An ambitious budget
FINANCE Minister AMA Muhith has presented a national budget for fiscal 2009-10 with hopes that it will mitigate effectively the impacts of global recession on the Bangladesh economy, maintain macroeconomic stability and help develop infrastructures relying more on the concept of public- private partnership (espoused in recent months by the FBCCI).
In many ways the budget has attempted to reflect different aspects of the pledges made by the Awami League at the time of the last national election. The many leaks in the media and informed speculation prior to the presentation of the budget however left few surprises.
It would only be accurate to suggest that the approximately Taka 1.14 trillion budget is not only ambitious but will also be challenging to implement. The government will have to overcome many associated down-side risks and tradeoffs.
One feature of the budget has raised controversy. It is the provision of 'whitening black money' by paying a flat 10% tax on the amount. It has been pointed out that such undisclosed income, mostly arising out of corruption or deliberate evasion at the time of providing records of income to the income tax authorities, can be invested and used in 62 prescribed sectorsincluding agro-processing industries, share market and in purchasing apartments (aimed at mollifying the construction sector). This dry-cleaned money may apparently also be invested in Balancing, Modernisation, Rehabilitation and Expansion (BMRE) projects in prescribed industries.
Some advocates of this course of action have mentioned about the 'short term appeal' for such a method. I believe, however, that in the long term it will do more harm than good. It will lower the moral threshold and encourage corruption. It will also raise questions as to why those willing to take advantage of such an arrangement will be paying less as tax compared to those who pay tax according to prescribed legal terms and rates.
The least that could have been done was to ensure that anyone trying to whiten any amount pays a flat 25% tax on the marked amount and also a penalty of another 5%. We need to remember here that the people of this country deserve good tax collectors and opportunities where they do not suffer due to effects of administrative corruption and lack of respect for existing regulatory regimes.
The budget, as expected, has laid out a long-term vision pertaining not only to moving towards food autarky by 2012 but also to the solution of the continuing gas and power crisis. The allocation for this purpose is 48% higher than that in the revised budget for 2008-09. In this context the government has been constructive.
It has taken cognizance of issues like generation of nuclear energy, use of environment friendly energy technology, greater availability of renewable energy like solar power and tapping of coal resources in an environment friendly way. It has also decided to allocate special funds for Bapex for gas development and also stressed on using the potential of partnership between the private and the public sectors in this regard.
There are also some other constructive steps that need to be mentioned.
Facilitating gender empowerment and being gender sensitive has been woven into the budget by earmarking expenditures specifically for advancement of women through efforts undertaken by Ministries of Education, Health and Family Planning, Social Welfare and Food and Disaster Management.
Similarly, it will be pertinent to appreciate here the government's effort to expand social safety net programs by enhancing budget allocation (18.1% of the total budget outlay and the number of expected beneficiaries. This approach is consistent with the government's intention to reduce poverty effectively, especially among the underprivileged section. In this context emphasis will be placed on employment generation through provision of micro-credit and different fund management programs.
There will also be steps geared towards better management of consequences of natural disasters and in creating necessary structures that can provide better vocational training facilities to enhance skill in general and in particular among those wishing to seek employment abroad. This last aspect will be critical over the next two years when Bangladeshi migrant workers will have to compete within a shrinking market with other qualified candidates from Sri Lanka, India and the Philippines. This will be a difficult task and the government will have to coordinate the activities of the principal actors in this sector very carefully. Otherwise the desired success will elude us.
It would also be relevant to take note of the government's plan for moving towards a digital Bangladesh. The allocation in the information and communication technology sector has been increased considerably. This has included a special allocation of Taka 1 billion for ICT development and Taka 2 billion for Equity and Entrepreneurship Fund for ICT promotion. Such expenditure will be vital for introducing automated systems within the administration in general, educational institutions, land records and health sectors. It has also been proposed that steps will be taken to connect Bangladesh with the second submarine cable, essential for providing reliable internet service and e-commerce facilities to more people. This will be a step in the right direction.
The Finance Minister has expressed hope that there will be a Gross Domestic Product (GDP) growth of about 5.5% in fiscal 2010. This will require great discipline given the down-turns that are expected in our export sector over the next year. One can only hope that despite difficulties, the economy will still be able to achieve this desired growth through a sustained receipt of a high level of remittance from our migrant workers.
I cannot conclude my observations without remarking also on the proposed Annual Development Program (ADP). Consistent with the usual optimistic practice, our financial policy planners have again proposed a massive ADP for the next fiscal year despite the high deficit content of the budget. One is tempted to remind the responsible authorities that it does not help to be unnecessarily unrealistic.
We will, as it is, have a difficult time in raising the expected revenue. Consequently, it does not make too much of sense to present an ADP with a target of Taka 305 billion development expenditure. Our ability to achieve stated high targets in the history of our ADPs has always come under question.
During 2008-09, we have had to down-size our ADP. In view of this trend, I fail to see how we will be able to achieve our indicated target. It might have been better to project a more achievable figure of about Taka 230 billion.
There will be a lot of pressure on the government in its efforts to implement this multi-faceted budget aimed at not only helping the poorer sections of the society but also the vulnerable members of the indigenous community. It will require dedication from those charged with collection of taxes and duties, expansion of the tax net and a greater investment rate. There will also have to be meaningful coordination and serious monitoring of project implementation.
These are high expectations. One can only hope that they will be met.
Muhammad Zamir is a former Secretary and Ambassador and can be reached at mzamir@dhaka.net
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