One year of the government
Commerce: Good job, could have been better
ONE of the promises of the new government in its election manifesto was to stabilise commodity prices in the local market. The AL government took over office during a crucial time, when the local market was facing price spiral due to commodity price volatility in the global markets, there was uncertainty among importers, natural disasters, policy failures during the caretaker regime etc. The highest priority of the new government was increasing production, market intervention and ensuring supply to ease as well stabilise the commodity market.
The government has shown good performance by stabilising rice and edible oil prices. However, throughout the years, we observed "passing of the buck" between the government and businessmen. The price of a commodity, if procured locally, is dependent on production costs, transportation costs, storage costs, and wholesalers' and retailers' margins.
Commodity price, if procured internationally, usually reflects international market price, shipping costs, importer' margin, distributors' margin and retailers' margin. Hence, if there is a hike in commodity prices, importing countries like Bangladesh will also experience a rise. To safeguard ourselves from market movements, we need to ensure timely and adequate import of essentials.
We have seen such efforts from our government this year. The government intervened in the market prior to Ramadan to control price movements. The commerce ministry arranged buffer stocks and tried to address the supply side through imports. However, the market has not seen the full benefits of such initiatives. Rather, issues of "syndicate" (cartel) and hoarding were highlighted by the ministry.
My suggestion to the government is to refocus on policy issues rather than market intervention. Excessive market intervention through price control may lead to market failure. Hence, focus should be given on regulating the supply side by ensuring local production and timely import.
Local production can be increased through formulating and monitoring a national agriculture policy, which must incorporate timely distribution of agriculture inputs, distribution network management, subsidy arrangement, increasing involvement of the private sector, reflection of consumer desired prices, crop selection, crop diversification, modernisations and etc.
The government's role is not only to ensure timely imports, but also to manage the distribution network and sales of imported commodities since these are the intermediaries that ultimately ensure the supply to the consumers. Hence, the role of the Trading Corporation of Bangladesh (TCB) could be strengthened further. However, this "strengthening exercise" is not for putting TCB in competition with the private sector "biggies," but to enable it to intervene in the market as a price stabiliser in time need of.
At the same time, we need to focus on capacity building of TCB and put the right person in the right job. Incidentally, we are yet to see moves in this direction. Greater transparency is required to ensure smooth channeling of imported goods. Policies should be also accommodative to encourage market competition and needs to address the demand side of the market by formulating policies to protect consumer interests.
Our leaders should also focus on trade policies. In the past, we had lost ground in various trade forums and trade related agreements. Debates over TIFA are still going on. We have to incorporate the benefits of the TIFA in line with the WTO and attempt to obtain market access to the US, particularly duty free or least duty access of RMG to the US, which Bangladesh could not achieve in the WTO. Our representatives should take on the leadership in such forums. Our leaders must focus on the country's competitive advantages, bargaining capabilities and the need to be loud and clear. The art of negotiation should be applied in a dispassionate and coherent manner to reach to a win-win destination.
So far we could not reap the full benefits of the Safta agreement. While the lion's share of our imports comes from India, our export to India in FY 2009 was only $277 million, while export to Sri Lanka, Nepal and Pakistan were $19 million, $8 million and $76 million respectively, which constitutes only 2% of the country's total export of $15.5 billion. Our government should focus more on regional/bilateral trade opportunities. Here comes the role of our diplomatic missions, which can uphold the country's competitive advantages and promote our export products.
The new Export Policy 2009-2012 has focused on a number of policy measures which are likely to bring positive changes for our country, such as classification of export products, restructuring of the priority sectors and the special development sectors along with renewed focus on market expansion, diversification of the export basket and identification of new products.
In the new policy agro-products, light engineering goods, home textiles, ICT/ soft-ware, and ocean going vessels are identified in the priority sector list, which is consistent with the government policy of reforming the agriculture sector, promoting ICT education and building digital Bangladesh along with facilitating the thriving sectors of the country. Under the special development sector finished leather goods, uncut diamonds, textiles from hill tracts, fresh flowers and ceramic goods have been emphasised. These are definitely new avenues and if nurtured correctly can propel export earnings. Providing protections to these industries from foreign players will be a major challenge for the government.
The commerce ministry should also address the infrastructure issue with utmost priority. Industrial growth has been suffering from inadequate transportation facilities, inefficient port management and energy crisis. The cost of doing business is still high in Bangladesh compared to other South Asian countries. As per the Doing Business 2010 report, Bangladesh is ranked 4th among the South Asian countries
The government plans to build deep-sea ports, Padma bridge, and elevated express highways to address the infrastructure constraints. Funding these projects is the prime issue. Private sector capital and foreign capital will play a major role in this aspect. To ensure smooth flow of capital, market development, facilitating investments, and resolving energy issues should be the prime focus areas of the government.
The commerce ministry should work closely with the finance ministry to ensure proper budget allocation and commodity price control, the agriculture ministry for efficient local procurement, the foreign ministry for promoting country's export products to the foreign markets, and the home ministry to ensure law enforcement.
Mr. Faruk Khan has an open mind to new ideas. He is possibly the first commerce minister without any cloud on his name with regard to personal integrity. With a bit more focus on his core ministry affairs, a drive to ensure support from other stake holder ministries, and "in-house" capacity building to tackle the bi-lateral issues, he could remain remembered in the pages of history; though satisfying consumers in an emerging economy and supporting wealth creation through the business community is a tough job.
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