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Lower job creation at higher GDP growth appears misleading

Business Report
 
Bangladesh shows the paradox with higher a growth rate in recent years while job creation remains scare raising the question why economic growth is failing to reflect its presence in the job markets. 
The Centre for Policy Dialogue (CPD) made the disclosure in a pre-budget press conference on Wednesday last in the city saying the economy has failed to create adequate jobs when the government is claiming continued higher GDP growth in the past several years.
The experts’ think-tank said the economy is estimated to register 7 percent growth in the outgoing fiscal 2015-16 largely supported by the pay hike of public employees, after maintaining more than 6 percent growth in the past decade.
But the economic growth, particularly since 2013, could not result in enough job creation, it said wondering that revenue expenditure is going more to non-productive sectors like payment to higher pay scale and this may be one of the reasons for failure to create enough jobs despite higher budgetary public expenditure..
The CPD said the number of jobs rose impressively during 2002-2013, by 13.6 lakh per year. But it appears to have fallen to only three lakh a year since 2013. as per data on latest labour force presented by Bangladesh Bureau of Statistics.
The number of jobs declined by 12 lakh in the manufacturing sector in two years since 2013, said Towfiqul Islam Khan, a research fellow of CPD at a press briefing at Cirdap auditorium in Dhaka. 
“We have to think about the GDP growth that does not ensure enough job creation to benefit the greater section of the society,” CPD’s senior Fellow Debapriya Bhattacharya said in this connection.
He said the economy is expected to get rid of the 6-percent-plus growth trap at a time when the private sector investment declines as percentage of gross domestic product and tax collection remains low.
The rate of job creation and labour productivity have also declined although various factors such as inflation, bank interest rate on loans, balance of payments position and exchange rates remain favourable for economic growth, the CPD said. Impressive economic performance since the early 2000s was accompanied by strong growth in labour force up to 2013. But, this trend is currently showing signs of stagnation.
“In light of impressive GDP growth, sluggish labour market growth and an emerging demographic dividend provide causes of concern.” The government should pay attention to raising private investment and jobs through budgetary measures in the coming fiscal year, the CPD said.
It also called for increased allocation for social sectors, particularly education and health. Bangladesh ranks 155th out of 161 countries and 189th out of 190 countries in public spending as percentage of GDP on health and education.
The CPD said the unemployment rate for educated labour force, particularly for those having secondary and higher secondary education, has increased significantly but has fallen for uneducated workers and jobseekers. 
This regressive trend is a major concern for a country seeking to maintain the status of a middle-income country, it added.
Bhattacharya said education is not giving guarantee of employment. Most of the unemployed people have higher secondary education. He said the outgoing fiscal year will be marked as a year of high growth but four indicators, including the decline in private investment as percentage of GDP and job creation, have created a ‘dialectical situation’.
“It is the major contradiction of Bangladesh economy. So, only high growth will not be enough, its quality and sources are important,” Bhattacharya said.
The CPD said the role of private investment in GDP growth becomes rather weak. The investment growth in manufacturing sector remains sluggish particularly because of a lack of adequate infrastructure, including the supply of quality electricity and gas.
New investment in the apparel sector, which accounts for 48.3 percent of manufacturing sector has also been slow.
Citing a statistical modelling, CPD said private investment in Bangladesh would more than double had its law and order situation been like that of India.
“Thus the rule of law emerges as a very significant factor in upward drive of private investment which in turn is quite crucial to ensuring high growth,” the CPD said.
On the budget for next fiscal year, the CPD demanded making projection of revenue and expenditure in a realistic manner, saying the gap between the two is widening.
The think-tank suggested a 2-3 year plan to implement the VAT and Supplementary Duty Act 2012 in a realistic and staggered manner as there is opposition from businesses.
It said prices of some items such as electricity and steel will go up for the imposition of 15 percent value added tax. These two items currently enjoy reduced rates.
The CPD favours the new law that aims to automate the VAT system but capacity of small and medium enterprises needs to be enhanced for the implementation of the law.
CPD Executive Director Mustafizur Rahman said the government should keep the VAT rates at a low for some items as the impact of the indirect tax falls on common people. The existing law provides scope for VAT exemption in some service sectors. 
“We suggest keeping VAT rates reduced in some areas in socio-economic and industrial context,” he said. The focus should be on collecting more income tax.
The CPD has recommended reduction of prices of diesel and kerosene, saying the recent cuts in prices of oil favoured the richer section of the society. It stressed the need for an agricultural price commission to ensure fair prices for growers and an independent financial sector reform commission to identify problems in the sector.
Repeated recapitalisation of state-owned banks by people’s tax is difficult to justify when the state can’t provide adequate support to the poorest and marginalised sections due to scarcity of resources, the CPD said.

Comment

Business Report
 
Bangladesh shows the paradox with higher a growth rate in recent years while job creation remains scare raising the question why economic growth is failing to reflect its presence in the job markets. 
The Centre for Policy Dialogue (CPD) made the disclosure in a pre-budget press conference on Wednesday last in the city saying the economy has failed to create adequate jobs when the government is claiming continued higher GDP growth in the past several years.
The experts’ think-tank said the economy is estimated to register 7 percent growth in the outgoing fiscal 2015-16 largely supported by the pay hike of public employees, after maintaining more than 6 percent growth in the past decade.
But the economic growth, particularly since 2013, could not result in enough job creation, it said wondering that revenue expenditure is going more to non-productive sectors like payment to higher pay scale and this may be one of the reasons for failure to create enough jobs despite higher budgetary public expenditure..
The CPD said the number of jobs rose impressively during 2002-2013, by 13.6 lakh per year. But it appears to have fallen to only three lakh a year since 2013. as per data on latest labour force presented by Bangladesh Bureau of Statistics.
The number of jobs declined by 12 lakh in the manufacturing sector in two years since 2013, said Towfiqul Islam Khan, a research fellow of CPD at a press briefing at Cirdap auditorium in Dhaka. 
“We have to think about the GDP growth that does not ensure enough job creation to benefit the greater section of the society,” CPD’s senior Fellow Debapriya Bhattacharya said in this connection.
He said the economy is expected to get rid of the 6-percent-plus growth trap at a time when the private sector investment declines as percentage of gross domestic product and tax collection remains low.
The rate of job creation and labour productivity have also declined although various factors such as inflation, bank interest rate on loans, balance of payments position and exchange rates remain favourable for economic growth, the CPD said. Impressive economic performance since the early 2000s was accompanied by strong growth in labour force up to 2013. But, this trend is currently showing signs of stagnation.
“In light of impressive GDP growth, sluggish labour market growth and an emerging demographic dividend provide causes of concern.” The government should pay attention to raising private investment and jobs through budgetary measures in the coming fiscal year, the CPD said.
It also called for increased allocation for social sectors, particularly education and health. Bangladesh ranks 155th out of 161 countries and 189th out of 190 countries in public spending as percentage of GDP on health and education.
The CPD said the unemployment rate for educated labour force, particularly for those having secondary and higher secondary education, has increased significantly but has fallen for uneducated workers and jobseekers. 
This regressive trend is a major concern for a country seeking to maintain the status of a middle-income country, it added.
Bhattacharya said education is not giving guarantee of employment. Most of the unemployed people have higher secondary education. He said the outgoing fiscal year will be marked as a year of high growth but four indicators, including the decline in private investment as percentage of GDP and job creation, have created a ‘dialectical situation’.
“It is the major contradiction of Bangladesh economy. So, only high growth will not be enough, its quality and sources are important,” Bhattacharya said.
The CPD said the role of private investment in GDP growth becomes rather weak. The investment growth in manufacturing sector remains sluggish particularly because of a lack of adequate infrastructure, including the supply of quality electricity and gas.
New investment in the apparel sector, which accounts for 48.3 percent of manufacturing sector has also been slow.
Citing a statistical modelling, CPD said private investment in Bangladesh would more than double had its law and order situation been like that of India.
“Thus the rule of law emerges as a very significant factor in upward drive of private investment which in turn is quite crucial to ensuring high growth,” the CPD said.
On the budget for next fiscal year, the CPD demanded making projection of revenue and expenditure in a realistic manner, saying the gap between the two is widening.
The think-tank suggested a 2-3 year plan to implement the VAT and Supplementary Duty Act 2012 in a realistic and staggered manner as there is opposition from businesses.
It said prices of some items such as electricity and steel will go up for the imposition of 15 percent value added tax. These two items currently enjoy reduced rates.
The CPD favours the new law that aims to automate the VAT system but capacity of small and medium enterprises needs to be enhanced for the implementation of the law.
CPD Executive Director Mustafizur Rahman said the government should keep the VAT rates at a low for some items as the impact of the indirect tax falls on common people. The existing law provides scope for VAT exemption in some service sectors. 
“We suggest keeping VAT rates reduced in some areas in socio-economic and industrial context,” he said. The focus should be on collecting more income tax.
The CPD has recommended reduction of prices of diesel and kerosene, saying the recent cuts in prices of oil favoured the richer section of the society. It stressed the need for an agricultural price commission to ensure fair prices for growers and an independent financial sector reform commission to identify problems in the sector.
Repeated recapitalisation of state-owned banks by people’s tax is difficult to justify when the state can’t provide adequate support to the poorest and marginalised sections due to scarcity of resources, the CPD said.

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BUSINESS OPPOSES FLAT RATES
New VAT law to remain in hold again

Business Report

 
In view of severe protest from the business community, the govern-ment is contemplating to put in abeyance the implementation of the new VAT act that requires a flat rate of 15 percent by all business to simplify the procedure and increase government revenue collection.
The new development runs counter to the government pledge to the International Monetary Fund (IMF) that the law would be enforced from July this year. Business chamber and trade association are opposed to introduction of the new system because they fear the load would be too much and businessmen are not prepared for it. They also call for implanting the law in phases. 
“The VAT law implementation is on track and we are firmly committed to its launch in July 2016,” Finance Minister AMA Muhith had earlier written to IMF Managing Director Christine Lagarde in October last year.
In mid-May, Muhith however alerted the parliamentary standing committee on the finance ministry that the law may not be implemented in July although he was trying to win support from business in this respect. The committee opposed the implementation of the new law at that meeting.
A high-level meeting of the government has recently discussed the issue and decided not to implement the law from July this year. 
The stance has already been communicated to the National Board of Revenue and the next budget proposal has been prepared accordingly. The new VAT law was passed in parliament in 2012, but its implementation was delayed time and again due to opposition from businessmen and a lack of preparation by the tax authority.
The IMF delayed an instalment of its Extended Credit Facility due to a delay in the new VAT law. The finance ministry had informed the IMF that prior to placing the new law in parliament in 2012, the new VAT law underwent extensive consultation with takeholders. Despite this, the new law has come under criticism by the business community.
To counter the criticism, the NBR and Federation of Bangladesh Chambers of Commerce and Industry formed a joint committee which submitted its report in January last year.
As per their recommendations, some amendments were made to the law, and passed again in parliament in September. Major changes in the new law are: VAT will be a single rate at 15 percent, the tax base will be determined on the basis of actual transaction values and there would be no pre-approved values or truncated base and limited exemption.
After these, the finance minister again committed to implementing the new law in July this year to the IMF; accordingly, the global lender released its two remaining instalments in one go.
However, the business community began strong protests against the law and threatened to go for an all-out movement. Commerce Minister Tofail Ahmed also publicly requested the finance minister to implement it gradually. 
In addition, the NBR sent a detailed report to the finance ministry in April, mentioning the challenges in implementing the new law. The NBR said it would increase revenue collection but it would not be possible to protect local industries. It also said the new law is likely to increase the price of essentials and the cost of government development projects would go up. So, the NBR recommended consultation of all related issues at the highest government level.
So the demands of the businessmen are taken into account, the VAT law will have to be changed again, which is not possible before the budget. The finance minister will give a detailed statement in parliament in this regard, officials added.

Comment

Business Report

 
In view of severe protest from the business community, the govern-ment is contemplating to put in abeyance the implementation of the new VAT act that requires a flat rate of 15 percent by all business to simplify the procedure and increase government revenue collection.
The new development runs counter to the government pledge to the International Monetary Fund (IMF) that the law would be enforced from July this year. Business chamber and trade association are opposed to introduction of the new system because they fear the load would be too much and businessmen are not prepared for it. They also call for implanting the law in phases. 
“The VAT law implementation is on track and we are firmly committed to its launch in July 2016,” Finance Minister AMA Muhith had earlier written to IMF Managing Director Christine Lagarde in October last year.
In mid-May, Muhith however alerted the parliamentary standing committee on the finance ministry that the law may not be implemented in July although he was trying to win support from business in this respect. The committee opposed the implementation of the new law at that meeting.
A high-level meeting of the government has recently discussed the issue and decided not to implement the law from July this year. 
The stance has already been communicated to the National Board of Revenue and the next budget proposal has been prepared accordingly. The new VAT law was passed in parliament in 2012, but its implementation was delayed time and again due to opposition from businessmen and a lack of preparation by the tax authority.
The IMF delayed an instalment of its Extended Credit Facility due to a delay in the new VAT law. The finance ministry had informed the IMF that prior to placing the new law in parliament in 2012, the new VAT law underwent extensive consultation with takeholders. Despite this, the new law has come under criticism by the business community.
To counter the criticism, the NBR and Federation of Bangladesh Chambers of Commerce and Industry formed a joint committee which submitted its report in January last year.
As per their recommendations, some amendments were made to the law, and passed again in parliament in September. Major changes in the new law are: VAT will be a single rate at 15 percent, the tax base will be determined on the basis of actual transaction values and there would be no pre-approved values or truncated base and limited exemption.
After these, the finance minister again committed to implementing the new law in July this year to the IMF; accordingly, the global lender released its two remaining instalments in one go.
However, the business community began strong protests against the law and threatened to go for an all-out movement. Commerce Minister Tofail Ahmed also publicly requested the finance minister to implement it gradually. 
In addition, the NBR sent a detailed report to the finance ministry in April, mentioning the challenges in implementing the new law. The NBR said it would increase revenue collection but it would not be possible to protect local industries. It also said the new law is likely to increase the price of essentials and the cost of government development projects would go up. So, the NBR recommended consultation of all related issues at the highest government level.
So the demands of the businessmen are taken into account, the VAT law will have to be changed again, which is not possible before the budget. The finance minister will give a detailed statement in parliament in this regard, officials added.

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AIIB to approve two BD projects next month

Business Report

 
Bangladesh is going to get Tk 517 crore or $66 million in loans from the Asian Infrastructure Investment Bank (AIIB) for two power distribution projects — the first loan for the country from the China-led development bank.
These projects proposals are likely to be placed at a meeting of the directors of the Beijing-based bank on June 20 or 22. The first annual meeting of the Board of Governors of the bank will be held in Beijing on June 25-26. Another proposal for Bangladesh Rural Electrification Board might be placed at the AIIB board meeting after the project is approved by the Ecnec, official sources said.  
The two initial projects at a total cost of Tk 821 crore were approved at a meeting of the Executive Committee of the National Economic Council (Ecnec) in Dhaka last week and they will help to improve the transmission lines of the country.
Under the projects, Dhaka Electric Supply Company Ltd will upgrade two existing substations and install 33kV distribution lines underground in urban areas. The first project will upgrade grid substations and overhead distribution lines. It will cost Tk 569 crore, of which Tk 359 crore will come from the AIIB.
Another project is for replacing the small inefficient transformers and air-insulated switchgear systems at Bashundhara and Uttara grid substations with larger efficient transformers and gas-insulated switchgear systems.
The cost of the second project is Tk 251 crore, of which the AIIB will provide Tk 158 crore.
The interest rate of the AIIB loan will be linked to the repayment period. It will be LIBOR plus 0.80 percent to 1.4 percent, said an official of the finance ministry. The repayment period will be eight years to 20 years.
If the repayment period is eight years then the interest rate will be LIBOR plus 0.80 percent. If the repayment period is 20 years then the interest rate will be LIBOR plus 1.40 percent, according to the official.
LIBOR (London Interbank Offered Rate) is the rate at which banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates. Mohammad Asif-uz-Zaman, additional secretary of the Economic Relations Division, said a team from the AIIB would visit Bangladesh early next month when the terms and conditions of the loans will be finalised.
“The interest rate will be more or less that of the Asian Development Bank,” he said.
The ADB charges 1-1.5 percent for concessional loans while its non-concessional loan is LIBOR-linked and carries an interest rate of 4.5 percent. An official of the finance ministry said the project proposal is likely to be placed at a meeting of the directors of the Beijing-based bank on June 20 or 22.
The first annual meeting of the Board of Governors of the bank will be held in Beijing on June 25-26.
Another proposal for Bangladesh Rural Electrification Board might be placed at the AIIB board meeting after the project is approved by the Ecnec. Governors and representatives from the bank’s 57 founding signatories along with invited observers from international partners will participate in the meeting.
The AIIB, a new global multilateral financial institution, was formally established in December last year.

Comment

Business Report

 
Bangladesh is going to get Tk 517 crore or $66 million in loans from the Asian Infrastructure Investment Bank (AIIB) for two power distribution projects — the first loan for the country from the China-led development bank.
These projects proposals are likely to be placed at a meeting of the directors of the Beijing-based bank on June 20 or 22. The first annual meeting of the Board of Governors of the bank will be held in Beijing on June 25-26. Another proposal for Bangladesh Rural Electrification Board might be placed at the AIIB board meeting after the project is approved by the Ecnec, official sources said.  
The two initial projects at a total cost of Tk 821 crore were approved at a meeting of the Executive Committee of the National Economic Council (Ecnec) in Dhaka last week and they will help to improve the transmission lines of the country.
Under the projects, Dhaka Electric Supply Company Ltd will upgrade two existing substations and install 33kV distribution lines underground in urban areas. The first project will upgrade grid substations and overhead distribution lines. It will cost Tk 569 crore, of which Tk 359 crore will come from the AIIB.
Another project is for replacing the small inefficient transformers and air-insulated switchgear systems at Bashundhara and Uttara grid substations with larger efficient transformers and gas-insulated switchgear systems.
The cost of the second project is Tk 251 crore, of which the AIIB will provide Tk 158 crore.
The interest rate of the AIIB loan will be linked to the repayment period. It will be LIBOR plus 0.80 percent to 1.4 percent, said an official of the finance ministry. The repayment period will be eight years to 20 years.
If the repayment period is eight years then the interest rate will be LIBOR plus 0.80 percent. If the repayment period is 20 years then the interest rate will be LIBOR plus 1.40 percent, according to the official.
LIBOR (London Interbank Offered Rate) is the rate at which banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates. Mohammad Asif-uz-Zaman, additional secretary of the Economic Relations Division, said a team from the AIIB would visit Bangladesh early next month when the terms and conditions of the loans will be finalised.
“The interest rate will be more or less that of the Asian Development Bank,” he said.
The ADB charges 1-1.5 percent for concessional loans while its non-concessional loan is LIBOR-linked and carries an interest rate of 4.5 percent. An official of the finance ministry said the project proposal is likely to be placed at a meeting of the directors of the Beijing-based bank on June 20 or 22.
The first annual meeting of the Board of Governors of the bank will be held in Beijing on June 25-26.
Another proposal for Bangladesh Rural Electrification Board might be placed at the AIIB board meeting after the project is approved by the Ecnec. Governors and representatives from the bank’s 57 founding signatories along with invited observers from international partners will participate in the meeting.
The AIIB, a new global multilateral financial institution, was formally established in December last year.

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MTB to collect NID regn fees

Business Report

 
Mutual Trust Bank Limited (MTB) has recently signed an agreement with National Identity (NID) Registration Wing of Election Commission (EC) Secretariat for online collection of NID Fees. Under this agreement, NID holders can pay their NID fees at all MTB branches.
Md. Anwar Hossain, Director (Admin & Finance), NID Wing and Tarek Reaz Khan, Head of SME & Retail Banking of MTB signed the agreement on behalf of their respective organizations. 
Md. Elias Bhuiyan, Director (Admin & Finance) IDEA Project, EC, Mohammad Mahmud Gony, Senior Vice President of MTB and other senior officials of both the organizations were also present at the occasion, said a press release.

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Business Report

 
Mutual Trust Bank Limited (MTB) has recently signed an agreement with National Identity (NID) Registration Wing of Election Commission (EC) Secretariat for online collection of NID Fees. Under this agreement, NID holders can pay their NID fees at all MTB branches.
Md. Anwar Hossain, Director (Admin & Finance), NID Wing and Tarek Reaz Khan, Head of SME & Retail Banking of MTB signed the agreement on behalf of their respective organizations. 
Md. Elias Bhuiyan, Director (Admin & Finance) IDEA Project, EC, Mohammad Mahmud Gony, Senior Vice President of MTB and other senior officials of both the organizations were also present at the occasion, said a press release.

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Mobile Cos reports upward sales of SIM cards again

Business Report

 
Telecom operators which took the brunt of pressure to get their SIM registered under biometric system over the recent past added 10.68 lakh new mobile connections to their networks in April for the first time in four months.
Bangladesh has recorded 13.2 crore active SIMs as of April, according to data from Bangladesh Telecommunication Regulatory Commission.
The industry also added 7.17 lakh new internet connections in April, BTRC said in a report, which will be published this week. The number of internet connections rose 1.19 percent to an all-time high of 6.2 crore in April from the previous month.
In April, Grameenphone, the largest carrier, signed up 6.65 lakh new connections, the highest number among six operators. It has 5.69 crore active subscribers now. Banglalink, the second largest operator by subscribers, added 2.16 lakh new connections to its network in April to reach 3.22 crore.

Comment

Business Report

 
Telecom operators which took the brunt of pressure to get their SIM registered under biometric system over the recent past added 10.68 lakh new mobile connections to their networks in April for the first time in four months.
Bangladesh has recorded 13.2 crore active SIMs as of April, according to data from Bangladesh Telecommunication Regulatory Commission.
The industry also added 7.17 lakh new internet connections in April, BTRC said in a report, which will be published this week. The number of internet connections rose 1.19 percent to an all-time high of 6.2 crore in April from the previous month.
In April, Grameenphone, the largest carrier, signed up 6.65 lakh new connections, the highest number among six operators. It has 5.69 crore active subscribers now. Banglalink, the second largest operator by subscribers, added 2.16 lakh new connections to its network in April to reach 3.22 crore.

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