to farmers."
In the first six months of FY21, leather and leather products made a 6% negative growth year-on-year. Central Effluent treatment plant at Savar is not running fully. As a result, local tanners are compelled to sell leather at 40% lower than the international rate.
Exports of medicines, light engineering products and jute and jute goods have registered good growth in the first six months of the FY21.
In the first half, pharma products' export rose by 17% in July-December while light engineering saw a 57% increase in exports.
CMSMEs play a vital role in job creation and GDP growth. "To promote the CMSMEs, we recommend a comprehensive framework by revisiting its definition, easing the access to finance, ensuring 25% of government procurement from CMSMEs and establishment of SME Bank," the DCCI president said.