Category Archives: Economic, Fiscal and National Policy/Taxation

Budget industry friendly, growth supportive: EAB

http://thenewnationbd.com/newsdetails.aspx?newsid=42034

Budget industry friendly, growth supportive: EAB
It put forward 5-point proposals for Govt consideration
B&F Report

Exporters Association of Bangladesh (EAB) has termed the proposed budget for 2012-13 fiscal as growth-oriented and industry friendly and has welcomed the government for prioritising key sectors like power and energy, agriculture, communication and physical infrastructure.

Giving its post-budget reaction at a press conference in Sonargaon Hotel in the capital on Sunday, the leaders of the EAB, the apex trade body of export sector, also hailed the government initiative to protect the local industry as well as support the export-oriented sectors.

“All these would have a positive impact on the country’s industrialisation as a whole,” they said.
EAB belives the proposed budget is ‘a pro-people and growth-oriented’ one which will also help to accelerate growth of the export sector.

“A higher export growth will help to attain the key budgetary goal of achieving GDP growth to 7.2 per cent and inflation within 7.5 per cent for the next fiscal,” it added.

Reading out a written statement, the EAB President Abdus Salam Murshedy said steps like reducing tax on capital machinery imports for export sector and for Effluent Treatment Plant (ETP), withdrawal of VAT from the rented factory premises and continuation of incentive package for exploring new markets will certainly boost up export earnings.

Besides, emphasising on human resources development, block allocation for employment generation, incentive package for capital market, setting up a hi-tech park in Gazipur and API park in Munshiganj and incentive for ship building industry are also some bold steps proposed in the budget for the upcoming fiscal, he said.

Murshedy, however, expressed dismay over the budgetary provision of hiking tax at source on export proceed and put forward 5-point recommendations to the government “for its kind consideration”.

He also urged the government to consider some proposals for the interest of the export sector. The proposals are withdrawal of 1.2 per cent tax at soucre on exports uninterrupted power and gas supply to the export-oriented industries, cut in bank interest rate to single digit, unified exchange rate for exporters and a enhance rate of cash incentive (tax free).

“Hike in tax at source fro, 0.6 per cent to 1.2 per cent will adversely impact the export sector by reducing competitive edge of local goods in the international market. It will also hurt profitability of the entrepreneurs,” Murshedy added.

He pointed out that export sector is passing through a critical time influenced largely by various external and internal threats. On the other hand, he said a significant hike in power and fuel prices hit hard the industry by rising cost of production.

“In such a situation, the industry cannot afford a leap of tax at source because it will be an extra burden for it,” he noted.

How to bring in more FDI

http://www.thedailystar.net/newDesign/news-details.php?nid=237086

How to bring in more FDI

Fahmida Khatun

Foreign direct investment (FDI) has made enormous leaps since the 1990s in terms of its growth in the global economic landscape. Due to paucity of resources in developing and least developed countries, FDI has become an important component of their development strategies and in many cases it proved to be a win-win situation to both host and home countries. Host countries want to gain from FDI in multiple ways such as through having capital, technology and knowledge. Home countries also benefit through investing as they can penetrate into markets, gain access to raw materials and diversify business activities. They can also overcome trade barriers and reduce transport costs.

Bangladesh is considered to be one of the potential economies despite being besieged by multi-faceted adversities such as frequent natural disasters, high density of population, political turmoil and a low production capacity. The resilience and inherent strength of the economy, mainly due to its robust sectors such as agriculture, readymade garments and remittances, have been the basis of such optimism. However, in order to make its graduation to the next level of growth and fully exploit the growth potential, the country’s investment scenario has to be improved. The lack of adequate investment is one of the important reasons for the growth below the potential of the economy. The domestic investment rate has been stagnant at around 24 percent to 25 percent of the country’s gross domestic product (GDP) for the last ten years which is far below the level required for a country aiming to be become a middle-income country by 2021 with a growth rate of 10 percent. The sixth five-year plan (2011-15) of Bangladesh targets a GDP growth of 8 percent by the end of the plan period. This requires that the total investment has to grow by 8.1 percent per year and the share of investment in GDP has to be 32.5 percent by fiscal 2015. Low domestic investment has been a matter of concern as it holds back foreign investment as well.

Even though Bangladesh has been trying to bring in FDI since its independence and put in place FDI friendly policies in the early 1980s (Foreign Investment Promotion and Protection Act 1980 was such an attempt) much before some of its neighbours, it has been unable to accelerate FDI at the expected level. In the 1990s, there was an attraction for the East Asian and European investors to invest in the readymade garments industry of Bangladesh, thanks to the Generalised System of Preferences (GSP) and the availability of labour at a competitive price. Currently, the concentration of FDI is mainly on transport, storage and communication, manufacturing and power, gas and petroleum. Other sectors such as agriculture, trade and commerce and, services receive nominal FDI. In 2010, manufacturing sector was the highest recipient at 27.82 percent of total FDI, while the construction sector received the lowest with a share of 0.01 percent. The growth of FDI in Bangladesh has, however, been very inconsistent. A major inflow of FDI was observed in the mid 2000s and rose to $913.32 million in 2010.

While discussing the impediments to bringing FDI into the country, a host of issues have been raised ranging from infrastructural constraints to bureaucratic complexities to image building. However, the crux of the problem does, in fact, lie in three broad areas. First is the limited access to physical infrastructure, particularly supply of gas and electricity. This has emerged as a binding constraint on investment promotion in Bangladesh. For example, the supply of gas between December 2008 and December 2011 has increased only marginally from 1,606 million cubic feet to 1,960 million cubic feet, indicating an average growth of 7.4 percent. On the other hand, the demand for gas rose by 12.3 percent during this period, leading to a wide gap between demand and supply. At present, the demand for power in Bangladesh is around 6,500 megawatt, while the supply is 4,699 megawatt. In the recent times, the FDI rise has been observed mainly in the export processing zones (EPZ) as there is little or no gas and electricity supply constraint like the domestic tariff area. In order to overcome infrastructural bottlenecks, aid for productive capacity needs to be enhanced significantly. However, effective use of these funds has to be ensured. Public-private infrastructure development policy can also be a powerful tool to tackle the supply side constraints.

The second bottleneck is the culture of confrontational politics, which poses a serious threat for the safety of property and resources of prospective investors. Acrimony and bitterness among political parties often lead to destruction and affect lives and properties of people which in turn deter not only foreign investment but also local private investment. Many investors are even willing to spend on infrastructure to facilitate their investment in other sectors, only if there are political stability and predictability of return on their investment.

The third constraint is the lack of good governance and prevalence of corruption, which have put a scar on the reputation of the country at the global level. Because of advantages such as competitive prices for labour and other services, investors may find Bangladesh a lucrative investment destination. However, predicaments such as delay and a lack of transparency in decision making process, a dearth of effective implementation of regulations and policies, and discriminatory incentive packages act as stumbling blocks in bringing in FDI to the country.

FDI is not a panacea for slow growth, and it has several negative implications too. These include capital flight and repatriation of profit, dependency on technologies and limited transfer of technology and transfer pricing. With effective regulatory and oversight mechanism such issues can be addressed. FDI can supplement the local effort to produce goods and services and create jobs. If local businesses flourish, foreign investors will have confidence to bring their resources. Promotion of local businesses through access to adequate finance and creation of an enabling environment should also be a key target. Economic diplomacy is vital at this day and age to attract foreign resources. This has to be accompanied by good marketing skill which in other words is called ‘branding’. Such image building task has to be done primarily by the government but complemented by the private sector and all citizens of the country.

The writer is an economist and head of research at the Centre for Policy Dialogue.

Dressed to impress

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Dressed to impress

The readymade garments sector is vital for Bangladesh's regional commerce, which will increase by more than 9 percent annually through to 2016. Photo: HSBC

Noel Quinn

When I tell people in Hong Kong, London or New York that Bangladesh is a land of untapped business opportunities, there are usually some who’ll raise their eyebrows in incredulity or admiration. For those who haven’t visited in person, it’s a country they only know from media headlines as a place of natural calamities and social pressures as the population expands.

Fortunately, I’m finding that the sceptics and uninformed are increasingly in the minority. As the global business community focuses its attention on Asia, there’s mounting interest in Bangladesh for its skilled workforce, its thriving economy and the impressive export industry it’s built in just over 40 years.

While acknowledging that Bangladesh still has much to do to realise the government’s long-term vision, I believe the prospects here are quite bright. So does HSBC Commercial Banking, which handles over 8 percent of the country’s international trade, and which recently showed Bangladesh to be the Asia-Pacific’s second fastest-growing trade partner after Vietnam. In fact, our research indicates that Bangladesh’s regional commerce will increase by more than 9 percent annually through to 2016.

Our confidence stems from what we see on the ground, in the cities and in the export processing zones, and from our expectations that Asia will increasingly sit at the heart of the global economy. Bangladesh now ranks higher than India, Indonesia and the Philippines in the World Bank’s ‘Doing Business’ report, and it has nurtured companies producing goods for household brands including Levis, Nike, Raleigh and Sony.

Some have suggested that Bangladesh could become like Mexico, which has established itself as a low-cost manufacturing hub for its enormous neighbour to the north. In some ways the analogy is insufficient in that Bangladesh borders India and is also close to China – two economies HSBC thinks will become the world’s third-largest and largest respectively by 2050. In other ways, the analogy exaggerates because by 2050, even after a seven-fold increase, we expect China’s income per capita will only be 32 percent of that in the US.

What we know today is that Bangladesh is a competitive place to do business when benchmarked against its emerging market peers. It has clear cost advantages, and a committed young workforce that’s keen to learn. With an increasing number of international companies relying on Bangladesh for the timely delivery of quality garments, the country has a medium-term opportunity to win manufacturing investment in this vital export sector. With economic austerity in the West making consumers there more cost-conscious, companies here have an opportunity to promote sales of affordable clothing while investing to rise up the value chain.

The challenge, of course, is that Bangladeshis want to increase their earning power. They want economic diversification that will bring new job opportunities while reducing the nation’s reliance on apparel and expatriate remittances. This will require effort to build the infrastructure businesses need to capitalise on Bangladesh’s location, and it will require effort to attract new industries and the skills transfer that comes with them.

Though the garment industry is likely to provide the backbone of the economy for some time to come, it’s encouraging to see that companies making goods as diverse as camera lenses, shoes, mobile phone components and car parts have chosen to set up plants in the EPZs. Local entrepreneurs and investors from Canada to Taiwan are starting to recognise Bangladesh’s potential as a location for light engineering, shipbuilding, agro-processing, pharmaceuticals and ICT. Samsung’s recent opening of a research and development centre in Dhaka is a good case in point.

Like many local businesspeople, HSBC is watching with great interest as the governments of India and Bangladesh negotiate greater access to each other’s road, rail, sea and air transport networks. For India, a deal will improve domestic links to its north-eastern states. For Bangladesh, it could help the country become a regional centre for trade and manufacturing, a gateway to the sea for Nepal and Bhutan, and the hub of a trans-Asia highway connecting India to China and South-East Asia.

Looking eastwards, Bangladesh is positioning itself to boost trade with China as China rebalances its economy from exports to sustainable domestic demand. Last year, HSBC helped a customer in the Dhaka EPZ to buy yarn from China in Chinese Renminbi. This deal was another sign of things to come, as Bangladeshi firms seek to cement relationships with Chinese partners, cut transaction costs and hedge foreign exchange risk in what is set to be the next global currency.

Clearly, I have to be balanced in my conversations with overseas companies. Bangladesh must ensure power supplies and communications networks are robust, for example, and it must recognise the competitive strengths of neighbours such as Vietnam, Cambodia and Pakistan.

As I also tell them, however, it’s clear to me that there are few people who can match Bangladeshis for their resilience in the face of a challenge. If this country continues to reinforce its links with the developed world, while deepening relationships in the emerging markets, it has every reason to demand attention in biggest corporate boardrooms.

Noel Quinn is the head of commercial banking for HSBC Asia-Pacific and group general manager for HSBC Holdings.

Govt to lease out lands to private firms

http://www.thedailystar.net/newDesign/news-details.php?nid=227757

Govt to lease out lands to private firms
Entrepreneurs will build 257 industrial units on unused lands of state enterprises
Rejaul Karim Byron

The government will allow private entrepreneurs to build 257 industrial units on lands owned but unused by state companies.

The cabinet committee on economic affairs yesterday approved a proposal of the Privatisation Commission — the first such move in Bangladesh.

The government will lease out the public lands to the private entrepreneurs initially for 35 years.

Mashiur Rahman, economic affairs adviser to the prime minister, will lead an 11-member committee to deal with the issue.

The committee will mark out unused lands of different state-owned enterprises and commercial institutions.

The committee will submit its recommendations to the cabinet committee in two months.

The committee members include the executive chairman of the Board of Investment, chairman of the Privatisation Commission, governor of Bangladesh Bank, Prime Minister’s principal secretary, and secretaries of Finance Division, textile and jute ministry, commerce ministry and industries ministry.

The Privatisation Commission has already conducted a survey on 39 state enterprises that have 1,288 acres as surplus lands.

If the government parcels out five acres of land to one industrial unit, about 257 new industrial units can be set up on 1,288 acres, the commission said in its proposal.

The new industrial units will see more than Tk 5,000 crore in investment in the next two years if the average investment per unit is Tk 20 crore, the commission said.

If each industrial unit creates employment for 200 persons, a total of 50,000 jobs may be generated, the commission estimated.

The commission also said, if the proposal is implemented, scope for more industrialisation will be created without affecting the existing state enterprises.

The government may also increase revenue collection without losing its lands.

The commission said gas, power and other infrastructures may be given to the new industrial units on the basis of lease or sub-lease from the existing government enterprises without creating new infrastructures.

Meanwhile, the cabinet committee on purchase gave a go-ahead to another proposal for purchasing 20,500 laptops at a total cost of around Tk 109.32 crore.

The laptops will be used in opening multi-media classrooms in 20,500 educational institutions at secondary and higher secondary levels. Each of the laptops will be purchased at Tk 48,527 from state-owned enterprise Telephone Shilpa Sangstha. The laptops will carry a three-year warranty.

Besides, the purchase committee approved a proposal for procuring 50,000 tonnes of wheat. An Indian trader, LMJ International Ltd, will supply wheat at $303.90 a tonne.

Industrial projects go full steam ahead

http://www.theindependentbd.com/business/finance/88560-industrial-projects-go-full-steam-ahead.html

Industrial projects go full steam ahead
Author / Source : Jasim Uddin Khan

Dhaka, Jan 6: The government has woken up, after three years of its tenure, to the bleak investment scenario and is taking steps to implement Tk 1600 crore worth of projects involving five specialised industrial zones and four BSCIC estates, by 2014. In 2011, the overall flow of investment (as percentage of GDP) came down to a standstill, compared to the first two years of the government, due mainly to shortage of industrial plots, liquidity crisis and inadequacy of gas and power, sources said.

The large specialised industrial projects including the Tk 550-crore Savar Leather Industry Park, Tk 235-crore Munshiganj Active Pharmaceuticals Industrial Park, Tk 200-crore Automobile Park at Amin Bazar, Tk 400-crore Sirajganj Specialized Industrial Zone and the Tk-150 crore Mirershari Special Economic Zone had long been facing manifold problems including legal tangle, availability of funds, land acquisition and complex bureaucracy. All the projects have got the Cabinet nod.

Industries minister Dilip Barua on Wednesday told The Independent that the government was set to launch all the mentioned industrial projects between 2013 and 2014. He hoped that the ongoing industrial projects would accommodate over 2,500 entrepreneurs with projected employment for five lakh people.

The government has projected a major investment boom that is slated to see the investment-to-GDP ratio rise by over six percentage points by 2014-15.

Barua said work order for the much-awaited Savar Leather Industry Park would be issued within the next couple of months after completing a legal process. He said land acquisition, earth filling, construction, training and loan disbursement for the project had already been completed.

The minister hoped that construction of the industrial park for manufacturing pharmaceutical ingredients at Munshigonj would be completed this year.

The Active Pharmaceutical Ingredients (API) Park project will reduce dependency on imported raw materials for this industry from next year.

The project faced a land acquisition problem and now the government has asked the implementing agency, Bangladesh Small and Cottage Industries Corporation (BSCIC). to complete the construction work by this year itself. The proposed readymade garment (RMG) industrial park worth Tk 438 crore is set to be completed by 2013.

The minister said both the BEPZA and BSCIC had received applications seeking 350 industrial plots which the RMG Park could honour.

The BSCIC is putting up an automobile estate at Amin Bazar in the capital aiming to rehabilitate the automobile engineering workshops, which are scattered all over Dhaka, in a healthy and safe environment.

The industrial estate will have 187 plots of different sizes under the project and after establishment it will create employment opportunities for 20,000 people directly and for many more indirectly, the minister said.

Besides the BSCIC is constructing the largest ever industrial park in Sirajgonj worth Tk 400 crore to boost industrialisation and invigorate the rural economy. There will be 801 industrial plots and, of them, 570 will be reserved for private industrial entrepreneurs.

The project, covering 400 acres at Saidabad and Kalia Haripur in the district town, also received the go-ahead from the economic council, he added.

The Tk 384-crore project, which will have around 801 industrial plots, is expected to be completed by mid-2014. A total of 570 export-oriented, import-substitute and domestic mills and factories will be set up in the industrial park, officials said.

Another industrial plot is coming up at Mirsarai on 25 acres. According to the profile of the project which will be implemented by this year, the town will have 186 industrial plots where 125 small and medium units could be set up.

Once implemented, the project would create 6,000 direct jobs apart from several thousand indirect ones, the minister said.

Besides land acquisition for Gopalganj, Comilla, Kustia and Rangpur industrial estates under BSCIC is going on and is expected to be completed by 2013.

ECNEC approves Tk 5,068 crore for seven development projects

http://www1.bssnews.net/newsDetails.php?cat=0&id=218400&date=2012-01-03

ECNEC approves Tk 5,068 crore for seven development projects

DHAKA, Jan 3 (BSS) – The Executive Committee of the National Economic Council (ECNEC) today approved seven development projects involving Taka 5,068 crore.

Of the projects, the major one is the Taka 3,912-crore Second Local Governance Support Project (LGSP-II), which will provide better services to people by strengthening the capacity of union parishads (UPs).

The approval was given at a meeting of the ECNEC, held in the NEC Conference room in city’s Sher-e- Bangla Nagar with ECNEC Chairperson and Prime Minister Sheikh Hasina in the chair.

“Of the total project cost, Taka 2,995 crore will come from the national exchequer while Taka 2,073 crore as project assistance,” said Planning Division Secretary Bhuiyan Shafiqul Islam while briefing reporters after the meeting. He said the Local Government Division will implement the project by July 2016.

Planning Ministry sources said World Bank (WB) would provide Taka 2,073 crore for the LGSP-II project when the rest would come from the national exchequer.

He said the project aims at ensuring an efficient, accountable and transparent local government system so people can be provided with need-based and better services. The first phase of the project was successfully completed in July 2006-June 2011 period.

During the second phase of the project, the UPs will get equal amount of fund from both the government and the WB, which will also be spent for developing rural communication and hat-bazar infrastructure, water supply and sanitation, education, health and agriculture.

Besides, massive training programmes will be arranged for organizational capacity building of the union parishad, involving social services departments of the government.

The ECNEC also approved the construction of 19 regional passport offices’ project with Taka 104 crore to make it convenient for the people to have their machine readable passport (MRP) from the nearby passport offices.

The committee also approved the construction of the Union Parishad Complex Bhaban (2nd phase) project with a cost of Taka 780 crore.

The other projects approved in the meeting are: Construction of Aviation Refueling Facilities at Sylhet Osmani International Airport (Revised) project (Taka 51 crore-GOB); Construction of Liquid Fuel System for Sirajganj 150 MW Peaking Power Plant (Revised) project (Taka 60 crore-GOB); Emergency rehabilitation & Expansion of Urban Areas Power Distribution system Under Rajshahi Zone (Revised) project (Taka 110 crore-GOB) and Construction of connecting road between Buriganga embankment and Mohammadpur Bus Stand under Dhaka City Corporation project (Taka 51 crore-GOB).

Ministers, advisers to the Prime Minister, members of the Planning Commission, secretaries and officials concerned were present at the meeting.

‘Provide infrastructures, see expats’ investments’

http://www.daily-sun.com/details_ds-%E2%80%98provide-infrastructures,-see-expats%E2%80%99-investments%E2%80%99_440_1_3_1_5.html

‘Provide infrastructures, see expats’ investments’
Staff Correspondent

The Bangladesh government needs to provide sufficient infrastructures, utility services and land to see a good chunk of UK investment coming in the country’s industrial sector, said a visiting speaker of a London borough council.

Mizanur Rahman Chaudhury, Tower Hemlets Speaker of Council, also stressed the need to build special industrial zones and develop good governance to attract the Bangladeshi expatriates in London to invest in their own country.

The Speaker of Council came up with these suggestions when he met Industries Minister Dilip Barua in Dhaka on Sunday.

“Bangladeshi expatriates will be attracted to invest here in industrial sector if they find sufficient infrastructural supports along with special industrial zones,” Mizanur Rahman Chaudhury said, adding that the country has made significanct progress in overall economic condition.

He emphasised construction of special industrial zones, particularly in Sylhet, where the Bangladeshi expatriates in London could invest under public-private partnership.

Dilip Barua said the government prioritised the development of modern technology industries in the country. “Special industrial zones are being set up to attract the foreign investors.”

Dilip Barua highlighted the package incentives for the both local and foreign investors, saying that the government was offering facilities like tax holiday, freedom to use profit and residence permit for them.

“Both local and foreign investors can enjoy facilities equally,” he said, adding that a congenial atmosphere for investment prevailed in the country.

Dilip Barua urged the Bangladeshi expatriates in London to come up with industrial investments and contribute to economic development of their own country.