Illiberal political climate along with uncertainty hurts pvt investment
The country lost 0.55 per cent of the gross domestic product or Tk 4,900 crore due to the political unrest during January to mid-March in the current fiscal year, the Centre for Policy Dialogue said on Sunday.
At a press briefing held at the BRAC Centre Inn in the capital, the research-based independent think-tank also said that the major structural problem in the economy in this moment was lack of buoyancy in the private sector investment despite the positive trend in some major macroeconomic indicators.
‘The main structural problem in the economy is that private investment is not picking up due to the recently evolved illiberal political environment along with the existing political uncertainty,’ CPD distinguished fellow Debapriya Bhattacharya said.
Investors feel uncomfortable to make investment in such illiberal political situation where they remain doubtful about enjoying basic human rights particularly business-related rights from the state machinery including judiciary, Anti-Corruption Commission, Human Rights Commission and administration, he said.
Debapriya said lack of leadership, capacity, coordination and continuation of implementation of economic policies and institutional reform measures were also responsible for the bad situation in the private investment.
The CPD organised the briefing to present its recommendations for the next national budget for the fiscal year of 2015-2016.
It said the objective of the next budget should be supporting the economy to shift towards a higher economic growth trajectory coming out from the 6-per cent GDP growth trap and maintaining macroeconomic stability.
According to the CPD projection, shortfall in the total revenue (tax and non-tax) collection might stand at Tk 25,000 crore in the current fiscal year.
Regarding estimation on economic losses due to the political violence, the think-tank, however, said that the estimation was partial and conservative as it conducted analysis only on 11 major sectors.
‘If it was possible to capture all possible sources of losses, this would obviously raise the estimate of losses,’ it said.
The research organisation, however, differed with different estimations provided by the government and various business organisations claiming that those estimations were not realistic as it was not clear which methodology was followed to make those estimations.
The prime minister, Sheikh Hasina, earlier in parliament said that the country incurred a loss of Tk 1.20 lakh crore due to the political unrest while 16 business associations reported a daily loss of Tk 2,278 crore to the CPD.
These are high estimations and not realistic, Debapriya said.
‘We found the losses conducting the analysis following a methodology, if there is any conflict between CPD’s estimation and others’ estimation, they should clear the issue,’ he said replying to questions from reporters.
Economy incurs losses due to loss of assets amid political unrest but all assets are not destroyed as some portions can be adjusted, he said.
Such high estimates of losses may arise from errors of double counting as almost all the sectors are interrelated, CPD stated.
‘The GDP growth will be negative 2.5 per cent if we accept the losses at Tk 1.20 lakh crore which is around 3 per cent of the size of current GDP,’ CPD executive director Mustafizur Rahman said.
In the estimation, losses of assets and production both may be included, he said.
Debapriya said that there were some strong sides including downtrend in inflation and bank interest rate, stability in exchange rate, control in budget deficit and subsidy, positive situation in balance of payment in the economy.
He criticised the government’s dependency on undertaking reform measures in line with the conditions of International Monetary Fund and World Bank saying that the government could bring reforms by its own capacity through domestically-owned and nationally-designed.
‘The government loses policy space while implementing reforms on prescriptions of IMF or WB,’ he said.
The government should carefully analyse the conditions on receiving funds for budget supports in the name of extended credit facility or development support credit from IMF or WB as there are many hidden conditions in such funding, he said.
According to the CPD analysis, the apparel sector incurred the highest amount of loss — Tk 1,318 crore — due to the political violence followed by tourism sector Tk 825 crore, land transport sector Tk 744 crore, shrimp sector Tk 741 crore, poultry sector Tk 606 crore, wholesale and retail trading Tk 448 crore, agriculture sector Tk 398 crore, plastic sector Tk 244 crore, and banking and insurance Tk 398 crore.
The CPD said the economic losses of real estate, education and labour-related issues were not estimated in the analysis but the impact was formidable in the long-run.
It said that the losses of assets due to the political unrest were not included in the analysis rather it included the losses which were supposed to be included in the GDP.
Along with expediting implementation of reform measures, the CPD recommended that the government should set a realistic revenue collection target, emphasise on revenue mobilisation and increase tax net, prioritise non-tax revenue mobilisation, implement the proposed pay scale for government employees in phases to avoid fiscal pressure, strengthen monitoring of ADP implementation, revisit incentives for national savings certificates, and strengthen the district budget and local government.
CPD additional research director Khondaker Golam Moazzem and research fellow Towfiqul Islam Khan also spoke at the briefing.
At a press briefing held at the BRAC Centre Inn in the capital, the research-based independent think-tank also said that the major structural problem in the economy in this moment was lack of buoyancy in the private sector investment despite the positive trend in some major macroeconomic indicators.
‘The main structural problem in the economy is that private investment is not picking up due to the recently evolved illiberal political environment along with the existing political uncertainty,’ CPD distinguished fellow Debapriya Bhattacharya said.
Investors feel uncomfortable to make investment in such illiberal political situation where they remain doubtful about enjoying basic human rights particularly business-related rights from the state machinery including judiciary, Anti-Corruption Commission, Human Rights Commission and administration, he said.
Debapriya said lack of leadership, capacity, coordination and continuation of implementation of economic policies and institutional reform measures were also responsible for the bad situation in the private investment.
The CPD organised the briefing to present its recommendations for the next national budget for the fiscal year of 2015-2016.
It said the objective of the next budget should be supporting the economy to shift towards a higher economic growth trajectory coming out from the 6-per cent GDP growth trap and maintaining macroeconomic stability.
According to the CPD projection, shortfall in the total revenue (tax and non-tax) collection might stand at Tk 25,000 crore in the current fiscal year.
Regarding estimation on economic losses due to the political violence, the think-tank, however, said that the estimation was partial and conservative as it conducted analysis only on 11 major sectors.
‘If it was possible to capture all possible sources of losses, this would obviously raise the estimate of losses,’ it said.
The research organisation, however, differed with different estimations provided by the government and various business organisations claiming that those estimations were not realistic as it was not clear which methodology was followed to make those estimations.
The prime minister, Sheikh Hasina, earlier in parliament said that the country incurred a loss of Tk 1.20 lakh crore due to the political unrest while 16 business associations reported a daily loss of Tk 2,278 crore to the CPD.
These are high estimations and not realistic, Debapriya said.
‘We found the losses conducting the analysis following a methodology, if there is any conflict between CPD’s estimation and others’ estimation, they should clear the issue,’ he said replying to questions from reporters.
Economy incurs losses due to loss of assets amid political unrest but all assets are not destroyed as some portions can be adjusted, he said.
Such high estimates of losses may arise from errors of double counting as almost all the sectors are interrelated, CPD stated.
‘The GDP growth will be negative 2.5 per cent if we accept the losses at Tk 1.20 lakh crore which is around 3 per cent of the size of current GDP,’ CPD executive director Mustafizur Rahman said.
In the estimation, losses of assets and production both may be included, he said.
Debapriya said that there were some strong sides including downtrend in inflation and bank interest rate, stability in exchange rate, control in budget deficit and subsidy, positive situation in balance of payment in the economy.
He criticised the government’s dependency on undertaking reform measures in line with the conditions of International Monetary Fund and World Bank saying that the government could bring reforms by its own capacity through domestically-owned and nationally-designed.
‘The government loses policy space while implementing reforms on prescriptions of IMF or WB,’ he said.
The government should carefully analyse the conditions on receiving funds for budget supports in the name of extended credit facility or development support credit from IMF or WB as there are many hidden conditions in such funding, he said.
According to the CPD analysis, the apparel sector incurred the highest amount of loss — Tk 1,318 crore — due to the political violence followed by tourism sector Tk 825 crore, land transport sector Tk 744 crore, shrimp sector Tk 741 crore, poultry sector Tk 606 crore, wholesale and retail trading Tk 448 crore, agriculture sector Tk 398 crore, plastic sector Tk 244 crore, and banking and insurance Tk 398 crore.
The CPD said the economic losses of real estate, education and labour-related issues were not estimated in the analysis but the impact was formidable in the long-run.
It said that the losses of assets due to the political unrest were not included in the analysis rather it included the losses which were supposed to be included in the GDP.
Along with expediting implementation of reform measures, the CPD recommended that the government should set a realistic revenue collection target, emphasise on revenue mobilisation and increase tax net, prioritise non-tax revenue mobilisation, implement the proposed pay scale for government employees in phases to avoid fiscal pressure, strengthen monitoring of ADP implementation, revisit incentives for national savings certificates, and strengthen the district budget and local government.
CPD additional research director Khondaker Golam Moazzem and research fellow Towfiqul Islam Khan also spoke at the briefing.
Source: New Age
